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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from
to
Commission file number 000-50549
GTx, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 62-1715807 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
| incorporation or organization) |
| 3 N. Dunlap Street | ||
| Van Vleet Building | ||
| Memphis, Tennessee | 38163 | |
| (Address of principal executive offices) | (Zip Code) |
(901) 523-9700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of Each Exchange on Which Registered | |
| Common Stock, par value $0.001 per share | The NASDAQ Stock Market, LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act).
Yes o No þ
The aggregate market value of common stock held by non-affiliates of the Registrant based on
the closing sales price of the Registrant’s common stock on June 30, 2006 as reported on the NASDAQ
National Market was $116,782,839.
There were 34,857,079 shares of Registrant’s common stock issued and outstanding as of March
1, 2007.
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Documents Incorporated by Reference
Certain portions of the registrant’s definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the
end of the fiscal year covered by this Annual Report on Form 10-K, in connection with the
Registrant’s 2007 Annual Meeting of Stockholders are incorporated by reference into Part III of
this Annual Report on Form 10-K.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. The forward-looking
statements are contained principally in the sections entitled “Risk Factors,” “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These
statements involve known and unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially different from any future results,
performances or achievements expressed or implied by the forward-looking statements.
Forward-looking statements include statements about:
| • | The anticipated progress of our research, development and clinical programs; | ||
| • | Potential future licensing fees, milestone payments and royalty payments including any milestone payments or royalty payments that we may receive under our collaboration and license agreement with Ipsen Limited; | ||
| • | Our and our collaborator’s ability to market, commercialize and achieve market acceptance for our product candidates or products that we may develop; | ||
| • | Our ability to generate additional product candidates for clinical testing; | ||
| • | Our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and | ||
| • | Our estimates regarding the sufficiency of our cash resources. |
In some cases, you can identify forward-looking statements by terms such as “anticipates,”
“believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,”
“projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking
statements. Forward-looking statements reflect our current views with respect to future events, are
based on assumptions, and are subject to risks, uncertainties and other important factors. We
discuss many of these risks, uncertainties and other important factors in this Annual Report on
Form 10-K in greater detail in the section entitled “Risk Factors” under Part I, Item 1A below.
Given these risks, uncertainties and other important factors, you should not place undue reliance
on these forward-looking statements. Also, forward-looking statements represent our estimates and
assumptions only as of the date of this Annual Report on Form 10-K. You should read this Annual
Report on Form 10-K and the documents that we incorporate by reference in and have filed as
exhibits to this Annual Report on Form 10-K, completely and with the understanding that our actual
future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update any forward-looking statements
publicly, or to update the reasons actual results could differ materially from those anticipated in
any forward-looking statements, even if new information becomes available in the future.
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PART I
ITEM 1. BUSINESS
Overview
GTx, Inc., a Delaware corporation incorporated on September 24, 1997 is a biopharmaceutical
company dedicated to the discovery, development and commercialization of small molecules that
selectively target hormone pathways to treat cancer, osteoporosis and bone loss, muscle wasting and
other serious medical conditions. We are developing ACAPODENE® (toremifene citrate), a
selective estrogen receptor modulator, or SERM, in two separate clinical programs in men: first, a
pivotal Phase III clinical trial for the treatment of multiple serious side effects of androgen
deprivation therapy (“ADT”), for advanced prostate cancer, and second, a pivotal Phase III clinical
trial for the prevention of prostate cancer in high risk men with precancerous prostate lesions
called high grade prostatic intraepithelial neoplasia, or high grade PIN. We have licensed to Ipsen
Limited, or Ipsen, exclusive rights in the European Union, Switzerland, Norway, Iceland,
Lichtenstein and the Commonwealth of Independent States to develop and commercialize
ACAPODENE® and other products containing toremifene in all indications which we have
licensed from Orion Corporation, (“Orion”). We are also developing OstarineTM, a
selective androgen receptor modulator, or SARM, for the treatment of cancer wasting, which is known
as cancer cachexia and for chronic kidney disease (“CKD”) and end-stage renal disease (“ESRD”). We
plan to initiate a Phase IIb clinical trial evaluating OstarineTM for the treatment of
cancer cachexia by the summer of 2007 and another Phase IIb clinical trial evaluating
OstarineTM for the treatment of muscle wasting in CKD/ESRD patients by the end of 2007.
We believe that OstarineTM and our other SARMs have the potential to treat a variety of
other indications related to muscle wasting and bone loss including frailty and osteoporosis. Even
though we will maintain our primary focus in urology and oncology, GTx is evolving into a selective
nuclear hormone receptor modulator company that can target hormone pathways to address a myriad of
unmet medical needs in men and women.
We currently market FARESTON® (toremifene citrate 60 mg) tablets, which have been
approved by the U.S. Food and Drug Administration, or FDA, for the treatment of metastatic breast
cancer in postmenopausal women in the United States. In January 2005, we acquired from Orion the
right to market FARESTON® tablets in the United States for the metastatic breast cancer
indication. We also acquired from Orion a license to toremifene for all indications in humans
worldwide, except breast cancer outside of the United States. The active pharmaceutical ingredient
in FARESTON® is the same as in ACAPODENE®, but in a different dose. We plan
to build specialized sales and marketing capabilities to promote our product candidates to
urologists and medical oncologists in the United States and to seek partners to commercialize our
product candidates in broader markets in the United States and in the rest of the world.
We also have an extensive preclinical pipeline generated from our own discovery program that
includes potential product candidates, prostarine, for benign prostatic hyperplasia, or BPH, and
andromustine, an anticancer product candidate, for hormone refractory prostate cancer.
Our most advanced product candidate, ACAPODENE®, is being developed to treat the
multiple serious side effects of ADT and to prevent prostate cancer in high risk men with high
grade PIN. ADT is the standard medical treatment for patients who have advanced, recurrent or
metastatic prostate cancer, and we believe that there will be approximately one million prostate
cancer survivors who are expected to undergo ADT by 2008. It is the low estrogen levels
unintentionally caused by ADT that can lead to multiple serious side effects including: severe bone
loss, or osteoporosis, resulting in skeletal fractures; hot flashes; lipid profile changes that
lead to higher rates of cardiovascular disease; and breast pain and enlargement, or gynecomastia.
There are currently no drugs approved by the FDA for the treatment of these multiple serious side
effects of ADT. We commenced a pivotal Phase III clinical trial of ACAPODENE® 80 mg
under a Special Protocol Assessment, or SPA, with the FDA for this indication in November 2003. A
SPA is designed to facilitate the FDA’s review and approval of drug products by allowing the agency
to evaluate the proposed design and size of clinical trials that are intended to form the primary
basis for determining a drug product’s efficacy. We reached our enrollment goal in the fall of 2005
with approximately 1,400 patients randomized in the trial. The primary endpoint is the incidence of
vertebral morphometric fractures measured by x-ray, and the secondary endpoints include bone
mineral density, or BMD, hot flashes, gynecomastia
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and lipid profile changes. In December 2005, we conducted a planned interim analysis of BMD in the
first 197 patients to complete a year of treatment. Patients treated with ACAPODENE® 80
mg demonstrated statistically significant increases in BMD compared to placebo in all three
skeletal sites measured: lumbar spine, hip and femoral neck. In June 2006, we conducted a lipid
interim analysis of the same 197 patients. Patients treated with ACAPODENE® 80 mg had
statistically significant lower levels of total cholesterol, LDL, and triglycerides, reduction in
the ratio of total cholesterol to HDL, and higher levels of HDL, when compared to patients on
placebo. However, data on all patients completing the study will need to be evaluated before any
conclusions about clinical significance of the lipid profile findings can be drawn. In addition,
investors should note that interim results of a clinical trial do not necessarily predict final
results. We anticipate that we will complete this Phase III clinical trial in the fourth quarter of
2007. If the results are favorable, we expect to file a New Drug Application, or NDA, with the FDA
in 2008.
In the United States, prostate cancer is one of the most commonly diagnosed cancers and the
second leading cause of cancer-related deaths in men. Men who have high grade PIN are at high risk
of developing prostate cancer (approximately 50% of the men with high grade PIN found on a prostate
biopsy develop prostate cancer within three years). In the United States, there are over 115,000
new cases of high grade PIN diagnosed each year and an estimated 14 million men under the age of 80
may unknowingly harbor this condition. Currently, there is no approved treatment to prevent
prostate cancer in high risk men with high grade PIN. In January 2005, we initiated a pivotal Phase
III clinical trial of orally administered ACAPODENE® 20 mg for the prevention of
prostate cancer in high risk men with high grade PIN, which is being conducted under a SPA with the
FDA. We reached our enrollment goal of 1,260 patients in May 2006 and have enrolled approximately
300 additional patients into the trial to also participate in substudies requested by the FDA under
the SPA. We will evaluate efficacy endpoints at 36 months after completion of enrollment, with an
interim efficacy analysis to be conducted after a certain number of cancer events have been
recorded among study patients, which we currently expect to occur in the first quarter of 2008. If
the efficacy results from the interim analysis achieve the proscribed statistical outcome, we plan
to file a NDA with the FDA. If we are able to file a NDA based on the results of the interim
efficacy analysis, we will need to continue to collect safety data during the review process to
satisfy the FDA’s safety requirements set forth in the SPA.
In our third clinical program, OstarineTM, a SARM, is being developed to treat a
variety of medical conditions relating to muscle wasting and/or bone loss. Testosterone and other
anabolic steroids have been proven to reverse involuntary muscle wasting caused by aging, burns and
trauma, cancer, chronic kidney disease, end-stage renal disease, chronic obstructive pulmonary
disease and other diseases. However, testosterone and other anabolic steroids may cause serious
unwanted side effects, including stimulating prostate cancer growth in men and masculinization in
women. OstarineTM is an oral novel nonsteroidal agent designed to have anabolic activity
like testosterone without unwanted side effects on the prostate and skin.
In December 2006, we announced that OstarineTM met its primary endpoint in a Phase
II proof of concept, double-blind, randomized, placebo-controlled clinical trial in 60 elderly men
and 60 postmenopausal women. We initiated this proof of concept Phase II clinical trial of
OstarineTM in May 2006 and completed enrollment in July 2006. The trial was designed to
evaluate the activity of OstarineTM on building muscle as well as to assess safety in
both elderly men and postmenopausal women. Without a prescribed diet or exercise regimen, all
subjects treated with OstarineTM for three months had a dose dependent increase in the
primary endpoint of total lean body mass (muscle) with the 3 mg cohort achieving 1.4 kg compared to
placebo (p<0.001). Treatment with OstarineTM also resulted in a dose dependent
improvement in functional performance, a secondary endpoint measured by a stair climb test, with
the 3 mg cohort achieving a clinically significant improvement in both speed (p=0.006) and power
(p=0.005) compared to placebo. OstarineTM had a favorable safety profile, with no
serious adverse events reported. OstarineTM also exhibited tissue selectivity with
beneficial effects on lean body mass and performance and with no apparent change in measurements
for serum prostate specific antigen, or PSA (prostate), sebum production (skin and hair), or serum
luteinizing hormone, or LH (pituitary) compared to placebo. We recently conducted discussions with
various divisions of the FDA to investigate the required regulatory pathways for several
indications under consideration for OstarineTM’s ongoing clinical development. With more
clarity regarding the required regulatory pathway and with proof of concept Phase II clinical data,
we have selected cancer cachexia as the initial indication for OstarineTM development.
We plan to initiate a Phase IIb OstarineTM clinical trial for cancer cachexia by the
summer of 2007. We also plan to initiate a Phase IIb clinical trial of OstarineTM for
the treatment of muscle wasting in CKD/ESRD patients by the end of 2007.
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Scientific Background on Estrogens and Androgens
Both estrogens and androgens are hormones that play critical roles in men’s and women’s
health, regulating not only the reproductive system, but also having important effects on the
muscular, skeletal, cardiovascular, metabolic and central nervous systems. In order for the body to
function properly, a balance must exist between estrogens and androgens.
Estrogens prevent osteoporosis reducing the risk of skeletal fractures, may be cardio
protective by having a favorable effect on lipid profile, and may reduce hot flashes. As
testosterone levels decrease in aging men, there is also a gradual increase in estrogen levels in
the blood relative to testosterone levels which may promote BPH, initiate prostate cancer, and
cause gynecomastia.
Testosterone, the predominant androgen in men, is important for mental well-being and for
masculine physical characteristics, such as muscle size and strength and bone strength. Male
reproductive health is also dependent on testosterone to maintain sexual interest, fertility,
erectile function and normal prostate growth. Testosterone is converted into a more potent
androgen, dihydrotestosterone (DHT) which also stimulates sebaceous and hair glands and may cause
unwanted effects like acne and hair loss. DHT is the primary androgen involved in BPH. In aging
men, there is a gradual decline in testosterone levels, which contributes to a loss of muscle mass
and strength, and decreased bone mineralization which may result in osteoporosis and bone
fractures, erectile dysfunction, decreased sexual interest, depression and mood changes.
Estrogens and androgens perform their physiologic functions by binding to and activating their
hormone receptors located in various tissues. Once a hormone binds with its receptor, this
activates a series of cellular events that results in estrogenic or androgenic tissue effects.
Pharmaceuticals that target estrogens or androgens have been medically used for over 50 years.
The drugs that have been used to stimulate androgen receptors are either natural or synthetic
hormones, known as steroids. Steroids activate hormone receptors in all tissue types in a
non-selective manner resulting in not only beneficial effects but also in unwanted clinical
effects. In men, the absence of selectivity and conversion of testosterone to DHT may result in
unwanted side effects, such as the potential stimulation of latent into clinical prostate cancer,
and may enhance BPH, cause acne, cause loss of hair in men and hair growth in women and cause
gynecomastia. Currently, no orally available testosterone products have been approved for use in
the United States, and those testosterone products that are available must be administered by
intramuscular injections or by transdermal patches or gels that may not be convenient for patients
and, in some cases, can result in inconsistent blood levels of testosterone.
There are also classes of small molecules that are not steroids that can bind to the same
hormone receptors. These nonsteroidal small molecules may either stimulate or block hormone
receptors depending on the type of tissue in which the receptor is found and the interaction of the
small molecule with the receptor. A drug that has the ability to either block or stimulate the
hormone receptor is called a selective receptor modulator. A selective receptor modulator that can
either block or stimulate a hormone receptor in a tissue-selective manner may be able to mimic the
beneficial, while minimizing the unwanted, effects of natural or synthetic steroid hormones.
A SERM is a nonsteroidal small molecule that binds to and selectively modulates estrogen
receptors. SERMs have the ability to either stimulate or block estrogen’s activity in different
tissue types. SERMs have been shown to mimic estrogen’s beneficial action in bone and lipid
profiles, and we believe that SERMs have the potential to block estrogen’s harmful activity in the
prostate and the breast. Examples of SERMs currently on the market include toremifene, which is FDA
approved to treat advanced female breast cancer, and raloxifene, which is used to prevent and treat
female postmenopausal osteoporosis.
A SARM is a small molecule that binds to and selectively modulates androgen receptors, the
primary receptor to which testosterone binds. In men, SARMs potentially have beneficial action in
bone and muscle while blocking testosterone’s unwanted action in the prostate and skin. We further
believe that SARMs can be designed to either cross or not cross into the central nervous system and
to selectively modulate receptors in the brain to affect mood and sexual interest. Although no
SARMs have been commercialized to date, we believe that SARMs without
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testosterone’s or other exogenous anabolic steroid therapies’ harmful side effects can be
developed to treat a range of medical conditions, including: (1) muscle wasting conditions of
chronic diseases, such as cancer, AIDS, CKD, ESRD, neurodegenerative disorders, trauma and burns;
(2) muscle wasting conditions associated with aging such as frailty and sarcopenia; (3) the
prevention and/or treatment of osteoporosis; (4) prostate disorders, such as BPH and prostate
cancer; (5) disorders of the central nervous system, such as low libido, depression and other mood
disorders; (6) low testosterone conditions, such as hypogonadism and andropause; (7) male
reproductive functions, such as infertility, male contraception and erectile dysfunction; and (8)
other conditions, such as anemia, and male hair loss.
Marketed Product
FARESTON®
We currently market FARESTON® (toremifene citrate) 60 mg tablets, which have been
approved by the FDA for the treatment of metastatic breast cancer in postmenopausal women in the
United States. Toremifene is a selective estrogen receptor modulator owned and manufactured by
Orion. On January 1, 2005, we entered into a revised license and supply agreement with Orion to
exclusively license toremifene for all indications in the United States and for all indications in
humans, except breast cancer outside of the United States. Toremifene is the active pharmaceutical
ingredient in ACAPODENE®, our lead product candidate currently in Phase III clinical
trials for two indications, and FARESTON®.
We currently sell FARESTON® primarily through wholesale drug distributors. The top
three distributors, McKesson Corporation, Cardinal Health, Inc. and AmerisourceBergen Corporation,
accounted for approximately 94% of our revenues generated from the sale of FARESTON® for
the year ended December 31, 2006. The loss of any of these three distributors could have a
material adverse effect on continued FARESTON® sales. FARESTON® net product
sales accounted for 18% and 65% of our total revenue for the years ended December 31, 2006 and
2005, respectively.
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Product Candidates
The following table identifies the development phase and status for each of our product
candidates:
| Product | ||||||
| Candidate/ | Development | |||||
| Program | Indication | Phase | Status | |||
SERM
|
ACAPODENE® 80 mg Multiple serious side effects of ADT |
|||||
| ACAPODENE® 20 mg Prevention of prostate cancer in high risk men with high grade PIN |
||||||
SARM
|
OstarineTM Cancer cachexia |
|||||
| OstarineTM CKD/ESRD muscle wasting |
||||||
| Andarine | Phase I clinical trial | Four Phase I clinical trials completed | ||||
ACAPODENE®
Our most advanced product candidate, ACAPODENE®, is a SERM. ACAPODENE®
is being developed as a once-a-day oral tablet to (1) treat the multiple serious side effects of
ADT (80 mg dose) and (2) prevent prostate cancer in high risk men (20 mg dose). In January 2005, we
exclusively licensed toremifene, the active ingredient in ACAPODENE®, for all
indications in humans, except breast cancer outside of the United States. We licensed rights to
toremifene based on our belief that a SERM can treat complications resulting from ADT and reduce
the incidence of prostate cancer in high risk men with high grade PIN and toremifene’s established
record of safety in the treatment of postmenopausal women with advanced breast cancer. Under our
license and supply agreement, Orion manufactures and supplies to us FARESTON®, the 60 mg
dose of toremifene citrate, for sale in the United States to treat advanced breast cancer, as well
as ACAPODENE®, both 80 mg dose and 20 mg dose of toremifene citrate, for our Phase III
clinical trials for the treatment of multiple serious side effects resulting from ADT and to
prevent prostate cancer in high risk men.
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In September 2006, we licensed to Ipsen exclusive rights to develop and commercialize
ACAPODENE® and other products containing toremifene in all indications which we have
licensed from Orion in the European Union, Switzerland, Norway, Iceland, Lichtenstein and the
Commonwealth of Independent States (collectively, the “European Territory”).
ACAPODENE® 80 mg for the Treatment of Multiple Serious Side Effects of ADT
Scientific Overview. ADT is the standard medical treatment for patients who have advanced,
recurrent or metastatic prostate cancer. ADT reduces testosterone, a primary growth factor for
prostate cancer, to levels similar to that of castrated men. ADT is accomplished either surgically
by removal of the testes, or chemically by treatment with luteinizing hormone releasing hormone
agonists, known as LHRH agonists. LHRH agonists work by shutting off luteinizing hormone secretion
by the pituitary gland, which stops testosterone production by the testes. Examples of commercially
marketed LHRH agonists are Lupron® (leuprolide acetate), Zoladex® (goserelin
acetate),Viadur® (leuprolide acetate) and Eligard® (leuprolide acetate). The
reduction in testosterone from ADT also results in very low estrogen levels in men, because
estrogen is derived from testosterone in men. In fact, estrogen levels in men on ADT have been
shown to be lower than those levels in postmenopausal women.
Estrogen related side effects associated with ADT can include bone loss, which may lead to
osteoporosis and skeletal fractures, hot flashes, gynecomastia, adverse lipid changes which leads
to higher risk of cardiovascular diseases, depression, and memory loss. Bone loss leading to
osteoporosis and possible skeletal fractures is a significant clinical problem because clinical
studies have shown that prostate cancer patients who develop skeletal fractures have shorter
survival rates, with their median survival time shortened by 39 months. Hot flashes occur because
of reduced estrogen levels in the brain. Hot flashes experienced by prostate cancer patients on ADT
tend to be severe, frequent and protracted and may result in men being noncompliant in their
prescribed ADT.
Based on the results of our two Phase II clinical trials, the interim analysis performed in
our Phase III trial and our preclinical testing of ACAPODENE® 80 mg, as well as
preclinical and clinical information known about toremifene, we believe that ACAPODENE®
has estrogenic activity both in bone, which may prevent osteoporosis, and in the brain, which may
reduce hot flashes. Toremifene has been shown to improve lipid profiles in postmenopausal women
and, based on data received from our interim analysis of 197 men completing one year of treatment
in the ADT trial, we believe ACAPODENE® may improve lipid profiles in men undergoing
androgen deprivation therapy for prostate cancer. ACAPODENE® also can block estrogens’
action in the male breast, which may prevent and treat gynecomastia. As a consequence, we believe
that ACAPODENE® 80 mg has the potential to treat four serious side effects of LHRH
agonists: osteoporosis, hot flashes, adverse lipid changes and gynecomastia. Importantly, as
evidenced by two Phase II clinical trials, ACAPODENE® has not been shown to stimulate
prostate cancer growth or increase luteinizing hormone in men on ADT.
Potential Market. In the United States, we believe approximately 1,000,000 prostate cancer
patients will be treated with ADT by 2008, and over 100,000 new patients are started on this
therapy each year. An increasing number of prostate cancer patients are being treated by androgen
deprivation with LHRH agonists earlier than in the past because of two main factors: first,
medical studies have shown that early ADT prolongs the survival of prostate cancer patients, and
second, the serum test for PSA is detecting advanced prostate cancer earlier than in the past. The
net effect of prostate cancer being treated sooner and for longer periods is that the multiple
serious side effects of ADT have now been shown to contribute significantly to morbidity, and in
some cases may lead to increased mortality. Physicians are currently prescribing certain drugs on
an off-label basis to help ameliorate some of the specific serious side effects of ADT. These drugs
include bisphosphonates for osteoporosis, Megace® (megestrol acetate) and
antidepressants for hot flashes and tamoxifen for gynecomastia. Radiation is also used to treat
gynecomastia. However, no single therapy is available to treat multiple serious side effects of
ADT.
Clinical Trials. We have completed two Phase II clinical trials of ACAPODENE® for
the treatment of osteoporosis and hot flashes in patients with advanced, recurrent or metastatic
prostate cancer. The first Phase II trial was conducted at five clinical sites across the United
States and treated 43 patients with advanced, recurrent or metastatic prostate cancer shortly after
initiation of treatment with LHRH agonists. The second of these trials was conducted at three
clinical sites across the United States and treated 46 patients with advanced, recurrent or
metastatic prostate cancer who had been receiving LHRH agonists for more than 12 months. In each
trial, participants were randomized to either a daily oral dose of ACAPODENE® or a
placebo for six months. The primary
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endpoint of both trials was BMD. The secondary endpoint of both trials was the incidence of
hot flashes. We measured BMD and hot flash symptoms at entry into each of the clinical trials and
at six months. We did not evaluate the effects of ACAPODENE® on gynecomastia in either
of these trials.
In our first Phase II clinical trial, which evaluated 43 patients shortly after initiation of
treatment with LHRH agonists, patients who received ACAPODENE® at the highest tested
dose on average experienced an approximately 2% decrease in lumbar vertebral spine BMD at six
months, while the patients who received the placebo on average experienced an approximately 4%
decrease in lumbar vertebral spine BMD at six months. At the lower tested doses,
ACAPODENE®, as compared to the placebo, did not have a meaningfully different effect on
lumbar vertebral spine BMD. There was no significant difference between ACAPODENE® and
the placebo in the incidence of hot flashes at any tested dose.
In our second Phase II clinical trial, which evaluated 46 patients who had been receiving LHRH
agonists for more than 12 months, patients who received ACAPODENE® at the highest tested
dose experienced a 3.5% average increase in lumbar vertebral spine BMD, an indicator of bone
strength, while the patients who received the placebo experienced a 0.24% average increase in
lumbar vertebral spine BMD. The difference in these measurements had a p-value of less than 0.05.
A p-value of 0.05 or less generally represents a statistically significant difference in
treatments. The BMD changes in the hip were not significant vs. placebo. Only 12.5% of the
patients in this trial who received ACAPODENE® at the highest tested dose, compared to
50% of the patients who received the placebo, reported experiencing an increase in the frequency of
hot flashes during the clinical trial. The magnitude of the BMD changes seen in patients treated
with ACAPODENE® in this Phase II clinical trial were similar to those reported for each
of raloxifene and bisphosphonates in postmenopausal women with osteoporosis and bisphosphonates
being prescribed off-label to men with prostate cancer. However, bisphosphonates have not been
shown to have any effect on hot flashes or gynecomastia. At the lower tested doses,
ACAPODENE®, compared to the placebo, did not demonstrate a meaningful effect on lumbar
vertebral spine BMD or frequency of hot flashes.
In November 2003, we initiated a pivotal Phase III clinical trial of orally administered
ACAPODENE® 80 mg dose in patients undergoing ADT for advanced, recurrent or metastatic
prostate cancer under a SPA, from the FDA. We designed this pivotal Phase III clinical trial
principally based on the results of our second Phase II clinical trial that evaluated patients who
had been receiving LHRH agonists for more than 12 months. The primary endpoint of the trial is the
incidence of vertebral morphometric fractures measured by x-ray, and the secondary endpoints of the
trial include BMD, hot flashes, lipid changes and gynecomastia. We reached our enrollment goal in
the fall 2005 with approximately 1,400 patients with advanced, recurrent or metastatic prostate
cancer who have been receiving ADT for at least six months and who have significant existing bone
loss, or are greater than 70 years of age. The patients were randomized to receive either a placebo
or a daily 80 mg dose of ACAPODENE® for 24 months. We are conducting the trial in
approximately 150 sites in the United States and Mexico. In December 2005 and in accordance with
the SPA, we completed a planned interim BMD analysis among the first 197 patients who completed one
year of treatment. Patients treated with ACAPODENE® 80 mg demonstrated statistically
significant increases in BMD compared to placebo in all three skeletal sites measured, with lumbar
spine showing an improvement of 2.3 percentage points (p<0.001), hip, a 2.0 percentage point
improvement (p=0.001), and femoral neck, a 1.5 percentage point improvement (p=0.009). For
perspective, a SERM, raloxifene, study in postmenopausal osteoporosis in women showed a lumbar
spine BMD increase of 2.0 percentage points after one year which resulted in a 55% fracture
reduction in three years. In June 2006, we conducted a lipid interim analysis of the same 197
patients. Patients treated with ACAPODENE® 80 mg had statistically lower levels of
total cholesterol, LDL, and triglycerides, reduction in the ratio of total cholesterol to HDL, and
higher levels of HDL, when compared to patients on placebo. However, data on all patients
completing the study will need to be evaluated before any conclusions about clinical significance
of the lipid findings can be drawn. In addition, investors should note that interim results of a
clinical trial do not necessarily predict final results.
A Data Safety Monitoring Board (DSMB) meets every six months to review unblinded data from the
ACAPODENE® 80 mg ADT and ACAPODENE® 20 mg PIN clinical trials. In January
2007, the DSMB reviewed safety data from approximately 2,900 patients and recommended to continue
both trials, which we believe suggests that there are no clinically significant trends of serious
side effects related to ACAPODENE®. We currently anticipate that the ADT study will be
completed in the fourth quarter of 2007, and if efficacy is demonstrated in accordance with the
requirements of the SPA, we expect to file a NDA during 2008.
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ACAPODENE® 20 mg for the Prevention of Prostate Cancer in High Risk Men with High
Grade PIN
Scientific Overview. Patients who have an abnormal serum PSA test, a prostate cancer blood
test that is commonly administered to men as part of physical examinations or an abnormal digital
rectal examination routinely undergo a prostate biopsy to determine whether they have prostate
cancer. Precancerous prostate lesions known as high grade PIN, rather than prostate cancer, are
detected in approximately 10% of the patients who undergo prostate biopsies. Over the last 17
years, scientific evidence has established that men who have high grade PIN are at high risk for
developing prostate cancer. Prostate cancer eventually occurs in approximately 50% of men within
three years of their being diagnosed with high grade PIN. We believe that this strong correlation
between high grade PIN and prostate cancer makes these men an appropriate population to treat to
prevent prostate cancer. Currently, there is no approved treatment to prevent prostate cancer in
men who are diagnosed with high grade PIN.
Testosterone and estrogens together are important for the initiation of prostate cancer.
Estrogens may promote the development of prostate cancer by stimulating high grade PIN and causing
it to progress into prostate cancer. Estrogen receptors are found in the normal prostate and in
high grade PIN lesions. In animal models of prostate cancer, blocking estrogens’ action has been
shown to reduce the incidence of prostate cancer. Because ACAPODENE® blocks estrogen
receptors, we believe that it has the potential to reduce the incidence of prostate cancer in high
risk men with high grade PIN.
Potential Market. Prostate cancer is one of the most frequently diagnosed cancers and the
second leading cause of cancer-related deaths in men in the United States. There are approximately
218,000 new cases of prostate cancer diagnosed each year and 27,000 prostate cancer deaths annually
in the United States. In addition, there are over 115,000 new cases of high grade PIN diagnosed
each year, with an estimated 14 million men who unknowingly harbor high grade PIN.
Patients who are diagnosed with high grade PIN may undergo repeat biopsies following the
diagnosis in order to detect the progression of high grade PIN into prostate cancer. Prostate
biopsies are performed through an ultrasound probe placed in the rectum. Hollow needles are then
inserted through the probe through the rectum into the prostate to obtain sample cores of tissue.
Complications from this procedure include bleeding, pain, prostate infection and, in rare
instances, life-threatening blood infection (sepsis). Because the prostate biopsy technique
randomly samples the prostate gland with a relatively thin needle, both prostate cancer and high
grade PIN may be missed by the biopsy. Patients with high grade PIN are exposed to the potential
complications and the discomfort of invasive, repeat prostate biopsies and are subject to the
mental anguish of fearing that a diagnosis of prostate cancer may be imminent.
We have entered into separate collaboration agreements with diagnostic companies, including,
Hybritech, Inc., a wholly owned subsidiary of Beckman Coulter, Inc., diaDexus, Inc., MacroArray
Technologies, LLC, Onconome, Inc. (formerly known as Tessera, Inc.), and Gen-Probe, Incorporated,
to provide clinical samples to these companies from our Phase IIb clinical trial and our ongoing
Phase III clinical trial of ACAPODENE® 20 mg for the prevention of prostate cancer in
high risk men. Information resulting from these collaborations will be used to evaluate whether a
commercial test using blood or urine may be effectively developed to detect high grade PIN and/or
prostate cancer. By continuing to collaborate with leading diagnostic labs, we hope to have a
urine or blood test developed to detect high grade PIN in the millions of American men who may
unknowingly harbor high grade PIN and/or prostate cancer.
Clinical Trials. In 2004, we completed a randomized, double-blind, placebo-controlled,
dose-finding Phase IIb clinical trial of ACAPODENE® in men diagnosed with high grade PIN
to determine the efficacy and safety of a daily dose of ACAPODENE® for 12 months. The
trial enrolled 514 men and was conducted at 64 clinical sites across the United States. The primary
efficacy endpoint of this trial was incidence of prostate cancer at 12 months. Participants were
randomized to receive a 20 mg, 40 mg or 60 mg dose of ACAPODENE® or placebo. A screening
prostate biopsy was performed on each trial participant at the time of enrollment into the trial,
and eligibility was limited to participants who were diagnosed with high grade PIN and had no
evidence of prostate cancer. A second biopsy was performed six months after enrollment in an effort
to identify trial participants who had prostate cancer that was not detected by the initial biopsy.
The intent-to-treat population consisted of all patients initially enrolled in the trial who
returned for their six-month biopsy. We also analyzed trial results in a predefined subgroup of
patients
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that excluded patients showing biopsy evidence of prostate cancer at six months and patients
who did not complete the full course of therapy in the trial (completers analysis).
We analyzed the results of this Phase IIb clinical trial on a stratified basis, in which we
assessed the effect of individual clinical sites on the overall statistical analysis of the trial
results, and on an unstratified basis, in which we did not assess such effect. In the stratified
analysis of the per protocol population, which is the intent-to-treat population less two patients
in the group that received 20 mg of ACAPODENE® who were deemed to be not compliant with
the protocol, the cumulative, or overall, risk of prostate cancer was 24.4% in the group that
received 20 mg of ACAPODENE® compared with 31.2% in the group that received placebo. The
p-value for this result was less than 0.05. Thus, the cumulative risk of prostate cancer based on a
stratified analysis of the per protocol population was 22.0% lower in the 20 mg treatment group,
which would imply an annualized rate of prevention of cancers of 6.8 per 100 men treated. The
p-value in the unstratified analysis of the per protocol population for the comparison between the
group that received 20 mg of ACAPODENE® and the group that received placebo was 0.132.
In the stratified analysis of the intent-to-treat population, the cumulative risk of prostate
cancer was 24.9% in the group that received 20 mg of ACAPODENE® compared with 31.2% in
the group that received placebo. The p-value for this result was 0.081, which was statistically
significant under the protocol for this trial. Statistical significance under the protocol was
defined as a p-value of 0.10 or less. The p-value in the unstratified analysis of the
intent-to-treat population for the comparison between the group that received 20 mg of
ACAPODENE® and the group that received placebo was 0.148.
In a stratified analysis of the subgroup of patients who had no biopsy evidence of prostate
cancer at their initial screening biopsy or their six-month biopsy and completed the full course of
therapy in the trial, the cumulative risk of prostate cancer was 9.1% in the group that received 20
mg of ACAPODENE® compared with 17.4% in the group that received placebo, a 48.2%
reduction. The p-value for this result was less than 0.05. For the 40 mg and 60 mg treatment arms,
in the intent-to-treat population, the per protocol population and the predefined patient subgroup,
the cumulative risk of cancer was lower than the placebo group, although these results were not
statistically significant.
The overall rates of drug-related adverse events and serious adverse events did not differ to
a significant degree between any of the ACAPODENE® dose groups and placebo. The results
of our pivotal Phase III clinical trial of ACAPODENE® 20 mg for this indication may not
be the same as the results of this Phase IIb clinical trial.
In January 2005, we initiated a randomized, double-blind, placebo-controlled pivotal Phase III
clinical trial of orally administered ACAPODENE® 20 mg for the prevention of prostate
cancer in high risk men with high grade PIN, which is being conducted under a SPA with the FDA.
Approximately 130 clinical sites across the United States and Canada are participating in this
trial. We reached our enrollment goal of 1,260 patients in May 2006 and have enrolled
approximately 300 additional patients into the trial to also participate in substudies requested by
the FDA under the SPA. We will evaluate efficacy endpoints at 36 months after completion of
enrollment, with an interim efficacy analysis to be conducted after a certain number of cancer
events have been recorded among study patients, which we currently expect to occur in the first
quarter of 2008. If the results in this interim efficacy analysis achieve the proscribed
statistical outcome, we plan to file a NDA with the FDA. If we are able to file a NDA based on the
results of the interim efficacy analysis, we will need to continue to collect safety data during
the review process to satisfy the FDA’s safety requirements set forth in the SPA.
OSTARINETM
In our third clinical program, OstarineTM, a SARM, is being developed for the
treatment of a variety of medical conditions relating to muscle wasting and/or bone loss.
Testosterone and other anabolic steroids have been proven to beneficially treat involuntary muscle
wasting in acute and chronic diseases caused by aging, burns and trauma, cancer, chronic kidney
disease/end-stage renal disease, chronic obstructive pulmonary disease and other similar diseases.
Testosterone and other anabolic steroids, however, may cause unwanted side effects, including
stimulating prostate cancer growth in men and masculinization in
women. OstarineTM is an
oral nonsteroidal agent designed to have anabolic activity like testosterone without unwanted side
effects on prostate and skin.
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OstarineTM for the Treatment of Cancer Cachexia
Scientific Overview. Cancer cachexia is defined as the unintentional loss of lean body mass
or muscle. Cancer causes the body to go into a starvation-like state that results in the
preferential loss of muscle. Loss of muscle may lead to weakness, fatigue, diminished response and
greater toxicity to chemotherapy, and in some cases, death. Approximately one-third of
newly-diagnosed cancer patients have cancer cachexia which accounts for approximately 20% of cancer
deaths. Weight loss is one of the most important indicators of how long a cancer patient will live
since the survival of a patient with cancer is greatly impacted by the degree and rate of muscle
wasting. A greater lean body weight may increase strength, activity levels, quality of life,
response to chemotherapy and, ultimately, survival.
Testosterone increases lean body weight in both men and women. One of the causes of cancer
cachexia may be reduced levels of testosterone. Testosterone therapy, however, is not used for the
treatment of cancer cachexia for two reasons. First, the available delivery methods for
testosterone may not be convenient for patients, and testosterone can have a number of undesirable
side effects in men, such as the potential stimulation of latent prostate cancer, aggravation of
existing BPH and gynecomastia, and in women, masculinizing effects such as acne and facial hair.
We believe that OstarineTM is similar to testosterone in activating androgen
receptors in muscle, thereby promoting lean body weight, but does not stimulate sebaceous glands,
the cause of hair growth and acne, or the prostate, which may exacerbate BPH or stimulate prostate
cancer. In addition, OstarineTM is being developed in an oral dosage form, which
patients may find is more convenient to take.
Potential Market. There are approximately 1.3 million patients diagnosed with cancer each
year in the United States. It has been estimated that cancer cachexia afflicts approximately
410,000 patients. Over 30 clinical trials of supplemental nutritional support alone have reported
little or no benefit in counteracting cachexia in cancer patients receiving chemotherapy or
radiation. There are no drugs that have been approved by the FDA for the treatment of cancer
cachexia. Although there are two commercially available anabolic steroids being prescribed
off-label for the treatment of cancer cachexia, chronic use of these drugs may result in liver
toxicity. Also, Megase® has not been shown to increase lean body mass in spite of
increasing appetite.
OstarineTM for the Treatment of Muscle Wasting Related to Renal Disease
Scientific Overview. In chronic kidney disease, and especially end-stage renal disease
(dialysis), muscle wasting is the strongest and most consistent indicator of poor outcomes, (e.g.,
morbidity and mortality). The elderly with chronic kidney disease (CKD) are three times more likely
to be frail than elderly without CKD. A survey of ESRD patients showed that a high percentage of
these patients’ lives are impacted by muscle wasting, and their more common complaints include:
lack of energy (90%), feeling tired (90%), change in weight (62%) and muscle weakness (54%). A high
percentage of elderly ESRD patients fall each year (27% report having fallen the past 12 months
with an additional 16% reporting a fall in the prior year). While it is clear that a decline in
muscle function and exercise performance begin in early disease stages of CKD, the pathophysiology
of muscle wasting in CKD is complex, multifactoral and not fully understood. The primary causes for
the muscle wasting are thought to be sarcopenia, or the loss of muscle with aging; an increase in
inflammatory, catabolic cytokines; a loss of protein stores; insulin resistance; and inactivity (a
30 year old hemodialysis patient is likely to have less activity than a 70 year old healthy
sedentary individual).
Small clinical trials have demonstrated that anabolic steroids and exercise training can
increase muscle mass, serum protein markers, and physical function in ESRD patients. The data on
the relationship between cytokines and anabolic agents is not completely understood; however, there
is evidence to support that testosterone replacement may reduce some catabolic cytokines. The data
in a Phase II clinical trial of 120 elderly men and postmenopausal women indicated that
OstarineTM increased muscle mass and improved physical function.
Potential Market. There are in excess of 8.3 million Americans who are estimated to have CKD,
including approximately 400,000 ESRD patients. The reduction in the physical functioning of
patients who have CKD has been demonstrated in large longitudinal studies including the Health ABC
study (a study of 2,135 people who were between the ages of 70 to 79 years and had no functional
limitations at the initiation of the study) and the
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Cardiovascular Health Study (included a cross section of 5,317 U.S. citizens in the study aged
65 years and older). Unfortunately, in the United States, there are no approved treatments to
increase muscle mass and improve physical performance for these eight million Americans. The
anabolic steroids that have demonstrated the ability to increase muscle are not broadly used as
they have warnings in their labels related to the increased risk of prostate cancer in men and
masculinization in women. We are not aware of any pharmaceutical companies currently conducting
clinical trials to obtain an indication for muscle wasting in CKD/ESRD patients.
OstarineTM for the Treatment of Osteoporosis and Frailty
Scientific Overview. Every year after age 30, people lose on average a half pound of muscle
and gain a pound of fat. A typical man may lose 35% of muscle between the ages of 30 and 90 years
of age. A contributing factor to muscle loss in men is that testosterone levels decrease by 1%
every year after the age of 30 years. Muscle plays several important roles: muscle provides
strength and endurance, supports the skeletal system, plays an important role in metabolism, and
helps protect the body by providing protein for the immune system. During an illness or trauma to
the body, the energy demands of the body increase, and the body breaks down muscle to get protein
to fuel the body’s needs, to repair damaged organs, and to replenish immune system cells. Muscle
wasting starts a vicious cycle. As people lose muscle, they become fatigued more easily, making it
more difficult for them to rehabilitate and recover. Loss of muscle can cause frailty, loss of
independence and can worsen other conditions of aging such as osteoarthritis and osteoporosis.
People who are fatigued may become more sedentary, which can lead to a reduction in their quality
of life. Once people have lost muscle mass, it is increasingly difficult for the body to recover
from disease. Loss of muscle and bone with age is sometimes referred to as frailty whereas loss of
bone only is referred to as osteoporosis. A 2001 study among more than 5,000 elderly adults found
that over a three-year period the death rate among the frail elderly was 18%, versus a 3% mortality
rate in the non-frail elderly. The frail were also far more likely to experience falls,
hospitalizations and loss of independence.
We believe that OstarineTM can build muscle and bone by improving: (1) the body’s
efficiency at metabolizing protein from food, (2) the body’s ability to recycle protein, (3) the
body’s ability to burn fat and build muscle and (4) the body’s ability to maintain and promote bone. We believe that OstarineTM can increase muscle size and strength, resulting in
improved function, quality of life and speed of recovery, and can prevent osteoporosis and
fractures. OstarineTM has been designed to have anabolic properties in muscle and bone
without unwanted side effects, such as the stimulation of prostate cancer in men and masculization
in women. In preclinical studies of intact animals, OstarineTM has been shown to build
muscle and bone while shrinking the prostate.
Potential Market. There are approximately 17 million people over the age of 65 in the United
States who have age related loss of muscle mass. In the United States in 2003, there were
approximately 13.2 million hospital discharges among the 35 million people over the age of 65
years. It has been shown that from the time of the onset of their illness, approximately 50% of
the elderly declined in health after their hospital stay. Muscle wasting is a contributing factor
in their inability to completely recover. Current anabolic agents available in the market may be
experiencing limited acceptance by patients due to concerns about their potential undesirable side
effects, and inconvenient dosing. Testosterone is not available as an oral tablet in the United
States and topical gels and patches are the most utilized forms of delivery for testosterone
currently.
Clinical Trials. We have clinical data from two Phase I and one Phase II clinical trials of
OstarineTM. In our first Phase I clinical trial, a double-blind, placebo-controlled,
single-ascending dose study in 96 healthy male volunteers, OstarineTM was well
tolerated and there were no drug-related serious adverse events. This clinical trial demonstrated
that the half life of OstarineTM was approximately 24 hours.
The second Phase I clinical trial was a double-blind multiple ascending dose 14 day study to
evaluate the safety, tolerability, pharmacokinetics, and specific pharmacodynamic characteristics
of OstarineTMin 48 healthy male volunteers between 18 and 45 years of age and 23
elderly males with an average age of 68 years. Measurements included routine blood chemistry and
hematology, sex hormones and gonadotropins, serum prostate specific antigen, metabolic markers of
bone and muscle, cutaneous sebum analysis and DEXA scanning for body composition. Overall, clinical
laboratory values and hormonal effects for the 71 volunteers were consistent with anabolic
activity. Comparisons of DEXA assessments from the beginning of the study to DEXA assessments after
14 days showed
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positive changes in body composition at clinically relevant doses; increases in lean body mass and
decreases in fat mass were observed. OstarineTM did not appear to have unwanted side
effects on the prostate (serum PSA) or the skin (sebum analysis). OstarineTM was well
tolerated with no drug-related serious adverse events. However, Phase I clinical trials are not
designed to show efficacy, and the results of future clinical trials may not be the same as these
early observations.
In May 2006, we initiated a Phase II proof of concept, double-blind, randomized, dose finding
placebo-controlled clinical trial in 60 elderly men and 60 postmenopausal women. The trial was
designed to evaluate OstarineTM treatment in building muscle, as well as to assess
safety in both elderly men and postmenopausal women. Enrollment was completed in July 2006, and in
December 2006, we reported the top line results. Without a prescribed diet or exercise regimen,
all subjects treated with OstarineTM had dose dependent increases in the primary
endpoint total lean body mass with the 3 mg cohort achieving an increase of 1.4 kg compared to
placebo (p<0.001) after three months of treatment. Treatment with OstarineTM also
resulted in a dose dependent improvement in functional performance, a secondary endpoint, measured
by a stair climb test, with the 3 mg cohort achieving a clinically significant improvement in both
speed (p=0.006) and power (p=0.005) compared to placebo. OstarineTM had a favorable
safety profile, with no serious adverse events reported. OstarineTM also exhibited
tissue selectivity with beneficial effects on lean body mass and performance and with no apparent
change in measurements of serum PSA, sebum production, or serum LH. We recently conducted
discussions with various divisions of the FDA to investigate the required regulatory pathways for
several indications under consideration for OstarineTM’s ongoing clinical development.
With more clarity regarding the required regulatory pathway and with proof of concept Phase II
clinical data, we have selected cancer cachexia as the initial acute indication for
OstarineTM development. We plan to initiate a Phase IIb OstarineTM clinical
trial for cancer cachexia by the summer of 2007. We also plan to initiate a Phase IIb clinical
trial of Ostarine for the treatment of muscle wasting in CKD/ESRD patients by the end of the year.
ANDARINE
Andarine is another one of our SARMs that has been in clinical development for the treatment
of a variety of medical conditions relating to muscle wasting and/or bone loss. In March 2004, we
entered into a joint collaboration and license agreement with Ortho Biotech Products, L.P., a
subsidiary of Johnson & Johnson (“Ortho Biotech”) and other SARM compounds meeting specified
criteria. In December 2006, we reacquired our rights to develop and commercialize andarine and the
other SARM compounds previously licensed to Ortho Biotech, and the joint collaboration and license
agreement was terminated by the mutual agreement of the parties. We are in the process of
evaluating andarine and determining how we can maximize its value in our SARM portfolio.
PROSTARINE
We are also developing another product candidate, prostarine, for the potential treatment of
benign prostatic hyperplasia, or BPH, which is benign prostate enlargement that results in
obstruction of the urinary tract. In animal models, prostarine has been shown to have the ability
to shrink and prevent growth of the prostate gland. We are conducting preclinical studies required
to support clinical trials as well as evaluating other potential product candidates. It is
estimated that there are twelve million men in the United States with an enlarged prostate and
moderate to severe urinary symptoms. The market in the United States for BPH exceeds $1 billion
and is comprised primarily of alpha blockers which relax the smooth muscle of the prostate (e.g.
Flomax®) and 5-alpha reductace inhibitors (e.g. Proscar®) which shrink the
prostate tissue.
ANDROMUSTINE
First line therapy of patients who have advanced, recurrent or metastatic prostate cancer is
ADT. Since prostate cancer is dependent on androgens, such as testosterone, to grow, the reduction
in testosterone leads prostate cancer into remission. Unfortunately, with time, prostate cancer
circumvents the need for testosterone and comes out of remission. Once prostate cancer no longer
responds to androgen deprivation, it is referred to as hormone refractory prostate cancer.
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We have designed and are developing small molecules to specifically target and kill cancer
cells. In cell culture and in animals, these compounds selectively kill metastatic human prostate
cancer cells.
We believe there will be up to 1,000,000 men in the United States being treated with LHRH
agonists and other hormonal therapies for prostate cancer. Hormone refractory prostate cancer will
eventually occur in a majority of these patients. Once a patient develops hormone refractory
prostate cancer, the prognosis is poor. Andromustine could be a second line cancer therapy for
patients who have developed hormone refractory prostate cancer.
DRUG DISCOVERY AND OTHER RESEARCH AND DEVELOPMENT
Steroid hormone therapies, which include estrogen and testosterone therapies, have been used
to treat humans for many years. Steroid hormones by their nature have unselective effects in
various tissues. As a result, they have unintended side effects, which limit their clinical value.
SERM-based drugs, such as toremifene, tamoxifen and raloxifene, have achieved commercial
success in treating women as nonsteroidal small molecules that modulate hormone estrogen receptors
in a tissue selective way and minimize some of the side effects of the natural estrogen hormone to
treat breast cancer (toremifene and tamoxifen) or to treat postmenopausal osteoporosis
(raloxifene). We believe that the previous commercial and scientific success of SERMs indicates
that it is possible to design and develop classes of nonsteroidal small molecule drugs to modulate
hormone receptors in addition to estrogen receptors.
We believe that our drug discovery expertise will allow us to sustain our clinical pipeline
through the design and development of nonsteroidal small molecule drugs that modulate hormone
receptors. Our in-house medicinal chemists and scientists provide us with significant discovery and
development expertise. Using our capabilities in hormone receptor biology and medicinal chemistry,
we are able to target many hormone receptors and generate compounds that are designed to address
the shortcomings of natural hormone therapies.
We design and synthesize new compounds based on computer, or in silico, models and crystal
structures of a hormone receptor’s binding sites. We continually modify and improve these models to
reflect our study of the activity of new compounds in the laboratory, in which we determine the
link between chemical structures and biological activity, or structure-activity relationships.
We also have significant medicinal scale-up and high throughput capabilities, which facilitate
our rapid synthesis and evaluation of new compounds. Throughout our discovery process, we build
diversity into our chemistry structures in order to improve our likelihood of success in developing
novel compounds that have the potential to treat multiple indications. Through this approach, we
have generated clinical product candidates for the androgen receptor such as OstarineTM,
a nuclear hormone receptor modulator. We also have conducted other research and development
efforts focused on other SERM and SARM compounds, other receptor modulator compounds and anticancer
agents.
Our Strategy
Our objective is to develop and commercialize small molecules that selectively target hormone
pathways to treat cancer, osteoporosis and bone loss, muscle wasting and other serious medical
conditions. Key elements of our strategy to achieve this objective are to:
Obtain Regulatory Approval of ACAPODENE®. We are focused on completing two pivotal
Phase III clinical trials, both of which are being conducted under approved SPAs with the FDA,
obtaining regulatory approval and preparing for the potential commercial launch of
ACAPODENE® for two distinct indications in men’s health.
Retain Commercial Rights to ACAPODENE® in the United States and Establish Sales and
Marketing Infrastructure. We are currently planning to retain commercial rights to
ACAPODENE® in the United States. We believe that we can effectively market
ACAPODENE® to the target physician audience of urologists and medical oncologists in the
United States through a small, specialty sales force that we plan to build. We plan to collaborate
with pharmaceutical companies like Ipsen to commercialize, market and sell ACAPODENE®
outside of the United States and to physicians outside of urology and medical oncology in the
United States.
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Partner Commercial Rights to ACAPODENE® in Europe, Asia and the Rest of the World.
In September 2006, we licensed to Ipsen exclusive rights in the European Territory to develop and
commercialize ACAPODENE® and other products containing toremifene for all indications
which we have licensed from Orion. We are currently pursuing a similar partnership for
ACAPODENE® in Asia.
Extend Life Cycle of ACAPODENE®. We are studying various means to reformulate
ACAPODENE® with the goals of seeking longer intellectual property protection in the
European and Asian markets and extending its life cycle in the United States. GTx and Ipsen also
intend to apply for market exclusivity and regulatory extensions of patent life under applicable
European and U.S. laws, as appropriate, to protect our exclusive rights in ACAPODENE®
for the indications that we are currently testing in clinical trials.
