Because a small number of our existing stockholders own a material amount of our voting stock, your ability to influence corporate matters will be limited.
Our executive officers, directors and greater than 5% stockholders, in the aggregate, own approximately 17.56% of our outstanding common stock. As a result, such persons, acting together, will have the ability to influence our management and affairs and substantially all matters submitted to our stockholders for approval, including the election and removal of directors and approval of any significant transaction. These persons will also have the ability to influence our management and business affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.
Future sales of our common stock may cause our stock price to decline.
As of the date of this report, there were 45,964,286 shares of our common stock outstanding. On March 14, 2017, we entered into an underwriting agreement with H.C. Wainwright, pursuant to which we agreed to issue and sell 30,000,000 shares of our common stock and warrants to purchase an aggregate of 60,000,000 shares of our common stock. Under the terms of the underwriter agreement, we granted the underwriter a 30-day option to purchase an additional 4,500,000 shares of common stock and/or warrants to purchase up to an additional 9,000,000 shares of common stock. In addition, as of December 31, 2016, we had outstanding options and warrants to purchase 8,294,438 shares of our common stock that, if exercised, will result in these additional shares becoming available for sale. A large portion of these shares and outstanding equity awards are held by a small number of persons and investment funds. Sales by these stockholders or option holders of a substantial number of shares could significantly reduce the market price of our common stock. Moreover, certain holders of shares of common stock will have rights, subject to some conditions, to require us to file registration statements covering the shares they currently hold, or to include these shares in registration statements that we may file for ourselves or other stockholders.
We will need to raise additional capital to fund our operations, which may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.
We will need to seek additional capital through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that are not favorable to us.
Operating as a public company increases our expenses and administrative burden.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, our administrative staff will be required to perform additional tasks. For example, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and The NASDAQ Global Market, impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We must also bear all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws.
In particular, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, our stock price could decline, and we could face sanctions, delisting or investigations by The NASDAQ Global Market, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividend on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the value of their stock.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include:
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. 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 members of our board of directors, which is responsible for appointing the members of our management.
Our ability to use our net operating loss carryforwards may be subject to limitation and may result in increased future tax liability to us.
Generally, a change of more than 50% in the ownership of a corporation’s stock, by value, over a three-year period constitutes an ownership change for U.S. federal income tax purposes. An ownership change may limit a company’s ability to use its net operating loss carryforwards attributable to the period prior to such change. We underwent an ownership change within the meaning of Section 382 ownership of the Internal Revenue Code during 2012 and as such, our net operating loss carryforwards are limited. In addition, the pre-change R&D tax credits have also been limited for federal tax purposes. If we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income will be subject to limitations, which will result in increased future tax liability to us.
We may be unable to issue securities under our shelf registration statement, which may have an adverse effect on our liquidity.
We have filed a shelf registration statement on Form S-3 with the SEC. The registration statement is subject to Instruction I.B.6. of Form S-3, which imposes a limitation on the maximum amount of securities that we may sell pursuant to the registration statement during any twelve-month period. At the time we sell securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities we have sold during the prior twelve months in reliance on Instruction I.B.6. may not exceed one-third of the aggregate market value of our outstanding common stock held by non-affiliates as of a day during the 60 days immediately preceding such sale, as computed in accordance with Instruction I.B.6. Based on this calculation and as a result of this offering, we expect that we will be significantly limited, and likely unable, to sell additional securities pursuant to our effective registration statement on Form S-3 for a period of twelve months following the date of this offering, unless and until the market value of our outstanding common stock held by non-affiliates increases significantly. If we cannot sell securities under our shelf registration, we may be required to utilize more costly and time-consuming means of accessing the capital markets, which could materially adversely affect our liquidity and cash position.
If we do not receive shareholder approval under Nasdaq Marketplace Rule 5635(d) to issue more than 19.99% of our outstanding shares of common stock relating to our sale of Series X Units to certain institutional investors, such institutional investors shall
have the right to require the Company to redeem any or all of the Series X Convertible Preferred Stock that is ineligible for conversion.
If our or our licensors’ patent positions do not adequately protect our product candidates or any future products, others could compete with us more directly or prevent us from commercializing our products, which would harm our business.
We hold license rights to numerous U.S. European Patents (“EP”), and non-EP foreign patents and patent applications relating to blisibimod and Sollpura. Our Sollpura portfolio is made up of exclusively licensed patents and patent applications from Eli Lilly. Our blisibimod portfolio is made up of exclusively and non-exclusively licensed patents and patent applications from Amgen, Inc.
Our commercial success will depend in part on our and our licensors’ ability to obtain additional patents and protect our existing patent positions, particularly those patents for which we have secured exclusive rights, as well as our ability to maintain adequate protection of other intellectual property for our technologies, product candidates and any future products in the United States and other countries. If we or our licensors do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could materially harm our business, negatively affect our position in the marketplace, limit our ability to commercialize our product candidates and delay or render impossible our achievement of profitability. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries.
The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, and, therefore, validity and enforceability cannot be predicted with certainty. Patents may be challenged, deemed unenforceable, invalidated or circumvented. We and our licensors will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies, product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:
We are aware of two third-party issued United States patents that contain broad claims related to BLyS or BAFF binding polypeptides. Based on our analyses, if these patents were asserted against us, we do not believe that blisibimod would be found to infringe any valid claim of these patents. If we were to challenge the validity of either of these issued United States patent in court, we would need to overcome the presumption of validity that attaches to every United States patent by presenting clear and convincing evidence as to the invalidity of the patent’s claims. There is no assurance that a court would find in our favor on questions of infringement or validity, and we could incur substantial costs in litigation if we are required to defend against patent suits brought by third parties or if we initiate these suits. If third party patents are determined to be valid and construed to cover blisibimod, the development and commercialization of this program could be affected, subjecting us to potential liability for damages and in addition may require us to obtain a license to continue marketing the affected product. Such a license may not be available on commercially acceptable terms, if at all.
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets to protect our proprietary know-how and technological advances, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position.
We license patent rights from third-party owners. If we, or such owners, do not properly maintain or enforce the patents underlying such licenses, our competitive position and business prospects will be harmed.
We are party to a license agreement with Amgen that provides exclusive and worldwide rights to develop and commercialize the novel BAFF inhibitor blisibimod, as well as non-exclusive rights to certain technology relating to peptibody compositions and formulations. We are also a party to a license agreement with Eli Lilly and Company that provides exclusive and worldwide rights to develop and commercialize Sollpura, as well as non-exclusive rights to certain technology relating to Sollpura compositions and formulations.
We depend in part on our licensors to protect the proprietary rights covering blisibimod and Sollpura. Our licensors are responsible for maintaining certain issued patents and prosecuting certain patent applications. We have limited, if any, control over the amount or timing of resources that our licensors devote on our behalf or the priority they place on maintaining these patent rights and prosecuting these patent applications to our advantage. Our licensors may also be notified of alleged infringement and be sued for infringement of third-party patents or other proprietary rights. We may have limited, if any, control or involvement over the defense of these claims, and our licensors could be subject to injunctions and temporary or permanent exclusionary orders in the United States or other countries. Our licensors are not obligated to defend or assist in our defense against third-party claims of infringement. We have limited, if any, control over the amount or timing of resources, if any, that our licensors devote on our behalf or the priority they place on defense of such third-party claims of infringement.
Our success will depend in part on the ability of us or our licensors to obtain, maintain and enforce patent protection for their intellectual property, in particular, those patents to which we have secured exclusive rights. We or our licensors may not successfully prosecute the patent applications which we have licensed. Even if patents issue in respect of these patent applications, we or our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents or may pursue such litigation less aggressively than we would. Without protection for the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects.
If we do not obtain protection under the Hatch-Waxman Act and similar foreign legislation to extend our licensed patent terms and to obtain market exclusivity for our product candidates, our business will be materially harmed.
The Hatch-Waxman Act provides for an extension of patent term for drug compounds for a period of up to five years to compensate for time spent in the regulatory approval process. Assuming we gain a five-year patent term extension for blisibimod and that we continue to have rights under our license agreement with respect to blisibimod, we would have exclusive rights to blisibimod’s U.S. new chemical entity patent until 2027 or 2028. In Europe, similar legislative enactments allow patent terms in the European Union to be extended for up to five years through the grant of a Supplementary Protection Certificate. Assuming we gain such a five-year extension for blisibimod and that we continue to have rights under our license agreement with respect to blisibimod, we would have exclusive rights to blisibimod’s European new chemical entity patents until 2027. Further, since blisibimod has not been previously approved, blisibimod could be eligible for 12 years of data exclusivity from the U.S. FDA. During the data exclusivity period, competitors are barred from relying on the innovator biologic’s safety and efficacy data to gain approval.
Similarly, the European Union provides that companies who receive regulatory approval for a new small molecule compound or biologic will have a 10-year period of data exclusivity for that compound or biologic (with the possibility of a further one-year extension) in most EU countries, beginning on the date of such European regulatory approval, regardless of when the European new chemical entity patent covering such compound expires. A generic version of the approved drug may not be marketed or sold during such market exclusivity period. However, there is no assurance that we will receive the extensions of our patents or other exclusive rights available under the Hatch-Waxman Act or similar foreign legislation. If we fail to receive such Hatch-Waxman extensions or marketing exclusivity rights or if we receive extensions that are materially shorter than expected, our ability to prevent competitors from manufacturing, marketing and selling generic versions of our products will be materially harmed.
Our current patent positions and license portfolio may not include all patent rights needed for the full development and commercialization of our product candidates. We cannot be sure that patent rights we may need in the future will be available for license to us on commercially reasonable terms, or at all.
We typically develop product candidates using compounds for which we have in-licensed and original composition of matter patents and patents that claim the activities and methods for such compounds’ production and use to the extent known at that time. As we learn more about the mechanisms of action and new methods of manufacture and use of product candidates, we may file additional patent applications for these new inventions or we may need to ask our licensors to file them. We may also need to license additional patent rights or other rights on compounds, treatment methods or manufacturing processes because we learn that we need such rights during the continuing development of our product candidates.
Although our in-licensed and original patents may prevent others from making, using or selling similar products, they do not ensure that we will not infringe the patent rights of third parties. We may not be aware of all patents or patent applications that may impact our ability to make, use or sell our product candidates. For example, because we sometimes identify the mechanism of action or molecular target of a given product candidate after identifying its composition of matter and therapeutic use, we may not be aware until the mechanism or target is further elucidated that a third party has an issued or pending patent claiming biological activities or targets that may cover our product candidates. U.S. patent applications filed after November 29, 2000 are confidential in the U.S. Patent and Trademark Office for the first 18 months after such applications’ earliest priority date, and patent offices in non-U.S. countries often publish patent applications for the first time six months or more after filing. Furthermore, we may not be aware of published or granted conflicting patent rights. Any conflicts resulting from patent applications and patents of others could significantly reduce the coverage of our patents and limit our ability to obtain meaningful patent protection. If others obtain patents with conflicting claims, we may need to obtain licenses to these patents or to develop or obtain alternative technology.
We may not be able to obtain any licenses or other rights to patents, technology or know-how from third parties necessary to conduct our business as described in this report and such licenses, if available at all, may not be available on commercially reasonable terms. Any failure to obtain such licenses could delay or prevent us from developing or commercializing our product candidates or proposed product candidates, which would harm our business. Litigation or patent interference proceedings may be necessarily brought against third parties, as discussed below, to enforce any of our patents or other proprietary rights or to determine the scope and validity or enforceability of the proprietary rights of such third parties.
Litigation regarding patents, patent applications and other proprietary rights may be expensive and time consuming. If we are involved in such litigation, it could cause delays in bringing product candidates to market and harm our ability to operate.
Our commercial success will depend in part on our ability to manufacture, use, sell and offer to sell our product candidates and proposed product candidates without infringing patents or other proprietary rights of third parties. Although we are not currently aware of any litigation or other proceedings or third-party claims of intellectual property infringement related to our product candidates, the pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may obtain patents in the future and allege that the use of our technologies infringes these patent claims or that we are employing their proprietary technology without authorization. Likewise, third parties may challenge or infringe upon our or our licensors’ existing or future patents.
Proceedings involving our patents or patent applications or those of others could result in adverse decisions regarding the patentability of our inventions relating to our product candidates or the enforceability, validity or scope of protection offered by our patents relating to our product candidates.
Even if we are successful in these proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings. If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time-consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have our patents declared invalid, we may incur substantial monetary damages; encounter significant delays in bringing our product candidates to market; or be precluded from participating in the manufacture, use or sale of our product candidates or methods of treatment requiring licenses.
None.
We lease our main operating facility in Hayward, California. We occupy approximately 14,000 square feet under a facility lease agreement that expires in September 2017. We believe our existing facility is adequate for our current needs and that any additional space we need will be available in the future on commercially reasonable terms.
On February 13, 2017, a complaint was filed in the United States District Court for the Northern District of California captioned Brian Clevlen v. Anthera Pharmaceuticals, Inc., et al., Case No. 3:17-cv-715, on behalf of a putative class of the Company’s stockholders against the Company and certain of its current and former officers. The complaint asserts claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of all stockholders that purchased the Company’s common stock between February 10, 2015 and December 27, 2016. The complaint alleges that the Company made false or misleading statements and/or omissions with respect to the CHABLIS-SC1 trial and SOLUTION study. The complaint seeks unspecified damages, interest, attorneys’ fees, costs, and such other relief at the Court may deem just and proper. The Company intends to vigorously defend itself against the allegations in the action.
Other than as described above, we are not subject to any material pending legal proceedings. From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of our business.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Price Range of Common Stock
Our common stock has been listed on The NASDAQ Global Market under the symbol “ANTH” since our initial public offering (“IPO”). Prior to that offering, there was no public market for our common stock. The following table sets forth, for the periods indicated, the high and low intraday sales prices of our common stock as reported by The NASDAQ Global Market:
|
|
High
|
|
|
Low
|
|
First Quarter 2015
|
|
$
|
6.37
|
|
|
$
|
1.59
|
|
Second Quarter 2015
|
|
$
|
9.89
|
|
|
$
|
4.05
|
|
Third Quarter 2015
|
|
$
|
11.65
|
|
|
$
|
5.80
|
|
Fourth Quarter 2015
|
|
$
|
7.15
|
|
|
$
|
4.25
|
|
First Quarter 2016
|
|
$
|
4.90
|
|
|
$
|
2.28
|
|
Second Quarter 2016
|
|
$
|
4.40
|
|
|
$
|
2.69
|
|
Third Quarter 2016
|
|
$
|
4.00
|
|
|
$
|
2.80
|
|
Fourth Quarter 2016
|
|
$
|
3.42
|
|
|
$
|
0.64
|
|
Holders of our Common Stock
As of December 31, 2016, an aggregate of 45,964,286 shares of our common stock and 9,499 shares of Series X convertible preferred stock were issued and outstanding and were held by 37 and 5 registered holders, respectively, based on information provided by the Company’s transfer agent. A significantly larger number of stockholders may be "street name" or beneficial holders, whose shares of record are held by banks, brokers and other financial institutions.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings to finance the growth and development of our business. Therefore, we do not anticipate declaring or paying any cash dividends in the foreseeable future. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans
The information regarding securities authorized for issuance under equity compensation plans is included in Part III, Item 12 of this report.
Recent Sales of Unregistered Securities
All information under this Item has been previously reported on our Current Reports on Form 8-K, filed with the SEC.
Issuer Purchases of Equity Securities
We did not repurchase any securities during the quarter or year ended December 31, 2016.
ITEM 6. SELECTED FINANCIAL DATA (in thousands, except share and per share data)
The following tables reflect selected consolidated summary financial data for each of the last five fiscal years and are derived from our audited financial statements. This data should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8, “Financial Statements and Supplementary Data”, appearing elsewhere in this Annual Report on Form 10-K.
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except share and per share data)
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License revenue
|
|
$
|
139
|
|
|
$
|
2,562
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collaborative revenue
|
|
|
6
|
|
|
|
623
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total revenues
|
|
|
145
|
|
|
|
3,185
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
46,512
|
|
|
$
|
33,498
|
|
|
$
|
21,839
|
|
|
$
|
21,684
|
|
|
$
|
49,219
|
|
General and administrative
|
|
|
11,071
|
|
|
|
7,568
|
|
|
|
6,620
|
|
|
|
6,563
|
|
|
|
6,715
|
|
Research award (1)
|
|
|
(261
|
)
|
|
|
(2,638
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total operating expenses
|
|
|
57,322
|
|
|
|
38,428
|
|
|
|
28,459
|
|
|
|
28,247
|
|
|
|
55,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(57,177
|
)
|
|
|
(35,243
|
)
|
|
|
(28,459
|
)
|
|
|
(28,247
|
)
|
|
|
(55,934
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
(90
|
)
|
|
|
23
|
|
|
|
(96
|
)
|
|
|
(15
|
)
|
|
|
(111
|
)
|
Interest expense
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,049
|
)
|
|
|
(2,599
|
)
|
|
|
(3,354
|
)
|
Change in fair value of warrant liability
|
|
|
1,744
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Mark-to-market adjustment of warrant liability
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14,070
|
|
Total other income (expense)
|
|
|
1,654
|
|
|
|
23
|
|
|
|
(1,145
|
)
|
|
|
(2,614
|
)
|
|
|
10,605
|
|
Net loss
|
|
$
|
(55,523
|
)
|
|
$
|
(35,220
|
)
|
|
$
|
(29,604
|
)
|
|
$
|
(30,861
|
)
|
|
$
|
(45,329
|
)
|
Deemed dividends attributable to preferred stock
|
|
|
(10,914
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net loss applicable to common stockholders
|
|
|
(66,437
|
)
|
|
$
|
(35,220
|
)
|
|
$
|
(29,604
|
)
|
|
$
|
(30,861
|
)
|
|
$
|
(45,329
|
)
|
Net loss per share — basic and diluted (2)
|
|
$
|
(1.61
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(1.36
|
)
|
|
$
|
(1.69
|
)
|
|
$
|
(6.27
|
)
|
Weighted average shares used in net loss per share -- basic and
diluted (3)
|
|
|
41,310,269
|
|
|
|
35,631,237
|
|
|
|
21,776,269
|
|
|
|
18,267,413
|
|
|
|
7,225,406
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
(in thousands)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and short-term investments
|
|
$
|
20,843
|
|
|
$
|
46,951
|
|
|
$
|
2,639
|
|
|
$
|
25,946
|
|
|
$
|
24,753
|
|
Restricted cash
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
—
|
|
Working capital
|
|
|
12,084
|
|
|
|
39,394
|
|
|
|
(2,729
|
)
|
|
|
18,743
|
|
|
|
6,429
|
|
Total assets
|
|
|
23,471
|
|
|
|
48,125
|
|
|
|
3,490
|
|
|
|
37,417
|
|
|
|
26,445
|
|
Total notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,875
|
|
|
|
20,550
|
|
Total liabilities
|
|
|
10,624
|
|
|
|
8,468
|
|
|
|
5,751
|
|
|
|
22,659
|
|
|
|
29,971
|
|
Contingently redeemable & convertible preferred stock
|
|
|
377
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Convertible preferred stock
|
|
|
8,614
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Common stock and additional paid-in capital
|
|
|
411,410
|
|
|
|
391,688
|
|
|
|
314,550
|
|
|
|
301,965
|
|
|
|
252,827
|
|
Accumulated deficit
|
|
|
(407,554
|
)
|
|
|
(352,031
|
)
|
|
|
(316,811
|
)
|
|
|
(287,207
|
)
|
|
|
(256,346
|
)
|
Total stockholders’ equity (deficit)
|
|
|
12,470
|
|
|
|
39,657
|
|
|
|
(2,261
|
)
|
|
|
14,758
|
|
|
|
(3,526
|
)
|
|
(1) |
In March 2015, we received a research award of up to $3 million from CFFT for our development of Sollpura. For the year ended December 31, 2016, we recognized $0.3 million in research award from CFFT in connection with achieving certain milestones specified in the award agreement. The amount has been recognized as a component of Operating Expenses.
|
|
(2) |
Diluted earnings per share, or EPS, is identical to basic EPS since common equivalent shares are excluded from the calculation, as their effect is anti-dilutive.
|
|
(3) |
Weighted average shares used in net loss per basic and diluted share in 2012 have been adjusted to reflect a 1-for-8 reverse stock split effectuated by the Company on July 15, 2013.
|
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with our consolidated financial statements and the related notes set forth under “Item 8. Consolidated Financial Statements and Supplementary Data.” This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this report.
