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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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, 2009
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 incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 175 Toyota Plaza 7th Floor Memphis, Tennessee |
38103 | |
| (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 whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o 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. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act:
| Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company 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, 2009 as reported on The NASDAQ
Global Market was $179,881,356.
There were 36,420,901 shares of registrant’s common stock issued and outstanding as of March
10, 2010.
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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 2010 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 that 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, including whether current and future clinical trials will achieve similar results to clinical trials that we have successfully concluded; | ||
| • | the timing, scope and anticipated completion of current and future clinical trials; | ||
| • | the timing of regulatory submissions and the timing, scope and anticipated outcome of related regulatory actions; | ||
| • | potential future licensing fees, milestone payments and royalty payments including any milestone payments or royalty payments that we may receive under our collaborative arrangement with Ipsen Biopharm Limited (formerly known as Ipsen Developments Limited), or Ipsen; | ||
| • | our and Ipsen’s ability to obtain and maintain regulatory approvals of our product candidates and any related restrictions, limitations, and/or warnings in the label of an approved product candidate; | ||
| • | our and Ipsen’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 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 loss and
other serious medical conditions.
We are developing toremifene citrate, a selective estrogen receptor modulator, or SERM, in two
separate clinical programs in men: first, toremifene 80 mg in a completed pivotal Phase III
clinical trial to reduce fractures and treat other estrogen deficiency side effects of androgen
deprivation therapy, or ADT, in men with prostate cancer, and second, toremifene 20 mg in an
ongoing 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.
In our first clinical program, toremifene 80 mg is being developed to reduce fractures in men
with prostate cancer on ADT. ADT is the most common treatment for advanced, recurrent, or
metastatic prostate cancer, and we believe that it is currently used to treat approximately 700,000
men with prostate cancer in the United States. No treatments have been approved by the FDA to
reduce fractures in men with prostate cancer on ADT. In the first quarter of 2008, we announced
that the Phase III clinical trial results for toremifene 80 mg to reduce fractures and treat other
estrogen deficiency side effects of ADT in men with prostate cancer showed that toremifene 80 mg
reduced new morphometric vertebral fractures, met other key estrogen deficiency endpoints of bone
mineral density, or BMD, lipid profiles and gynecomastia, and also showed that toremifene 80 mg
demonstrated a reduction in hot flashes in a subset of patients. In December 2008, we submitted a
New Drug Application, or NDA, for toremifene 80 mg to reduce fractures in men with prostate cancer
on ADT to the U.S. Food and Drug Administration, or FDA. In October 2009, we received a Complete
Response Letter from the FDA regarding our NDA for toremifene 80 mg notifying us that the FDA would
not approve our NDA in its present form as a result of certain clinical deficiencies identified in
the Complete Response Letter. We met with the FDA in December 2009 to better understand our
options for addressing the deficiencies identified by the FDA in the Complete Response Letter. In
2010, we plan to submit to and discuss with the FDA a proposed protocol for a second pivotal Phase
III clinical trial evaluating toremifene 80 mg to reduce fractures in men with prostate cancer on
ADT to address in a single clinical trial the deficiencies identified by the FDA in the Complete
Response Letter. Any decision to initiate another clinical trial for toremifene 80 mg to reduce
fractures in men with prostate cancer on ADT will require us to obtain sufficient additional
funding for the trial.
We are developing toremifene 20 mg to prevent prostate cancer in high risk men with high grade
PIN. 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. We believe that more than 40% of men with high grade PIN detected on
a prostate biopsy develop prostate cancer within three years. Currently, there are no treatments
approved by the FDA to reduce the incidence of prostate cancer in high risk men with high grade
PIN. In January 2005, we initiated a pivotal Phase III clinical trial of toremifene 20 mg for the
prevention of prostate cancer in high risk men with high grade PIN, which is being conducted under
a Special Protocol Assessment, or SPA, with the FDA. The last patient completed the high grade PIN
Phase III clinical trial in February 2010. We plan to announce this year the results of the trial
and, if the results from the trial are positive, our plans to submit a NDA for toremifene 20 mg to
the FDA.
We licensed to Ipsen Biopharm Limited (formerly known as Ipsen Developments Limited), or
Ipsen, exclusive rights in the European Union, Switzerland, Norway, Iceland, Lichtenstein and the
Commonwealth of Independent States, which we collectively refer to as the European Territory, to
develop and commercialize toremifene in all indications which we have licensed from Orion
Corporation, or Orion, which include all indications in humans except the treatment and prevention
of breast cancer outside of the United States.
Additionally, we are developing selective androgen receptor modulators, or SARMs, a new class
of drugs with the potential to treat cancer cachexia (cancer induced muscle loss), chronic
sarcopenia, which is the loss of skeletal muscle mass resulting in reduced physical strength and
ability to perform activities of daily living, and other musculoskeletal wasting or muscle loss
conditions. In December 2006, we announced that Ostarine™ met its
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primary endpoint in a Phase II proof of concept, double blind, randomized, placebo controlled
clinical trial in 60 elderly men and 60 postmenopausal women. In October 2008, we announced that
Ostarine™ met its primary endpoint in a Phase II clinical trial evaluating absolute change in total
lean body mass (muscle) compared to placebo. In March 2010, we reacquired full rights to our SARM
program, including Ostarine™, following the termination by us and Merck & Co., Inc., or Merck, of
the exclusive license and collaboration agreement for SARM compounds and related SARM products,
which was entered into in December 2007. We plan to continue the development of Ostarine™ for the
treatment of cancer cachexia and, in this regard, we anticipate conducting an end of Phase II
meeting with the FDA to discuss a Phase III clinical development program for Ostarine™. We do not
anticipate significant development progress on Ostarine™, or our SARM program in general, including
the initiation of any additional clinical trials, unless and until we enter into one or more new
collaborations with third parties or otherwise obtain additional funding.
We are also developing GTx-758, an oral luteinizing hormone, or LH, inhibitor for the first
line treatment of advanced prostate cancer. In preclinical animal models, GTx-758 has demonstrated
the potential to reduce testosterone concentrations in blood to castrate levels, increase BMD, and
prevent hot flashes. In 2009, we completed two Phase I clinical trials, a single ascending dose
clinical trial and a multiple ascending dose clinical trial, evaluating GTx-758 in healthy male
volunteers. GTx-758 was well tolerated in both trials. In February 2010, we initiated a Phase II
clinical trial evaluating the ability of GTx-758 to reduce testosterone to castrate levels, which
is expected to be completed in the second half of 2010.
We market FARESTON® (toremifene citrate) 60 mg tablets, approved for the treatment
of metastatic breast cancer in postmenopausal women in the United States. The active
pharmaceutical ingredient in FARESTON® is the same as in our toremifene 80 mg and
toremifene 20 mg product candidates. 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
the treatment and prevention of breast cancer outside of the United States.
We
do not expect to obtain FDA or any other regulatory approvals to market any of our product
candidates in the near future. Due to the termination of our collaboration with Merck and the
expected recognition in the first quarter of 2010 of $49.9 million in deferred revenue and the
final payment from Merck of $5.0 million of cost reimbursement for research and development
expenses, we expect to report net income for the year ending December 31, 2010. However, while
recognition of this revenue is expected to result in net income for 2010, we expect to
incur significant operating losses in 2011 and for the foreseeable future. In addition, we expect that
significant additional clinical development will be required in order to potentially obtain FDA
approval of toremifene 80 mg, including an additional pivotal Phase III clinical trial of
toremifene 80 mg.
Scientific Background on Estrogens and Androgens
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 slow bone turnover, improve bone quality, and reduce the risk of skeletal fractures.
They may also have favorable effects 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 benign prostatic hyperplasia, or 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 function. Testosterone is converted into a more potent
androgen, dihydrotestosterone, or 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 and in turn may result in osteoporosis and
fractures, erectile dysfunction, decreased sexual interest, depression and mood changes.
Estrogens and androgens perform their physiologic functions by binding to and activating their
respective hormone receptors located in various tissues. Once a hormone binds with its receptor,
this activates a series of
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cellular events that results in estrogenic or androgenic tissue effects.
Pharmaceuticals that target estrogen or androgen receptors have been used medically for over
50 years. The drugs that have been used to stimulate androgen receptors are either natural or
synthetic hormones, known as steroids. Steroids are generally believed to 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 lack of selectivity of testosterone and its
conversion to DHT may result in unwanted side effects, such as the potential stimulation of latent
clinical prostate cancer, worsening of BPH, development or worsening of acne and gynecomastia, or
loss of hair in men. Hair growth, acne and masculinization are also of concern in women. To date,
no orally available testosterone products have been approved for use in the United States. 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. 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 metastatic female breast cancer, and raloxifene, which is used to prevent and
treat postmenopausal female 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
muscle and bone 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 androgen receptors in the brain to affect mood and sexual interest.
Although no SARMs have been commercialized to date, we believe that SARMs, without the harmful side
effects of testosterone or other exogenous anabolic steroid therapies, can potentially be developed
to treat a range of medical conditions, including: (1) muscle loss conditions of chronic diseases,
such as cancer, AIDS, chronic kidney disease, end-stage renal disease, neurodegenerative disorders,
trauma and burns; (2) muscle loss conditions associated with aging such as frailty and chronic
sarcopenia; (3) the prevention and/or treatment of osteoporosis; (4) prostate disorders, such as
BPH; (5) disorders of the central nervous system, such as low libido, depression and other mood
disorders; (6) low testosterone conditions, such as primary and secondary hypogonadism; (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 market FARESTON® (toremifene citrate) 60 mg tablets, approved for the treatment
of metastatic breast cancer in postmenopausal women in the United States. Toremifene is a SERM
owned and manufactured by Orion. Toremifene is the active pharmaceutical ingredient in
FARESTON® and is currently being developed in two separate clinical programs for
toremifene 80 mg and toremifene 20 mg. 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.
As part of our effort to complete the requirements for the submission of applications for
regulatory approval of toremifene 80 mg and toremifene 20 mg, we have conducted a number of studies
of toremifene in addition to our clinical trials, including a Thorough QT study. The results of
the Thorough QT study of 250 healthy male volunteers showed that toremifene prolonged the QT
interval in a dose dependent manner. Since we market FARESTON® in the United States
under a license agreement with Orion, we notified the FDA of the Thorough QT study results and have
proposed modifications to the FARESTON® label in the United States. FDA action on the
proposed label changes is pending. The study results could lead to the inclusion of restrictions,
limitations and/or warnings in the label of FARESTON® or an approved product candidate,
which may adversely affect the
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marketability of the product or limit the patients to whom the product is prescribed.
Separately, Orion recommended label changes to the European Medicines Agency, or EMEA. In January
2009, the EMEA recommended that the FARESTON® label within the European Union reflect
that toremifene should not be given to patients at risk of prolonged QT intervals or other certain
heart problems.
We sell FARESTON® primarily through wholesale drug distributors. The top three
distributors, McKesson Corporation, Cardinal Health, Inc. and AmerisourceBergen Corporation,
accounted for approximately 95% of our product sales generated from the sale of
FARESTON® for the year ended December 31, 2009. The loss of any of these three
distributors could have a material adverse effect on continued FARESTON® sales.
FARESTON® net product sales accounted for 22%, 8%, and 15% of our total revenue for the
years ended December 31, 2009, 2008 and 2007, respectively.
Product Candidates
The following table identifies the development phase and status for each of our clinical
product candidates:
| Product | ||||||
| Candidate/ | Development | |||||
| Program | Proposed Indication | Phase | Status | |||
SERM
|
Toremifene | |||||
| 80 mg To reduce fractures in men with prostate cancer on ADT |
Pivotal Phase III clinical trial; NDA pending |
Received a Complete Response Letter from the FDA regarding the NDA in October 2009 and anticipate meeting with the FDA in 2010 to discuss protocol for a second pivotal Phase III clinical trial. |
||||
| Toremifene | ||||||
| 20 mg Prevention of prostate cancer in high risk men with high grade PIN |
Pivotal Phase III clinical trial |
Results of the Phase III clinical trial to be announced in 2010. |
||||
SARM
|
OstarineTM | |||||
| Treatment of cancer cachexia | Phase II clinical trial | Phase II clinical trial completed in September 2008. | ||||
| OstarineTM | ||||||
| Treatment of chronic sarcopenia | Phase II clinical trial | Phase IIa clinical trial completed in December 2006. | ||||
LH inhibitor
|
GTx-758 Treatment of advanced prostate cancer |
Phase II clinical trial |
Phase II clinical trial expected to be completed in the second half of 2010. |
|||
Toremifene
Our most advanced product candidate, toremifene, is a SERM. Toremifene is being developed as
a once-a-day oral tablet to (1) reduce fractures and treat other estrogen deficiency side effects
of ADT in men with prostate cancer (80 mg dose) and (2) prevent prostate cancer in high risk men
with high grade PIN (20 mg dose). In January 2005, we exclusively licensed toremifene from Orion
for all indications in humans, except the treatment and prevention of breast cancer outside of the
United States. We licensed rights to toremifene based on toremifene’s established record of safety
in the treatment of postmenopausal women with metastatic breast cancer and our belief that SERMs
can treat estrogen related complications resulting from ADT and reduce the incidence of prostate
cancer in high risk men with high grade PIN. Under a license and supply agreement with Orion,
Orion manufactures and supplies us with FARESTON®, the 60 mg dose of toremifene citrate,
for sale in the United States to treat metastatic breast cancer in postmenopausal women, as well as
toremifene 20 mg for our Phase III clinical trial for the prevention of prostate cancer in high
risk men with high grade PIN. Additionally, Orion has agreed to manufacture our clinical
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supply and, if FDA approval of toremifene 80 mg is obtained, our commercial supply of
toremifene 80 mg. In September 2006, we licensed to Ipsen exclusive rights to develop and
commercialize toremifene in the European Territory in all indications that we have licensed from
Orion.
Toremifene 80 mg to Reduce Fractures and Treat Other Estrogen Deficiency
Side Effects of ADT in Men with Prostate Cancer
Side Effects of ADT in Men with Prostate Cancer
Scientific Overview. ADT is the most common 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 LH releasing hormone agonists, or LHRH
agonists. LHRH agonists work by shutting off LH 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), 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 men, aromatase converts testosterone to estrogen. By reducing testosterone to castrate
levels, ADT depletes up to 80% of a man’s estrogen, resulting in multiple estrogen deficiency side
effects. Estrogen deficiency side effects associated with ADT include high risk of fractures, as
well as accelerated and continuous bone loss, adverse lipid changes which may lead to higher risk
of cardiovascular diseases, hot flashes, gynecomastia, depression, and memory loss. Increased risk
of skeletal fractures is a significant clinical problem because clinical studies have shown that
prostate cancer patients who develop skeletal fractures have 39 month shorter survival rates. 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 are the side effect most
frequently mentioned by prostate cancer patients on ADT.
Based on the results of our Phase III clinical trial, our two Phase II clinical trials and our
preclinical testing of toremifene 80 mg, as well as preclinical and clinical information known
about toremifene, toremifene has shown estrogenic activity both in bone, which reduces fractures,
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 Phase III clinical trial, toremifene
has been shown to improve lipid profiles in men with prostate cancer on ADT. Toremifene has also
been shown to block estrogen’s action in the male breast, which may prevent and treat gynecomastia.
As a consequence, we believe that toremifene 80 mg has the potential to treat the following
estrogen deficiency related side effects of LHRH agonists: fractures, hot flashes, adverse lipid
changes and gynecomastia. Importantly, as evidenced by our two Phase II clinical trials and our
Phase III clinical trial, toremifene has not been shown to stimulate prostate cancer growth or
increase luteinizing hormone in men with prostate cancer on ADT.
Potential Market. In the United States, we believe that approximately 700,000 prostate cancer
patients are currently being treated with ADT, and approximately 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 prostate specific antigen, or 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 estrogen deficiency related 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 estrogen deficiency related 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. No treatments have been
approved by the FDA to reduce fractures or treat other estrogen deficiency side effects in men with
prostate cancer on ADT.
Clinical Trials. In November 2003, we initiated a pivotal Phase III clinical trial of orally
administered toremifene 80 mg dose in patients undergoing ADT for advanced, recurrent or metastatic
prostate cancer. 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 was the reduction of new
morphometric vertebral fractures measured by x-ray, and the secondary endpoints of the trial
included BMD, hot flashes, lipid profile changes and gynecomastia. We reached our enrollment goal
in the fall of 2005 and randomized approximately 1,400 patients into the trial with advanced,
recurrent or metastatic prostate cancer who had been receiving ADT for at least six months and who
had significant existing bone loss, or were greater than 70 years of age. The patients were
randomized to receive either a placebo or a daily 80 mg dose of toremifene for 24 months. We
conducted the trial in approximately 150 sites in the United States and Mexico.
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In December 2005, we completed a planned interim BMD analysis among the first 197 patients who
completed one year of treatment. Patients treated with toremifene 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).