Develop Diagnostic Tests for High Grade PIN. We are currently collaborating with several
diagnostics companies, including Hybritech, Inc., a wholly owned subsidiary of Beckman Coulter,
Inc., diaDexus, Inc., MacroArray Technologies, LLC, Onconome, Inc. (formerly known as Tessera,
Inc.), and Gen-Probe, Incorporated to develop an accurate blood or urine test to detect high grade
PIN. We will continue to seek additional collaborations with other companies with promising high
grade PIN diagnostics. We believe that men would be more willing to be tested for high grade PIN if
the diagnostic test were less invasive than a prostate biopsy. In February 2007, MacroArray
Technologies reported in Clinical Cancer Research the development of a urine test to non-invasively
detect high grade PIN. Given the large number of patients with undiagnosed high grade PIN, we
believe that the development of a blood or urine test would increase the detection of high grade
PIN and thereby expand the already large potential market for ACAPODENE® 20 mg.
Maintain Commercial Sales of FARESTON®. We intend to continue to market
FARESTON® in the United States.
Pursue Clinical Development of OstarineTM. We intend to initiate a Phase IIb
clinical trial for OstarineTM for the treatment of cancer cachexia by the summer of
2007. We are also planning to initiate a Phase IIb clinical trial of OstarineTM for the
treatment of CKD/ESRD muscle wasting by the end of 2007. We believe that OstarineTM and
our other SARMs have the potential to treat a variety of indications related to muscle wasting and
bone loss, including frailty and osteoporosis.
Build upon our Other SARM and Other Drug Discovery Capabilities to Sustain our Small Molecule
Product Candidate Pipeline to Selectively Target Hormone Pathways. We intend to develop our other
SARMs, as well as other small molecule product candidates, to treat diseases that affect large
numbers of patients and that are underserved by available alternatives. While our drug discovery
efforts to date have focused on SERM and SARM technologies, we believe that we have the capability
to discover additional drug candidates that target other hormone receptors. We plan to continue to
strengthen our drug discovery, medicinal chemistry and preclinical pharmacology groups to sustain
our pipeline of nonsteroidal small molecules designed to modulate a range of hormone receptors. We
may seek one or more collaborators for the development and commercialization of our SARM program,
other SERM product candidates, or other compounds under development.
Licenses and Collaborative Relationships
In addition to our own developed and discovered small molecules, we have established and
intend to continue to pursue licenses from and collaborative relationships with pharmaceutical
companies and academic institutions to further the development and commercialization of our small
molecule products.
Ipsen Group
In September 2006, we entered into a collaboration and license agreement with Ipsen pursuant
to which we granted Ipsen exclusive rights in the European Territory to develop and commercialize
ACAPODENE® and other products containing toremifene in all indications that we have
licensed from Orion, which include indications for all diseases or indications in humans except the
treatment and prevention of breast cancer. In the agreement, both parties have agreed that neither
party will seek to commercialize, promote, market or sell certain products within the European
Territory for an agreed period of time subsequent to the time of the first commercial launch of
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ACAPODENE® within the European Territory. We and Ipsen have also granted to each
other a right of first negotiation with respect to the development, marketing, sale and
distribution of any new SERM-based products for the field of the prevention and treatment of
prostate cancer or related side effects, or any other indication the parties may agree on. In
accordance with the terms of the agreement, Ipsen agreed to pay us €23 million as a license fee and
expense reimbursement, of which €1.5 million will be deferred and paid in equal installments over a
three year period. In October 2006, we received €21.5 million (approximately $27.1 million) from
Ipsen as initial payment for the license fee and expense reimbursement. Pursuant to the
agreement, we are also entitled to receive from Ipsen up to an aggregate of €39 million in
milestone payments depending on the successful development and launch of ACAPODENE® in
certain countries of the European Territory for the high grade PIN indication, subject to certain
conditions, and the ADT indication. Ipsen has agreed to be responsible for and to pay for all
clinical development, regulatory and launch activities to commercialize ACAPODENE® in
the European Territory for both the high grade PIN indication and ADT indication. We will remain
similarly responsible for all development and regulatory activities outside of the European
Territory. However, Ipsen has agreed to pay a portion of our ACAPODENE® development
costs in the United States if certain conditions are met. Under the agreement, Ipsen must elect to
retain its rights to commercialize ACAPODENE® and other products containing toremifene
for the high grade PIN indication. Until such time as Ipsen shall make its election, however, it
is required to initiate and carry out the development of ACAPODENE® for the high grade
PIN indication in the European Territory and to pay all costs associated therewith. Depending on
when Ipsen exercises this election, Ipsen may be required to pay an additional license fee as well
as a premium on its share of the development and clinical trial expenses incurred by us in the
United States since January 1, 2006, on account of ACAPODENE® for high grade PIN. If
Ipsen does not exercise its election within a certain period, Ipsen will not be obligated to pay us
for a portion of the development and clinical trial expenses incurred by us in the United States
since January 1, 2006, on account of ACAPODENE® for the high grade PIN indication, and
we may elect to terminate Ipsen’s rights to commercialize toremifene-based products for this
indication, in which event all of Ipsen’s rights to ACAPODENE® for the high grade PIN
indication (including all associated clinical trial data and regulatory filings and approvals) will
revert to us. Ipsen has agreed to pay us a royalty equal to a graduating percentage of aggregate
net sales of products containing toremifene (including ACAPODENE®) in the mid-teens,
which could reach the mid-twenties based on certain sales price thresholds being met, and which
rates will be dependent on whether such sales are for the high grade PIN indication or the ADT
indication. We will remain responsible for paying upstream royalties on ACAPODENE® to
both Orion and the University of Tennessee Research Foundation for the PIN indication and to Orion
only for the ADT indication. Ipsen will purchase the bulk drug product supply directly from Orion
and is responsible for the packaging and labeling of the final product.
Orion Corporation
In March 2000, we entered into a license and supply agreement with Orion to develop and
commercialize products containing toremifene, the active pharmaceutical ingredient in
FARESTON® and ACAPODENE®. Our rights under the original license agreement
were limited to specific disease fields pertaining to prostate cancer. In December 2004, we
entered into an agreement with Orion to purchase specified FARESTON® related assets
which Orion had re-acquired from another licensee. We also entered into an amended and restated
license and supply agreement with Orion which replaces the original license agreement. We paid
Orion approximately $5.2 million under the 2004 agreements for the assets and related license
rights.
Under the amended and restated license and supply agreement, we obtained an exclusive license
from Orion to develop and commercialize toremifene-based products, including FARESTON®
and ACAPODENE®, for all human indications worldwide, except breast cancer outside of the
United States. We are required to pay Orion a royalty on sales by us and our affiliates of
FARESTON® for breast cancer in the United States. We are also required to pay Orion a
royalty on sales by us, our affiliates and third-party sublicensees of other toremifene-based
products, including ACAPODENE® if approved for commercial sale. Our license and supply
agreement with Orion requires that Orion will manufacture and supply all of our and our
sublicensees’ needs for clinical trial and commercial grade material for toremifene-based products
developed and marketed in the United States and abroad, including ACAPODENE® globally
and FARESTON® in the United States. Orion may terminate its supply obligations under
specified circumstances. However, we have specified rights to assume manufacture of toremifene if
Orion terminates its supply of toremifene because it has ceased to manufacture toremifene, although
we would have to engage another supplier to do so. The term of the amended and restated license
and supply agreement lasts, on a country-by-country basis, until the later of expiration of our own
patents claiming the method of use or manufacture
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of toremifene for prostate cancer or the end of all marketing or regulatory exclusivity which
we may obtain for toremifene-based products. Orion may terminate the agreement as a result of our
uncured material breach or bankruptcy.
University of Tennessee Research Foundation
In August 2002, we executed an amended and restated exclusive license agreement with UTRF
granting us a worldwide exclusive license under their method of use patents relating to
ACAPODENE® 20 mg for the prevention of prostate cancer in high risk men with PIN. Under
the terms of the agreement, we are required to make annual maintenance fee payments and future
royalty payments to UTRF. We are also required to pay all expenses to file, prosecute and maintain
the patents relating to ACAPODENE® 20 mg for the prevention of prostate cancer in high
risk men with high grade PIN.
The amended and restated license agreement superseded a 1998 license agreement with UTRF
pursuant to which we reimbursed UTRF for certain patent expenses incurred by UTRF and agreed to
make sublicense fee payments and future royalty payments.
In June 2002, we executed two amended and restated exclusive license agreements with UTRF
granting us worldwide exclusive licenses under its composition of matter and method of use patents
relating to SARM compounds, including andarine and OstarineTM, to market, distribute and
sell licensed products. Under the terms of these license agreements, we are required to make
annual maintenance fee payments and future royalty payments to UTRF. We are also required to pay
all expenses to file, prosecute and maintain the patents relating to SARMs.
The amended and restated license agreements superseded a 2000 license agreement with UTRF
pursuant to which we reimbursed UTRF for certain patent expenses incurred by UTRF and agreed to
make sublicense fee payments and future royalty payments.
Effective as of December 2004, UTRF and The Ohio State University, or OSU, entered into two
inter-institutional agreements to share, in some cases, ownership of SARM technology, subject to
our exclusive license rights, and royalty payments received from our SARM license with UTRF. We
have agreed to amend our SARM license agreements to require us to provide the same kind of reports
and notifications to OSU that we currently provide to UTRF.
We have also executed with UTRF an amended and restated exclusive license agreement granting
us worldwide exclusive licenses with UTRF’s composition of matter and method of use patents for
some of the preclinical programs pertaining to viral cytolytics and gene therapy.
On November 28, 2006, we received correspondence from counsel representing UTRF claiming
$940,000 in annual license maintenance fees and residual alliance royalties under our two exclusive
license agreements with UTRF relating to SARM compounds.
In December 2006, we executed a letter of intent with UTRF agreeing to modify each of the
above referenced license agreements existing between the parties, including the two SARM license
agreements. The revised license agreements, when executed by us and UTRF, are intended to address
certain provisions of the agreements pertaining to the time and amount of payments for license
maintenance fees and royalty fees to be paid by us to UTRF. Upon execution of the revised license
agreements, we have agreed to pay to UTRF an aggregate consideration of $600,000 which will be
allocated among the license agreements.
Ortho Biotech Collaboration and License Agreement
In March 2004, we entered into a joint collaboration and license agreement with Ortho Biotech
for andarine, and specified backup SARM compounds. Under the terms of the agreement, we received
in April 2004 an up-front licensing fee and expense reimbursement totaling $6.7 million. The
up-front licensing fee and expense reimbursement were deferred and amortized into revenue on a
straight-line basis over the estimated five year andarine development period. In December 2006, we
reacquired full rights to develop and commercialize andarine and all backup compounds previously
licensed to Ortho Biotech and the joint collaboration and license agreement
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was terminated by mutual agreement of the parties. In connection with the termination of the
Ortho Biotech agreement, we recognized the associated $3.1 million balance of deferred revenue as
additional collaboration revenue.
Manufacturing
We do not currently own or operate manufacturing facilities for the production of clinical or
commercial quantities of ACAPODENE® or any of our SARMs, including andarine or
OstarineTM. We currently rely and expect to continue to rely on third parties for the
manufacture of our product candidates or products that we may develop.
We purchase toremifene citrate in specified doses, marketed as FARESTON®, from
Orion under an exclusive license and supply agreement providing for Orion to supply our
requirements for commercial product. Orion has agreed to supply us with, and we have agreed to
purchase from Orion, our worldwide requirements of toremifene citrate in specified doses in
finished tablet form at specified transfer prices. Orion’s manufacturing facility also produces
commercial quantities of toremifene tablets for FARESTON® and complies with the FDA’s
current Good Manufacturing Practice regulations. The raw materials necessary to manufacture
toremifene citrate tablets are readily available, but Orion is our only supplier of toremifene
tablets.
Orion may terminate its obligation to supply us with toremifene if:
| • | Marketing approval for ACAPODENE® for use in any of the licensed fields, except breast cancer, is not granted in the United States by December 31, 2009; or | ||
| • | Subject to a prior notice requirement, if Orion permanently ceases the manufacture of toremifene. |
Our license and supply agreement with Orion does not provide us with the current right to
manufacture toremifene. In addition, under the terms of our agreement with Orion, we have agreed to
purchase our requirements for toremifene tablets from Orion during the term of the agreement, which
extends for the life of our patent rights, beyond the term of Orion’s patents with respect to the
composition of matter of toremifene. There are a number of circumstances in which Orion is required
to grant manufacturing rights to us, including following termination of its supply obligation as
set forth above, failure by Orion to supply product to us for 90 days or to supply product in
dosages or formulations other than the dosages and formulations specified in the agreement or
termination of the agreement by us following a breach by Orion. However, in the event that Orion
terminates the license agreement as a result of our bankruptcy or a material breach of the
agreement by us that is not cured, we would not have the right to manufacture toremifene for
ACAPODENE® until Orion’s patents with respect to the composition of matter of toremifene
expire.
There are no complicated chemistries or unusual equipment required in the manufacturing
process for our SARMs. The active ingredient in each of andarine and OstarineTM is
manufactured using a four-step synthetic process that uses commercially available starting
materials and raw materials for each step. We contract with multiple third party vendors for our
clinical supply requirements for OstarineTM and andarine. We have begun the selection
process for the manufacture of full-scale commercial product which we expect to have selected by
the end of 2007.
Competition
The biotechnology and biopharmaceutical industries are characterized by rapidly advancing
technologies, intense competition and a strong emphasis on proprietary products. We face
competition from many different sources, including commercial pharmaceutical and biotechnology
enterprises, academic institutions, government agencies and private and public research
institutions.
Many of our competitors have significantly greater financial resources and expertise in
research and development, manufacturing, preclinical testing, clinical trials, regulatory approvals
and marketing approved products than we do. Smaller or early-stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established
companies. Our commercial opportunities will be reduced or eliminated if our competitors develop
and commercialize similar products that are safer, more effective,
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have fewer side effects or are less expensive than any products that we may develop. These
third parties compete with us in recruiting and retaining qualified scientific and management
personnel, establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies and technology licenses complementary to our programs or advantageous
to our business.
ACAPODENE® 20 mg for the Prevention of Prostate Cancer in High Risk Men with High
Grade PIN
Currently, there are no drug products that would compete with ACAPODENE® 20 mg for
the treatment of high grade PIN to reduce the incidence of prostate cancer. There are government
sponsored studies looking at the ability of nutritional supplements to prevent prostate cancer in
men with high grade PIN. These studies are much smaller than the ACAPODENE® 20 mg Phase
III trial and may not have enough clinical patients to show a statistically significant benefit.
Avodart® (dutasteride), from GlaxoSmithKline, is being evaluated in a Phase III clinical
trial in prostate cancer prevention in men with elevated PSA, but men with high grade PIN were
excluded from the Avodart trial.
ACAPODENE® 80 mg for the Treatment of Multiple Serious Side Effects of ADT
Currently, there are no products that have been approved by the FDA to treat multiple serious
side effects of ADT. We are aware of a number of drugs that are marketed or prescribed off-label
for the treatment of single side effects. For example, Evista® (raloxifene
hydrochloride), a SERM marketed by Eli Lilly, Fosamax® (alendronate sodium), a
bisphosphonate marketed by Merck, Zometa® (zoledronic acid) a bisphosphonate marketed by
Novartis, and Actonel® (risendronate sodium), a bisphosphonate marketed by
Sanofi-Aventis and Procter & Gamble, are each prescribed for the treatment of osteoporosis. Amgen
has an investigational drug, AMG-162 (denosumab), in Phase III trials for the prevention of
fractures in men undergoing ADT. Effexor® (venlafaxine hydrochloride), marketed by
Wyeth Pharmaceuticals, Catapres® (clonidine hydrochloride), marketed by Boehringer
Ingelheim, and Megace® (megesterol acetate), marketed by Bristol Myers Squibb, are
prescribed off-label to treat hot flashes caused by ADT. External beam radiation and tamoxifen are
both used to treat gynecomastia. There can be significant side effects associated with the use of
these drugs and radiation treatment. Most patients would need to take several different drugs and
potentially receive radiation treatments to treat multiple serious side effects of ADT. In
contrast, we believe that ACAPODENE® 80 mg as a single product candidate, has the
potential to treat multiple serious side effects.
SARMs for the Treatment of Cancer Cachexia and other Muscle and Bone Wasting Diseases
There are currently no drugs that have been approved by the FDA for the treatment of cancer
cachexia. Although there are two commercially available drugs, nandrolone and oxandrolone, that are
being prescribed off-label for the treatment of some types of cancer cachexia, chronic use of these
drugs may result in bleeding liver cysts and liver cell tumors. Nandrolone is an oral steroid that
is available from Steris Laboratories, a subsidiary of Watson Pharmaceuticals.
Oxandrin® (oxandrolone) is indicated as an adjunctive therapy to promote weight gain
after weight loss following extensive surgery, chronic infections and severe trauma and in some
patients who without pathophysiologic reasons fail to maintain normal weight but has been
prescribed off-label for cancer cachexia. Oxandrin® was marketed by Savient
Pharmaceuticals and generated approximately $60 million in annual sales. Savient has discontinued
production of Oxandrin® following the introduction of an authorized generic.
Oxandrin® has a black box warning for liver toxicity and has warnings and precautions
related to increasing the risk for prostate cancer and virilization in women.
Testosterone products have been used off-label to treat andropause and muscle wasting. Owing
to its potentially unwanted effects in the prostate, and possible inconvenient dosing, we believe
that testosterone products have had a limited impact on the market for muscle wasting. TAP
Pharmaceuticals and Ligand Pharmaceuticals have announced a collaboration to develop a SARM and may
be initiating Phase II studies in 2007, and other pharmaceutical companies are also developing
SARMs. Wyeth and Amgen have myostatin inhibitors in development which may compete for similar
patients as OstarineTM. Megace® (megesterol acetate) and Marinol®
(dronasinol) are appetite stimulants approved for AIDS patients which are used off-label for cancer
cachexia. Neither Megace® nor Marinol® increase muscle and neither have been
shown to improve physical function.
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FARESTON® for the Treatment of Breast Cancer
There are a number of drugs that have been approved by the FDA for the treatment of breast
cancer. Tamoxifen, which is marketed by AstraZeneca and several generic manufacturers, has been
approved by the FDA for the treatment of advanced breast cancer and the reduction of breast cancer
in women at high risk for developing the disease. The aromatase inhibitors, or AIs, such as
anastrozole, letrozole and exemestane, are used to treat breast cancer in postmenopausal women.
The AIs are growing at the expense of SERMs due to clinical trials such as the clinical trial
entitled “Arimidex and Tamoxifen: Alone or in Combination” or “ATAC,” which has shown efficacy and
tolerability advantages for AIs compared to tamoxifen.
Sales and Marketing
In order to commercialize any future products, we must broaden our sales and marketing
infrastructure or collaborate with third parties with sales and marketing experience and personnel.
We plan to build a small, highly-focused, specialty sales and marketing infrastructure, which we
expect to include 50 to 100 sales representatives, to market ACAPODENE® to the
relatively small and concentrated community of urologists and medical oncologists in the United
States and to market FARESTON® to targeted prescribers, principally medical oncologists
and other key specialists targeted in the United States. We believe that the urology and medical
oncology markets in the United States are readily accessible by a limited sales and marketing
presence due to the concentration of prescribing physicians. We have partnered with Ipsen to
commercialize ACAPODENE® in Europe. We are currently seeking partners to market
ACAPODENE® in Asia and other markets outside of the United States and Europe.
If approved by the FDA, OstarineTM for the treatment of muscle wasting and bone
loss may be prescribed in the United States and abroad by general practitioners, as well as
specialists such as medical oncologists. Therefore, we anticipate that we will seek collaboration
partners at an appropriate time to market, distribute and sell OstarineTM in the United
States and abroad, although we expect to retain rights to sell to specialists in the United States
through our specialty sales force.
We intend to devote sufficient marketing and sales efforts to maintain FARESTON®
sales at current trends.
Intellectual Property
We will be able to protect our technology from unauthorized use by third parties only to the
extent it is covered by valid and enforceable patents or is effectively maintained as trade
secrets. Patents and other proprietary rights are an essential element of our business.
For ACAPODENE® in the United States and internationally, we have entered into an
amended and restated license and supply agreement with Orion Corporation granting us an exclusive
license under Orion’s patents covering the composition of matter of toremifene, the active
pharmaceutical ingredient in ACAPODENE®, for all uses in humans in the United States,
and for all human uses outside the United States other than to treat breast cancer. The patent for
toremifene will expire in the United States in 2009 and in Australia, Italy, Sweden and Switzerland
in 2008. This patent has already expired in other European countries and in Japan and is likely to
expire in countries outside the United States before we commercialize ACAPODENE®. As a
result, outside of the United States and in the United States after 2009, we will need to rely
primarily on the protection afforded by the method of use patents that either have been already
issued or other patents that may later be issued in respect of our owned and licensed patent
applications relating to the use of ACAPODENE® for the relevant indications we seek.
We have licensed from the UTRF method of use patents in the United States and issued and
pending patent applications internationally related to the use of ACAPODENE® 20 mg for
the reduction in the incidence of prostate cancer in high risk men with high grade PIN. The method
of use patents issued in the United States related to the use of ACAPODENE® 20 mg for
this indication will begin expiring in 2019.
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We have our own pending method of use patent applications in the United States and
internationally related to the use of ACAPODENE® 80 mg for the treatment of
osteoporosis, gynecomastia and hot flashes and improvements of lipid profiles as multiple serious
side effects of ADT. A method of use patent related to the use of ACAPODENE® 80 mg for
the treatment of ADT-induced osteoporosis issued in the United States and will expire in 2023.
In all countries in which we hold or have licensed rights to patents or patent applications
related to ACAPODENE®, the composition of matter patents for toremifene, the active
pharmaceutical ingredient of ACAPODENE®, will expire before the method of use patents.
Furthermore, with respect to the method of use of ACAPODENE® 80 mg for the treatment of
osteoporosis, hot flashes and gynecomastia as multiple serious side effects of ADT worldwide and
the method of use of ACAPODENE® 20 mg for the reduction in the incidence of prostate
cancer in high risk men with high grade PIN outside the United States, we have some patents issued
and many more pending patent applications. Method of use patents for compounds where the
composition of matter patents have expired, carry the risk of individual physician prescribed
off-label use of the subject compounds.
In the event that patents issued in respect of our pending method of use patent applications,
after the expiration of the patent covering the composition of matter of toremifene in a particular
country, competitors could market and sell generic versions of toremifene at doses and in
formulations that are bioequivalent to ACAPODENE® for uses other than the indications
for ACAPODENE® covered by these pending method of use patent applications, and
individual physicians would be permitted to prescribe generic versions of toremifene for
indications that are protected by our or our licensors’ method of use patents and pending patent
applications. After the expiration of the patent covering the composition of matter of toremifene
in a particular country, if patents do not issue in respect of our pending method of use patent
applications related to the use of ACAPODENE® 80 mg for the treatment of osteoporosis,
hot flashes and gynecomastia as multiple serious side effects of ADT worldwide and the method of
use of ACAPODENE® 20 mg for the reduction in the incidence of prostate cancer in high
risk men with high grade PIN outside the United States, competitors could market and sell generic
versions of toremifene at doses and in formulations that are bioequivalent to FARESTON®
(toremifene citrate) 60 mg tablets for these indications.
Until January 2005, our license from Orion was limited to the use of toremifene for the
prevention and treatment of prostate cancer and the prevention and treatment of osteoporosis, hot
flashes and gynecomastia as multiple serious side effects of ADT in the treatment of prostate
cancer. We have since acquired the rights from Orion to market, sell and distribute a 60 mg
toremifene tablet under the trademark FARESTON® for the treatment of advanced breast
cancer in the United States and the rights to market, sell and distribute toremifene for all other
indications in humans in the United States and in the rest of world except for breast cancer
outside of the United States.
For OstarineTM and our other SARMs, including andarine and prostarine, we have an
exclusive license from the UTRF under its issued patents and pending patent applications in the
United States and internationally covering the composition of matter of the active pharmaceutical
ingredient in these product indications, pharmaceutical compositions and formulations and methods
of synthesizing the active pharmaceutical ingredients. We also have pending patent applications in
the United States and internationally related to methods for building muscle mass and bone in
patients and treating frailty, osteoporosis, cancer cachexia and other wasting diseases using
ostarineTM, andarine and other SARMs.
We have pending patent applications in the United States and internationally related to
methods for treating BPH using prostarine.
We also rely on trade secrets, technical know-how and continuing innovation to develop and
maintain our competitive position. We seek to protect our proprietary information by requiring our
employees, consultants, contractors, outside scientific collaborators and other advisors to execute
non-disclosure and confidentiality agreements and our employees to execute assignment of invention
agreements to the Company on commencement of their employment. Agreements with our employees also
prevent them from bringing any proprietary rights of third parties to us. We also require
confidentiality or material transfer agreements from third parties that receive our confidential
data or materials.
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Government Regulation
New Drug Development and Approval Process
Numerous governmental authorities in the United States and other countries extensively
regulate the testing, clinical development, manufacturing and marketing of pharmaceutical products
and ongoing research and development activities. In the United States, the FDA rigorously reviews
pharmaceutical products under the Federal Food, Drug, and Cosmetic Act and applicable regulations.
Non-compliance with FDA regulations can result in administrative and judicial sanctions, including
warning letters, clinical holds, fines, recall or seizure of products, injunctions, total or
partial suspension of production, refusal of the government to approve marketing applications or
allow entry into supply contracts, refusal to permit import or export of products, civil penalties,
criminal prosecution and other actions affecting a company and its products. The FDA also has the
authority to revoke previously granted marketing authorizations.
To secure FDA approval, an applicant must submit extensive preclinical and clinical data, as
well as information about product manufacturing processes and facilities and other supporting
information to the FDA for each indication to establish a product candidate’s safety and efficacy.
The development and approval process takes many years, requires the expenditure of substantial
resources and may be subject to delays or limitations of approval or rejection of an applicant’s
new drug application. Even if the FDA approves a product, the approval is subject to post-marketing
surveillance, adverse drug experience and other recordkeeping and reporting obligations, and may
involve ongoing requirements for post-marketing studies. The FDA also may place conditions on any
approvals that could restrict the commercial applications, advertising, promotion or distribution
of these products. Product approvals may be withdrawn if compliance with regulatory standards is
not maintained or if problems occur following initial marketing.
Preclinical and Clinical Testing
Preclinical studies involve laboratory evaluation of product characteristics and animal
studies to assess the biological activity and safety of the product. In some cases, long-term
preclinical studies are conducted while clinical studies are ongoing. The FDA, under its Good
Laboratory Practices regulations, regulates preclinical studies. Violations of these regulations
can, in some cases, lead to invalidation of the studies, requiring these studies to be replicated.
When the preclinical testing is considered adequate by the sponsor to demonstrate the safety and
scientific rationale for initial human studies, the results of the preclinical tests, together with
manufacturing information and analytical data, are submitted to the FDA as part of an
Investigational New Drug application, or IND. The IND becomes effective, if not rejected by the
FDA, within 30 days after FDA receives the IND. The FDA may, either during the 30-day period after
filing of an IND or at any future time, impose a clinical hold on proposed or ongoing clinical
trials on various grounds, including that the study subjects are or would be exposed to an
unreasonable and significant health risk. If the FDA imposes a clinical hold, clinical trials
cannot commence or recommence without FDA authorization and then only under terms authorized by the
FDA.
Clinical trials involve the administration of the investigational product candidates to humans
under the supervision of a qualified principal investigator. Clinical trials must be conducted in
accordance with Good Clinical Practice, or GCP, under protocols submitted to the FDA as part of the
IND. In addition, each clinical trial must be approved and conducted under the auspices of an
Investigational Review Board, or IRB, and with patient informed consent. The IRB will consider,
among other things, ethical factors and the safety of human subjects.
Clinical trials are conducted in three sequential phases, but the phases may overlap. Phase I
clinical trials usually involve healthy human subjects. The goal of the Phase I clinical trial is
to establish initial data about the safety, tolerability and pharmacokinetic properties of the
product candidates in humans. In Phase II clinical trials, controlled studies are conducted on an
expanded population of patients with the targeted disease. The primary purpose of these tests is to
evaluate the effectiveness of the drug candidate on the patients to determine if there are any side
effects or other risks associated with the drug and to determine the optimal dose of the drug from
the safety and efficacy profile developed from the clinical study. Phase III trials involve even
larger patient populations, often with several hundred or even several thousand patients depending
on the use for which the drug is being studied. Phase III trials are intended to establish the
overall risk-benefit ratio of the drug and provide, if appropriate, an adequate basis for product
labeling. During all clinical trials, physicians monitor the patients to determine
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effectiveness and to observe and report any reactions or other safety risks that may result
from use of the drug candidate.
Product Formulation and Manufacture
Concurrent with clinical trials and preclinical studies, companies must develop information
about the chemistry and physical characteristics of the drug and finalize a process for
manufacturing the product. In addition, manufacturers, including contract manufacturers, are
required to comply with the applicable FDA current Good Manufacturing Practice regulations. The
current Good Manufacturing Practice regulations include requirements relating to quality control
and quality assurance, as well as the corresponding maintenance of records and documentation. The
manufacturing process must be capable of consistently producing quality batches of the product and
the manufacturer must develop methods for testing the quality, purity and potency of the final
drugs. Additionally, appropriate packaging must be selected and tested and chemistry stability
studies must be conducted to demonstrate that the product does not undergo unacceptable
deterioration over its shelf-life.
Compliance with current Good Manufacturing Practice regulations also is a condition of new
drug application approval. The FDA must approve manufacturing facilities before they can be used in
the commercial manufacture of drug products. In addition, manufacturing establishments are subject
to pre-approval inspections and unannounced periodic inspections.
New Drug Application Process
After the completion of the clinical trial phases of development, if the sponsor concludes
that there is substantial evidence that the drug candidate is safe and effective for its intended
use, the sponsor may submit a new drug application, or NDA, to the FDA. The application must
contain all of the information on the drug candidate gathered to that date, including data from the
clinical trials, and be accompanied by a user fee.
The FDA determines whether a NDA as submitted is acceptable for filing. The FDA may refuse to
file an application, in which case the FDA retains one-half of the user fees. If the submission is
accepted for filing, the FDA begins an in-depth review of the application. As part of this review,
the FDA may refer the application to an appropriate advisory committee, typically a panel of
clinicians, for review, evaluation and a recommendation. The FDA is not bound by the recommendation
of an advisory committee. Under the Prescription Drug User Fee Act, or PDUFA, submission of a NDA
with clinical data requires payment of a fee, with some exceptions. In return, FDA assigns a goal
of six or ten months from filing of the application to return of a first “complete response,” in
which the FDA may approve the product or request additional information. There can be no assurance
that an application will be approved within the performance goal timeframe established under PDUFA.
If the FDA evaluations of the NDA and the manufacturing facilities are favorable, the FDA may
issue an approval letter authorizing commercial marketing of the drug candidate for specified
indications. The FDA could also issue an approvable letter, which usually contains a number of
conditions that must be met in order to secure final approval of the NDA. When and if those
conditions have been met to the FDA’s satisfaction, the FDA will issue an approval letter. On the
other hand, if the FDA’s evaluation of the NDA submission or manufacturing facilities is not
favorable, the FDA may refuse to approve the NDA or issue a non-approvable letter.
Marketing Approval and Post-Marketing Obligations
If the FDA approves an application, the drug becomes available for physicians to prescribe.
Periodic reports must be submitted to the FDA, including descriptions of any adverse reactions
reported. The FDA may require post-marketing studies, also known as Phase IV studies, as a
condition of approval. In addition to studies required by the FDA after approval, trials and
studies are often conducted to explore new indications for the drug. The purpose of these trials
and studies and related publications is to develop data to support additional indications for the
drug, which must be approved by the FDA, and to increase its acceptance in the medical community.
In addition, some post-marketing studies are done at the request of the FDA to develop additional
information regarding the safety of a product.
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Any products manufactured or distributed pursuant to FDA approvals are subject to continuing
regulation by the FDA, including record keeping requirements, reporting of adverse experiences with
the drug, drug sampling and distribution requirements, notifying the FDA and gaining its approval
of certain manufacturing or labeling changes, complying with certain electronic records and
signature requirements, and complying with FDA promotion and advertising requirements. Drug
manufacturers and their subcontractors are required to register their establishments and are
subject to periodic unannounced inspections for compliance with Good Manufacturing Practice
requirements. Also, newly discovered or developed safety or effectiveness data may require changes
to a product’s approved labeling, including the addition of new warnings and contraindications, or
even in some instances revocation or withdrawal of the product’s approval.
Drug Price Competition and Patent Term Restoration Act of 1984
Under the Drug Price Competition and Patent Term Restoration Act of 1984, known as the
Hatch-Waxman Act, a portion of a product’s patent term that was lost during clinical development
and application review by the FDA may be restored. The Hatch-Waxman Act also provides for a
statutory protection, known as exclusivity, against the FDA’s acceptance or approval of certain
competitor applications. The Hatch-Waxman Act also provides the legal basis for the approval of
abbreviated new drug applications.
Patent term restoration can compensate for time lost during product development and the
regulatory review process by returning up to five years of patent life for a patent that covers a
new product or its use. This period is generally one-half the time between the effective date of an
IND and the submission date of a NDA, plus the time between the submission date of a NDA and the
approval of that application. Patent term restorations, however, are subject to a maximum extension
of five years, and the patent term restoration cannot extend the remaining term of a patent beyond
a total of 14 years. The application for patent term extension is subject to approval by the United
States Patent and Trademark Office in conjunction with the FDA. It takes at least six months to
obtain approval of the application for patent term extension.
The Hatch-Waxman Act also provides for a period of statutory protection for new drugs that
receive NDA approval from the FDA. If a new drug receives NDA approval as a new chemical entity,
meaning that the FDA has not previously approved any other new drug containing the same active
entity, then the Hatch-Waxman Act prohibits an abbreviated new drug application or a NDA where the
applicant does not own or have a legal right of reference to all of the data required for approval
to be submitted by another company for a generic version of such drug, with some exceptions, for a
period of five years from the date of approval of the NDA. The statutory protection provided
pursuant to the Hatch-Waxman Act will not prevent the filing or approval of a full NDA, as opposed
to an abbreviated new drug application or a new drug application in which the applicant does not
own or have a legal right of reference to all of the data required for approval, for any drug,
including, for example, a drug with the same active ingredient, dosage form, route of
administration, strength and conditions of use. In order to obtain a NDA, however, a competitor
would be required to conduct its own clinical trials. If NDA approval is received for a new drug
containing an active ingredient that was previously approved by the FDA but the NDA is for a drug
that includes an innovation over the previously approved drug, for example, a NDA approval for a
new indication or formulation of the drug with the same active ingredient, and if such NDA approval
was dependent upon the submission to the FDA of new clinical investigations, other than
bioavailability studies, then the Hatch-Waxman Act prohibits the FDA from making effective the
approval of an abbreviated new drug application or a new drug application in which the applicant
does not own or have a legal right of reference to all of the data required for approval for a
generic version of such drug for a period of three years from the date of the NDA approval. This
three year exclusivity, however, only covers the innovation associated with the NDA to which it
attaches. Thus, the three year exclusivity does not prohibit the FDA, with limited exceptions, from
approving abbreviated new drug applications or a new drug application in which the applicant does
not own or have a legal right of reference to all of the data required for approval for drugs
containing the same active ingredient but without the new innovation.
While the Hatch-Waxman Act provides certain patent restoration and exclusivity protections to
innovator drug manufacturers, it also permits the FDA to approve abbreviated new drug applications
for generic versions of their drugs. The abbreviated new drug application process permits
competitor companies to obtain marketing approval for a drug with the same active ingredient for
the same uses but does not require the conduct and submission of clinical studies demonstrating
safety and effectiveness for that product. Instead of safety and effectiveness data, an abbreviated
new drug application applicant needs only to submit data demonstrating that its product is
bioequivalent
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to the innovator product as well as relevant chemistry, manufacturing and product data. The
Hatch-Waxman Act also instituted a third type of drug application that requires the same
information as a NDA, including full reports of clinical and preclinical studies, except that some
of the information from the reports required for marketing approval comes from studies which the
applicant does not own or have a legal right of reference. This type of application permits a
manufacturer to obtain marketing approval for a drug without needing to conduct or obtain a right
of reference for all of the required studies.
Finally, the Hatch-Waxman Act requires, in some circumstances, an applicant submitting an
abbreviated new drug application or a new drug application in which the applicant does not own or
have a legal right of reference to all of the data required for approval to notify the patent owner
and the holder of the approved NDA of the factual and legal basis of the applicant’s opinion that
the patent is not valid or will not be infringed. Upon receipt of this notice, the patent owner and
the NDA holder have 45 days to bring a patent infringement suit in federal district court and
obtain a 30-month stay against the company seeking to reference the NDA. The NDA holder could still
file a patent suit after the 45 days, but if they did, they would not have the benefit of the
30-month stay. Alternatively, after this 45-day period, the applicant may file a declaratory
judgment action, seeking a determination that the patent is invalid or will not be infringed.
Depending on the circumstances, however, the applicant may not be able to demonstrate a controversy
sufficient to confer jurisdiction on the court. The discovery, trial and appeals process in such
suits can take several years. If such a suit is commenced, the Hatch-Waxman Act provides a 30-month
stay on the approval of the competitor’s abbreviated new drug application or a new drug application
in which the applicant does not own or have a legal right of reference to all of the data required
for approval. If the litigation is resolved in favor of the competitor or the challenged patent
expires during the 30-month period, unless otherwise extended by court order, the stay is lifted
and the FDA may approve the application. Under regulations recently issued by the FDA, and
essentially codified under the recent Medicare prescription drug legislation, the patent owner and
the NDA holder have the opportunity to trigger only a single 30-month stay per abbreviated new drug
application or a new drug application in which the applicant does not own or have a legal right of
reference to all of the data required for approval. Once the applicant of the abbreviated new drug
application or a new drug application in which the applicant does not own or have a legal right of
reference to all of the data required for approval has notified the patent owner and the NDA holder
of the infringement, the applicant cannot be subjected to another 30-month stay, even if the
applicant becomes aware of additional patents that may be infringed by its product.
Pharmaceutical Pricing and Reimbursement
In both domestic and foreign markets, sales of any products for which we receive regulatory
approval for commercial sale will depend in part on the availability of reimbursement from
third-party payors. Third-party payors include government health administrative authorities,
managed care providers, private health insurers and other organizations. These third-party payors
are increasingly challenging the price and examining the cost-effectiveness of medical products and
services. In addition, significant uncertainty exists as to the reimbursement status of newly
approved healthcare product candidates. We may need to conduct expensive pharmacoeconomic studies
in order to demonstrate the cost-effectiveness of our products. Our product candidates may not be
considered cost-effective. Adequate third-party reimbursement may not be available to enable us to
maintain price levels sufficient to realize an appropriate return on our investment in product
development. The United States and state governments continue to propose and pass legislation
designed to reduce the cost of healthcare. Adoption of new legislation could further limit
reimbursement for pharmaceuticals.
The marketability of any products for which we receive regulatory approval for commercial sale
may suffer if the government and third-party payors fail to provide adequate coverage and
reimbursement. In addition, an increasing emphasis on managed care in the United States has and
will continue to increase the pressure on pharmaceutical pricing. Currently, our only marketed
product, FARESTON® for the treatment of metastatic breast cancer, is eligible for
coverage and reimbursement by third-party payors.
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Research and Development
Since our inception, we have been focused on drug discovery, preclinical development and
clinical development programs. Our research and development expenses were $33.9 million for the
year ended December 31, 2006, $30.9 million for the year ended December 31, 2005 and $18.0 million
for the year ended December 31, 2004.
Employees
As of December 31, 2006, we had 91 employees, 22 of whom were M.D.s and/or Ph.D.s. None of
our employees is subject to a collective bargaining agreement. We believe that we have good
relations with our employees.
Available Information
We file reports with the Securities and Exchange Commission (“SEC”), including annual reports
on Form 10-K, quarterly reports on Form 10-Q, and other reports from time to time. The public may
read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street,
NW, Washington, DC 20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer and the SEC
maintains an Internet site at http://www.sec.gov that contains the reports, proxy and information
statements, and other information filed electronically. Our website address is
http://www.gtxinc.com. Please note that these website addresses are provided as inactive textual
references only. We make available free of charge through our website our Annual Report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those
reports as soon as reasonably practicable after such material is electronically filed with or
furnished to the SEC. The information provided on our website is not part of this report, and is
therefore not incorporated by reference unless such information is otherwise specifically
referenced elsewhere in this report.
Executive Officers and Other Key Employees of the Registrant
The following table sets forth information about our executive officers and other key
employees as of March 1, 2007.
| Name | Age | Position(s) | ||||
Directors and Executive Officers |
||||||
Mitchell S. Steiner, M.D., F.A.C.S.
|
46 | Chief Executive Officer and Vice-Chairman of the Board of Directors | ||||
Marc S. Hanover, MBA.
|
44 | President, Chief Operating Officer and Director | ||||
Henry P. Doggrell, JD.
|
58 | Vice President, General Counsel and Secretary | ||||
Mark E. Mosteller, CPA.
|
44 | Vice President, Chief Financial Officer and Treasurer | ||||
K. Gary Barnette, Ph.D.
|
39 | Vice President, Clinical Research and Development Strategy | ||||
James T. Dalton, Ph.D.
|
44 | Vice President, Preclinical Research and Development | ||||
Gregory A. Deener.
|
45 | Vice President, Sales and Marketing Product Commercialization | ||||
Other Key Employees |
||||||
T. Gary Bird, Ph.D.
|
54 | Director of Corporate Quality | ||||
Robert S. Boger, M.D.
|
60 | Director of Drug Safety | ||||
Karen A. Veverka, Ph.D.
|
39 | Director of Preclinical Development | ||||
Domingo Rodriguez, M.D.
|
45 | Director of Clinical Operations | ||||
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Mitchell S. Steiner, M.D., F.A.C.S., a co-founder of GTx, has served as our Chief Executive
Officer and Vice-Chairman of our Board of Directors since our inception in September 1997. From
1995 to 2003, Dr. Steiner held numerous academic appointments, including Chairman and Professor of
Urology, Director of Urologic Oncology and Research and the Chair of Excellence in Urologic
Oncology at the University of Tennessee. Since 2003, Dr. Steiner has continued to serve on the
faculty at the University of Tennessee. Dr. Steiner holds a B.A. in Molecular Biology from
Vanderbilt University and an M.D. from the University of Tennessee, and performed his surgery and
urologic training at The Johns Hopkins Hospital.
Marc S. Hanover, MBA, a co-founder of GTx, has served as our President and Chief Operating
Officer and a director since our inception in September 1997. Prior to joining GTx, Mr. Hanover was
a founder of Equity Partners International, Inc., a private equity firm in Memphis, Tennessee, and
participated as a founder and investor in three healthcare companies. From 1985 to 1997, Mr.
Hanover was a Senior Vice President and a member of the Executive Management Committee of National
Bank of Commerce in Memphis, Tennessee. Mr. Hanover holds a B.S. in Biology from the University of
Memphis and a MBA in Finance from the University of Memphis.
Henry P. Doggrell, JD, has served as our General Counsel and Secretary since October 2001 and
was appointed Vice President on January 20, 2005. From April 1998 to August 2001, Mr. Doggrell was
Senior Vice President, Corporate Affairs at Buckeye Technologies, Inc., a specialty cellulose
company, where he was responsible for matters including corporate finance, investor relations,
mergers and acquisitions, intellectual property and licensing and strategic development. From 1996
to 1998, Mr. Doggrell served as General Counsel and Secretary of Buckeye Technologies. Prior to
joining Buckeye Technologies, Mr. Doggrell was a partner of the Baker, Donelson, Bearman, Caldwell
and Berkowitz law firm from 1988 to 1996, where he served as a member of the law firm management
committee and Chair of the firm’s Corporate Securities department. Mr. Doggrell holds a B.S. in
Commerce from the University of Virginia and a JD from Vanderbilt University.
Mark E. Mosteller, CPA, has served as our Chief Financial Officer since August 2001 and was
appointed Vice President and Treasurer on January 20, 2005. From April 1997 to August 2001, Mr.
Mosteller was an Executive Vice President of Union Planters Bank National Association, a subsidiary
of Union Planters Corporation, a bank holding company, and Chief Operating Officer of Union
Planters Mortgage, the mortgage division of Union Planters Bank National Association. From 1994 to
1997, Mr. Mosteller was the Chief Financial Officer of Boatmen’s National Mortgage, Inc., the
mortgage subsidiary of Boatmen’s Bancshares, Inc. From 1984 to 1994, Mr. Mosteller was employed as
an audit senior manager with Ernst & Young LLP. Mr. Mosteller is a certified public accountant and
holds a B.S. in Accounting from the University of Tennessee.
K. Gary Barnette, Ph.D., was appointed Vice President, Clinical Research and Development
Strategy in November 2005, and prior to that he served as Vice President, Clinical Research and
Development since January 20, 2005. He also served as our Director of Regulatory Affairs since
December 2001. From May 1998 to December 2001, Dr. Barnette was Assistant Director and then
Director, Regulatory Affairs at Solvay Pharmaceuticals, Inc., a specialty pharmaceutical company.
From March 1995 to May 1998, Dr. Barnette was a Clinical Pharmacology and Biopharmaceutics Reviewer
at the FDA, where he reviewed in the Divisions of Reproductive and Urologic Drug Products,
Metabolic and Endocrine Drug Products and Gastrointestinal and Coagulation Drug Products. Dr.
Barnette holds a B.S. in Biology from Salem College, and a Ph.D. in Basic Pharmaceutical Sciences
from West Virginia University.
James T. Dalton, Ph.D., has served as Vice President, Preclinical Research and Development
since January 2005. Dr. Dalton served as a scientific consultant to GTx from 1999 to 2005. Prior
to joining GTx, Dr. Dalton held several academic appointments including Assistant and Associate
Professor of Pharmaceutical Sciences in the College of Pharmacy at the University of Tennessee,
Memphis (1992-2000) and Professor in the Division of Pharmaceutics, College of Pharmacy at The Ohio
State University (2000-2007). SARMs were first discovered in Dr. Dalton’s research laboratories,
and he is co-inventor on all SARM patents. Dr. Dalton holds a B.S. in Pharmacy from the University
of Cincinnati and a Ph.D. in Pharmaceutics and Pharmaceutical Chemistry from The Ohio State
University.
Gregory A. Deener was appointed Vice President, Sales and Marketing on January 20, 2005, and
prior to that he served as our Director of Marketing and Sales since February 2004. Mr. Deener has
over 20 years of experience in Marketing and Sales and has launched a urology medicine within the
U.S. From 1996 to December 2003, Mr.
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Deener served as a Marketing Director for GlaxoSmithKline in various roles within the U.S. and
Europe. Most recently Mr. Deener was responsible for the launch of Avodart, a urology medicine for
BPH. From 1983 to 1996, Mr. Deener worked for Procter & Gamble in Brand Management and Sales. Mr.
Deener holds a B.S. in Business Administration from the University of North Carolina at Chapel
Hill.
T. Gary Bird, Ph.D., has served as our Director of Corporate Quality since October 2003. From
1995 to October 2003, Dr. Bird was a Senior Regulatory Scientist, Senior Quality Consultant and
Quality Technical Advisor for Biotechnology in Corporate Quality Assurance at Eli Lilly and
Company. Dr. Bird provided regulatory and quality direction to the biotechnology component of Eli
Lilly with respect to facility construction and operation. From 1992 to 1995, Dr. Bird was the
Assistant to the Deputy Director, Center for Biologics Evaluation and Research at the FDA. Dr. Bird
holds a B.S. from the University of Memphis in Invertebrate Zoology/Chemistry, a M.S. from the
University of Memphis in Invertebrate Zoology and a Ph.D. in Biochemistry/Entomology from
Mississippi State University.
Robert S. Boger, M.D., was appointed Director of Drug Safety on January 20, 2005. Prior to
that, he served as our Director of Clinical Development since May 2003. From January 2002 until he
joined GTx, Dr. Boger was a private consultant specializing in medicine, pharmacology and clinical
research. From 1997 to January 2002, Dr. Boger was Director of Clinical Research for
Transplantation and Immunology for Novartis Pharmaceuticals. From 1996 to 1997, Dr. Boger served as
Director of Medical Research and Clinical Science Leader of Roche’s CellCeptTransplant program.
Prior to joining Roche, Dr. Boger served as both Associate Director, Clinical Research and Medical
Director, Renin Inhibitor Venture for Abbott Laboratories. Dr. Boger holds a B.A. in Biophysics
from Amherst College and a M.D. from Harvard Medical School. Dr. Boger is board certified in
internal medicine, nephrology and clinical pharmacology.
Karen A. Veverka, Ph.D., has served as our Director of Preclinical Development since August
2000. Dr. Veverka is a co-inventor of several patents held by GTx in the area of medical
applications of SARMs. From 1996 to September 2000, Dr. Veverka was a post-doctoral research fellow
at St. Jude Children’s Research Hospital. Dr. Veverka holds a B.S. in Biochemistry from Kansas
State University and a Ph.D. from Mayo Graduate School/The Mayo Foundation.
Domingo Rodriguez, M.D., was appointed Director of Clinical Operations on October 7, 2005,
and prior to that, he served as our Regional Medical Scientist in the North East area of the United
States since November 2004. Dr. Rodriguez has 19 years of experience in the pharmaceutical/biotech
industry. Dr. Rodriguez started his career in the pharmaceutical industry in 1987 with
Bristol-Myers Squibb and for almost 14 years he served in various roles including Area Director for
the Medical Science Manager group, Acting Regional Sales Director, Senior Specialty District Sales
Manager. From 2002 to 2004, Dr. Rodriguez served as a Medical Director, Medical Science Liaison
and District Sales Manager for ICOS Corporation. Dr. Rodriguez completed medical school in Santo
Domingo, Dominican Republic.
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ITEM 1A. RISK FACTORS
We have identified the following additional risks and uncertainties that may have a material
adverse effect on our business, financial condition or results of operations. Investors should
carefully consider the risks described below before making an investment decision. Our business
faces significant risks and the risks described below may not be the only risks we face. Additional
risks not presently known to us or that we currently believe are immaterial may also significantly
impair our business operations. If any of these risks occur, our business, results of operations
or financial condition could suffer, the market price of our common stock could decline and you
could lose all or part of your investment in our common stock.
Risks Related to Our Financial Results and Need for Additional Financing
We have incurred losses since inception and anticipate that we will incur
continued losses for the foreseeable future.
We have a limited operating history. As of December 31, 2006, we had an accumulated deficit of
$229.8 million, of which $96.3 million related to non-cash dividends and adjustments to the
preferred stock redemption value. We have incurred losses in each year since our inception in 1997.
Net losses were $35.5 million for the year ended December 31, 2006, $36.8 million in 2005, and
$22.3 million in 2004. We expect to continue to incur significant and increasing operating losses
for the foreseeable future. These losses have had and will continue to have an adverse effect on
our stockholders’ equity and working capital.
Because of the numerous risks and uncertainties associated with developing small molecule
drugs, we are unable to predict the extent of any future losses or when we will become profitable,
if at all. We have primarily financed our operations and internal growth through sales of common
stock and preferred stock. In addition, we have received upfront license fees and payments pursuant
to our collaboration agreement with Ortho Biotech for andarine and certain other SARMs, which was
terminated in December 2006, and our collaboration agreement with Ipsen for European rights to
ACAPODENE® and other toremifene-based products. FARESTON® is currently our
only commercial product and, we expect, will account for all of our product revenue for the
foreseeable future. For the year ended December 31, 2006, we recognized $1.4 million in net
revenues from the sale of FARESTON®.
We expect our research and development expenses to increase in connection with our ongoing
clinical trials. In addition, subject to regulatory approval of any of our product candidates, we
expect to incur additional sales and marketing expenses and increased manufacturing expenses.
We will need substantial additional funding and may be unable to raise capital
when needed, which would force us to delay, reduce or eliminate our product
development programs or commercialization efforts.
We will need to raise additional capital to:
| • | Fund our operations and clinical trials; | ||
| • | Continue our research and development; and | ||
| • | Commercialize our product candidates, if any such product candidates receive regulatory approval for commercial sale. |
We estimate that our current cash resources, interest on these funds and product revenue from
the sale of FARESTON® will be sufficient to meet our projected operating requirements
through the first quarter of 2009. This estimate does not include funding from milestone payments
that we may receive under our existing collaboration with Ipsen, potential future collaboration
agreements with pharmaceutical companies, or potential future issuance and sale of securities.
This estimate does not include any potential product launch costs for ACAPODENE® in the
event that it is approved for marketing by the FDA.