Overview
Anthera Pharmaceuticals, Inc. is a biopharmaceutical company focused on advancing the development and commercialization of innovative medicines that benefit patients with unmet medical needs. We currently have two compounds in development, Sollpura and blisibimod. We licensed Sollpura from Eli Lilly & Co (“Eli Lilly”) in July 2014. Sollpura is a novel non-porcine investigational Pancreatic Enzyme Replacement Therapy (“PERT”) intended for the treatment of patients with Exocrine Pancreatic Insufficiency (“EPI”), often seen in patients with cystic fibrosis and other conditions. We licensed blisibimod from Amgen, Inc. (“Amgen”) in December 2007. Blisibimod targets B-cell activating factor, or BAFF, which has been shown to be elevated in a variety of B-cell mediated autoimmune diseases, including Immunoglobulin A nephropathy, or IgA nephropathy, systemic lupus erythematosus, or lupus, lupus nephritis, and others.
We were incorporated in September 2004. We have devoted substantially all of our resources to research and development of our product candidates. We have not generated any revenue from the commercial sales of our product candidates, and since inception we have funded our operations through equity offerings, private placements of convertible debt, debt financing, equity investment and cost reimbursement from a former collaborative partner, Zenyaku Kogyo Co., Ltd (“Zenyaku”), and a research award from Cystic Fibrosis Foundation Therapeutics Incorporated ("CFFT"). We will need substantial additional financing to continue to develop our product candidates, obtain regulatory approvals and to fund operating expenses, which we will seek to raise through public or private equity or debt financings, collaborative or other arrangements with third parties or through other sources of financing. We cannot assure you that such funds will be available on terms favorable to us, if at all. In addition to the normal risks associated with drug development companies, we may never successfully complete development of our product candidates, obtain adequate patent protection for our technology, obtain necessary government regulatory approval for our product candidates or achieve commercial viability for any approved product candidates. In addition, we may not be profitable even if we succeed in commercializing our product candidates.
In December 2014, we entered in an exclusive license agreement with Zenyaku for the development and commercialization of blisibimod in Japan and potentially other countries throughout Asia. In September 2015, Zenyaku provided us a notice of its intent to terminate the Zenyaku Agreement, effective January 7, 2016. The termination was “at will” and Zenyaku alleged no breach of the Zenyaku Agreement by us. There were no termination penalties incurred by us in connection with the early termination of the Zenyaku Agreement. We also regained full worldwide rights for blisibimod and we are actively pursuing partnerships with pharmaceutical and biotech companies to further advance the development of blisibimod globally.
In March 2015, we received a research award of up to $3 million from CFFT for our development of Sollpura. We retain the right to develop and commercialize Sollpura and will owe royalties to CFFT on net sales of any drug candidate approved and commercialized under the collaboration. The funding is to be disbursed by CFFT to us upon our achievement of milestones specified in the agreement. At our discretion, we may choose to fund a particular stage of the Sollpura development plan without CFFT funds. Any CFFT funds not expended on the development program of Sollpura must be returned to CFFT and, upon such return, the amounts of such returned funds will not be included as part of the research award for the purpose of calculating royalties or other amounts owed by us to CFFT. To the extent CFFT provides or makes available any information, expertise, know-how or other intellectual property related to cystic fibrosis or the treatment, prevention or cure thereof (“CFFT Know-How”) to us, CFFT grants to us a non-exclusive, transferrable, sublicensable, worldwide rights and license under all of CFFT’s rights in such CFFT Know-How to assist us to research, develop, commercialize, make or have made, use, sell, have sold, offer for sale, import, export and otherwise exploit the product.
Our Phase 3 Development of Sollpura in EPI
We initiated the Phase 3 SOLUTION study in the third quarter of 2015. SOLUTION was a randomized, open-label, assessor-blind, non-inferiority, active-comparator study evaluating the efficacy and safety of Sollpura in patients with cystic fibrosis-related exocrine pancreatic insufficiency. This pivotal study enrolled 128 patients in North America, Europe and Israel is intended to evaluate the non-inferiority of Sollpura compared with another commercially available PERT in a population of porcine-derived PERT responders. Topline data announced in December 2016 showed that the study narrowly missed the CFA non-inferiority margin of the primary modified Intent to Treat (mITT) analysis by one percent; however, by additional pre-specified analyses of CFA (mITT-Baseline Observation Carried Forward and Per Protocol), Sollpura met the non-inferiority criterion. The study also confirmed that the ratio of the three enzymes in Sollpura demonstrated an appropriate response in the coefficient of nitrogen absorption (CNA). CNA is a measure of protein digestion and absorption and is a key requirement of our planned US FDA regulatory submission. We expect to release data from the extension phase of the study in the first quarter of 2017.
Due to the narrow miss of the SOLUTION study, we plan to initiate a new Phase 3 study (RESULT), informed by data produced from the SOLUTION study. The RESULT study is expected to commence in the first half of 2017. Similar to the SOLUTION study, the RESULT study is a randomized, open-label, non-inferiority, active-comparator study. Approximately 150 cystic fibrosis patients who are porcine PERT responders will be enrolled in the same geographies as the SOLUTION study. Based on data from the SOLUTION study, the RESULT study’s design is being modified to 1) start Sollpura dosing as 125% of the pre-study PERT dose, and 2) allow for a more liberal dose titration, as needed, based on signs and symptoms throughout the primary treatment phase of the study. We believe that efficacy in the SOLUTION trial was limited by a restrictive dose optimization paradigm in a population whose dose of lipase at baseline had been optimized for porcine PERTs (but not Sollpura) and that modification of the dosing paradigm may allow for success in the RESULT study. Topline data from the RESULT study is expected around the end of 2017 or early 2018.
A second, smaller Phase 3 study, SIMPLICITY, was initiated in the second quarter of 2016. The SIMPLICITY study utilizes sachets containing Sollpura powder for oral solution. plan to enroll approximately 46 patients in two parts (Part A and Part B). Part A which evaluated the safety and general usability of the Sollpura powder for oral solution in 15 patients ≥7 years of age was completed in the fourth quarter of 2016. An independent Data Monitoring Committee evaluated the data from Part A and has determined that it is safe to proceed to enroll pediatric subjects below 7 years of age in Part B of the study. Based on the learning from the SOLUTION study, we plans to amend the SIMPLICITY study to follow similar dosing approach as the RESULT study. Part B will commence enrollment towards the middle of 2017. We expect to fully enroll the SIMPLICITY study and report topline data around the end of 2017 or early 2018, depending upon study initiation timeline.
During the third quarter of 2016, we initiated the EASY study, which provides continued access to Sollpura for patients who completed the SOLUTION study. We plan to modify this study to allow patients completing future studies (e.g., RESULT or SIMPLICITY Part B) to have continued access until the BLA for Sollpura is approved by the FDA.
We believe our Sollpura studies may offer a number of potential opportunities for differentiation versus the currently marketed porcine-derived PERTs, including:
|
• |
Use of biotechnology-derived high-purity enzymes that are produced by fermentation processes rather than from mammalian organs which carry a label warning for viral transmission;
|
|
• |
use of a novel chemically modified lipase drug substance that provides resistance to degradation at gastric pH;
|
|
• |
a formulation containing a ratio of the three digestive enzymes (lipase, protease and amylase) that closely matches the naturally-occurring enzyme ratio in humans;
|
|
· |
A product that is wholly non-porcine. The enzymes and excipients are non-porcine, and the capsule meets all of the specifications for kosher and halal;
|
|
• |
a capsule formulation using known, safe, excipients that provides lower pill burden and good delivery performance. The pure, high-activity enzyme constituents, and absence of bulky enteric coating give rise to smaller, easy-to-swallow capsules with good disintegration once swallowed, and adequate storage stability compared with porcine PERTs of an equivalent lipase unit dose strength; and
|
|
• |
a sachet formulation containing Sollpura power for oral solution which can be easily dissolved into water, and finally provides patients, especially young pediatric patients, with an easy-to-swallow dosing option.
|
Our Phase 2 Development of Blisibimod for in IgA Nephropathy
In June 2013, we initiated a Phase 2 clinical study, BRIGHT-SC study in Asian and Eastern Europe. The BRIGHT-SC study is a Phase 2 multicenter, randomized, double-blind, placebo-controlled study to evaluate the efficacy, safety, tolerability and immunogenicity of blisibimod in IgA nephropathy. Enrollment criteria are biopsy-proven IgA nephropathy and proteinuria greater than one gram per 24 hours (1g/24hr). Patients must be receiving standard of care medication including angiotensin converting enzyme inhibitors and angiotensin receptor blockers. Patients enrolled in the BRIGHT-SC study receive 300mg weekly blisibimod or placebo subcutaneously during the first 8 weeks of therapy, the induction phase, followed by a minimum of 24 weeks of 200mg weekly blisibimod or placebo, the maintenance phase. The BRIGHT-SC clinical study has enrolled patients in Southeast Asia, the European Union(“EU”) and Eastern Europe.
In March 2015, an interim futility analysis of BRIGHT-SC study was conducted by an independent unblinded statistician, who evaluated several important biomarkers of renal disease in patients who had completed at least 8 weeks of treatment and recommended the study to continue to completion as planned.
In June 2016, an interim analysis of the BRIGHT-SC study was conducted and the results showed a tendency toward lower proteinuria in blisibimod versus placebo treated patients. While the numerical reduction in proteinuria in blisibimod versus placebo treated patients at week 24 did not meet the predefined statistical primary endpoint of complete or partial response, longer-term data from the study demonstrated an increasingly large separation in proteinuria favoring the blisibimod treated arm compared to the placebo. Additionally, secondary biomarker data from the study, including changes in total B cell counts and changes in immunoglobulins IgA, IgG, and IgM, were highly consistent with previous studies with blisibimod and demonstrated marked reduction after 8 weeks on study.
In December 2016, an additional interim analysis of the BRIGHT-SC study was reported. As with the analysis in June, the numerical reduction in proteinuria in blisibimod versus placebo treated patients at week 48 did not meet the predefined statistical primary endpoint of complete or partial response. However, there was again a tendency toward slowing proteinuria progression with blisibimod. As a result of the increasing proteinuria effect after 48 weeks of dosing, and the demonstration of blisibimod’s effect on immunological markers relevant to IgA nephropathy including reductions of B cells, and immunoglobulins including IgA, IgG and IgM, we elected to continue the study until the majority of patients have had the opportunity to complete 2 years of treatment.
Revenue
We have not generated any revenue from the commercial sales of our product candidates since our inception and do not expect to generate any revenue from the commercial sales of our product candidates in the near term. However, as a result of the collaborative arrangement that we entered into with Zenyaku in December 2014 for the development of blisibimod, we began recognizing license fee revenue and collaborative revenue in 2015. The license fee from the collaborative arrangement with Zenyaku was initially amortized as revenue over the performance obligation period (product development period) while reimbursement for our FTEs was recorded as collaborative revenues as incurred. In September 2015, we received a termination notice from Zenyaku to terminate the collaborative arrangement, effective January 7, 2016. Consequently, we revised the amortization period of our deferred revenue to correspond with the shortened collaboration period and have fully amortized our deferred revenue as of January 7, 2016.
Research and Development Expenses
Since our inception, we have focused our activities on our product candidates development programs. We expense research and development costs as they are incurred. Research and development expenses consist of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by contract research organizations, or CROs, materials and supplies, licenses and fees and overhead allocations consisting of various administrative and facilities-related costs. Research and development activities are also separated into three main categories: licensing, clinical development and pharmaceutical development. Licensing costs consist primarily of fees paid pursuant to license agreements. Historically, our clinical development costs have included costs for preclinical and clinical studies. We expect to incur substantial clinical development costs for the continued development of blisibimod. Pharmaceutical development costs consist of expenses incurred relating to clinical studies and product formulation and manufacturing.
We are developing our product candidates in parallel, and we typically use our employee and infrastructure resources across several projects. Thus, some of our research and development costs are not attributable to an individually named project. These unallocated costs include salaries, stock-based compensation charges and related “fringe benefit” costs for our employees (such as workers compensation and health insurance premiums), consulting fees and travel.
The following table shows our total research and development expenses for 2016, 2015 and 2014 (in thousands):
|
Year Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
|
Allocated costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blisibimod (1) (2)
|
|
$
|
13,222
|
|
|
$
|
21,082
|
|
|
$
|
17,806
|
|
Sollpura
|
|
|
26,113
|
|
|
|
6,682
|
|
|
|
464
|
|
Varespladib (3)
|
|
|
—
|
|
|
|
—
|
|
|
|
(464
|
)
|
Unallocated costs
|
|
|
7,177
|
|
|
|
5,734
|
|
|
|
4,033
|
|
Total research and development expense
|
|
$
|
46,512
|
|
|
$
|
33,498
|
|
|
$
|
21,839
|
|
|
(1) |
During the year ended December 31, 2015, Blisibimod expense included reimbursed development costs totaling $1.5 million pursuant to the Zenyaku Agreement.
|
|
(2) |
During the year ended December 31, 2014, Blisibimod expense included non-cash license fee $1.0 million in connection with an amendment to the Amgen Agreement.
|
|
(3) |
During the year ended December 31, 2014, Varespladib expense included a refund of $0.5 million from a vendor for our VISTA-16 clinical study. All development efforts for Varespladib were terminated in 2012.
|
We expect that a large percentage of our research and development expenses in the future will be incurred in support of our current and future clinical development programs. These expenditures are subject to numerous uncertainties in timing and cost to completion. As we obtain results from clinical studies, we may elect to discontinue or delay clinical studies for certain clinical development programs in order to focus our resources on more promising clinical development programs. Completion of clinical studies may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of product candidates. The cost of clinical studies may vary significantly over the life of a program as a result of differences arising during clinical development, including:
|
• |
the number of sites included in the studies;
|
|
• |
the length of time required to enroll suitable patient subjects;
|
|
• |
the number of patients that participate in the studies;
|
|
• |
the number of doses that patients receive;
|
|
• |
the drop-out or discontinuation rates of patients; and
|
|
• |
the duration of patient follow-up.
|
Our expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to contracts with many research institutions, clinical research organizations and other service providers that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts are mainly driven by time and materials incurred by these service providers. Expenses related to clinical studies generally are accrued based on time and materials incurred by the service providers and in accordance with the contracts. If timelines or contracts are modified based upon changes to the clinical study design or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis.
None of our product candidates has received FDA or foreign regulatory marketing approval. In order to grant marketing approval, the FDA or foreign regulatory agencies must conclude that clinical data establishes the safety and efficacy of our product candidates and that the manufacturing facilities, processes and controls are adequate. Despite our efforts, our product candidates may not offer therapeutic or other improvement over existing, comparable drugs, be proven safe and effective in clinical studies, or meet applicable regulatory standards.
As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will receive cash inflows from the commercialization and sale of an approved product candidate, if ever.
General and Administrative Expenses
General and administrative expenses consist primarily of compensation for employees in executive and operational functions, including clinical, chemical manufacturing, regulatory, finance and business development. Other significant costs include professional fees for legal services, including legal services associated with obtaining and maintaining patents. We will continue to incur significant general and administrative expenses as a public company, including costs for insurance, costs related to the hiring of additional personnel, payment to outside consultants, lawyers and accountants and complying with the corporate governance, internal controls and similar requirements applicable to public companies.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.
While our significant accounting policies are more fully described in the accompanying notes to the consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2016, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements.
Revenue Recognition
During 2015, we had a collaborative arrangement with Zenyaku which provided for various types of payments to us, including development milestones, sales milestone, royalty, and reimbursement for a portion of the Company’s internal and external costs. All payments from Zenyaku were nonrefundable. The collaborative arrangement was on a best-efforts basis, did not require scientific achievement as a performance obligation and provided for payment to be made when costs were incurred or services were performed. The collaboration was terminated on January 7, 2016 pursuant to a termination notice from Zenyaku to us.
With respect to the collaborative arrangement with Zenyaku, we recognized revenue in accordance with FASB Accounting Standards Codification, or ASC 605 “ Revenue Recognition ”, subtopic ASC 605-25 “ Revenue with Multiple Element Arrangements ” and subtopic ASC 605-28 “ Revenue Recognition-Milestone Method ”, which provide accounting guidance for revenue recognition for arrangements with multiple deliverables and guidance on defining the milestone and determining when the use of the milestone method of revenue recognition for research and development transactions is appropriate, respectively. For multiple-element arrangements, each deliverable within a multiple deliverable revenue arrangement is accounted for as a separate unit of accounting if both of the following criteria are met: (1) the delivered item or items have value to the customer on a standalone basis and (2) for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control.
The deliverables under the Zenyaku agreement had been determined to be a single unit of accounting and as such any license fees received were recorded as deferred revenue and recognized ratably over the term of the estimated performance period under the agreement, which was the product development period. As a result of the early termination of the Zenyaku Agreement, we revised the amortization period of our deferred revenue to correspond with the shortened collaboration period in the third quarter of 2015 and fully amortized our deferred revenue as of January 7, 2016.
For the collaborative research activities, we were entitled to reimbursement from Zenyaku for our internal personnel cost at a pre-determined full time equivalent (“FTE”) rate. Revenue related to FTE services was recognized as research services that were performed over the related performance periods. We were required to perform research and development activities as specified in the collaboration agreement. The payments received were not refundable and were based on a contractual reimbursement rate per FTE working on the project. Reimbursement for FTE cost was recorded as collaborative revenue as incurred.
Stock-Based Compensation
We account for stock options and stock purchase rights related to our equity incentive plans under the provisions of ASC 718 which requires the recognition of the fair value of stock-based compensation. The fair value of stock options is estimated using a Black-Scholes option valuation model. This model requires the input of subjective assumptions including expected stock price volatility, expected life and estimated forfeitures of each award. The fair value of equity-based awards is amortized ratably over the requisite service period of the award. Due to the limited amount of historical data available to us, particularly with respect to stock-price volatility, employee exercise patterns and forfeitures, actual results could differ from our assumptions.
We account for equity instruments issued to non-employees in accordance with the provisions of ASC 718 and ASC 505, “Equity.” As a result, the non-cash charge to operations for non-employee options with service or other performance criteria is affected each reporting period by changes in the estimated fair value of our common stock, as the underlying equity instruments vest. The two factors which most affect these changes are the price of the common stock underlying stock options for which stock-based compensation is recorded and the volatility of the stock price. If our estimates of the fair value of these equity instruments change, it may have the effect of significantly changing compensation expense
Fair Value of Financial Instruments with Characteristics of Both Equity and Liability
The Company has issued certain financial instruments, including warrants to purchase common stock, which have the characteristics of both liability and equity. Financial instruments such as warrants that are evaluated to be classified as liabilities are fair valued upon issuance and are remeasured at fair value at subsequent reporting periods with the resulting change in fair value recorded in other income/(expense). The fair value of warrants is estimated using the valuation models that require the input of subjective assumptions including stock price volatility and expected life. As of December 31, 2016, all warrants have been reclassified from liability to equity.
Accrued Clinical Expense
We make estimates of our accrued clinical expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice us at least monthly in arrears for services performed. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued clinical expenses include:
|
• |
fees paid to CROs in connection with clinical studies;
|
|
• |
fees paid to investigative sites in connection with clinical studies;
|
|
• |
fees paid to contract manufacturers in connection with the production of clinical study materials; and
|
|
• |
fees paid to vendors in connection with preclinical development activities.
|
We base our accruals related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with many research institutions, clinical research organizations and other service providers that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts are mainly driven by time and materials incurred by these service providers. In accruing for service fees, we estimate the time and materials incurred by these service providers in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.