The last patient completed the ADT Phase III clinical trial in November 2007. In February
2008, we announced that the results of the Phase III clinical trial showed that toremifene 80 mg
reduced new morphometric vertebral fractures, met other key estrogen deficiency endpoints of BMD,
lipid profiles and gynecomastia, and also demonstrated a reduction in hot flashes in a subset of
patients. In the modified intent to treat analysis which included all patients with at least one
evaluable study radiograph and a minimum of one dose of study drug or placebo, toremifene 80 mg demonstrated a 50% reduction in new morphometric vertebral fractures. In an intent to
treat analysis, which included all patients randomized into the trial and who received a minimum of
one dose of study drug, toremifene 80 mg demonstrated a 54% reduction in new morphometric vertebral
fractures. In prespecified subset analyses, in study patients who were greater than 80% treatment
compliant, toremifene 80 mg reduced new morphometric vertebral fractures by 61%. When
study patients who had greater than 7% bone loss at one year and new morphometric vertebral
fractures were considered as treatment failures, toremifene 80 mg compared to placebo
demonstrated a 56% reduction.
Patients treated with toremifene 80 mg compared to placebo demonstrated
statistically significant increases in BMD in the lumbar spine, hip, and femur skeletal sites (each
site demonstrating p<0.0001). Toremifene 80 mg treatment compared to placebo also
resulted in a decrease in total cholesterol (p=0.011), LDL (p=0.018), and triglycerides
(p<0.0001), and an increase in HDL (p=0.001). There were also statistically significant
improvements in gynecomastia (p=0.003). In March 2008, we announced that in an analysis of hot
flashes in a subset of patients in the toremifene 80 mg Phase III clinical trial experiencing six
or more hot flashes per day at baseline and not being treated with megestrol acetate
(Megace®), toremifene 80 mg treatment reduced the number of hot flashes by an
average of 4.7 hot flashes per day compared to placebo patients who had a reduction of 1.6 hot
flashes per day (p=0.03). The reduction of hot flashes in patients treated with toremifene 80 mg was durable for at least 12 months.
Toremifene 80 mg had a favorable safety profile and was well tolerated. Among the most common
adverse events that occurred in over 2% of study subjects were joint pain (treated 7.3%, placebo
11.8%), dizziness (treated 6.3%, placebo 6.2%), back pain (treated 6.0%, placebo 5.2%), and
extremity pain (treated 5.0%, placebo 4.4%). Venous thromboembolic events, or VTEs, which included
both deep venous thrombosis and pulmonary embolism, were 17 (2.6%) in the toremifene 80
mg treated group and 7 (1.1%) in the placebo group. The risk for VTE’s was similar between the
toremifene 80 mg treated group and the placebo group in the second year of treatment.
The majority of VTEs occurred in men at high risk for a VTE (including: age greater than 80 years,
history of VTEs, recent surgical procedure or immobilization). In men without major risk factors
for VTE, there were 5 VTEs in the toremifene 80 mg treated group and 3 VTEs in the
placebo group.
As part of our effort to complete the requirements for the submission of applications for
regulatory approval of toremifene 80 mg, we have conducted a number of studies of toremifene in
addition to our clinical trials, including a Thorough QT study, a bioequivalence study and a series
of drug-drug interaction studies. The results of the Thorough QT study of 250 healthy male
volunteers, with 5 parallel cohorts receiving 20 mg, 80 mg or 300 mg doses of toremifene,
moxifloxacin, or placebo, showed that toremifene prolonged the QT interval in a dose dependent
manner. The mean change in QTcB (a measurement of QT interval corrected by Bazett’s formula) from
baseline relative to placebo for toremifene 20 mg was 5.79 milliseconds, for toremifene 80 mg, it
was 22.43 milliseconds, and for moxifloxacin, it was 8.83 milliseconds. Since we market
FARESTON® in the United States under a license agreement with Orion, we notified the FDA
of the Thorough QT study results and have proposed modifications to the FARESTON® label
in the United States. FDA action on the proposed label changes is pending. The study results
could lead to the inclusion of restrictions, limitations and/or warnings in the label of FARESTON
or an approved product candidate, which may adversely affect the marketability of the product or
limit the patients to whom the product is prescribed. Separately, Orion recommended label changes
to the EMEA. In January 2009, the EMEA recommended that the FARESTON® label within the
European Union reflect that toremifene should not be given to patients at risk of prolonged QT
intervals or other certain heart problems. Our Thorough QT study was designed to better understand
the risk of Torsades de Pointes, or Torsades, a rare and potentially fatal arrhythmia. The degree
of QT interval prolongation is recognized as an imperfect surrogate marker for the risk of
Torsades. Moreover, it is well established that not all medicines which prolong the QT interval
will result in Torsades and Torsades can occur in the absence of QT prolongation. The post
marketing pharmacovigilance database of approximately 480,000 patient years of use of toremifene at
doses up to 240 mg in women, who are more sensitive to develop Torsades than are men, and the
extensive clinical development programs in women and now in men,
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substantiate that there have been no reported cases of Torsades in patients taking toremifene.
In our pivotal Phase III clinical trial, there was no increase in adverse events that have been
associated with cardiac arrythmia in the toremifene group compared to placebo. The results of
these completed studies were included as a part of the NDA submission to the FDA for our toremifene
80 mg product candidate to reduce fractures in men with prostate cancer on ADT and, subject to
receipt of favorable results from our ongoing toremifene 20 mg Phase III clinical trial, will be
included as a part of the NDA submission for our toremifene 20 mg product candidate for the
prevention of prostate cancer in high risk men with high grade PIN, and will be used to update the
label for FARESTON®. The study results could lead to the inclusion of restrictions,
limitations and/or warnings in the label of FARESTON® or an approved product candidate,
which may adversely affect the marketability of the product or limit the patients to whom the
product is prescribed.
NDA Filing. In December 2008, we submitted a NDA for toremifene 80 mg to reduce fractures in
men with prostate cancer on ADT. In October 2009, we received a Complete Response Letter from the
FDA regarding our NDA for toremifene 80 mg to reduce fractures in men with prostate cancer on ADT,
notifying us that the FDA would not approve our NDA in its present form as a result of certain
clinical deficiencies identified in the Complete Response Letter. The FDA identified two
deficiencies in the Complete Response Letter and recommended that the following information be
provided to the FDA to address these clinical deficiencies: (i) results of a second adequate and
well-controlled Phase III clinical trial demonstrating the safety and efficacy of toremifene 80 mg
to reduce fractures in men with prostate cancer on ADT and (ii) results from an adequate and
well-controlled clinical trial demonstrating that toremifene 80 mg treatment to reduce fractures in
men with prostate cancer on ADT does not have a detrimental effect on either time-to-disease
progression or overall survival. We met with the FDA in December 2009 to better understand our
options for addressing the deficiencies identified by the FDA in the Complete Response Letter. In
2010, we plan to submit to and discuss with the FDA a proposed protocol for a second pivotal Phase
III clinical trial evaluating toremifene 80 mg to reduce fractures in men with prostate cancer on
ADT to address in a single clinical trial the deficiencies identified by the FDA in the Complete
Response Letter. Any decision to initiate another clinical trial for
toremifene 80 mg to reduce fractures in men with prostate cancer on
ADT will require us to obtain sufficient additional funding for the
trial.
Toremifene 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 15% of the patients who undergo prostate
biopsies. Over a 17
year period, scientific evidence has established that men who have high grade PIN are at high risk for
developing prostate cancer. We believe that more than 40% of these men will progress to prostate
cancer within three years. 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 are no treatments approved by the FDA to reduce the incidence of prostate cancer
in high risk men 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 toremifene blocks estrogen receptors in
the prostate, we believe that it has the potential to reduce the incidence of prostate cancer in
high risk men with high grade PIN.
Potential Market. 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. There are approximately
192,000 new cases of prostate cancer diagnosed each year and 28,000 prostate cancer deaths annually
in the United States. In addition, in the United States, there are over 115,000 new cases of high
grade PIN diagnosed each year, with an estimated 14 million men under the age of 80 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.
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We have entered into separate collaboration agreements with several diagnostic companies to
provide clinical samples to these companies from our Phase IIb clinical trial and/or our ongoing
Phase III clinical trial of toremifene 20 mg for the prevention of prostate cancer in high risk men
with high grade PIN. 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 toremifene in men diagnosed with high grade PIN to determine
the efficacy and safety of a daily dose of toremifene 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 toremifene or placebo. A screening prostate biopsy was performed on
each trial participant before 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 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 (completer’s 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 toremifene 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 toremifene 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 toremifene 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 toremifene 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 toremifene 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 toremifene 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 toremifene dose groups and placebo. The results of the
Phase IIb clinical trial may not be the same as or indicative of the results we obtain from the
pivotal Phase III clinical trial, and we do not know if the results from our pivotal Phase III
clinical trial will be sufficient for the FDA or any other regulatory authorities to approve
toremifene 20 mg to prevent prostate cancer in high risk men with high grade PIN.
In January 2005, we initiated a randomized, double blind, placebo controlled pivotal Phase III
clinical trial of orally administered toremifene 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. A SPA is
designed to facilitate the FDA’s review and approval of drug products by allowing the FDA 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 the NDA. However, there are circumstances
under which we may not receive the benefits of a SPA, notably if the FDA subsequently identifies a
substantial scientific issue essential to determining the product’s safety and efficacy, and we may
be required to conduct significant additional
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development in order to obtain regulatory approval notwithstanding a SPA with the FDA.
Approximately 130 clinical sites across the United States and Canada are participating in this
trial. We have randomized a total of 1,590 patients into the trial, 330 patients above our
enrollment goal of 1,260 patients. These additional patients are also participating in bone and
ocular substudies requested by the FDA under the SPA. A planned efficacy interim analysis
conducted in the second quarter of 2008 did not reach the specified statistical outcome of
p<0.003. A Data Safety Monitoring Board, or DSMB, meets every six months to review unblinded
data from the toremifene 20 mg Phase III clinical trial. In September 2009, an independent DSMB
conducted a planned, semi-annual review of unblinded safety data from the 1,590 patients
participating in the toremifene 20 mg Phase III high grade PIN clinical trial and recommended the
clinical trial continue as planned. The last patient completed the trial in February 2010. We
plan to announce this year the results of the trial and, if the results from the trial are
positive, our plans to submit a NDA for toremifene 20 mg to the FDA.
SARMs
SARMs are a new class of drugs with the potential to treat cancer cachexia (cancer induced
muscle loss), chronic sarcopenia, which is the loss of skeletal muscle mass resulting in reduced
physical strength and ability to perform activities of daily living, and other musculoskeletal
wasting or muscle loss conditions.
Ostarine™ 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
loss. 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 second, 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.
Ostarine™ is an oral nonsteroidal agent designed to have anabolic activity on muscle and bone
without unwanted side effects on prostate and skin. We believe that Ostarine™ 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, Ostarine™ is being developed in an oral
dosage form, which patients may find is more convenient to take.
Potential Market. Approximately five million patients are treated by medical oncologists in
the United States. Data has shown that two-thirds of patients with locally advanced or metastatic
cancer may be at risk for cancer cachexia as measured by any of the following: actively losing
weight, having functional limitations or losing muscle. The prevalence of precachexia at-risk
patients is estimated to be up to 2.9 million. 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, Megace®, an appetite stimulant which has been used
off-label for cancer patients, has not been shown to increase lean body mass in spite of increasing
appetite.
Clinical Trials. We have clinical data from two Phase I clinical trials and two Phase II
clinical trials of Ostarine™. In our first Phase I clinical trial, a double blind, placebo
controlled, single ascending dose study in 96 healthy male volunteers, Ostarine™ was well tolerated
and there were no drug-related serious adverse events. This clinical trial demonstrated that the
half life of Ostarine™ 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 Ostarine™ in 48 healthy male
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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
positive changes in body composition at clinically relevant doses; increases in lean body mass and
decreases in fat mass were observed. Ostarine™ did not appear to have unwanted side effects on the
prostate (serum PSA) or the skin (sebum analysis). Ostarine™ 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 Ostarine™ 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 topline results. Without a prescribed diet or exercise regimen, all subjects
treated with Ostarine™ had dose dependent increases in the primary endpoint total lean body mass.
Treatment with Ostarine™ also resulted in a dose dependent improvement in functional performance, a
secondary endpoint, measured by a stair climb test. Ostarine™ had a favorable safety profile, with
no serious adverse events reported. Ostarine™ 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.
In July 2007, we initiated a Phase II randomized, double blind, placebo controlled clinical
trial evaluating Ostarine™ for the treatment of cancer cachexia in 159 patients diagnosed with
non-small cell lung cancer, colorectal cancer, non-Hodgkin’s lymphoma, chronic lymphocytic
leukemia, or breast cancer. In October 2008, we announced topline results of this clinical trial.
In this analysis, the study met its primary endpoint of absolute change in total lean body mass
(muscle) compared to placebo and the secondary endpoint of muscle function (performance) after 16
weeks of treatment in 159 cancer patients with reported weight loss. We plan to continue the
development of Ostarine™ for the treatment of cancer cachexia and, in this regard, we anticipate
conducting an end of Phase II meeting with the FDA to discuss a Phase III clinical development
program for Ostarine™. We do not anticipate significant development progress on Ostarine™, or our
SARM program in general, including the initiation of any additional clinical trials, unless and
until we enter into one or more new collaborations with third parties or otherwise obtain
additional funding.
SARMs for the Treatment of Chronic Sarcopenia
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 20 and 80 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. 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. 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 SARMs 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 SARMs can increase muscle size and strength, resulting in improved function, quality of life
and speed of recovery, and can prevent osteoporosis and fractures. SARMs have been designed to
have anabolic properties in muscle and bone without unwanted side effects, such as the stimulation
of prostate cancer in men and masculinization in women. In preclinical studies of intact animals,
SARMs have been shown to build muscle and bone while shrinking the prostate.
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Potential Market. There are approximately 17.5 million people over the age of 65 in the
United States who have age related loss of muscle mass. In the United States in 2006, there were
approximately 13.1 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 loss 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. In December 2006, we announced that Ostarine™, a SARM, 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 do not anticipate significant development
progress on our SARM program, including the initiation of any additional clinical trials, unless
and until we enter into one or more new collaborations with third parties or otherwise obtain
additional funding.
LH Inhibitor
GTx-758 for the Treatment of Advanced Prostate Cancer
Scientific Overview. GTx-758 is a small molecule that we are developing for the first line
treatment of advanced prostate cancer. In animal models, GTx-758 rapidly suppressed secretion of
luteinizing hormone, LH, by feedback inhibition on the pituitary, inhibiting the production of
androgens by the testes.
ADT is the most common treatment for patients who have advanced prostate cancer. ADT reduces
testosterone, a primary growth factor for prostate cancer, to castrate levels. ADT is accomplished
either surgically by removal of the testes or chemically by LHRH therapy. LHRH agents work by
shutting off LH secretion by the pituitary gland thereby stopping testosterone production by the
testes. The reduction in testosterone by ADT also results in very low estrogen levels in men,
because estrogen is derived from testosterone in men. Estrogen deficiency side effects associated
with LHRH therapies may include bone loss and fractures, adverse lipid changes, hot flashes,
gynecomastia and impaired cognitive function.
In preclinical animal models, GTx-758 has demonstrated the potential to reduce testosterone
concentrations in blood to castrate levels, increase BMD, and prevent hot flashes.
Potential Market. In the United States, we believe that approximately 700,000 prostate cancer
patients are currently being treated with ADT, and approximately 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. In 2008, the annual U.S. sales of drugs for ADT, which
include currently marketed LHRH agonists, were approximately $1.7 billion.
Clinical Trials. In 2009, we evaluated GTx-758 in healthy male volunteers in two Phase I
clinical trials, a single ascending dose clinical trial completed in the second quarter and a
multiple ascending dose clinical trial completed in the fourth quarter. GTx-758 was well tolerated
in both trials. In February 2010, we initiated a Phase II clinical trial evaluating the ability of
GTx-758 to reduce testosterone to castrate levels in 70 subjects. We expect this trial to be
completed in the second half of 2010.
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 may be possible to design and develop classes of nonsteroidal small molecule drugs to
modulate hormone receptors in addition to estrogen receptors.
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We have an extensive preclinical pipeline generated from our own discovery program, including
estrogen receptor beta agonists and other novel compounds that are currently in preclinical
development for the potential treatment of ophthalmic diseases, cancer, psoriasis and/or pain.
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 selectively modulate
hormone receptors, inhibit cancer growth, or treat inflammatory conditions. Our in-house medicinal
chemists and scientists provide us with significant discovery and development expertise. Using our
capabilities in hormone receptor biology, cancer pharmacology and medicinal chemistry, we are able
to target many hormone receptors or other cellular targets and generate compounds that are designed
to address important unmet medical needs.
We design and synthesize new compounds based on computer, or in silico, models and crystal
structures of a molecular target’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 Ostarine™, a nuclear
hormone receptor modulator. We continue to conduct research and development efforts focused on
other SERM and SARM compounds, other hormone receptor modulator compounds and anticancer agents.
Our Strategy
Our objective is to discover, develop and commercialize small molecules that selectively
target hormone pathways to treat cancer, osteoporosis and bone loss, muscle loss and other serious
medical conditions. Key elements of our strategy to achieve this objective are to:
Obtain Regulatory Approvals of Toremifene 80 mg and Toremifene 20 mg. We have completed our
Phase III clinical trial of toremifene 80 mg to reduce fractures in men with prostate cancer on ADT
and submitted a NDA to the FDA in December 2008. In October 2009, we received a Complete Response
Letter from the FDA regarding our NDA for toremifene 80 mg to reduce fractures in men with prostate
cancer on ADT, notifying us that the FDA would not approve our NDA in its present form as a result
of certain clinical deficiencies identified in the Complete Response Letter. We met with the FDA
in December 2009 to better understand our options for addressing the deficiencies identified by the
FDA in the Complete Response Letter. In 2010, we plan to submit to and discuss with the FDA a
proposed protocol for a second pivotal Phase III clinical trial evaluating toremifene 80 mg to
reduce fractures in men with prostate cancer on ADT to address in a single clinical trial the
deficiencies identified by the FDA in the Complete Response Letter. In addition, we are
conducting our Phase III clinical trial of toremifene 20 mg for the prevention of prostate cancer
in high risk men with high grade PIN under a SPA with the FDA. The last patient completed the
trial in February 2010. We plan to announce this year the results of the trial and, if the results
from the trial are positive, our plans to submit a NDA for toremifene 20 mg to the FDA. We remain
focused on our efforts to continue the development of, and obtain regulatory approvals for our
toremifene product candidates.