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Our future funding requirements will depend on many factors, including:
| • | The scope, rate of progress and cost of our clinical trials and other research and development activities; | ||
| • | Future clinical trial results; | ||
| • | The achievement of certain milestone events under, and other matters related to, our collaboration and license agreement with Ipsen; | ||
| • | The terms and timing of any future collaborative, licensing and other arrangements that we may establish; | ||
| • | The cost and timing of regulatory approvals; | ||
| • | Potential future licensing fees, milestone payments and royalty payments, including any milestone payments or royalty payments that we may receive under our collaboration and license agreement with Ipsen; | ||
| • | The cost and timing of establishing sales, marketing and distribution capabilities; | ||
| • | The cost of establishing clinical and commercial supplies of our product candidates and any products that we may develop; | ||
| • | The effect of competing technological and market developments; | ||
| • | The cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and | ||
| • | The extent to which we acquire or invest in businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions. |
Until we can generate a sufficient amount of product revenue, we expect to finance future cash
needs through public or private equity offerings, debt financings or collaboration and licensing
arrangements, as well as through interest income earned on the investment of our cash balances and
revenue for the sale of FARESTON®.
If we raise additional funds by issuing equity securities, our stockholders will experience
dilution. Debt financing, if available, may involve restrictive covenants. Any debt financing or
additional equity that we raise may contain terms that are not favorable to us or our stockholders.
If we raise additional funds through collaboration and/or licensing arrangements with third
parties, it will be necessary to relinquish some rights to our technologies or our product
candidates, or we may be required to grant licenses on terms that may not be favorable to us.
Risks Related to Development of Product Candidates
We will not be able to commercialize our product candidates if our preclinical
studies do not produce successful results or our clinical trials do not
demonstrate safety and efficacy in humans.
Preclinical and clinical testing is expensive, can take many years and has an uncertain
outcome. Success in preclinical testing and early clinical trials does not ensure that later
clinical trials will be successful, and interim results of a clinical trial do not necessarily
predict final results. Typically, the failure rate for development candidates is high. Significant
delays in clinical testing could materially impact our product development costs. We do not know
whether planned clinical trials will begin on time, will need to be restructured or will be
completed on schedule, if at all. Several patients in our Phase III clinical trial of
ACAPODENE® 80 mg for the side effects of androgen deprivation therapy have withdrawn
from the trial, in accordance with the trial protocol, to seek treatment for a loss in bone mineral
density. Even if these patients are receiving a placebo, their withdrawal from the trial may
result in delays or an inability to achieve the proscribed statistical endpoint. We may
experience numerous unforeseen events during, or as a result of, preclinical testing and the
clinical trial process that could delay or prevent our ability to commercialize our product
candidates, including:
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| • | Regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site; | ||
| • | Our preclinical or clinical trials may produce negative or inconclusive results, which may require us to conduct additional preclinical or clinical testing or to abandon projects that we expect to be promising; | ||
| • | Registration or enrollment in our clinical trials may be slower than we currently anticipate, resulting in significant delays; | ||
| • | We might have to suspend or terminate our clinical trials if the participating patients are being exposed to unacceptable health risks; | ||
| • | Regulators or institutional review boards may suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements; and | ||
| • | Our product candidates may not have the desired effects or may include undesirable side effects. |
If any of these events were to occur and, as a result, we have significant delays in or
termination of clinical trials, our costs could increase and our ability to generate revenue could
be impaired, which would adversely impact our financial results.
For some of the indications for which we intend to conduct or are currently conducting
clinical trials for our product candidates, we do not have evidence from prior preclinical studies
in animals or clinical trials in humans of the potential effectiveness of such product candidates
for such indications. In the absence of preclinical or clinical data, our beliefs regarding the
potential effectiveness of our product candidates for these indications is generally based on
pharmacokinetic data and analyses and pharmacological rationales. For example, our belief that
ACAPODENE® has the potential to reduce hot flashes is based, in part, on our second
Phase II clinical trial in which a higher percentage of the subjects in the placebo group
experienced worsening in the frequency of hot flashes compared to the subjects treated with
ACAPODENE®. Although this observation suggests that ACAPODENE® does not cause
hot flashes or the worsening of hot flashes in men on androgen deprivation therapy, this trial was
too small to establish the potential effects of ACAPODENE® on the reduction in incidence
or severity of hot flashes. Similarly, an assessment of the potential to treat gynecomastia with
ACAPODENE® in this second Phase II clinical trial was inconclusive. We are assessing the
effect of ACAPODENE® on gynecomastia and hot flashes in our Phase III clinical trial.
Our preclinical or clinical trials may produce negative or inconclusive results that would not
support our belief regarding the potential effectiveness of our product candidates.
If we observe serious or other adverse events during the time our product
candidates are in development or after our products are approved and on the
market, we may be required to perform lengthy additional clinical trials, may
be denied regulatory approval of such products, may be forced to change the
labeling of such products or may be required to withdraw any such products from
the market, any of which would hinder or preclude our ability to generate
revenues.
To date, in our two Phase III clinical trials for ACAPODENE®, some patients have
experienced venous thromboembolic events, such as deep vein thromboses, pulmonary embolisms, and
myocardial infarctions, one of which resulted in a patient’s death, which were considered by
investigators as possibly related to treatment with ACAPODENE®. Because these trials are
blinded, we cannot establish whether these patients received placebo or ACAPODENE® in
the trial. There have been no drug-related serious adverse events related to our other product
candidates. A drug safety monitoring board meets every six months to review unblinded data from the
ACAPODENE® Phase III clinical trials that we are conducting. In January 2007, the drug
safety monitoring board reviewed safety data from in excess of 2,900 patients, including the venous
thromboembolic events and myocardial
infarctions referred to above, and recommended continuing both clinical trials with no changes
to the trial protocols. In addition, in our Phase II clinical trial for OstarineTM, we
observed a dose-related elevation of hepatic enzymes, and in our preclinical studies for
OstarineTM, we observed expected effects on the reproductive organs in the male
population, since our drug targets the androgen receptor which is located on these organs.
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If the incidence of these events increases in number or severity, if a regulatory authority
believes that these events constitute an adverse effect caused by the drug, or if other effects are
identified during clinical trials that we are currently conducting, during clinical trials that we
may conduct in the future or after any of our product candidates are approved and on the market:
| • | We may be required to conduct additional preclinical or clinical trials, make changes in labeling of any such approved products, reformulate any such products, or implement changes to or obtain new approvals of our or our contractors’ manufacturing facilities; | ||
| • | Regulatory authorities may be unwilling to approve our product candidates or may withdraw approval of our products; | ||
| • | We may experience a significant drop in the sales of the affected products; | ||
| • | Our reputation in the marketplace may suffer; and | ||
| • | We may become the target of lawsuits, including class action suits. |
Any of these events could prevent approval or harm sales of the affected product candidates or
products or could substantially increase the costs and expenses of commercializing and marketing
any such products.
Risks Related to Our Dependence on Third Parties
If third parties do not manufacture our product candidates in sufficient
quantities and at an acceptable cost, clinical development and
commercialization of our product candidates would be delayed.
We do not currently own or operate manufacturing facilities, and we rely, and expect to
continue to rely, on third parties for the production of clinical and commercial quantities of our
product candidates. Our current and anticipated future dependence upon others for the manufacture
of our product candidates may adversely affect our future profit margins and our ability to develop
product candidates and commercialize any product candidates on a timely and competitive basis.
We have agreed to purchase from Orion our worldwide requirements of toremifene, the active
pharmaceutical ingredient in ACAPODENE®, in finished tablet form at specified transfer
prices under a license and supply agreement. Similarly, Ipsen has agreed to purchase from Orion
ACAPODENE® tablets for clinical testing and commercial sale in the European Union,
Switzerland, Norway, Iceland, Lichtenstein and the Commonwealth of Independent States, which we
refer to collectively as the European Territory, under an amended supply agreement with Orion. As
such, both we and Ipsen rely on Orion as the single source supplier of ACAPODENE®.
In the event that Orion terminates our license and supply agreement due to our uncured
material breach or bankruptcy, we would not be able to manufacture ACAPODENE® until the
expiration of Orion’s patents with respect to the composition of matter of toremifene, the active
pharmaceutical ingredient in ACAPODENE®. Although Orion’s composition of matter patents
within the European Territory have expired, and as such, would not prevent Ipsen from manufacturing
ACAPODENE® within the European Territory, there is no obligation on the part of Orion to
transfer its manufacturing technology to Ipsen or to assist Ipsen in developing manufacturing
capabilities to meet Ipsen’s supply needs if Ipsen is in material breach of its supply agreement
with Orion. Although we and Ipsen have agreed to collaborate with each other in the event either of
our supply rights are terminated by Orion for any reason, a disruption in the supply of
ACAPODENE® could delay the development of and impair our and Ipsen’s ability to
commercialize ACAPODENE®. In addition, Orion may terminate its obligation to supply us
and Ipsen with toremifene if Orion ceases its manufacture of toremifene permanently, or Orion may
terminate its obligation to supply us with toremifene if ACAPODENE® is not approved for
commercial sale in the United States by December 31, 2009. If such termination occurs because Orion
is no longer manufacturing toremifene, or because such regulatory approval is not obtained prior to
the specified date, we and Ipsen will have the right to manufacture
ACAPODENE®, but any arrangements we make for an alternative supply would still have to
be made with a qualified alternative supplier with appropriate FDA approval in order for us to
obtain our supply requirements for
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ACAPODENE®. We and Ipsen have mutually agreed to
cooperate in the manufacture of ACAPODENE® in the event Orion ceases manufacture of
toremifene for any of the above-mentioned reasons.
We also rely on Orion to cooperate with us in the filing and maintenance of regulatory filings
with respect to the manufacture of ACAPODENE®. Orion may terminate its obligation to
assist us in obtaining and maintaining regulatory approval of ACAPODENE® if we do not
receive regulatory approval for ACAPODENE® in the United States by December 31, 2009. If
Orion terminates its obligation to cooperate in these activities, or does not cooperate with us or
otherwise does not successfully file or maintain these regulatory filings, we would be required to
make arrangements with a qualified alternative supplier, which could delay or prevent regulatory
approval of ACAPODENE®.
We have relied on third party vendors for OstarineTM, and we are currently
assessing our manufacturing needs for additional clinical trial materials and commercial supply of
OstarineTM as we continue to review our clinical strategy for OstarineTM. We
will evaluate whether to continue to rely on the manufacturing capabilities of these third party
vendors or whether some or all of the manufacturing process should be transferred to other contract
manufacturers as we plan for our clinical trials and potential commercial launch of
OstarineTM. Under our joint collaboration and license agreement with Ortho Biotech,
which was terminated in December 2006, Ortho Biotech was responsible for the manufacture, packaging
and supply of andarine for both clinical trials and commercialization. We are currently assessing
our manufacturing needs for additional clinical trial materials and commercial supply of andarine
as we continue to review our clinical strategy for andarine. If our current supply of
OstarineTM or andarine becomes unusable, if our OstarineTM or andarine supply
is not sufficient to complete our clinical trials, or if we are unsuccessful in identifying a
contract manufacturer or negotiating a manufacturing agreement on a timely basis for our clinical
trials and potential commercial launch, we could experience a delay in receiving an adequate supply
of OstarineTM or andarine.
We may not be able to maintain or renew our existing or any other third-party
manufacturing arrangements on acceptable terms, if at all. If we are unable to continue
relationships with Orion for ACAPODENE® and third party vendors for
OstarineTM, or to do so at an acceptable cost, or if these or other suppliers fail to
meet our requirements for these product candidates or for andarine for any reason, we would be
required to obtain alternate suppliers. However, we may not be permitted to obtain alternate
suppliers for ACAPODENE® under our license agreement with Orion if Orion terminates its
supply of ACAPODENE® due to our uncured material breach or bankruptcy. Any inability to
obtain alternate suppliers, including an inability to obtain approval from the FDA of an alternate
supplier, would delay or prevent the clinical development and commercialization of these product
candidates.
Use of third-party manufacturers may increase the risk that we will not have
adequate supplies of our product candidates.
Reliance on third-party manufacturers entails risks to which we would not be subject if we
manufactured product candidates or products ourselves, including:
| • | Reliance on the third party for regulatory compliance and quality assurance; | ||
| • | The possible breach of the manufacturing agreement by the third party because of factors beyond our control; | ||
| • | The possible termination or non-renewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us; and | ||
| • | The possible exercise by Orion of its right to terminate its obligation to supply us with toremifene: |
| • | If it permanently ceases manufacture of toremifene or if we do not obtain regulatory approval of ACAPODENE® in the United States prior to December 31, 2009; or | ||
| • | If Orion terminates due to our uncured material breach or bankruptcy. |
If we are not able to obtain adequate supplies of our product candidates, it will be more
difficult for us to develop our product candidates and compete effectively. Our product candidates
and any products that we may
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develop may compete with other product candidates and products for
access to manufacturing facilities. For example, the active pharmaceutical ingredient in
ACAPODENE® is also the active pharmaceutical ingredient in FARESTON®.
Further, Orion has agreed to supply ACAPODENE® tablets to Ipsen for clinical trials and
commercial supply in the European Territory. Orion also manufactures toremifene for third parties
for sale outside the United States for the treatment of advanced breast cancer in postmenopausal
women.
Our present or future manufacturing partners may not be able to comply with FDA-mandated
current Good Manufacturing Practice regulations, other FDA regulatory requirements or similar
regulatory requirements outside the United States. Failure of our third-party manufacturers or us
to comply with applicable regulations could result in sanctions being imposed on us, including
fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval
of our product candidates, delays, suspension or withdrawal of approvals, license revocation,
seizures or recalls of product candidates or products, operating restrictions and criminal
prosecutions, any of which could significantly and adversely affect supplies of our product
candidates.
If third parties on whom we rely do not perform as contractually required or
expected, we may not be able to obtain regulatory approval for or to
commercialize our product candidates.
We do not have the ability to independently conduct clinical trials for our product
candidates, and we must rely on third parties, such as contract research organizations, medical
institutions, clinical investigators and contract laboratories to conduct our clinical trials. In
addition, we rely on third parties to assist with our preclinical development of product
candidates. If these third parties do not successfully carry out their contractual duties or
regulatory obligations or meet expected deadlines, if the third parties need to be replaced, or if
the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our
clinical protocols or regulatory requirements or for other reasons, our preclinical development
activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be
able to obtain regulatory approval for or successfully commercialize our product candidates.
We are dependent on our collaborative arrangement with Ipsen to develop and commercialize
ACAPODENE® in the European Territory. We may also be dependent upon additional
collaborative arrangements to complete the development and commercialization of some of our other
product candidates. These collaborative arrangements may place the development and
commercialization of our product candidates outside our control, may require us to relinquish
important rights or may otherwise be on terms unfavorable to us.
The loss of Ipsen as a collaborator in the development or commercialization of
ACAPODENE®, any dispute over the terms of our collaborations with Ipsen, or any other
adverse development in our relationship with Ipsen could materially harm our business and might
accelerate our need for additional capital. For example, Ipsen is obligated to initiate and conduct
appropriate clinical studies as required by the appropriate regulatory authorities in order to
obtain marketing approvals of ACAPODENE® within the European Territory. Any failure on
the part of Ipsen to initiate these studies could delay the commercialization of
ACAPODENE® within the European Territory.
We may not be successful in entering into additional collaborative arrangements with other
third parties. If we fail to enter into additional collaborative arrangements on favorable terms,
it could delay or impair our ability to develop and commercialize our other product candidates and
could increase our costs of development and commercialization.
Dependence on collaborative arrangements, including our arrangement with Ipsen for the
development and commercialization of ACAPODENE®, subjects us to a number of risks,
including:
| • | We are not able to control the amount and timing of resources that Ipsen devotes to ACAPODENE®; | ||
| • | We may not be able to control the amount and timing of resources that our potential future partners may devote to our product candidates; | ||
| • | Our partners may experience financial difficulties or changes in business focus; |
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| • | Under certain circumstances, Ipsen may not be required to commercialize ACAPODENE® in certain countries of the European Territory if it is determined that it is not commercially reasonable for it to do so; | ||
| • | Pricing reimbursement constraints within the European Territory may diminish the prospects of our receiving royalty payments from Ipsen on aggregate net sales of ACAPODENE® in some or all of the countries within the European Territory; | ||
| • | Should a collaborator fail to develop or commercialize one of our compounds or product candidates, we may not receive any future milestone payments and will not receive any royalties for this compound or product candidate; | ||
| • | Business combinations or significant changes in a collaborator’s business strategy may also adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement; | ||
| • | A collaborator could move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors; | ||
| • | Collaborative arrangements are often terminated or allowed to expire, which would delay the development and may increase the cost of developing our product candidates; and | ||
| • | We may be required to relinquish important rights such as marketing and distribution rights. | ||
Additionally, we and Ipsen have agreed that neither party will seek to commercialize, promote,
market or sell certain products within the European Territory for an agreed period of time
subsequent to the time of the first commercial launch of ACAPODENE® within the European
Territory. We and Ipsen have also agreed to grant to the other a right of first negotiation with
respect to the development, marketing, sale and distribution of any new SERM-based products for the
field of the prevention and treatment of prostate cancer or related side effects, or any other
indication the parties agree on. Furthermore, our royalty rates under our collaboration agreement
with Ipsen are subject to a possible reduction if a generic version of toremifene achieves
specified sales levels in a major country within the European Territory or if Ipsen licenses patent
rights from a third party that would otherwise be infringed by Ipsen’s use, manufacture, sale or
import of toremifene. Ipsen has the right to terminate the collaboration agreement with 12 months
prior written notice for any reason and with 30 days prior written notice as a result of legitimate
and documented safety concerns. If the royalty rates under our collaboration agreement are reduced
or if Ipsen terminates the collaboration agreement, the anticipated benefits to us from this
agreement would be significantly reduced or eliminated. In addition, if Ipsen terminates the
collaboration agreement, the development of ACAPODENE® in the European Territory could
be delayed and our costs of development would increase.
Risks Related to Our Intellectual Property
Our license agreement with Orion excludes the use of toremifene in humans to
treat breast cancer outside the United States and may limit our ability to
market ACAPODENE® for human uses of toremifene outside the United
States.
Our exclusive license and supply agreement from Orion excludes the use of toremifene for the
treatment of breast cancer outside the United States. Orion has licensed to other parties the right
to market, sell and distribute toremifene for the treatment of advanced breast cancer outside the
United States and could license additional parties to market, sell and distribute toremifene for
this indication outside the United States.
Under the terms of our license agreement with Orion, Orion may require us and Ipsen to modify
our final ACAPODENE® development plans for specified major markets outside the United
States if those development plans could adversely affect Orion’s or Orion’s other licensees’
activities related to FARESTON® for breast cancer outside the United States or
toremifene-based animal health products. Although we do not believe that our or Ipsen’s development
plans adversely affect these activities, any future modifications to our or Ipsen’s plans imposed
by Orion may limit our and Ipsen’s ability to maximize the commercial potential of
ACAPODENE®.
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Furthermore, we and our affiliates are prohibited from marketing or selling products
containing toremifene or related SERM compounds for human use in the United States and other major
countries located outside the European Union during the term of Orion’s patents covering toremifene
in such countries, which in the United States expire in September 2009. The binding effect of this
noncompetition provision on us and our affiliates may make it more difficult for us to be acquired
by some potential buyers during the relevant time periods even if we determine that a sale of the
company would be in the best interests of our stockholders.
If some or all of our, or our licensors’, patents expire or are invalidated or
are found to be unenforceable, or if some or all of our patent applications do
not yield issued patents or yield patents with narrow claims, or if we are
estopped from asserting that the claims of an issued patent cover a product of
a third party, we may be subject to competition from third parties with
products with the same active pharmaceutical ingredients as our product
candidates.
Our commercial success will depend in part on obtaining and maintaining patent and trade
secret protection for our product candidates, the methods for treating patients in the product
indications using these product candidates and the methods used to synthesize these product
candidates. We will be able to protect our product candidates and the methods for treating patients
in the product indications using these product candidates from unauthorized use by third parties
only to the extent that we or our exclusive licensors own or control such valid and enforceable
patents or trade secrets. Additionally, Ipsen’s ability to successfully market
ACAPODENE® within a substantial portion of the European Territory may depend on the
granting of marketing and data exclusivity from the appropriate regulatory authorities.
Our rights to certain patent applications relating to SARM compounds that we
have licensed from UTRF are subject to the terms of UTRF’s interinstitutional agreements with OSU,
and our rights to future related improvements in some instances are subject to UTRF’s exercise of
exclusive options under its agreements with OSU for such improvements, which UTRF can exercise at
no additional cost to UTRF. In addition, under the terms of our agreements with the diagnostic
companies to which we provide clinical samples from our Phase IIb and Phase III clinical trial of
ACAPODENE®, we will not obtain any intellectual property rights in any of their
developments, including any test developed to detect high grade PIN or prostate cancer.
Even if our product candidates and the methods for treating patients for prescribed
indications using these product candidates are covered by valid and enforceable patents and have
claims with sufficient scope and support in the specification, the patents will provide protection
only for a limited amount of time. For example, the patent that we have licensed from Orion
covering the composition of matter of toremifene expires in the United States in September 2009.
Foreign counterparts of this patent have either already expired or will expire in Australia, Italy,
Sweden and Switzerland in 2008, that is, before we or Ipsen will receive regulatory approval to
commercialize ACAPODENE®. As a result, outside the United States and in the United
States after 2009, we will need to rely primarily on the protection afforded by method of use
patents relating to the use of ACAPODENE® for the relevant product indications that have
been issued or may be issued from our owned or licensed patent applications. Within the European
Union, Ipsen may need to rely primarily on the protection afforded by marketing and data
exclusivity for the ACAPODENE® products to be sold within the countries comprising the
European Union. To date, most of our applications for method of use patents filed for
ACAPODENE® outside of the United States are still pending and have not yielded issued
patents. Although we intend to apply, if appropriate, for extensions of patent terms under
applicable United States laws pertaining to our method of use patents, we may not be able to secure
any such regulatory exclusivity or extension of patent term. Loss of marketing and data exclusivity
for the ACAPODENE® products to be commercialized within the European Union could
adversely affect its ability to successfully commercialize these products, and our failure to
obtain any extension of patent terms for our method of use patents
could adversely affect our prospects for protecting our ACAPODENE® products from
competitive pressures in the United States for the time periods we currently expect. We are not
eligible for any such exclusivity or further extension of the composition of matter patent of
toremifene licensed to us by Orion in the United States.
Our and our licensors’ ability to obtain patents can be highly uncertain and involve complex
and in some cases unsettled legal issues and factual questions. Furthermore, different countries
have different procedures for obtaining patents, and patents issued in different countries provide
different degrees of protection against the use of a patented invention by others. Therefore, if
the issuance to us or our licensors, in a given country, of a patent covering an invention is not
followed by the issuance, in other countries, of patents covering the same invention, or if any
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judicial interpretation of the validity, enforceability or scope of the claims in a patent issued
in one country is not similar to the interpretation given to the corresponding patent issued in
another country, our ability to protect our intellectual property in those countries may be
limited. Changes in either patent laws or in interpretations of patent laws in the United States
and other countries may diminish the value of our intellectual property or narrow the scope of our
patent protection.
Even if patents are issued to us or our licensors regarding our product candidates or methods
of using them, those patents can be challenged by our competitors who can argue such patents are
invalid or unenforceable or that the claims of the issued patents should be limited or narrowly
construed. Patents also will not protect our product candidates if competitors devise ways of
making or using these product candidates without legally infringing our patents. The Federal Food,
Drug, and Cosmetic Act and FDA regulations and policies create a regulatory environment that
encourages companies to challenge branded drug patents or to create noninfringing versions of a
patented product in order to facilitate the approval of abbreviated new drug applications for
generic substitutes. These same types of incentives encourage competitors to submit new drug
applications that rely on literature and clinical data not prepared for or by the drug sponsor,
providing another less burdensome pathway to approval.
We also rely on trade secrets to protect our technology, especially where we do not believe
that patent protection is appropriate or obtainable. However, trade secrets are difficult to
protect. Our employees, consultants, contractors, outside scientific collaborators and other
advisors may unintentionally or willfully disclose our confidential information to competitors, and
confidentiality agreements may not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. Enforcing a claim that a third party illegally obtained and
is using our trade secrets is expensive and time-consuming, and the outcome is unpredictable.
Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.
Failure to obtain or maintain trade secret protection could adversely affect our competitive
business position.
If we lose our licenses from Orion and UTRF, we may be unable to continue our business.
We have licensed intellectual property rights and technology from Orion and UTRF under our
license agreements with each of Orion and UTRF. Each of these license agreements may be terminated
by the other party if we are in breach of our obligations under, or fail to perform any terms of,
the agreement and fail to cure that breach. If any of these agreements were terminated, then we may
lose our rights to utilize the technology and intellectual property covered by that agreement to
market, distribute and sell our licensed products, which may prevent us from continuing our
business. For example, on November 28, 2006, we received correspondence from counsel representing
UTRF claiming we owed additional annual license maintenance fees and residual alliance royalties
under two exclusive license agreements we entered into with UTRF granting us worldwide exclusive
licenses under UTRF’s composition of matter and method of use patents relating to SARM compounds,
including andarine and OstarineTM, to market, distribute and sell licensed products. In
December 2006, we entered into a letter of intent with UTRF agreeing to modify each of the license
agreements between us and UTRF including the two SARM license agreements. Upon execution of the
revised license agreements, we will pay UTRF an aggregate consideration of $600,000. Under our
exclusive license agreements with UTRF, in the event of a default or failure by us to perform any
of the terms, covenants or provisions of these agreements, we have 30 days after the giving of
written notice of any default to correct the default. If the default is not corrected within this
30-day period, UTRF has the right, at its option, to cancel and terminate these exclusive license
agreements. In the event that we and UTRF do not execute revised license agreements or we do not
pay the $600,000 consideration for the new license agreements, UTRF may elect to continue its
claims against us, which if not resolved, could result in a termination of the existing SARM
license agreements. If we did not prevail in our position that we are not in default under these
license agreements or otherwise establish that UTRF did not have a right to terminate them, then
the loss of these
licenses would have a material adverse effect on the continued development of our SARM program and
our business prospects would suffer.
Off-label sale or use of toremifene products could decrease sales of
ACAPODENE® and could lead to pricing pressure if such products
become available at competitive prices and in dosages that are appropriate for
the indications for which we and Ipsen are developing ACAPODENE®.
In all countries in which we hold or have licensed rights to patents or patent applications
related to ACAPODENE®, the composition of matter patents we license from Orion will
expire before our method of use
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patents, and in some countries outside the United States, the
composition of matter patents have already expired. Our method of use patents may not protect
ACAPODENE® from the risk of off-label sale or use of other toremifene products in place
of ACAPODENE®. Physicians are permitted to prescribe legally available drugs for uses
that are not described in the drug’s labeling and that differ from those uses tested and approved
by the FDA or its equivalent. Such off-label uses are common across medical specialties and are
particularly prevalent for cancer treatments. Any off-label sales of toremifene may adversely
affect our or Ipsen’s ability to generate revenue from the sale of ACAPODENE®, if
approved for commercial sale.
Even in the event that patents are issued from our pending method of use patent applications,
after the expiration of the patent covering the composition of matter of toremifene in a particular
country, competitors could market and sell toremifene products for uses for which
FARESTON® has already been approved. Thus, physicians in such countries would be
permitted to prescribe these other toremifene products for indications that are protected by our
method of use patents or patents issuing from pending patent applications, even though these other
toremifene products would not have been approved for those uses, and in most cases, the physician
would not be liable for contributing to the infringement of our patents. Moreover, because Orion
has licensed and could further license other parties to market, sell and distribute toremifene for
breast cancer outside the United States, physicians in such countries could prescribe these
products sold pursuant to another Orion license off-label. This further increases the risk of
off-label competition developing for ACAPODENE® for the indications for which we and
Ipsen are developing this product candidate. In addition, if no patents are issued with respect to
our pending method of use patent applications related to the use of ACAPODENE® in the
countries outside of the United States where these applications are currently pending, after the
expiration of the patent covering the composition of matter of toremifene in a particular country,
we would have no patent to prevent competitors from marketing and selling generic versions of
toremifene at doses and in formulations equivalent to ACAPODENE® for the indications
covered by our pending method of use patent applications. Also, regulatory authorities may not
recognize marketing and data exclusivity for ACAPODENE® in the European Union for the
treatment of prostate cancer and the multiple side effects resulting from androgen deprivation
therapy. If generic versions of toremifene are able to be sold in countries within the European
Territory for the indications for which Ipsen anticipates marketing ACAPODENE®, the
royalties to be paid to us by Ipsen will be reduced if the total generic sales exceed a certain
threshold for a certain period of time. Similarly, the royalties we will be paying to Orion for its
licensing and supply of toremifene will be reduced if the same generic sales thresholds are
reached.
If we infringe intellectual property rights of third parties, it may increase
our costs or prevent us from being able to commercialize our product
candidates.
There is a risk that we are infringing the proprietary rights of third parties because
numerous United States and foreign issued patents and pending patent applications, which are owned
by third parties, exist in the fields that are the focus of our drug discovery and development
efforts. Others might have been the first to make the inventions covered by each of our or our
licensors’ pending patent applications and issued patents and might have been the first to file
patent applications for these inventions. In addition, because patent applications can take many
years to issue, there may be currently pending applications, unknown to us or our licensors, which
may later result in issued patents that cover the production, manufacture, commercialization,
formulation or use of our product candidates. In addition, the production, manufacture,
commercialization, formulation or use of our product candidates may infringe existing patents of
which we are not aware. Defending ourselves against third-party claims, including litigation in
particular, would be costly and time consuming and would divert management’s attention from our
business, which could lead to delays in our development or commercialization efforts. If third
parties are successful in their claims, we might have to pay substantial damages or take other
actions that are adverse to our business.
As a result of intellectual property infringement claims, or to avoid potential claims, we
might:
| • | Be prohibited from selling or licensing any product that we may develop unless the patent holder licenses the patent to us, which the patent holder is not required to do; | ||
| • | Be required to pay substantial royalties or grant a cross license to our patents to another patent holder; or | ||
| • | Be required to redesign the formulation of a product candidate so it does not infringe, which may not be possible or could require substantial funds and time. |
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In addition, under our collaboration and license agreement with Ipsen, Ipsen may be entitled
to offset a portion of any royalties due to us in any calendar year on account of
ACAPODENE® sales to pay for costs incurred by Ipsen to obtain a license to any dominant
intellectual property rights that are infringed by such ACAPODENE® sales.
Risk Related to Regulatory Approval of Our Product Candidates
If we or our collaborators are not able to obtain required regulatory
approvals, we or our collaborators will not be able to commercialize our
product candidates, and our ability to generate revenue will be materially
impaired.
Our product candidates and the activities associated with their development and
commercialization are subject to comprehensive regulation by the FDA, and other regulatory agencies
in the United States and by comparable authorities in other countries. Failure to obtain regulatory
approval for a product candidate will prevent us from commercializing our product candidate and
will prevent our collaborators from commercializing the product candidate in the licensed
territories. We have not received regulatory approval to market any of our product candidates in
any jurisdiction and have only limited experience in preparing and filing the applications
necessary to gain regulatory approvals. In addition, we will not receive a substantial majority of
the milestone payments provided under our collaboration and license agreement with Ipsen or any
royalty payments if Ipsen is unable to obtain the necessary regulatory approvals to commercialize
ACAPODENE® within the European Territory. The process of obtaining regulatory approvals
is expensive, often takes many years, if approval is obtained at all, and can vary substantially
based upon the type, complexity and novelty of the product candidates involved.
Changes in the regulatory approval policy during the development period, changes in or the
enactment of additional regulations or statutes, or changes in regulatory review for each submitted
product application, may cause delays in the approval or rejection of an application. Even if the
FDA approves a product candidate, the approval may impose significant restrictions on the indicated
uses, conditions for use, labeling, advertising, promotion, marketing and/or production of such
product, and may impose ongoing requirements for post-approval studies, including additional
research and development and clinical trials. The FDA also may impose various civil or criminal
sanctions for failure to comply with regulatory requirements, including withdrawal of product
approval.
Furthermore, the approval procedure and the time required to obtain approval varies among
countries and can involve additional testing beyond that required by the FDA. Approval by one
regulatory authority does not ensure approval by regulatory authorities in other jurisdictions.
The FDA has substantial discretion in the approval process and may refuse to accept any
application or may decide that our data are insufficient for approval and require additional
preclinical, clinical or other studies. For example, we are conducting our Phase III clinical
trials of ACAPODENE® to treat the side effects of androgen deprivation therapy and for
the reduction in the incidence of prostate cancer in high risk men with high grade PIN under
Special Protocol Assessments from the FDA. A SPA is designed to facilitate the FDA’s review and
approval of drug products by allowing the agency to evaluate the proposed design and size of
clinical trials that are intended to form the primary basis for determining a drug product’s
efficacy. If agreement is reached with the FDA, a SPA documents the terms and conditions under
which the design of the subject trial will be adequate for submission of the efficacy and human
safety portion of a NDA. However, there are circumstances under which we may not receive the
benefits of a SPA, notably including if the FDA subsequently identifies a substantial scientific
issue essential to
determining the product’s safety or efficacy. In addition, varying interpretations of the data
obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of
a product candidate. Furthermore, even if we file an application with the FDA for marketing
approval of a product candidate, it may not result in marketing approval from the FDA.
We do not expect to receive regulatory approval for the commercial sale of any of our product
candidates that are in development for the next few years. Similarly, it is not anticipated that
Ipsen will receive the appropriate regulatory approvals to market ACAPODENE® within the
European Territory any sooner than we will achieve regulatory approval in the United States, and it
may be thereafter. The inability to obtain FDA approval or approval from comparable authorities in
other countries for our product candidates would prevent us or our collaborators from
commercializing these product candidates in the United States or other countries. See the section
entitled
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“Business — Government Regulation” under Part I, Item 1 above for additional information
regarding risks associated with approval, as well as risks related to post-approval requirements.
Risks Related to Commercialization
The commercial success of any products that we may develop will depend upon the
degree of market acceptance among physicians, patients, healthcare payors and
the medical community.
Any products that we may develop may not gain market acceptance among physicians, patients,
health care payors and the medical community. If these products do not achieve an adequate level of
acceptance, we may not generate material product revenues, and we may not become profitable. The
degree of market acceptance of our product candidates, if approved for commercial sale, will depend
on a number of factors, including:
| • | The prevalence and severity of any side effects; | ||
| • | Potential advantages over alternative treatments; | ||
| • | The ability to offer our product candidates for sale at competitive prices; | ||
| • | Relative convenience and ease of administration; | ||
| • | The strength of marketing and distribution support; and | ||
| • | Sufficient third-party coverage or reimbursement. |
Our only marketed product generating revenue is FARESTON®. FARESTON® is
subject to a number of risks that may cause sales of FARESTON® to continue to decline.
FARESTON® is currently our only marketed product. Sales of FARESTON® in
the United States have been declining and we anticipate that they will continue to do so. Continued
sales of FARESTON® could be impacted by many factors. The occurrence of one or more of
the following risks may cause sales of FARESTON® to decline more than we currently
anticipate:
| • | The loss of the availability of Orion’s website to market FARESTON®, which is an important source of advertising; | ||
| • | The loss of one or more of our three largest wholesale drug distributors, which accounted for approximately 94% of our revenue generated from the sale of FARESTON® for the year ended December 31, 2006; | ||
| • | The continued success of competing products, including aromatase inhibitors; | ||
| • | The loss of coverage or reimbursement for FARESTON® from Medicare and Medicaid, private health insurers or other third-party payors; | ||
| • | Exposure to product liability claims related to the commercial sale of FARESTON®, which may exceed our product liability insurance; | ||
| • | The failure of Orion to maintain regulatory filings or comply with applicable FDA requirements with respect to FARESTON®; | ||
| • | The ability of third parties to market and sell generic toremifene products that will compete with FARESTON® for the treatment of breast cancer after the composition of matter patents that we license from Orion expire in the United States in September 2009; | ||
| • | The loss of Orion, upon which we rely as a single source, as our supplier of FARESTON®; and |
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| • | Our inability to manufacture FARESTON® until Orion’s patents with respect to the composition of matter of toremifene expire if Orion terminates our license and supply agreement due to our uncured material breach or bankruptcy. |
Sales of pharmaceuticals for breast cancer in the SERM class have declined in recent years as
aromatase inhibitors have gained market share. We believe that aromatase inhibitors will continue
to capture breast cancer market share from SERMs, including from FARESTON®, resulting in
a continued decline in FARESTON® sales.
If we are unable to expand our sales and marketing capabilities or enter into
and maintain agreements with third parties to market and sell our product
candidates, we may be unable to generate product revenue from such candidates.
We have limited experience as a company in the sales, marketing and distribution of
pharmaceutical products. There are risks involved with building our own sales and marketing
capabilities, as well as entering into arrangements with third parties to perform these services.
For example, building a sales force is expensive and time-consuming and could delay any launch of a
product candidate. Similarly, we are relying on Ipsen to market and distribute our
ACAPODENE® product candidates through Ipsen’s established sales and marketing network
within the European Territory. If our collaboration and license agreement with Ipsen is terminated
for any reason, our ability to sell our ACAPODENE® product candidates in the European
Territory would be adversely affected, and we may be unable to develop or engage an effective sales
force to successfully market and sell our ACAPODENE® product candidates in the European
Territory. In addition, to the extent that we enter into arrangements with third parties to perform
sales, marketing and distribution services, our product revenues are likely to be lower than if we
market and sell any products that we develop ourselves.
If we are unable to obtain adequate coverage and reimbursement from third-party
payors for products we sell at acceptable prices, our revenues and prospects
for profitability will suffer.
Many patients will not be capable of paying for any products that we may develop and will rely
on Medicare and Medicaid, private health insurers and other third-party payors to pay for their
medical needs. If third-party payors do not provide coverage or reimbursement for any products that
we may develop, our revenues and prospects for profitability may suffer. In December 2003, the
President of the United States signed into law the Medicare Prescription Drug, Improvement and
Modernization Act of 2003, legislation creating a prescription drug benefit program for Medicare
recipients. The prescription drug program established by the legislation may have the effect of
reducing the prices that we are able to charge for products we develop and sell through the
program. This prescription drug legislation may also cause third-party payors other than the
federal government, including the states under the Medicaid program, to discontinue coverage for
products that we may develop or to lower the amount that they pay.
State Medicaid programs generally have outpatient prescription drug coverage, subject to state
regulatory restrictions, for the population eligible for Medicaid. The availability of coverage or
reimbursement for prescription drugs under private health insurance and managed care plans varies
based on the type of contract or plan purchased.
A primary trend in the United States health care industry is toward cost containment. In
addition, in some foreign countries, particularly the countries of the European Union, the pricing
of prescription pharmaceuticals is subject to governmental control. In these countries, pricing
negotiations with governmental authorities can take six to 12 months or longer after the receipt of
regulatory marketing approval for a product. To obtain reimbursement or pricing approval in some
countries, we or our collaborators may be required to conduct a clinical trial that compares the
cost effectiveness of our product candidates or products to other available therapies. The conduct
of such a clinical trial could be expensive and result in delays in our commercialization.
Third-party payors are challenging the prices charged for medical products and services, and many
third-party payors limit reimbursement for newly-approved health care products. In particular,
third-party payors may limit the indications for which they will reimburse patients who use any
products that we may develop or products we sell. Cost-control initiatives could decrease the price
we might establish for products that we may develop or that we sell, which would result in lower
product revenues to us.
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Another development that may affect the pricing of drugs is proposed Congressional action
regarding drug reimportation into the United States. The Medicare Prescription Drug, Improvement
and Modernization Act of 2003 gives discretion to the Secretary of Health and Human Services to
allow drug reimportation into the United States under some circumstances from foreign countries,
including countries where the drugs are sold at a lower price than in the United States. Proponents
of drug reimportation may attempt to pass legislation which would directly allow reimportation
under certain circumstances. If legislation or regulations were passed allowing the reimportation
of drugs, they could decrease the price we receive for any products that we may develop, negatively
affecting our revenues and prospects for profitability.
If product liability lawsuits are brought against us, we will incur substantial liabilities and may be required
to limit commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product
candidates in human clinical trials and will face an even greater risk if we commercially sell any
product that we may develop. If we cannot successfully defend ourselves against claims that our
product candidates or products caused injuries, we will incur substantial liabilities. Regardless
of merit or eventual outcome, liability claims may result in:
| • | Decreased demand for any product candidates or products; | ||
| • | Injury to our reputation; | ||
| • | Withdrawal of clinical trial participants; | ||
| • | Costs to defend the related litigation; | ||
| • | Substantial monetary awards to trial participants or patients; | ||
| • | Loss of revenue; and | ||
| • | The inability to commercialize any products for which we obtain or hold marketing approvals. |
We have product liability insurance that covers our clinical trials and commercial products up
to a $25.0 million annual aggregate limit. Insurance coverage is increasingly expensive. We may not
be able to maintain insurance coverage at a reasonable cost and we may not be able to obtain
insurance coverage that will be adequate to satisfy any liability that may arise.
If our competitors are better able to develop and market products than any
products that we may develop, our commercial opportunity will be reduced or
eliminated.
We face competition from established pharmaceutical and biotechnology
companies, as well as from academic institutions, government agencies and private and public
research institutions. Our commercial opportunities will be reduced or eliminated if our
competitors develop and commercialize products that are safer, more effective, have fewer side
effects or are less expensive than any products that we may develop. In addition, significant
delays in the development of our product candidates could allow our competitors to bring products
to market before us and impair our ability to commercialize our product candidates.
Various products are currently marketed or used off-label for some of the diseases and
conditions that we are targeting, and a number of companies are or may be developing new
treatments. The occurrence of such off-label uses could significantly reduce our ability to market
and sell any products that we may develop. For example, although there are no products that have
been approved by the FDA to treat multiple side effects of androgen deprivation therapy, we are
aware of a number of drugs marketed by Eli Lilly (Evista®), Merck (Fosamax®),
Sanofi-Aventis and Procter & Gamble (Actonel®), Wyeth Pharmaceuticals
(Effexor®), Boehringer Ingelheim (Catapres®), Novartis (Zometa®)
and Bristol Myers Squibb (Megace®) that are prescribed off-label to treat single side
effects of this therapy; that external beam radiation is used to treat breast pain and enlargement;
and that Amgen is developing a product candidate for the treatment of osteoporosis in prostate
cancer patients. While we have the only pharmaceutical product in clinical development to prevent
prostate cancer in high risk men with high grade PIN,
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GlaxoSmithKline is conducting a Phase III
study for Avodart® on prostate cancer prevention which purposely excludes the high risk
patient group of men with high grade PIN. In addition, there are nutritional supplement studies
(for example, selenium) investigating prostate cancer prevention in men with high grade PIN.
Similarly, while there are no drugs that have been approved by the FDA for the treatment of muscle
wasting from cancer, there are drugs marketed by Steris Laboratories and Savient Pharmaceuticals
that are being prescribed off-label for the treatment of some types of muscle wasting from cancer.
Testosterone and other anabolic agents are used to treat involuntary weight loss in patients who
have acute muscle wasting. Also, TAP Pharmaceuticals and Ligand Pharmaceuticals have entered into a
collaboration agreement to develop a SARM and may be initiating Phase II studies in 2007. In
addition, there are other SARM product candidates at an earlier stage of development that may
compete with our product candidates. Wyeth and Amgen have myostatin inhibitors in development which
may compete for similar patients as OstarineTM. This could result in reduced sales and
pricing pressure on our product candidates, if approved, which in turn would reduce our ability to
generate revenue and have a negative impact on our results of operations.
Many of our competitors have significantly greater financial resources and expertise in
research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining
regulatory approvals and marketing approved products than we do. Smaller or early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with
large and established companies. These third parties compete with us in recruiting and retaining
qualified scientific and management personnel, establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring technologies and technology licenses
complementary to our programs or advantageous to our business.
Risks Related to Employees and Growth
If we fail to attract and keep senior management and key scientific personnel,
we may be unable to successfully develop or commercialize our product
candidates.
Our success depends on our continued ability to attract, retain and motivate
highly qualified management, clinical and scientific personnel and on our ability to develop and
maintain important relationships with leading academic institutions, clinicians and scientists. If
we are not able to attract and keep senior management and key scientific personnel, particularly
Dr. Mitchell S. Steiner, we may not be able to successfully develop or commercialize our product
candidates. All of our employees are at-will employees and can terminate their employment at any
time. We do not carry “key person” insurance covering members of senior management, other than $25
million of insurance covering Dr. Steiner.
We will need to hire additional employees in order to continue our clinical
trials and commercialize our product candidates. Any inability to manage future
growth could harm our ability to commercialize our product candidates, increase
our costs and adversely impact our ability to compete effectively.
In order to continue our clinical trials and commercialize our product candidates, we will
need to expand the number of our managerial, operational, financial and other employees. We
currently anticipate that we will need between 150 and 250 additional employees by the time that
ACAPODENE® or OstarineTM is initially commercialized, including 50 to 100
sales representatives. The competition for qualified personnel in the biotechnology field is
intense.
Future growth will impose significant added responsibilities on members of management,
including the need to identify, recruit, maintain and integrate additional employees. Our future
financial performance and our ability to commercialize our product candidates and to compete
effectively will depend, in part, on our ability to manage any future growth effectively.
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Risks Related to Our Common Stock
Market volatility may cause our stock price and the value of your investment to decline.
The market prices for securities of biotechnology companies in general have been highly
volatile and may continue to be so in the future. The following factors, in addition to other risk
factors described in this section, may have a significant impact on the market price of our common
stock:
| • | Adverse results or delays in our clinical trials; | ||
| • | The timing of achievement of our clinical, regulatory and other milestones, such as the commencement of clinical development, the completion of a clinical trial or the receipt of regulatory approval; | ||
| • | Announcement of FDA approval or non-approval of our product candidates or delays in the FDA review process; | ||
| • | Actions taken by regulatory agencies with respect to our product candidates or products, our clinical trials or our sales and marketing activities; | ||
| • | The commercial success of any product approved by the FDA or its foreign counterparts; | ||
| • | Developments with respect to our collaboration with Ipsen; | ||
| • | The terms and timing of any collaborative, licensing or other arrangements that we may establish; | ||
| • | Regulatory developments in the United States and foreign countries; | ||
| • | Changes in the structure of health care payment systems; | ||
| • | Any intellectual property infringement lawsuit involving us; | ||
| • | Announcements of technological innovations or new products by us or our competitors; | ||
| • | Market conditions for the biotechnology or pharmaceutical industries in general; | ||
| • | Actual or anticipated fluctuations in our results of operation; | ||
| • | Changes in financial estimates or recommendations by securities analysts; | ||
| • | Sales of large blocks of our common stock; | ||
| • | Sales of our common stock by our executive officers, directors and significant stockholders; | ||
| • | Changes in accounting principles; and | ||
| • | The loss of any of our key scientific or management personnel. |
The stock markets in general, and the markets for biotechnology stocks in particular, have
experienced significant volatility that has often been unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the trading price of our
common stock. In the past, class action litigation
has often been instituted against companies whose securities have experienced periods of volatility
in market price. Any such litigation brought against us could result in substantial costs, which
would hurt our financial condition and results of operations and divert management’s attention and
resources, which could result in delays of our clinical trials or commercialization efforts.
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Our officers, directors and largest stockholders will maintain the ability to
control all matters submitted to stockholders for approval.
As of January 31, 2007, our officers, directors and holders of 5% or more of our outstanding
common stock beneficially owned approximately 81.8% of our outstanding common stock and our
officers and directors alone owned approximately 50.9% of our outstanding common stock. As a
result, these stockholders, acting together, will be able to control all matters requiring approval
by our stockholders, including the election of directors and the approval of mergers or other
business combination transactions. The interests of this group of stockholders may not always
coincide with our interests or the interests of other stockholders.
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 certificate of incorporation and our bylaws may delay or prevent an
acquisition of us or a change in our management. 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. Because our Board of
Directors is responsible for appointing the members of our management team, these provisions could
in turn affect any attempt by our stockholders to replace current members of our management team.
These provisions include:
| • | A classified Board of Directors; | ||
| • | A prohibition on actions by our stockholders by written consent; | ||
| • | The ability of our Board of Directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors; and | ||
| • | Limitations on the removal of directors. |
Moreover, because we are incorporated in Delaware, we are governed by the provisions of
Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of
15% of our outstanding voting stock from merging or combining with us for a period of three years
after the date of the transaction in which the person acquired in excess of 15% of our outstanding
voting stock, unless the merger or combination is approved in a prescribed manner. Finally, these
provisions establish advance notice requirements for nominations for election to our Board of
Directors or for proposing matters that can be acted upon at stockholder meetings. These provisions
would apply even if the offer may be considered beneficial by some stockholders.
A significant portion of our total outstanding shares are restricted from
immediate resale but may be sold into the market in the near future. This could
cause the market price of our common stock to drop significantly, even if our
business is doing well.
For the 12 month period ended December 31, 2006, the average daily trading volume of our
common stock on the NASDAQ Global Market was approximately 90,000 shares. As a result, future sales
of a substantial number of shares of our common stock in the public market, or the perception that
such sales may occur, could adversely affect the then-prevailing market price of our common stock.
As of December 31, 2006, we had 34,822,362 shares of common stock outstanding.
We, along with our executive officers and directors, have agreed to specified lock-up
provisions with regard to future sales of our common stock for a period of 90 days after our
recently completed public offering of common stock, which closed on December 18, 2006, as set forth
in the placement agent agreement executed in connection with the public offering, subject to
certain exceptions. The market price for shares of our common stock may drop significantly if
stockholders subject to these lock-up provisions sell a substantial number of shares when the
restrictions on resale lapse, or such shares are sold pursuant to specified exceptions, or if the
placement agents waive these lock-up provisions and allow the stockholders to sell some or all of
their shares. Based on information
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currently available to us, all of the shares to be outstanding
after this offering will be eligible for sale in the public market following expiration of these
lock-up provisions, subject in some cases to volume and other limitations under federal securities
laws.
Moreover, J.R. Hyde, III, and Oracle Partners, L.P., two of our largest stockholders, and
their affiliates, have rights, subject to some conditions, to require us to file registration
statements covering the approximately 10.8 million shares of common stock they hold in the
aggregate which are subject to registration rights or to include these shares in registration
statements that we may file for ourselves or other stockholders. Additionally, all shares of common
stock that we may issue under our employee benefit plans can be freely sold in the public market
upon issuance.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We sublease approximately 53,000 square feet of laboratory and office space in Memphis,
Tennessee, under an operating lease through December 31, 2007 with an option to extend for up to
three additional years. This lease is terminable by either party on 90 days’ notice.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | |
Market for Registrant’s Common Equity
Our common stock began trading on The NASDAQ Global Market under the symbol “GTXI” on February
3, 2004. Prior to that date, there was no established public trading market for our common stock.
The following table presents, for the periods indicated, the high and low closing sales prices per
share of our common stock as reported on The NASDAQ Global Market.
| 2006 | 2005 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
First Quarter |
$ | 12.08 | $ | 7.57 | $ | 13.66 | $ | 9.10 | ||||||||
Second Quarter |
11.57 | 8.11 | 11.48 | 8.68 | ||||||||||||
Third Quarter |
9.53 | 7.71 | 12.00 | 8.84 | ||||||||||||
Fourth Quarter |
18.30 | 9.26 | 9.46 | 7.43 | ||||||||||||
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On March 1, 2007 the closing price of our common stock as reported on The NASDAQ Global
Market was $22.01 per share and there were approximately 67 holders of record of our common stock.
The rules of the SEC require that the Company include in this annual Report on Form 10-K a
line-graph presentation comparing cumulative stockholder returns on its common stock with a broad
equity market index that includes companies whose equity securities are traded on the NASDAQ and
either a published industry or line-of-business standard index or an index of peer companies
selected by the Company. The Company has elected to use the NASDAQ Composite Index (which tracks
the aggregate price performance of equity securities of companies traded on NASDAQ) and the NASDAQ
Biotechnology Index (consisting of a group of approximately 130 companies in the biotechnology
sector, including the Company) for purposes of the performance comparison that appears below.
The following graph shows the cumulative total stockholder return assuming the investment of
$100.00 at the closing prices on February 3, 2004, the first day of trading of the Company’s common
stock on the NASDAQ Global Market: (1) the Company’s common stock; (2) NASDAQ Composite Index and
(3) NASDAQ Biotechnology Index. All values assume reinvestment of the full amounts of all
dividends. No dividends have been declared on the Company’s common stock. The closing sale price
of our common stock on December 31, 2006 as reported on the NASDAQ Global Market was $17.84.
The stockholder return shown on the graph below is not necessarily indicative of future
performance, and the Company does not make or endorse any predictions as to future stockholder
returns.
COMPARISON OF 35 MONTH CUMULATIVE TOTAL RETURN*
Among GTx Inc., The NASDAQ Composite Index
And The NASDAQ Biotechnology Index
Among GTx Inc., The NASDAQ Composite Index
And The NASDAQ Biotechnology Index
* $100 invested on 2/3/04 in stock or on 1/31/04 in indices-including reinvestment of
dividends.