Results of Operations
Comparison of Years Ended December 31, 2016 and 2015
Revenue
The following table summarizes our revenues for the years ended December 31, 2016 and 2015 (in thousands, except percentages):
|
|
2016
|
|
|
2015
|
|
|
$ Change
|
|
|
% Change
|
|
License revenue
|
|
$
|
139
|
|
|
$
|
2,562
|
|
|
$
|
(2,423
|
)
|
|
|
(95
|
)%
|
Collaborative revenue
|
|
|
6
|
|
|
|
623
|
|
|
|
(617
|
)
|
|
|
(99
|
)%
|
Total revenues
|
|
$
|
145
|
|
|
$
|
3,185
|
|
|
$
|
(3,040
|
)
|
|
|
(96
|
)%
|
Revenue decreased in the year ended December 31, 2016 primarily due to the termination of a collaborative partnership with Zenyaku. We began to recognize revenues in 2015 as a result of the collaborative arrangement that we entered into with Zenyaku in December 2014 for the development of blisibimod. During the year ended December 31, 2015, we recorded $2.6 million for the amortization of the license fee and $0.6 million for the reimbursement of FTEs. License fee from the collaborative arrangement was amortized over the period of performance (product development period) while reimbursement for our FTEs was recorded as collaborative revenue. In September 2015, we received a termination notice from Zenyaku to terminate the collaborative arrangement, effective January 7, 2016. Consequently, we revised the amortization period of our deferred revenue to correspond with the shortened collaboration period and fully amortized the deferred revenue as of January 7, 2016.
Research and Development Expense
The following table summarizes our research and development expenses for the years ended December 31, 2016 and 2015 (in thousands, except percentages):
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
|
Research and development expense
|
|
$
|
46,512
|
|
|
$
|
33,498
|
|
|
$
|
13,014
|
|
|
|
39
|
%
|
Research and development expenses increased in 2016 from 2015 primarily due to costs associated with acceleration of the manufacturing scale-up timeline, including the production of demonstration and registration batches at commercial launch scale for Sollpura™. Additionally, clinical development expense also increased from prior year due to the initiation of three new clinical studies, namely the CHABLIS-7.5 study with blisibimod in severe lupus patients, the SIMPLICITY study with Sollpura in sachet formulation and the EASY study which provides continued access to Sollpura™ for patients who rolled off the SOLUTION clinical study.
General and Administrative Expense
The following table summarizes our general and administrative expenses for the years ended December 31, 2016 and 2015 (in thousands, except percentages):
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
|
General and administrative expenses
|
|
$
|
11,071
|
|
|
$
|
7,568
|
|
|
$
|
3,503
|
|
|
|
47
|
%
|
General and administrative expenses increased in 2016 from 2015 primarily due to higher non-cash stock-based compensation expense recognized in 2016 as a result of options issued in 2016 and higher expense related to professional services to support the growth of the Company.
Research Award
The following table summarizes our research award for the years ended December 31, 2016 and 2015 (in thousands, except percentages):
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
|
Research Award
|
|
$
|
(261
|
)
|
|
$
|
(2,638
|
)
|
|
$
|
(2,377
|
)
|
|
|
(91
|
)%
|
Research award decreased in 2016 from 2015 primarily due to the timing of achieving certain milestones specified in the award agreement. We achieved a majority of the milestones in 2015 and as a result we recognized $2.6 million out of total of $3.0 million in research award from CFFT for the year ended December 31, 2015.
Other Income (Expense)
The following table summarizes our other income (expenses) for the years ended December 31, 2016 and 2015 (in thousands, except percentages):
|
|
2016
|
|
|
2015
|
|
|
$ Change
|
|
|
% Change
|
|
Other income (expense)
|
|
$
|
(90
|
)
|
|
$
|
23
|
|
|
$
|
(113
|
)
|
|
|
(492
|
)%
|
Change in fair value of warrant liability
|
|
|
1,744
|
|
|
|
—
|
|
|
|
1,744
|
|
|
|
100
|
%
|
Total other income (expense)
|
|
$
|
1,654
|
|
|
$
|
23
|
|
|
$
|
1,631
|
|
|
|
7,092
|
%
|
Other income (expense) recorded in 2016 included change in fair value of warrant liability, interest earned on our cash and cash equivalents and the net impact of realized gain or loss from foreign currency exchange fluctuations. In connection with the subscription agreement for the sale of convertible preferred stock entered in September 2016, we issued common stock warrants to certain institutional investors. The initial fair value of the liability associated with these warrants was $3.7 million, and the fair value decreased to $1.9 million when the number of shares of common stock underlying the warrants became fixed in November 2016. The changes in the fair value of the warrants is recognized in the statement of operations in the year ended December 31, 2016. Other income (expense) recorded in 2015 was mainly a result of interest earned on our cash and cash equivalents and the net impact of realized gain or loss from foreign currency exchange fluctuations.
Comparison of Years Ended December 31, 2015 and 2014
Revenue
The following table summarizes our revenues for the years ended December 31, 2015 and 2014 (in thousands, except percentages):
|
|
2015
|
|
|
2014
|
|
|
$ Change
|
|
|
% Change
|
|
License revenue
|
|
$
|
2,562
|
|
|
$
|
—
|
|
|
$
|
2,562
|
|
|
|
100
|
%
|
Collaborative revenue
|
|
|
623
|
|
|
|
—
|
|
|
|
623
|
|
|
|
100
|
%
|
Total revenues
|
|
$
|
3,185
|
|
|
$
|
—
|
|
|
$
|
3,185
|
|
|
|
100
|
%
|
We began to recognize revenues in 2015 as a result of the collaborative arrangement that we entered into with Zenyaku in December 2014 for the development of blisibimod. During the year ended December 31, 2015, we recorded $2.6 million for the amortization of the license fee and $0.6 million for the reimbursement of FTEs. License fee from the collaborative arrangement was amortized over the period of performance (product development period) while reimbursement for our FTEs was recorded as collaborative revenue. In September 2015, we received a termination notice from Zenyaku to terminate the collaborative arrangement, effective January 7, 2016. Consequently, we revised the amortization period of our deferred revenue to correspond with the shortened collaboration period and have fully amortized our deferred revenue as of January 7, 2016.
Research and Development Expense
The following table summarizes our research and development expenses for the years ended December 31, 2015 and 2014 (in thousands, except percentages):
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
Research and development expense
|
|
$
|
33,498
|
|
|
$
|
21,839
|
|
|
$
|
11,659
|
|
|
|
53
|
%
|
Research and development expenses increased in 2015 from 2014 primarily due to higher non-cash stock-based compensation recognized in 2015 as a result of options issued in 2015 and higher expense in manufacturing and CRO fees to support the ongoing CHABLIS-SC1 and BRIGHT-SC studies and enable the initiation of our Phase 3 SOLUTION study with Sollpura. The increase is partially offset by $1.5 million in expense reimbursements from Zenyaku for certain development costs associated with blisibimod.
General and Administrative Expense
The following table summarizes our general and administrative expenses for the years ended December 31, 2015 and 2014 (in thousands, except percentages):
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
General and administrative expenses
|
|
$
|
7,568
|
|
|
$
|
6,620
|
|
|
$
|
948
|
|
|
|
14
|
%
|
General and administrative expenses increased in 2015 from 2014 primarily due to higher non-cash stock-based compensation expense recognized in 2015 as a result of options issued in 2015 and higher expense related to professional services to support the growth of the Company.
Research Award
The following table summarizes our research award for the years ended December 31, 2015 and 2014 (in thousands, except percentages):
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|
Research Award
|
|
$
|
(2,638
|
)
|
|
$
|
—
|
|
|
$
|
(2,638
|
)
|
|
|
(100
|
)%
|
In March 2015, we received a research award of up to $3 million from CFFT for our development of Sollpura. For the year ended December 31, 2015, we recognized $2.6 million in research award from CFFT in connection with achieving certain milestones specified in the award agreement. The amount has been recognized as a component of Operating Expenses. There was no research award recognized in 2014.
Other Income (Expense)
The following table summarizes our other income (expenses) for the years ended December 31, 2015 and 2014 (in thousands, except percentages):
|
|
2015
|
|
|
2014
|
|
|
$ Change
|
|
|
% Change
|
|
Other expense
|
|
$
|
23
|
|
|
$
|
(96
|
)
|
|
$
|
119
|
|
|
|
124
|
%
|
Interest expense
|
|
|
—
|
|
|
|
(1,049
|
)
|
|
|
1,049
|
|
|
|
100
|
%
|
Total Other income (expense)
|
|
$
|
23
|
|
|
$
|
(1,145
|
)
|
|
$
|
1,168
|
|
|
|
102
|
%
|
Other income (expense) recorded in 2015 and 2014 was mainly a result of interest earned on our cash and cash equivalents and the net impact of realized gain or loss from foreign currency exchange fluctuations. There was no interest expense recorded in 2015 due to the full payment of our long-term debt in 2014.
Liquidity and Capital Resources
To date, we have funded our operations primarily through private placements of preferred stock and common stock, convertible debt, debt financings and public offerings of common stock, equity investment and cost reimbursement from a collaborative partner, and a research award from CFFT. As of December 31, 2016, we had cash and cash equivalents of approximately $20.8 million.
Our principal liquidity requirements are primarily to meet our working capital needs, support ongoing business activities, research and development, and our capital expenditure needs.
In September 2016, we entered into a subscription agreement with certain institutional investors, pursuant to which we sold 17,000 Series X units for a purchase price of $1,000 per unit in a registered direct offering. Each unit consists of one share of Series X Convertible Preferred Stock and a warrant to purchase 126.96 shares of common stock at an exercise price of $2.36 per share, which is a 20% premium over the conversion price of Series X Convertible Preferred Stock. The offering resulted in gross proceeds of $17.0 million. The subscription agreement provides that the investors have the right, but not the obligation, to make an additional investment of up to $28.3 million within 20 trading days following our initial public announcement of top-line data from our SOLUTION study (“Additional Investment”). No further investments were made by the investors and the right for Additional Investment expired on January 26, 2017.
On April 21, 2016, we entered into an At Market Issuance Sales Agreement (“ATM Agreement”) with H.C. Wainwright & Co., LLC (“H.C. Wainwright”) to create an at-the-market equity program under which the Company from time to time may offer and sell shares of its common stock, par value $0.001 per share, having an aggregate offering price of up to $25.0 million through H.C. Wainwright, as agent. $2.7 million was sold during the year ended December 31, 2016, leaving a balance of $22.3 million available for future sale pursuant to the Agreement.
On March 12, 2015, we executed an equity purchase agreement (as amended, the “Purchase Agreement”), with Lincoln Park Capital Fund, LLC (“LPC”) pursuant to which we have the right, but not the obligation, to sell to LPC up to an aggregate of $10.0 million of common stock over a period of two years in amounts as set forth in the Purchase Agreement. In July 2015, we amended the Purchase Agreement and reduced the amount LPC can purchase to an aggregate of $6.0 million of common stock over a period of two years. On April 27, 2016, we amended the Purchase Agreement with LPC, pursuant to which the Company has the right, but not the obligation, to sell to LPC up to an aggregate of $15.0 million in shares of common stock by March 12, 2017. As of December 31, 2016, $1.6 million had been sold through the Purchase Agreement, leaving a balance of $13.4 million available for future sale pursuant to the Agreement. The Purchase Agreement expired on March 12, 2017.
On November 15, 2013, we entered into a Sales Agreement (the “Agreement”) with Cowen to create an at-the-market (“ATM’) offering program under which the Company from time to time could offer and sell shares of its common stock, par value $0.001 per share, having an aggregate offering price of up to $25.0 million through Cowen, as agent. As of December 31, 2016, we had sold $24.3 million of common stock through the ATM program, of which $2.5 million was sold during the year ended December 31, 2016. The Agreement was terminated on April 21, 2016.
In March 2016, we filed a universal shelf registration statement with the SEC on Form S-3 (File No. 333-210166) for the proposed offering from time to time of up to $100.0 million of our securities, including common stock, preferred stock, debt securities and/or warrants. On April 21, 2016, we registered $25.0 million under the registration statement for the H.C. Wainwright ATM Agreement. On March 14, 2017, we amended the H.C. Wainwright ATM Agreement and reduced the amount registered under the registration statement to $23 million. On April 27, 2016, we registered $14.4 million under the registration statement for the LPC Purchase Agreement. On March 12, 2017, upon the expiration of the LPC Purchase Agreement, $13.4 million of unused amount became available under the registration statement. On September 8, 2016, we registered $22.1 million under the registration statement for a subscription agreement with certain institutional investors for the sale of convertible preferred stock and issuance of warrants in a registered direct offering. On March 14, 2017, we entered into an equity underwriting agreement H.C. Wainwright, pursuant to which we agreed to issue and sell an aggregate of 30,000,000 shares of our common stock and warrants to purchase an aggregate of 60,000,000 shares of our common stock for gross proceeds of $15 million. Under the terms of the underwriter agreement, we granted the underwriter a 30-day option to purchase an additional 4,500,000 shares of common stock and/or warrants to purchase up to an additional 9,000,000 shares of common stock. The financing transaction is expected to close on March 17, 2017, subject to satisfaction of customary closing conditions. In connection with this registered direct offering of common stock and warrants, we registered $53.5 million under the registration statement. As of the date of this report, there is a balance of $0.4 million available for future issuance under the registration statement.
We do not believe our current capital is sufficient to fund our operating plan through March 2018. Accordingly, our financial statements for the fiscal year ended December 31, 2016, included in this Annual Report on Form 10-K contain a going concern qualification from our independent registered public accounting firm. Despite the capacity remaining under our registration statement and the remaining amounts available under our ATM and LPC Purchase Agreement, pursuant to Instruction I.B.6 to Form S-3, we may not sell more than the equivalent of one-third of our public float during any 12 consecutive months so long as our public float is less than $75 million, which will limit our ability to raise funds using those facilities. As of March 11, 2017, our public float is approximately $34.8 million. Other than those facilities, we currently do not have arrangements to obtain additional financing. Any such financing could be difficult to obtain on favorable terms or at all. If we are unable to raise additional funds, we may have to delay, reduce or eliminate some of our clinical trials and our development programs. Even if we raise additional funds by issuing equity or equity-linked securities, such financings may only be available on unattractive terms and, in such event, the market price of our common stock may decline and further dilution to our existing stockholders will result. In addition, the expectation of future dilution as a result of our offering of securities convertible into equity securities may cause our stock price to decline.
We will need substantial additional financing to continue the development of our product candidates, obtain regulatory approvals, and prepare for commercial readiness if the clinical trials are successful; such financing may not be available on terms favorable to us if at all, which raises substantial doubt about our ability to continue as a going concern as of the date of this report. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our clinical trials. We plan to meet our capital requirements primarily through issuances of equity securities, future partnerships, debt financing, and in the longer term, revenue from product sales. Failure to generate revenue or raise additional capital would adversely affect our ability to achieve our intended business objectives.
Cash Flows
Comparison of Years Ended December 31, 2016 and 2015
Cash flows during the years ended December 31, 2016 and 2015 consisted of the following (in thousands):
|
|
2016
|
|
|
2015
|
|
Net cash used in operating activities
|
|
$
|
(48,919
|
)
|
|
$
|
(30,907
|
)
|
Net cash used in investing activities
|
|
|
(766
|
)
|
|
|
(80
|
)
|
Net cash provided by financing activities
|
|
|
23,577
|
|
|
|
75,299
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(26,108
|
)
|
|
$
|
44,312
|
|
During the years ended December 31, 2016 and 2015, our operating activities used cash of $48.9 million and $30.9 million, respectively. The increase in cash used for operating activities in 2016 was mainly attributable to higher research and development expense due to costs associated with acceleration of the manufacturing scale-up timeline, the purchase and installation of manufacturing equipment at our contract manufacturers, and the initiation of three new clinical studies in 2016.
During the year ended December 31, 2016, cash used in investment activities was $0.8 million, which was primarily driven by the purchase of capital equipment to support the manufacturing activities for the development of Sollpura. During the year ended December 31, 2015, cash used in investing activities was immaterial.
During the year ended December 31, 2016, cash provided by financing activities was $23.6 million, which was driven by net proceeds received from the sale of our common stock pursuant to an equity purchase agreement, sale of common stock pursuant to at-the-market (“ATM”) sales agreements, and sale of preferred stock and warrants to purchase our common stock pursuant to a subscription agreement. During the year ended December 31, 2015, cash provided by financing activities was $75.3 million, which was driven by net proceeds of $12.1 million received from the sale of our common stock through an ATM program, $53.9 million received from the sale of our common stock through two public offerings, and $9.0 million from the sale of our common stock at a 30% premium to a collaborative partner.
Comparison of Years Ended December 31, 2015 and 2014
Cash flow from operations during the years ended December 31, 2015 and 2014 consisted of the following (in thousands):
|
|
2015
|
|
|
2014
|
|
Net cash used in operating activities
|
|
$
|
(30,907
|
)
|
|
$
|
(25,601
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(80
|
)
|
|
|
10,000
|
|
Net cash provided by (used in) financing activities
|
|
|
75,299
|
|
|
|
(7,706
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
44,312
|
|
|
$
|
(23,307
|
)
|
During 2015 and 2014, our operating activities used cash of $30.9 million and $25.6 million, respectively. The increase in cash used for operating activities in 2015 was mainly attributable to higher research and development expense due to the continued advancement of blisibimod in the clinics and the launch of a new registration enabling trial with Sollpura.
During the year ended December 31, 2015, investing activities used cash of $80,000 in capital expenditures. During the year ended December 31, 2014, investing activities provided cash of $10.0 million, which amount represented the release of $10.0 million in restricted cash as a result of repayment of our long-term debt to Square 1 Bank.
During the year ended December 31, 2015, financing activities provided cash of $75.3 million from the issuance of common stock through two rounds of public offerings, an ATM sales agreement, and equity investments by a collaborative partner. During the year ended December 31, 2014, financing activities used cash of $7.7 million, which represented the net effect of $18.1 million used for the early retirement of our venture debt, offset by $10.4 million in net proceeds received from the sale of stock pursuant to an equity purchase agreement and an ATM sales agreement.
Contractual Obligations and Commitments
We have lease obligations consisting of two operating leases for our operating facilities that expires in September 2017 and May 2019, respectively.
The following table summarizes our estimated scheduled future minimum contractual obligations and commitments as of December 31, 2016 (in thousands):
|
Payment Due by Period
|
|
|
|
Contractual Obligations
|
< 1 year
|
|
1-3 years
|
|
3-5 years
|
|
> 5 years
|
|
Total
|
|
Facility Leases
|
|
$
|
209
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
256
|
|
The above amounts exclude potential payments to be made under our license agreements to our licensors that are based on the progress of our product candidates in development, as these payments are not determinable.
Under the Amgen Agreement, we are obligated to make additional milestone payments upon the achievement of certain development, regulatory and commercial objectives. We are also obligated to pay royalties on future net sales of products that are developed and approved as defined by this collaboration. Our royalty obligations as to a particular licensed product will be payable on a country-by-country basis and licensed on a product-by-licensed-product basis, for the longer of (a) the date of expiration of the last-to-expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell or import of such licensed product by us or a sublicensee in such country, or (b) 10 years after the first commercial sale of the applicable licensed product in the applicable country.
Under the Lilly Agreement, we are obligated to make milestone payments upon the achievement of certain regulatory and commercial sales milestones. In addition, after sales of the licensed products exceed an aggregate of $100.0 million in the United States, we are obligated to pay tiered royalties on future net sales, ranging from the single digits to the mid-teens, for products that are developed and approved as defined in the Lilly Agreement. Our royalty obligations as to a particular licensed product will be payable, on a licensed product-by-licensed product basis, for the longer of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by the Company or a sublicense in such country, or (b) 12 years after the first commercial sale of the applicable licensed product in the applicable country.