Commercialize Toremifene 80 mg and Toremifene 20 mg in the United States and Establish a Sales
and Marketing Infrastructure. We have licensed from Orion the commercial rights to toremifene in
the United States. We believe that, if approved, we can effectively market toremifene to
urologists and medical oncologists in the United States through a specialty sales force that we
plan to build.
Partner Additional Commercial Rights to Toremifene. In September 2006, we licensed to Ipsen
exclusive rights in the European Territory to develop and commercialize toremifene in
all indications which we have licensed from Orion. We are currently pursuing similar
collaborations or partnerships for toremifene in Asia and other markets outside of the United
States and the European Territory. We 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 toremifene 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 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
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more willing to be tested for high grade PIN if the diagnostic test were less invasive than a
prostate biopsy. 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 toremifene 20 mg.
Pursue Clinical Development and Commercialization of SARMs. As a result of the termination of
our collaboration with Merck, we reacquired full rights to our SARM program, including Ostarine™.
We plan to continue the development of Ostarine™ for the treatment of cancer cachexia and, in this
regard, we anticipate conducting an end of Phase II meeting with the FDA to discuss a Phase III
clinical development program for Ostarine™ for which we will need additional funding. Accordingly,
we are pursuing a global strategic partnership or collaboration for the clinical development and
commercialization of our SARM product candidates.
Build Upon Our Other Drug Discovery Capabilities to Sustain Our Small Molecule Product
Candidate Pipeline. While our clinical development efforts to date have focused on SERM and SARM
technologies, we have the capability to discover and develop additional drug candidates for other
important disease targets. We intend to develop new molecules to treat diseases that affect large
numbers of patients and are underserved by available alternatives or for which there are no current
alternatives. In 2009, we completed two Phase I clinical trials, a single ascending dose clinical
trial and a multiple ascending dose clinical trial, evaluating GTx-758 in healthy male volunteers.
GTx-758 was well tolerated in both trials. In February 2010, we initiated a Phase II clinical
trial evaluating the ability of GTx-758 to reduce testosterone to castrate levels, which is
expected to be completed in the second half of 2010.
Increase Commercial Sales of FARESTON®. We market FARESTON® for the
treatment of metastatic breast cancer in postmenopausal women in the United States. Our strategy
is to increase commercial sales of FARESTON®. However, sales of pharmaceuticals for
breast cancer in the SERM class have declined in recent years as aromatase inhibitors have gained
market share.
Licenses and Collaborative Relationships
In addition to our internally-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 product candidates. Our most significant license and collaboration relationships are as
follows:
Orion Corporation
In March 2000, we entered into a license and supply agreement with Orion to develop and
commercialize products containing toremifene. 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 in January 2005 with Orion which replaced 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 for all human indications
worldwide, except breast cancer outside of the United States. We are required to pay Orion a
portion of certain types of upfront and milestone income that we receive from third-party
sublicensees, after we recover our clinical development costs, and 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 toremifene 80 mg and toremifene 20 mg 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
toremifene globally and FARESTON® in the United States. Orion may terminate its supply
obligations at its election at any time as a result of our failure to obtain regulatory approval of
one of our toremifene product candidates in the United States prior to December 31, 2009, in which
event we will have the right to enter into a contract manufacturing agreement with another supplier
for toremifene-based products. However, any arrangements we make for an alternative supply would
have to be made with a qualified alternative supplier with appropriate FDA approval in order for us
to obtain our supply requirements for toremifene. The term of the amended and restated license and
supply agreement lasts, on a country-by-country basis, until the later of
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expiration of our own patents claiming the processes or the methods of use of toremifene for
prostate cancer or the end of all marketing or regulatory exclusivity which we may obtain for
toremifene-based products. The term of our method of use patents extend from 2019 to 2023. Orion
may terminate the amended and restated license and supply agreement, on a country-by-country basis,
as a result of our uncured material breach, including under certain circumstances if we decided not
to commercially launch toremifene in any major country after we obtain regulatory approval in such
country, or our bankruptcy. Following the termination of the amended and restated license and
supply agreement by Orion for our material breach, we will grant a royalty-bearing license to Orion
to enable Orion to continue the development and commercialization of toremifene-based products in
the countries in which the agreement is terminated.
University of Tennessee Research Foundation
In July 2007, we and UTRF entered into a consolidated, amended and restated license agreement,
or the SARM License Agreement, to consolidate and replace our two previously existing SARM license
agreements with UTRF and to modify and expand certain rights and obligations of each of the parties
under both license agreements. Pursuant to the SARM License Agreement, we were granted exclusive
worldwide rights in all existing SARM technologies owned or controlled by UTRF, including all
improvements thereto, and exclusive rights to future SARM technology that may be developed by
certain scientists at the University of Tennessee or subsequently licensed to UTRF under certain
existing inter-institutional agreements with The Ohio State University. Unless terminated earlier,
the term of the SARM License Agreement will continue, on a country-by-country basis, for the longer
of 20 years or until the expiration of the last valid claim of any licensed patent in the
particular country in which a licensed product is being sold. UTRF may terminate the SARM License
Agreement for our uncured breach or upon our bankruptcy.
In September 2007, we and UTRF entered into an amended and restated license agreement, or the
SERM License Agreement, to replace our previously existing exclusive worldwide license agreement
for toremifene. Pursuant to the SERM License Agreement, we were granted exclusive worldwide rights
to UTRF’s method of use patents relating to SERMs, including toremifene for chemoprevention of
prostate cancer as well as future related SERM technologies that may be developed by certain
scientists at the University of Tennessee. Unless terminated earlier, the term of the SERM License
Agreement will continue, on a country-by-country basis, in a particular country for the longer of
20 years from the effective date of our previously existing exclusive worldwide license agreement
with UTRF for toremifene or until the expiration of the last valid claim of any licensed
patent in such country. UTRF may terminate the SERM License Agreement for our uncured breach or
upon our bankruptcy.
Under the SARM License Agreement and the SERM License Agreement, or together, the UTRF License
Agreements, we paid UTRF a one-time, upfront fee of $290,000 per UTRF License Agreement as
consideration for entering into the UTRF License Agreements. We are also obligated to pay UTRF
annual license maintenance fees and royalties on sublicense revenues and net sales of products. We
also agreed to pay all expenses to file, prosecute and maintain the patents relating to the
licensed SARM and SERM technologies, and are obligated to use commercially reasonable efforts to
develop and commercialize products based on the licensed SARM and SERM technologies.
In December 2008, we and UTRF amended the UTRF License Agreements, or together, the License
Amendments, to, among other things, clarify the treatment of certain payments that we may receive
from our current and future sublicensees for purposes of determining sublicense fees payable to
UTRF, including the treatment of payments made to us in exchange for the sale of our securities in
connection with sublicensing arrangements. In consideration for the execution of the License
Amendments, we paid UTRF an aggregate of $540,000.
Ipsen
In September 2006, we entered into a collaboration and license agreement with Ipsen, or the
Ipsen Collaboration Agreement, pursuant to which we granted Ipsen exclusive rights in the European
Territory to develop and commercialize toremifene in all indications which we have licensed from
Orion, which include all indications in humans except the treatment and prevention of breast cancer
outside of the United States. Under the Ipsen Collaboration 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 upon period of time subsequent to the time of the first commercial
launch of toremifene within the European Territory. Also under the Ipsen Collaboration Agreement,
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.
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In accordance with the terms of the Ipsen Collaboration Agreement, Ipsen paid us €23.0 million
as a license fee and expense reimbursement, of which €1.5 million was paid to us in equal
installments over a three-year period. In October 2006, we received €21.5 million (approximately
$27.1 million) from Ipsen as the initial payment for the license fee and expense reimbursement. In
September 2009, 2008, and 2007, we received €500,000 (approximately $726,000, $711,000, and
$688,000, respectively) from Ipsen for the three annual installment payments. Pursuant
to the Ipsen Collaboration Agreement, we are also entitled to receive from Ipsen up to an aggregate
of €39.0 million in milestone payments depending on the successful development and launch of
toremifene in certain countries of the European Territory for the high grade PIN indication,
subject to certain conditions, and the ADT indication. In February 2008, we earned a milestone of
€1.0 million (approximately $1.5 million) with the achievement of the primary endpoint in the
toremifene 80 mg ADT Phase III clinical trial.
Ipsen has agreed to be responsible for and to pay all clinical development, regulatory and
launch activities to commercialize toremifene 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 toremifene development costs in the United States, if certain conditions are met.
Under the Ipsen Collaboration Agreement, Ipsen must elect to retain its rights to commercialize
toremifene 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 toremifene 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
toremifene for high grade PIN. If Ipsen does not exercise its election, 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 toremifene 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 toremifene 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 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 toremifene to both Orion and 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.
With respect to the development and commercialization of toremifene-based products, the term
of the Ipsen Collaboration Agreement will continue until the parties are no longer developing and
commercializing toremifene-based products. Ipsen may terminate the Ipsen Collaboration Agreement
for our uncured breach, upon our bankruptcy, 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, or in
the event that either the UTRF License Agreements or the license and supply agreement with Orion
terminate early.
Merck & Co., Inc.
In December 2007, we entered into a global exclusive license and collaboration agreement, or
the Merck Collaboration Agreement, governing our and Merck’s joint research, development and
commercialization of SARM compounds and related SARM products. In March 2010, following Merck’s
determination to discontinue internal development of Ostarine™ (previously designated by Merck as
MK-2866), we and Merck mutually agreed to terminate our collaboration and, as a result, we
reacquired full rights to our SARM program, including Ostarine™.
Under the Merck Collaboration Agreement, we granted Merck an exclusive worldwide license under
our SARM-related patents and know-how. In connection with entering into the Merck Collaboration
Agreement, Merck paid us an upfront licensing fee of $40.0 million and purchased approximately
$30.0 million of our common stock. In addition, Merck agreed to pay us $15.0 million in guaranteed
cost reimbursements for research and development activities in equal annual installments over a
three year period beginning on the first anniversary of the effective date of the Merck
Collaboration Agreement. We received $5.0 million from Merck in both December 2008 and December
2009 as the first and second payments of cost reimbursements for research and development
activities. Although the Merck Collaboration Agreement has been terminated, Merck remains
obligated to pay us the third and final payment of $5.0 million of cost reimbursements for research
and development activities in late 2010.
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Manufacturing
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.
We have agreed to purchase from Orion our worldwide requirements of toremifene in a finished
tablet form at specified prices under a license and supply agreement. Similarly, Ipsen has agreed
to purchase from Orion, toremifene tablets for clinical testing and commercial sale in
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 toremifene. 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. 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.
Orion may terminate its obligation to supply us and Ipsen at its election at any time. There
are a number of circumstances in which Orion is required to grant manufacturing rights to us and
Ipsen, including following termination of its supply obligation, 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. Also, under certain circumstances, if additional manufacturing capacity is needed to supply
our increasing need for product, we have the right at certain sales levels to require Orion to
qualify an additional manufacturing site at our expense. Under these circumstances, we and Ipsen
would need to make arrangements for an alternative supply which would have to be made by a
qualified alternative supplier with the appropriate FDA approval in order for us to obtain our
supply requirements for toremifene. In addition, Orion may terminate its obligation to supply us
or Ipsen with toremifene if we or Ipsen are in material breach of our respective supply agreements
with Orion, or in connection with certain bankruptcy events involving us or Ipsen, respectively.
If Orion elects to terminate its obligation to manufacture and supply us and Ipsen with toremifene,
any arrangements we make for an alternative supply would have to be have to be made with a
qualified alternative supplier with appropriate FDA approval in order for us to obtain our supply
requirements for toremifene. In addition, although Orion’s composition of matter patents have
expired, and as such, neither we nor Ipsen would be prevented from manufacturing toremifene within the United States or European Territory, there is no obligation on the part of Orion
to transfer its manufacturing technology to us or Ipsen or to assist us or Ipsen in developing
manufacturing capabilities to meet our respective supply needs. We and Ipsen have mutually agreed
to cooperate in the manufacture of toremifene in the event Orion ceases manufacture of toremifene
for any of the above-mentioned reasons.
There are no complicated chemistries or unusual equipment required in the manufacturing
process for our SARMs. The active ingredient in Ostarine™ and our other SARMs is manufactured
using a four-step synthetic process that uses commercially available starting materials and raw
materials for each step. Initially, we relied on third party vendors for the manufacture of
Ostarine™ drug substance. During the term of our collaboration, Merck assumed primary
manufacturing responsibilities for Ostarine™ and other SARM products developed under our
collaboration. In connection with the termination of our collaboration, Merck agreed to return to
us all remaining inventory of Ostarine™ drug substance.
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, 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. Our commercial opportunities will be reduced or eliminated if our
competitors develop and commercialize similar products that are safer, more effective, have fewer
side effects or are less expensive than any products that we and/or our collaborators may develop.
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Toremifene 80 mg to Reduce Fractures and Treat Other Estrogen Deficiency
Side Effects of ADT in Men with Prostate Cancer
Side Effects of ADT in Men with Prostate Cancer
Currently, there are no products that have been approved by the FDA to reduce fractures in men
with prostate cancer. We are aware of a number of drugs that are marketed or prescribed off-label
for the treatment of single estrogen deficiency related side effects. For example,
Evista® (raloxifene hydrochloride), a SERM marketed by Eli Lilly & Co.,
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. ProliaTM (denosumab), a monoclonal antibody developed by
Amgen, is under regulatory review in the United States, Switzerland, Australia and Canada for the
treatment and prevention of postmenopausal osteoporosis and for the treatment of bone loss in
patients undergoing hormone ablation therapy for breast or prostate cancer and has received a
positive opinion in Europe from the EMEA’s Committee for Medicinal Products for Human Use.
Effexor® (venlafaxine hydrochloride), marketed by Pfizer, Inc., Catapres®
(clonidine hydrochloride), marketed by Boehringer Ingelheim, and Megace® (megestrol
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 treatments. In
addition, most patients would need to take several different drugs and potentially receive
radiation treatments to treat multiple estrogen deficiency side effects of ADT. In contrast, we
believe that toremifene 80 mg as a single product candidate has the potential to treat multiple
estrogen deficiency side effects of ADT.
Toremifene 20 mg for the Prevention of Prostate Cancer in High Risk Men with High Grade PIN
Currently, there are no drug products approved by the FDA to reduce the incidence of prostate
cancer in high risk men with high grade PIN. 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 toremifene 20 mg Phase III clinical trial and may not have enough
clinical patients to show a statistically significant benefit. GlaxoSmithKline is expected to
resubmit a supplemental NDA for Avodart® for prostate cancer risk reduction among men at
increased risk of developing the disease. However, men with high grade PIN were excluded from the
Avodart® Phase III clinical trial. Finasteride has been shown to reduce the risk of
prostate cancer and in a retrospective ad hoc analysis the risk of high grade PIN in men with a PSA
of 0-3 ng/dl. Because finasteride also increased the risk for high grade prostate cancer tumors
(Gleason Grade 7-10) and sexual side effects, some physicians have not recommended the use of
finasteride for prevention of prostate cancer.
SARMs for the Treatment of Cancer Cachexia and Chronic Sarcopenia
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, an oral steroid, 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.
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 also been prescribed off-label for
cancer cachexia. Oxandrolone 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 loss. 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 loss. Pharmacopeia (now
owned by Ligand Pharmaceuticals) in-licensed the Bristol Myers Squibb SARM program and has a
product candidate in a Phase I clinical study. Abbott Laboratories and Ligand Pharmaceuticals have
a collaboration to develop a SARM and have been conducting Phase I clinical studies. Other
pharmaceutical companies are also developing SARMs. Pfizer, Inc., Eli Lilly & Co., and Amgen have
myostatin inhibitors in development that may compete with Ostarine™ if approved for commercial
sale. Megace® (megestrol acetate) and Marinol® (dronabinol) are appetite
stimulants approved for AIDS patients that are used off-label for cancer cachexia. In addition,
Cytokinetics, Inc. is developing a troponin activator with a muscle specific mechanism in a Phase I
study. Moreover, there are other categories of drugs in development, including ghrelin receptor
agonists and growth hormone secretagogues, which may have some muscle activity.
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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 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. 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” which has shown efficacy and tolerability advantages for AIs
compared to tamoxifen.
Sales and Marketing
We market FARESTON® (toremifene citrate) 60 mg tablets, approved for the treatment
of metastatic breast cancer in postmenopausal women in the United States. 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 specialty sales and marketing infrastructure to market toremifene 80 mg and toremifene 20 mg, if
approved by the FDA, to the relatively small and concentrated community of urologists and medical
oncologists in the United States. We have partnered with Ipsen to commercialize toremifene in
the European Territory if approved for commercial sale. We are currently seeking partners to market toremifene in
Asia and other markets outside of the United States and the European Territory.