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The material in this section is not “soliciting material,” is not deemed filed with the
SEC and is not to be incorporated by reference in any filing of the Company under the Securities
Act of 1933 or the Exchange Act whether made before or after the date hereof and irrespective of
any general incorporation language in such filing.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We currently intend to
retain any future earnings to fund the development and expansion of our business, and therefore we
do not anticipate paying cash dividends on our common stock in the foreseeable future. Any future
determination to pay dividends will be at the discretion of our Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
You should read the selected financial data below in conjunction with “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and the audited financial
statements, notes thereto and other financial information included elsewhere in this Annual Report
on Form 10-K. The statements of operations data for the years ended December 31, 2004, 2005 and
2006, and the balance sheet data at December 31, 2005 and 2006, are derived from our audited
financial statements included elsewhere in this Annual Report on Form 10-K. The statements of
operations data for the years ended December 31, 2002 and 2003, and the consolidated balance sheet
data at December 31, 2002, 2003 and 2004, are derived from our audited financial statements that
are not included in this Annual Report on Form 10-K. Historical results are not indicative of the
results to be expected in the future.
| Years Ended December 31, | ||||||||||||||||||||
| 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
Statement of Operations Data: |
||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Product sales, net |
$ | 1,357 | $ | 2,445 | $ | — | $ | — | $ | — | ||||||||||
Total collaboration revenue |
6,148 | 1,337 | 1,867 | — | — | |||||||||||||||
Total revenues |
7,505 | 3,782 | 1,867 | — | — | |||||||||||||||
Operating expenses: |
||||||||||||||||||||
Cost of product sales |
773 | 1,573 | — | — | — | |||||||||||||||
Research and development expenses |
33,897 | 30,923 | 17,950 | 10,778 | 9,569 | |||||||||||||||
General and administrative expenses |
11,352 | 9,845 | 7,211 | 3,559 | 2,453 | |||||||||||||||
Loss from operations |
38,517 | (38,559 | ) | (23,294 | ) | (14,337 | ) | (12,022 | ) | |||||||||||
Interest income |
3,007 | 1,720 | 946 | 143 | 156 | |||||||||||||||
Net loss |
(35,510 | ) | (36,839 | ) | (22,348 | ) | (14,194 | ) | (11,866 | ) | ||||||||||
Accrued preferred stock dividends |
— | — | (455 | ) | (3,436 | ) | (2,147 | ) | ||||||||||||
Adjustment to preferred stock redemption value |
— | — | 17,125 | (77,844 | ) | (7,220 | ) | |||||||||||||
Net loss attributable to common stockholders |
$ | (35,510 | ) | $ | (36,839 | ) | $ | (5,678 | ) | $ | (95,474 | ) | $ | (21,233 | ) | |||||
Net loss per share attributable to common stockholders: |
||||||||||||||||||||
Basic |
$ | (1.14 | ) | $ | (1.42 | ) | $ | (0.25 | ) | $ | (12.34 | ) | $ | (2.75 | ) | |||||
Diluted |
$ | (1.14 | ) | $ | (1.42 | ) | $ | (0.93 | ) | $ | (12.34 | ) | $ | (2.75 | ) | |||||
| As of December 31, | ||||||||||||||||||||
| 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
Balance Sheet Data: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 119,550 | $ | 74,014 | $ | 64,528 | $ | 14,769 | $ | 8,925 | ||||||||||
Working capital |
111,363 | 70,030 | 61,298 | 12,775 | 7,654 | |||||||||||||||
Total assets |
129,255 | 82,811 | 73,082 | 17,310 | 10,030 | |||||||||||||||
Cumulative redeemable convertible preferred stock |
— | — | — | 165,292 | 64,026 | |||||||||||||||
Accumulated deficit |
(229,779 | ) | (194,269 | ) | (157,430 | ) | (151,752 | ) | (56,278 | ) | ||||||||||
Total stockholders’ equity (deficit) |
97,049 | 73,579 | 63,909 | (150,231 | ) | (55,308 | ) | |||||||||||||
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our financial
statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion
may contain forward-looking statements based upon current expectations that involve risks and
uncertainties. Our actual results and the timing of selected events could differ materially from
those anticipated in these forward-looking statements as a result of several factors, including
those set forth under Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
We are a biopharmaceutical company dedicated to the discovery, development and
commercialization of small molecules that selectively target hormone pathways to treat cancer,
osteoporosis and bone loss, muscle wasting and other serious medical conditions. We are developing
ACAPODENE® (toremifene citrate), a selective estrogen receptor modulator, or SERM, in
two separate clinical programs in men: first, a pivotal Phase III clinical trial for the treatment
of multiple serious side effects of androgen deprivation therapy (“ADT”), for advanced prostate
cancer, and second, a pivotal Phase III clinical trial for the prevention of prostate cancer in
high risk men with precancerous prostate lesions called high grade prostatic intraepithelial
neoplasia, or high grade PIN. We have licensed to Ipsen Limited, or Ipsen, exclusive rights in the
European Union, Switzerland, Norway, Iceland, Lichtenstein and the Commonwealth of Independent
States to develop and commercialize ACAPODENE® and other products containing toremifene
in all indications which we have licensed from Orion Corporation, (“Orion”). We are also developing
OstarineTM, a selective androgen receptor modulator, or SARM, for the treatment of
cancer wasting, which is known as cancer cachexia and for chronic kidney disease (“CKD”) and
end-stage renal disease (“ESRD”). We plan to initiate a Phase IIb clinical trial evaluating
OstarineTM for the treatment of cancer cachexia by the summer of 2007 and another Phase
IIb clinical trial evaluating OstarineTM for the treatment of muscle wasting in
CKD/ESRD patients by the end of the year. We believe that OstarineTM and our other
SARMs have the potential to treat a variety of other indications related to muscle wasting and bone
loss including frailty and osteoporosis. Even though we will primarily maintain our focus in
urology and oncology, GTx is evolving into a selective nuclear hormone receptor modulator company
that can target hormone pathways to address a myriad of unmet medical needs in men and women.
We also have an extensive preclinical pipeline generated from our own discovery program that
includes potential product candidates, prostarine, for benign prostatic hyperplasia, and
andromustine, an anticancer product candidate, for hormone refractory prostate cancer.
We commenced a pivotal Phase III clinical trial of ACAPODENE® 80 mg under a Special
Protocol Assessment, or a SPA, with the United States Food and Drug Administration, or FDA, for the
treatment of multiple serious side effects of ADT in November 2003. We reached our enrollment
goal in the fall of 2005 with approximately 1,400 patients randomized into the trial. We
anticipate that we will complete the ADT clinical trial in the fourth quarter of 2007 with a New
Drug Application, or NDA, filing expected in 2008 if the results are favorable.
In January 2005, we initiated a pivotal Phase III clinical trial of ACAPODENE® 20
mg for the prevention of prostate cancer in high risk men with high grade PIN, which is being
conducted under a SPA with the FDA. We reached our enrollment goal of 1,260 patients in May 2006.
We have enrolled approximately 300 additional patients into the trial to also participate in
substudies requested by the FDA under the SPA. We anticipate conducting an efficacy analysis
within 24 months of completion of enrollment. We will evaluate efficacy endpoints at 36 months
after completion of enrollment, and with an interim efficacy analysis to be conducted after a
certain number of cancer events have been recorded among study patients, which we currently expect
to occur in the first quarter of 2008. If the efficacy results from the interim analysis achieve
the expected statistical outcome, we plan to file a NDA with the FDA. If we are able to file a NDA
based on the results of the interim efficacy analysis, we will need to continue to collect safety
data during the review process to satisfy the FDA’s safety requirements set forth in the SPA.
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In our third clinical program, OstarineTM, a SARM, is being developed to treat a
variety of medical conditions relating to muscle wasting and/or bone loss. In December 2006, we
announced that OstarineTM met its primary endpoint in a Phase II proof of concept,
double-blind, randomized, placebo-controlled clinical trial in 60 elderly men and 60 postmenopausal
women. The trial was designed to evaluate the activity of OstarineTM on building
muscle as well as to assess safety in both elderly men and postmenopausal women. We recently
conducted discussions with various divisions of the FDA to investigate the required regulatory
pathways for several indications under consideration for OstarineTM’s ongoing clinical
development. With more clarity regarding the required regulatory pathway and with proof of concept
Phase II clinical data, we have selected cancer cachexia as the initial indication for
OstarineTM development. We plan to initiate a Phase IIb OstarineTM clinical
trial for cancer cachexia by the summer of 2007. We also plan to initiate a Phase IIb clinical
trial of OstarineTM for the treatment of muscle wasting in CKD/ESRD patients by the end
of the year.
Our net loss for the year ended December 31, 2006 was $35.5 million. Our net loss included
FARESTON® net product sales of $1.4 million and the recognition of collaboration revenue
of $6.1 million. We have financed our operations and internal growth primarily through private
placements of preferred stock and public offerings. On December 18, 2006, we completed an
underwritten public offering of 3,799,600 shares of common stock and received net proceeds of
approximately $57.4 million. We expect to continue to incur net losses over the next several years
as we continue our clinical development and research and development activities, apply for
regulatory approvals, expand our sales and marketing capabilities and grow our operations.
Sales and Marketing
We currently market FARESTON® (toremifene citrate 60 mg) tablets, which have been
approved by the U.S. Food and Drug Administration, or FDA, for the treatment of metastatic breast
cancer in postmenopausal women in the United States. In January 2005, we acquired from Orion the
right to market FARESTON® tablets in the United States for the metastatic breast cancer
indication. We also acquired from Orion a license to toremifene for all indications in humans
worldwide, except breast cancer outside of the United States. The active pharmaceutical ingredient
in FARESTON® is the same as in ACAPODENE®, but in a different dose. We plan
to build specialized sales and marketing capabilities to promote our product candidates to
urologists and medical oncologists in the United States and to seek partners to commercialize our
product candidates in broader markets in the United States and in the rest of the world.
Research and Development
Since our inception in 1997, we have been focused on drug discovery and development programs.
Research and development expenses represented 75% of our total operating expenses for the year
ended December 31, 2006. Research and development expenses include our expenses for personnel
associated with our research activities, screening and identification of product candidates,
formulation and synthesis activities, manufacturing, preclinical studies, toxicology studies,
clinical trials, regulatory affairs, and quality assurance activities.
We expect that research and development expenditures will continue to increase in future years
due to (1) the continuation of the pivotal Phase III clinical trial of ACAPODENE® 80 mg
for the treatment of multiple serious side effects of ADT for advance prostate cancer, (2) the
continuation of the pivotal Phase III clinical trial of ACAPODENE® 20 mg for the
prevention of prostate cancer in high risk men with high grade PIN, (3) the continued clinical and
preclinical development of OstarineTM, (4) the continued preclinical development of
other product candidates, including prostarine and andromustine and (5) the increase in research
and development personnel.
There is a risk that any drug discovery and development program may not produce revenue.
Moreover, because of uncertainties inherent in drug discovery and development, including those
factors described in Item 1A “Risk Factors” of this Annual Report on Form 10-K, we may not be able
to successfully develop and commercialize any of our product candidates.
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Drug development in the United States is a process that includes several steps defined by the
FDA. The FDA approval process for a new drug involves completion of preclinical studies and the
submission of the results of these studies to the FDA, together with proposed clinical protocols,
manufacturing information, analytical data and other information in an Investigational New Drug
application, or IND, which must become effective before human clinical trials may begin. Clinical
development typically involves three phases of study: Phase I, II and III. The most significant
costs associated with clinical development are the Phase III clinical trials as they tend to be the
longest and largest studies conducted during the drug development process. After completion of
clinical trials, a New Drug Application, or NDA, may be submitted to the FDA. In responding to a
NDA, the FDA may refuse to file the application, or if accepted for filing, the FDA may not grant
marketing approval, request additional information or deny the application if it determines that
the application does not provide an adequate basis for approval.
The successful development of our product candidates is highly uncertain. We cannot
reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to
complete the development of, or the period in which material net cash inflows are expected to
commence from, any of our product candidates due to the numerous risks and uncertainties associated
with developing drugs, including the uncertainty of:
| • | The scope, rate of progress and cost of our clinical trials and other research and development activities; |
| • | Future clinical trial results; |
| • | The achievement of certain milestone events under, and other matters related to, our collaboration and license agreement with Ipsen; |
| • | The terms and timing of any future collaborative, licensing and other arrangements that we may establish; |
| • | The cost and timing of regulatory approvals; |
| • | Potential future licensing fees, milestone payments and royalty payments, including any milestone payments or royalty payments that we may receive under our collaboration and license agreement with Ipsen; |
| • | The cost and timing of establishing sales, marketing and distribution capabilities; |
| • | The cost of establishing clinical and commercial supplies of our product candidates and any products that we may develop; |
| • | The effect of competing technological and market developments; |
| • | The cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and |
| • | The extent to which we acquire or invest in businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions. |
Any failure to complete the development of our product candidates in a timely manner could
have a material adverse effect on our operations, financial position and liquidity. A discussion of
the risks and uncertainties associated with completing our projects on schedule, or at all, and
some consequences of failing to do so, are set forth under Item 1A “Risk Factors” of this Annual
Report on Form 10-K.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and other related costs
for personnel serving executive, finance, legal, human resources, information technology, investor
relations and marketing
functions. Other costs include facility costs not otherwise included in research and
development expense and professional fees for legal, accounting, public relations, and marketing
services. General and administrative expenses also include insurance costs and
FARESTON® selling and distribution expenses. We expect that our
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general and
administrative expenses will increase in future periods as we add personnel and infrastructure to
support the planned growth of our business. In addition, we plan to expand our sales and marketing
efforts which will result in increased sales and marketing expenses in future years.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations
is based on our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these financial
statements requires us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements as well as the reported revenues and expenses during the reporting periods.
On an ongoing basis, we evaluate our estimates and judgments related to revenue recognition, income
taxes, intangible assets, long-term service contracts and other contingencies. We base our
estimates on historical experience and on various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 2 to our financial
statements appearing at the end of this Annual Report on Form 10-K, we believe that the following
accounting policies are most critical to aid you in fully understanding and evaluating our reported
financial results.
Revenue Recognition
Our revenues consist of product sales of FARESTON® and revenues derived from our
collaboration and license agreements.
We use revenue recognition criteria outlined in Staff Accounting Bulletin (“SAB”) No. 101,
“Revenue Recognition in Financial Statements” as amended by SAB No. 104 (together, “SAB 104”) and
Statement of Financial Accounting Standards (“SFAS”) No. 48, “Revenue Recognition When Right of
Return Exists” (“SFAS No. 48”) and Emerging Issues Task Force (“EITF”) Issue 00-21, “Revenue
Arrangements with Multiple Deliverables” (“EITF 00-21”). Accordingly, revenues from licensing and
collaboration agreements are recognized based on the performance requirements of the agreement.
Non-refundable up-front fees, where we have an ongoing involvement or performance obligation, are
generally recorded as deferred revenue in the balance sheet and amortized as collaboration revenue
in the condensed statements of operations over the term of the performance obligation. We estimate
the performance obligation period to be five years for the development of ACAPODENE® for
both the high grade PIN and ADT indications in the European Territory with Ipsen. The factors that
drive the actual development period of a pharmaceutical product are inherently uncertain and
include determining the timing and expected costs to complete the project, projecting regulatory
approvals and anticipating potential delays. We use all of these factors in initially estimating
the economic useful lives of our performance obligations, and we also continuously monitor these
factors for indications of appropriate revisions.
We recognize net product sales revenue from the sale of FARESTON® less deductions
for estimated sales discounts and sales returns. We recognize revenue from product sales when the
goods are shipped and title and risk of loss pass to the customer and the other criteria of SAB No.
104 and SFAS No. 48 are satisfied. We account for rebates to certain governmental agencies as a
reduction of product sales. We allow customers to return product within a specified time period
prior to and subsequent to the product’s labeled expiration date. As a result, we estimate an
accrual for product returns, which is recorded as a reduction of product sales, based on factors
which include historical product returns and estimated product in the distribution channel which is
expected to exceed its expiration date. We retained substantially the same wholesale customers of,
and the distribution channel that was used by, another pharmaceutical company that distributed
FARESTON® for six years prior to our obtaining the rights to market FARESTON®
in January 2005. We also obtained historical product return trend information that we continue to
update with our own product return data. We estimate the amount of product in the distribution
channel which is expected to exceed its expiration date and be returned by the customer by
receiving information
from our three largest wholesale customers about the levels of FARESTON® inventory
held by these customers. These three largest wholesale customers accounted for 94% of the total
sales of FARESTON® for the year ended December 31, 2006. Based on this information, and
other factors, we estimate the number of months of product on
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hand. For the year ended December
31, 2006, actual product returns were approximately $287,000 and the provision for product returns
was approximately $428,000 which resulted in an accrual for product returns at December 31, 2006 of
$415,000. At December 31, 2005, our accrual for product returns was $274,000. During the three
months ended December 31, 2006, we recorded a provision for product returns of approximately
$375,000. If actual future results are different than our estimates, we may need to adjust our
estimated accrual for product returns, which could have a material effect on earnings in the period
of the adjustment.
Research and Development Expenses
We expense research and development costs in the period in which they are incurred. These
costs consist of direct and indirect costs associated with specific projects as well as fees paid
to various entities that perform research, development and clinical trial studies on our behalf.
Patent Costs
We expense patent costs, including legal fees, in the period in which they are incurred.
Patent expenses are included in general and administrative expenses in our statements of
operations.
Share-Based Compensation
We have stock option plans that provide for the purchase our common stock by certain of its
employees and directors. Effective January 1, 2006, we adopted SFAS 123(R), “Share-Based Payment”
(“SFAS 123R”), and began recognizing compensation expense for our share-based payments based on the
fair value of the awards. Share-based payments include stock option grants under our stock option
plans. Prior to January 1, 2006, we accounted for share-based compensation expense using the
intrinsic value recognition method prescribed by Accounting Principles Board Opinion (“APB”) No. 25
and SFAS 123. Since we adopted SFAS 123R under the modified prospective and the prospective
transition methods, results from prior periods have not been restated. Under SFAS 123R,
forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting
period. This estimate is adjusted periodically based on the extent to which actual forfeitures
differ, or are expected to differ, from the previous estimate.
Total share-based compensation expense for the year ended December 2006 was $1.4 million, of
which $540,000 and $861,000 were recorded in the statements of operations as research and
development expenses and general and administrative expenses, respectively. Prior to the adoption
of SFAS 123R, we accounted for share-based compensation expense under APB No. 25. Total
share-based compensation expense for the years ended December 31, 2005 and 2004 was $819,000 and
$804,000, respectively. Included in share-based compensation expense for all periods presented is
share-based compensation expense related to deferred compensation arrangements for our directors,
which was $140,000 and $180,000 for the years ended December 31, 2006 and 2005, respectively. On
the date of adoption of SFAS 123R, the unamortized balance of deferred stock compensation of $1.7
million was reduced to zero with an offsetting adjustment to additional paid-in capital.
Income Taxes
We account for deferred taxes by recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to reverse. A valuation
allowance is provided when it is more likely than not that some portion or all of the deferred tax
assets will not be realized. This valuation allowance is estimated by management based on our
projected future taxable income. The estimate of future taxable income is highly subjective. We
have incurred losses since inception and anticipate that we will incur continued losses for the
foreseeable future. However, these assumptions may be inaccurate, and unanticipated events and
circumstances may occur in the future. To the extent actual results
differ from these estimates, our future results of operations may be affected. At December
31, 2006, and 2005, net of the valuation allowance, the net deferred tax assets were reduced to
zero.
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Purchased Intangible Assets
We account for our purchased intangible assets in accordance with SFAS No. 142, “Goodwill and
Other Intangible Assets,” which requires that purchased intangible assets with finite lives be
amortized over their estimated economic lives. Our purchased intangible asset, license fee,
represents a license fee paid to Orion in connection with entering into an amended and restated
license and supply agreement. The license fee is being amortized on a straight-line basis over the
term of the agreement which we estimate to be 16 years. Other purchased intangible assets
represent the costs incurred to acquire software used by us. We amortize the cost of purchased
software on a straight-line basis over the estimated useful lives of the software, generally three
years. We use a discounted cash flow model to value our license fee. The discounted cash flow
model requires assumptions about the timing and amount of future cash inflows and outflows, risk
and the cost of capital. Each of these factors can significantly affect the value of the license
fee. We review our license fee for impairment on a periodic basis using an undiscounted net cash
flows approach. If the undiscounted cash flows of our license fee are less than its carrying value,
it is written down to the discounted cash flow value. We determined that there was no impairment
to our license fee at December 31, 2006 and 2005. If we are unsuccessful in obtaining regulatory
approval for ACAPODENE®, we may not be able to recover the carrying amount of our
license fee.
Results of Operations
Comparison of Years Ended December 31, 2006 and December 31, 2005
Revenues. Revenues for the year ended December 31, 2006 were $7.5 million as compared to $3.8
million for the same period of 2005. Revenues include net sales of FARESTON® marketed
for the treatment of metastatic breast cancer and collaboration income from Ortho Biotech for
andarine and Ipsen for ACAPODENE®. During the years ended December 31, 2006 and 2005,
FARESTON® net sales were $1.4 million and $2.4 million, respectively, while costs of
products sales were $773,000 and $1.6 million, respectively. During the year ended December 31,
2006, the sales price of FARESTON® increased by 10% while sales revenue and sales volume
decreased by 32% and by 37%, respectively, as compared to the same period in 2005. Collaboration
income was $6.1 million for the year ended December 31, 2006, of which $4.3 million and $1.8
million was from Ortho Biotech and Ipsen, respectively. In connection with the termination of the
Ortho Biotech agreement, we recognized the associated $3.1 million balance of deferred revenue as
additional collaboration revenue. Collaboration income from Ortho Biotech was $1.3 million for the
year ended December 31, 2005.
Research and Development Expenses. Research and development expenses increased 9.7% to $33.9
million for the year ended December 31, 2006 from $30.9 million for the year ended December 31,
2005. The following table identifies the research and development expenses for each of our product
candidates, as well as research and development expenses pertaining to our other research and
development efforts for each of the periods presented. Research and development spending for past
periods is not indicative of spending in future periods.
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| Product | ||||||||||||||
| Candidate/ | Years Ended December 31, | Increase | ||||||||||||
| Program | Indication | 2006 | 2005 | (Decrease) | ||||||||||
| (in thousands) | ||||||||||||||
SERM |
ACAPODENE® | |||||||||||||
| 80 mg | ||||||||||||||
| Multiple serious | $ | 8,446 | $ | 11,720 | $ | (3,274 | ) | |||||||
| side effects of ADT | ||||||||||||||
| ACAPODENE® | ||||||||||||||
| 20 mg | ||||||||||||||
| Prevention of | 10,737 | 7,615 | 3,122 | |||||||||||
| prostate cancer in | ||||||||||||||
| high risk men with | ||||||||||||||
| high grade PIN | ||||||||||||||
SARM |
OstarineTM | |||||||||||||
| Cancer cachexia and | 6,723 | 4,750 | 1,973 | |||||||||||
| CKD/ESRD muscle wasting | ||||||||||||||
| Andarine | 56 | 173 | (117 | ) | ||||||||||
Other research and
development |
7,935 | 6,665 | 1,270 | |||||||||||
Total research and
development
expenses |
$ | 33,897 | $ | 30,923 | $ | 2,974 | ||||||||
General and Administrative Expenses. General and administrative expenses increased 16% to
$11.4 million for the year ended December 31, 2006 from $9.8 million for the year ended December
31, 2005. The increase of approximately $1.6 million was primarily the result of increased
personnel related expenses of approximately $730,000, an increase in share-based compensation
expense as a result of the adoption of SFAS No.123R effective January 1, 2006 of approximately
$550,000, and a foreign currency transaction loss of $237,000 related to our Ipsen collaboration.
Interest Income. Interest income increased to $3.0 million for the year ended December 31, 2006
from $1.7 million for the year ended December 31, 2005. The increase of approximately $1.3 million
was attributable to higher average interest rates in addition to higher average cash and cash
equivalents balances during the year ended December 31, 2006, as compared to the prior year.
Comparison of Years Ended December 31, 2005 and December 31, 2004
Revenues. Revenues for the year ended December 31, 2005 were $3.8 million as compared to $1.9
million for the same period of 2004. Revenues for the year ended December 31, 2005 included net
sales of FARESTON® marketed for the treatment of metastatic breast cancer, which we
acquired the rights to distribute effective January 1, 2005 from Orion Corporation. During the
year ended December 31, 2005, FARESTON® net sales were $2.4 million while cost of
product sales was $1.6 million. Revenues also included collaboration income of $1.3 million and
$1.1
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million for the years ended December 31, 2005 and 2004, respectively, from our partner, Ortho
Biotech for andarine, one of our proprietary SARM compounds. Revenues for the year ended December
31, 2004 also included $812,000 from the reimbursement of andarine development costs received from
Ortho Biotech.
Research and Development Expenses. Research and development expenses increased 71.7% to $30.9
million for the year ended December 31, 2005 from $18.0 million for the year ended December 31,
2004. The following table identifies the research and development expenses for each of our product
candidates, as well as research and development expenses pertaining to our other research and
development efforts for each of the periods presented.
| Product | ||||||||||||||
| Candidate/ | Year Ended December 31, | Increase | ||||||||||||
| Program | Indication | 2005 | 2004 | (Decrease) | ||||||||||
| (in thousands) | ||||||||||||||
SERM |
ACAPODENE® | |||||||||||||
| 80 mg | ||||||||||||||
| Multiple serious | $ | 11,720 | $ | 6,484 | $ | 5,236 | ||||||||
| side effects of ADT | ||||||||||||||
| ACAPODENE® | ||||||||||||||
| 20 mg | ||||||||||||||
| Prevention of | 7,615 | 2,247 | 5,368 | |||||||||||
| prostate cancer in | ||||||||||||||
| high risk men with | ||||||||||||||
| high grade PIN | ||||||||||||||
SARM |
OstarineTM | |||||||||||||
| Cancer cachexia and | 4,750 | 4,011 | 739 | |||||||||||
| CKD/ESRD muscle wasting | ||||||||||||||
| Andarine | 173 | 2,212 | (2,039 | ) | ||||||||||
Other research and
development |
6,665 | 2,996 | 3,669 | |||||||||||
Total research and
development
expenses |
$ | 30,923 | $ | 17,950 | $ | 12,973 | ||||||||
General and Administrative Expenses. General and administrative expenses increased 37%
to $9.8 million for the year ended December 31, 2005 from $7.2 million for the year ended December
31, 2004. The increase of $2.6 million was primarily due to an increase in personnel related
expenses, insurance costs, intellectual property related expenses, FARESTON® selling and
distribution expenses and Sarbanes-Oxley compliance expenses.
Interest Income. Interest income increased to approximately $1.7 million for the year ended
December 31, 2005 from $946,000 for the year ended December 31, 2004. The increase was the result
of higher average yields which were partially offset by lower average cash and cash equivalents
balances during the year ended December 31, 2005 as compared to the prior year.
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Liquidity and Capital Resources
Through December 31, 2006, we financed our operations and internal growth through private
placements of preferred stock, the proceeds of our initial public offering, our follow-on offerings
in October 2005 and December 2006 and proceeds from our collaboration agreements. We have incurred
significant losses since our inception in 1997 as we have devoted substantially all of our
resources to research and development, including our clinical trials. As of December 31, 2006, we
had an accumulated deficit of $229.8 million, of which $96.3 million related to non-cash dividends
and adjustments to the preferred stock redemption value. Our accumulated deficit resulted primarily
from:
| • | Our research and development activities associated with; |
| • | ACAPODENE® 80 mg for the treatment of multiple serious side effects of ADT, including two Phase II clinical trials and an ongoing pivotal Phase III clinical trial; | ||
| • | ACAPODENE® 20 mg for the prevention of prostate cancer in high risk men with high grade PIN, including our Phase IIb clinical trial and an ongoing pivotal Phase III clinical trial; | ||
| • | Preclinical and clinical development of andarine and OstarineTM, which is being developed for the treatment of muscle wasting and/or bone loss in acute and chronic diseases; |
| • | General and administrative expenses; and | ||
| • | Non-cash dividends and adjustments to the preferred stock redemption value of $96.3 million related to our cumulative redeemable convertible preferred stock. |
We expect to continue to incur net losses over the next several years as we continue our
clinical development and research and development activities, apply for regulatory approvals,
expand our sales and marketing capabilities and grow our operations.
At December 31, 2006, we had cash and cash equivalents of $119.6 million, compared to $74.0
million at December 31, 2005 and $64.5 million at December 31, 2004. On February 6, 2004, we
successfully completed an initial public offering of 5,400,000 shares of common stock at an
offering price to the public of $14.50 per share, resulting in net proceeds of approximately $70.4
million. On October 17, 2005, we completed an underwritten public offering of 6,325,000 shares of
common stock at an offering price to the public of $7.80 per share resulting in net proceeds of
approximately $45.7 million. On December 18, 2006, we completed a public offering of 3,799,600
shares of common stock at an offering price to the public of $16.00 per share resulting in net
proceeds of approximately $57.4 million.
Net cash used in operating activities was $11.5 million, $34.8 million and $15.7 million for
the years ended December 31, 2006, 2005 and 2004, respectively. The use of cash in all periods
resulted primarily from funding our net losses. Net cash used in operating activities for years
ended December 31, 2006 and 2004 was reduced by up-front license fees and reimbursement of
development expenses. In 2006, we received approximately $27.1 million in connection with our
collaboration with Ipsen and in 2004, we received approximately $6.7 million in connection with our
collaboration with Ortho Biotech. Cash requirements for operating activities are expected to
increase in future periods, due in part to significant costs related to the continuation of two
pivotal Phase III clinical trials for ACAPODENE® as well as the clinical and preclinical
development of OstarineTM and our other product candidates.
Net cash used in investing activities for the year ended December 31, 2006 was $578,000 and
was primarily for the purchase or research and development equipment, computer equipment and
software. Net cash used in investing activities for 2005 was $1.4 million and was primarily for
the purchase of research and development equipment, leasehold improvements, office and computer
equipment, software and furniture and fixtures. Net cash used in investing activities in 2004 was
primarily for the purchase of research and development equipment, office equipment and the purchase
of an intangible asset (license fee) of $4.8 million. We currently expect to make expenditures for
capital equipment and software of up to $1.2 million for the year ended December 31, 2007.
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Net cash provided by financing activities, was $57.6 million, $45.7 million and $71.4 million
for the years ended December 31, 2006, 2005 and 2004, respectively. Net cash provided by financing
activities for the year ended December 31, 2006 reflected net proceeds from our follow-on public
offering, which closed on December 18, 2006. Net cash provided by financing activities for the year
ended December 31, 2005 reflected net proceeds from our follow-on offering which closed October 17,
2005. Net cash provided by financing activities for the year ended December 31, 2004 reflected net
proceeds from our initial public offering which closed February 6, 2004.
We estimate that our current cash resources, interest on these funds and product revenue from
the sale of FARESTON®, will be sufficient to meet our projected operating requirements
through the first quarter of 2009. This estimate does not include funding from milestone payments
that we may receive under our existing collaboration with Ipsen, potential future collaboration
agreements with pharmaceutical companies, or the potential future issuance and sale of our
securities. This estimate also does not include any potential product launch costs for
ACAPODENE® in the event that it is approved for marketing by the FDA.
Our forecast of the period of time through which our financial resources will be adequate to
support our projected operating requirements is a forward-looking statement and involves risks and
uncertainties, and actual results could vary as a result of a number of factors, including the
factors discussed under Item 1A “Risk Factors” section of this annual report on Form 10-K. We have
based this estimate on assumptions that may prove to be wrong, and we could utilize our available
capital resources sooner than we currently expect. Because of the numerous risks and uncertainties
associated with the development of our product candidates and other research and development
activities, including risks and uncertainties that could impact the rate of progress of our
development activities, we are unable to estimate with certainty the amounts of increased capital
outlays and operating expenditures associated with our current and anticipated clinical trials and
other research and development activities. Our future funding requirements will depend on many
factors, including:
| • | The scope, rate of progress and cost of our clinical trials and other research and development activities; | ||
| • | Future clinical trial results; | ||
| • | The achievement of certain milestone events under, and other matters related to, our collaboration and license agreement with Ipsen; | ||
| • | The terms and timing of any collaborative, licensing and other arrangements that we may establish; | ||
| • | The cost and timing of regulatory approvals; | ||
| • | Potential future licensing fees, milestone payments and royalty payments, including any milestone payments or royalty payments that we may receive under our collaboration and license agreement with Ipsen; | ||
| • | The cost and timing of establishing sales, marketing and distribution capabilities; | ||
| • | The cost of establishing clinical and commercial supplies of our product candidates and any products that we may develop; | ||
| • | The effect of competing technological and market developments; | ||
| • | The cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and | ||
| • | The extent to which we acquire or invest in businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions. |
Until we can generate a sufficient amount of product revenue, we expect to finance future cash
needs through public or private equity offerings, debt financings or collaboration and licensing
arrangements, such as our arrangement with Ipsen, as well as through interest income earned on cash
balances and revenues from the sale of FARESTON®. With the exception of payments that
we may receive under our collaboration with Ipsen, we do not currently have any commitments for
future external funding. We cannot be certain that additional funding will be
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available on acceptable terms, or at all. To the extent that we raise additional funds by
issuing equity securities, our stockholders may experience dilution, and debt financing, if
available, may involve restrictive covenants. To the extent that we raise additional funds through
collaboration and licensing arrangements, such as our arrangement with Ipsen, it may be necessary
to relinquish some rights to our technologies or product candidates, or grant licenses on terms
that are not favorable to us. If adequate funds are not available, we may be required to delay,
reduce the scope of or eliminate one or more of our research or development programs or to obtain
funds through collaborations with others that are on unfavorable terms or that may require us to
relinquish rights to some of our technologies or product candidates that we would otherwise seek to
develop on our own.
We have no long-term debt. At December 31, 2006, we had contractual obligations as follows:
| Payment Due by Period | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
Capital lease obligations |
$ | 15 | $ | 5 | $ | 10 | $ | — | $ | — | ||||||||||
Operating lease obligations |
806 | 806 | — | — | — | |||||||||||||||
Purchase obligations |
19 | 19 | — | — | — | |||||||||||||||
Total |
$ | 840 | $ | 830 | $ | 10 | $ | — | $ | — | ||||||||||
Our long-term commitments under the operating lease shown above consist of payments
relating to a lease for laboratory and office space at 3 North Dunlap Street, Memphis, Tennessee.
This lease expires on December 31, 2007, unless we exercise certain options granted to us to extend
the lease. The table above excludes contingent payments under the license agreements to which we
are a party.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk for changes in interest rates relates to our cash equivalents on
deposit in highly liquid money market funds. The primary objective of our cash investment
activities is to preserve principal while at the same time maximizing the income we receive from
our invested cash without significantly increasing risk of loss. We do not use derivative
financial instruments in our investment portfolio. The effect of a hypothetical decrease of one
percentage point in the average interest rate earned on our cash equivalents would have resulted in
a decrease in our interest income of approximately $655,000 for the year ended December 31, 2006.
We operate primarily in the United States. However, some of our clinical trial sites are
located in Canada, Germany, Ireland, Mexico and the United Kingdom which requires us to make
payments for certain clinical trial services in foreign currencies. In accordance with the terms
of a collaboration and license agreement, Ipsen Limited is required to pay us €1.5 million as
additional license fees over a three year period. We are also entitled to receive from Ipsen up to
€39.0 million in milestone payments subject to the successful development and launch of
ACAPODENE® in certain countries of the European Territory. Ipsen’s obligation to make
payments to us in Euros exposes us to potential foreign currency transaction losses. Our exposure
to foreign currency rate fluctuations will increase because we are obligated to pay Orion
Corporation, our supplier of ACAPODENE® and FARESTON®, in Euros. However,
such exposure is not expected to be material. We do not currently use derivative financial
instruments to mitigate this exposure.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements and the report of our independent registered public accounting firm
are included in this Annual Report on Form 10-K beginning on page F-1, which are incorporated by
reference herein. The index to this report and the financial statements is included in Item 15
below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure
that information required to be disclosed in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s
rules and forms and that such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer, as appropriate, to allow for
timely decisions regarding required disclosures.
We have carried out an evaluation, under the supervision and with the participation of our
management, including our chief executive officer and chief financial officer, of the effectiveness
of the design and operation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.
Based on the evaluation of these disclosure controls and procedures, our chief executive officer
and chief financial officer have concluded that our disclosure controls and procedures were
effective.
Management’s Report on Internal Control over Financial Reporting
We, as management of GTx, are responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Securities Exchange Act Rule
13a-15(f). 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 United States generally accepted accounting
principles. Any system of internal control, no matter how well designed, has inherent limitations,
including the possibility that a control can be circumvented or overridden and misstatements due to
error or fraud may occur and not be detected. Also, because of changes in conditions, internal
control effectiveness may vary over time. Accordingly, even an effective system of internal
control will provide only reasonable assurance that the objectives of the internal control system
are met.
Under the supervision and with the participation of management, including our chief executive
officer and principal financial officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting as of December 31, 2006 using the criteria for effective
internal control over financial reporting as described in “Internal Control – Integrated
Framework,” issued by the Committee of Sponsoring Organization of the Treadway Commission. Based
on this evaluation, we concluded that, as of December 31, 2006, our internal control over financial
reporting was effective.
Attestation Report
Ernst & Young LLP, an independent registered public accounting firm, has issued an attestation
report on management’s assessment of our internal control over financial reporting, as stated in
their report which is included elsewhere herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth
quarter of 2006 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
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PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K
because we will file our definitive proxy statement for our 2007 Annual Meeting of Stockholders
with the U.S. Securities and Exchange Commission pursuant to Regulation 14A (the “2007 Proxy
Statement”) not later than 120 days after the end of the fiscal year covered by this Annual Report
on Form 10-K, and certain information included in the 2007 Proxy Statement is incorporated herein
by reference.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
(1) The information required by this Item concerning our directors, audit committee and audit
committee financial expert, may be found under the section entitled “Proposal No. 1 – Election of
Directors” and “Additional Information About the Board of Directors” appearing in the 2007 Proxy
Statement. Such information is incorporated herein by reference.
(2) The information required by this Item concerning compliance with Section 16(a) of the
Securities Exchange Act of 1934 may be found in the section entitled “Security Ownership of Certain
Beneficial Owners and Management–Section 16(a) Beneficial Ownership Reporting Compliance” appearing
in the 2007 Proxy Statement. Such information is incorporated herein by reference.
(3) The information required by this Item concerning our executive officers is set forth in
the section entitled “Executive Officers and Other Key Employees of Registrant” in Part I, Item 1
of this Form 10-K and is incorporated herein by reference.
(4) Our Board has adopted a Code of Business Conduct and Ethics applicable to all officers,
directors and employees as well as Guidelines on Governance Issues. These documents are available
on our website (www.gtxinc.com) under “About GTx” at “Corporate Governance.” We will provide a
copy of these documents to any person, without charge, upon request, by writing to us at GTx, Inc.
Director, Investor Relations, 3 North Dunlap Street, Memphis, Tennessee 38163. We intend to
satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver
from, a provision of the Code of Business Conduct and Ethics by posting such information on our
website at the address and the locations specified above.
ITEM 11. EXECUTIVE COMPENSATION
(1) The information required by this Item concerning director and executive compensation is
incorporated herein by reference to the information from the 2007 Proxy Statement under the
sections entitled “Compensation Discussion and Analysis,” “Executive Compensation,” “Potential
Payments Upon Termination or Change in Control” and “Director Compensation.”
(2) The information required by this Item concerning Compensation Committee interlocks and
insider participation is incorporated herein by reference to the information from the 2007 Proxy
Statement under the section entitled “Compensation Committee Interlocks and Insider Participation.”
(3) The information required by this Item concerning our Compensation Committee’s review and
discussion of the Compensation Discussion and Analysis section of the 2007 Proxy Statement is
incorporated herein by reference to the information from the 2007 Proxy Statement under the section
entitled “Compensation Committee Report.”
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
(1) The information required by this Item with respect to security ownership of certain
beneficial owners and management is incorporated herein by reference to the information from the
2007 Proxy Statement under the section entitled “Security Ownership of Certain Beneficial Owners
and Management.”
(2) The information required by this Item with respect to securities authorized for issuance
under our equity compensation plans is incorporated herein by reference to the information from the
2007 Proxy Statement under the section entitled “Equity Compensation Plan Information.”
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
(1) The information required by this Item concerning related party transactions is
incorporated herein by reference to the information from the 2007 Proxy Statement under the section
entitled “Certain Relationships and Related Party Transactions.”
(2) The information required by this Item concerning director independence is incorporated
herein by reference to the information from the 2007 Proxy Statement under the section entitled
“Additional Information About the Board of Directors-Director Independence.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated herein by reference to the information
from the 2007 Proxy Statement under the section entitled “Proposal No. 2 – Ratification of
Appointment of Independent Registered Public Accounting Firm.”
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Index to Financial Statements
| Page | Description | |
F-2
|
Management’s Report on Internal Control Over Financial Reporting | |
F-3
|
Reports of Independent Registered Public Accounting Firm | |
F-5
|
Balance Sheets at December 31, 2006 and 2005 | |
F-6
|
Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004 | |
F-7
|
Statements of Cumulative Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Years Ended December 31, 2006, 2005 and 2004 | |
F-8
|
Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004 | |
F-9
|
Notes to Financial Statements |
(a)(2) Financial statement schedules are omitted as they are not applicable.
(a)(3) See 15(b) below.
(b) Exhibits
| Number | Description | |
3.1
|
Restated Certificate of Incorporation of GTx, Inc. (1) | |
3.2
|
Amended and Restated Bylaws of GTx, Inc.(2) | |
4.1
|
Reference is made to Exhibits 3.1 and 3.2 | |
4.2
|
Specimen of Common Stock Certificate(3) | |
4.3
|
Amended and Restated Registration Rights Agreement between Registrant and Oracle Partners, L.P. dated August 7, 2003(3) | |
4.4*
|
Amended and Restated Registration Rights Agreement between Registrant and J. R. Hyde, III dated August 7, 2003(3) | |
4.5
|
Amended and Restated Registration Rights Agreement between Registrant and Memphis Biomed Ventures dated August 7, 2003(3) | |
10.1*
|
Genotherapeutics, Inc. 1999 Stock Option Plan(3) | |
10.2*
|
GTx, Inc. 2000 Stock Option Plan(3) | |
10.3*
|
GTx, Inc. 2001 Stock Option Plan(3) | |
10.4*
|
GTx, Inc. 2002 Stock Option Plan(3) | |
10.5*
|
2004 Equity Incentive Plan and Form of Stock Option Agreement(3) | |
10.6*
|
2004 Non-Employee Directors’ Stock Option Plan and Form of Stock Option Agreement(3) | |
10.7
|
Reserved | |
10.8*
|
Employment Agreement dated October 1, 2003, between Registrant and Mitchell S. Steiner, M.D.(3) |
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| Number | Description | |
10.9*
|
Employment Agreement dated October 1, 2003, between Registrant and Marc S. Hanover(3) | |
10.10*
|
Employment Agreement dated October 1, 2003, between Registrant and Mark E. Mosteller(3) | |
10.11*
|
Employment Agreement dated October 1, 2003, between Registrant and Henry P. Doggrell(3) | |
10.12*
|
Form of Indemnification Agreement(3) | |
10.13
|
Lease Agreement, dated March 7, 2001, between The University of Tennessee and TriStar Enterprises, Inc.(3) | |
10.14
|
Sublease Agreement dated October 1, 2000, as amended, between Registrant and TriStar Enterprises, Inc.(3) | |
10.15††#
|
Amended and Restated License and Supply Agreement dated October 22, 2001, between Registrant and Orion Corporation(3) | |
10.16††
|
Amendment No. 1 to the License and Supply Agreement dated March 5, 2003, between Registrant and Orion Corporation(3) | |
10.17†
|
Production and Manufacturing Agreement dated September 9, 2002, between Registrant and ChemSyn Laboratories (Department of EaglePicher Technologies, LLC)(3) | |
10.18†
|
Amendment No. 1 to the Production and Manufacturing Agreement dated September 30, 2003, between Registrant and ChemSyn Laboratories (Department of EaglePicher Technologies, LLC)(3) | |
10.19†
|
Quotation Agreement dated August 8, 2003 between Registrant and EaglePicher Pharmaceutical Services(3) | |
10.20††
|
Amended and Restated Exclusive License Agreement dated June 3, 2002, between Registrant and University of Tennessee Research Foundation(3) | |
10.21††
|
Amended and Restated Exclusive License Agreement dated June 14, 2002, between Registrant and University of Tennessee Research Foundation(3) | |
10.22††
|
Amended and Restated Exclusive License Agreement dated August 30, 2002, between Registrant and University of Tennessee Research Foundation(3) | |
10.23††
|
Amendment No. 2 to the License and Supply Agreement dated December 29, 2003, between Registrant and Orion Corporation(3) | |
10.24†
|
Purchase Agreement dated December 13, 2004, between Registrant and Orion Corporation(4) | |
10.25†
|
Amended and Restated License and Supply Agreement effective January 1, 2005, between Registrant and Orion Corporation(5) | |
10.26
|
Sublease Agreement dated April 1, 2005, as amended, between Registrant and TriStar Enterprises, Inc.(6) | |
10.27*
|
Employment Agreement dated January 1, 2005, between Registrant and James T. Dalton(7) | |
10.28*
|
Compensation Information for Registrant’s Executive Officers, effective as of January 1, 2006(8) | |
10.29*
|
Employment Agreement dated August 26, 2005, between Registrant and K. Gary Barnette(9) | |
10.30*
|
Employment Agreement dated August 26, 2005, between Registrant and Gregory A. Deener(10) | |
10.31*
|
Amended and Restated 2004 Non-Employee Directors’ Stock Option Plan(16) | |
10.32†
|
Amendment dated May 23, 2006 to the Amended and Restated License and Supply Agreement effective January 1, 2005, between Registrant and Orion Corporation(11) | |
10.33†
|
Amendment dated June 30, 2006 to the Amended and Restated License and Supply Agreement effective January 1, 2005, between Registrant and Orion Corporation(12) | |
10.34*
|
Form of Stock Option Agreement under the Amended and Restated 2004 Non-Employee Directors’ Stock Option Plan(13) | |
10.35†
|
Partial Assignment Agreement among Registrant, Orion Corporation and Ipsen Limited dated September 7, 2006(14) | |
10.36†
|
Collaboration and License Agreement between Registrant and Ipsen Limited dated September 7, 2006(15) | |
23.1
|
Consent of Ernst & Young LLP | |
24.1
|
Power of Attorney (included on the signature pages hereto) | |
31.1
|
Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) | |
31.2
|
Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) | |
32.1
|
Certification of Chief Executive Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)(17) | |
32.2
|
Certification of Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)(17) |
| † | Confidential treatment granted. The redacted portions have been filed separately with the SEC as required by Rule 406 of Regulation C. |
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| †† | Confidential treatment extension requested. The redacted portions have been filed separately with the SEC as required by Rule 406 of Regulation C. | |
| * | Indicates a management contract or compensation plan or arrangement. | |
| # | Revised redacted agreement filed herewith. | |
| (1) | Filed as Exhibit 4.1 to the Registrant’s registration statement on Form S-3 (File No. 333-127175), filed with the SEC on August 4, 2005, and incorporated herein by reference. | |
| (2) | Filed as Exhibit 3.2 to the Registrant’s registration statement on Form S-1 (File No. 333-109700), filed with the SEC on October 15, 2003, as amended, and incorporated herein by reference. | |
| (3) | Filed as the like numbered Exhibit to the Registrant’s registration statement on Form S-1 (File No. 333-109700), filed with the SEC on October 15, 2003, as amended, and incorporated herein by reference. | |
| (4) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-50549), filed with the SEC on March 7, 2005, and incorporated herein by reference. | |
| (5) | Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K/A (File No. 000-50549), filed with the SEC on March 7, 2005, and incorporated herein by reference. | |
| (6) | Filed as Exhibit 10.27 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the SEC on July 27, 2005, and incorporated herein by reference. | |
| (7) | Filed as Exhibit 10.28 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the SEC on July 27, 2005, and incorporated herein by reference. | |
| (8) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-50549), filed with the SEC on November 7, 2005, and incorporated herein by reference. | |
| (9) | Filed as Exhibit 10.1 to the Registrant’s Currrent Report on Form 8-K (File No. 000-50549), filed with the SEC on September 8, 2005, and incorporated herein by reference. | |
| (10) | Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 000-50549), filed with the SEC on September 8, 2005 and incorporated herein by reference. | |
| (11) | Filed as Exhibit 10.33 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the SEC on August 9, 2006, and incorporated herein by reference. | |
| (12) | Filed Exhibit 10.34 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the SEC on August 9, 2006, and incorporated herein by reference. | |
| (13) | Filed Exhibit 10.35 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the SEC on November 3, 2006, and incorporated herein by reference. | |
| (14) | Filed Exhibit 10.36 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the SEC on November 3, 2006, and incorporated herein by reference. | |
| (15) | Filed Exhibit 10.37 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the SEC on November 3, 2006, and incorporated herein by reference. | |
| (16) | Filed Exhibit 10.1 to the Registrant’s Quarterly Report on Form 8-K (File No. 000-50549), filed with the SEC on April 27, 2006, and incorporated herein by reference. | |
| (17) | This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing. |
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SIGNATURES
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.
GTx, Inc. |
|||
| By | /s/ Mitchell S. Steiner |
||
Mitchell S. Steiner, M.D., F.A.C.S. |
|||
Chief Executive Officer, Vice Chairman and Director
|
Date: March 9, 2007 |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes
and appoints Mitchell S. Steiner and Mark E. Mosteller, and each of them, acting individually, as
his attorney-in-fact, each with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and all amendments to
this Annual Report on Form 10-K, 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 and necessary to be done in connection therewith and about the
premises, as fully 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 or her 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.
| Date | ||||
/s/ J. R. Hyde, III
|
Chairman of the Board of Directors | March 9, 2007 | ||
/s/ Mitchell S. Steiner
|
Chief Executive Officer, Vice Chairman and Director | March 9, 2007 | ||
/s/ Mark E. Mosteller
|
Vice President, Chief Financial Officer and Treasurer | March 9, 2007 | ||
| (Principal Financial and Accounting Officer) | ||||
/s/ Marc S. Hanover
|
President, Chief Operating Officer and Director | March 9, 2007 | ||
/s/ Andrew M. Clarkson
|
Director | March 9, 2007 | ||
/s/ J. Kenneth Glass
|
Director | March 9, 2007 | ||
/s/ Robert W. Karr
|
Director | March 9, 2007 | ||
/s/ Rosemary Mazanet
|
Director | March 9, 2007 | ||
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| Date | ||||
/s/ John H. Pontius
|
Director | March 9, 2007 | ||
/s/ Timothy R. G. Sear
|
Director | March 9, 2007 | ||
/s/ Michael G. Carter |
Director | |||
| March 9, 2007 |
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GTx, Inc.
INDEX TO FINANCIAL STATEMENTS
| Page | ||||
| F-2 | ||||
| F-3 | ||||
| F-5 | ||||
| F-6 | ||||
| F-7 | ||||
| F-8 | ||||
| F-9 | ||||
F-1
Table of Contents
MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
INTERNAL CONTROL OVER FINANCIAL REPORTING
We, as management of GTx, Inc., are responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Securities Exchange Act Rule
13a-15(f). 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 United States generally accepted accounting
principles. Any system of internal control, no matter how well designed, has inherent limitations,
including the possibility that a control can be circumvented or overridden and misstatements due to
error or fraud may occur and not be detected. Also, because of changes in conditions, internal
control effectiveness may vary over time. Accordingly, even an effective system of internal
control will provide only reasonable assurance that the objectives of the internal control system
are met.
Under the supervision and with the participation of management, including our principal
executive officer and principal financial officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting as of December 31, 2006 using the criteria for
effective internal control over financial reporting as described in “Internal Control – Integrated
Framework,” issued by the Committee of Sponsoring Organization of the Treadway Commission. Based
on this evaluation, we concluded that, as of December 31, 2006, our internal control over financial
reporting was effective. Ernst & Young LLP, an independent registered public accounting firm, has
issued an attestation report on management’s assessment of our internal control over financial
reporting, as stated in their report which is included elsewhere herein.
/s/ Mitchell S. Steiner
|
/s/ Mark E. Mosteller | |||
Mitchell S. Steiner, M.D., F.A.C.S.
|
Mark E. Mosteller, CPA | |||
Vice Chairman and
|
Vice President, Chief Financial Officer | |||
Chief Executive Officer
|
and Treasurer |
Memphis, Tennessee
February 21, 2007
February 21, 2007
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
GTx, Inc.
GTx, Inc.