Under the research award agreement with CFFT, we are obligated to pay royalties to CFFT as follows: i) a one-time royalty in an amount equal to five times the actual award, payable in three installments between the first and second anniversaries of the first commercial sale of a product; ii) a one-time royalty in an amount equal to the actual award after net product sales reaches $100 million; and iii) in the event of a license, sale or other transfer of the product or a change of control transaction prior to the commercial sale of the product, a milestone payment equal to three times the actual award.
Funding Requirements
To date, we have not generated any revenue. We expect to incur substantial expenses and generate significant operating losses over the next several years as we continue to advance our product candidates into clinical studies and as we:
|
• |
continue clinical development of blisibimod;
|
|
• |
hire additional clinical, scientific and management personnel; and
|
|
• |
implement new operational, financial and management information systems.
|
Our future capital uses and requirements depend on numerous forward-looking factors. These factors include the following:
|
• |
the progress of clinical studies of our product candidates;
|
|
• |
the time and costs involved in obtaining regulatory approvals;
|
|
• |
delays that may be caused by evolving requirements of regulatory agencies;
|
|
• |
the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims;
|
|
• |
our ability to establish, enforce and maintain selected strategic alliances; and
|
|
• |
the acquisition of technologies, product candidates and other business opportunities that require financial commitments.
|
At December 31, 2016, our capital resources consisted of cash and cash equivalents of $20.8 million. On March 14, 2017, we entered in an equity underwriting agreement with H.C. Wainwright, pursuant to which we agreed to issue and an aggregate of 30,000,000 shares of our common stock and warrants to purchase an aggregate of 60,000,000 shares of our common stock for gross proceeds of $15 million. Under the terms of the underwriter agreement, we granted the underwriter a 30-day option to purchase an additional 4,500,000 shares of common stock and/or warrants to purchase up to an additional 9,000,000 shares of common stock. The financing transaction is expected to close on March 17, 2017, subject to satisfaction of customary closing conditions. We will need substantial additional financing to continue the development of our product candidates, obtain regulatory approvals, and prepare for commercial readiness if the clinical trials are successful; such financing may not be available on terms favorable to us, if at all, which raises substantial doubt about our ability to continue as a going concern as of the date of this report. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of its clinical trials. We plan to meet our capital requirements primarily through issuances of equity securities, future partnerships, debt financing, and in the longer term, revenue from product sales. Failure to generate revenue or raise additional capital would adversely affect our ability to achieve its intended business objectives.
Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities or by selling debt securities, if convertible, further dilution to our existing stockholders may result. To the extent our capital resources are insufficient to meet our future capital requirements, we will need to finance our future cash needs through public or private equity offerings, collaboration agreements, debt financings or licensing arrangements.
If adequate funds are not available, we may be required to terminate, significantly modify or delay our development programs, or obtain funds through collaborators that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. We may elect to raise additional funds even before we need them if the conditions for raising capital are favorable.
We will need substantial additional financing to continue the development of our product candidates, obtain regulatory approvals, and prepare for commercial readiness if the clinical trials are successful; such financing may not be available on terms favorable to us, if at all, which raises substantial doubt about our ability to continue as a going concern as of the date of this report. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of its clinical trials. We plan to meet our capital requirements primarily through issuances of equity securities, future partnerships, debt financing, and in the longer term, revenue from product sales. Failure to generate revenue or raise additional capital would adversely affect the Company’s ability to achieve its intended business objectives
Off-Balance Sheet Arrangements
We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. We are exposed to market risk related to fluctuations in interest rates and market prices. However, since a majority of our investments are in highly liquid money market funds, we do not believe we are subject to any material market risk exposure. As of December 31, 2016, we did not have any material derivative financial instruments. The fair value of our cash and cash equivalents was $20.8 million as of December 31, 2016.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements required by this item are set forth beginning in Item 15 of this report and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive officer and Principal Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2016. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to that company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(e), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the year covered by this report. Based on the foregoing, our Chief Executive Officer and Principal Accounting Officer concluded that, as of December 31, 2016, our disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures which pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP; provide reasonable assurance that receipts and expenditures are being made only in accordance with management’s and or the board of directors’ authorization; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect material errors in our consolidated financial statements. Also, projection of any evaluation of the effectiveness of our internal control over financial reporting to future periods is subject to the risk that controls may become inadequate because of changes in conditions, because the degree of compliance with our policies and procedures may deteriorate.
Management, including our chief executive officer and principal accounting officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2016. We reviewed the results of management’s assessment with the Audit Committee of our board of directors. Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2016. BDO USA, LLP, our independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting as of December 31, 2016, which is included herein.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the most recent quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
The information required by this Item 10 is incorporated by reference from our definitive Proxy Statement for our 2017 Annual Meeting of Stockholders (“Proxy Statement”), where it appears under the headings “Election of Directors”, “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance.”
We have adopted a Code of Ethics that applies to all directors, officers and employees of the Company. We publicize the Code of Business Conduct and Ethics through posting the policy on our website, http://www.anthera.com.
ITEM 11.
Executive Compensation
The information required by this Item 11 is incorporated by reference from our Proxy Statement where it appears under the headings “Compensation Discussion and Analysis”, “Compensation of Executive Officers”, “Election of Directors” and “Compensation Committee Report.”
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 is incorporated by reference from our Proxy Statement where it appears under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is incorporated by reference from our Proxy Statement where it appears under the headings “Certain Relationships and Related Transactions” and “Election of Directors.”
ITEM 14.
Principal Accountant Fees and Services
The information required by this Item 14 is incorporated by reference from our Proxy Statement where it appears under the heading “Ratification of Auditors.”
PART IV
ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL
STATEMENT SCHEDULES
The following documents are filed as part of this report:
|
(1) |
Index list to Consolidated Financial Statements:
|
|
Page
|
|
61
|
|
62
|
|
63
|
|
64
|
|
65
|
|
66
|
|
67
|
|
(2) |
Consolidated financial statement Schedules
|
All other schedules are omitted because they are not required or the required information is included in the consolidated financial statements or notes thereto.
The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Anthera Pharmaceuticals, Inc.
Hayward, California
We have audited the accompanying consolidated balance sheets of Anthera Pharmaceuticals, Inc. as of December 31, 2016 and 2015 and the related consolidated statements of operations and comprehensive loss, Series X Convertible Preferred Stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Anthera Pharmaceuticals, Inc. at December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Anthera Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 16, 2017, expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
San Jose, California
March 16, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Anthera Pharmaceuticals, Inc.
Hayward, California
We have audited Anthera Pharmaceuticals, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Anthera Pharmaceuticals, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Anthera Pharmaceuticals, Inc.’s maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Anthera Pharmaceuticals, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive loss, series X convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2016 and our report dated March 16, 2017, expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
San Jose, California
March 16, 2017
ANTHERA PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,843
|
|
|
$
|
46,951
|
|
Accounts receivable
|
|
|
—
|
|
|
|
326
|
|
Prepaid expenses and other current assets
|
|
|
1,865
|
|
|
|
585
|
|
Total current assets
|
|
|
22,708
|
|
|
|
47,862
|
|
Property and equipment — net
|
|
|
763
|
|
|
|
263
|
|
TOTAL
|
|
$
|
23,471
|
|
|
$
|
48,125
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,782
|
|
|
$
|
5,259
|
|
Accrued clinical expenses
|
|
|
3,884
|
|
|
|
1,377
|
|
Accrued liabilities
|
|
|
113
|
|
|
|
98
|
|
Accrued payroll and related costs
|
|
|
1,845
|
|
|
|
1,596
|
|
Deferred revenue
|
|
|
—
|
|
|
|
138
|
|
Total current liabilities
|
|
|
10,624
|
|
|
|
8,468
|
|
Total liabilities
|
|
|
10,624
|
|
|
|
8,468
|
|
Commitments and Contingencies (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingently Redeemable Series X Convertible Preferred Stock, $0.001 par
value, 487 and 0 shares issued and outstanding as of December 31, 2016
and December 31, 2015, respectively
|
|
|
|
|
|
|
|
|
|
|
|
377
|
|
|
|
—
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Series X Convertible Preferred Stock, $0.001 par value, 5,000,000 shares
authorized; 9,012 and 0 shares issued and outstanding as of December 31, 2016
and December 31, 2015, respectively
|
|
|
8,614
|
|
|
|
—
|
|
Common stock, $0.001 par value, 100,000,000 shares authorized; 45,964,286 and
40,004,037 shares issued and outstanding as of December 31, 2016 and
December 31, 2015, respectively
|
|
|
46
|
|
|
|
40
|
|
Additional paid-in capital
|
|
|
411,364
|
|
|
|
391,648
|
|
Accumulated deficit
|
|
|
(407,554
|
)
|
|
|
(352,031
|
)
|
Total stockholders’ equity
|
|
|
12,470
|
|
|
|
39,657
|
|
TOTAL
|
|
$
|
23,471
|
|
|
$
|
48,125
|
|
See accompanying notes to consolidated financial statements.
ANTHERA PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
|
|
Years ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
License revenue
|
|
$
|
139
|
|
|
$
|
2,562
|
|
|
$
|
—
|
|
Collaborative revenue
|
|
|
6
|
|
|
|
623
|
|
|
|
—
|
|
Total revenues
|
|
|
145
|
|
|
|
3,185
|
|
|
|
—
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
46,512
|
|
|
$
|
33,498
|
|
|
$
|
21,839
|
|
General and administrative
|
|
|
11,071
|
|
|
|
7,568
|
|
|
|
6,620
|
|
Research award
|
|
|
(261
|
)
|
|
|
(2,638
|
)
|
|
|
—
|
|
Total operating expenses
|
|
|
57,322
|
|
|
|
38,428
|
|
|
|
28,459
|
|
LOSS FROM OPERATIONS
|
|
|
(57,177
|
)
|
|
|
(35,243
|
)
|
|
|
(28,459
|
)
|
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
(90
|
)
|
|
|
23
|
|
|
|
(96
|
)
|
Interest expense
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,049
|
)
|
Change in fair value of warrant liability
|
|
|
1,744
|
|
|
|
—
|
|
|
|
—
|
|
Total other income (expense)
|
|
|
1,654
|
|
|
|
23
|
|
|
|
(1,145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(55,523
|
)
|
|
$
|
(35,220
|
)
|
|
$
|
(29,604
|
)
|
Deemed dividends attributable to preferred stock
|
|
|
(10,914
|
)
|
|
|
—
|
|
|
|
—
|
|
Net loss applicable to common stockholders
|
|
|
(66,437
|
)
|
|
$
|
(35,220
|
)
|
|
|
(29,604
|
)
|
Net loss per share applicable to common
stockholders —basic and diluted
|
|
$
|
(1.61
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(1.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares used in
per share calculation—basic and diluted
|
|
|
41,310,269
|
|
|
|
35,631,237
|
|
|
|
21,776,269
|
|
See accompanying notes to consolidated financial statements.
ANTHERA PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF SERIES X CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands except share and per share amounts)
|
|
Contingently Redeemable Series X Convertible Preferred Stock
|
|
|
Series X Convertible Preferred Stock
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders'
Equity
(Deficit)
|
|
Balance at December 31, 2013
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
19,415,901
|
|
|
$
|
19
|
|
|
$
|
301,946
|
|
|
$
|
(287,207
|
)
|
|
$
|
14,758
|
|
Issuance of common stock upon release of
restricted stock units
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66,704
|
|
|
|
1
|
|
|
|
195
|
|
|
|
-
|
|
|
|
196
|
|
Issuance of common stock pursuant to exercise of
stock options and employee stock purchase plan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,000
|
|
|
|
-
|
|
|
|
37
|
|
|
|
-
|
|
|
|
37
|
|
Issuance of common stock pursuant to an equity
purchase agreement, net of issuance cost of $7
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
512,626
|
|
|
|
-
|
|
|
|
1,301
|
|
|
|
-
|
|
|
|
1,301
|
|
Issuance of common stock pursuant to an
at-the-market equity program, net of issuance cost
of $354
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,982,978
|
|
|
|
3
|
|
|
|
9,047
|
|
|
|
-
|
|
|
|
9,050
|
|
Share-based compensation related to equity awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,001
|
|
|
|
-
|
|
|
|
2,001
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(29,604
|
)
|
|
|
(29,604
|
)
|
Balance at December 31, 2014
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
23,005,209
|
|
|
$
|
23
|
|
|
$
|
314,527
|
|
|
$
|
(316,811
|
)
|
|
$
|
(2,261
|
)
|
Issuance of common stock upon release of
restricted stock units
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
515
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
Issuance of common stock pursuant to exercise of
stock options and employee stock purchase plan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140,662
|
|
|
|
-
|
|
|
|
410
|
|
|
|
-
|
|
|
|
410
|
|
Issuance of common stock pursuant to an equity
purchase agreement, net of issuance cost of $60
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
59,338
|
|
|
|
-
|
|
|
|
75
|
|
|
|
-
|
|
|
|
75
|
|
Issuance of common stock pursuant to an
at-the-market equity program, net of issuance cost
of $379
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,208,529
|
|
|
|
3
|
|
|
|
12,055
|
|
|
|
-
|
|
|
|
12,058
|
|
Issuance of common stock for cash at average
$5.62 per share, net of issuance cost of $3,744
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,222,223
|
|
|
|
10
|
|
|
|
53,746
|
|
|
|
-
|
|
|
|
53,756
|
|
Issuance of common stock to Zenyaku Kogyo Co.,
Ltd. for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,946,810
|
|
|
|
3
|
|
|
|
6,297
|
|
|
|
-
|
|
|
|
6,300
|
|
Issuance of common stock to Amgen to settle a
license fee obligation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
420,751
|
|
|
|
1
|
|
|
|
999
|
|
|
|
-
|
|
|
|
1,000
|
|
Share-based compensation related to equity awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,536
|
|
|
|
-
|
|
|
|
3,536
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,220
|
)
|
|
|
(35,220
|
)
|
Balance at December 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
40,004,037
|
|
|
$
|
40
|
|
|
$
|
391,648
|
|
|
$
|
(352,031
|
)
|
|
$
|
39,657
|
|
Issuance of common stock pursuant to exercise of
stock options and employee stock purchase plan
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135,275
|
|
|
|
-
|
|
|
|
304
|
|
|
|
-
|
|
|
|
304
|
|
Share based compensation related to equity awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,880
|
|
|
|
-
|
|
|
|
6,880
|
|
Issuance of common stock pursuant to an
at-the-market equity program, net of issuance costs of $277
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,500,985
|
|
|
|
2
|
|
|
|
4,848
|
|
|
|
-
|
|
|
|
4,850
|
|
Issuance of common stock pursuant to an equity
purchase agreement, net of issuance costs of $87
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
514,829
|
|
|
|
-
|
|
|
|
1,579
|
|
|
|
-
|
|
|
|
1,579
|
|
Issuance of Series X convertible preferred stock, net of
issuance costs of $156
|
|
|
17,000
|
|
|
|
16,844
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Investors’ right to acquire future shares of Series X-1
convertible preferred stock
|
|
|
-
|
|
|
|
(3,583
|
)
|
|
|
-
|
|
|
|
3,583
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,583
|
|
Reclassification of Series X convertible preferred
stock from temporary to permanent equity
|
|
|
(16,513
|
)
|
|
|
(9,206
|
)
|
|
|
16,513
|
|
|
|
9,206
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,206
|
|
Conversion of Series X convertible preferred stock
into common stock
|
|
|
|
|
|
|
-
|
|
|
|
(7,501
|
)
|
|
|
(5,456
|
)
|
|
|
3,809,160
|
|
|
|
4
|
|
|
|
5,452
|
|
|
|
-
|
|
|
|
-
|
|
Beneficial conversion feature on Series X convertible
preferred stock
|
|
|
-
|
|
|
|
(8,831
|
)
|
|
|
|
|
|
|
(802
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
9,633
|
|
|
|
-
|
|
|
|
8,831
|
|
Deemed dividend attributable to Series X
convertible preferred stock
|
|
|
-
|
|
|
|
8,831
|
|
|
|
-
|
|
|
|
2,083
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,914
|
)
|
|
|
-
|
|
|
|
(8,831
|
)
|
Issuance and reclassification of warrants related to
Series X convertible preferred stock
|
|
|
-
|
|
|
|
(3,678
|
)
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,934
|
|
|
|
-
|
|
|
|
1,934
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(55,523
|
)
|
|
|
(55,523
|
)
|
Balance at December 31, 2016
|
|
|
487
|
|
|
$
|
377
|
|
|
|
9,012
|
|
|
$
|
8,614
|
|
|
|
45,964,286
|
|
|
$
|
46
|
|
|
$
|
411,364
|
|
|
$
|
(407,554
|
)
|
|
$
|
12,470
|
|
ANTHERA PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(55,523
|
)
|
|
$
|
(35,220
|
)
|
|
$
|
(29,604
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
266
|
|
|
|
285
|
|
|
|
344
|
|
Stock-based compensation expense
|
|
|
6,739
|
|
|
|
3,541
|
|
|
|
2,175
|
|
Change in fair value of warrant liability
|
|
|
(1,744
|
)
|
|
|
—
|
|
|
|
—
|
|
Common stock issued to settle a license fee obligation
|
|
|
—
|
|
|
|
—
|
|
|
|
1,000
|
|
Amortization of discount and deferred interest on notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
219
|
|
Amortization of debt issuance cost
|
|
|
—
|
|
|
|
—
|
|
|
|
226
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
326
|
|
|
|
(326
|
)
|
|
|
—
|
|
Prepaid expenses and other current assets
|
|
|
(1,280
|
)
|
|
|
(202
|
)
|
|
|
(26
|
)
|
Accounts payable
|
|
|
(477
|
)
|
|
|
3,027
|
|
|
|
(1,210
|
)
|
Accrued clinical expenses
|
|
|
2,507
|
|
|
|
138
|
|
|
|
587
|
|
Accrued liabilities
|
|
|
15
|
|
|
|
(113
|
)
|
|
|
(46
|
)
|
Accrued payroll and related costs
|
|
|
390
|
|
|
|
527
|
|
|
|
734
|
|
Deferred revenue
|
|
|
(138
|
)
|
|
|
(2,564
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(48,919
|
)
|
|
|
(30,907
|
)
|
|
|
(25,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment purchases
|
|
|
(766
|
)
|
|
|
(80
|
)
|
|
|
—
|
|
Decrease in restricted cash
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(766
|
)
|
|
|
(80
|
)
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of Series X Convertible Preferred Stock, warrants and option to
purchase Series X-1 Convertible Preferred Stock, net of offering cost
|
|
|
16,844
|
|
|
|
—
|
|
|
|
—
|
|
Principal payment against note payable
|
|
|
—
|
|
|
|
—
|
|
|
|
(18,094
|
)
|
Proceeds from issuance of common stock, net of offering costs
|
|
|
6,429
|
|
|
|
65,889
|
|
|
|
10,351
|
|
Proceeds from issuance of common stock to collaborative partner
|
|
|
—
|
|
|
|
9,000
|
|
|
|
—
|
|
Proceeds from issuance of common stock pursuant to exercise of stock options
and employee stock purchase plan
|
|
|
304
|
|
|
|
410
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
23,577
|
|
|
|
75,299
|
|
|
|
(7,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(26,108
|
)
|
|
|
44,312
|
|
|
|
(23,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
46,951
|
|
|
|
2,639
|
|
|
|
25,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
20,843
|
|
|
$
|
46,951
|
|
|
$
|
2,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
655
|
|
Issuance of common stock as a commitment fee pursuant to an equity purchase agreement
|
|
$
|
87
|
|
|
$
|
60
|
|
|
$
|
7
|
|
Issuance of common stock to settle a license fee obligation
|
|
$
|
—
|
|
|
$
|
1,000
|
|
|
$
|
—
|
|
Fair value of warrants issued in connection with Series X Convertible Preferred Stock
|
|
$
|
3,678
|
|
|
$
|
—
|
|
|
$
|
—
|
|
See accompanying notes to consolidated financial statements.