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 toremifene 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 for all uses in humans in the
United States, and for all human uses outside the United States other than the treatment and
prevention of breast cancer. Orion’s patent for toremifene expired in the United States in
September 2009 and foreign counterparts of this patent also have expired. As a result, we will
need to rely primarily on the protection afforded by the method of use patents that either have
been already issued or may later issue from our owned or licensed patent applications.
We have licensed from UTRF method of use patents and pending patent applications for specific
disease indications and doses in the United States, and issued and pending patent applications
internationally related to the use of toremifene 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 toremifene for this indication will begin expiring in 2019.
We have our own method of use patents and applications in the United States and
internationally related to the use of toremifene 80 mg for the treatment of osteoporosis and
reduction of fractures in men with prostate cancer treated by ADT, as well as other side effects
from ADT such as gynecomastia and hot flashes. A method of use patent related to the use of
toremifene for the treatment of ADT-induced osteoporosis and fractures in men with prostate cancer
is issued in the United States and will expire in 2023. Furthermore, with respect to the method of
use of toremifene 80 mg for the treatment of osteoporosis and fractures and other side effects of
ADT in men with prostate cancer worldwide and the method of use of toremifene 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 other pending patent applications.
Even though patents have issued in respect of our pending method of use patent applications,
since patents covering the composition of matter of toremifene have expired, competitors could
market and sell generic versions of toremifene at doses and in formulations that are bioequivalent
to FARESTON® (toremifene citrate 60 mg) for uses other than the indications for
toremifene covered by our issued and pending method of use patent applications, and individual
physicians would be permitted to prescribe generic versions of toremifene 60 mg for indications
that are protected by our or our licensors’ method of use patents and pending patent applications.
Assuming toremifene receives appropriate marketing approval, if patents do not issue in
particular countries on account of our pending method of use patent applications related to the use
of toremifene 80 mg for the treatment of osteoporosis and fractures and other side effects of ADT
in men with prostate cancer and the use of toremifene 20 mg for the
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reduction in the incidence of prostate cancer in high risk men with high grade PIN outside the
United States, competitors may be able to market and sell generic versions of toremifene tablets
for these indications.
For Ostarine™ and our other SARMs, we have an exclusive license from 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 methods of synthesizing the active pharmaceutical ingredients. We
have also licensed issued and pending patent applications in the United States and internationally
related to methods for building muscle mass and bone in patients, for treating bone related
disorders including bone frailty and osteoporosis, and for treating muscle wasting disorders
including cancer cachexia using Ostarine™ and other SARMs.
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.
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 recently obtained authority
to 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 the 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.
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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 Practices 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 typically
considers, 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 a 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
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 current applicable FDA 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 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.
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, the 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. The
FDA initially 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.
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 a “complete response” letter at the end of the review period.
A “complete response” letter will be issued to let a company know that the review period for a
drug is complete and that the application is not yet ready for approval. The letter will describe
specific deficiencies and, when possible, will outline recommended actions the applicant might take
to get the application ready for approval.
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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.
In accordance with newly-gained authority pursuant to the Food and Drug Administration
Amendments Act of 2007, the FDA may impose risk evaluation mitigation strategies, or REMS, on a
product if the FDA believes there is a reason to monitor the safety of the drug in the marketplace.
REMS are a new tool for the FDA that became effective in March 2008, and the agency has begun to
implement this new authority on a case-by-case assessment as to whether a REMS is needed. Since
the effective date, the FDA has used its new REMS enforcement authority more than 60 times and it
is anticipated the agency will continue to use this authority on a regular basis going forward.
REMS could add training requirements for healthcare professionals, safety communications efforts,
and limits on channels of distribution, among other things. The sponsor would be required to
evaluate and monitor the various REMS activities and adjust them if need be. The financial impact
of REMS is uncertain at this time.
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, or ANDAs.
Patent term extension 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 extensions, however, are subject to a maximum extension
of five years, and the patent term extension 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 generally 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 ANDA or a NDA submitted pursuant to section
505(b)(2) of the Federal Food, Drug, and Cosmetics Act, 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 (505(b)(2) NDA), 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 ANDA or
505(b)(2) NDA, 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, and any use of the drug for which
marketing approval is sought could not violate another NDA holder’s patent claims.
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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 ANDA or 505(b)(2) NDA 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
ANDAs or 505(b)(2) NDAs 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 ANDAs for generic versions of
their drugs assuming the approval would not violate another NDA holder’s patent claims. The ANDA
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 ANDA applicant needs only to submit data demonstrating that its product is bioequivalent 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, a 505(b)(2) NDA, 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.
If a competitor submits an ANDA or 505(b)(2) NDA for a compound or use of any compound covered
by another NDA holder’s patent claims, the Hatch-Waxman Act requires, in some circumstances, the
applicant 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
miss the 45-day deadline, 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 ANDA or 505(b)(2) NDA. 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 ANDA or 505(b)(2) NDA. Once the applicant of the ANDA or 505(b)(2) NDA 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
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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.
Research and Development
Since our inception in 1997, we have been focused on drug discovery, preclinical development
and clinical development programs. Research and development expenses include, but are not limited
to, 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 and medical affairs
activities, quality assurance activities and license fees. Our research and development expenses
were $32.3 million for the year ended December 31, 2009, $44.3 million for the year ended December
31, 2008, and $38.5 million for the year ended December 31, 2007.
Employees
As of December 31, 2009, we had 120 employees, 32 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 electronically with the U.S. Securities and Exchange Commission, or SEC, our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934. We make available on our Web site at www.gtxinc.com, free of charge, copies of these
reports as soon as reasonably practicable after we electronically file such material with, or
furnish it to, the SEC. Further, copies of these reports are located at the SEC’s Public Reference
Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public
Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a Web site
that contains reports, proxy statements, and other information regarding our filings at
www.sec.gov. 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 of the Registrant
The following table sets forth information about our executive officers as of March 10, 2010.
| Name | Age | Position(s) | ||||
Mitchell S. Steiner, M.D., F.A.C.S.
|
49 | Chief Executive Officer and Vice Chairman of the Board of Directors | ||||
Marc S. Hanover
|
47 | President, Chief Operating Officer and Director | ||||
Ronald A. Morton, Jr., M.D., F.A.C.S.
|
51 | Vice President, Chief Medical Officer | ||||
Henry P. Doggrell
|
61 | Vice President, General Counsel and Secretary | ||||
Mark E. Mosteller
|
47 | Vice President, Chief Financial Officer and Treasurer | ||||
James T. Dalton, Ph.D.
|
47 | Vice President, Preclinical Research and Development | ||||
Gregory A. Deener
|
48 | Vice President, Sales and Marketing | ||||
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, 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
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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.
Ronald A. Morton, Jr., M.D., F.A.C.S., was appointed Vice President and Chief Medical Officer
in April 2007. He joined GTx from the University of Medicine & Dentistry of New Jersey Robert Wood
Johnson Medical School, where he served as Professor of Surgery, Chief of Urology and Director of
Urologic Oncology for the Cancer Institute of New Jersey from January 2004 until April 2007. Dr.
Morton also held the Conzen Chair for Clinical Research and was the Director of the New Jersey
Center for Clinical and Translational Sciences. Prior to joining Robert Wood Johnson Medical
School in 2004, Dr. Morton held a dual faculty appointment at the Baylor College of Medicine in the
Scott Department of Urology and in the Department of Molecular and Cell Biology (May 1994 to
December 2003), was Clinical Director of the Baylor Adult Urology Program (July 2000 to December
2003), Chief of Urology at the Houston Veterans Administration Medical Center (January 1999 to
December 2003), and Director of the Baylor Prostate Cancer Center Research Laboratories (July 1996
to December 2003). He received his bachelor and medical degrees from The Johns Hopkins University
and completed his urology training and postdoctoral fellowship and was an AFUD Scholar at The Johns
Hopkins Brady Urological Institute.
Henry P. Doggrell 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 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 by
Ernst & Young LLP. Mr. Mosteller is a Certified Public Accountant and holds a B.S. in Accounting
from the University of Tennessee.
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 25 years of experience in Marketing and Sales and has launched a urology medicine within the
U.S. From 1996 to December 2003, Mr. 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.
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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 we anticipate that we will incur continued losses
for the foreseeable future.
We have a limited operating history. As of December 31, 2009, we had an accumulated deficit
of $368.2 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 $46.3 million for the year ended December 31, 2009, $51.8 million in 2008,
and $40.4 million in 2007. Due to the termination of our collaboration with Merck & Co., Inc., or
Merck, and the expected recognition in the first quarter of 2010 of $49.9 million in deferred
revenue and the final payment from Merck of $5.0 million of cost reimbursement for research and
development expenses, we expect to report net income for the year ending December 31, 2010.
However, while recognition of this revenue is expected to result in net income for 2010, we
expect to incur significant operating losses in 2011 and for the foreseeable future. In
addition, we do not expect to obtain FDA or any other regulatory approvals to market any of our
product candidates in the near future. These losses have had and will continue to have an adverse
effect on our stockholders’ equity and working capital.
In October 2009, we received a Complete Response Letter from the U.S. Food and Drug
Administration, or FDA, regarding our New Drug Application, or NDA, for toremifene 80 mg to reduce
fractures in men with prostate cancer on ADT notifying us that the FDA would not approve our NDA in
its present form as a result of certain clinical deficiencies identified in the Complete Response
Letter. As a result, FDA approval of toremifene 80 mg, if it occurs, will be substantially
delayed. In addition, we expect that significant additional clinical development will be required
in order to potentially obtain FDA approval of toremifene 80 mg, including an additional pivotal
Phase III clinical trial. We do not currently have the cash resources sufficient to fund such
additional clinical development, and if we are unable to obtain funding sufficient to continue or
complete the development of toremifene 80 mg, we may be required to further delay or eliminate our
toremifene 80 mg development program, which would have a material adverse effect on our business
and growth prospects.
Because of the numerous risks and uncertainties associated with developing and commercializing
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 financed our operations and internal growth primarily
through public offerings and private placement of our common stock, as well as payments from our
current and former collaborators which include $40.0 million in upfront license fees from Merck
received in January 2008, a $1.5 million milestone payment from Ipsen Biopharm Limited, or Ipsen,
received in April 2008, and $5.0 million received from Merck in guaranteed cost reimbursements for
research and development activities in both December 2009 and December 2008. In March 2010, we and
Merck agreed to terminate our collaboration and, as a result, we will not receive any milestone
payments or royalties for the development or sale of selective androgen receptor modulators, or
SARMs, from Merck. Although the collaboration with Merck was terminated, Merck remains obligated
to pay us the third and final payment of $5.0 million of cost reimbursements for research and
development activities in late 2010. We do not anticipate significant development progress on
Ostarine™, or our SARM program in general, including the initiation of any additional clinical
trials, unless and until we enter into one or more new collaborations with third parties or
otherwise obtain additional funding. FARESTON® is currently our only commercial product
and, until such time that we receive regulatory approval to market any of our product candidates,
we expect that FARESTON® will account for all of our product revenue. For the year
ended December 31, 2009, we recognized $3.3 million in net revenues from the sale of
FARESTON®. If we, Ipsen, and/or any potential future collaborators are unable to
develop and commercialize any
of our product candidates, if development is delayed or if sales revenue from any product
candidate that receives marketing approval is insufficient, we may never become profitable and we
will not be successful.
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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 substantial additional capital to:
| • | fund our operations and conduct clinical trials, including any additional clinical trial that we may undertake in an effort to obtain FDA approval of toremifene 80 mg or any of our SARM product candidates; | ||
| • | 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 and cash equivalent balances, short-term investments,
interest income and product revenue from the sale of FARESTON® will be sufficient to
meet our projected operating requirements for at least the next twelve months. This estimate does
not include any costs related to additional clinical development of our toremifene 80 mg product
candidate or SARM program that we may undertake in an effort to obtain FDA approval. 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. Our future funding requirements will depend on many
factors, including:
| • | whether and to what extent we determine to continue the development of toremifene 80 mg following discussion with the FDA, including an additional clinical trial to address the deficiencies identified by the FDA in the Complete Response Letter for toremifene 80 mg; | ||
| • | the scope, rate of progress and cost of our, Ipsen’s and/or any potential future collaborators’ clinical trials and other research and development activities; | ||
| • | future clinical trial results; | ||
| • | the terms and timing of any future collaborative, licensing and other arrangements that we may establish; | ||
| • | the cost and timing of regulatory filings and/or approvals to commercialize our product candidates and any related restrictions, limitations, and/or warnings in the label of an approved product candidate; | ||
| • | potential future licensing fees, milestone payments and royalty payments, including any milestone payments or royalty payments that we may receive under our collaborative arrangement with Ipsen; | ||
| • | the cost and timing of establishing medical education, sales, marketing and distribution capabilities; | ||
| • | the cost of establishing clinical and commercial supplies of our product candidates and any products that we, Ipsen, and/or any potential future collaborators 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 cost of defending any other litigation claims; 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
short-term investments, 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. In December 2009, we
announced a reduction of approximately 26% of our workforce in order to reduce our operating
expenses in connection with the receipt of the Complete Response Letter regarding our NDA for
toremifene 80 mg and the associated delay in the potential regulatory approval of toremifene 80 mg.
If we are unable to raise additional funds when needed, we may need to further reduce our
expenditures, perhaps significantly, to preserve our cash. The cost-cutting measures we have
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taken
and may take in the future may not be sufficient to enable us to meet our cash requirements, and
they may negatively affect our business and growth prospects.
If we raise additional funds by issuing equity securities, our stockholders may 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 may be necessary to relinquish rights to some of our technologies or product
candidates, or we may be required to grant licenses on terms that are not favorable to us. Our
ability to raise additional funds may be adversely impacted by our receipt of the Complete Response
Letter from the FDA in October 2009 regarding our NDA for toremifene 80 mg and the related
uncertainty regarding the continued development of, and prospects for FDA approval of, toremifene
80 mg, as well as current economic conditions, including the effects of the disruptions to and
continuing volatility in the credit and financial markets in the United States and worldwide. As a
result of these and other factors, we cannot be certain that additional funding will be available
on acceptable terms, or at all. If adequate funds are not available when we need them, we may be
required to delay, reduce the scope of or eliminate one or more of our research or development
programs or 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.
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 if our or our collaborators’ 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.
In clinical studies, the efficacy and/or safety results from the trial may be insufficient to
support the submission or approval of a NDA with the FDA. For example, we received a Complete
Response Letter in October 2009 from the FDA regarding our NDA for toremifene 80 mg to reduce
fractures in men with prostate cancer on ADT, notifying us that the FDA would not approve our NDA
in its present form as a result of certain clinical deficiencies identified in the Complete
Response Letter, which deficiencies may only be addressed by conducting an additional pivotal Phase
III clinical trial of toremifene 80 mg. In 2010, we plan to submit to and discuss with the FDA a
proposed protocol for a second pivotal Phase III clinical trial evaluating toremifene 80 mg to
reduce fractures in men with prostate cancer on ADT to address in a single clinical trial the
deficiencies identified by the FDA in the Complete Response Letter. Any decision to initiate
another clinical trial for toremifene 80 mg to reduce fractures in men with prostate cancer on
ADT will require us to obtain sufficient additional funding for the trial. In addition, in
connection with our pivotal Phase III clinical trial of toremifene 20 mg for the prevention of
prostate cancer in high risk men with high grade PIN, a planned efficacy interim analysis was
conducted in the second quarter of 2008, which concluded that the efficacy results did not reach
the specified statistical outcome, and we were therefore unable to submit a NDA to the FDA based on
this efficacy interim analysis. Until such time as we conclude the clinical trial and analyze the
data, which we expect will occur in 2010, we will not be able to determine if the clinical trial
successfully demonstrated a statistically significant positive outcome to allow us to submit a NDA
to the FDA to seek marketing approval for this product candidate.
We, Ipsen, or any potential future collaborators may experience numerous unforeseen events
during, or as a result of, preclinical testing and the clinical trial process that could delay or
prevent our or our collaborators’ ability to commercialize our product candidates, including:
| • | regulators or institutional review boards may not authorize us or our collaborators to commence a clinical trial or conduct a clinical trial at a prospective trial site; | ||
| • | preclinical or clinical trials may produce negative or inconclusive results, which may require us or our collaborators to conduct additional preclinical or clinical testing or to abandon projects that we expect to be promising; | ||
| • | registration or enrollment in clinical trials may be slower than we currently anticipate, resulting in significant delays; |
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| • | we, Ipsen, or any potential future collaborators may suspend or terminate 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, Ipsen, or any potential future
collaborators 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 currently 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. Our, Ipsen’s
or any potential future collaborators’ preclinical or clinical trials may produce negative or
inconclusive results that would not support our beliefs regarding the potential effectiveness of
our product candidates.
If we, Ipsen, or any potential future collaborators 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, Ipsen, or any potential future collaborators 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.