We have audited management’s assessment, included in the accompanying report on management’s
assessment of internal control over financial reporting, that GTx, Inc. maintained effective
internal control over financial reporting as of December 31, 2006, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). GTx, 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. Our responsibility is to express an opinion on
management’s assessment and an opinion on the effectiveness of 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, evaluating management’s assessment, testing and evaluating the
design and operating effectiveness of internal control, and 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, management’s assessment that GTx, Inc. maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on
the COSO criteria. Also, in our opinion, GTx, Inc. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2006, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the accompanying balance sheets as of December 31, 2006 and 2005, and the
related statements of operations, cumulative redeemable convertible preferred stock and
stockholders’ equity (deficit) and cash flows for each of the three years in the period ended
December 31, 2006, of GTx, Inc. and our report dated February 20, 2007, expressed an unqualified
opinion thereon.
Memphis, Tennessee
February 21, 2007
February 21, 2007
F-3
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
GTx, Inc.
GTx, Inc.
We have audited the accompanying balance sheets of GTx, Inc. as of December 31, 2006 and 2005, and
the related statements of operations, cumulative redeemable convertible preferred stock and
stockholders’ equity (deficit) and cash flows for each of the three years in the period ended
December 31, 2006. 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of GTx, Inc. at December 31, 2006 and 2005, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2006, in
conformity with U.S. generally accepted accounting principles.
As discussed in Note 2 to the financial statements, effective January 1, 2006, the Company adopted
Statement of Financial Accounting Standards No. 123 R, Share Based Payment, to account for stock
based compensation.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of GTx, Inc.’s internal control over financial reporting
as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 20, 2007 expressed an unqualified opinion thereon.
Memphis, Tennessee
February 21, 2007
February 21, 2007
F-4
Table of Contents
GTx, Inc.
BALANCE SHEETS
(in thousands, except share data)
(in thousands, except share data)
| December 31, | ||||||||
| 2006 | 2005 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 119,550 | $ | 74,014 | ||||
Accounts receivable, net |
61 | 153 | ||||||
Inventory |
207 | 135 | ||||||
Prepaid expenses and other current assets |
1,882 | 1,702 | ||||||
Total current assets |
121,700 | 76,004 | ||||||
Property and equipment, net |
1,448 | 1,746 | ||||||
Purchased intangible assets: |
||||||||
License fee, net |
4,226 | 4,524 | ||||||
Other, net |
488 | 454 | ||||||
Other assets |
1,393 | 83 | ||||||
Total assets |
$ | 129,255 | $ | 82,811 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 1,336 | $ | 1,407 | ||||
Accrued expenses |
3,149 | 3,230 | ||||||
Deferred revenue — current portion |
5,852 | 1,337 | ||||||
Total current liabilities |
10,337 | 5,974 | ||||||
Deferred revenue, less current portion |
21,554 | 2,958 | ||||||
Capital lease obligation |
15 | 20 | ||||||
Other long-term liability |
300 | 280 | ||||||
Commitments and contingencies |
||||||||
Stockholders’ equity: |
||||||||
Common stock, $0.001 par value: 60,000,000
shares authorized; 34,822,362 shares issued
and outstanding at December 31, 2006 and
30,993,967 shares issued and outstanding at
December 31, 2005 |
35 | 31 | ||||||
Deferred stock compensation |
— | (1,725 | ) | |||||
Additional paid-in capital |
326,793 | 269,542 | ||||||
Accumulated deficit |
(229,779 | ) | (194,269 | ) | ||||
Total stockholders’ equity |
97,049 | 73,579 | ||||||
Total liabilities and stockholders’ equity |
$ | 129,255 | $ | 82,811 | ||||
The accompanying notes are an integral part of these financial statements.
F-5
Table of Contents
GTx, Inc.
STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(in thousands, except share and per share data)
| Years Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Revenues: |
||||||||||||
Product sales, net |
$ | 1,357 | $ | 2,445 | $ | — | ||||||
Collaboration revenue |
6,148 | 1,337 | 1,055 | |||||||||
Reimbursement of development costs |
— | — | 812 | |||||||||
Total revenues |
7,505 | 3,782 | 1,867 | |||||||||
Costs and expenses: |
||||||||||||
Cost of product sales |
773 | 1,573 | — | |||||||||
Research and development expenses |
33,897 | 30,923 | 17,950 | |||||||||
General and administrative expenses |
11,352 | 9,845 | 7,211 | |||||||||
Total costs and expenses |
46,022 | 42,341 | 25,161 | |||||||||
Loss from operations |
(38,517 | ) | (38,559 | ) | (23,294 | ) | ||||||
Interest income |
3,007 | 1,720 | 946 | |||||||||
Net loss |
(35,510 | ) | (36,839 | ) | (22,348 | ) | ||||||
Accrued preferred stock dividends |
— | — | (455 | ) | ||||||||
Adjustment to preferred stock redemption value |
— | — | 17,125 | |||||||||
Net loss attributable to common stockholders |
$ | (35,510 | ) | $ | (36,839 | ) | $ | (5,678 | ) | |||
Net loss per share attributable to common stockholders: |
||||||||||||
Basic |
$ | (1.14 | ) | $ | (1.42 | ) | $ | (0.25 | ) | |||
Diluted |
$ | (1.14 | ) | $ | (1.42 | ) | $ | (0.93 | ) | |||
Weighted average shares used in computing net loss per
share attributable to common stockholders: |
||||||||||||
Basic |
31,150,035 | 25,982,478 | 22,993,221 | |||||||||
Diluted |
31,150,035 | 25,982,478 | 24,062,271 | |||||||||
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
GTx, Inc.
STATEMENTS OF CUMULATIVE REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS’ EQUITY (DEFICIT)
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except share and per share data)
AND STOCKHOLDERS’ EQUITY (DEFICIT)
For the Years Ended December 31, 2006, 2005 and 2004
(in thousands, except share and per share data)
| Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||||||||||
| Cumulative Redeemable | Total | |||||||||||||||||||||||||||||||
| Convertible | Common | Deferred | Stockholders’ | |||||||||||||||||||||||||||||
| Preferred Stock | Stock | Stock | Additional Paid-in | (Accumulated | Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Compensation | Capital | Deficit ) | (Deficit) | |||||||||||||||||||||||||
Balances at January 1, 2004 |
1,231,955 | $ | 165,292 | 7,735,848 | $ | 8 | $ | (3,505 | ) | $ | 5,018 | $ | (151,752 | ) | $ | (150,231 | ) | |||||||||||||||
Preferred stock dividends |
— | 455 | — | — | — | — | (455 | ) | (455 | ) | ||||||||||||||||||||||
Preferred stock adjustment to
redemption value |
— | (17,125 | ) | — | — | — | — | 17,125 | 17,125 | |||||||||||||||||||||||
Conversion of preferred stock to
common stock |
(1,231,955 | ) | (148,622 | ) | 11,521,075 | 12 | — | 148,610 | — | 148,622 | ||||||||||||||||||||||
Issuance of common stock |
— | — | 5,400,000 | 5 | — | 70,360 | — | 70,365 | ||||||||||||||||||||||||
Amortization of stock-based
compensation |
— | — | — | — | 804 | — | — | 804 | ||||||||||||||||||||||||
Exercise of employee stock options |
— | — | 7,793 | — | — | 27 | — | 27 | ||||||||||||||||||||||||
Net loss and comprehensive loss |
— | — | — | — | — | — | (22,348 | ) | (22,348 | ) | ||||||||||||||||||||||
Balances at December 31, 2004 |
— | — | 24,664,716 | 25 | (2,701 | ) | 224,015 | (157,430 | ) | 63,909 | ||||||||||||||||||||||
Issuance of common stock |
— | — | 6,325,000 | 6 | — | 45,657 | — | 45,663 | ||||||||||||||||||||||||
Amortization of stock-based
compensation |
— | — | — | — | 487 | — | — | 487 | ||||||||||||||||||||||||
Exercise of employee stock options |
— | — | 4,251 | — | — | 27 | — | 27 | ||||||||||||||||||||||||
Forfeitures of stock-based
compensation |
— | — | — | — | 489 | (489 | ) | — | — | |||||||||||||||||||||||
Directors’ deferred compensation |
— | — | — | — | — | 180 | — | 180 | ||||||||||||||||||||||||
Share-based compensation related
to the modification of employee
stock options |
— | — | — | — | — | 152 | — | 152 | ||||||||||||||||||||||||
Net loss and comprehensive loss |
— | — | — | — | — | — | (36,839 | ) | (36,839 | ) | ||||||||||||||||||||||
Balances at December 31, 2005 |
— | — | 30,993,967 | 31 | (1,725 | ) | 269,542 | (194,269 | ) | 73,579 | ||||||||||||||||||||||
Issuance of common stock |
— | — | 3,799,600 | 4 | — | 57,422 | — | 57,426 | ||||||||||||||||||||||||
Exercise of employee stock options |
— | — | 28,795 | — | — | 153 | — | 153 | ||||||||||||||||||||||||
Directors’ deferred compensation |
— | — | — | — | — | 140 | — | 140 | ||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | 1,261 | — | 1,261 | ||||||||||||||||||||||||
Reversal of deferred stock
compensation |
— | — | — | — | 1,725 | (1,725 | ) | — | — | |||||||||||||||||||||||
Net loss and comprehensive loss |
— | — | — | — | — | — | (35,510 | ) | (35,510 | ) | ||||||||||||||||||||||
Balances at December 31, 2006 |
— | $ | — | 34,822,362 | $ | 35 | $ | — | $ | 326,793 | $ | (229,779 | ) | $ | 97,049 | |||||||||||||||||
The accompanying notes are an integral part of these financial statements.
F-7
Table of Contents
GTx, Inc.
STATEMENTS OF CASH FLOWS
(in thousands)
(in thousands)
| Years Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ | (35,510 | ) | $ | (36,839 | ) | $ | (22,348 | ) | |||
Adjustments to reconcile net loss to net cash used in
operating activities: |
||||||||||||
Depreciation and amortization |
1,140 | 1,038 | 475 | |||||||||
Share-based compensation |
1,261 | 639 | 804 | |||||||||
Directors’ deferred compensation |
140 | 180 | — | |||||||||
Deferred revenue amortization |
(6,148 | ) | (1,337 | ) | (1,055 | ) | ||||||
Foreign currency transaction loss |
237 | — | — | |||||||||
Loss on retirement of property and equipment |
— | 33 | — | |||||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable, net |
92 | (153 | ) | — | ||||||||
Inventory |
(72 | ) | 313 | (448 | ) | |||||||
Prepaid expenses and other assets |
(1,727 | ) | (93 | ) | (1,488 | ) | ||||||
Accounts payable |
(71 | ) | 507 | 439 | ||||||||
Accrued expenses and other long-term liability |
(61 | ) | 893 | 1,263 | ||||||||
Deferred revenue |
29,259 | — | 6,687 | |||||||||
Net cash used in operating activities |
(11,460 | ) | (34,819 | ) | (15,671 | ) | ||||||
Cash flows from investing activities: |
||||||||||||
Purchase of property and equipment |
(338 | ) | (935 | ) | (1,174 | ) | ||||||
Purchase of intangible assets |
(240 | ) | (446 | ) | (4,826 | ) | ||||||
Net cash used in investing activities |
(578 | ) | (1,381 | ) | (6,000 | ) | ||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from issuance of common stock |
57,426 | 45,663 | 71,836 | |||||||||
Deferred initial public offering costs |
— | — | (433 | ) | ||||||||
Payments on capital lease obligation |
(5 | ) | (4 | ) | — | |||||||
Proceeds from exercise of employee stock options |
153 | 27 | 27 | |||||||||
Net cash provided by financing activities |
57,574 | 45,686 | 71,430 | |||||||||
Net increase in cash and cash equivalents |
45,536 | 9,486 | 49,759 | |||||||||
Cash and cash equivalents, beginning of year |
74,014 | 64,528 | 14,769 | |||||||||
Cash and cash equivalents, end of year |
$ | 119,550 | $ | 74,014 | $ | 64,528 | ||||||
Supplemental schedule of non-cash investing and
financing activities: |
||||||||||||
Preferred stock dividends |
$ | — | $ | — | $ | 455 | ||||||
Preferred stock adjustment to redemption value |
$ | — | $ | — | $ | (17,125 | ) | |||||
Capital lease |
$ | — | $ | — | $ | 24 | ||||||
Transfer of deferred IPO costs to stockholders’ equity |
$ | — | $ | — | $ | 1,471 | ||||||
The accompanying notes are an integral part of these financial statements.
F-8
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(in thousands, except share and per share data)
1. Business and Basis of Presentation
GTx, Inc. (“GTx,” the “Company,” or “we”), a Delaware Corporation incorporated on September
24, 1997 and headquartered in Memphis, Tennessee, is a biopharmaceutical company dedicated to the
discovery, development and commercialization of small molecules that selectively target hormone
pathways to treat cancer, osteoporosis and bone loss, muscle wasting and other serious medical
conditions. GTx operates in one business segment.
GTx is developing ACAPODENE® (toremifene citrate), a selective estrogen receptor
modulator, or SERM, in two separate clinical programs in men: first, a pivotal Phase III clinical
trial for the treatment of serious side effects of androgen deprivation therapy, or ADT, for
advanced prostate cancer and second, a pivotal Phase III clinical trial for the prevention of
prostate cancer in high risk men with precancerous prostate lesions called high grade prostatic
intraepithelial neoplasia, or high grade PIN. GTx has licensed to Ipsen Limited (“Ipsen”)
exclusive rights in the European Union, Switzerland, Norway, Iceland, Lichtenstein, and the
Commonwealth of Independent States to develop and commercialize ACAPODENE® and other
products containing toremifene for all indications which we have licensed from Orion Corporation.
GTx is also developing OstarineTM, a selective androgen receptor modulator, or SARM for
the treatment of cancer wasting, which is known as cancer cachexia and for chronic kidney disease
and end state renal disease.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Actual amounts and results could differ from those estimates.
Cash and Cash Equivalents
The Company considers highly liquid investments with initial maturities of three months or
less to be cash equivalents.
Inventory
Inventory consists of FARESTON® tablets that are manufactured by Orion Corporation
and delivered to the Company as finished goods. Inventory is stated at the lower of cost
(first-in, first-out method) or market.
F-9
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Property and Equipment
Property and equipment is stated at cost. Amortization of leasehold improvements is recognized
over the shorter of the estimated useful life of the leasehold improvement or the lease term.
Depreciation is computed using the straight-line method over the estimated useful lives as follows:
Equipment
|
3 to 5 years | |
Leasehold improvements
|
3 to 6 years | |
Furniture and fixtures
|
5 years |
Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with Statement of Financial
Accounting Standards (“SFAS”) No.144, “Accounting for the Impairment or Disposal of Long-Lived
Assets and for Long-Lived Assets to be Disposed of,” which requires that companies consider whether
events or changes in facts and circumstances, both internally and externally, may indicate that an
impairment of long-lived assets held for use are present. Management periodically evaluates the
carrying value of long-lived assets and has determined that there was no impairment as of December
31, 2006 and 2005. Should there be impairment in the future, the Company would recognize the
amount of the impairment based on the expected future cash flows from the impaired assets. The cash
flow estimates would be based on management’s best estimates, using appropriate and customary
assumptions and projections at the time.
Purchased Intangible Assets
The Company accounts for its purchased intangible assets in accordance with SFAS No.142,
“Goodwill and Other Intangible Assets,” which requires that purchased intangible assets with finite
lives be amortized over their estimated economic lives. The Company’s purchased intangible asset,
license fee, represents the value of a license and supply agreement purchased by the Company as
described in Note 6. The license fee is being amortized on a straight-line basis over the term of
the agreement which the Company estimates to be 16 years. Other purchased intangible assets
represent the costs incurred to acquire software used by the Company. The Company amortizes the
cost of purchased software on a straight-line basis over the estimated useful lives of the
software, generally three years. Management analyzed the license fee in accordance with SFAS No.
144 and determined that there was no impairment as of December 31, 2006 and 2005.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, which include cash and cash
equivalents, accounts receivable and accounts payable approximate their fair values.
Concentration of Risk
Financial instruments that potentially subject the Company to a concentration of credit risk
consist of cash and cash equivalents and accounts receivable. The Company has established
guidelines relating to diversification and maturities of its cash equivalents which allow the
Company to manage risk. The Company’s cash equivalents consist primarily of money market funds.
Bank deposits may at times be in excess of FDIC insurance limits. The Company’s three largest
customers are wholesale drug distributors and account for approximately 84% and 92% of accounts
receivable as of December 31, 2006, and 2005, respectively.
F-10
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Revenue Recognition
The Company recognizes net product sales revenue from the sale of FARESTON® less
deductions for estimated sales discounts and sales returns. Revenue from product sales is
recognized when the goods are shipped and title and risk of loss pass to the customer and the other
criteria outlined in Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial
Statements” as amended by SAB No. 104 (together, “SAB No. 104”) and SFAS No. 48, “Revenue
Recognition When Right of Return Exists” are satisfied. The Company accounts for rebates to
certain governmental agencies as a reduction of product sales. The Company allows customers to
return product within a specified time period prior to and subsequent to the product’s labeled
expiration date. The Company estimates an accrual for product returns, which is recorded as a
reduction of product sales, based on factors which include historical product returns and estimated
product in the distribution channel which is expected to exceed its expiration date. At December
31, 2006 and 2005, the Company’s accrual for product returns was $415 and $274, respectively. If
actual future results are different than the Company’s estimates, the Company may need to adjust
its estimated accrual for product returns, which could have a material effect on results of
operations in the period of the adjustment.
Collaboration revenue consists of non-refundable up-front payments and license fees associated
with the Company’s collaboration and license agreements discussed in Note 8. The Company
recognized revenue in accordance with SAB No. 104. Accordingly, revenues from licensing agreements
are recognized based on the performance requirements of the agreement. Non-refundable up-front
fees, where the Company has an ongoing involvement or performance obligation, are recorded as
deferred revenue in the balance sheets and amortized as collaboration revenue in the statements of
operations over the term of the performance obligation.
Research and Development Costs
The Company expenses research and development costs in the period in which they are incurred.
These costs consist of direct and indirect costs associated with specific projects as well as fees
paid to various entities that perform research and clinical trials on behalf of the Company.
Patent Costs
The Company expenses patent costs, including legal expenses, in the period in which they are
incurred. Patent expenses are included in general and administrative expenses in the Company’s
statements of operations.
Income Taxes
The Company accounts for deferred taxes by recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are expected to reverse. A
valuation allowance is provided when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Accordingly, at December 31, 2006 and 2005, net of the
valuation allowance, the net deferred tax assets were reduced to zero.
Stock Options
The Company has stock option plans that provide for the purchase of the Company’s Common Stock
by certain of its employees and directors, which are described more fully in Note 3 “Share-Based
Compensation.” Effective January 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based
Payment” (“SFAS 123R”) and began recognizing compensation expense for its share-based payments
based on the fair value of the awards. See Note 3 “Share-Based Compensation” for further
discussion.
F-11
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Deferred Stock Compensation
In anticipation of the Company’s initial public offering on February 6, 2004, the Company
determined that, for financial reporting purposes, the estimated value of its common stock was in
excess of the exercise price for stock options issued to employees from June 30, 2003 to December
31, 2003. Accordingly, the Company recorded non-cash deferred stock-based compensation of $4,055,
and amortized the related expense on a straight-line basis over the estimated service period, which
was generally five years. The Company recorded amortization of deferred stock compensation of
$487 and $804 for years ended December 31, 2005 and 2004, respectively. At December 31, 2005, the
Company had approximately $1,725 of deferred stock-based compensation to be amortized over the
remaining vesting periods of the related stock options. At January 1, 2006 upon adoption of SFAS
123R the unamortized balance was reduced to zero with an offsetting adjustment to additional
paid-in capital.
Basic and Diluted Net Loss Per Share
The Company computed net loss per share attributable to common stockholders according to SFAS
No. 128, “Earnings per Share,” which requires disclosure of basic and diluted earnings (loss) per
share.
Basic net loss per share attributable to common stockholders is calculated based on the
weighted average number of common shares outstanding during the period. Diluted net loss per share
attributable to common stockholders gives effect to the dilutive potential of common stock
consisting of stock options and convertible preferred stock.
The following tables set forth the computation of the Company’s basic and diluted net loss per
share attributable to common stockholders for the years ended December 31, 2006, 2005 and 2004:
| Years Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Basic net loss per share attributable to common stockholders |
||||||||||||
Numerator: |
||||||||||||
Net loss attributable to common stockholders |
$ | (35,510 | ) | $ | (36,839 | ) | $ | (5,678 | ) | |||
Denominator: |
||||||||||||
Common stock outstanding at beginning of period |
30,993,967 | 24,664,716 | 7,735,848 | |||||||||
Conversion of preferred stock to common stock |
— | — | 10,387,855 | |||||||||
Issuance of common stock in initial public offering |
— | — | 4,868,852 | |||||||||
Issuance of common stock in public offering |
145,738 | 1,316,986 | — | |||||||||
Exercise of employee stock options |
10,330 | 776 | 666 | |||||||||
Weighted average shares used in computing basic net loss
per share |
31,150,035 | (1) | 25,982,478 | (2) | 22,993,221 | |||||||
Basic net loss per share attributable to common stockholders |
$ | (1.14 | ) | $ | (1.42 | ) | $ | (0.25 | ) | |||
| Years Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Diluted net loss per share attributable to common stockholders |
||||||||||||
Numerator: |
||||||||||||
Net loss |
$ | (35,510 | ) | $ | (36,839 | ) | $ | (22,348 | )(3) | |||
Denominator: |
||||||||||||
Common stock outstanding at beginning of period |
30,993,967 | 24,664,716 | 7,735,848 | |||||||||
Conversion of preferred stock to common stock |
— | — | 11,456,905 | |||||||||
Issuance of common stock in initial public offering |
— | — | 4,868,852 | |||||||||
Issuance of common stock in public offering |
145,738 | 1,316,986 | — | |||||||||
Exercise of employee stock options |
10,330 | 776 | 666 | |||||||||
Weighted average shares used in computing diluted net loss per
share |
31,150,035 | (1) | 25,982,478 | (2) | 24,062,271 | |||||||
Diluted net loss per share attributable to common stockholders |
$ | (1.14 | ) | $ | (1.42 | ) | $ | (0.93 | ) | |||
F-12
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
(1) The weighted average shares used in computing basic and diluted net loss per share
attributable to common stockholders for the year ended December 31, 2006 include 145,738 shares,
which represent the weighted average effect during the period of the Company’s issuance of
3,799,600 shares of common stock on December 18, 2006. At December 31, 2006, the Company had
outstanding 34,822,362 shares of common stock.
(2) The weighted average shares used in computing basic and diluted net loss per share
attributable to common stockholders for the year ended December 31, 2005 include 1,316,986
shares, which represent the weighted average effect during the period of the Company’s issuance
of 6,325,000 shares of common stock on October 17, 2005.
(3) Diluted net loss per share attributable to common stockholders is calculated as if the
conversion of all preferred stock, and accrued dividends thereon, into shares of common stock
occurred as of the beginning of the period. As a result, the diluted net loss per share
attributable to common stockholders does not include accrued preferred stock dividends or the
adjustments to preferred stock redemption value.
Weighted average options outstanding to purchase shares of common stock of 1,462,842,
1,244,232, and 997,059 were excluded from the calculation of diluted net loss per share
attributable to common stockholders for the years ended December 31, 2006, 2005 and 2004,
respectively, as inclusion of the options would have an anti-dilutive effect on the net loss per
share for the periods.
Adjustment to Preferred Stock Redemption Value
The Company’s preferred stock was recorded at its redemption value. The per share redemption
price was equal to the greater of liquidation value, which included accrued dividends, or the fair
value calculated on an as-if converted to common stock basis. The Company determines redemption
value (fair value) considering factors such as the share price of preferred stock issuances,
achievement of significant milestones in clinical trials and general market conditions. At
December 31, 2003, the per share redemption value was determined based on the estimated projected
midpoint on the range of the Company’s initial public offering price per common share. The changes
in redemption value affect the loss attributable to common stockholders for the year ended December
31, 2004.
Comprehensive Loss
The Company has adopted the provisions of SFAS No. 130, “Comprehensive Income.” SFAS 130
establishes standards for the reporting and display of comprehensive income and its components for
general purpose financial statements. For all periods presented, there were no differences between
net loss and comprehensive loss.
Recent Accounting Pronouncements
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the
accounting for uncertainty in tax positions.
FIN 48 requires the recognition in the financial statements, the impact of a tax position, if
that position is more likely than not of being sustained on audit, based on the technical merits of
the position. The provisions of FIN 48 are effective as of January 1, 2007, with the cumulative
effect of the change in accounting principle recorded as an adjustment to opening retained
earnings. The adoption of the standard did not have a material effect on the Company’s financial
condition.
F-13
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
3. Share-Based Compensation
Effective January 1, 2006, the Company adopted SFAS 123R and began recognizing compensation
expense for its share-based payments based on the fair value of the awards. Share-based payments
include stock option grants under the Company’s stock option plans. Prior to January 1, 2006, the
Company accounted for share-based compensation expense using the intrinsic value recognition method
prescribed by APB No. 25 and SFAS No.123.
SFAS 123R requires share-based compensation expense recognized since January 1, 2006 to be
based on the following: a) grant date fair value estimated using the minimum value method in
accordance with the original provisions of SFAS 123, “Accounting for Share-based Compensation” for
unvested options granted prior to the Company’s initial public offering (“IPO”) in February 2004;
b) grant date fair value estimated using the intrinsic value method for unvested options granted
prior to the Company’s IPO and previously accounted for using Accounting Principles Board Opinion
(“APB”) No. 25, “Accounting for Stock Issued to Employees;” c) grant date fair value estimated in
accordance with the original provisions of SFAS No.123 for unvested options granted after the
Company’s IPO and prior to the adoption date and d) grant date fair value estimated in accordance
with the provisions of SFAS 123R for unvested options granted on or after the adoption date.
The adoption of SFAS 123R has resulted in increased share-based compensation expense and net
loss of $626 and increased net loss per share of $0.02 for the year ended December 31, 2006. Since
the Company adopted SFAS 123R under the modified prospective and the prospective transition
methods, results from prior periods have not been restated. On the date of adoption of SFAS 123R,
the unamortized balance of deferred stock compensation of $1,725 was reduced to zero with an
offsetting adjustment to additional paid-in capital (See Note 2 “Deferred Stock Compensation”).
SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to
be reported as a financing cash flow, rather than as an operating cash flow as required prior to
the adoption of SFAS 123R. The impact of adopting SFAS 123R on future results will depend on,
among other things, levels of share-based options granted in the future, actual forfeiture rates
and the timing of option exercises.
The following table illustrates the effect on net loss and net loss per share if the Company
had not adopted SFAS 123R and applied the fair value recognition provisions of SFAS No.123 and the
intrinsic value recognition provisions of APB No. 25 to options granted under the Company’s stock
option plans in all periods presented. For purposes of this pro forma disclosure, the fair value of
the options granted is estimated using the Black-Scholes-Merton option pricing model, the minimum
value method and the intrinsic value method.
| Years Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Net loss attributable to common stockholders, as
reported |
$ | (35,510 | ) | $ | (36,839 | ) | $ | (5,678 | ) | |||
Add: Share-based compensation expense included in
reported net loss |
1,401 | 819 | 804 | |||||||||
Deduct: Share-based compensation expense determined
under the fair value based method |
(1,401 | ) | (2,034 | ) | (1,319 | ) | ||||||
Pro forma net loss attributable to common stockholders |
$ | (35,510 | ) | $ | (38,054 | ) | $ | (6,193 | ) | |||
Net loss per share attributable to common stockholders: |
||||||||||||
Basic – as reported |
$ | (1.14 | ) | $ | (1.42 | ) | $ | (0.25 | ) | |||
Basic – pro forma |
$ | (1.14 | ) | $ | (1.46 | ) | $ | (0.27 | ) | |||
Diluted – as reported |
$ | (1.14 | ) | $ | (1.42 | ) | $ | (0.93 | ) | |||
Diluted – pro forma |
$ | (1.14 | ) | $ | (1.46 | ) | $ | (0.95 | ) | |||
F-14
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Under SFAS 123R forfeitures are estimated at the time of valuation and reduce expense ratably
over the vesting period. This estimate is adjusted periodically based on the extent to which actual
forfeitures differ, or are expected to differ, from the previous estimate. Under SFAS 123 and APB
No. 25, the Company elected to account for forfeitures when awards were actually forfeited, at
which time all previous pro forma expense was reversed to reduce pro forma expense for that period.
Total share-based compensation expense for the year ended December 31, 2006 was $1,401, of
which $540 and $861 were recorded in the statements of operations as research and development
expenses and general and administrative expenses, respectively. Prior to the adoption of SFAS
123R, the Company accounted for share-based compensation expense under APB No. 25. Total
share-based compensation expense for the years ended December 31, 2005, and 2004 was $819 and $804,
respectively. Share-based compensation expense for the years ended December 31, 2006 and 2005
included share-based compensation expense related to deferred compensation arrangements for the
Company’s directors of $140 and $180, respectively.
The Company grants options to purchase common stock to certain employees and directors under
various plans at prices equal to the market value of the stock on the dates the options are
granted. The options have a term of ten years from the grant date and vest three years from the
grant date for director options and in periods up to five years from the grant date for employee
options. Employees have 90 days after the employment relationship ends to exercise all vested
options except in the case of retirement, permanent disability or death, where exercise periods are
generally longer. The Company issues new shares of common stock upon the exercise of options. The
fair value of each option grant is separately estimated for each vesting date. The fair value of
each option is amortized into compensation expense on a straight-line basis between the grant date
for the award and each vesting date. The Company estimates the fair value of certain stock option
awards as of the date of the grant by applying the Black-Scholes-Merton option pricing valuation
model. The application of this valuation model involves assumptions that are judgmental and highly
sensitive in the determination of compensation expense. The weighted average for key assumptions
used in determining the fair value of options granted in 2006, 2005 and 2004 and a summary of the
methodology applied to develop each assumption are as follows:
| Years Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Expected price volatility |
70.3 | % | 61.6 | % | 59.7 | % | ||||||
Risk-free interest rate |
4.6 | % | 4.0 | % | 3.9 | % | ||||||
Weighted average expected life in years |
6.0 years | 5.7 years | 6.0 years | |||||||||
Dividend yield |
0 | % | 0 | % | 0 | % | ||||||
Forfeiture rate |
14.0 | % | n/a | n/a | ||||||||
Expected Price Volatility — This is a measure of the amount by which a price has fluctuated or
is expected to fluctuate. We use an average expected price volatility of other publicly traded
biopharmaceutical companies as it is management’s belief that this is the best indicator of future
volatility due to the limited period of time the Company’s stock has been publicly traded. An
increase in the expected price volatility will increase compensation expense.
Risk-Free Interest Rate — This is the U.S. Treasury rate for the week of the grant having a
term approximating the expected life of the option. An increase in the risk-free interest rate will
increase compensation expense.
Expected Life — This is the period of time over which the options granted are expected to
remain outstanding and is based on management’s estimate, taking into consideration vesting term,
contractual term and historical actual
life. Options granted have a maximum term of ten years. An increase in the expected life will
increase compensation expense.
F-15
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
Dividend Yield — The Company has not made any dividend payments nor does it have plans to pay
dividends in the foreseeable future. An increase in the dividend yield will decrease compensation
expense.
Forfeiture Rate — This is the estimated percentage of options granted that are expected to be
forfeited or canceled before becoming fully vested. This estimate is based on historical
experience. An increase in the forfeiture rate will decrease compensation expense.
The following is a summary of stock option transactions for all of the Company’s stock option
plans for the three years ended December 31, 2006:
| Weighted Average | ||||||||
| Number of | Exercise Price Per | |||||||
| Shares | Share | |||||||
Options outstanding at January 1, 2004 |
828,750 | $ | 6.18 | |||||
Options granted |
323,250 | 11.35 | ||||||
Options forfeited |
(1,000 | ) | 8.90 | |||||
Options exercised |
(7,793 | ) | 3.48 | |||||
Options outstanding at December 31, 2004 |
1,143,207 | 7.66 | ||||||
Options granted |
236,000 | 10.71 | ||||||
Options forfeited |
(73,206 | ) | 6.83 | |||||
Options exercised |
(4,251 | ) | 8.87 | |||||
Options outstanding at December 31, 2005 |
1,301,750 | 8.27 | ||||||
Options granted |
225,834 | 8.50 | ||||||
Options forfeited |
(40,500 | ) | 9.42 | |||||
Options exercised |
(28,795 | ) | 5.32 | |||||
Options outstanding at December 31, 2006 |
1,458,289 | 8.33 | ||||||
The following table summarizes information about stock options outstanding at December 31,
2006:
| Options Outstanding | Options Exercisable | |||||||||||||||||||
| Weighted | ||||||||||||||||||||
| Average | Weighted | |||||||||||||||||||
| Remaining | Weighted | Average | ||||||||||||||||||
| Number | Contractual | Average | Number | Exercise | ||||||||||||||||
| Exercise Price | Outstanding | Life(years) | Exercise Price | Exercisable | Price | |||||||||||||||
$2.24 - $ 2.24 |
35,375 | 3.89 | $ | 2.24 | 35,375 | $ | 2.24 | |||||||||||||
$6.24 - $ 7.85 |
826,330 | 6.52 | 6.64 | 406,182 | 6.57 | |||||||||||||||
$8.51 - $14.50 |
596,584 | 8.06 | 11.03 | 74,504 | 13.16 | |||||||||||||||
| 1,458,289 | 7.08 | 8.33 | 516,061 | 7.22 | ||||||||||||||||
F-16
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
At December 31, 2006, the aggregate intrinsic value of all outstanding options was $13,871
with a weighted average remaining contractual term of 7.08 years, of which 516,061 of the
outstanding options are currently exercisable with an aggregate intrinsic value of $5,480, a
weighted average exercise price of $7.22 and a weighted average remaining contractual term of 5.79
years. For the years ended December 31, 2006, 2005 and 2004, the weighted average grant date fair
values of options granted was $5.67, $6.23, and $6.58, respectively. There were 28,795 options
exercised during the year ended December 31, 2006. The total intrinsic value of options exercised
during the year ended December 31, 2006 was $204. At December 31, 2006, the total compensation
cost related to non-vested awards not yet recognized was $2,644 with a weighted average expense
recognition period of 1.78 years. Options available for future issuance under the Company’s stock
option plans were 1,550,672 at December 31, 2006. On January 1, 2007, options available for future
issuance increased to 2,304,453 in accordance with the provisions of the Company’s stock option
plans.
| 4. | Property and Equipment, Net | |
| Property and equipment, net consist of the following: |
| December 31, | ||||||||
| 2006 | 2005 | |||||||
Equipment |
$ | 3,146 | $ | 2,813 | ||||
Leasehold improvements |
669 | 669 | ||||||
Furniture and fixtures |
312 | 307 | ||||||
| 4,127 | 3,789 | |||||||
Less: accumulated depreciation |
(2,679 | ) | (2,043 | ) | ||||
| $ | 1,448 | $ | 1,746 | |||||
Depreciation expense for the years ended December 31, 2006, 2005 and 2004 was $636, $639 and $454,
respectively. Of these amounts, $377, $468 and $396, respectively, were included in research and
development expenses in the statements of operations.
| 5. | Accrued Expenses | |
| Accrued expenses consist of the following: |
| December 31, | ||||||||
| 2006 | 2005 | |||||||
Clinical trial |
$ | 1,117 | $ | 893 | ||||
Other |
924 | 745 | ||||||
Research and development |
627 | 1,148 | ||||||
Professional fees |
481 | 444 | ||||||
| $ | 3,149 | $ | 3,230 | |||||
F-17
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
| 6. | Purchased Intangible Assets | |
| Purchased intangible assets consist of the following: |
| December 31, | ||||||||
| 2006 | 2005 | |||||||
License fee |
$ | 4,826 | $ | 4,826 | ||||
Less: accumulated amortization |
(600 | ) | (302 | ) | ||||
| $ | 4,226 | $ | 4,524 | |||||
Other purchased intangible assets |
$ | 832 | $ | 592 | ||||
Less: accumulated amortization |
(344 | ) | (138 | ) | ||||
| $ | 488 | $ | 454 | |||||
In accordance with the terms of the Amended and Restated License and Supply Agreement with
Orion Corporation, the Company was required to pay a license fee of $4,826. This license fee is
being amortized on a straight-line basis over the term of the agreement which the Company estimates
to be 16 years (see Note 8). Other purchased intangible assets consist of software which is being
amortized on a straight-line basis over its estimated useful life of three years. Amortization
expense for the years ended December 31, 2006, 2005 and 2004 was $504, $400, and $21, respectively.
Estimated future amortization expense for purchased intangible assets at December 31, 2006 is
as follows:
| Years Ending December 31, | ||||
2007 |
$ | 529 | ||
2008 |
473 | |||
2009 |
357 | |||
2010 |
320 | |||
2011 |
298 | |||
Thereafter |
2,737 | |||
Total |
$ | 4,714 | ||
7. Common and Preferred Stock
The Company’s certificate of incorporation authorizes the Company to issue 60,000,000 shares
of common stock with $0.001 par value per share and 5,000,000 shares of Preferred Stock, par value
$0.001.
On October 17, 2005, the Company completed an underwritten public offering of 6,325,000 shares
of common stock including the exercise of the over-allotment option by the underwriters, at a price
to the public of $7.80 per share. Net cash proceeds from this offering were $45,663 after
deducting underwriting discounts and other offering expenses.
On December 18, 2006, the Company completed an underwritten public offering of 3,799,600
shares of common stock at a price to the public of $16.00 per share. Net cash proceeds from this
offering were $57,426 after deducting underwriting discounts and other offering expenses.
F-18
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
| 8. | Collaboration and License Agreements | |
| Ipsen Collaboration and License Agreement |
In September 2006, the Company entered into a collaboration and license agreement with Ipsen
pursuant to which the Company granted Ipsen exclusive rights in the European Union, Switzerland,
Norway, Iceland, Lichtenstein and the Commonwealth of Independent States (collectively, the
“European Territory”) to develop and commercialize ACAPODENE® and other products
containing toremifene in all indications which the Company has licensed from Orion Corporation,
(“Orion”), which include all indications in humans except the treatment and prevention of breast
cancer outside of the United States. In accordance with the terms of the license agreement, Ipsen
has agreed to pay the Company €23,000 as a license fee and expense reimbursement, of which €1,500
will be paid in equal installments over a three year period. In October 2006, the Company received
€21,500 (approximately $27,100) from Ipsen as the initial payment for the license fee and expense
reimbursement. Pursuant to the agreement, GTx is also entitled to receive from Ipsen up to an
aggregate of €39,000 in milestone payments depending on the successful development and launch of
ACAPODENE® in certain countries of the European Territory for the high grade PIN
indication, subject to certain conditions, and the ADT indication. Ipsen has agreed to be
responsible for and to pay all clinical development, regulatory and launch activities to
commercialize ACAPODENE® in the European Territory for both the high grade PIN
indication and ADT indication. Ipsen has agreed to pay the Company a royalty equal to a graduating
percentage of aggregate net sales of products containing toremifene (including
ACAPODENE®) which rates will be dependent on whether such sales are for the high grade
PIN indication or the ADT indication. GTx will remain responsible for paying upstream royalties on
ACAPODENE® to both Orion and the University of Tennessee Research Foundation (“UTRF”)
for the PIN indication and to Orion only for the ADT indication. Ipsen will purchase the bulk drug
product supply directly from Orion and is responsible for the packaging and labeling of the final
product.
The Company recorded deferred revenue of $29,259 related to the Ipsen upfront license fee and
expense reimbursement which is expected to be amortized into revenue on a straight-line basis over
the estimated five year development period for ACAPODENE® in the European Territory.
The Company recognized as collaboration revenue $1,853 for the year ended December 31, 2006 from
the amortization of the Ipsen deferred revenue.
University of Tennessee Research Foundation License Agreement
In August 2002, the Company executed an Amended and Restated Exclusive License Agreement with
the UTRF granting the Company a worldwide exclusive license under its method of use patents
relating to ACAPODENE® 20 mg for the treatment and/or prevention of prostate cancer and
PIN that may develop into prostate cancer. Under the terms of the agreement, the Company is
required (1) to make annual maintenance fee payments and (2) to make future royalty payments.
The amended license agreement superseded a 1998 license agreement with UTRF pursuant to which
the Company reimbursed UTRF for certain patent expenses incurred by UTRF and agreed to make
sublicense fee payments and future royalty payments.
In June 2002, the Company executed two Amended and Restated Exclusive License Agreements with
UTRF granting the Company worldwide exclusive licenses under its composition of matter and method
of use patents relating to SARM compounds, including andarine and OstarineTM, to market,
distribute and sell licensed products. Under the terms of the license agreements, the Company is
required (1) to make annual maintenance fee payments and (2) to make future royalty payments.
The amended license agreement superseded a 2000 license agreement with UTRF pursuant to which
the Company reimbursed UTRF for certain patent expenses incurred by UTRF and agreed to make
sublicense fee payments and future royalty payments.
F-19
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
The Company also has executed with UTRF an Amended and Restated Exclusive License Agreement
granting the Company worldwide exclusive licenses with UTRF’s composition of matter and method of
use patents for some of the Company’s preclinical programs pertaining to viral cytolytics and gene
therapy.
In December 2006, the Company and UTRF entered into a letter of intent agreeing to modify each
of the above referenced license agreements existing between the parties. The revised license
agreements, when executed by the Company and UTRF, are intended to address certain provisions of
the agreements pertaining to license maintenance fees and royalty fees. Upon execution of the
revised license agreements, the Company will pay to UTRF an aggregate consideration of $600 which
will be allocated among the license agreements.
Orion Corporation License and Supply Agreement
On December 29, 2004, the Company entered into an Amended and Restated License and Supply
Agreement (“License and Supply Agreement”) with Orion Corporation (“Orion”) granting the Company
exclusive rights to Orion’s compound, toremifene, for all products for human uses, including the
Company’s product candidate, ACAPODENE®, excluding, however, products for breast cancer
sold outside of the United States. The License and Supply Agreement, which has an effective date
of January 1, 2005, replaces an earlier agreement entered into with Orion in 2000, and subsequently
amended in 2001 and 2003 (“Original License”). Under the agreement, the Company was required to
pay a license fee of $4,826. The term of the license and supply agreement will survive for the
term of the Company’s patents, including the Company’s patents to treat complications arising from
ADT and the patents it licenses from UTRF for the treatment and/or prevention of PIN and prostate
cancer. The term of the Company’s method of use patents extend from 2019 to 2023.
Under the Original License, the Company paid Orion $400, which it is allowed to offset along
with clinical trial expenses against licensing fees and milestone payments it will pay to Orion if
the Company sublicenses rights to its patents to third parties. The License and Supply Agreement
retains these provisions and obligates the Company to make future royalty payments of varying
amounts for toremifene based products for breast cancer in the United States and to treat or
prevent PIN or prostate cancer or to treat complications arising from ADT.
The Company has agreed to achieve specified minimum sales requirements of
ACAPODENE® in the United States after commercialization of the product or it must pay
Orion royalties based on the amount of the shortfall. In addition, the Company is required to pay
up to $1,000 if the Company is acquired before receiving marketing approval for the use of
ACAPODENE® for the prevention or treatment of PIN or prostate cancer or to treat
complications arising from ADT. Orion may terminate its supply Agreement if marketing approval for
ACAPODENE® is not granted in the United States by December 31, 2009.
Ortho Biotech Collaboration and License Agreement
In March 2004, the Company entered into a joint collaboration and license agreement with Ortho
Biotech Products, L.P., a subsidiary of Johnson & Johnson (“Ortho Biotech”) for andarine, and
specified backup SARM compounds. Under the terms of the agreement, the Company received in April
2004 an up-front licensing fee and expense reimbursement totaling $6,687. The up-front licensing
fee and expense reimbursement were deferred and amortized into revenue on a straight-line basis
over the estimated five year andarine development period. In December 2006, the Company reacquired
full rights to develop and commercialize andarine and all backup compounds previously licensed to
Ortho Biotech and the joint collaboration and license agreement was terminated by mutual agreement
of the parties. In connection with the termination of the Ortho Biotech agreement, the Company
recognized the associated $3.1 million balance of deferred revenue as additional collaboration
revenue. The Company recognized revenue of $4,295, $1,337 and $1,055 for the years ended December
31, 2006, 2005 and 2004, respectively, from the amortization of the up-front license fee and
expense reimbursement. Additionally, the Company recognized revenue of $812 for the year ended
December 31, 2004 from the reimbursement of andarine development costs in accordance with this
collaboration and license agreement.
F-20
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
9. Income Taxes
We have incurred net losses since inception and, consequently, have not recorded any U.S.
federal and state income taxes. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.
The principal components of the Company’s net deferred income tax assets consist of the
following:
| December 31, | ||||||||
| 2006 | 2005 | |||||||
Deferred income tax assets: |
||||||||
Net federal and state operating loss carryforwards |
$ | 38,921 | $ | 34,246 | ||||
Research and development credits |
4,614 | 3,229 | ||||||
Cash basis method |
641 | 1,185 | ||||||
Deferred stock compensation |
1,185 | 744 | ||||||
Deferred revenue |
10,319 | 1,622 | ||||||
Total deferred tax assets |
55,680 | 41,026 | ||||||
Deferred income tax liabilities: |
||||||||
Depreciation |
84 | 120 | ||||||
Total deferred tax liabilities |
84 | 120 | ||||||
Net deferred income tax assets |
55,596 | 40,906 | ||||||
Valuation allowance |
(55,596 | ) | (40,906 | ) | ||||
| $ | — | $ | — | |||||
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and
amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by
a valuation allowance. The valuation allowance increased by $14.7 million, $15.0 million and $8.9
million in 2006, 2005 and 2004, respectively.
At December 31, 2006, the Company had net federal operating loss carryforwards of
approximately $101.3 million, which expire from 2018 to 2026 if not utilized. The Company had
state operating loss carryforwards of approximately $82.3 million, which expire from 2013 to 2021
if not utilized. The company also had research and development credits of $4.6 million, which
expire from 2018 to 2026 if not utilized.
Utilization of the net operating loss and tax credit carryforwards may be subject to a
substantial annual limitation due to ownership change limitations provided by the Internal Revenue
Code of 1986, as amended and similar state provisions. The annual limitations may result in the
expiration of net operating loss carryforwards before utilization.
F-21
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
10. Directors’ Deferred Compensation Plan
Since June 30, 2004, non-employee directors have had the opportunity to defer all or a portion
of their fees under the Directors’ Deferred Compensation Plan until termination of their status as
directors. Deferrals can be made into a cash account, a stock unit account, or a combination of
both. Stock unit accounts will be paid out in the form of Company stock, except that any
fractional shares will be paid out in cash valued at the then current market price of the Company’s
common stock.
For the years ended December 31, 2006, 2005, and 2004, the Company incurred board of director
fee expense of $163, $137, and $98, respectively, of which $140, $125, and $55 was deferred and
will be paid in common stock. At December 31, 2006, 32,638 stock units had been credited to
individual director stock unit accounts.
11. 401(k) Plan
The Company sponsors a 401(k) retirement savings plan that is available to all eligible
employees. The plan is intended to qualify under Section 401(k) of the Internal Revenue Code of
1986, as amended. The plan provides that each participant may contribute up to a statutory limit of
their pre-tax compensation which was $15 for employees under age 50 and $20 for employees 50 and
older in calendar year 2006. Employee contributions are held in the employees’ name and invested
by the plan’s trustee. The plan also permits the Company to make matching contributions, subject to
established limits. In 2006, the Company elected to match a portion of employee’s contributions to
the plan in the amount of $89.
| 12. | Commitments and Contingencies | |
| Operating Lease Commitments | ||
The Company leases laboratory facilities and office space pursuant to a lease which is
accounted for as an operating lease. The lease expires December 31, 2007, with an option to extend
for up to three additional years and is terminable by either party upon 90 day’s notice. Rent
expense was approximately $712, $599 and $219 for the years ended December 31, 2006, 2005 and 2004,
respectively.
Purchase Commitments
The Company had outstanding contractual purchase obligations of $19 and $104 at December 31,
2006 and 2005, respectively. These outstanding contractual purchase obligations are not recorded
in the accompanying financial statements as the amounts represent future obligations, not
liabilities, at December 31, 2006 and 2005, respectively.
F-22
Table of Contents
GTx, Inc.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share data)
13. Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for the years ended December 31, 2006 and 2005.
| Quarters Ended Year 2006 | ||||||||||||||||
| March 31 | June 30 | September 30 | December 31 | |||||||||||||
Revenues: |
||||||||||||||||
Product sales, net |
$ | 876 | $ | 288 | $ | 348 | $ | (155 | )(a) | |||||||
Collaboration revenue |
334 | 335 | 724 | 4,755 | (b) | |||||||||||
Total revenues |
1,210 | 623 | 1,072 | 4,600 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Cost of product sales |
467 | 170 | 118 | 18 | ||||||||||||
Research and development expenses |
8,441 | 8,444 | 9,614 | 7,398 | ||||||||||||
General and administrative expenses |
2,950 | 2,692 | 2,867 | 2,843 | ||||||||||||
Total costs and expenses |
11,858 | 11,306 | 12,599 | 10,259 | ||||||||||||
Loss from operations |
(10,648 | ) | (10,683 | ) | (11,527 | ) | (5,659 | ) | ||||||||
Interest income |
724 | 699 | 638 | 946 | ||||||||||||
Net loss |
$ | (9,924 | ) | $ | (9,984 | ) | $ | (10,889 | ) | $ | (4,713 | ) | ||||
Net loss per share: |
||||||||||||||||
Basic |
$ | (0.32 | ) | $ | (0.32 | ) | $ | (0.35 | ) | $ | (0.15 | ) | ||||
Diluted |
$ | (0.32 | ) | $ | (0.32 | ) | $ | (0.35 | ) | $ | (0.15 | ) | ||||
| Quarters Ended Year 2005 | ||||||||||||||||
| March 31 | June 30 | September 30 | December 31 | |||||||||||||
Revenues: |
||||||||||||||||
Product sales, net |
$ | 353 | $ | 1,492 | $ | 288 | $ | 312 | ||||||||
Collaboration revenue |
334 | 335 | 334 | 334 | ||||||||||||
Total revenues |
687 | 1,827 | 622 | 646 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Cost of product sales |
245 | 920 | 185 | 223 | ||||||||||||
Research and development expenses |
7,326 | 8,639 | 8,454 | 6,504 | ||||||||||||
General and administrative expenses |
2,520 | 2,642 | 2,271 | 2,412 | ||||||||||||
Total costs and expenses |
10,091 | 12,201 | 10,910 | 9,139 | ||||||||||||
Loss from operations |
(9,404 | ) | (10,374 | ) | (10,288 | ) | (8,493 | ) | ||||||||
Interest income |
324 | 354 | 345 | 697 | ||||||||||||
Net loss |
$ | (9,080 | ) | $ | (10,020 | ) | $ | (9,943 | ) | $ | (7,796 | ) | ||||
Net loss per share: |
||||||||||||||||
Basic |
$ | (0.37 | ) | $ | (0.41 | ) | $ | (0.40 | ) | $ | (0.26 | ) | ||||
Diluted |
$ | (0.37 | ) | $ | (0.41 | ) | $ | (0.40 | ) | $ | (0.26 | ) | ||||
| (a) | Decrease in net product sales reflects the increase during the quarter to the Company’s reserve for FARESTON® product returns. See Note 2, Revenue Recognition. | |
| (b) | Increase reflects amortization of Ipsen deferred revenue for the entire quarter and recognition of the remaining balance of Ortho Biotech deferred revenue in connection with the termination of the Ortho Biotech agreement. See Note 8, Collaboration and License Agreements. |
F-23
Exhibit 10.15
[ * ] = Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuantis
pursuant to Rule 406 of the Securities Act of 1933, as amended.
AMENDED AND RESTATED LICENSE AND SUPPLY AGREEMENT
This Amended And Restated License And Supply Agreement (this “Agreement”) is
entered into and made effective as of this ___day of October, 2001 (the “Amendment Date”) by
and between Orion Corporation, a corporation organized and existing under the laws of
Finland and having its principal office at Orionintie 1 FIN-02200 Espoo, Finland (“Orion”), and GTx
Inc., (fka Genotherapeutics, Inc.) a corporation organized and existing under the laws of
the State of Tennessee, U.S.A. and having its principal office at 3 North Dunlap Avenue, Van Vleet
Building, Third Floor, Memphis, Tennessee 38163, USA (“GTX”).
Whereas, Orion and GTX entered into a Toremifene License and Supply Agreement
effective as of March 30, 2000 (the “Effective Date”), to govern the Parties’ rights and
obligations with respect to the research, development, commercialization and manufacture of Product
(as defined in said agreement) (the “Original Agreement”);
Whereas, the Parties desire with this Agreement to supercede the Original Agreement
as of the Amendment Date to provide that GTX shall have the sole responsibility for researching,
developing, registering and commercializing the Product (as defined below) within the Field (as
defined below) worldwide, and that Orion shall have no monetary or other responsibilities for
researching, developing, registering and commercializing Product, but shall remain responsible for
manufacturing Orion Product (as defined below), as agreed herein;
Now Therefore for and in consideration of the mutual covenants contained herein, the
receipt and sufficiency of which are hereby acknowledged, Orion and GTX (hereinafter individually a
“Party”; and collectively the “Parties”) hereto agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall be defined as set forth below.