ANTHERA PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. |
ORGANIZATION AND DESCRIPTION OF BUSINESS
|
Organization
Anthera Pharmaceuticals, Inc. (“the Company”) is a biopharmaceutical company focused on advancing the development and commercialization of innovative medicines that benefit patients with unmet medical needs. The Company currently has two compounds in development, Sollpura and blisibimod. The Company licensed Sollpura from Eli Lilly & Co (“Eli Lilly”) in July 2014. Sollpura is a novel non-porcine investigational Pancreatic Enzyme Replacement Therapy (“PERT”) intended for the treatment of patients with Exocrine Pancreatic Insufficiency (“EPI”), often seen in patients with cystic fibrosis and other conditions. The Company licensed blisibimod from Amgen, Inc. (“Amgen”) in December 2007. Blisibimod targets B-cell activating factor or (“BAFF”) which has been shown to be elevated in a variety of B-cell mediated autoimmune diseases, including Immunoglobulin A nephropathy, or IgA nephropathy, systemic lupus erythematosus (“SLE”), or lupus, lupus nephritis, and others.
Liquidity and Need for Additional Capital
The Company’s planned principal operations are acquiring product and technology rights, raising capital and performing research and development activities. The Company is currently conducting research and development activities to treat autoimmune diseases and EPI. The Company’s activities are subject to significant risks and uncertainties. Successful completion of the Company’s development programs and, ultimately, the attainment of profitable operations are dependent on future events, including, among other things, its ability to access potential markets; secure financing; develop a customer base; attract, retain and motivate qualified personnel; and develop strategic alliances.
Since inception in 2004, the Company has funded its operations through equity offerings, private placements of convertible debt, debt financing, equity investment and cost reimbursement from a former collaborative partner, Zenyaku Kogyo Co., Ltd. (“Zenyaku”), and a research award from Cystic Fibrosis Foundation Therapeutics Incorporated ("CFFT"). On April 21, 2016, the Company entered into an At Market Issuance Sales Agreement (“ATM Agreement”) with H.C. Wainwright & Co., LLC (“H.C. Wainwright”) to create an at-the-market equity program under which the Company from time to time may offer and sell shares of its common stock, par value $0.001 per share, having an aggregate offering price of up to $25 million through H.C. Wainwright, as agent, which was amended and reduced to $23 million on March 14, 2017.
In September 2016, the Company entered into a subscription agreement with certain institutional investors pursuant to which it sold 17,000 units for a purchase price of $1,000 per unit, with each unit consisting of one share of the Company’s Series X convertible preferred stock, which are convertible into shares of the Company’s common stock, and warrants to purchase up to a number of shares of common stock equal to 25% of the number of shares of common stock issuable upon conversion of the of Series X convertible preferred stock, in a registered direct offering. The offering resulted in gross proceeds of $17.0 million.
At December 31, 2016, the Company’s capital resources consisted of cash and cash equivalents of $20.8 million. On March 14, 2017, the Company entered into an underwriting agreement with H.C. Wainwright, pursuant to which the Company agreed to issue and sell and aggregate of 30,000,000 shares of its common stock and warrants to purchase an aggregate of 60,000,000 shares of its common stock for gross proceeds of $15 million. Under the terms of the underwriter agreement, we granted the underwriter a 30-day option to purchase an additional 4,500,000 shares of common stock and/or warrants to purchase up to an additional 9,000,000 shares of common stock. The financing transaction is expected to close on March 17, 2017, subject to satisfaction of customary closing conditions.
To fully execute its business plan, the Company will need to complete certain research and development activities and clinical studies. Further, the Company’s product candidates will require regulatory approval prior to commercialization. These activities may span many years and require substantial capital to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. The Company will need substantial additional financing to continue development of its product candidates, obtain regulatory approvals, and prepare for commercial readiness if the clinical trials are successful; such financing may not be available on terms favorable to the Company, if at all, which raises substantial doubt about the Company’s ability to continue as a going concern as of the date of this report. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If adequate funds are not available, the Company may be required to delay, reduce the scope of, or eliminate one or more of its clinical trials. The Company plans to meet its capital requirements primarily through issuances of equity securities, future partnerships, debt financing, and in the longer term, revenue from product sales. Failure to generate revenue or raise additional capital would adversely affect the Company’s ability to achieve its intended business objectives.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or GAAP.
The Company has evaluated events and transactions subsequent to the balance sheet date and has disclosed all events or transactions that occurred subsequent to the balance sheet date but prior to filing this Annual Report on Form 10-K that would require recognition or disclosure in the Consolidated Financial Statements.
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Revenue Recognition
During 2015, the Company had a collaboration with Zenyaku Kogyo Co., Ltd. (“Zenyaku”) which provided for various types of payments from Zenyaku, including development milestones, sales milestone, royalty, and reimbursement for a portion of the Company’s internal and external costs. All payments from Zenyaku are nonrefundable. The collaborative arrangement was on a best-efforts basis, did not require scientific achievement as a performance obligation and provided for payment to be made when costs were incurred or services were performed. The collaboration was terminated on January 7, 2016 pursuant to a termination notice from Zenyaku to the Company.
With respect to the collaborative arrangement with Zenyaku, the Company recognized revenue in accordance with FASB Accounting Standards Codification, or ASC 605 “ Revenue Recognition ”, subtopic ASC 605-25 “ Revenue with Multiple Element Arrangements ” and subtopic ASC 605-28 “ Revenue Recognition-Milestone Method ”, which provide accounting guidance for revenue recognition for arrangements with multiple deliverables and guidance on defining the milestone and determining when the use of the milestone method of revenue recognition for research and development transactions is appropriate, respectively. For multiple-element arrangements, each deliverable within a multiple deliverable revenue arrangement is accounted for as a separate unit of accounting if both of the following criteria are met: (1) the delivered item or items have value to the customer on a standalone basis and (2) for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control.
The deliverables under the Zenyaku agreement had been determined to be a single unit of accounting and as such any license fees received were recorded as deferred revenue and recognized ratably over the term of the estimated performance period under the agreement, which was the product development period. As a result of an early termination of the Zenyaku agreement, the Company revised the amortization period of its deferred revenue to correspond with the shortened collaboration period in the third quarter of 2015 and had fully amortized its deferred revenue as of January 7, 2016.
For the collaborative research activities, the Company was entitled to reimbursement from Zenyaku for its internal personnel cost at a pre-determined full time equivalent (“FTE”) rate. Revenue related to FTE services was recognized as research services were performed over the related performance periods. The Company was required to perform research and development activities as specified in the collaboration agreement. The payments received were not refundable and were based on a contractual reimbursement rate per FTE working on the project. Reimbursement for FTE costs was recorded as collaborative revenue as incurred.
Use of Estimates
The preparation of these consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures. On an ongoing basis, management evaluates its estimates, including critical accounting policies or estimates related to clinical trial accruals, tax provision, stock-based compensation, warrant liabilities, and computation of beneficial conversion features. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates.
Financial Instruments with Characteristics of Both Equity and Liabilities
The Company has issued certain financial instruments, including warrants to purchase common stock, which have the characteristics of both liability and equity. Financial instruments such as warrants that are evaluated to be classified as liabilities are fair valued upon issuance and are remeasured at fair value at subsequent reporting periods with the resulting change in fair value recorded in other income/(expense). The fair value of warrants is estimated using the valuation models that require the input of subjective assumptions including stock price volatility and expected life. As of December 31, 2016, all warrants have been reclassified from liability to equity.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity or remaining maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist primarily of cash currencies and money market funds, for which the carrying amounts are reasonable estimates of fair value. Cash equivalents are recognized at fair value.
Property and Equipment—Net
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed over the estimated useful lives of the respective assets, which range from three to five years, using the straight-line method. Repairs and maintenance costs are expensed as incurred. Leasehold improvements are stated at cost and amortized using the straight-line method over the term of the lease or the life of the related asset, whichever is shorter.
Long-Lived Assets
The Company’s long-lived assets and other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Through December 31, 2016, the Company had not experienced impairment losses on its long-lived assets.
Accrued Clinical Studies
Expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to contracts with many research institutions, clinical research organizations and other service providers that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed fee or unit price. Payments under the contracts are mainly driven by time and materials incurred by these service providers. Expenses related to clinical studies are generally accrued based on time and materials incurred by the service providers and in accordance with the contracts. This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual cost. The majority of service providers invoice at least monthly in arrears for services performed. The Company periodically confirms the accuracy of estimates with the service providers and makes adjustments if necessary. Examples of estimated accrued clinical expenses include:
|
• |
fees paid to Contract Research Organizations, or CROs, in connection with clinical studies;
|
|
• |
fees paid to investigative sites in connection with clinical studies;
|
|
• |
fees paid to contract manufacturers in connection with the production of clinical study materials; and
|
|
• |
fees paid to vendors in connection with preclinical development activities.
|
Research and Development Costs
Research and development expenses consist of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by CROs, materials and supplies, licenses and fees, and overhead allocations consisting of various administrative and facilities related costs. Clinical study expenses are further separated into two main categories: clinical development and pharmaceutical development. Clinical development costs include costs for Phase 1, 2 and 3 clinical studies. Pharmaceutical development costs consist of expenses incurred in connection with manufacturing campaigns, product formulation and chemical analysis.
The Company charges research and development costs, including clinical study costs, to expense when incurred. Clinical study costs are a significant component of research and development expenses. All of the Company’s clinical studies are performed by third-party CROs. The Company accrues costs for clinical studies performed by CROs based on patient enrollment activities and adjusts the estimates, if required, based upon the Company’s ongoing review of the level of effort and costs actually incurred by the CROs. The Company monitors levels of performance under each significant contract, including the extent of patient enrollment and other activities through communications with the CROs, and adjusts the estimates, if required, on a monthly basis so that clinical expenses reflect the actual effort expended by each CRO.
All material CRO contracts are terminable by the Company upon written notice and the Company is generally only liable for actual effort expended by the CROs and certain noncancelable expenses incurred at any point of termination.
Income Taxes
The Company accounts for income taxes in accordance with the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.
Segments
The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making. The Company’s long-lived tangible assets consist of mainly machinery purchased by the Company and installed by its contract manufacturing vendors. The machinery are used for all of the Company’s product manufacturing campaigns.
Stock-Based Compensation
The Company uses the Black-Scholes option pricing model as the method for determining the estimated fair value for all stock-based awards, including employee stock options, and rights to purchase shares under the Company’s Employee Stock Purchase Plan, and recognizes the costs in its consolidated financial statements over the employees’ requisite service period. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of share-based awards, including the option’s expected term and the price volatility of the underlying stock. Additionally, the Company is required to include an estimate of the number of awards that will be forfeited in calculating compensation costs, which are recognized over the requisite service period of the awards on a straight-line basis.
Expected Term —The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method, which is computed as the arithmetic mean of weighted vested period and contractual life.
Expected Volatility —Expected volatility is estimated using the Company’s historical stock prices.
Expected Dividend —The Black-Scholes option pricing model calls for a single expected dividend yield as an input and the Company has never paid dividends and has no plans to pay dividends.
Risk-Free Interest Rate —The risk-free interest rate used in the Black-Scholes option pricing method is based on the U.S. Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of option.
Estimated Forfeitures —The estimated forfeiture rate is determined based on the Company’s historical forfeiture rates to date. The Company monitors actual forfeitures and periodically updates the estimate.
Equity instruments issued to nonemployees are recorded at their fair value as determined in accordance with guidance provided by the Financial Accounting Standard Board (“FASB”) and are periodically revalued as the equity instruments vest and recognized as expense over the related service period.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606). The standards update outlines a single comprehensive model for entities to utilize to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that will be received in exchange for the goods and services. Additional disclosures will also be required to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In 2016, the FASB issued accounting standards updates to address implementation issues and to clarify the guidance for identifying performance obligations, licenses and determining if a company is the principal or agent in a revenue arrangement. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09. The mandatory adoption date of ASC 606 for the Company is now January 1, 2018. There are two methods of adoption allowed, either a “full” retrospective adoption or a “modified” retrospective adoption. The Company expects to adopt the standard on a modified retrospective basis applying the new rules to all contract existing at January 1, 2018, with an adjustment for the cumulative effect of all changes recognized in beginning retained earnings. Given that the Company is not currently generating revenue and most likely will not be generating revenue at the date of adoption, the adoption of this guidance will not materially impact our consolidated financial statements..
In September 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as Going Concern (“ASU 2014-15”). ASU 2014-15 defines when and how companies are required to disclose going concern uncertainties, which must be evaluated each interim and annual period. Specifically, the ASU requires management to determine whether substantial doubt exists regarding the entity’s going concern presumption. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the financial statements are issued (or available to be issued). If substantial doubt exists, certain disclosures are required; the extent of those disclosures depends on an evaluation of management’s plans (if any) to mitigate the going concern uncertainty. The guidance is effective for fiscal years ending after December 15, 2016 and for interim periods within that fiscal year. The Company has adopted this guidance during the year ended December 31, 2016.
In November 2015, the FASB issued guidance on the classification of deferred taxes, ASU No. 2015-17 (“ASU 2015-17”), Balance Sheet Classification of Deferred Taxes. ASU 2015-17 eliminates the guidance in Topic 740, Income Taxes, that required an entity to separate deferred tax liabilities and assets between current and noncurrent amounts in a classified balance sheet. The amendments require that all deferred tax liabilities and assets of the same tax jurisdiction or a tax filing group, as well as any related valuation allowance, be offset and presented as a single amount in a classified balance sheet. The amendments are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted as of the beginning of any interim period or annual reporting period. The Company adopted this guidance during the year ended December 31, 2016.
In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). ASU 2016-02 impacts any entity that enters into a lease with some specified scope exceptions. This new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The guidance updates and supersedes Topic 840, Leases. For public entities, ASU 2016-02 is effective for fiscal years, and interim periods with those years, beginning after December 15, 2018, and early adoption is permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We do not expect the adoption of this standard to have a material impact on our financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The Company continues to evaluate ASU 2016-09 and at the current time has not quantified the effects adoption of the new standard will have on its financial statements.
In March 2015, the Company received a research award of up to $3 million from the CFFT for the Company's development of Sollpura. The Company retains the right to develop and commercialize Sollpura and will owe royalties to CFFT on net sales of any drug candidate approved and commercialized under the collaboration. The funding is disbursed by CFFT to the Company upon the Company’s achievement of milestones specified in the award agreement. At its discretion, the Company may choose to fund a particular stage of the Sollpura development plan without CFFT funds. Any CFFT funds not expended on the development program of Sollpura must be returned to CFFT and, upon such return, the amounts of such returned funds will not be included as part of the research award for the purpose of calculating royalties or other amounts owed by the Company to CFFT. To the extent CFFT provides or makes available any information, expertise, know-how or other intellectual property related to cystic fibrosis or the treatment, prevention or cure there-of (“CFFT Know-How”) to the Company, CFFT grants to the Company a non-exclusive, transferrable, sublicensable, worldwide rights and license under all of CFFT’s rights in such CFFT Know-How to assist the Company to research, develop, commercialize, make or have made, use, sell, have sold, offer for sale, import, export and otherwise exploit the product.
In consideration for CFFT’s research award and any licenses of intellectual property granted by CFFT, the Company agreed to pay royalties to CFFT as follows: i) a one-time royalty in an amount equal to five times the actual award, payable in three installments between the first and second anniversaries of the first commercial sale of a product; ii) a one-time royalty in an amount equal to the actual award after net product sales reaches $100 million; and iii) in the event of a license, sale or other transfer of the product or a change of control transaction prior to the commercial sale of the product, a milestone payment equal to three times the actual award.
For the year ended December 31, 2016, the Company recognized $0.3 million of research award from CFFT in connection with achieving certain milestones specified in the award agreement. The amount has been recognized as a component of operating expense, which offsets total operating expense.
4. |
FAIR VALUE OF INSTRUMENTS
|
Pursuant to the accounting guidance for fair value measurement and its subsequent updates, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a hierarchy for inputs used in measuring fair value that minimizes the use of unobservable inputs by requiring the use of observable market data when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on active market data. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.
The fair value hierarchy is broken down into the three input levels summarized below:
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• |
Level 1 —Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by us at the reporting date. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. Treasuries and trading securities with quoted prices on active markets.
|
|
• |
Level 2 —Valuations based on inputs other than the quoted prices in active markets that are observable either directly or indirectly in active markets. Examples of assets and liabilities utilizing Level 2 inputs are U.S. government agency bonds, corporate bonds, commercial paper, certificates of deposit and over-the-counter derivatives.
|
|
• |
Level 3 —Valuations based on unobservable inputs in which there are little or no market data, which requires the Company to develop its own assumptions.
|
The following tables present the Company’s fair value hierarchy for all its financial assets (including those in cash and cash equivalents), in thousands, by major security type measured at fair value on a recurring basis as of December 31, 2016 and 2015 (in thousands):
|
December 31, 2016
|
|
|
Estimated
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
19,416
|
|
|
$
|
19,416
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
Estimated
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
45,156
|
|
|
$
|
45,156
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company used quoted market prices to determine the fair value of cash equivalents, which consist of money market funds and therefore these are classified in Level 1 of the fair value hierarchy. There were no transfers between Level 1, Level 2 or Level 3 for the year ended December 31, 2016.
5 . WARRANT LIABILITY
Pursuant to the subscription agreement for the sale of convertible preferred stock entered in September 2016, the Company issued common stock warrants to the institutional investors. Each warrant has an exercise price equal to 120% of the conversion price of the Series X convertible preferred stock. The warrants are exercisable after March 13, 2017 and expire on September 13, 2019. The Company accounted for the warrants under ASC Topic 815, Derivatives and Hedging (“ASC 815”). The fair value of the warrants are measured and recorded as a liability because the strike price and number of shares underlying the warrants were unknown upon issuance. At the end of each reporting period, the changes in fair value during the period are recorded as a component of other income (expense) in the consolidated statement of operations. The initial fair value of the liability associated with these warrants was $3.7 million. On November 16, 2016, five days following the announcement of the Company’s CHABLIS-SC1 clinical study, the conversion price of the Series X convertible preferred stock became fixed. As a result, the warrant exercise price was fixed at $2.36 and the number of shares underlying the warrants was fixed at 2,158,236. The Company remeasured the fair value of the warrants at $1.9 million as of November 16, 2016 and recorded the reduction in fair value subsequent to the issuance date of $1.7 million as part of non-operating income in its consolidated statements of operations. In addition, as the exercise price became fixed, the warrant liability was reclassified to additional paid-in capital.
The following table summarizes the change of warrant liability (in thousands):
Fair value upon issuance on September 14, 2016
|
|
$
|
3,678
|
|
Change in fair value through November 16, 2016
|
|
|
(1,744
|
)
|
Balance reclassified to additional paid-in capital
|
|
$
|
1,934
|
|
The exercise price and number of shares of common stock underlying the warrants were not determinable upon issuance and as such the estimated fair value was determined by using the Monte Carlo simulation model on September 14, 2016. On November 16, 2016, the Company estimated the fair value of the warrants using the Black-Scholes valuation model as the exercise price and number of shares of common stock underlying the warrants were fixed. Inputs used in the valuation on each date were as follows:
|
|
November 16,
2016
|
|
|
September 14,
2016
|
|
Common stock price
|
|
$
|
1.89
|
|
|
$
|
3.20
|
|
Exercise price
|
|
$
|
2.36
|
|
|
$
|
2.95
|
|
Expected Volatility
|
|
|
84
|
%
|
|
|
120
|
%
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-Free Interest Rate
|
|
|
1.22
|
%
|
|
|
0.90
|
%
|
Expected Term (years)
|
|
|
2.82
|
|
|
|
3
|
|
For the fair value determination on November 16, 2016, the Company computed the expected volatility based on daily pricing observations for a period that corresponds to the expected term of the warrants. For the fair value determination on September 14, 2016, the Company determined the expected volatility based on both historical and implied volatilities. Historical volatility was computed using daily pricing observations for a period that corresponds to the expected term of the warrants while implied volatility was computed using publicly traded options of the Company as well as the Company’s peer companies. The Company believes this method produces an estimate that is representative of its expectations of future volatility over the expected term of these warrants. The expected term for both valuation dates are based on the remaining contractual term of the warrants. The risk-free interest rates are the U.S. Treasury bond rate as of the valuation dates.