In our Phase III clinical trial for toremifene 20 mg for the prevention of prostate
cancer in high risk men with high grade PIN, some patients have experienced venous thromboembolic
events, or VTEs, such as deep vein thromboses and pulmonary embolisms, as well as myocardial
infarctions, or heart attacks, which have been considered by investigators as possibly related to
treatment with toremifene 20 mg. Because this trial is blinded, we do not know whether
these patients received placebo or toremifene 20 mg in this trial. In addition, although the
results from our Phase III clinical trial for toremifene 80 mg to reduce fractures and treat other
estrogen deficiency side effects of ADT in men with prostate cancer showed that the drug had a
generally favorable safety profile compared to placebo and was well tolerated, there were a higher
number of subjects experiencing a VTE in the toremifene 80 mg treatment group, 17 (2.6%) versus 7
(1.1%) in the placebo group. Even though the majority of VTEs recorded in the clinical trial
occurred in men who were at high risk for a VTE (including: age greater than 80 years, history of
VTEs, recent surgical procedure or immobilization) and data from the clinical trial showed that the
number of men without any of these independent risk factors for VTEs in whom a VTE occurred during
the clinical trial was 5 in the toremifene 80 mg treatment group versus 3 in the placebo group, the
FDA will consider the overall safety profile from the clinical trial when making its determination
to grant marketing approval and to require potential warnings in the label if approval is granted.
As part of our effort to complete the requirements for the submission of applications for
regulatory approval to commercialize toremifene 80 mg and 20 mg, we have conducted a number of
studies of toremifene in addition to our clinical trials, including a Thorough QT study (toremifene
80 mg and toremifene 20 mg), a bioequivalence study (toremifene 80 mg), a series of drug-drug
interaction studies (toremifene 80 mg and toremifene 20 mg), and a semen quality study (toremifene
20 mg) to assess the effect of toremifene. The results of the Thorough QT study of 250 healthy
male volunteers, with 5 parallel cohorts receiving 20 mg, 80 mg or 300 mg doses of toremifene,
moxifloxacin, or placebo, showed that toremifene prolonged the QT interval in a dose dependent
manner. The mean
change in QTcB (a measurement of QT interval corrected by Bazett’s formula) from baseline
relative to placebo for toremifene 20 mg was 5.79 milliseconds, for toremifene 80 mg, it was 22.43
milliseconds, and for moxifloxacin, it was 8.83 milliseconds. Since we market FARESTON®
in the United States under a license agreement with Orion Corporation, or Orion, we notified the
FDA of the Thorough QT study results and have proposed modifications to the FARESTON®
label in the United States. FDA action on the proposed label changes is pending. Separately, Orion
recommended label changes to the European Medicines Agency, or EMEA. In January 2009, the EMEA
recommended that the FARESTON® label within the European Union reflect that toremifene
should not be given to patients at risk of prolonged QT intervals or other certain heart problems.
The results of these completed studies have been included as a part of the NDA submission to the
FDA for our toremifene 80 mg product candidate to
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reduce fractures in men with prostate cancer on
ADT and, subject to receipt of favorable results from our ongoing toremifene 20 mg Phase III
clinical trial, will be included as a part of the NDA submission for our toremifene 20 mg product
candidate for the prevention of prostate cancer in high risk men with high grade PIN, and will be
used to update the label for FARESTON®. The study results could lead to the inclusion
of restrictions, limitations and/or warnings in the label of FARESTON® or an approved
product candidate, which may adversely affect the marketability of the product or limit the
patients to whom the product is prescribed.
In addition, in our Phase II clinical trial for Ostarine™ for the treatment of cancer cachexia
(cancer induced muscle loss), we observed mild elevations of hepatic enzymes in a few patients, and
in our preclinical studies for Ostarine™, only at the highest doses, we observed expected selective
effects on the reproductive and other target organs in the male population consistent with the
stimulating and inhibiting effects on the androgen receptor which is located in these organs.
If the incidence of the events described above increases in number or severity, if a
regulatory authority believes that these or other 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, Ipsen, or any potential future collaborators may conduct in the
future or after any of our product candidates are approved and marketed:
| • | we, Ipsen, or any potential future collaborators 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 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
We are dependent upon our collaborative arrangement with Ipsen to further develop and
commercialize toremifene 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 toremifene, any
dispute over the terms of our collaboration with Ipsen, or any other adverse developments in our
relationship with Ipsen could materially harm our business and would 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 toremifene within the European Territory. Any failure on the part of Ipsen to
initiate these studies could delay the commercialization of toremifene within the European
Territory. In addition, the
receipt of the Complete Response Letter from the FDA in October 2009 has delayed Ipsen’s plans
to seek marketing approval of toremifene 80 mg in the European Territory.
We may not be successful in entering into additional collaborative arrangements with other
third parties, and even if we do enter into collaborative arrangements with other parties, such
arrangements may not be successful. 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 collaborative arrangement with Ipsen
for the development and commercialization of toremifene subjects us to a number of risks,
including:
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| • | we are not able to control either the amount and timing of resources that Ipsen devotes to toremifene; | ||
| • | we may not be able to control the amount and timing of resources that our potential future collaborators may devote to our product candidates; | ||
| • | Ipsen or any potential future collaborations may experience financial difficulties or changes in business focus; | ||
| • | we may be required to relinquish important rights such as marketing and distribution rights; | ||
| • | under certain circumstances, Ipsen may not be required to commercialize toremifene in certain countries of the European Territory if Ipsen determines 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 toremifene 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 the 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; | ||
| • | under certain circumstances, a collaborator could move forward with a competing product candidate developed either independently or in collaboration with others, including our competitors; and | ||
| • | collaborative arrangements are often terminated or allowed to expire, such as our former collaboration with Merck, which would delay the development and may increase the cost of developing our product candidates. |
We may not realize the anticipated benefits from our collaborative arrangement with Ipsen, and
may not receive the anticipated benefits from any future collaboration arrangements that we might
establish.
We may not receive any future milestone payments provided for under our collaborative
arrangement with Ipsen if our agreement with Ipsen is terminated, if certain clinical development
and regulatory milestones under our agreement with Ipsen are not achieved or if Ipsen fails to
develop and commercialize toremifene in the European Territory. In addition, even if required
regulatory approvals to market toremifene are obtained, it is possible that Ipsen will not
successfully market and sell any toremifene products in which case we would not receive royalties
to the extent that we currently anticipate. Furthermore, our royalty rates under our
collaboration and license 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, and Ipsen may be entitled to offset a portion of any royalties due to us if Ipsen
licenses patent rights from a third party that would otherwise be infringed by Ipsen’s use,
manufacture, sale or import of toremifene compounds.
Under our agreement with Ipsen, 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 toremifene 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. However, there can be no
assurance that we will be able to reach an agreement with Ipsen on reasonable terms, or at all,
for any new SERM-based products.
Ipsen may terminate the license and collaboration agreement for our uncured breach, upon our
bankruptcy, 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, or in the event that either the
UTRF License Agreements or the license and supply agreement with Orion terminate early. If our
agreement with Ipsen is terminated, the anticipated future benefits to us from this agreement would
be eliminated and the development and commercialization of toremifene in the European Territory
would be delayed. In any such or similar events, we may not realize the anticipated benefits from
our collaborative arrangement with Ipsen.
Besides Ipsen, we have established and intend to continue to establish collaborations with
third parties to develop and commercialize some of our current and future product candidates, and
these collaborations may not be
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successful or we may otherwise not realize the anticipated benefits
from these collaborations. For example, in March 2010, following Merck’s determination to
discontinue internal development of Ostarine™ (previously designated by Merck as MK-2866), we and
Merck mutually agreed to terminate our collaboration and, as a result, we will not receive any
milestone payments or royalties for the development or sale of SARMs from Merck. In the future, we
may not be able to locate third-party collaborators to develop and market our product candidates,
and we may lack the capital and resources necessary to develop our product candidates alone.
If third parties do not manufacture our product candidates in sufficient quantities, in the
required timeframe, 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, if any, 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 in a finished
tablet form at specified prices under a license and supply agreement. Similarly, Ipsen has agreed
to purchase from Orion toremifene 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 toremifene.
Orion may terminate its supply obligations at its election at any time as a result of our
failure to obtain regulatory approval of one of our toremifene product candidates in the United
States prior to December 31, 2009. If Orion elects to terminate its obligation to manufacture and
supply us and Ipsen with toremifene, any arrangements we make for an alternative supply would have
to be made with a qualified alternative supplier with appropriate FDA approval in order for us to
obtain our supply requirements for toremifene. In addition, although Orion’s composition of matter
patents have expired, and as such, neither we nor Ipsen would be prevented from manufacturing
toremifene within the United States or European Territory, there is no obligation on the part of
Orion to transfer its manufacturing technology to us or Ipsen or to assist us or Ipsen in
developing manufacturing capabilities to meet our respective supply needs. We and Ipsen have
mutually agreed to cooperate in the manufacture of toremifene in the event Orion ceases manufacture
of toremifene for any of the above-mentioned reasons. Although we and Ipsen have agreed to
cooperate with each other in the event either of our supply rights are terminated by Orion for any
reason, a disruption in the supply of toremifene could delay the development of and impair our and
Ipsen’s ability to commercialize toremifene.
We also rely on Orion to cooperate with us in the filing and maintenance of regulatory filings
with respect to the manufacture of toremifene, and Orion may terminate its obligation to assist us
in obtaining and maintaining regulatory approval of toremifene at its election at any time. 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 further delay or prevent
regulatory approval of toremifene.
Historically, we have relied on third party vendors for the manufacture of Ostarine™ drug
substance. However, Merck assumed primary manufacturing responsibilities for Ostarine™ under our
exclusive license and collaboration
agreement with Merck, which agreement was terminated in March 2010. In connection with the
termination of the agreement with Merck, Merck agreed to return to us all remaining inventory of
Ostarine™ drug substance. If this supply of Ostarine™ becomes unusable or if we are unsuccessful
in identifying a contract manufacturer or negotiating a manufacturing agreement on a timely basis
for our Ostarine™ or other SARM product candidates supply needs, we could experience a delay in
conducting any additional clinical trials of Ostarine™ or other SARM product candidates. 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 the relationship with Orion for
toremifene, or to do so at an acceptable cost, or other suppliers fail to meet our requirements for
Ostarine™ or other SARM product candidates for any reason, we would be required to obtain alternate
suppliers. 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.
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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; | ||
| • | drug product supplies not meeting the requisite requirements for clinical trial use; and | ||
| • | the possible exercise by Orion of its right to terminate its obligation to supply us with toremifene, which it may do at its election at any time. |
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, Ipsen and/or our potential future collaborators may develop may compete
with other product candidates and products for access to manufacturing facilities. For example,
the active pharmaceutical ingredient in our toremifene 80 mg and toremifene 20 mg product
candidates is also the active pharmaceutical ingredient in FARESTON®. Further, Orion
has agreed to supply toremifene 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 metastatic 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 successfully 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.
Risks Related to Our Intellectual Property
If we lose our licenses from the University of Tennessee Research Foundation, or UTRF, we may
be unable to continue a substantial part of our business.
We have licensed intellectual property rights and technology from UTRF used in a substantial
part of our business. These license agreements may be terminated by UTRF 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 a substantial part of our business and may result in
a serious adverse effect on our financial condition, results of operations and any prospects for
growth. Additionally, the termination of our UTRF license for chemoprevention of prostate cancer
could lead to a termination of our license and collaboration agreement with Ipsen, which would
result in a loss of any potential
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milestone or royalty payments from Ipsen related to the high
grade PIN indication.
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 result in issued patents or
result in patents with narrow or unenforceable claims, or if we are prevented 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
toremifene within a substantial portion of the European Territory may depend on having 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 inter-institutional agreements with The Ohio State
University, or 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. In
addition, under the terms of some of our agreements with diagnostic companies to which we provided
clinical samples from our clinical trials of toremifene 20 mg, 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 has expired in the United States and abroad. As a
result, we will need to rely primarily on the protection afforded by method of use patents relating
to the use of toremifene for the relevant prescribed indications that have been issued or may be
issued from our owned or licensed patent applications. Also, within the European Territory, Ipsen may
need to rely primarily on the protection afforded by marketing and data exclusivity for the
toremifene products that may be sold within the countries comprising the European Territory. To date,
many of our applications for method of use patents filed for toremifene outside of the United
States are still pending and have not yielded issued patents. Loss of marketing and data
exclusivity for any toremifene products that may be commercialized within the European Territory could
adversely affect Ipsen’s ability to successfully commercialize these products.
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 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 non-infringing 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
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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.
Off-label sale or use of toremifene products could decrease sales of toremifene 80 mg and
toremifene 20 mg tablets if approved for commercial sale, 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 toremifene.
In all countries in which we hold or have licensed rights to patents or patent applications
related to toremifene, the composition of matter patents we license from Orion have expired. As a
result, we will need to rely primarily on the protection afforded by method of use patents. Our
method of use patents may not protect toremifene from the risk of off-label sale or use of other
toremifene products in place of toremifene 80 mg and toremifene 20 mg tablets. 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 other toremifene products may adversely affect our or Ipsen’s
ability to generate revenue from the sale of toremifene 80 mg and 20 mg tablets, if approved for
commercial sale.
Even in the event that patents are issued from our pending method of use patent applications,
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 method
of use 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 or potential 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 toremifene 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 toremifene in the countries
outside of the United States where these applications are currently pending, we would not have as
extensive patent coverage to prevent competitors from marketing and selling generic versions of
toremifene at doses and in formulations equivalent to toremifene 80 mg and toremifene 20 mg tablets
for the indications covered by our pending method of use patent applications. Also, regulatory
authorities may not recognize marketing and data exclusivity for
toremifene in the European Territory for the treatment of prostate cancer and estrogen deficiency side effects resulting from ADT. If
generic versions of toremifene are able to be sold in countries within the European Territory for
the indications for which Ipsen anticipates marketing toremifene, 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 generic sales
thresholds are reached.
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 toremifene for human uses
outside the United States.
Our exclusive license and supply agreement from Orion excludes the use of toremifene for the
treatment of metastatic breast cancer in postmenopausal women 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 toremifene 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 toremifene.
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, development, and
manufacture and process synthesis efforts. Others might have
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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, synthesis, commercialization, formulation or use of our product candidates. In
addition, the production, manufacture, synthesis, 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, Ipsen and/or our potential future collaborators 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 that it does not infringe, which may not be possible or could require substantial funds and time. |
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 product sales to
pay for costs incurred by Ipsen to obtain a license to any dominant intellectual property rights
that are infringed by the products at issue.
Risks Related to Regulatory Approval of Our Product Candidates
If we, Ipsen, or any potential future collaborators are not able to obtain required regulatory
approvals, we or such 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, 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 or any collaborator from commercializing the
product candidate. We have not received regulatory approval to market any of our product
candidates in any jurisdiction, and we do not expect to obtain FDA or any other regulatory
approvals
to market any of our product candidates in the near future. 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 toremifene 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. For example,
the FDA announced in 2008 that, due to staffing and resource limitations, it has given its managers
discretion to miss certain timing goals for completing reviews of NDAs set forth under the
Prescription Drug User Fee Act, or PDUFA. Although the FDA has since publicly expressed a
recommitment to meeting PDUFA deadlines, it remains unclear whether and to what extent the FDA will
adhere to PDUFA deadlines in the future. If the FDA were to miss a PDUFA timing goal for one of
our product candidates, the development and commercialization of the product candidate could be
delayed. In addition, the Food and Drug Administration Amendments Act of 2007, or the FDA
Amendments Act, which was enacted in September 2007, expands the FDA’s authority to regulate drugs
throughout the product life cycle, including enhanced authority to require post-approval studies
and clinical trials. Other proposals have been made to impose additional requirements on drug
approvals, further expand post-approval requirements and restrict sales and promotional activities.
This new legislation, and the additional proposals if enacted, may make it more difficult or
burdensome for us or our potential future collaborators to obtain approval of our product
candidates. 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 approval may also impose
risk evaluation mitigation strategies, or REMS, on a product if the FDA believes
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there is a reason
to monitor the safety of the drug in the market place. REMS may include requirements for
additional training for health care professionals, safety communication efforts and limits on
channels of distribution, among other things. The sponsor would be required to evaluate and
monitor the various REMS activities and adjust them if need be. 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, in October 2009, we received a Complete
Response Letter from the FDA regarding our NDA for toremifene 80 mg to reduce fractures in men with
prostate cancer on ADT notifying us that the FDA would not approve our NDA in its present form as a
result of certain clinical deficiencies identified in the Complete Response Letter. As a result,
FDA approval of toremifene 80 mg, if it occurs, will be substantially delayed. In addition, we
completed our Phase III clinical trial of toremifene 80 mg to reduce fractures and treat other
estrogen deficiency side effects of ADT in men with prostate cancer and are conducting our Phase
III clinical trial of toremifene 20 mg for the prevention of prostate cancer in high risk men with
high grade PIN, under Special Protocol Assessments, or SPAs, with the FDA. A SPA is designed to
facilitate the FDA’s review and approval of drug products by allowing the FDA 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 if the FDA subsequently identifies a substantial
scientific issue essential to determining the product’s safety or efficacy, and we may be required
to conduct significant additional development in order to obtain regulatory approval
notwithstanding a SPA with the FDA. For example, even though our Phase III clinical trial of
toremifene 80 mg to reduce fractures in men with prostate cancer on ADT was completed under a SPA,
we were unable to obtain approval of our NDA for toremifene 80 mg that we submitted in December
2008. 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 submit an application to 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, including toremifene 80 mg in the near future. In October
2009, we received a Complete
Response Letter from the FDA regarding our NDA for toremifene 80 mg to reduce fractures in men
with prostate cancer on ADT identifying two deficiencies in our application and requesting that
clinical trials be conducted to address the deficiencies. Furthermore, it is not anticipated that
Ipsen will receive the appropriate regulatory approvals to market toremifene within the European
Territory any sooner than we will achieve regulatory approval in the United States, and it likely
will be thereafter. The inability to obtain FDA approval or approval from comparable authorities
in other countries for our product candidates would prevent us, Ipsen, or any potential future
collaborators from commercializing these product candidates in the United States or other
countries. See the section entitled “Business — Government Regulation” under Part I, Item 1 of
this Annual Report on Form 10-K for additional information regarding risks associated with
marketing approval, as well as risks related to post-approval requirements.