Additional terms used in specific Sections of this Agreement shall be defined in such Sections.
1.1 “Affiliate” shall mean any business entity controlled by a Party, or which controls a
Party, or which is under common control with a Party. “Control” herein means the direct or indirect
ownership of more than fifty percent (50%) of the authorized issued voting shares in such entity,
or such other relationship as in fact legally results in effective control over the management,
business and affairs of such entity or Party, as the case may be.
1.2 “Annual Net Sales” shall mean Net Sales (as defined below) in any calendar year.
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
1.
1.3 “Calendar Quarter” shall mean each of the three (3) month periods beginning on January 1,
April 1, July I and October 1 of each year during the Term (as defined below).
1.4 “Competing Product” shall mean any pharmaceutical product containing an anti-estrogen
and/or a SERM as a therapeutically active ingredient as well as any salt thereof, which product is
licensed, sold and/or marketed for use in the Field, including, but not limited to, other dosage
forms licensed, sold and/or marketed for use in the same Field as the Product. Competing Product
does not include Orion Product, its Affiliate or subcontractor, but includes any generic form of
the Product.
1.5 “DMF” shall have the meaning provided in Section 7.4.
1.6 “Field” shall mean the prevention and treatment of prostate cancer, which shall mean for
purposes hereof: preventing prostate carcinogenesis; suppressing or inhibiting prostate cancer;
reducing the risk of developing prostate cancer; increasing the survival rate of a subject with
prostate cancer; and treating prostate cancer.
1.7 “First Commercial Sale” means in each country, the date the Product is first sold,
marketed, or publicly made available for sale for use in the Field by GTX, its Affiliate or a GTX
Unaffiliated Sublicensee. Product for use in the Field, distributed or used for clinical trial
purposes shall not be considered sold, marketed or made publicly available for sale and shall not
constitute First Commercial Sale.
1.8 “Generic Product” shall mean a generic pharmaceutical product for human use containing
Toremifene as an active ingredient and which can be substituted by the prescriber or dispenser for
a Product for use in the Field.
1.9 “GTX Final Development and Registration Plan” shall mean the final product development and
registration plan for each Product in the Field prepared by GTX, its Affiliate or a GTX
Unaffiliated Sublicensee, as the same may be modified from time to time pursuant to Section 7.3.
1.10 “GTX Know-How” shall mean such non-patented and unpublished non-clinical, pre-clinical
and clinical documentation, information, and data including information and data in the US IND [ * ] relating to the use of any anti-estrogen and/or SERM in the Field, that is owned or controlled
by, and disclosable by and available to, GTX and its Affiliates as of the Effective Date or at any
time during the Term, including but not limited to all registration materials for the Product
developed, acquired or compiled by GTX and/or its Affiliates as of the Effective Date or at any
time during the Term, and all non-patented and unpublished documentation, information and data
relating to the formulation, manufacture and/or quality control of the Product that is owned or
controlled by GTX and/or its Affiliates as of the Effective Date or at any time during the Term.
1.11 “GTX Patents” shall mean the patents issued from GTX Patent Applications as of the
Effective Date and other patents owned or controlled by GTX and its Affiliates that are issued at
any time during the Term and that relate to the manufacture, sale or
use of any anti-estrogen and/or SERM for use in the Field (including any divisions,
continuations, continuations-
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
2.
in-part, re-examinations, reissues, additions, renewals and extensions
thereof). GTX Patents in existence as of the Effective Date are set forth in Part I of Schedule A.
1.12 “GTX Patent Applications” shall mean patent applications of GTX and/or its Affiliates
pending as of the Effective Date and patent applications owned or controlled by GTX and/or its
Affiliates that are filed at any time during the Term, in each case that relate to the manufacture,
sale or use of any anti-estrogen and/or SERM for use in the Field (including any divisions,
continuations, continuations-in-part, re-examinations, reissues, additions, renewals and extensions
thereof). GTX Patent Applications in existence as of the Effective Date are set forth in Part II of
Schedule A. For purposes of this Agreement, the Parties acknowledge that GTX Patent Applications
shall include patent application U.S. Serial No. [ * ] which claims the use of Product in the
Field, which application is in the name of and owned by The University of Tennessee Research
Corporation. GTX represents and warrants that it has acquired sufficient rights and licenses from
The University of Tennessee Research Corporation to said application for the purpose of performing
its obligations under this Agreement.
1.13 “GTX Patent Rights” shall mean GTX Patents and GTX Patent Applications.
1.14 “GTX Preliminary Development and Registration Plan” shall mean the preliminary product
development plan for the development of the Product in the Field prepared by GTX which has been
provided to Orion prior to Effective Date, and which was attached to the Original Agreement.
1.15 “GTX Territory” shall mean all countries or territories worldwide.
1.16 “GTX Unaffiliated Sublicensee” shall mean any sublicensee of GTX other than a GTX
Affiliate. For avoidance of doubt, Orion shall not be a GTX Unaffiliated Sublicensee.
1.17 “Major Country” shall mean the United States of America including its fifty states, the
District of Columbia, Puerto Rico, and all other USA territories and possessions (“USA”), Canada,
Japan, Great Britain, France, Germany, Spain and Italy.
1.18 “Manufacturing Patents” shall have the meaning provided in Section 7.6.
1.19 “Net Sales” shall mean the invoiced gross sales of the Product to a Third Party which is
not a GTX Unaffiliated Sublicensee, less: (A) credits and allowances or adjustments (consistent
with generally accepted accounting principles), granted to such customers on account of rejections,
recalls or returns of the Product previously sold; (B) any customary and reasonable trade and cash
discounts, rebates, including government rebates, granted in connection with sale of Product to
such customers; (C) sales, tariff duties and/or use taxes directly imposed and with reference to
particular sales; and (D) outbound transportation prepaid or allowed, amounts allowed or credited
on returns, export licenses, import duties, value added tax, and prepaid freight.
1.20 “North American Territory” shall mean (i) the USA (ii) Mexico, and (iii) Canada.
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
3.
1.21 “Orion Know-How” shall mean such non-patented and unpublished non-clinical, pre-clinical
and clinical documentation, information, and data relating to the Orion Product that is owned or
controlled by, and disclosable by and available to, Orion and its Affiliates as of the Effective
Date or at any time during the Term which is necessary for the development by GTX of Product for
use in the Field (including without limitation filing an application for Regulatory Approval for
the Product for use in the Field), including information and data in U.S. NDA [ * ] relating to
the Orion Product, registration materials for the Orion Product, documentation, information and
data relating to the formulation and/or quality control of the Orion Product. Except as otherwise
provided in Sections 7.6, 13.9, 15.1, 16.3.2, 16.4 and 20.2, Orion Know-How shall exclude
information relating to Orion’s manufacture of Toremifene (as defined below) and Orion Product (as
defined below).
1.22 “Orion Patents” shall mean the patents owned or controlled by Orion that are directed to
the compound Toremifene per se, and relate to the use or sale of Toremifene and all other patents
issued from Orion Patent Applications during the Term (including any divisions, continuations,
continuations-in-part, re-examinations, reissues, additions, renewals and extensions thereof).
Orion Patents in existence as of the Effective Date are set forth in Part I of Schedule B. Schedule
B shall be amended by Orion from time to time during the Term to include future Orion Patents.
1.23 “Orion Patent Applications” shall mean patent applications owned or controlled by Orion
and its Affiliates that are pending as of the Effective Date, and patent applications owned or
controlled by Orion and its Affiliates that are filed at any time during the Term, in each case
that are directed to the compound Toremifene per se and relate to the use or sale of Toremifene
(including any divisions, continuations, continuations-in-part, re-examinations, reissues,
additions, renewals and extensions thereof). Orion Patent Applications in existence as of the
Amendment Date are set forth in Part II of Schedule C. Schedule C shall be amended by Orion from
time to time during the Term to include future Orion Patent Applications.
1.24 “Orion Patent Rights” shall mean Orion Patents and Orion Patent Applications.
1.25 “Orion Product” shall mean tablets containing [ * ] of Toremifene respectively, that are
manufactured by Orion and are commercially available as of the Amendment Date, and such other
dosage strength or formulation of Toremifene as a therapeutically active ingredient as Orion may
agree to manufacture pursuant to Section 16.4.
1.26 “Orion Unaffiliated Sublicensee” shall mean any licensee or sublicensee under the Orion
Patent Rights, other than an Orion Affiliate, GTX, a GTX Affiliate or a GTX Unaffiliated
Sublicensee.
1.27 “Premium” shall mean, with respect to an equity investment by a Third Party in GTX, an
amount equal to the difference between the total consideration paid for the
purchase of shares of GTX stock and the fair market value of such stock, as defined herein.
Such fair market value shall be equal to either (i) if GTX has not had an initial public offering
of its stock prior to the date of such investment by such Third Party, and does not conduct such a
public offering concurrently with such investment, the average price per share of GTX stock offered
in GTX’s two (2) most recent rounds of equity financing, multiplied by the number of shares of GTX
stock
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
4.
issued to such Third Party investor, also on an as-warranted basis, or (ii) if GTX has had an
initial public offering of its stock prior to the date of such investment by such Third Party, or
is then conducting such a public offering concurrently with such Third Party investment, the
trading price of a share of GTX common stock on the date such Third Party investment is made (or,
if such date is not a trading day, the price of a share of GTX common stock on the most recent
trading day prior to the date of such investment, and if such Third Party investment occurs
concurrent with the initial public offering, then the price per share at which stock is offered to
the public), multiplied by the number of shares issued to such Third Party investor.
1.28 “Product” shall mean any pharmaceutical product for human use within the Field containing
Toremifene as a therapeutically active ingredient.
1.29 “Regulatory Approval” shall mean all governmental approvals required to import, market,
promote and sell the Product for use in the Field in any given country or territory in the GTX
Territory, including but not limited to, product registrations, medical approvals and price and
marketing approvals.
1.30 “ROW Territory” shall mean the GTX Territory except the North American Territory and
Japan.
1.31 “Sales of Generic Product” shall mean the documented sale and use of a Generic Product.
1.32 “Specifications” shall mean the current specifications (as of the Amendment Date) for the
Orion Product, as such specifications are, with regard to [ * ] containing Toremifene, set forth
in the Orion NDA [ * ] approved by the U.S. FDA, and with regard to [ * ] and [ * ]
tablet of Orion Product set forth in Schedule C (Copies of such current specifications are set
forth in Schedule C attached hereto and made a part hereof.) The Specifications shall also include
any other modified or additional specifications applicable to Orion Product which may be
manufactured by Orion, pursuant to Section 16.3 or 16.4. Schedule C may be amended from time to
time as necessary to reflect modifications to the Specifications that may be implemented pursuant
to Section 16.3 or to include Specifications for any Other Product that Orion may agree to
manufacture pursuant to Section 16.4.
1.33 “Term” shall mean the period commencing on the Amendment Date and continuing, on a
country by country basis until the date of expiration or invalidation of the last to expire or be
invalidated of the GTX Patent Rights, subject to earlier termination under Section 20 as provided
herein.
1.34 “Third Party” or “Third Parties” shall mean any party or parties other than GTX, Orion,
an Affiliate of GTX, or an Affiliate of Orion.
1.35 “Toremifene” shall mean [ * ].
1.36 “Trademarks” shall mean the trademarks GTX selects and registers for the Product in the
Territory in accordance with Section 9 of this Agreement.
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
5.
1.37 “U.S. FDA” shall mean the United States Food and Drug Administration and any successor
regulatory agency.
1.38 “U.S. IND” shall mean an Investigational New Drug Application filed with the U.S. FDA.
1.39 “U.S. NDA” shall mean a New Drug Application filed with the U.S. FDA.
1.40 “Upfront and Milestone Income” shall have the meaning provided in Section 3.1.1(c).
1.41 “Valid Claim” shall mean a claim of an issued patent which has not expired and which has
not been held revoked, invalid or unenforceable by decision of a court or other governmental agency
of competent jurisdiction, unappealable or unappealed with the time allowed for appeal having
expired, and which has not been admitted to be invalid through reissue or disclaimer or otherwise.
2. GRANT AND SCOPE OF RIGHTS GRANTED
2.1 Orion Grants to GTX
2.1.1 License Grants. Orion hereby grants to GTX:
(i) an exclusive right and license, with the right to grant sublicenses as provided in Section
2.1.4, under Orion Patent Rights and Orion Know-How, to develop, use, have used, sell, have sold,
import, market and distribute the Product in the North American Territory and in Japan in the
Field;
(ii) a non-exclusive right and license, with the right to grant sublicenses as provided in
Section 2.1.4, under Orion Patent Rights and Orion Know-How, to develop, use, have used, sell, have
sold, import, market and distribute the Product in the ROW Territory for exclusive use in the
Field;
(iii) a non-exclusive license, under the Orion Patents and Orion Know-How, to perform research
and preclinical development activities in accordance with Section 2.5 using the Powder (as defined
in Section 13.6.2) to be provided to GTX pursuant to Section 13.6.2; and
Licenses under Sections 2.1.1 (i) and (ii) may be expanded to include the right to make and
have made Products as provided in Sections 7.6, 13.9, 15.1, 16.3.2, 16.4 and 20.2.2 on such terms
as are set forth in such Sections.
For the avoidance of doubt, nothing herein shall limit or restrict or be construed to limit or
restrict Orion from using, and GTX acknowledges that Orion may use Toremifene and Product as a
reference compound and/or product in its R&D and business activities.
2.1.2 Manufacturing Rights Reserved. Except as otherwise provided in Sections 7.6, 13.9, 15.1,
16.3.2, 16.4 and 20.2.2, Orion retains the exclusive right to manufacture
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
6.
or have manufactured
Toremifene, Orion Product and Product including, without limitation, any Toremifene and Orion
Product to be supplied to GTX under this Agreement and subject to Sections 7.6, 13.9, 15.1, 16.3.2,
16.4 and 20.2.2 herein, during the Term GTX undertakes to purchase all its requirement of Product
exclusively from Orion.
2.1.3 Use of Orion Know-How. Under the licenses granted pursuant to Sections 2.1.1 (i)-(ii),
GTX shall, subject to the terms and conditions of this Agreement, including without limitation
Section 8, have the right to use and reference Orion Know-How in support of GTX’s clinical trials
and applications for Regulatory Approval within the Field for the Product in the GTX Territory.
Subject to the license rights granted hereunder, Orion retains full ownership rights to all Orion
Know-How.
2.1.4 Sublicensing. GTX shall have the right to sublicense its rights received under this
Agreement in the GTX Territory to any Third Party, provided that GTX shall notify Orion within
fifteen (15) days after execution of an agreement between GTX and a GTX Unaffiliated Sublicensee.
GTX shall endeavor to include in its agreement with each GTX Unaffiliated Sublicensee a provision
stating that, upon termination of this Agreement, such Sublicensee and Orion shall discuss, and as
appropriate, negotiate the terms and conditions under which Orion and such sublicensee would be
willing to collaborate with regard to the further development and/or commercialization of the
Product for use in the Field in which GTX and such sublicensee were previously developing and/or
commercializing Products, provided that any such further development and/ or commercialization of
the Product by Orion and such sublicensee shall be subject to and conditioned by a definite written
agreement, if any, accepted and signed by duly authorized representatives of Orion. GTX shall
forward to Orion a complete copy of each sublicense agreement. No sublicense shall relieve GTX of
any of its obligations or commitments under this Agreement and GTX shall cause its Affiliates and
GTX Unaffiliated Sublicensees to comply with all of GTX obligations and commitments under this
Agreement.
GTX shall remain jointly and severally liable to Orion with its Affiliate(s) and GTX
Unaffiliated Sublicensee(s) that obtain a sublicense under the licenses granted to GTX pursuant to
Section 2.1.1 for performance of GTX’s obligations under this Agreement. GTX shall be responsible
for complying and ensuring that such of its Affiliates and GTX Unaffiliated Sublicensees, as
applicable, comply with all relevant laws, regulations and requirements relating to the
importation, packaging, distribution, marketing, promotion, sale and use of Product in the GTX
Territory.
Orion shall have the right to propose to GTX one or more potential sub-licensees for the
Product for use in the Field in Japan, South Korea and China (including, for the purpose of this
Agreement, the People’s Republic of China and Taiwan). GTX shall consider such proposal(s) in good
faith when appointing a sub-licensee for the Product for use in the Field for Japan, South Korea
and China. After the Amendment Date, Orion may disclose to its current licensee for
Toremifene in the breast cancer field in the USA, Japan, South Korea and China the existence
of this Agreement and the fact that it pertains to the development and commercialization of
Toremifene in the Field, [ * ] .
2.1.5 GTX Rights of First Negotiation
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
7.
(a) Orion grants GTX, on a country by country basis, the right of first negotiation to
negotiate further agreements under commercially reasonable terms and conditions regarding the
further development, registration, promotion, marketing, sales and distribution of a pharmaceutical
product for human use within the Field containing anti-estrogens and/or SERMs, including analogs,
metabolites, and/or derivatives thereof, as the active ingredient (a) which is covered by a Valid
Claim within the GTX Patent Rights in such country; and (b) for which Orion has both a license or
other right to develop and commercialize such products and within five (5) years after the
Amendment Date, Orion has commenced Phase I clinical trials for such product anywhere in the world
for a primary indication falling within the Field (a product fulfilling (a) and (b), hereinafter
referred to as “Additional Product”). Within thirty (30) days after GTX’s receipt in writing of a
first offer from Orion regarding commercially reasonable terms and conditions for obtaining rights
in and to such Additional Product, GTX shall notify Orion in writing if it wishes to enter into
negotiations with respect to such Product. Should GTX elect to exercise such right, the Parties
agree to negotiate in good faith the commercially reasonable terms and conditions for a letter of
intent to be completed within ninety (90) days of receipt by Orion of such notification from GTX
Any deadlines may be extended by mutual written agreement. Should GTX fail to provide written
notification to Orion by the end of the thirty (30) day period, or GTX notifies Orion that it does
not wish to enter into negotiations; or the Parties, despite conducting good faith negotiations,
are unable to finalize the commercial terms of the letter of intent within the ninety day (90)
period, GTX shall have no further rights in the anti-estrogens and/or SERM including analogs,
metabolites, and/or derivatives thereof, and Orion shall be free to contract with a Third Party
concerning same or itself pursue the development, registration, promotion, marketing, sales and
distribution of such Additional Product.
(b) During the term of any Orion Patent or pendency of Orion Patent Application in the
relevant country, Orion grants GTX, on a country by country basis and as set forth in this Section
2.1.5 (b), a right of first negotiation to negotiate with Orion an agreement under which GTX would,
on commercially reasonable terms and conditions, develop, register, promote, market, sell and
distribute pharmaceutical products containing Toremifene for use outside the Field (“Other
Activities”), provided, however, that such right of first negotiation described in this Section
2.1.5(b) shall not extend to breast cancer indications.
(i) If after the Amendment Date, a Third Party (including without limitation an Orion
Unaffiliated Sublicensee or a GTX Unaffiliated Sublicensee) approaches Orion in writing and
indicates its desire to obtain a license and/or other rights from Orion to conduct Other
Activities, or if an Orion Affiliate refers such a Third Party having such interest to Orion, then
Orion shall advise such Third Party to approach GTX and discuss such Other Activity with GTX. Orion
shall for a period of two hundred and ten (210) days from the date that Orion notifies GTX in
writing that a Third Party has an interest in an Other Activity, refrain from granting such Third
Party such license and/or other rights to conduct such Other Activities. If GTX desires to obtain a
license and other support from Orion to conduct such Other
Activities (alone or together with such Third Party) GTX shall notify Orion in writing
thereof. If GTX so notifies Orion, then the Parties shall negotiate exclusively with each other
the terms of a binding, commercially reasonable license agreement under which Orion would grant GTX
a license to conduct such Other Activities and provide other related support to GTX, provided that
GTX’s right to conduct such Other Activity shall be subject to and conditioned by, and become
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8.
effective only upon the execution by the Parties of a separate, mutually acceptable written
agreement, if any, with respect thereto. Such negotiations, if any, shall continue for up to one
hundred and eighty (180) days after Orion receives such notification from GTX or until the expiry
of said period of two hundred and ten (210) days, which ever is earlier (hereinafter referred to as
“Negotiation Period”). If the Parties, despite conducting good faith negotiations, if any, are
unable to or do not finalize and execute a binding license agreement within the Negotiation Period,
then GTX shall have no rights with respect to such Other Activities, and Orion and/or its Affiliate
shall have the right to conduct such Other Activities alone or together with a Third Party(ies) or
grant a Third Party a license and/or other rights from Orion to conduct Other Activities without
any obligation to GTX.
(ii) If after the Amendment Date a Third Party (including without limitation an Orion
Unaffiliated Sublicensee or a GTX Unaffiliated Sublicensee) approaches GTX or a GTX Affiliate and
indicates its desire to obtain a license and/or other rights to conduct Other Activities, then GTX
shall Promptly notify Orion in writing. Within thirty (30) days after GTX provides any such notice
to Orion, GTX shall inform Orion if GTX desires to negotiate the terms and conditions under which
GTX would be willing to obtain a license from Orion to conduct the Other Activities that are the
subject of such notice. If GTX so notifies Orion of its interest, then the Parties shall negotiate
exclusively with each other a letter of intent providing for the material, commercially reasonable
terms and conditions under which Orion would be willing to grant GTX a license to conduct such
Other Activities and provide other related support to GTX. Such negotiations shall continue for up
to one hundred and eighty (180) days after Orion receives such notification from GTX. If GTX fails
to provide written notice to Orion of GTX’s interest in conducting such Other Activities by the end
of such thirty (30) day period, or if the Parties, despite conducting good faith negotiations, are
unable to finalize such a letter of intent within such one hundred and eighty (180) day period,
then GTX shall have no further rights with respect to such Other Activities, and Orion shall have
the right to grant to such Third Party a license and/or other rights to conduct such Other
Activities without further obligation to GTX with respect to such Other Activities. If the Parties
finalize a letter of intent pursuant to this subsection (ii) providing for the material terms and
conditions under which GTX would obtain a license conduct Other Activities within such one hundred
and eighty (180) day period, then the Parties shall promptly thereafter meet to negotiate an
agreement setting forth more fully the terms and conditions contained in such letter of intent as
well as other applicable terms and conditions typically contained in agreements of similar nature,
provided that GTX’s right to conduct such Other Activity shall be subject to and conditioned by,
and become effective only upon the execution by the Parties of a separate, mutually acceptable
written agreement, with respect thereto, if any, and further provided that neither GTX nor Orion
shall either itself conduct such Other Activities or grant any Third Party the right to do so
unless (I) GTX has provided Orion notice that it is not interested in conducting such Other
Activity, or (II) GTX has failed to provided Orion with such notice of its interest in conducting
such Other Activity within such thirty (30) day period, or (III) the Parties fail to agree upon the
terms of a letter of intent or
execute such agreement within the applicable one hundred eighty (180) day period, which ever
of items (I)-(III) occur first.
(iii) If after the Amendment Date Orion or an Orion Affiliate desires to initiate the conduct
of Other Activities, then Orion shall promptly so notify GTX in
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9.
writing. Within thirty (30) days
after GTX receives any such notification from Orion, GTX shall inform Orion if GTX desires to
negotiate the terms and conditions under which Orion would be willing to grant GTX a license and
other support from Orion to conduct the Other Activities that are the subject of such notice. If
GTX so notifies Orion of its interest, then the Parties shall negotiate exclusively with each other
on a binding, commercially reasonable license agreement under which Orion would grant GTX a license
to conduct such Other Activities and Orion would provide other related support to GTX, provided
that GTX’s right to conduct such Other Activity shall be subject to and conditioned by, and become
effective only upon the execution by the Parties of a separate, mutually acceptable written
agreement, if any, with respect thereto. Such negotiations shall continue for up to one hundred and
eighty (180) days after Orion receives such notification from GTX. If GTX fails to provide written
notice to Orion of GTX’s interest in conducting such Other Activities by the end of such thirty
(30) day period, or if the Parties, despite conducting good faith negotiations, are unable to
finalize and execute a binding license agreement within such one hundred and eighty (180) day
period, then GTX shall have no rights with respect to such Other Activities, and Orion or its
Affiliate shall have the right to conduct such Other Activities alone or together with a Third
Party(ies) without any obligation to GTX. Orion shall not grant a license to any Third Party to
commercialize products containing Toremifene for such Other Activities unless and until (I) GTX has
provided Orion notice that it is not interested in conducting such Other Activity, or (II) GTX has
failed to provide Orion with such notice of its interest in conducting such Other Activity within
such thirty (30) day period, or (III) the Parties fail to execute such binding license agreement
within such one hundred eighty (180) day period, which ever of items (I)-(III) occur first.
(iv) If GTX desires to conduct Other Activities, then GTX shall promptly notify Orion in
writing of GTX’s desire to conduct such Other Activity and the terms and conditions under which GTX
would be willing to obtain a license to conduct such Other Activities and other related support
from Orion, provided that any such license to GTX to conduct such Other Activity shall be subject
to and conditioned by, and become effective only upon the execution by the Parties of a separate,
mutually acceptable written agreement, if any (“Additional Agreement”). If GTX so notifies Orion of
its interest, then the Parties shall discuss, and as appropriate, negotiate exclusively with each
other with regard to an Additional Agreement for up to one hundred and eighty (180) days after
Orion receives such notification from GTX. If the Parties are unable to or do not finalize and
execute such Additional Agreement within such one hundred and eighty (180) day period, then GTX
shall have no rights with respect to such Other Activities, and Orion or its Affiliate shall have
the right to itself conduct such Other Activities or to grant to such Third Party a license and/or
other right to conduct such Other Activities without further obligation to GTX with respect
thereto.
(v) Any deadlines provided in this Section 2.1.5(b) may be extended by mutual written
agreement of the Parties. GTX’s rights under this Section 2.1.5(b) shall apply on an indication by
indication basis.
2.2 No Implied Licenses. Any rights not expressly granted by either Party to the other Party
in this Agreement are expressly reserved by the Party owning or controlling such rights and,
accordingly, no licenses other than those specified herein shall be deemed granted by this
Agreement by implication, estoppel or otherwise.
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10.
2.3 United States Government Rights. In the event it is determined that any GTX Patent Rights
were developed with the support of the United States Government or any agency thereof (the
“Government”), the Government will retain rights in the GTX Patent Rights as set forth in Title 35
U.S.C. §200 et seq. All rights herein granted to GTX are subject to any such rights held by the
Government and further subject to any restrictions or obligations that may be imposed by the
Government pursuant to such rights, at such time that it is determined.
2.4 Orion’s Right of First Negotiation.
2.4.1 Whereas Orion has considerable knowledge and experience in the marketing, sales and
distribution of pharmaceutical products in, inter alia, Scandinavia (which term shall for purpose
of this Section 2.4 comprise the countries of Denmark, Finland, Norway and Sweden), GTX undertakes
to regard Orion as its preferential partner for the marketing, sales and distribution of the
Product in Scandinavia for use in the Field. Consequently, GTX grants, and shall cause its
Affiliates and Unaffiliated Sublicensees who receive a sublicense under the license granted to GTX
pursuant to Section 2.1.1 in Scandinavia to grant, to Orion a right of first negotiation to
negotiate in good faith an agreement(s) under commercially reasonable terms and conditions
regarding the marketing, sales and/or distribution by Orion of the Product in Scandinavia for use
in the Field, with the express understanding that such commercially reasonable terms and conditions
shall not comprise an obligation to develop and register the Product for use in the Field in any
country of Scandinavia.
2.4.2 Within thirty (30) days after Orion’s receipt of a first written offer from GTX
regarding commercially reasonable terms and conditions governing such rights, Orion shall notify
GTX in writing if it wishes to negotiate the terms and conditions under which Orion could obtain
the rights contemplated in this Section 2.4. Should Orion so exercise such right, the Parties shall
negotiate exclusively with each other and in good faith the commercially reasonable terms and
conditions for a license and distribution agreement for the marketing, sales and distribution by
Orion of the Product in Scandinavia for use in the Field, such negotiations to be completed within
one hundred and eighty (180) days from the date of Orion’s notification to GTX. Any deadlines may
be extended by mutual agreement upon reasonable request. If Orion fails to provide written
notification to GTX by the end of the thirty (30) day period; Orion notifies GTX that it does not
wish to enter into negotiations; or the Parties, despite conducting good faith negotiations, are
unable to finalize the material commercial terms of agreement within such one hundred and eighty
(180) day period (any such event, a “Termination of the Orion Right”), Orion shall have no further
right under this Agreement to market, sell and distribute the Product in Scandinavia and GTX shall
be free to offer to or enter into an agreement with any Third Party or any GTX Affiliate with
respect to such activities after the Termination of the Orion Right occurs.
2.4.3 In the event that GTX’s Unaffiliated Sublicensee for Product for use in the Field in the
USA does not obtain the right and license to sell, have sold, import, market and
distribute the Product in the Field in Europe at the time of execution of the sublicense
agreement for the Product for use in the Field in the USA, then Orion shall, on the terms and
conditions of Sections 2.4.1 and 2.4.2, have a right of first negotiation to negotiate in good
faith an agreement(s) under commercially reasonable terms and conditions regarding the marketing,
sales and/or distribution of the Product for use in the Field in Europe.
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11.
2.5 Use of Toremifene by GTX for Research. Subject to Sections 2.1.1 (iii) and 13.6.2, GTX
may use the Powder provided to it pursuant to Section 13.6.2 to perform stability studies and other
activities with respect to Products for use in the Field that are necessary for supporting
Regulatory Approval of Products or expanding the indications for Products within the Field. GTX
shall, upon Orion’s request therefor, provide Orion with written updates of any and all activities
undertaken by or on behalf of it pursuant to this Section 2.5, and with the results thereof in
reasonable detail.
2.6 Prohibited Actions. During the Term of this Agreement, Orion shall not grant any rights
to any Third Party that are inconsistent with the licenses granted to GTX pursuant to Section
2.1.1.
3. PAYMENTS
3.1 Types of Payments. For the rights, privileges and licenses granted hereunder, GTX shall
pay Orion in the manner provided as follows:
3.1.1 In the event GTX or its Affiliate receives Upfront and Milestone Income (as defined in
Section 3.1.1(c)), GTX shall pay Orion as follows:
(a) Any Upfront and Milestone Income shall first be applied to [ * ] both prior to and
after the Amendment Date, and also for the [ * ] .
(b) Upon full reimbursement of such [ * ] pursuant to Section 3.1.1 (a), any remaining
Upfront and Milestone Income (the “Net Upfront and Milestone Income”) shall then be paid by GTX to
Orion as follows:
(i) GTX shall pay Orion [ * ] of the portion of Net Upfront and Milestone Income that is [ * ] ; and
(ii) [ * ] of the portion of the Net Upfront and Milestone Income that is [ * ] .
(c) For the purposes of this Agreement, “Upfront and Milestone Income” shall mean any bona
fide consideration (either in cash or non-cash form) received by GTX or its Affiliate from a GTX
Unaffiliated Sublicensee for sublicensing GTX’s rights in and to the Product for use in the Field
in the GTX Territory excluding: (i) Royalty Income (as defined in Section 3.1.4); (ii) cost of
goods payments for supply of Product manufactured by Orion and supplied at the prices set forth in
Section 13 herein below, or payments to reimburse GTX’s fully burdened costs of manufacturing or
having manufactured Product by or on behalf of GTX as permitted under this Agreement; (iii) in the
form of a loan; or (iv) for the purchase of an
equity interest in GTX (except to the extent such purchase price is a Premium over the fair
market value of such stock, in which case the Premium, but not the portion of such price that is at
the fair market value of such stock, shall be included in Upfront and Milestone Income).
Notwithstanding the foregoing, if GTX receives Upfront and Milestone Income received in the form
described in (ii) or (iii) [ * ] . For example and without limitation, if [ * ] .
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12.
3.1.2 If` GTX is Acquired prior to the first Regulatory Approval of Product for use in the
Field, then GTX shall pay to Orion an amount equal to the lesser of one million dollars
($1,000,000) or [ * ] of the fair market value of GTX at the time of such acquisition.
“Acquired” means that GTX either (i) sells all or substantially all of its assets to a Third Party,
or (ii) is merged with or consolidated or reorganized into a Third Party, or becomes a subsidiary
of a Third Party, and, as a result of such transaction, the stockholders of GTX immediately prior
to such transaction own less than fifty percent (50%) of the surviving parent entity.
3.1.3 For commercial sales of each Product by GTX, or its Affiliates in a country of GTX
Territory commencing on the First Commercial Sale of Product, GTX shall during the Term pay Orion a
running royalty in the amount of [ * ] of Net Sales of Product on a country by country basis,
subject to the provisions of Sections 3.1.6 and 20.2.2.
3.1.4 Subject to the provisions of Sections 3.1.6 and 20.2.2, in the event GTX receives
running royalty income from GTX Unaffiliated Sublicensees for sublicensing GTX’s rights in and to
the Product for use in the Field and/or based upon sales by GTX Unaffiliated Sublicensees of
Product for use in the Field in the Territory (“Royalty Income”), GTX shall during the Term pay
Orion the lesser of, on a country by country basis, either (i) [ * ] of such Royalty Income; or
(ii) [ * ] of such GTX Unaffiliated Sublicensees, provided, however, that in no event shall the
amounts due to Orion pursuant to this Section 3.1.4 be [ * ] of Net Sales of such GTX
Unaffiliated Sublicensees.
3.1.5 As of December 31, 2000, an upfront license fee of four hundred thousand dollars
($400,000) (the “Upfront License Fee”), was paid in full by GTX to Orion. This payment shall be
creditable by GTX against fees or payments due to Orion with respect to Upfront and Milestone
Income pursuant to Section 3.1.1.
3.1.6 If a Generic Product is sold in any Major Country of the GTX Territory, and, for two (2)
succeeding calendar quarters the Sales of Generic Product in that country [ * ] of the sales of
Product (calculated on a unit basis) in that country, then the royalty on Net Sales owed by GTX to
Orion under Section 3.1.3 and the payments due to Orion on Royalty Income pursuant to Section
3.1.4, respectively, shall be reduced to [ * ] of the amount otherwise due to Orion pursuant to
either Section 3.1.3 or 3.1.4, as applicable, with regard to such country with such reduction to be
applicable to the immediately succeeding calendar quarter only.
3.2 Non-Refundability. All milestone payments GTX makes to Orion pursuant to Section 3.1.1
shall be non-refundable once paid. However, if this Agreement is terminated for any reason prior to
a given milestone payment becoming due or if the events specified for a given milestone payment do
not occur, then GTX shall have no obligation to make such milestone payment.
3.3 Royalty Reports and Payments. Commencing with the first Calendar Quarter in which GTX,
its Affiliates or a GTX Unaffiliated Sublicensees make the First Commercial Sale of the Product,
GTX shall provide Orion with a written report of Net Sales and Royalty Income on a
country-by-country basis within forty-five (45) days after the last day of March, June, September
and December for Royalty Income accruing on Net Sales during the three (3)
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13.
preceding calendar
months. Concurrently with the submission of each such written report, GTX shall pay or cause to be
paid to Orion the total amount of royalties shown to be due thereon.
3.4 Currency. GTX shall make all Upfront and Milestone Income and royalty payments to Orion
pursuant to Section 3.1 in U.S. Dollars except that GTX shall make all cost of goods payments to
Orion pursuant to Section 13 in euros. Where royalty payments are made, payments earned shall be
first determined by GTX in the currency of the country where the Net Sales on the sales giving rise
to payments were made and then converted directly to its equivalent in U.S. dollars. The rates of
exchange for converting the currencies involved to U.S. dollars shall be the Foreign Exchange Rates
quoted in the Wall Street Journal rate on the last business day of the quarterly period in which
the royalty payments were earned.
3.5 No Royalties Payable Between Affiliates. No royalties shall be payable to a Party on
sales between the other Party, its Affiliates or between the Party’s Affiliates.
3.6 No Multiple Royalties. No multiple royalties shall be payable because the Product, its
manufacture, use or sale is or shall be covered by multiple patents.
4. LIAISON
Representatives of the Parties shall meet bi-annually or as otherwise agreed to review
development, sales and marketing activities for the Product for use in the Field in the GTX
Territory, with the exact dates and locations of such meetings to be mutually agreed upon. Such
meetings shall alternate between GTX’s and Orion’s offices or be at other mutually agreed upon
locations, with each Party to be responsible for the travel and living costs and expenses of its
own representatives attending such meetings.
5. PAYMENT, RECORD KEEPING AND AUDIT RIGHTS
5.1 Method of Payment. In the event of any required tax withholding, the paying Party will
provide the receiving Party with any relevant certificates or documents required for national,
state or local tax credit and reporting purposes. Payments hereunder shall not be creditable
against any other amounts payable by a Party under this Agreement, except as otherwise expressly
stated herein. All payments shall be made by bank wire transfer (e.g., “SWIFT” or other comparable
electronic transfer method) to such account(s) as the receiving Party shall designate beforehand in
writing to the paying Party. Payments shall be deemed paid once funds are freely available to the
receiving Party at such account(s).
5.2 Late Payments. The Party entitled to payment hereunder reserves the right to charge the
paying Party interest on any amounts owing from the paying Party which are overdue by more than
fourteen (14) business days at a rate of [ * ] per annum, or the maximum rate allowed by law,
whichever is lower, calculated from the date any payment was due and payable.
5.3 Record Keeping and Audit Rights. Each Party shall keep or cause to be kept accurate
records relating to Net Sales, royalties, development and any other costs and expenses subject to
payment, deduction or reimbursement by either Party to the other Party in sufficient detail to
enable the amounts payable hereunder to be determined. Upon the written request of
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14.
either Party
(but not more frequently than once in any calendar year), the requesting Party may retain an
independent certified public accountant, subject to approval by the other Party (which approval
shall not be unreasonably withheld), to review such records to verify the accuracy of the payments
made or payable hereunder. Such accountant shall be required to execute a confidentiality agreement
in a form reasonably acceptable to the audited Party and shall report to the auditing Party only
the amount of any underpayment or overcharge. Within ten (10) business days after completion of
such review, the Parties shall reconcile any underpayment or overcharge. The auditing Party shall
pay the cost of any review of records conducted at its request under this Section. However, if the
review establishes underpayment or overcharge by the audited Party of over three percent (3%)
during the period of the review, the audited Party shall promptly reimburse the auditing Party for
the fees and expenses of the accountant. Such audit rights may be exercised by the Parties only
with respect to records for the current calendar year and the preceding two (2) calendar years.
6. GTX PRODUCT MARKETING AND SALES ACTIVITIES
6.1 Minimum Sales Requirements for USA.
6.1.1 Levels of MSRs. GTX shall have annual minimum sales requirements for Product for use in
the Field (“MSRs”) in the second year and fourth year after Product Launch in the USA equal to [ * ] of GTX’s annual Product Sales Projections (as defined below) in the USA. To establish such
projections for the purpose of the foregoing sentence, GTX shall provide to Orion annual Product
Sales Projections in the USA within ninety (90) days after GTX, its Affiliate or Unaffiliated
Sublicensee completes the last pivotal clinical trial as provided in the GTX Final Development and
Registration Plan for Product in the USA. The Parties shall set forth in Schedule D GTX’s MSR
obligations within sixty (60) days after GTX provides such projections, and such MSRs shall be made
a part hereof. Beginning with the [ * ] year after Product Launch in USA for use in the Field
until the end of the Term, GTX shall have an annual MSR equal to [ * ] of the average of GTX’s
Actual Product Sales (as defined below) in the USA for Product in the Field for the [ * ].
“Product Sales Projections” means GTX’s good faith estimates of the target patient population in a
given year for Products in the Field, multiplied by the price per tablet of Product for use in the
Field that GTX plans to be able to charge during the [ * ] after Product Launch. “Actual
Product Sales” means GTX’s, its Affiliate’s or a GTX Unaffiliated Sublicensee’s actual Net Sales of
Product in the Field during a given year in the USA.
For example, in year [ * ] if the target patient population is [ * ] subjects in the
Field and the Product would be consumed [ * ] for the Field at a hypothetical price of [ * ],
GTX’s Product Sales Projections would [ * ]. The hypothetical price for a tablet set forth above
is hypothetical and was only used for the sole purpose of explaining the mechanism for calculating
the Product Sales Projections and MSRs. Nothing contained in such example shall be so construed to
deny the right of GTX to freely set its resale price of the Product.
6.1.2 Product Launch Date. “Product Launch in USA” shall be determined by the date on which
the Product has received Regulatory Approval and is commercially available in the USA as follows:
(i) if such date occurs during the first six (6) months of any calendar year (i.e., January 1-June
30), Product Launch in USA shall be deemed to have
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15.
occurred on January 1 of such calendar year, and
(ii) if such date occurs during the last six (6) months of any calendar year (i.e., July 1-December
31), Product Launch in USA shall be deemed to have occurred on January 1 of the following calendar
year.
6.1.3 Adjustment. GTX’s annual Product Sales Projections for the Field in the USA shall be
subject to adjustment by written agreement of the Parties, with a corresponding adjustment in the
MSRs, in the event of government intervention in given markets (including, but not limited to,
government mandated health care reforms, rebates or regulatory changes), failure to obtain (or
delay in obtaining) approval for a Product indication in the Field, or other events or causes
affecting the market for the Product for use in the Field beyond the control of GTX, including but
not limited to lower than anticipated pricing approvals measured on an aggregate basis throughout
USA; GTX Patent Rights and/or Orion Patent Rights invalidation, infringement or expiration; Product
safety and/or efficacy issues and/or major therapeutic advances materially affecting the market
potential for the Product for use in the Field (including but not limited to new surgical
procedures or introduction of new competitive products with superior safety and/or efficacy
profiles); or a Force Majeure event (as described in Section 26).
6.1.4 Failure to Achieve MSRs. If GTX’s annual Product Sales in USA for the Field are less
than the MSRs in any applicable calendar year, GTX shall, without prejudice to its payment
obligations under Section 3.1, pay Orion royalties corresponding to the “shortfall” between the
actual royalties paid by GTX for such year and the royalties which would have been payable pursuant
to Section 3.1 had GTX achieved the MSRs during such year. GTX’s payment of such “shortfall”
hereunder shall be Orion’s sole and exclusive remedy for GTX’s failure to achieve MSRs in USA for
such year. However, if GTX fails to pay such “shortfall,” then Orion may, without prejudice to its
right to such shortfall, also terminate this Agreement pursuant to Section 20.2.2.
6.2 No Minimum Sales Requirements Outside of USA. GTX shall not have any MSRs with respect to
sale of the Product in any countries in GTX Territory outside of the USA.
6.3 Marketing and Sales Efforts in the Major Countries
6.3.1 Commercially Reasonable Obligation. On a country by country basis, subject to Sections
6.3 and 6.4, during the period commencing with Regulatory Approval in a Major Country, and for the
remainder of the Term, GTX, its Affiliate and/or a GTX Unaffiliated Sublicensee shall use
commercially reasonable efforts to promote, market, distribute and sell the Product for use in the
Field in the Major Countries. For purposes of this Section 6.3, “commercially reasonable” shall
mean using, in each of the Major Countries, an equivalent degree of effort as GTX, its Affiliate or
a GTX Unaffiliated Sublicensee would use to promote, market, distribute and sell a product of it
own that is of comparable market potential in the respective Major Countries during the same time
period (as determined by consideration of, without limitation, potential market, patent protection,
and availability of competitive products),
including but not limited to, engaging in the following activities (subject to any applicable
U.S. FDA restrictions or other applicable legal restrictions):
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16.
(a) Using reasonable diligence to establish and maintain good business relationships with
hospitals, health systems, doctors and other medical professionals in accordance with standard and
customary practices in the Major Countries;
(b) Using commercially reasonable efforts to establish and maintain an adequate capacity of
sales personnel consisting of reasonably qualified personnel who have been certified, as trained by
GTX, its Affiliate or a GTX Unaffiliated Sublicensee, to promote and market the Product for use in
the Field in the Major Countries, and to provide such sales force with adequate sales and
promotional materials for the Product;
(c) Promoting and detailing the Product for use in the Field throughout the Major Countries,
provided that GTX, its Affiliate or a GTX Unaffiliated Sublicensee may, in its discretion use
relatively greater promotional and detailing efforts (i) in some Major Countries than it uses in
other of such countries, and (ii) in some parts of each Major Country than in other parts thereof,
consistent with its overall marketing plan; and further provided, however, that the foregoing shall
in no event be deemed to limit GTX’s its Affiliate or a GTX Unaffiliated Sublicensee overall
obligations under the first paragraph of this Section 6.3.1.
(d) Advertising the Product for use in the Field in professional journals and publications and
sponsoring or attending appropriate symposia, trade exhibitions and medical education programs in a
manner equivalent to that used for GTX’s, its Affiliate’s or a GTX Unaffiliated Sublicensee’s, as
applicable, own products of comparable market potential in such Major Country; and
(e) Formulating and using reasonable efforts to implement annual sales and marketing plans for
the Product for use in the Field in the Major Countries and providing copies of such plans to Orion
for review and comment, provided that Orion shall not have approval rights with respect to such
plans.
6.3.2 Sales Objectives and Other Factors for the USA. GTX and Orion shall agree in writing
upon annual target sales objectives for the Product for use in the Field in the USA, commencing
with the fourth calendar year after First Commercial Sale of the Product for use in the Field in
the USA, provided that such annual target sales objectives shall not be considered MSRs for any
purposes, but instead shall be used by the Parties for informational and planning purposes and
shall be one (1) factor, among others, to be considered in assessing whether GTX has complied with
its commercially reasonable obligations hereunder. GTX’s level of sales and marketing expenses for
the Product for use in the Field in the USA and events or causes affecting the market for the
Product for use in the Field beyond the control of GTX shall also be among the factors to be
considered in assessing whether GTX has complied with its commercially reasonable obligations
hereunder.
6.4 Product Launch
6.4.1 Timing of Launch. GTX shall use commercially reasonable efforts to launch the Product
for use in a given indication in the Field as soon as practical in every Major Country of the GTX
Territory where GTX, its Affiliates and/or GTX Unaffiliated Sublicensees have obtained Regulatory
Approval for such indication. Notwithstanding the foregoing, GTX, its
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17.
Affiliate or a GTX
Unaffiliated Sublicensee may, acting in good faith in the exercise of its reasonable business
judgment, determine either to delay the launch of the Product for use in a given indication in the
Field or not to launch the Product for use in a given indication in the Field in any given country
in the GTX Territory other than a Major Country, which decision to delay or not to launch shall not
be deemed a failure to use commercially reasonable efforts. Further, GTX’s, its Affiliates’ or a
GTX Unaffiliated Sublicensee’s decision to delay the launch of the Product for use in the Field in
any Major Country for up to six (6) months after GTX or its Affiliates have obtained Regulatory
Approval in such country, shall not be deemed a failure to use commercially reasonable efforts
pursuant to Section 6.3 to the extent that GTX can demonstrate that such delay was attributable to
bona fide business reasons affecting the Product.
6.4.2 Decisions Not to Launch. GTX shall promptly notify Orion in writing if GTX, its
Affiliate or a GTX Unaffiliated Sublicensee, as applicable, determines to delay the launch of the
Product for use in a given indication in the Field in any Major Country after obtaining Regulatory
Approval of Product therefor. If such decision is due to any reasons other than the potential for,
or the existence of, adverse business effects in such Major Country, then such decision shall be
deemed a material breach of this Agreement pursuant to Section 20.2.2 and GTX shall be subject to
the provisions of such Section within thirty days (30) after GTX’s decision not to launch in such
Major Country.
6.5 Marketing Costs and Expenses. Except as other-wise provided herein or as otherwise
mutually agreed by the Parties, GTX, its Affiliate or a GTX Unaffiliated Sublicensee shall bear all
costs and expenses connected with its marketing and sales activities for the Product for use in the
Field and its performance under this Agreement.
6.6 Marketing Plans and Reports.
6.6.1 Marketing Plans. GTX shall develop and provide to Orion by October 31 of each year
during the Term marketing and sales plans for the Product for each Major Country for the following
calendar year, commencing with the calendar year in which Regulatory Approval is obtained in each
respective country. Such plans shall include the projected Annual Net Sales and the projected
advertising and promotion budgets for such year, and shall not be applicable to the calculation of
MSRs pursuant to Section 6.1, for which GTX shall separately provide information.
6.6.2 Marketing and Sales Reports. GTX shall provide to Orion, within forty-five (45) days
after the end of each calendar year, a written marketing activities and sales report for each of
the Major Countries. The report shall include at least a description of sales, marketing and
promotion activities and a list of scientific conferences or other events involving the Product or
its therapeutic area, accompanied by a general description of the nature and extent of GTX’s
participation in such conferences or events.
7. GTX PRODUCT DEVELOPMENT AND REGISTRATIONS
7.1 GTX Development and Registration Activities.
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18.
7.1.1 GTX Activities. In accordance with the GTX Preliminary Development and Registration
Plan and the GTX Final Development and Registration Plan, GTX shall undertake development and
registration activities for the Product for use in the Field in the GTX Territory, including but
not limited to, conducting or sponsoring, and completing or having completed in accordance with
U.S. FDA regulations and Good Clinical Practice regulations under the European Union legislation
and directives requirements, all clinical studies and other activities required for Regulatory
Approval under the GTX Final Development and Registration Plan. Without limiting the provisions of
Section 7.6, GTX shall use its commercially reasonable efforts to pursue such development and
registration activities under the GTX Final Development and Registration Plan with the objective of
filing applications for Regulatory Approval in all Major Countries throughout the GTX Territory
according to the anticipated filing dates set forth in the GTX Final Development and Registration
Plan timetable. GTX’s Regulatory Approvals in the GTX Territory shall be owned solely by GTX.
7.1.2 Orion Activities.
(a) Orion shall use its commercially reasonable efforts to assist GTX in obtaining and
maintaining the U.S. FDA Regulatory Approval of Products and any other required Regulatory
Approvals in the Major Countries of the GTX Territory relating to the manufacture, use, marketing
or sale of Product for use in the Field (by providing to GTX relevant information, documents and
data in its possession in relation to regulatory inquiries during the Regulatory Approval process
for Products, necessary additional letters of cross-reference or authorization equivalent to those
described in Section 7.4, assistance in obtaining free sales certificates, and other similar
assistance).
(b) Orion shall perform any stability testing for the bulk Orion Product to be manufactured
and supplied by Orion to GTX that is required by regulatory authorities in any Major Country. Such
testing shall be provided at no cost to GTX, except that GTX will reimburse Orion’s direct costs of
performing any such stability testing that must be conducted solely for the [ * ] tablet of the
Orion Product. Orion employees shall, at Orion’s cost and expense, have the right to participate in
all FDA and other regulatory agency meetings regarding the use of the Product in the Field.
(c) Orion shall have no obligation to research, develop, register, commercialize any Product
or carry out any studies or testing in relation to Products, including without limitation with
respect to any new or additional strength, dosage form, formulation or route of administration of
the Orion Product or the Product, or provide any documentation, information or data relating to the
foregoing, except as expressly provided in Section 7.1.2(a) or otherwise set forth in this
Agreement, unless the Parties expressly mutually agree otherwise in writing after the Amendment
Date. Other than as expressly agreed in this Agreement, Orion shall have no obligation to fund or
pay for any of the costs and expenses of such activities. All studies, trials, tests, activities,
documentation, data and information required by any regulatory or other governmental agency or
which is necessary or useful for the research, development, registration or commercialization of
the Product shall, unless otherwise expressly agreed to herein, be for the sole cost and
responsibility of GTX.
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19.
7.1.3 FDA File. Any regulatory filings (including without limitation any DMFs that GTX may
develop if it obtains the right to manufacture Product) compiled and filed by or on behalf of GTX
shall remain the property of GTX, but GTX shall, upon request therefor by Orion, negotiate with
Orion the terms under which GTX would provide appropriate authorization letters to relevant
regulatory bodies to enable Orion to reference such regulatory filings for purposes of applying for
and supporting Orion’s applications for Regulatory Approval of products containing Toremifene
outside the Field.
7.2 Development and Registration Costs. Except as otherwise expressly provided in this
Agreement or otherwise mutually agreed in writing by the Parties after the Amendment Date, GTX
shall bear all costs and expenses related to Product registration and regulatory activities,
including without limitation costs of filing, obtaining and maintaining all Regulatory Approvals
throughout GTX Territory, as well as all costs and expenses for the research and development of the
Product for use in the Field, provided that GTX shall not be responsible for any costs related to
the manufacture of the Orion Product (except for payments that GTX must make to Orion pursuant to
Section 7.1.2(b) or Section 13 (such costs collectively referred to herein as “Manufacturing
Costs”). Except for the Manufacturing Costs or as otherwise expressly provided in this Section 7,
Orion shall bear no responsibility for any costs or expenses related to Product registration,
regulatory, research or development activities in relation to the Product.