See Footnote 15 – “Subsequent Event” for warrants issued after December 31, 2016 and before the date of this report.
6. |
PROPERTY AND EQUIPMENT
|
Property and equipment are comprised of the following (in thousands):
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Laboratory equipment
|
|
$
|
2,013
|
|
|
$
|
1,312
|
|
Computer and software
|
|
|
115
|
|
|
|
50
|
|
Office furniture and fixture
|
|
|
140
|
|
|
|
140
|
|
Leasehold improvements
|
|
|
206
|
|
|
|
206
|
|
Total property and equipment
|
|
|
2,474
|
|
|
|
1,708
|
|
Less accumulated depreciation and amortization
|
|
|
(1,711
|
)
|
|
|
(1,445
|
)
|
Property and equipment, net
|
|
$
|
763
|
|
|
$
|
263
|
|
For the years ended December 31, 2016, 2015, and 2014, the Company recorded $266,000, $285,000, and $344,000 respectively, in depreciation and amortization expense.
7. |
COLLABORATIVE ARRANGEMENT
|
Zenyaku Kogyo Co., Ltd.
In December 2014, the Company entered into an exclusive license agreement with Zenyaku (“Zenyaku Agreement”) for the development and commercialization of blisibimod in Japan and potentially other countries throughout Asia, while the Company retained full development and commercialization rights of blisibimod for all other global territories including North America and the European Union.
Under the terms of the Zenyaku Agreement, the Company had the right to receive an upfront and forgivable loan of $7.0 million, milestone payments of up to $22.0 million contingent upon the achievement of certain regulatory and commercial sales milestones, and up to $15.0 million in sales of the Company’s common stock at a purchase price equal to 1.3 times the volume weighted average price of the Company’s common stock for 20 trading days prior to the delivery of the closing notice (the “Premium Purchase Price”). Not all the conditions required to secure the forgivable loan were met and therefore, the Company had not exercised its right to receive the loan from Zenyaku. During 2015, the Company had exercised its right with respect to $11.0 million of the $15.0 million in equity puts to Zenyaku, of which $9.0 million was received through the issuance of 2,946,810 shares of common stock and the Company does not expect to receive the remaining $2.0 million.
Under the terms of the Zenyaku Agreement, Zenyaku was responsible for all development, marketing and commercialization costs in Japan and would reimburse Anthera for i) 100% of blisibimod development cost in Japan for IgA nephropathy; ii) 25% of global blisibimod development cost outside of Japan for IgA nephropathy; iii) a percentage of Anthera’s personnel costs at a pre-determined full-time equivalent (“FTE”) rate and iv) exclusive purchase of blisibimod clinical drug supplies at cost and blisibimod commercial drug products from the Company at a premium to the Company’s manufacturing cost.
In September 2015, Zenyaku provided the Company a notice of its intent to terminate the Zenyaku Agreement, effective January 7, 2016 (“Termination Notice”). The termination was “at will” and the Termination Notice alleged no breach of the Zenyaku Agreement by the Company. There were no termination penalties incurred by the Company in connection with the early termination of the Zenyaku Agreement by Zenyaku. No patients had been enrolled in any blisibimod clinical studies in the Zenyaku territory and Zenyaku. The Company regained global rights of blisibimod on January 7, 2016. As a result of the Termination Notice, the Company changed the amortization period of its deferred revenue and has fully amortized its deferred revenue as of January 7, 2016.
8. |
COMMITMENTS AND CONTINGENCIES
|
Leases
The Company leases its main operating facility in Hayward, California. The lease is for approximately 14,000 square feet and the lease agreement will expire in September 2017. In April 2016, the Company leased its second operating facility in Pleasanton, California. The lease is for approximately 1,200 square feet and the lease agreement will expire in May 2019. For the years ended December 31, 2016, 2015 and 2014, the Company recognized $195,000, $222,000 and $244,000, respectively, in rental expense.
As of December 31, 2016, future minimum lease payments under non-cancellable operating leases were as follows (in thousands):
2017
|
|
$
|
209
|
|
2018
|
|
|
33
|
|
2019
|
|
|
14
|
|
Total
|
|
$
|
256
|
|
Other Commitments
In December 2007, the Company and Amgen entered into a worldwide, exclusive license agreement (the “Amgen Agreement”) to develop and commercialize blisibimod in any indication, including for the treatment of systemic lupus erythematosus (“lupus”). Under the terms of the Amgen Agreement, the Company paid a nonrefundable, upfront license fee of $6.0 million. As there was no future alternative use for the technology, the Company expensed the license fee in research and development expenses during 2007. Under the terms of the Amgen Agreement, the Company is obligated to make additional milestone payments to Amgen of up to $33.0 million upon the achievement of certain development and regulatory milestones. The Company is also obligated to pay tiered royalties on future net sales of products, ranging from the high single digits to the low double digits, which are developed and approved as defined by this collaboration. The Company’s royalty obligations as to a particular licensed product will be payable, on a country-by-country and licensed product-by-licensed product basis, for the longer of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by the Company or a sublicense in such country or (b) 10 years after the first commercial sale of the applicable licensed product in the applicable country.
In connection with the collaborative arrangement with Zenyaku pursuant to the Zenyaku Agreement, the Company amended the Amgen Agreement in November 2014 to (i) adjust certain royalty and milestone payment obligations payable to Amgen in light of the collaboration between Anthera and Zenyaku and (ii) provide that the sublicense granted by Anthera to Zenyaku shall survive the termination of the Amgen Agreement. Under this amendment, Anthera also agreed to grant Amgen that number of shares of its common stock equal $1.0 million divided by the volume weighted average price of the Company’s common stock for 20 trading days prior to issuance. The Company issued 420,751 shares of common stock to Amgen at $2.3767 per share on January 28, 2015, pursuant to a subscription agreement with Amgen, with the consideration paid by Amgen in the form of a waiver of a fee otherwise payable to Amgen under the Amgen Agreement. The Company accrued $1.0 million of license fees as research and development expense with a corresponding current liability in the year ended December 31, 2014.
On July 11, 2014, the Company and Eli Lilly and Company (“Eli Lilly”) entered into a worldwide, exclusive license agreement (the “Lilly Agreement”), to develop and commercialize Sollpura, a Phase 3 novel investigational Pancreatic Enzyme Replacement Therapy (“PERT”), for the treatment of patients with Exocrine Pancreatic Insufficiency, or EPI, often seen in patients with cystic fibrosis and other conditions. Under the terms of the Lilly Agreement, the Company was not required to make any up-front payment but is obligated to make milestone payments of up to up to $33.5 million for capsule products and $9.5 million for reformulated products upon the achievement of certain regulatory and commercial sales milestones, none of which have been achieved as of December 31, 2016. In addition, after sales of the licensed products exceed an aggregate of $100.0 million in the United States, the Company is obligated to pay tiered royalties on future net sales of products, ranging from the single digits to the mid-teens, that are developed and approved as defined in the Lilly Agreement. The Company’s royalty obligations as to a particular licensed product will be payable, on a licensed product-by-licensed product basis, for the longer of (a) the date of expiration of the last to expire valid claim within the licensed patents that covers the manufacture, use or sale, offer to sell, or import of such licensed product by the Company or a sublicense in such country, or (b) 12 years after the first commercial sale of the applicable licensed product in the applicable country.
See Note 3 – “Research Award” for discussion of commitments and contingencies associated with the research award received from the CFFT.
Litigation
On February 13, 2017, a complaint was filed in the United States District Court for the Northern District of California captioned Brian Clevlen v. Anthera Pharmaceuticals, Inc., et al., Case No. 3:17-cv-715, on behalf of a putative class of the Company’s stockholders against the Company and certain of its current and former officers. The complaint asserts claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of all stockholders that purchased the Company’s common stock between February 10, 2015 and December 27, 2016. The complaint alleges that the Company made false or misleading statements and/or omissions with respect to the CHABLIS-SC1 trial and SOLUTION study. The complaint seeks unspecified damages, interest, attorneys’ fees, costs, and such other relief at the Court may deem just and proper. The Company intends to vigorously defend itself against the allegations in the action.
The outcome of the legal proceeding is inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period. No provision for loss nor disclosure is required in relation to this action because a reasonably possible loss or range of losses cannot be estimated.
9. |
STOCKHOLDERS’ EQUITY (DEFICIT)
|
Preferred Stock
The Company has authorized 5,000,000 shares of $0.001 par value preferred stock. The Company’s Board of Directors is authorized to designate the terms and conditions of any preferred stock issued by the Company without further action by the common stockholders. The Company designated 17,000 shares of its authorized and unissued preferred stock as Series X convertible preferred stock and filed an Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock with the Delaware Secretary of State. As of December 31, 2016, there were 9,499 shares of Series X Convertible Preferred Stock issued and outstanding, of which 487 shares were contingently redeemable.
In September, 2016, the Company entered into a subscription agreement with certain institutional investors pursuant to which it sold 17,000 (“Initial Tranche”) Series X units for a purchase price of $1,000 per unit in a registered direct offering. Each unit consists of one share of Series X Convertible Preferred Stock and a warrant to purchase 126.96 shares of common stock. The conversion price for the Series X Convertible Preferred Stock became fixed on November 16, 2016 at $1.9692 per share, which represented the VWAP of the Company’s common stock over the five full trading days following the date of the Company’s initial public announcement of topline and/or efficacy data from the CHABLIS-SC1 study on November 10, 2016. The registered direct offering resulted in gross proceeds of $17.0 million. The holders of Series X Convertible Preferred Stock do not have any voting rights nor the right to elect any members to the board of directors. The Series X Convertible Preferred Stock has a contingent redemption clause. The Company is not required to issue any shares of common stock upon conversion of any shares of Series X Convertible Preferred Stock to the extent that (i) the aggregate issuance of common stock will be greater than 8,385,828 shares or 19.99% of the total outstanding shares of the Company (the “Threshold Amount”) and (ii) the conversion has not been approved by the Company’s stockholders in accordance with the stockholder approval requirements of Nasdaq Marketplace Rule 5635(d) (a “Blocked Conversion”). In the event that a Blocked Conversion occurs after April 30, 2017, the holders of shares of Series X Stock who are not able to convert their Series X Convertible Preferred Stock in full because of the Blocked Conversion shall have the right to require the Company to redeem any or all of the Series X Convertible Preferred Stock that is ineligible for conversion at a redemption price equal to the product of: (x) the number of their shares underlying the to-be-redeemed Series X Convertible Preferred Stock, multiplied by (y) the two-day volume weighted average price of the Company’s common stock prior to the date of delivery of such notice of redemption. Based on a conversion price of $1.9692 per share, on November 16, 2016 the date the number of shares subject to redemption was fixed, the Series X Convertible Preferred Stock were convertible into 8,632,947 shares of common stock, which exceeds the Threshold Amount by 247,119 shares of common stock or 487 shares of Series X Convertible Preferred Stock. As of December 31, 2016, 7,501 shares of Series X Convertible Preferred Stock had been converted into 3,809,160 shares of common stock and no warrants had been exercised.
The subscription agreement also provides that the investors have the right, but not the obligation, to make additional investments as follows: within 20 trading days following the Company’s initial public announcement of top-line data from the Company’s ongoing SOLUTION study (Phase 3 study evaluating the efficacy and safety of Sollpura in subjects with cystic fibrosis-related exocrine pancreatic insufficiency), the investors may purchase up to 28,330 (“Second Tranche”) shares of Series X Convertible Preferred Stock at a purchase price of $1,000 per share for an aggregate purchase price of $28.3 million (“Additional Investment”). The terms of the Series X-1 Convertible Preferred Stock are identical to the Series X Convertible Preferred Stock, except as follows: the conversion price for the Series X-1 Convertible Preferred Stock will be equal to the lower of: (a) 75% of the five-day VWAP of the Company’s common stock over the five full trading days following the Company’s initial public announcement of topline clinical efficacy and safety data from the SOLUTION clinical study, or (b) 175% of the conversion price for the Series X Convertible Preferred Stock, or $3.45; the Series X-1 Convertible Preferred Stock do not include any contingent redemption features. The top-line data from the SOLUTION study was announced on December 27, 2016. No further investments were made by the investors and the right for Additional Investment expired on January 26, 2017.
The Company allocated the proceeds from the financing amongst the Series X Convertible Preferred Shares, the warrants to purchase shares of common stock, and the investors’ rights to purchase shares of Series X-1 Convertible Preferred Stock. The accounting for each component on issuance and through December 31, 2016 is as follows:
|
· |
Series X Convertible Preferred Stock – Due to the contingent redemption feature related to NASDAQ conversion limits that could result in a potential redemption for cash, the Company initially classified the 17,000 shares of Series X Convertible Preferred Stock in the mezzanine section (between equity and liabilities) on the date of issuance. The Company recorded the residual value of these shares at $9.6 million, which is net of allocation of $3.7 million to the fair value of the warrants to purchase common stock and $3.7 million to the relative fair value of the rights to purchase Series X-1 Convertible Preferred Stock on the date of issuance. On November 16, 2016, the conversion price became fixed at $1.9692 and therefore, the Series X Convertible Preferred Stock is convertible into 8,632,947 shares of common stock, which exceeded the aggregate number of common stock permitted for conversion by 247,119 shares or 487 shares of Series X Convertible Preferred Stock. Therefore, the 487 shares of Series X Convertible Preferred Stock remained contingently redeemable on November 16, 2016 and shareholders approval will be required for the conversion of these shares; the remaining 16,513 shares of Series X Convertible Preferred Stock ceased to be redeemable and were reclassified from the mezzanine section to equity.
|
|
· |
Warrants to Purchase Common Stock – The Company determined that, on the date of issuance, the warrants were not considered indexed to its own stock because the underlying instruments were not “fixed-for-fixed” and therefore, the warrants should be accounted for as derivatives. The warrants were initially measured at fair value at inception of $3.7 million and recorded as a liability with a corresponding entry to Series X Convertible Preferred Stock. On November 16, 2016, the Company remeasured the fair value of the warrants when the exercise price for the warrants became fixed and recorded the change in fair value as part of other income/expense in the Company’s statement of operation. The fair value of the Company’s warrant liability is discussed in Note 5. The number of shares of common stock underlying the warrants also became fixed on November 16, 2016 and therefore, the related warrant liability of $1.9 million was reclassified as stockholders’ equity.
|
|
· |
Rights to Purchase Series X-1 Convertible Preferred Stock – The Company determined that the investors’ rights to purchase future shares of Series X-1 Convertible Preferred Stock was a freestanding instrument on issuance. The instrument is treated as equity due to the permanent equity classification of the underlying Series X-1 Convertible Preferred Stock. The right was allocated based on its relative fair value of $3.7 million to the proceeds of the Series X Convertible Preferred Stock and recorded as part of permanent equity. Subsequent to issuance, the Company determined that investors’ right to purchase future shares of Series X-1 Convertible Preferred Stock would not be exercised. As such, the Company reclassified $3.6 million to the Series X shares in permanent equity. At December 31, 2016, no amount remained associated with the Tranche Right. The following table summarizes the assumptions used in the Monte Carlo simulation model to determine the fair value of the option related to the rights to purchase Series X-1 Convertible Preferred Stock on the date of issuance:
|
Common stock price
|
|
$
|
3.20
|
|
Initial Series X Convertible Preferred Stock conversion price
|
|
$
|
2.95
|
|
Expected volatility based on blended historical and implied volatilities
|
|
|
120
|
%
|
Dividend yield
|
|
|
0
|
%
|
Risk-free interest rate
|
|
|
0.90
|
%
|
Expected term (years)
|
|
|
3
|
|
|
· |
Beneficial Conversion Feature – Because the conversion price of the shares of Series X Convertible Preferred Stock was less than the fair value of the Company’s common stock at the date of issuance, the in-the-money conversion feature (Beneficial Conversion Feature, or BCF) requires separate financial statement recognition and is measured at the intrinsic value (i.e., the amount of the increase in value that preferred stockholders would realize upon conversion based on the value of the conversion shares on the issuance date). The initial BCF of $8.8 million was recorded as a discount to the Contingently Redeemable Series X Convertible Preferred Stock in mezzanine and was immediately accreted as a deemed preferred stock dividend and, accordingly, an adjustment to net loss to arrive at net loss applicable to common stockholders. The BCF was reassessed on November 16, 2016 when the conversion price of the Series X shares became fixed and resulted in an additional $0.8 million being recorded as a reduction to the Series X Convertible Preferred Stock in permanent equity. No deemed dividend was recorded as the shares were no longer redeemable.
|
|
· |
Conversion of Series X Convertible Preferred Stock – On December 7, 2016, pursuant to a conversion notice received from one of the holders of the Series X Convertible Preferred Stock, the Company converted 7,501 shares of Series X Convertible Preferred Stock into 3,809,160 shares of common stock, leaving a balance of 9,499 shares of Series X Convertible Preferred Stock outstanding as of December 31, 2016. The conversion was reflected as a reduction in Series X Convertible Preferred Stock in permanent equity. The unamortized discount was recognized as a deemed dividend of $2.1 million in connection with the conversion of the Series X Convertible Preferred Stock,
|
As of December 31, 2016, 487 shares of Series X Convertible Preferred Stock were contingently redeemable. The redemption value is dependent on the 2-day VWAP of the Company’s common stock on the date of conversion. As the estimated redemption value as of December 31, 2016 approximated the carrying value, no adjustment was made to the carrying value
Common Stock
In March 2016, we filed a universal shelf registration statement with the SEC on Form S-3 (File No. 333-210166) for the proposed offering from time to time of up to $100.0 million of our securities, including common stock, preferred stock, debt securities and/or warrants. On April 21, 2016, we registered $25.0 million under the registration statement for the H.C. Wainwright ATM Agreement. On March 14, 2017, we amended the H.C. Wainwright ATM Agreement and reduced the amount registered under the registration statement to $23 million. On April 27, 2016, we registered $14.4 million under the registration statement for the LPC Purchase Agreement. On March 12, 2017, upon the expiration of the LPC Purchase Agreement, $13.4 million of unused amount became available under the registration statement. On September 8, 2016, we registered $22.1 million under the registration statement for a subscription agreement with certain institutional investors for the sale of convertible preferred stock and issuance of warrants in a registered direct offering. On March 14, 2017, we entered into an equity underwriting agreement H.C. Wainwright, pursuant to which we agreed to issue and sell an aggregate of 30,000,000 shares of our common stock and warrants to purchase an aggregate of 60,000,000 shares of our common stock for gross proceeds of $15 million. Under the terms of the underwriter agreement, we granted the underwriter a 30-day option to purchase an additional 4,500,000 shares of common stock and/or warrants to purchase up to an additional 9,000,000 shares of common stock. In connection with the registered direct offering of common stock and warrants, we registered $53.5 million under the registration statement. As of the date of this report, there is a balance of $0.4 million available for future issuance under the registration statement
On April 21, 2016, the Company entered into an at-the-market sales agreement with H.C. Wainwright (the “H.C. Wainwright ATM Agreement”) under which the Company from time to time may offer and sell shares of its common stock, par value $0.001 per share, having an aggregate offering price of up to $25.0 million through H.C. Wainwright, as agent. On March 14, 2017, the Company amended the H.C. Wainwright ATM Agreement and reduced the amount of aggregate offering price to $23.0 million. For the year ended December 31, 2016, the Company sold $2.7 million in shares of common stock pursuant to the H.C. Wainwright ATM Agreement, leaving a balance of $20.3 million available for future sale pursuant to the H.C. Wainwright ATM Agreement as of the date of this report.