Risks Related to Commercialization
The commercial success of any products that we, Ipsen, and/or any potential future
collaborators may develop, including any toremifene products, will depend upon the market and the
degree of market acceptance among physicians, patients, healthcare payors and the medical
community.
Any products that we, Ipsen, and/or any potential future collaborators 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 or receive royalties to the extent we currently anticipate, 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:
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| • | efficacy and safety results in clinical trials; | ||
| • | 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. |
As part of our effort to complete the requirements for the submission of applications for
regulatory approval to commercialize toremifene 80 mg and toremifene 20 mg, we have conducted a
number of studies of toremifene in addition to our clinical trials, including a Thorough QT study
(toremifene 80 mg and toremifene 20 mg), a bioequivalence study (toremifene 80 mg), a series of
drug-drug interaction studies (toremifene 80 mg and toremifene 20 mg), and a semen quality study
(toremifene 20 mg) to assess the effect of toremifene. The results of the Thorough QT study of 250
healthy male volunteers, with 5 parallel cohorts receiving 20 mg, 80 mg or 300 mg doses of
toremifene, moxifloxacin, or placebo, showed that toremifene prolonged the QT interval in a dose
dependent manner. The mean change in QTcB (a measurement of QT interval corrected by Bazett’s
formula) from baseline relative to placebo for toremifene 20 mg was 5.79 milliseconds, for
toremifene 80 mg, it was 22.43 milliseconds, and for moxifloxacin, it was 8.83 milliseconds. Since
we market FARESTON® in the United States under a license agreement with Orion, we
notified the FDA of the Thorough QT study results and have proposed modifications to the
FARESTON® label in the United States. FDA action on the proposed label changes is
pending. Separately, Orion recommended label changes to the European Medicines Agency, or EMEA. In
January 2009, the EMEA recommended that the FARESTON® label within the European Union
reflect that toremifene should not be given to patients at risk of prolonged QT intervals or other
certain heart problems. The results of these completed studies were included as a part of the NDA
submission to the FDA for our toremifene 80 mg product candidate to reduce fractures in men with
prostate cancer on ADT and, subject to receipt of favorable results from our ongoing toremifene 20
mg Phase III clinical trial, will be included as a part of the NDA submission for our toremifene 20
mg
product candidate for the prevention of prostate cancer in high risk men with high grade PIN,
and will be used to update the label for FARESTON®. The study results could lead to the
inclusion of restrictions, limitations and/or warnings in the label of FARESTON® or an
approved product candidate, which may adversely affect the marketability of the product or limit
the patients to whom the product is prescribed.
Our only marketed product generating revenue is FARESTON®, which is subject to a
number of risks. These risks may cause sales of FARESTON® to continue to decline.
FARESTON® is currently our only marketed product. FARESTON® is
indicated for the treatment of metastatic breast cancer in postmenopausal women.
FARESTON® competes against tamoxifen, fulvestrant, and several aromatase inhibitors,
including anastrozole, letrozole, and exemestane, for hormonal treatment of breast cancer. Sales
of pharmaceuticals for breast cancer in the SERM class have declined in recent years as aromatase
inhibitors have gained market share and we believe this trend will continue. Further, the branded
competitors have greater resources and generic competitors are preferred by insurers. Continued
sales of FARESTON® also could be impacted by many other 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 together accounted for approximately 95% of our product sales of FARESTON® for the year ended December 31, 2009; | ||
| • | any restrictions, limitations, and/or warnings added to the FARESTON® label as a result of our studies of toremifene, including a Thorough QT study and drug interaction studies, or otherwise; | ||
| • | the continued success of competing products, including aromatase inhibitors; |
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| • | 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 introduction of generic toremifene products that compete with FARESTON® for the treatment of breast cancer; and | ||
| • | the loss of Orion, upon which we rely as a single source, as our supplier of FARESTON®. |
If we are unable to expand our sales and marketing capabilities or establish 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.
We currently plan to build a specialty sales force to market our product candidates, if approved
for commercial sale, to urologists and medical oncologists in the United States. In the event we
are unable to hire a sufficient number of qualified sales personnel consistent with our plans, this
could delay the commercialization of any of our product candidates if approved for commercial sale.
We are relying on Ipsen to market and distribute our toremifene 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 toremifene
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 toremifene product
candidates in the European Territory. Currently, we do not have a partner outside of the European
Territory and our success in regions other than the European Territory may be dependent on our
ability to find suitable partners in other regions of the world. 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, Ipsen, and/or any potential future collaborators 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, Ipsen, and/or any
potential future collaborators 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, Ipsen, and/or any potential future
collaborators may develop, our revenues and prospects for profitability may suffer. For example,
the Medicare Prescription Drug, Improvement and Modernization Act of 2003 created a prescription
drug benefit program for Medicare recipients. The prescription drug program established by this
legislation may have the effect of reducing the prices that we, Ipsen, or any potential future
collaborators are able to charge for products we, Ipsen, and/or any potential future collaborators
develop and sell through the program. This 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, Ipsen, and/or any potential future collaborators may develop or to
lower the amount that they pay. In addition, members of the United States Congress have stated
their desire to reduce the government’s cost for reimbursements of prescription drugs by amending
this legislation.
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 twelve months or longer after the
receipt of regulatory marketing approval for a product. To obtain reimbursement or pricing
approval in some countries, we, Ipsen, or any potential future collaborators may be
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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 or our collaborators’ commercialization efforts. 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, Ipsen, and/or
any potential future collaborators may develop or sell. Cost-control initiatives could decrease
the price we might establish for products that we, Ipsen, or any potential future collaborators may
develop or sell, which would result in lower product revenues or royalties payable to us.
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, Ipsen, or any potential future
collaborators receive for any products that we, Ipsen, and/or any potential future collaborators
may develop, negatively affecting our revenues and prospects for profitability.
Healthcare reform measures could hinder or prevent our product candidates’ commercial success.
Among policy makers and payors in the United States and elsewhere, there is significant
interest in promoting changes in health care systems to contain health care costs and improve
quality. While reform proposals often involve expanding coverage to more individuals, health care
reform may also involve increased government price controls, additional regulatory mandates and
other measures designed to lower medical and pharmaceutical costs which could have an adverse
impact on our business.
If product liability lawsuits are brought against us, we may 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 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,
Ipsen, and/or any potential future collaborators may develop, our commercial opportunity will be
reduced or eliminated.
We face competition from commercial pharmaceutical and biotechnology enterprises, 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, Ipsen, and/or any potential future collaborators may develop. In addition,
significant delays in the development of our product candidates could allow our
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competitors to
bring products to market before us and impair any 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 in our pipeline, and a number of companies are or may be
developing new treatments. These product uses, as well as promotional efforts by competitors
and/or clinical trial results of competitive products, could significantly diminish any ability to
market and sell any products that we, Ipsen, and/or any potential future collaborators may develop.
For example, although there are no products that have been approved by the FDA to reduce fractures
or treat estrogen deficiency related side effects of ADT, we are aware of a number of drugs,
including drugs marketed by Eli Lilly & Co. (Evista®), Merck (Fosamax®),
Sanofi-Aventis and Warner Chilcott (Actonel®), Pfizer Inc. (Effexor®),
Boehringer Ingelheim (Catapres®), Novartis (Zometa®) and Bristol Myers Squibb
(Megace®), that are prescribed to treat single side effects of ADT; that external beam
radiation and tamoxifen are used to treat breast pain and enlargement, or gynecomastia.
ProliaTM (denosumab), a monoclonal antibody developed by Amgen, is under regulatory
review in the United States, Switzerland, Australia and Canada for the treatment and prevention of
postmenopausal osteoporosis and for the treatment of bone loss in patients undergoing hormone
ablation therapy for breast or prostate cancer, and has received a positive opinion in Europe from
the EMEA’s Committee for Medicinal Products for Human Use. While we have the only pharmaceutical
product in clinical development to prevent prostate cancer in high risk men with high grade PIN,
GlaxoSmithKline is expected to resubmit a supplemental NDA for Avodart® for prostate
cancer risk reduction among men at increased risk of developing the disease. Additionally, recent
literature has suggested that finasteride and dutasteride may be effective in reducing the risk of
prostate cancer progression. Testosterone and other anabolic agents are used to treat involuntary
weight loss in patients who have acute muscle loss. There are other SARM product candidates in
development that may compete with our product candidates. Pfizer Inc, Eli Lilly & Co., and Amgen
have myostatin inhibitors in development that may compete with Ostarine™ if approved for commercial
sale. In addition, Cytokinetics, Inc. is developing a troponin activator with a muscle specific
mechanism in a Phase I study. Moreover, there are other categories of drugs in development,
including ghrelin receptor agonists and growth hormone secretagogues that may have some muscle
activity. Other appetite stimulants such as megestrol acetate and dronabinol are also used
off-label for cancer cachexia. Competition 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.
In December 2009, we announced a reduction of approximately 26% of our workforce in order to
reduce our operating expenses in connection with the receipt of the Complete Response Letter
regarding our NDA for toremifene 80 mg and the associated delay in the potential regulatory
approval of toremifene 80 mg. This and any future workforce reductions may negatively affect our
ability to retain or attract talented employees.
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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 100 and 150 additional employees in order to
commercialize toremifene 80 mg or toremifene 20 mg, including approximately 65 sales consultants.
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.
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:
| • | the results of our discussions with the FDA regarding the actions necessary to address the deficiencies identified by the FDA in the Complete Response Letter we received in October 2009 regarding our NDA for toremifene 80 mg, our ability to obtain the funding necessary for further clinical development of toremifene 80 mg, and any related announcements by us with respect to the same; | ||
| • | adverse results or delays in our clinical trials; | ||
| • | the timing of achievement of, or failure to achieve, our, Ipsen’s and any potential future collaborators’ 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, including regulatory actions requiring or leading to restrictions, limitations and/or warnings in the label of FARESTON® or an approved product candidate; | ||
| • | the commercial success of any product approved by the FDA or its foreign counterparts; | ||
| • | developments with respect to our collaborations with Ipsen; | ||
| • | introductions or announcements of technological innovations or new products by us, Ipsen, potential future collaborators, or our competitors, and the timing of these introductions or announcements; | ||
| • | market conditions for equity investments in general, or the biotechnology or pharmaceutical industries in particular; | ||
| • | 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 or reimbursement policies of health care payment systems; | ||
| • | any intellectual property infringement lawsuit involving us; | ||
| • | actual or anticipated fluctuations in our results of operations; | ||
| • | changes in financial estimates or recommendations by securities analysts; |
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| • | 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. Recently, the financial markets have faced almost unprecedented turmoil,
resulting in a decline in investor confidence and concerns about the proper functioning of the
securities markets, which decline in general investor confidence has resulted in depressed stock
prices for many companies notwithstanding the lack of a fundamental change in their underlying
business models or prospects. 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.
Our executive officers, directors and largest stockholders have the ability to control all
matters submitted to stockholders for approval.
As of January 31, 2010, our executive officers, directors and holders of 5% or more of our
outstanding common stock beneficially owned approximately 59.3% of our outstanding common stock,
and our executive officers and directors alone beneficially owned approximately 46.5% of our
outstanding common stock. As a result, these stockholders, acting together, may or will have the
ability 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.
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If there are substantial sales of our common stock, the market price of our common stock could
drop substantially, even if our business is doing well.
For the 12-month period ended December 31, 2009, the average daily trading volume of our
common stock on the NASDAQ Global Market was approximately 372,346 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, 2009, we had 36,420,901 shares of common stock outstanding.
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. If any of these large
stockholders were to sell large blocks of shares in a short period of time, the market price of our
common stock could drop substantially.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Effective October 1, 2009, we terminated our sublease agreement dated April 1, 2005 with the
University of Tennessee Research Foundation (“UTRF”) and entered into a new sublease agreement with
UTRF for the lease of approximately 53,000 square feet of laboratory and office space located at 3
North Dunlap Street, Memphis, Tennessee. The new sublease expires on December 31, 2012, unless
sooner terminated in accordance with the terms of this sublease. We have an option to extend the
new sublease for an additional two years.
In December 2007, we entered into a sublease for approximately 31,000 square feet of office
space located at 175 Toyota Plaza, Memphis, Tennessee, under an operating lease which expires on
April 30, 2015. We have an option to terminate this sublease beginning December 31, 2010. In July
2008, we amended the sublease to add approximately 22,000 square feet of additional office space
through April 30, 2015. We have an option to terminate the sublease for this additional space
effective December 31, 2012.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any material legal proceedings.
ITEM 4. (REMOVED AND RESERVED)
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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. The following table presents, for the periods indicated, the high and low intraday sales
prices per share of our common stock as reported on The NASDAQ Global Market.
| 2009 | 2008 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
First Quarter |
$ | 18.00 | $ | 8.06 | $ | 20.00 | $ | 10.75 | ||||||||
Second Quarter |
11.24 | 8.07 | 19.00 | 13.98 | ||||||||||||
Third Quarter |
13.59 | 7.72 | 20.20 | 14.14 | ||||||||||||
Fourth Quarter |
12.70 | 3.22 | 19.63 | 12.54 | ||||||||||||
On March 10, 2010, the closing price of our common stock as reported on The NASDAQ Global
Market was $3.66 per share and there were approximately 72 holders of record of our common stock.
Performance Graph1
The rules of the SEC require that we include in our annual report to stockholders a
line-graph presentation comparing cumulative stockholder returns on our 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 us. We have elected to use The NASDAQ Composite Index (which tracks the aggregate
price performance of equity securities of companies traded on NASDAQ Stock Market) and The NASDAQ
Biotechnology Index (consisting of a group of approximately 130 companies in the biotechnology
sector, including us) 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 December 31, 2004 on The NASDAQ Global Market for: (1) our common
stock; (2) The NASDAQ Composite Index and (3) The NASDAQ Biotechnology Index. All values assume
reinvestment of the full amounts of all dividends. No dividends have been declared on our common
stock. The closing sale price of our common stock on December 31, 2009 as reported on The NASDAQ
Global Market was $4.20.
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The stockholder return shown on the graph below is not necessarily indicative of future
performance, and we do not make or endorse any predictions as to future stockholder returns.
COMPARISON
OF 5 YEAR 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 12/31/04 in stock or index, including reinvestment of dividends. | |
| Fiscal year ending December 31. | ||
| 1 | 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 GTx, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934 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.
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| 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, 2009, 2008 and
2007, and the balance sheet data as of December 31, 2009 and 2008, 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, 2006 and 2005, and the consolidated balance sheet
data as of December 31, 2007, 2006 and 2005, 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, | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
Statement of Operations Data: |
||||||||||||||||||||
Revenues: |
||||||||||||||||||||
Product sales, net |
$ | 3,289 | $ | 1,088 | $ | 1,076 | $ | 1,357 | $ | 2,445 | ||||||||||
Collaboration revenue |
11,441 | 12,440 | 6,050 | 6,148 | 1,337 | |||||||||||||||
Total revenues |
14,730 | 13,528 | 7,126 | 7,505 | 3,782 | |||||||||||||||
Cost and expenses: |
||||||||||||||||||||
Cost of product sales |
1,290 | 649 | 621 | 773 | 1,573 | |||||||||||||||
Research and development expenses |
32,344 | 44,259 | 38,508 | 33,897 | 30,923 | |||||||||||||||
General and administrative expenses |
27,749 | 23,105 | 13,501 | 11,352 | 9,845 | |||||||||||||||
Total costs and expenses |
61,383 | 68,013 | 52,630 | 46,022 | 42,341 | |||||||||||||||
Loss from operations |
(46,653 | ) | (54,485 | ) | (45,504 | ) | (38,517 | ) | (38,559 | ) | ||||||||||
Interest income |
159 | 2,705 | 5,145 | 3,007 | 1,720 | |||||||||||||||
Loss before income taxes |
(46,494 | ) | (51,780 | ) | (40,359 | ) | (35,510 | ) | (36,839 | ) | ||||||||||
Income tax benefit |
238 | — | — | — | — | |||||||||||||||
Net loss |
$ | (46,256 | ) | $ | (51,780 | ) | $ | (40,359 | ) | $ | (35,510 | ) | $ | (36,839 | ) | |||||
Net loss per share: |
||||||||||||||||||||
Basic and diluted |
$ | (1.27 | ) | $ | (1.43 | ) | $ | (1.16 | ) | $ | (1.14 | ) | $ | (1.42 | ) | |||||
| As of December 31, | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
Balance Sheet Data: |
||||||||||||||||||||
Cash, cash equivalents and short-term investments |
$ | 49,044 | $ | 97,667 | $ | 100,178 | $ | 119,550 | $ | 74,014 | ||||||||||
Working capital |
34,723 | 79,047 | 132,932 | 111,363 | 70,030 | |||||||||||||||
Total assets |
57,721 | 108,109 | 159,730 | 129,255 | 82,811 | |||||||||||||||
Accumulated deficit |
(368,174 | ) | (321,918 | ) | (270,138 | ) | (229,779 | ) | (194,269 | ) | ||||||||||
Total stockholders’ (deficit) equity |
(8,750 | ) | 32,018 | 78,917 | 97,049 | 73,579 | ||||||||||||||
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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
contains 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 Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form
10-K. See “Special Note Regarding Forward-Looking Statements” 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 loss and other serious medical conditions.