7.2.1 Development and Registration Costs prior to Amendment Date. The Parties agree that GTX
shall, notwithstanding anything to the contrary in the Original Agreement or otherwise, also bear
all costs and expenses related to Product research, development, registration, regulatory
compliance and other activities relating to the development of Product that were incurred prior to
the Amendment Date by GTX (excluding any Manufacturing Costs) (hereinafter referred to as “Incurred
Costs”). Consequently, GTX shall forever release and discharge Orion of any and all claims that it
purports to have at the Amendment Date or may have thereafter against Orion with respect to
Incurred Costs.
7.3 GTX Development and Registration Plan.
7.3.1 Completion of GTX Final Development and Registration Plan. The GTX Preliminary
Development and Registration Plan was attached to the Original Agreement as Schedule B. GTX will
prepare a GTX Final Development and Registration Plan for each Major Country in a timely fashion
upon receiving approval from the appropriate regulatory authority in each Major Country of a plan
for regulatory approval in that country. Immediately upon completion of the GTX Final Development
and Registration Plan for each Major Country, a copy of such Plan shall be provided to Orion.
7.3.2 Orion’s right to comment on and object to Plan. Orion shall have the right to comment
on each GTX Final Development and Registration Plan for each Major Country. Additionally, Orion
shall have the right to object to each GTX Final Development and Registration Plan for each Major
Country to the extent such plan could reasonably be deemed to affect adversely Orion’s development,
commercialization, sales or registration of Orion’s proprietary product Fareston(R) outside the
Field or Toremifene outside the Field. GTX undertakes to change and/or amend the GTX Final
Development and Registration Plan for each Major Country to the extent Orion has so objected
thereto as necessary to alleviate or obviate
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20.
such adverse effect. Orion shall provide GTX with such comments and/or objections within
thirty (30) days from Orion’s receipt of the GTX Final Development and Registration Plan.
7.3.3 Changes to Such Plan. GTX may modify the GTX Final Development and Registration Plan,
as GTX deems necessary and consistent with Section 7.3.1, but shall notify Orion of such changes.
Any changes to the GTX Final Development and Registration Plan for each Major Country shall also be
subject to Section 7.3.2.
7.4 Orion Documentation and Data
7.4.1 GTX Access to Orion Know-How. Orion has provided and shall continue to provide GTX with
copies of the Orion Know-How, documentation, information and data listed or referenced in the GTX
Preliminary Development and Registration Plan, and GTX shall be authorized to use and reference the
same in its applications for Regulatory Approval and regulatory compliance activities in relation
to such Regulatory Approvals. Any Product Drug Master Files (“DMFs”) compiled or owned by Orion
shall remain the property of Orion, but Orion shall, upon reasonable request therefor by GTX,
provide appropriate authorization letters to relevant regulatory bodies in the GTX Territory within
forty-five (45) days from such request to enable GTX to reference such DMFs for purposes of GTX’s
applications for Regulatory Approval and regulatory compliance activities in the GTX Territory as
provided for in Section 7.1. For the avoidance of doubt, neither Party is obligated to disclose the
contents of its DMFs to the other Party.
7.4.2 GTX Access to Data. During the Term, Orion shall provide GTX, within forty-five (45)
days of receipt of a written request from GTX specifying in detail the documentation, information
and data requested, access to Orion Know-How that GTX reasonably requires for regulatory filings
for the use of Product in the Field in the GTX Territory. Upon GTX’s request, Orion shall provide
GTX with copies of such Orion Know-How referenced in the preceding sentence only in such form and
content as is available to Orion, provided that, upon Orion’s request, GTX shall reimburse Orion
for Orion’s direct out-of-pocket cost of making such copies and providing GTX with such Orion
Know-How.
GTX shall also provide to Orion quarterly reports summarizing GTX’s progress under the GTX
Preliminary Development and Registration Plan and the GTX Final Development and Registration Plan.
7.4.3 Letter of Cross Reference. Orion agrees that the Cross Reference letter dated December
10, 1999 from Orion to GTX shall remain in effect and may not be revoked by Orion unless this
Agreement is terminated. During the Term, Orion shall permit GTX, its Affiliates and the GTX
Unaffiliated Sublicensees to reference, and shall provide GTX with an appropriate authorization
letter to enable GTX, its Affiliates and the GTX Unaffiliated Sublicensees to reference, Orion’s
existing U.S. NDA [ * ] and all other applications or filings for Regulatory Approval for Orion
Products for use in the breast cancer indication and related DMFs that are identified in Schedule E
hereof (hereinafter “Orion Product Approvals”) for the purpose of applying for and supporting
Regulatory Approval of Products for use in the Field within the GTX Territory. Orion shall update
Schedule E from time to time during the Term to set forth all Orion Product Approvals and DMFs that
are owned and controlled by Orion. GTX
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21.
recognizes that Orion has obtained the Orion Product Approvals solely for the purpose of its
proprietary product Fareston(R), and that nothing herein shall be construed so as to obligate Orion
to maintain or cause to be maintained any Orion Product Approvals solely for allowing GTX, its
Affiliates and/or GTX Unaffiliated Sublicensees referring thereto, provided that during the Term
Orion shall not withdraw such Orion Product Approvals in the absence of commercially justifiable
reasons in relation to Fareston(R).
7.4.4 All requests by GTX to Orion for documentation, information or data, as agreed herein,
shall be addressed only to the attention of such person(s) as is/are designated in writing or in
electronic form by Orion from time to time.
7.5 GTX Registration and Marketing Approval Applications. GTX, its Affiliates and/or GTX
Unaffiliated Sublicensees shall have the responsibility and the right to submit registration
applications for Regulatory Approval and marketing and price approval of the Product for use in the
Field within the GTX Territory.
7.6 Failure to File or Extend. Orion shall have the right to terminate its obligations under
Section 7.1.2(a) and its obligations to manufacture and supply to GTX Orion Product upon one
hundred and twenty (120) days prior written notice to GTX, if either (I) Regulatory Approval has
not been granted for the Product for use in the Field in the USA by December 31, 2007, or (II) the
last Valid Claim included in the Orion Patent Rights in the USA expires (which the Parties
currently anticipate to occur in 2009) or is invalidated. Any such notice hereunder shall be given
no later than sixty (60) days after the occurrence of the applicable event giving rise to such
right, provided that GTX shall inform Orion in writing by December 31, 2007, whether or not
Regulatory Approval has been granted for the Product for use in the Field in the USA by such date.
The time for Orion to provide notice to GTX of its decision to exercise its right with regard to
the event described in item (I) shall be deemed to commence upon the receipt by Orion of such
notice from GTX, provided that nothing shall be construed so as to prevent Orion from exercising
its right with regard to the event described in item (I) if Orion finds out, either by itself or
through a Third Party that Regulatory Approval has not been granted for the Product for use in the
Field in the USA by December 31, 2007. Effective upon the date that GTX receives any notice from
Orion pursuant to this Section 7.6 and during the Term, Orion hereby grants GTX a contingent
license under the Orion Patent Rights and Orion Know-How and all other patents and patent
applications owned or controlled by Orion during the Term that relate to the manufacture, use or
sale of Toremifene or Orion Product (“Manufacturing Patents”) to make and have made Product for use
in the Field in the GTX Territory. Such license shall be exclusive with respect to Products for use
in the Field and in the North American Territory and Japan, and nonexclusive with respect to
Products for exclusive use in the Field in the ROW Territory. Orion shall as soon as practically
possible after providing any notice to GTX pursuant to this Section 7.6 provide GTX with such
then-existing manufacturing, process and quality control procedures, documentation and other
relevant know-how and information to the extent reasonably necessary to enable GTX to exercise its
manufacturing right pursuant to this Section 7.6 (hereinafter “Product Manufacturing Know-How”),
including without limitation providing up to ten (10) person-days of technology transfer assistance
at GTX’s site of manufacture of Product using Orion personnel skilled in such manufacturing
operations, at no charge to GTX.
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22.
At any time prior to December 31, 2007, GTX may propose to discuss whether Orion would be
willing either to commit to manufacture and supply to GTX Orion Product for a certain amount of
time to allow GTX to have uninterrupted supply during critical Product development or
commercialization periods, or to allow GTX to locate and qualify a Third Party manufacturer of
Orion Product for such purpose. Upon such request, the Parties shall promptly discuss whether or
not Orion is interested in supplying GTX with such needs of Orion Product. Nothing in this
paragraph shall be deemed to require Orion to take any action or to impose an obligation for, or
constitute a commitment by Orion in relation to such subject matter.
7.7 Reimbursement of Orion Costs. Except as provided for otherwise in this Section 7, GTX
shall reimburse Orion for all costs and expenses incurred by Orion in fulfilling its obligations
under this Section 7. Orion shall issue an invoice for all such reasonable costs and expenses so
incurred during each Calendar Quarter and GTX shall effect payment of such invoice within thirty
(30) days from the date of the invoice.
8. CONFIDENTIALITY AND PUBLICITY
8.1 Confidentiality Obligation. Each Party shall hold the other Party’s Confidential
Information (as defined below) of which it becomes informed in connection with this Agreement or
the Original Agreement in strictest confidence and shall not disclose such Confidential Information
to Third Parties or otherwise use it, except to the extent such use or disclosure is expressly
permitted by the terms of this Agreement or is reasonably necessary for the performance of this
Agreement.
8.2 Permitted Disclosures. Permitted disclosures of Confidential Information hereunder
include, but are not limited to: (A) disclosures to regulatory agencies to the extent required for
Regulatory Approval, including but not limited to, GTX Product registrations and applications in
the GTX Territory (to the extent expressly permitted hereunder), and (B) disclosures to the
Parties’ Affiliates, employees, agents and independent contractors (including clinical
investigators, consultants and contract research organizations) who have a bona fide “need to
know”, and GTX Unaffiliated Sublicensees, and prospective sublicensees, provided that for such
permitted disclosures under subsection (B) the disclosing Party shall obligate the recipients to
maintain the confidentiality of Confidential Information under terms substantially similar to those
contained in this Section 8.
8.3 Confidential Information. “Confidential Information” includes, but is not limited to, any
information relating to the terms of this Agreement, the Original Agreement, the Product, the Orion
Product, GTX Know-How, GTX Patent Rights, Orion Patent Rights, Orion Know-How, GTX Preliminary
Development and Registration Plan, GTX Final Development and Registration Plan, clinical and
non-clinical studies involving the Product, and all sales and marketing plans for the Product, as
well as information concerning all other products and the business affairs, manufacturing processes
and other activities of the disclosing Party that are designated as confidential in writing or
orally disclosed, provided such oral disclosure is confirmed as confidential in writing within
thirty (30) days thereafter. However, Confidential Information shall not include any information:
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23.
(a) Publicly Available Information. Which at the time of disclosure is or later comes into
public domain by publication or otherwise through no fault of the receiving Party;
(b) Previously Known Information. Which can be demonstrated by documentation or other
competent proof to have been in the receiving Party’s possession prior to disclosure;
(c) Subsequently Received Information. Which is subsequently received by the receiving Party
from a Third Party who is not bound by any confidentiality undertaking to the disclosing Party or
to any of its Affiliates with respect to said information;
(d) Independently Developed Information. Which is independently developed by or for the
receiving Party without reference to the disclosing Party’s Confidential Information; or
(e) Legally Required Disclosures of Information. Which is legally required to be disclosed
pursuant to any statute or regulation or any judicial or administrative order including any
material or information requested by the Securities and Exchange Commission or Finnish equivalent
thereof to the extent that such information cannot be treated confidential.
8.4 Duration of Confidentiality Obligation. The confidentiality obligations of the Parties
hereunder shall remain in effect during the Term and shall survive the termination or expiration of
this Agreement for any reason and be effective until the later of five (5) years after such
termination or expiration, or ten (10) years after the Amendment Date.
8.5 Publicity and Announcements
8.5.1 With regard to the existence and content of commercial terms and conditions of this
Agreement, unless agreed upon by the Parties, neither Party shall originate any publicity, news
release or other public announcement, written or oral, whether to the public press, stockholders or
otherwise, relating to this Agreement or any amendment hereto, without the approval of the other
Party, except as required by law, including, without limitation, provisions regarding the
disclosure requirement for publicly quoted companies, and then only to the minimum extent so
required, in which event such Party shall give the other Party a reasonable opportunity to review
the form and content of the announcement before such legally required announcement is made.
8.5.2 GTX may originate any publicity, news release or other public announcement, written or
oral, whether to the public press, stockholders or otherwise, relating to the use of the Product in
the Field, provided that GTX forwards to Orion such publicity, news release or other public
announcement fourteen (14) days prior to such publicity, news release or other public announcement,
except as otherwise required by law or regulation. It is agreed that such publicity, news release
or other public announcement does not require the approval of Orion, unless Orion considers such
publicity, news release or other public announcement to (I) fall within the scope of Section 8.5.1;
or (II) be misleading or incorrect, in which case Orion
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24.
shall, within five (5) business days after receiving such publicity, news release or other
public announcement, so notify GTX and provide written comments specifying changes that Orion
reasonably believes will correct such inaccuracy, except as otherwise required by law or
regulation. If requested by Orion, such publicity, news release or other public announcement shall
include wording to the effect that Toremifene is a proprietary compound of Orion, and that
Toremifene has been licensed by Orion to GTX for use in the Field.
9. TRADEMARKS
9.1 Use of Trademarks. GTX shall market and sell the Product for use in the Field in GTX
Territory only under Trademarks selected by GTX. GTX shall not select a Trademark which is
confusingly similar to the Orion trademark Fareston(R). GTX shall own and control all Trademarks
excluding, for the avoidance of doubt Fareston(R). GTX shall notify Orion if GTX decides to change,
alter, modify or replace the Trademark initially selected by it for the Product without the express
written prior approval thereof by Orion.
9.2 Trademark Filing and Maintenance. GTX shall be responsible for filing, maintaining,
prosecuting and defending the Trademarks in the GTX Territory.
9.3 Worldwide Trademark Enforcement. GTX shall be responsible for and control Trademark
prosecution, maintenance, and/or enforcement worldwide. If requested by Orion, GTX shall provide
Orion with copies of all documents relating to the maintenance of the Trademark in the GTX
Territory, at Orion’s expense.
10. PATENT OWNERSHIP AND WARRANTIES
10.1 Patent Ownership.
10.1.1 Subject to the license rights granted to GTX hereunder, Orion retains full ownership of
all Orion Patent Rights and shall be responsible for filing, prosecuting, and maintaining Orion
Patent Rights as provided for in Section 11.
10.1.2 Subject to the license rights granted to Orion hereunder, GTX retains full ownership of
all GTX Patent Rights and shall be responsible for filing, prosecuting, and maintaining GTX Patent
Rights as provided for in Section 11.
10.2 Orion Patent Warranties. Orion warrants and represents that, to the best of its
management’s knowledge as of the Effective Date,: (A) Schedule B sets forth all of the Orion Patent
Rights as of the Effective Date and as of the Amendment Date which are directed to the composition
of matter, use or sale of the compound Toremifene per se; (B) Orion has not and will not grant,
license, convey, assign, and/or transfer to any Third Party any rights to Orion Patent Rights for
use in the Field, or any rights to manufacture the Product or Toremifene for use in the Field, or
other rights to any Third Party inconsistent with the licenses and other rights granted to GTX
hereunder, (C) based upon Orion’s reasonably diligent investigation, the Orion Patent Rights are
(i) valid, in full force, and enforceable and/or (ii) there are no existing valid Third Party
patents in the GTX Territory that might be infringed by the manufacture or sale of the Orion
Product by Orion to GTX under this Agreement, and (D) the use and sale of Products
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25.
in the Field and in the GTX Territory by GTX, its Affiliates or Unaffiliated Sublicensees
pursuant to this Agreement will not, in the absence of a license from Orion, infringe any patents
owned or controlled by Orion other than the Orion Patent Rights. Additionally, Orion represents and
warrants to GTX that to the best of its management’s knowledge as of the Amendment Date, Orion has
not received any written claims from any Third Party alleging that the use of Toremifene in the
Field infringes such Third Party’s patent rights.
10.3 GTX Patent Warranties. GTX warrants and represents that, to the best of its management’s
knowledge as of the Effective Date: (A) Schedule A sets forth all of the GTX Patent Rights as of
the Effective Date which cover the Product for use in the Field and that it had full right and
authority to grant to Orion and Orion Affiliate the rights granted to it under the Original
Agreement; (B) subject to Section 2.1.4, GTX has not and will not grant to any Third Party any
rights under the Orion Patent Rights or Orion Know-How inconsistent with GTX’s licenses under this
Agreement, and (C) the United States Government or any agency thereof should not exercise such
rights as set forth and/or referenced to in Section 2.3, if GTX’s development, registration and
commercialization of the Product for use in the Field will be carried out as agreed herein and (D)
(i) the GTX Patent Rights are valid, in full force, and enforceable and (ii) upon GTX’s reasonably
diligent investigation, there are no existing valid and enforceable Third Party patents in the GTX
Territory that might be infringed by the marketing, promotion, distribution, importation, offer for
sale or sale of the Product by GTX, its Affiliates and GTX Unaffiliated Sublicensees.
11. PATENT PROSECUTION AND INFRINGEMENT
11.1 Orion Patent Filing and Prosecution. Orion shall, at its sole expense, prosecute,
maintain and defend Orion Patent Rights in the GTX Territory and Orion shall control all Orion
Patent Rights filings and actions. Orion shall use its commercially reasonable efforts to obtain
extensions in the Major Countries in the GTX Territory in which such extensions are available.
11.2 GTX Patent Filing and Prosecution. GTX shall, as its sole expense, file, prosecute,
maintain and defend GTX Patent Rights in the GTX Territory and GTX shall control all GTX Patent
Rights filings and actions. GTX shall use its commercially reasonable efforts to obtain GTX Patent
Rights protection and commercially reasonable efforts to obtain GTX Patent Rights extensions in any
countries in the GTX Territory in which such extensions are available.
11.3 Notification of Infringement. The Parties shall promptly inform each other of any
information that comes to their attention involving actual or apparent infringements or
misappropriations of Orion Patent Rights, Orion Know-How, GTX Patent Rights, GTX Know-How, or
Trademarks by any Third Party, or claims of alleged infringement made by any Third Party in the GTX
Territory against Orion, its Affiliates, or Orion Unaffiliated Sublicensees, GTX, its Affiliates,
or GTX Unaffiliated Sublicensees, resulting from the manufacture, importation, marketing, sale or
use of the Product in the Field.
11.4 Infringement of Third Parties Rights by Orion. Orion shall, at its sole discretion,
direct or defend in its own name and at its own expense any legal or other action or proceeding,
including any settlement or negotiation, with respect to any alleged infringement of
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26.
a Third Party patent or other proprietary right as a result of Orion’s, its Affiliates’, or
Orion Unaffiliated Sublicensees’ manufacture of Toremifene or Orion Product for use in the Field,
excluding actions and proceedings covered by Section 11.5. During the time any such proceeding or
any appeal thereof is pending, Royalty Income payable by GTX under Section 3.1 in the country in
which such proceeding is pending shall be paid by GTX into an interest-bearing escrow account
pending the outcome of such proceeding. Upon a favorable final resolution of such proceeding or any
appeal thereof, GTX shall resume paying Orion the full royalties in such country, and all funds in
such escrow account shall be paid to Orion. Upon an unfavorable final resolution of such proceeding
or any appeal thereof, the funds in such escrow account shall be applied toward the damage award in
such action, if any, and the balance, if any, shall be paid to Orion. If Orion fails to defend such
proceeding or discontinues the defense, all funds in such escrow account shall be returned to GTX
and GTX shall have no further obligation to pay Royalty Income in such country.
11.5 Infringement of Third Parties Rights by GTX. GTX shall, at its sole discretion, direct
or defend in its own name and at GTX’s own expense in the GTX Territory any legal or other action
or proceeding, including any settlement or negotiation, with respect to any alleged infringement of
a Third Party patent, trademark or other proprietary right as a result of GTX’s, its Affiliates’,
or GTX Unaffiliated Sublicensees’ making, having made, importing, marketing, distributing, using or
selling the Product in GTX Territory for use in the Field, excluding actions and proceedings
covered by Section 11.4.
11.6 Infringement Indemnification.
11.6.1 Orion Infringement Indemnification. Orion shall indemnify, defend and hold GTX
(including for purposes of this Section 11.6.1, GTX Affiliates and GTX Unaffiliated Sublicensees),
its and their officers, directors, and employees, and permitted successors and assigns, harmless
from and against any and all liabilities, damages, claims, demands, costs and/or expenses
(including reasonable attorneys’ fees) (collectively, “Losses”) claimed by any Third Party in any
patent or proprietary right infringement suit or action which may be brought as a result of
Orion’s, its Affiliates’, or Orion Unaffiliated Sublicensees’ manufacture of Toremifene or Orion
Product, except to the extent such Losses arise out of claims for which GTX shall defend, indemnify
and hold Onion harmless pursuant to Section 11.6.2, and further subject to the conditions of
indemnification set forth in Section 14.7.
11.6.2 GTX Infringement Indemnification. GTX shall indemnify, defend and hold Orion
(including for purposes of this Section Orion’s Affiliates and Unaffiliated Sublicensees) its and
their officers, directors, and employees, and permitted successors and assigns, harmless from and
against any and all Losses claimed by any Third Party in any suits or actions relating to patent,
trademark or other proprietary right infringements as a result of GTX’s, its Affiliates’, or GTX
Unaffiliated Sublicensees’ making or having made, importing, marketing, using or selling the
Product or Other Product under the Trademark in GTX Territory for use in the Field, except to the
extent such Losses arise out of claims for which Orion shall indemnify, defend and hold GTX
harmless pursuant to Section 11.6.1, and further subject to the conditions of indemnification set
forth in Section 14.7.
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27.
11.7 Termination for Infringement of Third Party Rights. Should either Party be prevented by
reason of an adverse, non-appealable court or administrative proceeding, order or judgment or
arbitral award against it from manufacturing, making, using or selling the Orion Product and/ or
Product in any country within the GTX Territory as required or permitted under this Agreement,
then, as to such country or territory so affected, the other Party may, upon sixty (60) days prior
written notice thereof to the other Party, terminate this Agreement upon written notice to the
other Party with respect to such country, and the Parties shall make a final transition accounting
and settlement for outstanding bona fide costs, payments and expenses to which each Party is
entitled hereunder with respect to such country.
11.8 Third Party Infringement of Orion Patent Rights.
11.8.1 Orion Enforcement. Orion shall have the first right but not the obligation, to
commence, at its own expense appropriate measures to enforce Orion Patent Rights against
infringement by Third Parties relating to the manufacture, use, sale, offer for sale, or import of
products containing Toremifene for use in the Field, within a reasonable period of time after Orion
becomes aware of such infringement (including, but not limited to, by notifying the infringing
Third Party of such infringement and demanding that such Third Party cease and desist from such
infringement) and, if such infringement does not cease, commence a legal proceeding to enforce
Orion Patent Rights, if any, against Third Party infringements within a reasonable period of time
of the date Orion becomes aware of such infringement. Orion shall notify GTX promptly after Orion
becomes aware of such infringement, and, upon request therefor by GTX, keep GTX reasonably informed
regarding Orion’s intended strategy in such situation. During the time any such proceeding or any
appeal thereof is pending, no Royalty Income shall be payable under Section 3.1 in the country in
which such proceeding is pending. Upon a favorable final resolution of such proceeding or any
appeal thereof, GTX shall resume paying Orion the full royalties in such country, and GTX shall
also be liable for payment of any back royalties payable for such period for which such a
proceeding has been pending. Orion’s commencement of such proceeding shall be at Orion’s own
expense, provided that Orion shall be entitled to retain all recoveries in such proceeding or any
appeal thereof. Such commencement by Orion shall not relieve either Party of its obligations under
Section 11.6.
11.8.2 GTX Enforcement.
(a) Orion Patent Rights. If within a reasonable period of time from the date Orion becomes
aware of any alleged Third Party infringement of the Orion Patent Rights relating to the
manufacture, use, sale, offer for sale, or import of Products containing Toremifene for use in the
Field, either by notice from GTX or otherwise, Orion has not commenced a legal proceeding pursuant
to Section 11.8.1, or if at any time Orion discontinues the pursuit of such proceeding, GTX may, at
its option, commence, continue or intervene, as the case may be, in such proceeding, provided,
however, that with respect to any such proceedings in any country in the GTX Territory, GTX shall
first request Orion to notify GTX whether any Third Party has a right to enforce the relevant Orion
Patent Rights in the relevant countries, in which event Orion shall promptly respond to such
request, and further provided that GTX’s rights hereunder are subject and secondary to any rights
that Orion has granted to any Third Party prior to the Amendment Date in such country with respect
to enforcement of the relevant Orion Patent Rights. During the time any such proceeding or any
appeal thereof is pending, no
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28.
Royalty Income shall be payable under Section 3.1 in the country in which such proceeding is
pending. Upon a favorable final resolution of such proceeding or any appeal thereof, GTX shall
resume paying Orion the full royalties in such country, and GTX shall also be liable for payment of
any back royalties payable for such period for which such a proceeding has been pending. GTX’s
commencement, continuation or intervention in such proceeding shall be at GTX’s own expense,
provided that GTX shall be entitled to retain all recoveries in such proceeding or any appeal
thereof. Such commencement, continuation or intervention by GTX shall not relieve either Party of
its obligations under Section 11.6.
11.9 Third Party Infringement of GTX Patent Rights and Trademark.
11.9.1 GTX shall have the sole right, but not the obligation, at its own expense, to commence
appropriate measures to enforce GTX Patent Rights and rights to Trademarks against Third Party
infringements (including, but not limited to, notifying the infringing Third Party of such
infringement and demanding that such Third Party cease and desist from such infringement) and, if
such infringement does not cease, commence a legal proceeding to enforce such GTX Patent Rights or
rights to Trademarks, if any against Third Party infringements. GTX’s commencement of such
proceeding shall be at GTX’s own expense, provided that GTX shall be entitled to retain all
recoveries in such proceeding or any appeal thereof. Such commencement by GTX shall not relieve
either Party of its obligations under Section 11.6.
11.10 Mutual Cooperation. In the event of any infringement litigation in the GTX Territory
involving the Product or Orion Product or any Orion Patent Rights or GTX Patent Rights or the
Trademark, the non-prosecuting or non-defending Party shall render such reasonable assistance as
may be requested by the prosecuting or defending Party in connection with such infringement
actions. If Orion requests GTX’s assistance in connection with such infringement claims or actions,
Orion shall reimburse GTX for such direct, documented out-of-pocket expenses as are reasonably
incurred by GTX during the course of it providing such requested assistance. If GTX requests
Orion’s assistance in connection with such infringement claims or actions, GTX shall reimburse
Orion for such direct, documented out-of-pocket expenses as are reasonably incurred by Orion during
the course of it providing such requested assistance. Before incurring such expenses, the Parties
shall in good faith agree in writing on the nature and extent of assistance to be rendered, and an
estimate of the total expenses, which expenses shall be monitored periodically.
11.11 Patent Challenges
11.11.1 If GTX, its Affiliate, or GTX Unaffiliated Sublicensee, either directly or through a
contractor or agent, challenges the validity of any Orion Patent Rights in any Major Country within
the GTX Territory and does not cease such challenge within thirty (30) days of receipt of written
notice from Orion, then such challenge shall be deemed a material breach of this Agreement and
Orion shall have the right to terminate this Agreement by written notice with immediate effect, at
Orion’s sole discretion, in its entirety or with respect to such country.
11.11.2 If Orion challenges the validity of any GTX Patent Rights in any Major Country in GTX
Territory other than Major Country that is a member of the European Union and does not cease such
challenge within thirty (30) days of receipt of written notice from GTX, then
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such challenge shall be deemed a material breach of this Agreement and GTX shall be entitled
to terminate this Agreement by written notice with immediate effect, at GTX’s sole discretion, in
its entirety or with respect to such country.
11.12 Activities During Infringement Litigation
11.12.1 In the event of any patent or trademark or other proprietary right infringement
litigation involving the Product in GTX Territory in which GTX defends or prosecutes such
litigation, GTX may, at any time following one hundred eighty (180) days after the commencement of
such litigation, request in writing that Orion suspend the manufacture of the Orion Product for use
in the Field in the part of the GTX Territory so affected pending resolution of such litigation if
GTX reasonably deems such action necessary or advisable to mitigate possible damages that may be
incurred during the pendency of such litigation. If Orion elects not to comply with such request
within thirty (30) days after receipt thereof, then all damages resulting from Orion’s continued
manufacturing of the Product for use in the Field in the part of the GTX Territory so affected
after Orion’s receipt of such request shall be borne by Orion and be subject to Orion’s
indemnification obligation to GTX pursuant to Section 14.6.1.
11.12.2 In the event of any patent or trademark or other proprietary right infringement
litigation involving the Orion Product in the GTX Territory in which Orion defends or prosecutes
such litigation, Orion may, at any time following one hundred eighty (180) days after the
commencement of such litigation, request in writing that GTX suspend the import, distribution,
marketing, sale and use of the Product, and suspend Orion’s manufacture and supply of Orion Product
for GTX hereunder, in the part of the Territory so affected pending resolution of such litigation
if Orion reasonably deems such action necessary or advisable to mitigate possible damages that may
be incurred during the pendency of such litigation. If GTX elects not to comply with such request
within thirty (30) days after receipt thereof, then all damages resulting from GTX’s continued
importing, distribution, marketing, sale and use of the Product in the part of the GTX Territory so
affected after GTX’s receipt of such request shall be borne by GTX and be subject to GTX
indemnification obligation to GTX pursuant to Section 14.6.2. If GTX elects to comply with such
request, such compliance shall be considered a suspension of GTX’s marketing and sales obligations,
notwithstanding Section 6.
11.12.3 In the event either Party receives a written claim of any alleged or actual
infringement of a Third Party patent or trademark or other proprietary right as a result of
Orion’s, its Affiliate(s) or Unaffiliated Sublicensee(s’) manufacturing of or selling Orion Product
to GTX, or GTX, its Affiliates, or GTX Unaffiliated Sublicensees making, having made, marketing,
using or selling the Product in GTX Territory for use in the Field, each Party shall so notify the
other Party and the Parties shall confer regarding the basis for such claim, and discuss how the
Parties may resolve the situation. Orion shall have the right to suspend its manufacture and supply
of the Orion Product in and/or to the part of the GTX Territory so affected upon twenty (20) days
prior written notice to GTX pending resolution of such claim or any related infringement
litigation, if necessary to mitigate damages that may be incurred. If Orion exercises its rights
hereunder, the Parties shall thereafter discuss from time to time whether the situation has been
resolved and, accordingly, whether Orion is in a position to resume the supply of Orion Product
pursuant to this Agreement.
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12. COMPETING PRODUCTS
12.1 Obligations With Respect to Competing Products
12.1.1 Beginning on the Effective Date and until the expiration of the last of the Orion
Patent Rights on a country by country basis in the Major Countries, GTX and GTX Affiliates
undertake not to market or sell a Competing Product in such country, excluding those countries of
the Major Countries within the European Union, in which countries GTX and GTX Affiliates undertake
not to market or sell any Competing Product for a period of five (5) years from the Amendment Date.
12.1.2 However, nothing contained in this Section 12.1 shall be construed as preventing either
Party from conducting research and development activities relating to a Competing Product during
such period or thereafter.
13. PRODUCT ORDERS, SUPPLY AND PAYMENTS
13.1 Orion Supply Obligations
13.1.1 Product Supply. During the Term, Orion shall, subject to the terms of this Section 13,
supply GTX and GTX Affiliates with their requirements of Orion Product. Orion shall supply the
Product in bulk tablet form.
13.1.2 Product Delivery. Orion shall supply Orion Product to GTX only against receipt of
GTX’s written purchase orders. Except as otherwise provided herein or as otherwise expressly agreed
in writing by the Parties, delivery shall be within ninety (90) days from receipt and confirmation
by Orion of GTX’s purchase order. Orion shall confirm the delivery dates within ten (10) business
days after receipt of GTX’s purchase orders and, subject to the provisions of Section 13.2, Orion
shall use its best reasonable efforts to fill such orders on the requested delivery dates, but
shall in any event fill such orders within ninety (90) days from receipt and confirmation of GTX’s
purchase order. Orion shall deliver Orion Product F.O.B. Espoo, Finland to a carrier designated by
GTX. GTX shall pay shipping costs and shall assume title to and risk of loss for Orion Product
purchased hereunder upon delivery to GTX’s designated carrier.
13.1.3 Product Shipping Instructions. GTX shall provide Orion with appropriate instructions
for each shipment of Orion Product hereunder designating the desired carrier, destination and
method of transport. If Orion becomes aware that the designated carrier is unable to accept the
desired shipment within the requested delivery period, Orion shall promptly notify GTX and GTX
shall promptly designate another carrier or carriers.
13.2 Orion Affiliates and Subcontractors. Orion may satisfy its supply obligations under this
Agreement either directly or through any Orion Affiliate, whether located inside or outside GTX
Territory (provided that such Orion Affiliate has a manufacturing site which has received all
required regulatory approvals and that Orion guarantees the performance of such Affiliate), and
such supply by Orion Affiliates shall not be deemed an infringement of GTX’s rights hereunder.
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13.3 GTX Forecasts
13.3.1 Rolling Forecasts. Not later than ninety (90) days prior to GTX’s first commercial
order of Orion Product from Orion for GTX’s Product launch anywhere in the GTX Territory, GTX shall
inform Orion in writing of GTX’s bona fide, good faith estimated requirements of Orion Product in
the GTX Territory during the remainder of the calendar year of said Product launch. Thereafter, for
the remainder of the Term, GTX shall provide to Orion by September 30 of each year a purchase
forecast of GTX’s estimated requirements of Orion Product for the fifteen (15) month period
beginning with October 1 of the then current year, allocated for each calendar month of such
period. GTX shall update its purchase estimates to Orion on a monthly basis by indicating by the
end of each month revised estimates or confirming that no revisions are necessary, which shall
provide Orion with GTX’s rolling fifteen (15) month forecasts.
13.3.2 Excess Quantities. If GTX orders a quantity of Orion Product in excess of one hundred
twenty-five percent (125%) of GTX’s purchase forecast provided two (2) Calendar Quarters prior to
such order, Orion shall deliver the quantity in excess of one hundred twenty-five percent (125%) up
to one hundred fifty percent (150%) of such forecast within one hundred twenty (120) days from
receipt and confirmation of GTX’s purchase order. If GTX orders a quantity of Orion Product in
excess of one hundred fifty percent (150%) of GTX’s purchase forecast provided two (2) Calendar
Quarters prior to such order, Orion shall use commercially reasonable efforts to supply the
quantity in excess of one hundred fifty percent (150%) up to two hundred percent (200%) of such
forecast as soon as practical, but in no event later than one hundred eighty (180) days from
receipt and confirmation of GTX’s purchase order. If GTX orders a quantity of Orion Product in
excess of two hundred percent (200%) of GTX’s purchase forecast provided two (2) Calendar Quarters
prior to such Order, Orion shall use commercially reasonable efforts to supply the quantities in
excess of such forecast as soon as practical.
13.3.3 Minimum Quantities. Of the amounts of Orion Product indicated by GTX in its rolling
monthly forecasts, GTX shall purchase at least one hundred percent (100%) of its estimated
requirement for Orion Product for the first three (3) months of such forecast, eighty percent (80%)
of its estimated requirement of Orion Product for the fourth, fifth and sixth months of such
forecast, and fifty percent (50%) of its estimated requirement of Orion Product for the seventh,
eighth and ninth months of such forecast. All orders and deliveries of Orion Product shall be in
full batch sizes of Orion Product, as determined by Orion from time to time. Orion shall notify GTX
in writing prior to the date upon which GTX must provide its first commercial order of Orion
Product under this Section 13 of what the size of a full batch of Orion Product is at such time.
13.4 Prices and Payment
13.4.1 Commercial Pricing Formula. Orion’s annual price of bulk Orion Product to GTX for
commercial purposes, delivered F.O.B., Espoo, Finland, shall be:
[ * ]
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32.
13.4.2 Invoicing and Payment. Orion shall invoice GTX for commercial orders of Orion Product
shipped, and GTX shall pay such invoice within thirty (30) days of receipt.
13.4.3 Price Changes. GTX may, no more than once per year, request that Orion determine
whether the average cost of the raw materials set forth in Schedule C used to manufacture Product
during the immediately preceding year has, in the aggregate, changed by more than five percent (5%)
of the average cost thereof that applied during the year immediately preceding the date that is one
year earlier than the date of GTX’s request (any such change, a “Significant Cost Change”).
Reasonably promptly following any such request by GTX, Orion shall make such determination and
notify GTX of the result of such determination. Additionally, if Orion determines that a
Significant Cost Change has occurred (other than in response to such a request by GTX), it shall so
notify GTX. If Orion determines that a Significant Cost Change has occurred upon GTX’s request or
upon Orion’s own investigation, then the Parties shall (no more than once annually) adjust the
price to reflect such Significant Cost Change. Such price shall apply to Orion Products purchased
by GTX following the date of Orion’s notice to GTX that a Significant Cost Change has occurred.
13.5 Resale Prices. GTX, its Affiliates and GTX Unaffiliated Sublicensees shall be free to
set their own resale prices for the Product sold in the GTX Territory.
13.6 Product Supply for Testing and Registration; Supply of Toremifene.
13.6.1 Product Supply for Testing and Registration. The supply price for the [ * ] tablet
of bulk Orion Product for clinical trials shall be [ * ] per tablet. Orion shall supply GTX
with such quantities of [ * ] tablets of bulk Product as GTX may require of Orion Product
and/or placebos for GTX’s use in clinical trials referenced in the GTX Preliminary Development and
Registration Plan or the GTX Final Development and Registration Plan. The price for the [ * ]
tablet of bulk Orion Product for clinical trials shall be [ * ] per tablet. Orion shall supply
GTX with such quantities of [ * ] tablets of bulk Product as GTX may require of Orion Product
and/or placebos for GTX’s use in clinical trials referenced in the GTX Preliminary Development and
Registration Plan or the GTX Final Development and Registration Plan. The price for the [ * ]
tablet of bulk Orion Product for clinical trials shall be [ * ] per tablet. Orion shall supply
GTX with such quantities as GTX may require of [ * ] tablets of Orion Product and/or placebos
for GTX’s use in clinical trials referenced in the GTX Preliminary Development and Registration
Plan or the GTX Final Development and Registration Plan. The price for a [ * ] placebo for such
clinical trials shall be [ * ], per tablet. All Orion Product supplied for testing and
registration pursuant to this Section 13.6 shall be provided in bulk packaging.
13.6.2 Supply of Toremifene.
For the sole purpose of aiding GTX in its efforts to obtain Regulatory Approval for the
Product for use in the Field in the GTX Territory, Orion shall, during the Term, upon written order
thereof by GTX, provide GTX, free of charge, with up to [ * ] of Toremifene in bulk powder form
(the “Powder”). GTX undertakes to use such Powder only for studies necessary to support Regulatory
Approval for Product for use in the Field. Upon ordering Powder from Orion,
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GTX shall provide Orion with a detailed description of such study(ies) and the expected amount
of Powder needed for said study(ies).
As consideration for Orion’s agreeing to provide the Powder to GTX, all results, data,
information, inventions, memoranda, reports, discoveries, work products and other results
(including without limitation any patents(s) granted thereon), which are conceived, derived,
reduced to practice, made and/or developed by or on behalf of GTX and arising out of or relating to
the use of the Powder (hereinafter referred to as “Results”) shall be jointly owned by GTX and
Orion such that each party shall have a one-half undivided interest in and to such results, without
a duty of accounting to the other Party. Orion’s interest in the Results, and any patent rights
related thereto, shall be subject to the licenses granted to GTX pursuant to Section 2.1 to the
extent such Results are included in the Orion Patent Rights or Orion Know-How. GTX hereby grants to
Orion an exclusive, royalty-free, worldwide license with the right to grant sublicenses, under
GTX’s joint interest in the Results and any intellectual property rights relating thereto for use
in developing, using, having used, selling, having sold, importing, marketing and distributing
products outside of the Field. Orion hereby grants to GTX an exclusive, royalty-free, worldwide
license, with the right to grant sublicenses, under Orion’s joint interest in the Results and any
intellectual property rights relating thereto, for use in developing, using, having used, selling,
having sold, importing, marketing and distributing products in the Field, to the extent such rights
are not otherwise included in the Orion Patent Rights or Orion Know-How licensed to GTX pursuant to
Section 2.1.1.
Any use of the Results by GTX other than for the purposes of this Agreement (hereinafter
referred to as “Other Use”), shall not be permitted without the express written consent of Orion,
which Orion may withhold at its sole discretion.
Without prejudice to the foregoing, the Results shall be deemed both Orion’s and GTX’s
Confidential Information and shall be used and treated for purposes of Section 8 of this Agreement
as Confidential Information of the other Party. GTX shall promptly disclose to Orion all Results
immediately when such Results are available.
GTX and Orion shall mutually determine whether or not any of the Results provide the basis for
any patentable inventions. If both Orion and GTX consider that patents for any such inventions
involving Results should be sought, then such applications shall, in accordance with what has been
stated herein above, be filed in the Parties’ joint name, and the Parties shall share equally all
costs of filing, prosecuting and maintaining relevant patent applications and patents. The Parties
shall negotiate in good faith on the division of responsibilities with regard to drafting, filing,
prosecuting and maintaining the relevant patent applications and, patents. If the Parties do not
decide that patent application(s) should be filed for any patentable inventions included in the
Results, then the Results shall continue to be treated as Confidential Information of both Parties.
13.7 Agreement Terms Govern. Except as otherwise agreed in writing by the Parties, the terms
and conditions of this Agreement shall govern Orion and its Affiliates’ sale of Orion Product to
GTX, its Affiliates and GTX Unaffiliated Sublicensees during the Term, notwithstanding any
conflicting terms and conditions set forth in GTX’s forecast, order or
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34.
purchase documents or in Orion’s sale or acceptance documents and any such conflicting terms
are hereby expressly rejected.
13.8 Price Adjustment for Commercial Supply. It is agreed upon by the Parties that the price
of the [ * ] tablet of Orion Product to GTX shall be reduced below [ * ] based upon
attaining certain milestone purchases of Product as follows: if GTX purchases annually an aggregate
amount of [ * ] of tablet [ * ] the price of the tablet shall be [ * ] per [ * ]
tablet. Similarly, (i) the price to GTX of the [ * ] tablet of Orion Product shall be reduced
if GTX purchases annually [ * ] of the [ * ] tablets such that the price per [ * ]
tablet of Orion Product shall be [ * ] and (ii) the price to GTX of the [ * ] tablet of
Orion Product shall be reduced if GTX purchases annually [ * ] of the [ * ] tablets such
that the price per [ * ] tablet of Orion Product shall be [ * ] . If a price adjustment is
triggered under this Section 13.8, then the adjusted price shall apply to the entire amount of the
relevant tablets purchased during the relevant year. Orion shall within thirty (30) days after the
end of such year, pay to GTX an amount equal to the number of relevant tablets actually purchased
during such year, multiplied by the difference between the price paid by GTX for supply of the
relevant tablets and the lower price that is actually applicable due to the adjustment to be made
pursuant to this Section 13.8.
13.9 Termination of Product Supply. Orion shall, at its sole discretion, have the right upon
providing twenty-four (24) months prior written notice thereof, to terminate its obligations under
this Section 13 relating to the manufacture and supply of Orion Product and/or Toremifene (pursuant
to Section 13.6.2) in the event that Orion permanently ceases the manufacture of Toremifene and/or
Orion Product. In the event that Orion so terminates such obligations, Orion shall grant GTX a
contingent license under the Orion Patent Rights, Orion Know-How and the Manufacturing Patents to
make and have made Product for use in the Field in the GTX Territory during the Term, with such
license to be exclusive with respect to Products for use in the Field and in the North American
Territory, and non-exclusive for exclusive use in the Field in the ROW Territory. Such license
shall become effective upon GTX’s receipt of notice from Orion under this Section 13.9. Orion shall
during such twenty-four (24) month notice period, and as soon as practically possible after GTX’s
written request, provide GTX with Product Manufacturing Know-How to the extent reasonably necessary
to enable GTX to exercise its back-up manufacturing right pursuant to this Section 13.9, including
without limitation providing up to ten (10) person-days of technology transfer assistance at GTX’s
site of manufacture of Product using Orion personnel skilled in such manufacturing operations, at
no charge to GTX.
14. PRODUCT WARRANTIES AND INDEMNIFICATION
14.1 Product Warranties and Limitations
14.1.1 Orion Warranties. Orion warrants and represents that the Orion Product manufactured by
Orion, its Affiliate(s) or subcontractor(s), as the case may be, and delivered to GTX, its
Affiliate(s) or GTX Unaffiliated Sublicensee(s) hereunder for resale shall (i) from the date of
shipment until the end of the specified shelf-life conform to the Specifications (provided,
however, that Orion Product has after shipment been handled and stored properly and been afforded
sufficient protection against deterioration and damage) and
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shall have been manufactured in accordance with U.S. FDA Good Manufacturing Practices and
equivalent Good Manufacturing Practices in Europe to the extent applicable to Orion, its Affiliates
or subcontractors as the manufacturer(s) of Orion Product, and (ii) be transferred free and clear
of any security interests, liens and encumbrances. It is expressly agree that, except as expressly
provided for in Section 10.2, no representation, warranty, commitment or obligations given, made or
undertaken by Orion in this Agreement shall apply with regard to any Product manufactured by a
party other than Orion, its Affiliates or subcontractors, including without limitation any Product
manufactured by or on behalf of GTX under its stand-by and other manufacturing rights pursuant to
Section 7.6, 13.9, 15.1, 16.3.2, 16.4 or 20.2.2.
14.1.2 Limitations. Except as otherwise expressly stated herein, no warranties or
representations, express or implied are made or shall be deemed to have been made by Orion, its
Affiliate or subcontractor including without limitation the warranties of fitness for a particular
purpose and merchantability, regarding any Product, including without limitation the Orion Product
and Other Product. Subject to Orion’s warranty and indemnification obligations under this Agreement
for Orion Product, Orion shall have no responsibility or liability for any Product, including
without limitation Orion Product and Other Product manufactured by Orion and/or used, supplied,
marketed, or sold by GTX, its Affiliates or GTX Unaffiliated Sublicensees.
14.2 Certificate of Analysis. Orion shall furnish GTX with one or more certificates of
analysis for each batch of Orion Product supplied hereunder, in the form required by law in each
country of GTX Territory where the Orion Product is marketed, with shipment of each such batch.
14.3 Product Inspections
14.3.1 GTX Inspection and Analysis. GTX shall inspect and analyze a representative sample of
Orion Product from batches supplied by Orion promptly after receipt. If, after inspection, GTX
reasonably believes the shipment does not meet the Specifications, GTX shall notify Orion in
writing within thirty (30) days after GTX’s receipt of any such goods. If GTX does not so notify
Orion, GTX shall be deemed to have waived all claims against Orion for said quantity delivered,
except for any latent defects that could not have been reasonably discovered upon such inspection,
which defects shall be notified by GTX to Orion within fourteen (14) days from discovery of same.
Any claims by GTX regarding goods delivered shall specify in reasonable detail the nature and basis
for the claim and cite relevant Orion lot numbers or other information to enable specific
identification of the goods involved. GTX shall not be required to accept Orion Product having a
shelf-life of less than eighty percent (80%) of the stated expiration dating on the date of
shipment by Orion.
14.3.2 Orion Response. Orion shall respond to all claims made by GTX on a case-by-case basis
and Orion shall have the right to first inspect any goods involved before being required to take
any action with respect thereto. Orion shall review any such claim of nonconformity made by GTX
within thirty (30) business days of receipt of GTX’s notice under Section 14.3.1 and conduct any
required testing of the goods involved as soon as possible, but in no event later than forty-five
(45) days after receipt thereof, or earlier if the U.S. FDA or any corresponding regulatory
authority in the Territory requires an earlier response from Orion. If such review and testing by
Orion (or testing by an independent laboratory as set forth below)
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36.
confirms that a claimed quantity does not meet the Specifications, then, at Orion’s expense,
GTX shall dispose of or return such quantity involved as Orion shall direct in writing and Orion
shall replace such quantity with conforming goods as soon as possible, but in no event later than
sixty (60) days after testing is completed, which shall be GTX’s sole and exclusive remedy for such
non-conformity. If the Parties fail to agree as to whether a delivered quantity meets the
Specifications, then the Parties shall have the batch in dispute analyzed by a mutually agreed upon
independent testing laboratory located in the country in which Orion Product to which goods relate
is intended for resale, or, if the Parties agree, in Finland. Such laboratory’s determination shall
be deemed final as to any dispute over the Specifications and the nonprevailing Party shall bear
the costs of such independent laboratory’s testing.
14.4 Product Storage. Each Party shall properly store Orion Product under conditions that
will not adversely affect the quality or normal shelf life thereof.
14.5 GTX Responsibilities in GTX Territory
14.5.1 Labeling. GTX shall be responsible for packaging of the Product, and for all labeling,
inserts, packaging and promotional materials and any other materials which accompany, are
distributed, used or referred to in any way by GTX, its Affiliate(s) or GTX Unaffiliated
Sublicensee(s) in connection with the Product and GTX shall ensure that same shall conform to all
legal requirements in each country of the GTX Territory in which the Product is sold. Subject to
applicable legal and regulatory requirements and space limitations, all Product labeling,
packaging, inserts and promotional materials shall indicate that the Product is sold by GTX under
license from Orion. GTX shall, upon written request therefore by Orion, provide Orion with copies
of representative samples of materials which GTX, its Affiliates and GTX Unaffiliated Sublicensees
intend to use in connection with the marketing, promotion and sale of the Product thirty (30) days
prior to their first use thereof, provided that nothing herein or otherwise, including without
limitation any request by Orion to be furnished with such materials or review of same, shall be
construed as Orion assuming any liability or responsibility for such materials or their conformity
to all legal requirements in any country of the GTX Territory in which the Product is sold and such
request and/or review by Orion of such materials shall be without prejudice to the first sentence
of this Section 14.5. GTX, its Affiliates, or GTX Unaffiliated Sublicensee shall register, promote,
market and sell the Product in the GTX Territory only for the indications for which relevant
Regulatory Approvals have been obtained and only in accordance with applicable legal and
governmental authority requirements.
14.5.2 Notification. GTX shall also be responsible for notifying, reporting or registering
this Agreement or the business relationship created hereby with any government authorities in the
GTX Territory to the extent legally required. Orion shall provide GTX with such assistance as GTX
may reasonably request in connection therewith.
14.6 Reciprocal Indemnification Provisions
14.6.1 Orion Indemnification. Orion shall defend, indemnify and hold GTX, its Affiliates, GTX
Unaffiliated Sublicensees, and its and their officers, directors and employees, harmless from and
against any and all liabilities, damages, claims, demands, costs, or expenses (including reasonable
attorneys’ fees) Losses claimed by any Third Party for any property or
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37.
other economic loss or damage or injury or death suffered by it to the extent the same is
determined to have been caused by (A) the negligence, fault, willful wrongdoing or any other act or
omission in relation to the manufacture by Orion, its Affiliates or subcontractor(s) of the Orion
Product, or a material breach of this Agreement by Orion, its Affiliate(s) or Unaffiliated
Sublicensee(s), or (B) or a breach by Orion of the warranties set forth in Section 14.1, except
with respect to each of (A) and (B) to the extent that such Losses are caused by activities for
which GTX must defend, indemnify and hold harmless pursuant to Section 14.6.2.
14.6.2 GTX Indemnification in GTX Territory. GTX shall defend, indemnify and hold Orion, its
Affiliates, and its and their the officers, directors and employees harmless from and against any
and all Losses claimed by any Third Party for any property or other economic loss or damage, injury
or death suffered by it to the extent the same is determined to have been caused by (A) the
negligence, fault, willful wrongdoing or any other act or omission, or material breach of this
Agreement by GTX, its Affiliates or Unaffiliated Sublicensees or (B) the manufacture, use, sale,
importation, distribution, and/or marketing of the Product in the Field in GTX Territory, including
without limitation any product liability claim for property or other economic loss or damage,
injury or death suffered by a Third Party arising out of or relating to the Product or Other
Product or use thereof, except with respect to each of (A) and (B) to the extent that such Losses
are caused by activities for which Orion must defend, indemnify and hold harmless GTX pursuant to
Section 14.6.1.