On March 12, 2015, the Company executed an equity purchase agreement with LPC, pursuant to which the Company has the right, but not the obligation, to sell to LPC up to an aggregate of $10.0 million in shares of common stock over a period of two years. In July 2015, the Company amended the equity purchase agreement to reduce the amount available for purchase to $6.0 million. On April 27, 2016, the Company amended the equity purchase agreement and increased the amount of common stock available for purchase to $15.0 million. As of December 31, 2016, the Company sold approximately $1.6 million in shares of common stock pursuant to the equity purchase agreement. In connection with the sale of shares to LPC, for the year ended December 31, 2016, the Company issued 24,829 shares to LPC as commitment fee pursuant to the equity purchase agreement. The equity purchase agreement expired on March 12, 2017.
Based on the requirements of Form S-3, however, there are certain factors, such as volume of trading in the Company’s common stock and stock price, which may limit the amount that can be raised in a short period of time through Purchase Agreement and registration statements described above.
At December 31, 2016, the Company had reserved the following shares for future issuance:
Convertible Series X preferred stock
|
|
|
4,576,668
|
|
Common stock options outstanding
|
|
|
5,996,024
|
|
Common stock warrants outstanding
|
|
|
2,198,414
|
|
Common stock options available for future grant under stock option plan
|
|
|
472,676
|
|
Common stock available for future grant under ESPP plan
|
|
|
68,677
|
|
Total
|
|
|
13,312,459
|
|
Warrants
In connection with a venture debt executed in March 2011, the Company issued a seven-year warrant to the lender for the purchase of 40,178 shares of the Company’s common stock at an exercise price of $48.00 per share. The warrant was immediately exercisable and expires in March 2018. As of December 31, 2016, the warrant remained outstanding and exercisable.
In connection with the issuance of Series X convertible preferred stock in September 2016, the Company issued warrants to certain institutional investors to purchase shares of the Company’s common stock. On November 16, 2016, the exercise price and number of shares of common stock underlying the warrants became fixed at $2.36 and 2,158,236, respectively. The warrants are exercisable at any time and from time to time after March 13, 2017, and will expire on September 13, 2019. As of December 31, 2016, the warrants remained outstanding but not exercisable.
Option Plan
On March 25, 2013, the Company’s board of directors adopted the 2013 Stock Option and Incentive Plan (the “2013 Plan”), which was also approved by the Company’s stockholders at its annual general meeting on May 16, 2013. The Company initially reserved 1,750,000 shares of its common stock for the issuance of awards under the 2013 Plan, plus all shares remaining available for grant under the Company’s 2010 Stock Option and Incentive Plan (the “2010 Plan), plus any additional shares returned under the 2010 Plan or 2013 Plan as a result of the cancellation, forfeiture or other termination (other than by exercise) of awards issued pursuant to the 2010 Plan or 2013 Plan, subject in all cases to adjustment including reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock. In May 2015, the Company’s shareholders approved an increase of 1,790,818 shares to the 2013 Plan pool. In April 2016, the Company’s shareholders approved an increase of 1,600,000 shares to the 2013 Plan pool. Of the shares of common stock reserved for issuance under the 2013 Plan, no more than 750,000 shares will be issued to any individual participant as incentive options, non-qualified options or stock appreciation rights during any calendar year. The 2013 Plan permits the granting of incentive and non-statutory stock options, restricted and unrestricted stock awards, restricted stock units, stock appreciation rights, performance share awards, cash-based awards and dividend equivalent rights to eligible employees, directors and consultants. The option exercise price of an option granted under the 2013 Plan may not be less than 100% of the fair market value of a share of the Company’s common stock on the date the stock option is granted. Options granted under the 2013 Plan have a maximum term of 10 years and generally vest over four years. In addition, in the case of certain large stockholders, the minimum exercise price of incentive options must equal 110% of fair market value on the date of grant and the maximum term is limited to five years. Subject to overall Plan limitations, the maximum aggregate number of shares of common stock that may be issued in the form of incentive options shall not exceed 6,250,000 shares of common stock.
The following table summarizes stock option activity for 2014, 2015 and 2016:
|
|
Number of
Options
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Life in
Years
|
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|
Balance at December 31, 2013
|
|
|
1,997,075
|
|
|
$
|
5.21
|
|
|
|
9.11
|
|
|
$
|
48
|
|
Options granted
|
|
|
1,389,743
|
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(2,000
|
)
|
|
$
|
2.08
|
|
|
|
|
|
|
|
|
|
Options cancelled/forfeited
|
|
|
(362,849
|
)
|
|
$
|
5.78
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
3,021,969
|
|
|
$
|
3.67
|
|
|
|
8.92
|
|
|
$
|
0
|
|
Options granted
|
|
|
1,392,499
|
|
|
$
|
7.10
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(80,218
|
)
|
|
$
|
3.73
|
|
|
|
|
|
|
|
|
|
Options cancelled/forfeited
|
|
|
(78,269
|
)
|
|
$
|
4.01
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
4,255,981
|
|
|
$
|
4.79
|
|
|
|
8.44
|
|
|
$
|
4,330
|
|
Options granted
|
|
|
2,960,142
|
|
|
$
|
3.27
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(116,773
|
)
|
|
$
|
2.20
|
|
|
|
|
|
|
|
|
|
Option forfeited
|
|
|
(440,000
|
)
|
|
$
|
9.48
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
(663,326
|
)
|
|
$
|
5.06
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
5,996,024
|
|
|
$
|
3.73
|
|
|
|
8.19
|
|
|
$
|
0
|
|
Ending vested at December 31, 2016
|
|
|
2,602,023
|
|
|
$
|
4.11
|
|
|
|
7.20
|
|
|
$
|
0
|
|
Vested and expected to vest at December 31, 2016
|
|
|
5,575,887
|
|
|
$
|
3.76
|
|
|
|
8.12
|
|
|
$
|
0
|
|
As of December 31, 2016, there were 472,676 shares available for grant under the 2013 Plan.
The assumptions used in the Black-Scholes option-pricing model to value stock options are as follows:
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Expected Volatility
|
|
|
98
|
%
|
|
|
94
|
%
|
|
|
91
|
%
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-Free Interest Rate
|
|
|
1.51
|
%
|
|
|
1.70
|
%
|
|
|
1.60
|
%
|
Expected Term (years)
|
|
|
5.90
|
|
|
|
5.92
|
|
|
|
5.22
|
|
Weighted-average fair value per option
|
|
$
|
2.53
|
|
|
$
|
5.40
|
|
|
$
|
1.35
|
|
The intrinsic value of stock options represents the difference between the exercise price of stock options and the market price of our stock on that day for all in-the-money options. Additional information related to our stock options is summarized below (in thousands except per share information):
|
Years Ended December 31,
|
|
|
2016
|
|
2015
|
|
2014
|
|
Intrinsic value of options exercised
|
|
$
|
177
|
|
|
$
|
140
|
|
|
$
|
3
|
|
Proceeds received from the exercise of stock options
|
|
$
|
257
|
|
|
$
|
299
|
|
|
$
|
4
|
|
There was $6.8 million of total unrecognized compensation expense as of December 31, 2016. The unrecognized compensation expense will be amortized on a straight-line basis over a weighted-average remaining period of 2.54 years.
Information about stock options outstanding, vested and exercisable as of December 31, 2016, was as follows:
|
|
Options Outstanding
|
|
|
Options Vested & Exercisable
|
|
Range of Exercise Price
|
|
Number of Shares
|
|
|
Weighted-Average
Remaining
Contractual Life
(In Years)
|
|
|
Number of Shares
|
|
|
Weighted-Average
Remaining
Contractual Life
(In Years)
|
|
$ 1.47 - $2.86
|
|
|
1,461,031
|
|
|
|
8.22 |
|
|
|
653,306
|
|
|
|
7.41
|
|
$ 2.89 - $4.61
|
|
|
2,821,394
|
|
|
|
9.09
|
|
|
|
676,873
|
|
|
|
8.47
|
|
$ 4.75 - $9.48
|
|
|
1,665,132
|
|
|
|
6.72
|
|
|
|
1,236,294
|
|
|
|
6.48
|
|
$ 10.72 - $33.52
|
|
|
45,092
|
|
|
|
5.35
|
|
|
|
32,175
|
|
|
|
4.05
|
|
$ 65.36 - $65.36
|
|
|
3,375
|
|
|
|
4.50
|
|
|
|
3,375
|
|
|
|
4.50
|
|
Total
|
|
|
5,996,024
|
|
|
|
8.19
|
|
|
|
2,602,023
|
|
|
|
7.20
|
|
2010 Employee Stock Purchase Plan
Effective July 2010, under the terms of the ESPP, eligible employees of the Company may authorize the Company to deduct amounts from their compensation, which amounts are used to enable the employees to purchase shares of the Company’s common stock. The Company initially reserved 12,500 shares of common stock for issuance thereunder plus on January 1, 2011 and each January 1 thereafter, the number of shares of stock reserved and available for issuance under the Plan shall be cumulatively increased by the lesser of (i) one percent (1%) of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or (ii) 31,250 shares of common stock. During the year ended December 31, 2016, 2015 and 2014, 18,502, 60,444 and 25,000 shares were issued pursuant to the purchase of common stock by our employees under the ESPP, respectively. As of December 31, 2016, there were 68,677 shares available for grant under the 2010 Employee Stock Purchase Plan.
Under the ESPP, eligible employees of the Company may authorize the Company to deduct amounts from their compensation, which amounts are used to enable the employees to purchase shares of the Company’s common stock. The purchase price per share is 85% of the fair market value of the common stock as of the first date or the ending date of the applicable semi-annual purchase period, whichever is less (the “Look-Back Provision”). The 15% discount and the Look-Back Provision make the ESPP compensatory. The Black-Scholes option pricing model was used to value the employee stock purchase rights. For the years ended December 31, 2016, 2015 and 2014, the following weighted-average assumptions were used in the valuation of the stock purchase rights:
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Expected Volatility
|
|
|
97
|
%
|
|
|
82
|
%
|
|
|
41
|
%
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-Free Interest Rate
|
|
|
0.38
|
%
|
|
|
0.08
|
%
|
|
|
0.05
|
%
|
Expected Term (years)
|
|
|
0.50
|
|
|
|
0.50
|
|
|
|
0.50
|
|
Weighted-average grant date fair value per right
|
|
$
|
1.50
|
|
|
$
|
1.04
|
|
|
$
|
1.04
|
|
Stock-Based Compensation Expense
Total stock-based compensation expense, including expense recorded for the ESPP, was as follows (in thousands):
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Research and development
|
|
$
|
1,795
|
|
|
$
|
1,453
|
|
|
$
|
825
|
|
General and administrative (1)
|
|
|
4,944
|
|
|
|
2,088
|
|
|
|
1,350
|
|
Total employee stock-based compensation
|
|
$
|
6,739
|
|
|
$
|
3,541
|
|
|
$
|
2,175
|
|
|
(1)
|
Included in general and administrative expense was approximately $1.5 million in stock-based compensation associated with the cancellation of options by a former employee in December 2016.
|
11. NET LOSS PER SHARE
Basic net loss attributable to common stockholders per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. The computation of diluted Earnings Per Share, or EPS, is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. In addition, in computing the dilutive effect of convertible securities, the numerator is adjusted to add back any convertible preferred dividends and the after-tax amount of interest recognized in the period associated with any convertible debt. The numerator also is adjusted for any other changes in income or loss that would result from the assumed conversion of those potential common shares, such as profit-sharing expenses. Diluted EPS is identical to basic EPS since common equivalent shares are excluded from the calculation, as their effect is anti-dilutive.
The following table summarizes the Company’s calculation of net loss per common share (in thousands except share and per share amounts):
|
|
Year Ended December 31,
|
|
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(55,523
|
)
|
|
$
|
(35,220
|
)
|
|
$
|
(29,604
|
)
|
Deemed dividend attributable to preferred stock
|
|
|
(10,914
|
)
|
|
|
—
|
|
|
|
—
|
|
Net loss applicable to common stockholders
|
|
$
|
(66,437
|
)
|
|
$
|
(35,220
|
)
|
|
$
|
(29,604
|
)
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
41,310,269
|
|
|
|
35,631,237
|
|
|
|
21,776,269
|
|
Basic and diluted net loss per share
|
|
$
|
(1.61
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(1.36
|
)
|
The following outstanding potentially dilutive securities were excluded from the computation of diluted net loss per share, as the effect of including them would have been antidilutive:
|
|
Year Ended December 31,
|
|
|
|
2016 |
|
|
2015
|
|
|
2014
|
|
Total options to purchase common stock
|
|
|
5,996,024
|
|
|
|
4,255,981
|
|
|
|
3,021,969
|
|
Total warrants to purchase common stock
|
|
|
2,198,414
|
|
|
|
40,178
|
|
|
|
556,838
|
|
Series X convertible preferred stock
|
|
|
4,576,668
|
|
|
|
—
|
|
|
|
—
|
|
Total restricted stock units
|
|
|
—
|
|
|
|
—
|
|
|
|
937
|
|
Total
|
|
|
12,771,106
|
|
|
|
4,296,159
|
|
|
|
3,579,744
|
|
12. |
EMPLOYEE BENEFIT PLAN
|
The Company maintains a defined contribution 401(k) plan, or the 401(k) Plan. Employee contributions are voluntary and are determined on an individual basis, limited by the maximum amounts allowable under federal tax regulations. Prior to 2011, the Company had not made any contributions to the 401(k) Plan. In December 2012, the Company amended its 401(k) plan to provide for non-elective employer contribution at the Company’s discretion. During the years ended December 31, 2016, 2015 and 2014, the Company contributed approximately $264,000, $284,000 and $185,000, respectively, in non-elective employer contribution into the employees’ 401(k) accounts.
The Company’s loss before provision for income taxes during the years ended December 31, 2016, 2015 and 2014, was a domestic loss of $66.4 million, $35.2 million and $29.6 million, respectively.
The Company has incurred net operating losses since inception. The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements and has established a full valuation allowance against its deferred tax assets.
The components of the provision for income taxes during the years ended December 31, 2016, 2015 and 2014 are as follows (in thousands):
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Foreign
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total current
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(20,942
|
)
|
|
|
(11,080
|
)
|
|
|
(9,046
|
)
|
State
|
|
|
8,936
|
|
|
|
(3,250
|
)
|
|
|
(2,689
|
)
|
Foreign
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total deferred
|
|
|
(12,006
|
)
|
|
|
(14,330
|
)
|
|
|
(11,735
|
)
|
Valuation allowance
|
|
|
12,006
|
|
|
|
14,330
|
|
|
|
11,735
|
|
Total provision for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.
The significant components of the Company’s deferred tax assets for the years ended December 31, 2016 and 2015 are as follows (in thousands):
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
44,909
|
|
|
$
|
37,576
|
|
Tax credits
|
|
|
4,084
|
|
|
|
3,023
|
|
Intangible assets
|
|
|
1,470
|
|
|
|
2,033
|
|
Capitalized R&D
|
|
|
40,297
|
|
|
|
35,514
|
|
Other
|
|
|
1,677
|
|
|
|
2,285
|
|
Total deferred tax assets
|
|
|
92,437
|
|
|
|
80,431
|
|
Deferred tax liabilities
|
|
|
—
|
|
|
|
—
|
|
Valuation allowance
|
|
|
(92,437
|
)
|
|
|
(80,431
|
)
|
Net deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
The reconciliation between the Company’s effective tax rate on income (loss) from continuing operations and the statutory tax rates for the years ended December 2016, 2015, and 2014 is as follows:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Statutory rate
|
|
|
34
|
%
|
|
|
34
|
%
|
|
|
34
|
%
|
State tax
|
|
|
(9
|
)%
|
|
|
6
|
%
|
|
|
6
|
%
|
Tax credit
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
1
|
%
|
Deemed dividend and warrant liability revaluation
|
|
|
(4
|
)%
|
|
|
—
|
%
|
|
|
—
|
%
|
Stock based compensation
|
|
|
(4
|
)%
|
|
|
(1
|
)%
|
|
|
(1
|
)%
|
Valuation allowance
|
|
|
(18
|
)%
|
|
|
(41
|
)%
|
|
|
(40
|
)%
|
Effective tax rates
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Tax benefits of net operating losses, temporary differences and credit carryforwards are recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s history of operating losses, management believes that the deferred tax assets arising from the above-mentioned future tax benefits are currently not likely to be realized and, accordingly, has provided a full valuation allowance. The net valuation allowance increased by $12.0 million in 2016, $14.3 million in 2015, and $11.7 million in 2014.
The amount of the valuation allowance for deferred tax assets associated with excess tax deductions from stock-based compensation arrangements that would be allocated to contributed capital if the future tax benefits are subsequently recognized is $0.3 million.
Net operating losses and tax return credit carryforwards as of December 31, 2016, are as follows (in thousands):
|
|
Amount
|
|
Expiration Years
|
Net operating losses—federal
|
|
$
|
117,090
|
|
Beginning 2024
|
Net operating losses—state
|
|
$
|
89,251
|
|
Beginning 2017
|
Tax return credits—federal
|
|
$
|
2,342
|
|
Beginning 2032
|
Tax return credits—state
|
|
$
|
2,640
|
|
Do not expire
|
Utilization of the domestic NOL and tax credit forwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code Section 382, as well as similar state provisions. In general, an “ownership change,” as defined by the code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Any limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization.
As of December 31, 2016, the Company had unrecognized tax benefits of $1.7 million, all of which would not currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance. The Company did not anticipate any significant change to the unrecognized tax benefit balance as of December 31, 2016. A reconciliation of unrecognized tax benefits is as follows (in thousands):
|
|
Amount
|
|
Balance as of December 31, 2013
|
|
|
828
|
|
Additions based on tax positions related to prior year
|
|
|
—
|
|
Additions based on tax positions related to current year
|
|
|
171
|
|
Balance as of December 31, 2014
|
|
$
|
999
|
|
Additions based on tax positions related to prior year
|
|
|
—
|
|
Additions based on tax positions related to current year
|
|
|
269
|
|
Balance as of December 31, 2015
|
|
$
|
1,268
|
|
Deductions based on tax positions related to prior year
|
|
|
(27
|
)
|
Additions based on tax positions related to current year
|
|
|
420
|
|
Balance as of December 31, 2016
|
|
$
|
1,661
|
|
The Company would classify interest and penalties related to uncertain tax positions in income tax expense, if applicable. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2016. The tax years 2004 through 2016 remain open to examination by one or more major taxing jurisdictions to which the Company is subject.
The Company does not anticipate that total unrecognized net tax benefits will significantly change prior to the end of 2017.