We are developing toremifene citrate, a selective estrogen receptor modulator, or SERM, in two
separate clinical programs in men. We commenced a pivotal Phase III clinical trial of toremifene
80 mg to reduce fractures and treat other estrogen deficiency related side effects of androgen
deprivation therapy, or ADT, in men with prostate cancer in November 2003. In the first quarter of
2008, we announced that the Phase III clinical trial results for toremifene 80 mg to reduce
fractures and treat other estrogen deficiency side effects of ADT in men with prostate cancer
showed that toremifene 80 mg reduced new morphometric vertebral fractures, met other key endpoints
of bone mineral density, or BMD, lipid profiles and gynecomastia, and also showed that toremifene
80 mg demonstrated a reduction in hot flashes in a subset of patients. In December 2008, we
submitted a New Drug Application, or NDA, for toremifene 80 mg to reduce fractures in men with
prostate cancer on ADT to the U.S. Food and Drug Administration, or FDA. In October 2009, we
received a Complete Response Letter from the FDA regarding our NDA for toremifene 80 mg notifying
us that the FDA would not approve our NDA in its present form as a result of certain clinical
deficiencies identified in the Complete Response Letter. The FDA identified two deficiencies in
the Complete Response Letter and recommended that the following information be provided to the FDA
to address these clinical deficiencies: (i) results of a second adequate and well-controlled Phase
III clinical trial demonstrating the safety and efficacy of toremifene 80 mg to reduce fractures in
men with prostate cancer on ADT and (ii) results from an adequate and well-controlled clinical
trial demonstrating that toremifene 80 mg treatment to reduce fractures in men with prostate cancer
on ADT does not have a detrimental effect on either time-to-disease progression or overall
survival. We met with the FDA in December 2009 to better understand our options for addressing the
points made by the FDA in the Complete Response Letter. In 2010, we plan to submit to and discuss
with the FDA a proposed protocol for a second pivotal Phase III clinical trial evaluating
toremifene 80 mg to reduce fractures in men with prostate cancer on ADT to address in a single
clinical trial the deficiencies identified by the FDA in the Complete Response Letter. Any
decision to initiate another clinical trial for toremifene 80 mg to reduce fractures in men with
prostate cancer on ADT will require us to obtain sufficient funding for the trial.
We are also developing toremifene 20 mg in an ongoing 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. In January 2005, we initiated a pivotal
Phase III clinical trial of toremifene 20 mg for the prevention of prostate cancer in high risk men
with high grade PIN, which is being conducted under a Special Protocol Assessment, or SPA, with the
FDA. The last patient completed the trial in February 2010. We plan to announce this year the
results of the trial and, if the results from the trial are positive, our plans to submit a NDA for
toremifene 20 mg to the FDA.
We have licensed to Ipsen Biopharm Limited (formerly known as Ipsen Developments Limited), or
Ipsen, exclusive rights in the European Union, Switzerland, Norway, Iceland, Lichtenstein and the
Commonwealth of Independent States, which we collectively refer to as the European Territory, to
develop and commercialize toremifene in all indications which we have licensed from Orion
Corporation, or Orion, which include all indications in humans except the treatment and prevention
of breast cancer outside of the United States.
Additionally, we are developing selective androgen receptor modulators, or SARMs, a new class
of drugs with the potential to treat cancer cachexia (cancer induced muscle loss), chronic
sarcopenia, which is the loss of skeletal muscle mass resulting in reduced physical strength and
ability to perform activities of daily living, and other musculoskeletal wasting or muscle loss
conditions. In December 2006, we announced that Ostarine™ 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. In October 2008, we announced that
Ostarine™ met its primary
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endpoint in a Phase II clinical trial evaluating absolute change in total
lean body mass (muscle) compared to placebo. In March 2010, we reacquired full rights to our SARM
program, including Ostarine™ (previously designated by Merck & Co., Inc., or Merck, as MK-2866),
following the termination by us and Merck of the exclusive license and collaboration agreement for
SARM compounds and related SARM products, which was entered into in December 2007. We plan to
continue the development of Ostarine™ for the treatment of cancer cachexia and, in this regard, we
anticipate conducting an end of Phase II meeting with the FDA to discuss a Phase III clinical
development program for Ostarine™. We do not anticipate significant development progress on
Ostarine™, or our SARM program in general, including the initiation of any additional clinical
trials, unless and until we enter into one or more new collaborations with third parties or
otherwise obtain additional funding.
We are also developing GTx-758, an oral luteinizing hormone, or LH, inhibitor for the first
line treatment of advanced prostate cancer. In preclinical animal models, GTx-758 has demonstrated
the potential to reduce testosterone concentrations in blood to castrate levels, increase BMD, and
prevent hot flashes. In 2009, we completed two Phase I clinical trials, a single ascending dose
clinical trial and a multiple ascending dose clinical trial, evaluating GTx-758 in healthy male
volunteers. GTx-758 was well tolerated in both trials. In February 2010, we initiated a Phase II
clinical trial evaluating the ability of GTx-758 to reduce testosterone to castrate levels in 70
subjects. We expect this trial to be completed in the second half of 2010.
We market FARESTON® (toremifene citrate) 60 mg tablets, approved for the treatment
of metastatic breast cancer in postmenopausal women in the United States. Part of our strategy is
to increase commercial sales of FARESTON®. However, sales of pharmaceuticals for breast
cancer in the SERM class have declined in recent years as aromatase inhibitors have gained market
share. The active pharmaceutical ingredient in FARESTON® is the same as in our
toremifene 80 mg and toremifene 20 mg product candidates.
Our net loss for the year ended December 31, 2009 was $46.3 million. Our net loss included
FARESTON® net product sales of $3.3 million and the recognition of collaboration revenue
of $11.4 million. We have financed our operations and internal growth primarily through public
offerings and private placements of our common stock, as well as payments from our current and
former collaborations. In December 2009, we announced a reduction of approximately 26% of our
workforce in order to reduce our operating expenses in connection with the receipt of the Complete
Response Letter regarding our NDA for toremifene 80 mg and the associated delay in the potential
regulatory approval of toremifene 80 mg. We expect to continue to incur significant net losses as
we continue our clinical development and research and development activities, apply for and address
issues related to potential regulatory approvals and, subject to regulatory approval of our product
candidates, expand our sales and marketing capabilities. Due to the termination of our
collaboration with Merck and the expected recognition of $49.9 million in deferred revenue and
the final payment from Merck of $5.0 million of cost reimbursement for research and development
expenses, we expect to report net income for the year ending December 31, 2010. However, while
recognition of this revenue is expected to result in net income for 2010, we expect to
incur significant operating losses in 2011 and for the foreseeable future. In addition, we do not
expect to obtain FDA or any other regulatory approvals to market any of our product candidates in
the near future. In addition, we expect that significant additional clinical development will be
required in order to potentially obtain FDA approval of toremifene 80 mg, including an additional
pivotal Phase III clinical trial of toremifene 80 mg.
Sales and Marketing
We market FARESTON® (toremifene citrate) 60 mg tablets, approved 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 in postmenopausal women indication. We also acquired from Orion a license
to toremifene for all indications in humans worldwide, except breast cancer outside of the United
States. 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 specialty sales and marketing infrastructure to market toremifene 80 mg and
toremifene 20 mg, if approved by the FDA, to the relatively small and concentrated community of
urologists and medical oncologists in the United States. We have partnered with Ipsen to
commercialize toremifene in the European Territory if approved for commercial sale. We are currently seeking
partners to market toremifene in Asia and other markets outside of the United States and the European Territory.
Research and Development
Since our inception in 1997, we have been focused on drug discovery and development programs.
Research and development expenses include, but are not limited to, our expenses for personnel,
supplies, and facilities associated with our research activities, screening and identification of
product candidates, formulation and synthesis
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activities, manufacturing, preclinical studies,
toxicology studies, clinical trials, regulatory and medical affairs activities, quality assurance
activities and license and royalty fees.
We expect that research and development expenditures for fiscal year 2010 will be less than
fiscal year 2009 due to the completion of the pivotal Phase III clinical trial for the prevention
of prostate cancer in high risk men with high grade PIN. This expectation does not consider the
impact of additional expenses for toremifene 80 mg and Ostarine that we may incur for further
clinical development of these programs. Future research and development expenses will be focused
on the following:
| • | activities relating to our efforts to obtain regulatory approvals of toremifene 80 mg to reduce fractures and treat other estrogen deficiency side effects of ADT in men with prostate cancer, including potentially an additional pivotal Phase III clinical trial of toremifene 80 mg; | ||
| • | the completion of the pivotal Phase III clinical trial of toremifene 20 mg for the prevention of prostate cancer in high risk men with high grade PIN; | ||
| • | our ongoing SARM research and development efforts; and | ||
| • | the continued preclinical and clinical development of other product candidates, including GTx-758. |
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 Part I, 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.
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 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 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. Even if the FDA grants marketing approval, the FDA may
impose restrictions, limitations and/or warnings in the label of an approved product candidate,
which may adversely affect the marketability of the product or limit the patients to whom the
product is prescribed.
The successful development and commercialization 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 and commercialization of, or the period in which
material net cash inflows are expected to commence from, any of our product candidates, including
any product candidates developed and/or commercialized through our collaboration with Ipsen, due to
the numerous risks and uncertainties associated with developing and commercializing drugs,
including the uncertainty of:
| • | whether and to what extent we determine to continue the development of toremifene 80 mg following discussion with the FDA, including an additional clinical trial to address the deficiencies identified by the FDA in the Complete Response Letter for toremifene 80 mg; | ||
| • | the scope, rate of progress and cost of our, Ipsen’s, and/or any potential future collaborators’ clinical trials and other research and development activities; | ||
| • | future clinical trial results; | ||
| • | the terms and timing of any future collaborative, licensing and other arrangements that we may establish; | ||
| • | the cost and timing of regulatory filings and/or approvals to commercialize our product candidates, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate; |
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| • | potential future licensing fees, milestone payments and royalty payments, including any milestone payments or royalty payments that we may receive under our collaborative arrangement with Ipsen; | ||
| • | the cost and timing of establishing medical education, sales, marketing and distribution capabilities; | ||
| • | the cost of establishing clinical and commercial supplies of our product candidates and any products that we, Ipsen, and/or any potential future collaborators may develop; | ||
| • | the effect of competing technological and market developments; and | ||
| • | the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, and the cost of defending any other litigation claims. |
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 development and commercialization
efforts on schedule, or at all, and some consequences of failing to do so, are set forth under Part
I, 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, sales and marketing functions. General and administrative expenses also include
facility costs, insurance costs, and professional fees for legal, accounting, public relations,
marketing services, and FARESTON® selling and distribution expenses. We expect our
general and administrative expenses for fiscal year 2010 to be less than fiscal year 2009 since
fiscal year 2009 general and administrative expenses included spending on sales and marketing,
medical education and other supporting activities in anticipation of regulatory approval of our
toremifene product candidates that we do not expect to incur in 2010, as well as the December 2009
reduction in our workforce.
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, share-based compensation, 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.
Collaboration revenue consists of non-refundable upfront payments, license fees,
reimbursements for research and development activities, and milestone payments associated with our
collaboration and license agreements and is based on the performance requirements of the specific
agreements. We have analyzed our agreements with multiple element arrangements to determine
whether the deliverables under the agreement, including license and
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performance obligations such as
joint steering committee participation and research and development activities, can be separated or
whether all of the deliverables must be accounted for as a single unit of accounting. For these
arrangements, we were not able to identify evidence of fair value for the undelivered elements and
therefore recognize any consideration for a single unit of accounting in the same manner as the
revenue is recognized for the final deliverable, which is ratable over the performance period. The
performance period is estimated at the inception of the agreement and is reevaluated at each
reporting period. Cost reimbursements for research activities are recognized as collaboration
revenue if amounts are determinable and collection of the related receivable is reasonably assured.
Revenues from milestone payments for which we have no continuing performance obligations are
recognized upon achievement of the performance milestone, as defined in the related agreement,
provided the milestone is substantive and a culmination of the earnings process has occurred.
Performance obligations typically consist of significant milestones in the development life cycle
of the related product candidates and technology, such as initiation of clinical trials,
achievement of specified clinical trial endpoints, filing for approval with regulatory agencies and
approvals by regulatory agencies.
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
continually monitor these factors for indications of appropriate revisions. We estimated the
performance obligation period to be six years for the development of toremifene for both the high
grade PIN and ADT indications under our collaboration agreement with Ipsen. We estimated the
performance obligation period to be ten years for our collaboration agreement with Merck. However,
due to the termination of the license and collaboration agreement with Merck in March 2010, we
expect to recognize as collaboration revenue all of the remaining $49.9 million unamortized revenue
that was deferred as of December 31, 2009, as well as the final payment of $5.0 million for cost
reimbursement for research and development expense that we will receive from Merck in late 2010,
during the first quarter of 2010.
We recognize revenue from net product sales of FARESTON® less deductions for
estimated sales discounts and sales returns. We recognize revenue from product sales when
persuasive evidence of an arrangement exists, title passes, the price is fixed or determinable, and
collectability is reasonably assured. 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. We consider
historical product return trend information that we continue to update each period. We estimate
the number of months of product on hand and the amount of product 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 approximately 95% of our product sales of
FARESTON® for the year ended December 31, 2009. Based on this information, and other
factors, we estimate an accrual for product returns. At December 31, 2009 and 2008, our accrual
for product returns was $494,000 and $815,000, respectively.
Research and Development Expenses
Research and development expenses include, but are not limited to, our expenses for personnel,
supplies, and facilities associated with research activities, screening and identification of
product candidates, formulation and synthesis activities, manufacturing, preclinical studies,
toxicology studies, clinical trials, regulatory and medical affairs, quality assurance activities
and license and royalty fees. We expense these costs in the period in which they are incurred. We
estimate our liabilities for research and development expenses in order to match the recognition of
expenses to the period in which the actual services are received. As such, accrued liabilities
related to third party research and development activities are recognized based upon our estimate
of services received and degree of completion of the services in accordance with the specific third
party contract.
Share-Based Compensation
We have stock option and equity incentive plans that provide for the purchase of our common
stock by certain of our employees and non-employee directors. We recognize compensation expense
for our share-based payments based on the fair value of the awards on the grant date and recognize
the expense over the period during which an employee or non-employee director is required to
provide service in exchange for the award.
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The determination of the fair value of share-based payment awards on the date of grant include
the expected life of the award, the expected stock price volatility over the expected life of the
awards, expected dividend yield, and risk-free interest rate. We estimate the expected life of
options by calculating the average of the vesting term and contractual term of the options. We
estimate the expected stock price volatility based on the historical volatility of our common
stock. The risk-free interest rate is determined using U.S. Treasury rates where the term is
consistent with the expected life of the stock options. Expected dividend yield is not considered
as we have not made any dividend payments and have no plans of doing so in the foreseeable future.
The amount of share-based compensation expense recognized is reduced ratably over the vesting
period by an estimate of the percentage of options granted that are expected to be forfeited or
canceled before becoming fully vested. 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 31, 2009 was $5.4 million,
of which approximately $2.1 million and approximately $3.2 million were recorded in the statements
of operations as research and development expenses and general and administrative expenses,
respectively. Total share-based compensation expense for the years ended December 31, 2008 and
2007 was $3.7 million and $2.2 million, 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 $178,000, $178,000 and $183,000 for the years ended
December 31, 2009, 2008 and 2007, respectively. At December 31, 2009, the total compensation cost
related to non-vested awards not yet recognized was approximately $12.5 million with a weighted
average expense recognition period of 2.23 years.
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. Accordingly, at December 31, 2009 and 2008, net of the valuation
allowance, the net deferred tax assets were reduced to zero.
Intangible Assets
We amortize our purchased intangible assets with finite lives over their estimated economic
lives. Our purchased intangible assets, license fees, represent license fees paid to Orion in
connection with entering into an amended and restated license and supply agreement and to the
University of Tennessee Research Foundation, or UTRF, in connection with entering into two amended
and restated license agreements. The Orion license fee is being amortized on a straight-line basis
over the term of the agreement which we estimate to be 16 years. The UTRF license fees are being
amortized on a straight-line basis over the term of each agreement with UTRF, which we estimate to
be approximately 14 years and 11.5 years, respectively. We review long-lived assets for impairment
whenever 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. An impairment loss would be
recognized when estimated future cash flows is less than the carrying amount. The cash flow
estimates would be based on management’s best estimates, using appropriate and customary
assumptions and projections at the time.
Recent Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a
consensus of the FASB Emerging Issues Task Force) (“ASU No. 2009-13”). ASU No. 2009-13 amends
revenue recognition
guidance related to multiple deliverable arrangements to provide new guidance concerning the
determination of whether an arrangement involving multiple deliverables contains more than one unit
of accounting and the manner in which arrangement consideration should be allocated to such
deliverables. The amended guidance is effective for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010 and may be applied
prospectively or retroactively. We do not expect the adoption of ASU No. 2009-13 to have a
material impact on our financial position or results of operations.