14.7 Conditions for Indemnification. With respect to any indemnification obligations of
either Party to the other Party under this Agreement, the following conditions must be met for such
indemnification obligations to become applicable: (A) the indemnified Party shall notify the
indemnifying Party promptly in writing of any claim which may give rise to an obligation on the
part of the indemnifying Party hereunder; (B) the indemnifying Party shall be allowed to timely
undertake the sole control of the defense of any such action and claim, including all negotiations
for the settlement, or compromise of such claim or action at its sole expense; and (C) the
indemnified Party shall render reasonable assistance, information, cooperation and authority to
permit the indemnifying Party to defend such action, it being agreed that any out-of-pocket
expenses or other expenses incurred by the indemnified Party in rendering the same shall be borne
or reimbursed promptly by the indemnifying Party.
14.8 Liability Insurance. GTX shall procure and maintain insurance, including product
liability insurance, adequate to cover its obligations hereunder and which are consistent with
normal business practices of prudent companies commercializing products of similar nature that
present similar liability risks. It is understood that such insurance shall not be construed to
create a limit of GTX’s liability with respect to its any of its obligations hereunder, including
without limitation its indemnification and compensation obligations under this Agreement. GTX shall
provide Orion with written evidence of such insurance (including without limitation financial
information that describes the amounts available under such insurance) upon request. This Section
14.8 shall survive the termination expiration of this Agreement for ten (10) years for whatsoever
reason.
15. STANDBY MANUFACTURING RIGHTS
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15.1 Inability to Manufacture or Supply. If Orion is unable to supply or manufacture Orion
Product, as ordered pursuant to Sections 13.1.2 and 13.3.2, for ninety (90) or more consecutive
days after the agreed delivery time for any reason, (including but not limited to a Force Majeure
event), save as for reasons arising from acts or omissions of GTX, its Affiliates and/or its
Unaffiliated Sublicensees, including without limitation failure by GTX, its Affiliates and/or its
Unaffiliated Sublicensees to notify Orion of Orion’s failure to deliver Orion Product ordered
pursuant to Sections 13.1.2 and 13.3.2, then GTX may, at its option, responsibility and expense,
elect to manufacture or have a Third Party manufacture Toremifene for use in manufacturing and
selling the Product for use in the Field anywhere in the GTX Territory until such time as Orion can
demonstrate to GTX’s reasonable satisfaction that Orion is capable of resuming the manufacture of
Toremifene and/or Orion Product, as applicable. To the extent necessary to implement such standby
manufacturing rights, Orion hereby grants GTX a contingent license under the Orion Patent Rights,
Orion Know-How and Manufacturing Patents to make and have made Product for use in the Field in the
GTX Territory. Such license shall be exclusive with respect to Products for use in the Field and in
the North American Territory, and nonexclusive for exclusive use in the Field in the ROW Territory,
with such license to become effective only under the circumstances specified in the preceding
sentence. In such case, Orion shall as soon as practically possible provide GTX with Product
Manufacturing Know-How to the extent reasonably necessary to enable GTX to exercise its back-up
manufacturing right pursuant to this Section 15.1, including without limitation providing up to ten
(10) person-days of technology transfer assistance at GTX’s site of manufacture of Product using
Orion personnel skilled in such manufacturing operations, at no charge to GTX. Orion shall promptly
notify GTX in writing of any circumstances rendering it unable to manufacture Product and the
estimated duration of such circumstances. GTX’s standby-manufacturing rights under this Section
15.1 shall be GTX’s sole and exclusive remedy for Orion’s failure to manufacture or have
manufactured Orion Product for supply to GTX under Section 13.
16. MANUFACTURING INSPECTIONS AND CHANGES
16.1 Regulatory Inspections. Each Party shall allow representatives of the U.S. FDA and any
other regulatory agency or authority with jurisdiction over the manufacture, marketing and
distribution of the Product to tour and inspect all facilities utilized by such Party in the
manufacture, testing, packaging, storage, and shipment of Product sold under this Agreement, and
shall co-operate with such representatives in every reasonable manner. Each Party shall also
provide the other Party with a copy of any U.S. FDA Form 483 notices of adverse findings,
regulatory letters or similar notifications it receives from any other governmental authority
setting forth adverse findings or non compliance with any applicable laws, regulations or standards
relating to the Product within five (5) days of its own receipt thereof. Each Party shall also
provide the other Party with a copy of its proposed written response to such governmental authority
before submission and shall incorporate any changes thereto which the other Party may reasonably
request.
16.2 Orion-initiated Manufacturing Changes. Save as for changes required under applicable
laws and regulations or by any competent regulatory or other authority, during the Term, Orion
shall not make any material changes to its manufacturing operations for Toremifene and Orion
Product to be supplied to GTX pursuant to this Agreement, without informing GTX prior to such
changes; provided that if such changes would require GTX to make additional
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39.
filings with regulatory authorities or to seek additional Regulatory Approvals for Orion
Product, then Orion shall not make such change without GTX’s prior written consent, such consent
not to be unreasonably withheld, conditioned or delayed
16.3 GTX-Initiated Manufacturing Changes
16.3.1 GTX Request for Manufacturing Changes. Prior to Orion providing GTX with notice
pursuant to Section 13.9, GTX may, from time to time during the Term and as agreed in this Section
16.3, make a written and detailed request for changes in Orion’s manufacturing operations, or the
Specifications, for Toremifene and Orion Product. Such changes that are required and mandatory
under applicable laws and regulations in a Major Country shall be deemed “Required Manufacturing
Changes”, and such changes that are intended to promote quality control/quality assurance, and/or
to achieve greater efficiency or cost savings in the manufacturing process shall be deemed “Other
Manufacturing Changes”.
16.3.2 Required Manufacturing Changes. Provided that GTX furnishes Orion with evidence of
Required Manufacturing Changes, Orion shall commence the implementation of Required Manufacturing
Changes as soon as practicable, but in no event later than (i) ninety (90) days after receipt of
GTX’s request (or within such other longer time period as may be mutually agreed upon by the
Parties if implementation within ninety (90) days is impossible or reasonably impractical, such
agreement not to be unreasonably withheld, condition or delayed by GTX) or (ii) earlier if required
by the U.S. FDA or any corresponding regulatory authority in a Major Country. If Orion does not
commence the implementation of Required Manufacturing Changes within the time period referenced in
the preceding sentence or does not notify GTX in writing that Orion disputes whether GTX’s
requested changes are Required Manufacturing Changes, then GTX shall have the option to exercise
standby manufacturing rights for Toremifene and Product pursuant to Section 15.1 until such time as
Orion implements such Required Manufacturing Changes. If Orion notifies GTX in writing that Orion
disputes whether GTX’s requested changes are Required Manufacturing Changes, the Parties shall
resolve such dispute by reference to a mutually agreed upon independent Third Party regulatory
expert as soon as possible for a binding determination of whether the requested changes are
Required Manufacturing Changes. If such independent Third Party regulatory expert determines that
GTX’s requested changes are Required Manufacturing Changes, Orion shall implement such changes as
soon as possible. Any modification to the Specifications that is necessary to implement or reflect
a Required Manufacturing Change shall be deemed to be included in the Specifications, and any
Products manufactured thereunder by Orion shall be deemed Orion Products.
16.3.3 Other Manufacturing Changes. Orion shall give due consideration to making Other
Manufacturing Changes proposed by GTX. Orion shall within sixty (60) days from receipt of GTX’s
written request for Other Manufacturing Changes provide GTX a written response to such request
indicating whether it would be willing to discuss, and as appropriate, negotiate the terms and
conditions under which Orion would be willing to implement such Other Manufacturing Changes.
16.4 New Dosage Strengths and Formulations. Upon written request by GTX, the Parties shall
meet in person or by teleconference to discuss, and as appropriate, negotiate the
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terms under which Orion would be willing to manufacture and supply to GTX any dosage strengths
or formulations of the Product other than those that are available as an Orion Product as of the
Amendment Date (including without limitation any combination Product containing Toremifene and
another active ingredient) or any Product otherwise having specifications different from Orion
Product Specifications (such Products, collectively “Other Product(s)”), as provided in this
Section 16.4.
The Parties shall conduct such discussions during a sixty (60) day period following GTX’s
written request setting forth in sufficient detail the changes proposed by GTX, or any mutually
agreed extension of such time period (“Evaluation Period”). If Orion would be willing to
manufacture such Other Product, Orion shall within the Evaluation Period notify GTX of the terms
and conditions under which it would be willing to do so, and the Parties shall negotiate a written
amendment to this Agreement to include the applicable terms and conditions under which Orion would
manufacture such Other Product, including without limitation the supply price of such Other
Product. Upon execution of such amendment, such Other Product shall be deemed to be an Orion
Product. Such negotiation shall be conducted for up to one hundred twenty (120) days following
GTX’s receipt of Orion’s notice of such terms and conditions (“Negotiation Period”). It is
expressly agreed that Orion shall have no obligation to manufacture and supply any Other Product
unless a mutually acceptable definitive written amendment to this Agreement, if any, in relation to
such Other Product is executed by duly authorized representatives of both Parties.
In the event Orion notifies GTX within the Evaluation Period that it will not be interested in
supplying such Other Product, or the Parties do not amend this Agreement during the Negotiation
Period to specify applicable terms for, or execute another agreement governing, Orion’s supply of
such Other Product for use in the Field, then if GTX has a good faith basis for requiring supply of
such Other Product, including but not limited to its desire to develop a dosage strength of Product
other than one which is in clinical development by or on behalf of GTX as of the Amendment Date and
in which an Orion Product is available, or a formulation of Product that incorporates a new
technology or another active ingredient in order to optimize the pharmacokinetic properties of
Product, improve the competitive position of Product in the market, or to increase the efficiency
or safety of Products, GTX shall have the right to manufacture, or engage a Third Party
subcontractor to manufacture, such Other Product for sale and use in the Field only. GTX shall
exercise such right to manufacture or have manufactured an Other Product for sale and use in the
Field pursuant to this Section 16.4 in good faith only, and not for the purpose of obtaining the
right to manufacture Product by, for example, proposing minor changes to the Product formulation
that do not present a commercially reasonable basis for development. To the extent reasonably
necessary to implement such manufacturing right, Orion hereby grants GTX a contingent license under
Orion’s Patent Rights, Orion Know-How, Manufacturing Patents, and Product Manufacturing Know-How to
make and have made the relevant Other Product for use in the Field in the GTX Territory. Such
license shall be exclusive with respect to Products for use in the Field and in the North American
Territory, and nonexclusive for exclusive use in the Field in the ROW Territory, and shall become
effective only under the circumstances specified in this Section 16.4.
17. PRODUCT RECALLS
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17.1 Recall Notification. Each Party shall promptly notify the other Party in writing of any
facts relating to the advisability of the recall, destruction or withholding from the market of the
Product anywhere in the GTX Territory (collectively, “Recall”).
17.2 Recall Implementation in GTX Territory. If at any time (A) any governmental or
regulatory authority in the GTX Territory issues a request, directive or order for a Recall; (B) a
court of competent jurisdiction orders a Recall in the GTX Territory; or (C) GTX determines,
following consultation with Orion (except in emergency situations in which there is insufficient
time for such consultation), that a Recall in the GTX Territory is necessary or advisable, GTX
shall take all appropriate corrective actions to effect the Recall and Orion shall provide GTX with
such cooperation in connection with the Recall as GTX may reasonably request.
17.3 Recall Costs and Expenses in GTX Territory. GTX shall bear the costs and expenses of any
Recall in the GTX Territory, provided that Orion shall bear all costs and expenses of any Recall in
the GTX Territory to the extent such Recall is the result of a breach in the warranties set forth
in Section 14.1.
18. ADVERSE DRUG EXPERIENCES
18.1 Adverse Events.
(a) To ensure that all relevant safety information for Toremifene is shared between the
Parties, the following information will be exchanged: (i) GTX will provide to Orion all regulatory
safety updates (e.g. 120-day safety updates, annual reports, post-authorization safety updates)
upon public release thereof concerning the Product; and (ii) Orion will provide to GTX Periodic
Safety Update Reports upon public release thereof prepared in accordance with ICH E2C guidelines
covering Orion’s Toremifene indication for breast cancer. In addition, any safety information which
may negatively affect the benefit-risk ratio of Toremifene products or that may have consequences
regarding the product information (e.g. labeling, data sheets, instruction leaflets) or may require
immediate safety measures to be taken by either Party shall be forwarded to the other Party without
any delay. Each Party is responsible for any regulatory safety reporting requirements with respect
to its own Regulatory Approval applications and regulatory requirements according to applicable
laws, rules and regulations. If the FDA requires that reports of adverse events must be exchanged
between the Parties, and submitted to the FDA in connection with both Parties’ regulatory filings
for Toremifene products, the details of the Parties’ exchange of such information will be modified
accordingly and documented as an Exhibit to this Agreement.
(b) The intent of Section 18.1(a) is to enable each Party to comply with regulatory
requirements for Toremifene products. If either Party learns that the foregoing exchange of
information is not sufficient for such Party to meet regulatory requirements with respect to
Toremifene products that it has the right to commercialize, it may so note by the other Party.
Promptly thereafter, the Parties shall discuss and agree upon a mutually acceptable modification to
the foregoing procedure that enables the Party providing such notice to conform with such
regulatory requirements with respect to such Toremifene products. Specifically and without
limitation, to the extent regulatory authorities outside of the United States require
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reporting or other obligations with respect to adverse drug experiences in addition to those
stated in Section 18.1(a) above, the Parties shall, promptly after the Amendment Date, meet and
negotiate in good faith mutually agreeable procedures to meet such obligations.
This Section 18 shall survive the expiration or termination of this Agreement.
19. REPRESENTATIONS AND WARRANTIES
19.1 Representations and Warranties of the Parties. Each Party hereby represents and warrants
to the other Party as follows:
(a) Corporate Status. It is a corporation duly organized and validly existing under the laws
of its state or other jurisdiction of incorporation or formation;
(b) Authority. It has the power and authority to execute and deliver this Agreement, and to
perform its obligations hereunder;
(c) No Conflicts. The execution, delivery and performance by it of this Agreement and its
compliance with the terms and provisions hereof does not and will not conflict with or result in a
breach of any of the terms and provisions of or constitute a default under (i) any loan agreement,
guaranty, financing agreement, agreement affecting a product or other agreement or instrument
binding or affecting it or its property; (ii) the provisions of its charter documents or by-laws;
or (iii) any order, whit, injunction or decree of any court or governmental authority entered
against it or by which any of its property is bound;
(d) No Approvals. Except for the regulatory filings and approvals for the Product referenced
herein, no authorization, consent or approval of any governmental authority or Third Party is
required for the execution, delivery or performance by it of this Agreement, and the execution,
delivery or performance of this Agreement will not violate any law, rule or regulation applicable
to such party;
(e) Enforceability. This Agreement has been duly authorized, executed and delivered and
constitutes its legal, valid and binding obligation enforceable against it in accordance with its
terms subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors’ rights and to the availability of
particular remedies under general equity principles; and
(f) Compliance with Laws. It shall comply with all applicable local, state, national, regional
and governmental laws and regulations relating to its activities under this Agreement.
(g) Negative Data or Information. Each Party has, to the best of its management knowledge, no
knowledge of negative data or information regarding the Product, which, to the best of its
reasonable belief, would have a material effect on the regulatory approval process and/or on the
commercialization of the Product in the Field.
20. TERM AND EARLY TERMINATION RIGHTS
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20.1 Term. The Term shall be as stated in Section 1.33.
20.2 Termination for Cause. Either Party shall have the right, without prejudice to any other
rights or remedies available to it, either to terminate this Agreement or the license rights
granted to a Party under this Agreement on a country-by-country basis for cause as described in
this Section 20.2 as follows.
20.2.1 Bankruptcy. Either Party shall have the right to terminate this Agreement and same
shall terminate upon expiry of a sixty (60) days notice period, if the other Party becomes
insolvent, is adjudged bankrupt, applies for judicial or extra-judicial settlement with its
creditors, makes an assignment for the benefit of its creditors, voluntarily files for bankruptcy
or has a receiver or trustee (or the like) in bankruptcy appointed by reason of its insolvency, or
in the event an involuntary bankruptcy action is filed against the other Party and not dismissed
within ninety (90) days, or if the other Party becomes the subject of liquidation or dissolution
proceedings or otherwise discontinues business.
20.2.2 Material Breach. If either Party commits a material breach of this Agreement and if the
Party alleged to be in breach of this Agreement fails to (i) cure such breach or (ii) commence bona
fide dispute resolution proceedings under Section 24.2 contesting whether a breach has occurred
and/or whether such breach is a material breach, in either case within sixty (60) days after
receipt of written notice from the Party asserting the breach, then the Party asserting the breach
may terminate this Agreement in its entirety (if such breach is a material breach other than as
specified in Section 11.11.1), or, if such breach is by GTX and is described in Section 6.4.2 or
11.11.1 terminate the license granted to GTX pursuant to Section 2.1 with respect to the Major
Country in relation to which such material breach occurred. If the Agreement is terminated either
in its entirety or with regard to a particular Major Country, as the case may be, then:
if GTX is the breaching Party, then GTX shall grant to Orion a nonexclusive, royalty-bearing
license, with the right to grant sublicenses, under the GTX Patent Rights, the Trademark and the
GTX Know-How to make have made, use, sell, offer for sale, market and promote, and import Products
in the country(ies) in which GTX’s license terminates (if such breach is a material breach
described in Section 6.4.2) or, for any other material breach, throughout the GTX Territory; or
if Orion is the breaching Party, then the license granted to GTX shall be expanded to include
a license under the Orion Patent Rights, Orion Know-How, and Manufacturing Patents to make and have
made Products for use in the Field in the GTX Territory during the Term, with such license to be
exclusive with respect to Products for use in the Field and in the North American Territory, and
nonexclusive for exclusive use in the Field in the ROW Territory, and Orion shall as soon as
practically possible provide GTX with Product Manufacturing Know-How to the extent reasonably
necessary to enable GTX to exercise its manufacturing right pursuant to this Section, including
without limitation providing up to ten (10) person-days of technology transfer assistance at GTX’s
site of Manufacture or Product using Orion personnel skilled in such manufacturing operations, at
no charge to GTX.
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If a non-breaching Party obtains a license under this Section 20.2.2 above, it shall pay to
the other Party a running royalty equal to [ * ] of such non-breaching Party’s Net Sales of
Product in the territory in which such license applies. Furthermore, if GTX is the breaching Party,
GTX shall promptly transfer to Orion, at GTX’s expense, all Regulatory Approvals and registration
filings for the Product in the territory in which Orion obtains such license, together with such
documentation, information and data in its possession as Orion may need for regulatory compliance
in the course of exercising its rights in such territory with respect to Product.
20.3 Termination by Mutual Agreement. The Parties may terminate this Agreement at any time by
drafting and executing a mutually acceptable written agreement. The written agreement shall specify
the consequences of such termination.
20.4 Other Termination by Orion
20.4.1 Orion shall have the right to terminate this Agreement upon thirty (30) days prior
written notice to GTX if any business entity which is a direct competitor of Orion for Toremifene
should any time during the Term acquire control over the business affairs of GTX by purchase or
acquisition of a fifty percent (50%) or greater interest in GTX’s issued and outstanding stock, all
or substantially all of GTX’s assets, or the GTX business unit or division dealing with the
Product. If Orion after the thirty (30) days from receipt of notification (such notification to be
furnished by GTX to Orion at the latest by such purchase or acquisition becoming public knowledge),
does not exercise its rights to terminate this Agreement, Orion shall irrevocably lose and forfeit
such right.
20.5 Other Termination by GTX
20.5.1 Change of Control of Orion. GTX shall have the right to terminate this Agreement upon
thirty (30) days prior written notice to Orion if any business entity which is a direct competitor
of GTX for Toremifene for use in the Field should any time during the Term acquire control over the
business affairs of Orion by purchase or acquisition of a fifty percent (50%) or greater interest
in Orion’s issued and outstanding stock, all or substantially all of Orion’s assets, or the Orion
business unit or division dealing with the Product. If GTX after the thirty (30) days from receipt
of notification, such notification to be furnished by Orion to GTX at the latest by such purchase
or acquisition becoming public knowledge, does not exercise its rights to terminate this Agreement,
GTX shall irrevocably lose and forfeit such right.
20.5.2 Safety or Efficacy. If at any time during the Term: (i) GTX decides not to file an
application for Regulatory Approval in any country or decides to withdraw such application due to
documented adverse reactions or other safety issues with the Product or the Product’s lack of
efficacy or limited efficacy (collectively, “Safety or Efficacy Issues”); (ii) GTX’s application(s)
for Regulatory Approval in any country is rejected due to Safety or Efficacy Issues; (iii) GTX’s
application(s) for Regulatory Approval in any country is subsequently withdrawn because of Safety
or Efficacy Issues; or (iv) the Product is withdrawn or recalled from the market in any country
because of Safety or Efficacy Issues, then GTX may, at its option, terminate this Agreement with
respect to such country upon thirty (30) days prior written notice to Orion. GTX must exercise this
right of termination within the later of
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(a) sixty (60) days of the occurrence of the event giving rise to such right or (b) thirty
(30) days of GTX’s last meeting, if any, with the relevant regulatory authorities, provided that
GTX uses reasonable diligence to schedule such meeting and that Orion is providing reasonable
co-operation to GTX in connection with such meeting. GTX may, at its option, exercise its right of
termination under this Section 20.5.2 on a country-by-country basis, and, if GTX does so, GTX’s
termination notice shall specify the country or countries of the GTX Territory affected.
20.6 Effect of Termination. Termination or expiration of this Agreement through any means and
for any reason shall not relieve the Parties of any obligations accruing prior thereto and shall be
without prejudice to the rights and remedies of either Party with respect to any prior breach of
any of the provisions of this Agreement.
21. NOTICES
21.1 Manner of Giving Notices. All notices required or permitted in connection with this
Agreement shall be writing and may be given by personal delivery, prepaid registered or certified
airmail letter, courier, facsimile, addressed to the Party to receive the same at its address set
forth below, or to such other address as it shall later designate by like notice to the other
Party. Notice of termination of this Agreement if given by facsimile shall be confirmed by prepaid
registered or certified airmail letter dated and posted within twenty-four (24) hours. The
effective date of receipt of any notice if served by facsimile shall be deemed the first business
day in the city of destination following the transmission or dispatch thereof and, if served by
courier shall deemed the second business day in the city of destination following the dispatch
thereof unless earlier received. Notice by personal delivery shall be effective as of the date of
such delivery.
21.2 Addresses for Notices
Notices to Orion shall be sent to:
Orion Corporation
Orion Pharma
Attn: President of Orion Pharma
Orionintie 1, P.O. Box 65
FIN-02101 Espoo
Finland
Facsimile: 358-9-429-3044
Orion Pharma
Attn: President of Orion Pharma
Orionintie 1, P.O. Box 65
FIN-02101 Espoo
Finland
Facsimile: 358-9-429-3044
With a copy to:
Orion Corporation
Orion Pharma
Attn: Legal Counsel
Orionintie 1, P.O. Box 65
FIN-02101 Espoo
Finland
Facsimile: 358-9-429-4088
Orion Pharma
Attn: Legal Counsel
Orionintie 1, P.O. Box 65
FIN-02101 Espoo
Finland
Facsimile: 358-9-429-4088
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
46.
Notices to GTX shall be sent to:
GTx, Inc.
Attn: President, with a copy to the General Counsel
3 North Dunlap Avenue,
Van Vleet Building, Third Floor
Memphis, Tennessee 38163
U.S.A.
Telephone: 1-901-523-9700 x107
Facsimile: 1-901-523-9772
Attn: President, with a copy to the General Counsel
3 North Dunlap Avenue,
Van Vleet Building, Third Floor
Memphis, Tennessee 38163
U.S.A.
Telephone: 1-901-523-9700 x107
Facsimile: 1-901-523-9772
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Robert Jones, Esq.
Telephone: (650) 843-5034
Facsimile: (650) 849-7400
Telephone: (650) 843-5034
Facsimile: (650) 849-7400
22. INTEGRATION
This Agreement represents the entire Agreement between the Parties relating to the subject
matter hereof and supersedes all prior arrangements, understandings, correspondence, notes, minutes
and agreements between the Parties (or their predecessors in interest) whether written or oral. No
supplement, modification or amendment of this Agreement shall be binding unless executed by the
Parties in writing and signed by the duly authorized representatives of both Parties.
23. ASSIGNMENT
Neither Party may assign this Agreement or any of its rights hereunder, nor delegate any of
its duties or obligations hereunder, to any Third Party without the prior written consent of the
other Party, except to an Affiliate in accordance with the terms of this Agreement, in which case
notification thereof shall be provided to the other Party no later than thirty (30) days prior to
such assignment to an Affiliate. Neither Party shall unreasonably withhold its consent which shall
be provided within thirty (30) days, to such contemplated assignment if such contemplated
assignment is in connection with the sale by either Party of all or substantially all of its assets
to a Third Party. Any assignment of this Agreement to an Affiliate of the assigning Party shall not
relieve the assigning Party of its responsibilities and obligations hereunder.
24. GOVERNING LAW AND DISPUTE RESOLUTION
24.1 Governing Law. This Agreement, including the validity, construction, interpretation and
performance thereof, shall be governed entirely by the laws of Sweden. It is the specific intent
and agreement of the Parties that the United Nations Convention on the International Sale of Goods
shall not apply to this Agreement.
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
47.
24.2 Dispute Resolution. All disputes arising out of or in connection with this Agreement
(except those involving actions commenced by or involving Third Parties and affecting or involving
only one of the Parties) shall be resolved with the following mechanism:
24.2.1 Attempted Amicable Resolution. The Parties shall promptly give each other written
notice of any disputes requiring resolution hereunder, which written notice shall specify the
Section(s) of this Agreement the other Party is alleged to have breached and shall briefly state
the initiating Party’s claims, and the Parties shall use reasonable efforts to resolve any such
disputes in an amicable manner.
Any disputes arising in connection with this Agreement which cannot be resolved in an amicable
manner by representatives of the Parties shall be referred, not later than thirty (30) days after
initiation of dispute resolution proceedings under this Section 24.2.1, to the following corporate
officers of the Parties for resolution:
For GTX: President and Chief Executive Officer (or his or her designee)
For Orion: President of Orion-Pharma (or his or her designee)
Such officers (or their designees) shall attempt to resolve the dispute and shall communicate
with each other by facsimile or telephone or in personal meetings in an effort to resolve the
dispute.
24.2.2 Arbitration. Any disputes (excluding any dispute, controversy or claim arising out of
or relating to the validity, enforceability, scope or infringement of patent or trademark rights)
arising in connection with this Agreement which cannot be resolved by the Parties within forty-five
(45) days after initiation of dispute resolution proceedings under Section 24.2.1 shall be finally
settled by binding arbitration under the Rules of the Arbitration Institute of the Stockholm
Chamber of Commerce, Stockholm, Sweden in accordance with said Rules then in effect with
proceedings to be held in Stockholm, Sweden in the English language. Reasonable submission of
evidence shall be permitted in any such proceeding to the extent permitted under and consistent
with such Rules. Judgment upon any award rendered by the arbitrator(s) in such proceedings may be
issued and enforced by any court having competent jurisdiction. Any disputes arising out of or
relating to the validity, enforceability, scope or infringement of patent or trademark rights shall
be submitted for resolution by a court of competent jurisdiction.
24.3 Effect of Commencing Dispute Resolution. If either Party in good faith commences dispute
resolution proceedings under Section 24.2, (A) any applicable notice periods or cure periods
hereunder (including but not limited to the periods referenced in Sections 20.2 and 20.4) shall be
temporarily suspended pending the outcome of such dispute resolution proceedings and (B) the
non-breaching Party may, at its option, pay any amounts payable to the other Party that are in
dispute into an interest-bearing escrow account pending the outcome of such dispute resolution
proceedings.
25. LIMITATION OF DAMAGES
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
48.
Except for indirect damages resulting from breach of Section 8, in no event shall either Party
be liable to the other Party for any indirect, consequential or punitive damages in connection with
the performance of this Agreement or any breach of this Agreement (excluding such damages payable
to a Third Party which are subject to the indemnification obligations of the Parties set forth in
this Agreement.
26. FORCE MAJEURE
Neither Party shall be held in breach of this Agreement for failure to perform any of its
obligations hereunder to the extent and for the time period such performance is prevented in whole
or in part by reason of any Force Majeure event, including but not limited to industrial disputes,
strikes, lockouts, riots, mobs, fires, floods, and other natural disasters and Acts of God, wars
declared or undeclared, civil strife, embargo, delays in delivery or defects or shortages of raw
materials from suppliers, loss or breakdown of any production equipment, losses or shortage of
power, damage to or loss of goods in transit, currency restrictions, or events caused by reason of
laws, regulations or orders by any government, governmental agency or instrumentality or by any
other supervening unforeseeable circumstances whatsoever beyond the control of the Party so
affected. The Party so affected shall (A) give prompt written notice to the other Party of the
nature and date of commencement of the Force Majeure event and its expected duration and (B) use
its reasonable efforts to avoid or remove the Force Majeure event as soon as possible to the extent
it is so able to do.
27. RELATIONSHIP OF PARTIES
The relationship of the Parties under this Agreement is that of independent contractors.
Nothing contained in this Agreement shall be construed so as to constitute the Parties as partners,
joint venturers or agents of the other. Neither Party has any express or implied right or authority
under this Agreement to assume or create any obligations or make any warranties and representations
on behalf of or in the name of the other Party, or to bind the other Party to any contract,
agreement or undertaking with any Third Party, and no conduct of the Parties pursuant to the terms
of this Agreement shall be deemed to establish such right or authority. Neither Party shall make
any representation to Third Parties that the relationship created hereby constitutes a partnership,
joint venture or agency relationship.
28. SEVERABILITY
In case one or more of the provisions contained in this Agreement shall, for any reason, be
held invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall
be construed by limiting such invalid, illegal or unenforceable provision, if such is not possible,
by deleting such provision from this Agreement.
29. NON-WAIVER
The failure by either Party at any time to enforce any of the terms or provisions or
conditions of this Agreement or exercise any right hereunder shall not constitute a waiver of the
same or affect that Party’s rights thereafter to enforce or exercise the same. No waiver of any of
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
49.
the provisions of this Agreement shall be deemed binding unless executed in writing by the
Party to be bound by it.
30. HEADINGS
The headings in this Agreement are for convenience of reference only and shall not be used in
the interpretation of any provisions hereof.
31. GOVERNING LANGUAGE
The English language version of this Agreement shall be controlling in all respects regardless
of whether any translations into any other languages are made.
32. EXECUTION
This Agreement shall be executed by the Parties in two (2) original counterparts, one (1)
original counterpart being retained by each Party and either of which shall be deemed sufficient to
prove the existence and terms and conditions hereof. This Agreement may be executed by the Parties
by the exchange of facsimile signature pages, with signed original counterparts of the Agreement to
be exchanged by the Parties promptly thereafter.
In Witness Whereof, the Parties’ duly authorized representatives hereto have executed
this Agreement as of the Amendment Date.
| Orion Corporation | GTx, Inc. | |||||
By:
|
/s/ Jyrki Mattila | By: | /s/ Mitchell S. Steiner MD | |||
| Jyrki Mattila | Mitchell Steiner, M.D. | |||||
Title:
|
President | Title: | Vice-Chairman and CEO | |||
| Orion Corporation Orion Pharma | GTx, Inc. | |||||
By:
|
/s/ Timo Lappalainen | By: | /s/ Marc Hanover | |||
| Timo Lappalainen | Marc Hanover | |||||
Title:
|
Senior Vice President | Title: | President and COO | |||
| Business Development & Finance | GTx, Inc. | |||||
| Orion Corporation Orion Pharma | ||||||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
50.
SCHEDULE A: PART I
| COUNTRY/JURISDICTION | TITLE | INVENTORS | PATENT NO. | ISSUE DATE | STATUS | |||||||
1. UNITED STATES
|
METHOD FOR CHEMOPREVENTION OF PROSTATE CANCER |
1. MITCHELLS S.
STENIER 2. SHARAN RAGHAW |
6,265,448 | July 24, 2001 | Issued | |||||||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
1.
SCHEDULE A: PART II
APPLICATIONS FILED IN THE UNITED STATES
[ * ]
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
2.
APPLICATIONS FILED IN FOREIGN JURISDICTIONS
[ * ]
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
3.
SCHEDULE B: PART I. ORION PATENTS
| TITLE: | Novel Alkane and Alkene Derivatives and their Preparation and Use (Toremifene) |
| Country | Patent No. | Expiry | ||||||
AU
|
Australia | 556608 | May 25, 2008* | |||||
BG
|
Bulgaria | 98379 | May 20, 2003 | |||||
CA
|
Canada | 1185977 | April 23, 2002 | |||||
DK
|
Denmark | 170927 | December 21, 2003* | |||||
EP
|
Europe | 95875 | December 21, 2003* | |||||
CH
|
Switzerland | 95875 | May 19, 2008* | |||||
IT
|
Italy | 95875 | February 14, 2008* | |||||
SE
|
Sweden | 95875 | May 20, 2008* | |||||
FI
|
Finland | 77839 | December 21, 2003* | |||||
HK
|
Hong Kong | 83/89 | May 20, 2003 | |||||
HU
|
Hungary | 193536 | May 26, 2003 | |||||
HU
|
Hungary | 200742 | May 26, 2003 | |||||
IE
|
Ireland | 55023 | December 21, 2003* | |||||
IL
|
Israel | 68784 | May 25, 2003 | |||||
JP
|
Japan | 2105540 | May 25, 2003 | |||||
JP
|
Japan | 1739006 | June 29, 2005* | |||||
JP
|
Japan | 1959197 | May 25, 2003 | |||||
JP
|
Japan | 1867986 | May 25, 2003 | |||||
LV
|
Latvia | 5066 | May 26, 2003 | |||||
NO
|
Norway | 156164 | December 21, 2003* | |||||
NZ
|
New Zealand | 204349 | May 25, 2003 | |||||
SG
|
Singapore | 654/88 | May 20, 2003 | |||||
SU
|
Russia | 1508955 | May 26, 2003 | |||||
US
|
USA | 4696949 | September 29, 2009* | |||||
US
|
USA | 5491173 | September 29, 2004 | |||||
US
|
USA | 4996225 | February 17, 2008 | |||||
ZA
|
South Africa | 833803 | May 25, 2003 | |||||
| EP = | Germany, Belgium, Austria, Italy, Sweden, Netherlands, Switzerland, Liechtenstein, Luxembourg, Great Britain, France |
| * | patent term extension |
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
1.
SCHEDULE B: PART II. ORION PATENT APPLICATIONS
TITLE: [ * ]
| Country | Patent No. | |||
CN
|
China | [ * ] | ||
RO
|
Romania | [ * ] | ||
| * | Administrative protection based on [ * ] | |
| ** | Pipe-line protection based on [ * ] |
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
2.
SCHEDULE C: SPECIFICATIONS
Specifications for [ * ] tablets
| TEST | SPECIFICATION | |||||
| [ * ] | [ * ] | [ * ] | ||||
CHARACTERS |
||||||
Colour
|
[ * ] | [ * ] | [ * ] | |||
Shape
|
[ * ] | [ * ] | [ * ] | |||
Score
|
[ * ] | [ * ] | [ * ] | |||
Code
|
[ * ] | [ * ] | [ * ] | |||
Coating
|
[ * ] | [ * ] | [ * ] | |||
[ * ] |
||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ] |
||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ] |
||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
[ * ]
|
[ * ] | [ * ] | [ * ] | |||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
3.
SCHEDULE D: GTS’S MSR OBLIGATION
(TO BE COMPLETED PURSUANT TO SECTION 6.1.1)
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
4.
SCHEDULE E: ORION PRODUCT APPROVALS
REGISTRATION STATUS 27.9.2001
ORION PHARMA
ORION PHARMA
Status: Approved, Pending
Submission types: Marketing authorisations
(2 PAGES)
Submission types: Marketing authorisations
(2 PAGES)
| Decision | ||||||||||||||
| Sent Date | Appl. Date | Product | Country | Date | Decision | M.A. holder | ||||||||
N=39 |
||||||||||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | [ * ] | [ * ] | |||||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | [ * ] | ||||||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | [ * ] | ||||||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | [ * ] | ||||||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | [ * ] | ||||||||||
[ * ]
|
[ * ] | [ * ] | [ * ] | [ * ] | ||||||||||
30.12.87
|
30.12.87 | Fareston 20 mg tablet | Finland | 21.12.88 | Approved | Orion-yhtyma Oy Farmos | ||||||||
27.12.88
|
Fareston 60 mg tablet | Russia | 12.12.89 | Approved | Orion Corporation | |||||||||
27.12.88
|
Fareston 20 mg tablet | Russia | 12.12.89 | Approved | Orion Corporation | |||||||||
26.02.93
|
Fareston 60 mg tablet | Latvia | 20.05.93 | Approved | Orion-yhtyma Oy Farmos | |||||||||
26.02.93
|
Fareston 20 mg tablet | Latvia | 20.05.93 | Approved | Orion-yhtyma Oy Farmos | |||||||||
26.05.92
|
Fareston 60 mg tablet | Norway | 31.07.95 | Approved | Orion Corporation | |||||||||
10.11.93
|
Fareston 60 mg tablet | Ukraine | 02.02.96 | Approved | Orion Corporation | |||||||||
10.11.93
|
Fareston 20 mg tablet | Ukraine | 02.02.96 | Approved | Orion Corporation | |||||||||
14.11.94
|
30.11.94 | Fareston 60 mg tablet | Sweden | 14.02.96 | Approved | Orion Corporation | ||||||||
14.11.94
|
30.11.94 | Fareston 60 mg tablet | Finland | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
30.11.94 | Fareston 60 mg tablet | United Kingdom | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
30.11.94 | Fareston 60 mg tablet | Spain | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
30.11.94 | Fareston 60 mg tablet | Portugal | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
29.11.94 | Fareston 60 mg tablet | Netherlands | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
29.11.94 | Fareston 60 mg tablet | Luxembourg | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
28.11.94 | Fareston 60 mg tablet | Italy | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
29.11.94 | Fareston 60 mg tablet | Ireland | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
01.12.94 | Fareston 60 mg tablet | Greece | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
28.11.94 | Fareston 60 mg tablet | Germany | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
30.11.94 | Fareston 60 mg tablet | France | 14.02.96 | Approved | Orion Corporation | ||||||||
27.11.94
|
30.11.94 | Fareston 60 mg tablet | Belgium | 14.02.96 | Approved | Orion Corporation | ||||||||
17.11.92
|
Fareston 60 mg tablet | Austria | 14.02.96 | Approved | Orion Corporation | |||||||||
27.11.94
|
Fareston 60 mg tablet | Denmark | 14.02.96 | Approved | Orion Corporation | |||||||||
31.03.96
|
Fareston 60 mg tablet | Uzbekistan | 16.09.96 | Approved | Orion Corporation | |||||||||
31.03.96
|
Fareston 20 mg tablet | Uzbekistan | 16.09.96 | Approved | Orion Corporation | |||||||||
19.12.94
|
03.01.95 | Fareston 60 mg tablet | United States of America | 29.05.97 | Approved | Orion Corporation | ||||||||
10.04.95
|
15.07.96 | Fareston 60 mg tablet | Hungary | 14.01.98 | Approved | Orion Corporation | ||||||||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
5.
| Decision | |||||||||||||||
| Sent Date | Appl. Date | Product | Country | Date | Decision | M.A. holder | |||||||||
01.08.97
|
01.08..97 | Fareston 60 mg tablet | Cyprus | 23.04.98 | Approved | Orion Corporation | |||||||||
10.07.96
|
Fareston 60 mg tablet | Taiwan, R.O.C. | 29.09.98 | Approved | Orion Corporation | ||||||||||
31.03.95
|
Fareston 60 mg tablet | Dominican Republic | 29.12.98 | Approved | Orion Corporation | ||||||||||
10.11.95
|
26.04.96 | Fareston 60 mg tablet | China | 13.02.99 | Approved | Orion Corporation | |||||||||
30.07.01
|
Fareston 60 mg tablet | Georgia | 30.07.01 | Approved | Orion Corporation | ||||||||||
30.07.01
|
Fareston 20 mg tablet | Georgia | 30.07.01 | Approved | Orion Corporation | ||||||||||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
6.
TOREMIFENE LICENSE AND SUPPLY AGREEMENT
BY AND BETWEEN
ORION CORPORATION
Espoo, Finland
And
GTX INC.,
Tennessee, U.S.A.
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
Table of Contents
| Page | ||||
1. DEFINITIONS |
1 | |||
1.1 “Affiliate” |
1 | |||
1.2 “Annual Net Sales” |
1 | |||
1.3 “Calendar Quarter” |
1 | |||
1.4 “Competing Product” |
1 | |||
1.5 “DMF” |
2 | |||
1.6 “Field” |
2 | |||
1.7 “First Commercial Sale” |
2 | |||
1.8 “Generic Product” |
2 | |||
1.9 “GTX Final Development and Registration Plan” |
2 | |||
1.10 “GTX Know-How” |
2 | |||
1.11 “GTX Patents” |
2 | |||
1.12 “GTX Patent Applications” |
2 | |||
1.13 “GTX Patent Rights” |
3 | |||
1.14 “GTX Preliminary Development and Registration Plan” |
3 | |||
1.15 “GTX Territory” |
3 | |||
1.16 “GTX Unaffiliated Sublicensee” |
3 | |||
1.17 “Major Country” |
3 | |||
1.18 “Manufacturing Patents” |
3 | |||
1.19 “Net Sales” |
3 | |||
1.20 “North American Territory” |
3 | |||
1.21 “Orion Know-How” |
3 | |||
1.22 “Orion Patents” |
4 | |||
1.23 “Orion Patent Applications” |
4 | |||
1.24 “Orion Patent Rights” |
4 | |||
1.25 “Orion Product” |
4 | |||
1.26 “Orion Unaffiliated Sublicensee” |
4 | |||
1.27 “Premium” |
4 | |||
1.28 “Product” |
5 | |||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
-i-
Table of Contents
(CONTINUED)
(CONTINUED)
| Page | ||||
1.29 “Regulatory Approval” |
5 | |||
1.30 “ROW Territory” |
5 | |||
1.31 “Sales of Generic Product” |
5 | |||
1.32 “Specifications” |
5 | |||
1.33 “Term” |
5 | |||
1.34 “Third Party” |
5 | |||
1.35 “Toremifene” |
5 | |||
1.36 “Trademarks” |
5 | |||
1.37 “U.S. FDA” |
5 | |||
1.38 “U.S. IND” |
5 | |||
1.39 “U.S. NDA” |
5 | |||
1.40 “Upfront and Milestone Income” |
6 | |||
1.41 “Valid Claim” |
6 | |||
2. GRANT AND SCOPE OF RIGHTS GRANTED |
6 | |||
2.1 Orion Grants to GTX |
6 | |||
2.2 No Implied Licenses |
10 | |||
2.3 United States Government Rights |
10 | |||
2.4 Orion’s Right of First Negotiation |
11 | |||
2.5 Use of Toremifene by GTX for Research |
11 | |||
2.6 Prohibited Actions |
12 | |||
3. PAYMENTS |
12 | |||
3.1 Types of Payments |
12 | |||
3.2 Non-Refundability |
13 | |||
3.3 Royalty Reports and Payments |
14 | |||
3.4 Currency |
14 | |||
3.5 No Royalties Payable Between Affiliates |
14 | |||
3.6 No Multiple Royalties |
14 | |||
4. LIAISON |
14 | |||
5. PAYMENT, RECORD KEEPING AND AUDIT RIGHTS |
14 | |||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
-ii-
Table of Contents
(CONTINUED)
(CONTINUED)
| Page | ||||
5.1 Method of Payment |
14 | |||
5.2 Late Payments |
15 | |||
5.3 Record Keeping and Audit Rights |
15 | |||
6. GTX PRODUCT MARKETING AND SALES ACTIVITIES |
15 | |||
6.1 Minimum Sales Requirements for USA |
15 | |||
6.2 No Minimum Sales Requirements Outside of USA |
16 | |||
6.3 Marketing and Sales Efforts in the Major Countries |
16 | |||
6.4 Product Launch |
18 | |||
6.5 Marketing Costs and Expenses |
18 | |||
6.6 Marketing Plans and Reports |
18 | |||
7. GTX PRODUCT DEVELOPMENT AND REGISTRATIONS |
19 | |||
7.1 GTX Development and Registration Activities |
19 | |||
7.2 Development and Registration Costs |
20 | |||
7.3 GTX Development and Registration Plan |
20 | |||
7.4 Orion Documentation and Data |
21 | |||
7.5 GTX Registration and Marketing Approval Applications |
22 | |||
7.6 Failure to File or Extend |
22 | |||
7.7 Reimbursement of Orion Costs |
23 | |||
8. CONFIDENTIALITY AND PUBLICITY |
23 | |||
8.1 Confidentiality Obligation |
23 | |||
8.2 Permitted Disclosures |
23 | |||
8.3 Confidential Information |
23 | |||
8.4 Duration of Confidentiality Obligation |
24 | |||
8.5 Publicity and Announcements |
24 | |||
9. TRADEMARKS |
25 | |||
9.1 Use of Trademarks |
25 | |||
9.2 Trademark Filing and Maintenance |
25 | |||
9.3 Worldwide Trademark Enforcement |
25 | |||
10. PATENT OWNERSHIP AND WARRANTIES |
25 | |||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
-iii-
Table of Contents
(CONTINUED)
(CONTINUED)
| Page | ||||
10.1 Patent Ownership |
25 | |||
10.2 Orion Patent Warranties |
25 | |||
10.3 GTX Patent Warranties |
26 | |||
11. PATENT PROSECUTION AND INFRINGEMENT |
26 | |||
11.1 Orion Patent Filing and Prosecution |
26 | |||
11.2 GTX Patent Filing and Prosecution |
26 | |||
11.3 Notification of Infringement |
26 | |||
11.4 Infringement of Third Parties Rights by Orion |
27 | |||
11.5 Infringement of Third Parties Rights by GTX |
27 | |||
11.6 Infringement Indemnification |
27 | |||
11.7 Termination for Infringement of Third Party Rights |
28 | |||
11.8 Third Party Infringement of Orion Patent Rights |
28 | |||
11.9 Third Party Infringement of GTX Patent Rights and Trademark |
29 | |||
11.10 Mutual Cooperation |
29 | |||
11.11 Patent Challenges |
29 | |||
11.12 Activities During Infringement Litigation |
30 | |||
12. COMPETING PRODUCTS |
31 | |||
12.1 Obligations With Respect to Competing Products |
31 | |||
13. PRODUCT ORDERS, SUPPLY AND PAYMENTS |
31 | |||
13.1 Orion Supply Obligations |
31 | |||
13.2 Orion Affiliates and Subcontractors |
32 | |||
13.3 GTX Forecasts |
32 | |||
13.4 Prices and Payment |
33 | |||
13.5 Resale Prices |
33 | |||
13.6 Product Supply for Testing and Registration; Supply of Toremifene |
33 | |||
13.7 Agreement Terms Govern |
35 | |||
13.8 Price Adjustment for Commercial Supply |
35 | |||
13.9 Termination of Product Supply |
35 | |||
14. PRODUCT WARRANTIES AND INDEMNIFICATION |
36 | |||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
-iv-
Table of Contents
(CONTINUED)
(CONTINUED)
| Page | ||||
14.1 Product Warranties and Limitations |
36 | |||
14.2 Certificate of Analysis |
36 | |||
14.3 Product Inspections |
36 | |||
14.4 Product Storage |
37 | |||
14.5 GTX Responsibilities in GTX Territory |
37 | |||
14.6 Reciprocal Indemnification Provisions |
38 | |||
14.7 Conditions for Indemnification |
38 | |||
14.8 Liability Insurance |
38 | |||
15. STANDBY MANUFACTURING RIGHTS |
39 | |||
15.1 Inability to Manufacture or Supply |
39 | |||
16. MANUFACTURING INSPECTIONS AND CHANGES |
39 | |||
16.1 Regulatory Inspections |
39 | |||
16.2 Orion-initiated Manufacturing Changes |
40 | |||
16.3 GTX-Initiated Manufacturing Changes |
40 | |||
16.4 New Dosage Strengths and Formulations |
41 | |||
17. PRODUCT RECALLS |
42 | |||
17.1 Recall Notification |
42 | |||
17.2 Recall Implementation in GTX Territory |
42 | |||
17.3 Recall Costs and Expenses in GTX Territory |
42 | |||
18. ADVERSE DRUG EXPERIENCES |
42 | |||
18.1 Adverse Events |
42 | |||
19. REPRESENTATIONS AND WARRANTIES |
43 | |||
19.1 Representations and Warranties of the Parties |
43 | |||
20. TERM AND EARLY TERMINATION RIGHTS |
44 | |||
20.1 Term |
44 | |||
20.2 Termination for Cause |
44 | |||
20.3 Termination by Mutual Agreement |
45 | |||
20.4 Other Termination by Orion |
45 | |||
20.5 Other Termination by GTX |
45 | |||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
-v-
Table of Contents
(CONTINUED)
(CONTINUED)
| Page | ||||
20.6 Effect of Termination |
46 | |||
21. NOTICES |
46 | |||
21.1 Manner of Giving Notices |
46 | |||
21.2 Addresses for Notices |
46 | |||
22. INTEGRATION |
47 | |||
23. ASSIGNMENT |
47 | |||
24. GOVERNING LAW AND DISPUTE RESOLUTION |
48 | |||
24.1 Governing Law |
48 | |||
24.2 Dispute Resolution |
48 | |||
24.3 Effect of Commencing Dispute Resolution |
48 | |||
25. LIMITATION OF DAMAGES |
49 | |||
26. FORCE MAJEURE |
49 | |||
27. RELATIONSHIP OF PARTIES |
49 | |||
28. SEVERABILITY |
49 | |||
29. NON-WAIVER |
50 | |||
30. HEADINGS |
50 | |||
31. GOVERNING LANGUAGE |
50 | |||
32. EXECUTION |
50 | |||
| [ * ] = | Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuantis pursuant to Rule 406 of the Securities Act of 1933, as amended. |
-vi-
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
| (1) | Registration Statement (Form S-8 No. 333-118882) pertaining to the GTx, Inc. Directors’ Deferred Compensation Plan, | ||
| (2) | Registration Statement (Form S-8 No. 333-112576) pertaining to the GTx, Inc. 2004 Equity Incentive Plan, 2004 Non-Employee Directors’ Stock Option Plan, 2002 Stock Option Plan, 2001 Stock Option Plan, 2000 Stock Option Plan, and 1999 Stock Option Plan, and | ||
| (3) | Registration Statement (Form S-8 No. 333-136527) pertaining to the GTx, Inc. Amended and Restated 2004 Non-Employee Directors’ Stock Option Plan; |
of our reports dated February 21, 2007, with respect to the financial statements of GTx, Inc., GTx,
Inc.’s report on management’s assessment of internal control over financial reporting, and the
effectiveness of internal control over financial reporting of GTx, Inc., included in the Annual
Report (Form 10-K) for the year ended December 31, 2006.
/s/ Ernst & Young LLP
Memphis, Tennessee
February 21, 2007
February 21, 2007
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Mitchell S. Steiner, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of GTx, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.
Date: March 9, 2007
/s/ Mitchell S. Steiner
Mitchell S. Steiner, M.D., F.A.C.S.
Chief Executive Officer and
Vice-Chairman of the Board of Directors
Mitchell S. Steiner, M.D., F.A.C.S.
Chief Executive Officer and
Vice-Chairman of the Board of Directors
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Mark E. Mosteller, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of GTx, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.
Date: March 9, 2007
/s/
Mark E. Mosteller
Mark E. Mosteller, CPA
Vice President and Chief Financial Officer
Mark E. Mosteller, CPA
Vice President and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of GTx, Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Mitchell S. Steiner, Chief Executive Officer of the Company certify, pursuant to Rule
13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date:
March 9, 2007
/s/
Mitchell S. Steiner
Mitchell S. Steiner, M.D., F.A.C.S.
Chief Executive Officer and
Vice-Chairman of the Board of Directors
Mitchell S. Steiner, M.D., F.A.C.S.
Chief Executive Officer and
Vice-Chairman of the Board of Directors
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by reference into any filing of
the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934
(whether made before or after the date of the Form 10-K), irrespective of any general incorporation
language contained in such filing.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
18 U. S. C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of GTx, Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Mark E. Mosteller,
Chief Financial Officer of the Company certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date:
March 9, 2007
/s/
Mark E. Mosteller
Mark E. Mosteller, CPA
Vice President and Chief Financial Officer
Mark E. Mosteller, CPA
Vice President and Chief Financial Officer
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the
Securities and Exchange Commission and is not to be incorporated by reference into any filing of
the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934
(whether made before or after the date of the Form 10-K), irrespective of any general incorporation
language contained in such filing.