14. |
SUMMARIZED QUARTERLY UNAUDITED FINANCIAL DATA
|
Quarterly results were as follows (in thousands, except per share data):
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
License revenue
|
|
$
|
139
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collaborative revenue
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total revenues
|
|
|
145
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
9,624
|
|
|
$
|
11,966
|
|
|
$
|
14,096
|
|
|
$
|
10,825
|
|
General and administrative
|
|
|
2,238
|
|
|
|
2,576
|
|
|
|
2,504
|
|
|
|
3,754
|
|
Research award
|
|
|
—
|
|
|
|
(261
|
)
|
|
|
—
|
|
|
|
—
|
|
LOSS FROM OPERATIONS
|
|
|
(11,717
|
)
|
|
|
(14,281
|
)
|
|
|
(16,600
|
)
|
|
|
(14,579
|
)
|
Other income (expense)
|
|
|
(9
|
)
|
|
|
(53
|
)
|
|
|
(47
|
)
|
|
|
19
|
|
Change in fair value of warrant liability
|
|
|
—
|
|
|
|
—
|
|
|
|
169
|
|
|
|
1,575
|
|
NET LOSS
|
|
$
|
(11,726
|
)
|
|
$
|
(14,334
|
)
|
|
$
|
(16,478
|
)
|
|
$
|
(12,985
|
)
|
Deemed dividend attributable to preferred
stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,807
|
)
|
|
|
(2,107
|
)
|
Net loss applicable to common stockholders
|
|
|
(11,726
|
)
|
|
|
(14,334
|
)
|
|
|
(25,285
|
)
|
|
|
(15,092
|
)
|
Net loss per share—basic and diluted
|
|
$
|
(0.29
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
(0.61
|
)
|
|
$
|
(0.36
|
)
|
Shares used in computing basic and diluted
net loss per share
|
|
|
40,049,895
|
|
|
|
41,032,544
|
|
|
|
41,682,669
|
|
|
|
42,459,248
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
License revenue
|
|
$
|
49
|
|
|
$
|
146
|
|
|
$
|
548
|
|
|
$
|
1,819
|
|
Collaborative revenue
|
|
|
196
|
|
|
|
143
|
|
|
|
185
|
|
|
|
99
|
|
Total revenues
|
|
|
245
|
|
|
|
289
|
|
|
|
733
|
|
|
|
1,918
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
5,995
|
|
|
$
|
8,539
|
|
|
$
|
10,359
|
|
|
$
|
8,605
|
|
General and administrative
|
|
|
1,907
|
|
|
|
1,696
|
|
|
|
2,091
|
|
|
|
1,874
|
|
Research award
|
|
|
—
|
|
|
|
(1,100
|
)
|
|
|
(367
|
)
|
|
|
(1,171
|
)
|
LOSS FROM OPERATIONS
|
|
|
(7,657
|
)
|
|
|
(8,846
|
)
|
|
|
(11,350
|
)
|
|
|
(7,390
|
)
|
Other income (expense)
|
|
|
(3
|
)
|
|
|
(49
|
)
|
|
|
24
|
|
|
|
51
|
|
NET LOSS
|
|
$
|
(7,660
|
)
|
|
$
|
(8,895
|
)
|
|
$
|
(11,326
|
)
|
|
$
|
(7,339
|
)
|
Net loss per share—basic and diluted
|
|
$
|
(0.28
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.18
|
)
|
Shares used in computing basic and
diluted net loss per share
|
|
|
27,595,081
|
|
|
|
35,817,794
|
|
|
|
39,241,738
|
|
|
|
39,947,036
|
|
15. SUBSEQUENT EVENTS
On January 27, 2017, a purchase right provided to certain investors to make additional investments (see Note 9) became expired and unexercised.
On January 5 and 30, 2017, the Company received conversion notices from holders of Series X Convertible Preferred Stock and converted 9,012 shares of Series X Convertible Preferred Stock into 4,576,349 shares of common stock.
On March 14, 2017, the Company entered into an underwriting agreement with H.C. Wainwright, pursuant to which we agreed to issue and sell an aggregate of 30,000,000 shares of its common stock and warrants (the “Tranche 1 Warrants” and the “Tranche 2 Warrants”) to purchase an aggregate of 60,000,000 shares of its common stock for gross proceeds of $15 million. Each Tranche 1 and Tranche 2 Warrant has an exercise price of $0.55 and $0.50 per share, respectively. The Tranche 1 and Tranche 2 Warrants will become exercisable on any day on or after the date that the Company has sufficient authorized shares of common stock. The Tranche 1 Warrant will expire five years following the Exercisable Date and the Tranche 2 Warrant will expire six months following the Exercisable Date. The shares of common stock and accompanying warrants were immediately separable. Under the terms of the underwriter agreement, we granted the underwriter a 30-day option to purchase an additional 4,500,000 shares of common stock and/or warrants to purchase up to an additional 9,000,000 shares of common stock. The financing transaction is expected to close on March 17, 2017, subject to satisfaction of customary closing condition.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
ANTHERA PHARMACEUTICALS, INC.
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Craig Thompson
|
|
|
|
Craig Thompson
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
Dated: March 16, 2017
POWER OF ATTORNEY
We, the undersigned officers and directors of Anthera Pharmaceuticals, Inc., hereby severally constitute and appoint Craig Thompson and May Liu, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him or her and in his or her name, place and stead, and in any and all capacities, to sign for us and in our names in the capacities indicated below any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
|
Title
|
Date
|
|
|
|
/s/ Craig Thompson
|
Chief Executive Officer and Director (Principal Executive Officer)
|
March 16, 2017
|
Craig Thompson
|
|
|
|
|
|
/s/ May Liu
|
Senior Vice President, Finance and Administration (Principal
Accounting Officer)
|
March 16, 2017
|
May Liu
|
|
|
|
|
|
/s/ Paul F. Truex
|
Chairman of the Board of Directors
|
March 16, 2017
|
Paul F. Truex
|
|
|
|
|
|
/s/ Christopher S. Henney
|
Director
|
March 16, 2017
|
Christopher S. Henney
|
|
|
|
|
|
/s/ Brian R. Mueller
|
Director
|
March 16, 2017
|
Brian R. Mueller
|
|
|
|
|
|
/s/ Steven B. Engle
|
Director
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March 16, 2017
|
Steven B. Engle
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|
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|
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/s/ David E. Thompson
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Director
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March 16, 2017
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David E. Thompson
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|
|
/s/ Brent V. Furse
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Director
|
March 16, 2017
|
Brent V. Furse
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|
|
|
|
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/s/ Philip T. Sager
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Director
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March 16, 2017
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Philip T. Sager
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Exhibit Index
Number
|
|
Description
|
|
|
|
3.1
|
|
Fifth Amended and Restated Certificate of Incorporation(1)
|
|
|
|
3.2
|
|
Certificate of Amendment to the Fifth Amended and Restated Certificate of Incorporation filed October 12, 2012(2)
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|
|
|
3.3
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|
Certificate of Amendment to the Fifth Amended and Restated Certificate of Incorporation filed July 12, 2013 and effective July 15, 2013(3)
|
|
|
|
3.5
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|
Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock filed on September 15, 2016 (5)
|
|
|
|
3.6
|
|
Form of Certificate of Designation of Preferences, Rights and Limitations of Series X-1 Convertible Preferred Stock filed on September 12, 2016(6)
|
|
|
|
3.7
|
|
Amended and Restated Bylaws, as amended on May 21, 2015(7)
|
|
|
|
4.1
|
|
Specimen certificate evidencing shares of common stock(8)
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|
|
|
4.2
|
|
Specimen Series X Convertible Preferred Stock certificate(9)
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|
|
|
4.3
|
|
Form of Warrant sold pursuant to that Securities Purchase Agreement, among the Company and the purchasers thereto, dated September 20, 2010(10)
|
|
|
|
4.4
|
|
Form of Warrant Agreement dated as of March 25, 2011(11)
|
|
|
|
4.5
|
|
Form of Warrant sold pursuant to that Subscription Agreement, among the Company and the purchasers thereto, dated September 6, 2016(12)
|
|
|
|
#10.1
|
|
2005 Equity Incentive Plan and form agreements thereunder(13)
|
|
|
|
#10.2
|
|
Amended and Restated 2010 Stock Option and Incentive Plan(14)
|
|
|
|
#10.3
|
|
Certificate of Amendment to Amended and Restated 2010 Stock Option and Incentive Plan(15)
|
|
|
|
#10.4
|
|
Form of Non-Qualified Stock Option Agreement for Company Employees Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(16)
|
|
|
|
#10.5
|
|
Form of Non-Qualified Stock Option Agreement for Non-Employee Directors Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(16)
|
|
|
|
#10.6
|
|
Form of Incentive Stock Option Agreement Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(16)
|
|
|
|
#10.7
|
|
Form of Restricted Stock Award Agreement Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(16)
|
|
|
|
#10.8
|
|
Restricted Stock Unit Award Agreement Under the Anthera Pharmaceuticals, Inc. 2010 Stock Option and Incentive Plan(17)
|
|
|
|
#10.9
|
|
2010 Employee Stock Purchase Plan(18)
|
|
|
|
#10.10
|
|
Amendment No. 1 to 2010 Employee Stock Purchase Plan(19)
|
|
|
|
#10.11
|
|
Amendment No. 2 to 2010 Employee Stock Purchase Plan(20)
|
|
|
|
#10.12
|
|
2013 Stock Option and Incentive Plan(21)
|
#10.13
|
|
Form of Non-Qualified Stock Option Agreement for Company Employees Under the 2013 Stock Option and Incentive Plan(22)
|
|
|
|
#10.14
|
|
Form of Non-Qualified Stock Option Agreement for Non-Employees Directors Under the 2013 Stock Option and Incentive Plan(22)
|
|
|
|
#10.15
|
|
Form of Incentive Stock Option Agreement Under the 2013 Stock Option and Incentive Plan(22)
|
|
|
|
#10.16
|
|
Form of Restricted Stock Award Agreement Under the 2013 Stock Option and Incentive Plan(22)
|
|
|
|
#10.17
|
|
Form of Restricted Stock Unit Award Agreement Under the 2013 Stock Option and Incentive Plan(22)
|
|
|
|
#10.18
|
|
Form of Amended and Restated Indemnification Agreement(23)
|
#10.19
|
|
Form of Amended and Restated Change in Control Agreement(24)
|
|
|
|
#10.20
|
|
Form of Amended and Restated Severance Benefits Agreement(25)
|
|
|
|
+10.21
|
|
License Agreement between Amgen Inc. and the Company, dated as of December 18, 2007(26)
|
|
|
|
10.22
|
|
Amendment No. 1 to License Agreement between Amgen Inc. and the Company, dated as of October 16, 2009(27)
|
|
|
|
+10.23
|
|
Amendment No. 2 to License Agreement between Amgen Inc. and the Company, dated as of November 26, 2014(28)
|
|
|
|
10.24
|
|
Form of Securities Purchase Agreement, among the Company and the purchasers thereto, dated September 20, 2010(29)
|
|
|
|
10.25
|
|
Lease by and between the Company and MEPT Mount Eden LLC, dated as of May 4, 2011(30)
|
|
|
|
10.26
|
|
Lease Amendment by and between the Company and MEPT Mount Eden LLC, dated as of November 13, 2013(31)
|
|
|
|
+10.27
|
|
License Agreement between the Company and Eli Lilly, dated as of July 11, 2014(32)
|
|
|
|
+10.28
|
|
Collaboration and License Agreement between the Company and Zenyaku Kogyo Co., Ltd., dated as of December 11, 2014(33)
|
|
|
|
+10.29
|
|
Stock Purchase Agreement between the Company and Zenyaku Kogyo Co., Ltd., dated as of December 11, 2014(34)
|
|
|
|
+10.30
|
|
Subscription Agreement between the Company and Zenyaku Kogyo Co., Ltd., dated as of January 27, 2015(35)
|
|
|
|
+10.31
|
|
Subscription Agreement between the Company and Amgen Inc., dated as of January 27, 2015(36)
|
|
|
|
+10.32
|
|
Subscription Agreement between the Company and Zenyaku Kogyo Co., Ltd., dated as of August 14, 2015 (37)
|
|
|
|
#10.33
|
|
Deferred Compensation Election Form by and between the Company and Paul Truex, effective as of December 28, 2015 (38)
|
|
|
|
#10.34
|
|
Employment Offer Letter between the Company and Mr. Craig Thompson, dated as of December 4, 2015 (39)
|
|
|
|
#10.35
|
|
Employment Agreement, by and between the Company and Mr. Paul Truex, dated as of January 25, 2016 (40)
|
|
|
|
#10.36
|
|
Employment Agreement, by and between the Company and Mr. Craig Thompson, dated as of January 25, 2016 (41)
|
|
|
|
#10.37
|
|
Employment Agreement, by and between the Company and Dr. Colin Hislop, dated as of January 25, 2016 (42)
|
|
|
|
#10.38
|
|
Employment Agreement, by and between the Company and Ms. Klara Dickinson-Eason, dated as of January 25, 2016 (43)
|
|
|
|
#10.39
|
|
Employment Agreement, by and between the Company and Dr. Chuck Olson, dated as of January 25, 2016 (44)
|
#10.40
|
|
Employment Agreement, by and between the Company and Ms. May Liu, dated as of January 25, 2016 (45)
|
|
|
|
#10.41
|
|
Employment Offer Letter, by and between the Company and Dr. James Pennington, dated as of April 1, 2016 (46)
|
|
|
|
#10.42
|
|
Employment Offer Letter, by and between the Company and Dr. William Shanahan, dated as of April 25, 2016 (47)
|
|
|
|
#10.43
|
|
Amended and Restated Employment Offer Letter, by and between the Company and Mr. Craig Thompson, dated as of December 6, 2016 (filed herewith)
|
|
|
|
10.41
|
|
Stock Purchase Agreement between the Company and Lincoln Park Capital Fund, LLC, dated as of March 12, 2015 (48)
|
|
|
|
10.42
|
|
Amendment to the Stock Purchase Agreement between the Company and Lincoln Park Capital Fund LLC, dated as of July 8, 2015 (49)
|
|
|
|
10.43
|
|
Amendment to the Stock Purchase Agreement between the Company and Lincoln Park Capital Fund LLC, dated as of April 27, 2016 (50)
|
|
|
|
10.44
|
|
At Market Issuance Sales Agreement, dated April 21, 2016, between Anthera Pharmaceuticals, Inc. and H.C. Wainwright & Co., LLC (51)
|
|
|
|
10.45
|
|
Subscription Agreement, dated September 6, 2016, between Anthera Pharmaceuticals, Inc. and purchasers affiliated with Biotechnology Value Fund, L.P. and Rock Springs Capital Master Fund LP (filed as Exhibit 10.1 to the registrant's Form 8-K filed with the SEC on September 12, 2016 and incorporated herein by reference)(52)
|
|
|
|
14.1
|
|
Code of Ethics (53)
|
|
|
|
21.1
|
|
Subsidiaries of Anthera Pharmaceuticals, Inc.(54)
|
|
|
|
23.1
|
|
Consent of BDO USA LLP, independent registered public accounting firm
|
|
|
|
24.1
|
|
Power of Attorney (included on signature page hereto)
|
|
|
|
31.1
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
|
31.2
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
|
|
|
|
32.1 |
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant Section 906 of the Sarbanes-Oxley Act of 2002
|
+
|
Certain provisions of this Exhibit have been omitted pursuant to a request for confidential treatment.
|
#
|
Indicates management contract or compensatory plan, contract or agreement.
|
(1)
|
Filed as Exhibit 3.6 to the registrant’s Registration Statement on Form S-1/A (File No. 333-161930), filed with the SEC on February 3, 2010 and incorporated herein by reference.
|
(2)
|
Filed as the same numbered exhibit to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 26, 2013 and incorporated herein by reference.
|
(3)
|
Filed as Exhibit 3.1 to the registrant Current Report on Form 8-K, filed with the SEC on July 16, 2013 and incorporated herein by reference.
|
(4)
|
Filed as Exhibit 3.1 to the registrant Current Report on Form 8-K, filed with the SEC on September 12, 2016 and incorporated herein by reference.
|
|
|
(5)
|
Filed as Exhibit 3.1 to the registrant's Form 8-K filed with the SEC on September 15, 2016 and incorporated herein by reference.
|
|
|
(6)
|
Filed as Exhibit 3.2 to the registrant Current Report on Form 8-K, filed with the SEC on September 12, 2016 and incorporated herein by reference.
|
|
|
(7)
|
Filed as Exhibit 3.4 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 10, 2015 and incorporated herein by reference.
|
|
|
(8)
|
Filed as the same numbered exhibit to the registrant’s Amendment No. 3 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on January 29, 2010 and incorporated herein by reference.
|
|
|
(9)
|
Filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K, filed with the SEC on September 12, 2016 and incorporated herein by reference.
|
|
|
(10)
|
Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K, filed with the SEC on September 22, 2010 and incorporated herein by reference.
|
|
|
(11)
|
Filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K, filed with the SEC on March 29, 2011 and incorporated herein by reference.
|
(12)
|
Filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K, filed with the SEC on September 6, 2016 and incorporated herein by reference.
|
(13)
|
Filed as the same numbered exhibit to the registrant’s Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on September 15, 2009 and incorporated herein by reference.
|
(14)
|
Filed as Appendix A to the registrant’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on June 8, 2010 and incorporated herein by reference.
|
(15)
|
Filed as Exhibit 10.2 to registrant’s Quarterly Report on Form 10-Q, filed with the SEC on August 12, 2011 and incorporated herein by reference.
|
(16)
|
Filed as Exhibit 10.2 to the registrant’s Amendment No. 4 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on February 3, 2010 and incorporated herein by reference.
|
(17)
|
Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 14, 2010 and incorporated herein by reference.
|
(18)
|
Filed as Appendix B to the registrant’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on June 8, 2010 and incorporated herein by reference.
|
(19)
|
Filed as Exhibit 10.42 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 7, 2011 and incorporated herein by reference.
|
(20)
|
Filed as Exhibit 10.34 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 26, 2013 and incorporated herein by reference.
|
(21)
|
Filed as Annex B to the registrants Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 5, 2013 and incorporated herein by reference.
|
(22)
|
Filed as the same numbered exhibit to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 28, 2014 and incorporated herein by reference.
|
(23)
|
Filed as Exhibit 10.3 to the registrant’s Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on September 15, 2009 and incorporated herein by reference.
|
(24)
|
Filed as the Exhibit 10.4 to the registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on October 19, 2009 and incorporated herein by reference.
|
(25)
|
Filed as the Exhibit 10.5 to the registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on October 19, 2009 and incorporated herein by reference.
|
(26)
|
Filed as Exhibit 10.10 to the registrant’s Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on September 15, 2009 and incorporated herein by reference.
|
(27)
|
Filed as Exhibit 10.18 to the registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-161930), filed with the SEC on October 19, 2009 and incorporated herein by reference.
|
(28)
|
Filed as Exhibit 10.23 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 16, 2015, and incorporated herein by reference.
|
(29)
|
Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed with the SEC on September 22, 2010 and incorporated herein by reference.
|
(30)
|
Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 13, 2011, and incorporated herein by reference.
|
(31)
|
Filed as Exhibit 10.27 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 28, 2014, and incorporated herein by reference.
|
(32)
|
Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q/A, filed with the SEC on December 12, 2014 and incorporated herein by reference
|
(33)
|
Filed as Exhibit 10.33 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 16, 2015 and incorporated herein by reference
|
(34)
|
Filed as Exhibit 10.34 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 16, 2015 and incorporated herein by reference
|
(35)
|
Filed as Exhibit 10.35 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 16, 2015 and incorporated herein by reference
|
(36)
|
Filed as Exhibit 10.36 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 16, 2015 and incorporated herein by reference
|
|
|
(37)
|
Filed as Exhibit 10.32 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
|
|
(38)
|
Filed as Exhibit 10.33 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
|
|
(39)
|
Filed as Exhibit 10.34 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
|
|
(40)
|
Filed as Exhibit 10.35 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
|
|
(41)
|
Filed as Exhibit 10.36 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
|
|
(42)
|
Filed as Exhibit 10.37 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
|
|
(43)
|
Filed as Exhibit 10.38 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
|
|
(44)
|
Filed as Exhibit 10.39 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
|
|
(45)
|
Filed as Exhibit 10.40 to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2016 and incorporated herein by reference
|
(46)
|
Filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q, filed with the SEC on May 10, 2016 and incorporated herein by reference
|
|
|
(47)
|
Filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2016 and incorporated herein by reference
|
(48)
|
Filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed with the SEC on March 16, 2015 (dated March 12, 2015) and incorporated herein by reference
|
|
|
(49)
|
Filed as Exhibit 10.1 to the registrant's Form 8-K, filed with the SEC on April 27, 2016 and incorporated herein by reference
|
|
|
(50)
|
Filed as Exhibit 10.1 to the registrant's Form 8-K, filed with the SEC on April 21, 2016 and incorporated herein by reference
|
|
|
(51)
|
Filed as the same numbered exhibit to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 7, 2011 and incorporated herein by reference
|
|
|
(52)
|
Filed as Exhibit 10.1 to the registrant’s Form 8-K filed with the SEC on September 12, 2016 and incorporated herein by reference.
|
|
|
(53)
|
Filed as the same numbered exhibit to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 7, 2011 and incorporated herein by reference
|
|
|
(54)
|
Filed as the same numbered exhibit to the registrant’s Annual Report on Form 10-K, filed with the SEC on March 14, 2012 and incorporated herein by reference
|
ITEM 16. FORM 10-K SUMMARY
None.