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Results of Operations
Comparison of Years Ended December 31, 2009 and December 31, 2008
Revenues. Revenues for the year ended December 31, 2009 were $14.7 million as compared to
$13.5 million for the same period of 2008. Revenues for the year ended December 31, 2009 included
net sales of FARESTON® marketed for the treatment of metastatic breast cancer in
postmenopausal women and collaboration income from Ipsen and Merck. During the years ended
December 31, 2009 and 2008, FARESTON® net product sales were $3.3 million and $1.1
million, respectively, while cost of products sales were $1.3 million and $649,000, respectively.
FARESTON® net product sales for the year ended December 31, 2009 increased from the same
period in the prior year as a result of a price increase instituted in the fourth quarter of 2008,
partially offset by a decrease of approximately 22% in sales volume of FARESTON® as
compared to the year ended December 31, 2008. The increase in cost of product sales was due to an
increase in royalty expense which is based on our net sales of FARESTON®. Collaboration
income was $11.4 million for the year ended December 31, 2009, which consisted of approximately
$5.8 million and $5.6 million from the amortization of deferred revenue from Ipsen and Merck,
respectively. For the year ended December 31, 2008, collaboration income was $12.4 million, of
which $5.9 million and $5.1 million was from the amortization of deferred revenue from Ipsen and
Merck, respectively, and approximately $1.5 million was from an earned milestone from Ipsen with
the achievement of the primary endpoint in the toremifene 80 mg Phase III clinical trial. As a
result of the termination of our collaboration with Merck in March 2010, collaboration income in
2010 is expected to increase substantially as compared to 2009. This is a result of the
recognition of previously deferred collaboration income that was being recognized over our ten year
expected obligation period under the agreement. As of December 31, 2009, we had $49.9 million in
deferred revenue related to this collaboration that we expect to recognize as revenue, along with
the final payment from Merck of $5.0 million of research and development cost reimbursement that
will be received from Merck in late 2010, in the first quarter of 2010.
Research and Development Expenses. Research and development expenses decreased 27% to $32.3
million for the year ended December 31, 2009 from $44.3 million for the year ended December 31,
2008. The decrease in research and development expenses during the year ended December 31, 2009
compared to the year ended December 31, 2008 was due primarily to the completion of the toremifene
80 mg Phase III clinical trial, a decreased number of subject visits in the toremifene 20 mg Phase
III clinical trial due to a portion of the subjects having completed the trial prior to or during
the year ended December 31, 2009, and the completion of the Ostarine™ Phase II cancer cachexia
clinical trial during 2008. Research and development expenses for the year ended December 31, 2008
included payment of a $1.2 million fee to the FDA for the submission of the NDA for toremifene 80
mg and a payment to UTRF of $540,000 for the execution of amendments to our existing SARM and SERM
license agreements. These amounts are included in “Toremifene 80 mg” and “Other research and
development”, respectively, for the year ended December 31, 2008 in the table below. Research and
development expenses were also lower in the year ended December 31, 2009 as a result of our
decision to not pay cash bonuses to employees for 2009. Research and development expenses included
employee bonus expense of $967,000 for the year ended December 31, 2008.
The decrease in research and development expenses in the year ended December 31, 2009 was
partially offset by increased research and development spending on our Phase I clinical trials for
GTx-758 and by approximately $290,000 of severance costs incurred related to our workforce
reduction that occurred in December 2009. Additionally, toremifene 80 mg tablets purchased at a
cost of approximately $941,000 were recorded as research and development expense in the fourth
quarter due to the receipt of the Complete Response Letter regarding our NDA for toremifene 80 mg
and the associated delay in the potential regulatory approval of toremifene 80 mg to reduce
fractures in men with prostate cancer on ADT. This expense is included in “Toremifene 80 mg” in
the table below.
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The following table identifies the research and development expenses for each of our clinical
product candidates, as well as research and development expenses pertaining to our other research
and development efforts, for each of the periods presented. “Other research and development”
expenses in the table below represent the cost of personnel, supplies and facilities associated
with preclinical and discovery research and development activities. Research and development
spending for past periods is not indicative of spending in future periods.
| Product | Years Ended | |||||||||||||
| Candidate/ | December 31, | |||||||||||||
| Program | Proposed Indication | 2009 | 2008 | Increase/ (Decrease) | ||||||||||
| (in thousands) | ||||||||||||||
SERM |
Toremifene | |||||||||||||
| 80 mg |
||||||||||||||
| To reduce fractures in men with prostate cancer on ADT | $ | 3,377 | $ | 11,724 | $ | (8,347 | ) | |||||||
| Toremifene | ||||||||||||||
| 20 mg |
||||||||||||||
| Prevention of prostate cancer in high risk men with high grade PIN | 5,881 | 9,338 | (3,457 | ) | ||||||||||
SARM |
OstarineTM |
|||||||||||||
| Treatment of cancer cachexia | 679 | 5,973 | (5,294 | ) | ||||||||||
LH inhibitor |
GTx-758 |
|||||||||||||
| Treatment of advanced prostate cancer | 10,074 | 3,786 | 6,288 | |||||||||||
Other research and
development |
12,333 | 13,438 | (1,105 | ) | ||||||||||
Total research and
development expenses |
$ | 32,344 | $ | 44,259 | $ | (11,915 | ) | |||||||
General and Administrative Expenses. General and administrative expenses increased 20%
to $27.7 million for the year ended December 31, 2009 from $23.1 million for the year ended
December 31, 2008. The increase of approximately $4.6 million was primarily the result of
increased personnel and personnel related expenses of approximately $5.3 million, severance costs
and legal fees of $656,000 related to the workforce reduction that occurred in December 2009, and
an increase of approximately $630,000 in intellectual property and other legal expenses. These
increases were slightly offset by a decrease in marketing expenses of approximately $950,000 due to
lower spending on marketing expositions and public relation activities in the current year.
General and administrative expenses were also lower in the year ended December 31, 2009 as compared
to the prior year as a result of our decision to not pay cash bonuses to employees for 2009.
General and administrative expenses for the year ended December 31, 2008 included employee bonus
expense of approximately $1.3 million.
Interest Income. Interest income decreased to $159,000 for the year ended December 31, 2009
from $2.7 million for the year ended December 31, 2008. The decrease of approximately $2.5 million
was attributable to
lower average interest rates and lower average cash balances during the year ended December
31, 2009, as compared to the prior year.
Comparison of Years Ended December 31, 2008 and December 31, 2007
Revenues. Revenues for the year ended December 31, 2008 were $13.5 million as compared to
$7.1 million for the same period of 2007. Revenues for the year ended December 31, 2008 included
net sales of FARESTON® marketed for the treatment of metastatic breast cancer in post
menopausal women and collaboration income from Ipsen and Merck. During the years ended December
31, 2008 and 2007, FARESTON® net product sales were $1.1 million for both periods, while
cost of products sales were $649,000 and $621,000, respectively. Although FARESTON® net
product sales for the year ended December 31, 2008 were consistent with the prior year, the 2008
net product sales included an increase in the average price of FARESTON® of 44% as a
result of a price increase in the fourth quarter of 2008. The sales volume of FARESTON®
also increased 4% for the year ended December 31,
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2008 as compared to year ended December 31, 2007.
The increase in net product sales due to the increase in price and volume in 2008 was offset by an
increase in the provision for product returns. While we did not estimate a
material increase in the volume of product returns as a result of the price increase in the fourth
quarter of 2008, the price increase did result in an increase in the amount of the estimated
product returns accrual since certain product returns are accepted at or near the current sales
price of FARESTON®. Collaboration income was $12.4 million for the year ended December
31, 2008, which consisted of approximately $5.9 million and $5.1 million from the amortization of
deferred revenue from Ipsen and Merck, respectively, and approximately $1.5 million from an earned
milestone from Ipsen with the achievement of the primary endpoint in the toremifene 80 mg Phase III
clinical trial. For the year ended December 31, 2007, collaboration income was $6.1 million, of
which $5.9 million and $198,000 was from the amortization of deferred revenue Ipsen and Merck,
respectively.
Research and Development Expenses. Research and development expenses increased 15% to $44.3
million for the year ended December 31, 2008 from $38.5 million for the year ended December 31,
2007. The following table identifies the research and development expenses for each of our
clinical 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 expenses for the year ended December 31, 2008 included payment of a
$1.2 million fee to the FDA for the submission of the NDA for toremifene 80 mg to reduce fractures
in men with prostate cancer on ADT. This amount is included in “Toremifene 80 mg” in the table
below. Additionally, research and development expenses for the year ended December 31, 2008
included a payment to UTRF of $540,000 for the execution of amendments to our existing SARM and
SERM license agreements. This amount is included in “Other research and development” in the table
below. Included in “Other research and development” for the year ended December 31, 2007 is a
sublicense royalty of approximately $1.9 million paid to UTRF as a result of our collaboration with
Merck.
| Product | Years Ended | |||||||||||||
| Candidate/ | December 31, | |||||||||||||
| Program | Proposed Indication | 2008 | 2007 | Increase/ (Decrease) | ||||||||||
| (in thousands) | ||||||||||||||
SERM |
Toremifene | |||||||||||||
| 80 mg | ||||||||||||||
| To reduce fractures in men with prostate cancer on ADT | $ | 11,724 | $ | 9,422 | $ | 2,302 | ||||||||
| Toremifene | ||||||||||||||
| 20 mg | ||||||||||||||
| Prevention of prostate cancer in high risk men with high grade PIN | 9,338 | 8,694 | 644 | |||||||||||
SARM |
OstarineTM | |||||||||||||
| Treatment of cancer cachexia | 5,973 | 7,056 | (1,083 | ) | ||||||||||
LH inhibitor |
GTx-758 | |||||||||||||
| Treatment of advanced prostate cancer | 3,786 | — | 3,786 | |||||||||||
Other research and
development |
13,438 | 13,336 | 102 | |||||||||||
Total research and
development expenses |
$ | 44,259 | $ | 38,508 | $ | 5,751 | ||||||||
General and Administrative Expenses. General and administrative expenses increased 71%
to $23.1 million for the year ended December 31, 2008 from $13.5 million for the year ended
December 31, 2007. The increase of approximately $9.6 million was primarily the result of
increased personnel and personnel related expenses of approximately $4.5 million, marketing
expenses of approximately $1.9 million in connection with the planned commercialization of our
toremifene product candidates, medical education expenses of approximately $1.6 million, and
$460,000 in losses from our investment in the Bank of America’s Columbia Strategic Cash Portfolio.
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Interest Income. Interest income decreased to $2.7 million for the year ended December 31,
2008 from $5.1 million for the year ended December 31, 2007. The decrease of approximately $2.4
million was attributable to lower average interest rates offset by slightly higher average cash and
cash equivalents balances during the year ended December 31, 2008, as compared to the prior year.
Liquidity and Capital Resources
Through December 31, 2009, we have financed our operations and internal growth primarily
through public offerings and private placements of our common stock, as well as payments from our
current and former collaborations. 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, 2009, we had an accumulated deficit of $368.2 million, which
resulted primarily from:
| • | our research and development activities associated with: |
| • | the development of toremifene 80 mg to reduce fractures and treat other estrogen deficiency side effects of ADT in men with prostate cancer, including two Phase II clinical trials, a pivotal Phase III clinical trial, and the preparation and submission of a NDA to the FDA; | ||
| • | the development of toremifene 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; | ||
| • | the preclinical and clinical development of our SARM compounds; | ||
| • | the continued preclinical and clinical development of other product candidates, including GTx-758; |
| • | 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, which was converted to common stock in conjunction with our initial public offering. |
We expect to continue to incur significant net losses as we continue our clinical development
and research and development activities, apply for regulatory approvals, and, subject to regulatory
approval of our product candidates, expand our sales and marketing capabilities. Due to the
termination of our collaboration with Merck and the expected recognition in the first quarter of
2010 of $49.9 million in deferred revenue and the final payment from Merck of $5.0 million of cost
reimbursement for research and development expenses, we expect to report net income for the year
ending December 31, 2010. However, while recognition of this revenue is expected to result in net
income for 2010, we expect to incur significant operating losses in
2011 and for the
foreseeable future. In addition, we expect that significant additional clinical development will
be required in order to potentially obtain FDA approval of toremifene 80 mg, including an
additional pivotal Phase III clinical trial of toremifene 80 mg.
At December 31, 2009, we had cash, cash equivalents and short-term investments of $49.0
million, compared to $97.7 million at December 31, 2008 and $110.0 million at December 31, 2007.
As of December 31, 2009, our cash and cash equivalents consisted of bank deposits, certificates of
deposit with original maturities of 90 days or less, and money market mutual funds which are
required to comply with Rule 2a-7 under the Investment Company Act of 1940. Our short-term
investments consisted of investments in certificates of deposit with original maturities greater
than three months and less than one year.
In September 2006, we entered into a collaboration and license agreement with Ipsen, under
which Ipsen paid us €21.5 million (approximately $27.1 million) as a license fee and expense
reimbursement and paid us €1.5 million in equal installments over a three year period from the date
of the agreement. In September of 2009, 2008, and 2007, we received €500,000 (approximately
$726,000, $711,000, and $688,000, respectively) from Ipsen for the three annual installment
payments. Pursuant to the agreement, we are also entitled to receive
from Ipsen up to a total of €39.0
million in milestone payments depending on the successful development and launch of toremifene in
certain countries of the European Territory for the high grade PIN indication, subject to certain
conditions, and the ADT indication. In February 2008, we earned a milestone of €1.0 million
(approximately $1.5 million) with the
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achievement of the primary endpoint in the toremifene 80 mg
Phase III clinical trial. Ipsen has agreed to pay a portion of our toremifene development costs in
the United States if certain conditions are met. Under the collaboration agreement, Ipsen must
elect to retain its rights to commercialize toremifene and other products containing toremifene for
the high grade PIN indication.
In December 2007, we entered into an exclusive license and collaboration agreement with Merck,
or the Merck Collaboration Agreement, which was terminated in March 2010. In connection with
entering into this agreement, we received an upfront licensing fee of $40.0 million in
January 2008, and Merck purchased approximately $30.0 million of our common stock in December 2007.
Under our collaboration with Merck, we were entitled to receive up to $422.0 million in future
milestone payments, and Merck also agreed to pay us $15.0 million in guaranteed cost reimbursements
for research and development activities in equal annual installments over a three year period
beginning on the first anniversary of the effective date of the agreement. We received the first
and second $5.0 million payments in December 2009 and 2008, respectively. As a result of the
termination of our collaboration with Merck, we will not receive any of the $422.0 million in
milestone payments or royalties for the development or sale of SARMs from Merck provided for under
our former collaboration with Merck. We do not anticipate significant development progress on
OstarineTM, or our SARM program in general, including the initiation of any
additional clinical trials, unless and until we enter into one or more new collaborations with
third parties or otherwise obtain additional funding. Although the Merck Collaboration Agreement
was terminated, Merck remains obligated to pay us the third and final payment of $5.0 million of
cost reimbursements for research and development activities in late 2010.
Net cash used in operating activities was $46.0 million, $2.9 million and $37.6 million for
the years ended December 31, 2009, 2008 and 2007, respectively. The use of cash in all periods
resulted primarily from funding our net losses. In 2009, this was reduced by approximately
$726,000 related to the third and final annual license fee and expense reimbursement installment
payment from Ipsen in conjunction with our collaboration and license agreement, $5.0 million from
Merck related to the second annual installment cost reimbursement payment in conjunction with our
exclusive license and collaboration agreement, and approximately $2.3 million in distributions from
our investment in Bank of America Corporation’s Columbia Strategic Cash Portfolio. In 2008, this
was substantially offset by the receipt of $40.0 million in conjunction with our exclusive license
and collaboration agreement with Merck, approximately $1.5 million from Ipsen due to the
achievement of the primary endpoint in the toremifene 80 mg Phase III clinical trial, approximately
$711,000 related to the second annual license fee and expense reimbursement installment payment
from Ipsen in conjunction with our collaboration and license agreement, $5.0 million from Merck
related to the first annual installment payment in conjunction with our exclusive license and
collaboration agreement, and approximately $7.1 million in distributions from our investment in
Bank of America Corporation’s Columbia Strategic Cash Portfolio. Net cash used in operating
activities for the year ended December 31, 2007 was reduced by the receipt of approximately
$688,000 from Ipsen related to the first annual license fee and expense reimbursement installment
payment in conjunction with our collaboration and license agreement with Ipsen.
Net cash used in investing activities for the year ended December 31, 2009 was $9.4 million
and was for the purchase of short-term investments in certificates of deposit of approximately
$11.3 million and the purchase of information technology equipment, research and development
equipment, and software totaling approximately
$600,000. This was reduced by the maturities of certificates of deposit of approximately $2.5
million. Net cash used in investing activities for the year ended December 31, 2008 was $2.9
million and was primarily for the purchase of furniture and fixtures, leasehold improvements,
office equipment, software and information technology equipment related to the addition of office
space. Additionally, investing activities in 2008 included the purchase of research and development
equipment. Net cash used in investing activities for the year ended December 31, 2007 was $1.7
million and was primarily for the purchase of research and development equipment, office equipment,
computer equipment and software and the purchase of intangible assets (license fees) of $513,000.
We currently expect to make capital expenditures of approximately $226,000 for the year ending
December 31, 2010.
Net cash provided by financing activities was $131,000, $1.2 million and $20.0 million for the
years ended December 31, 2009, 2008 and 2007, respectively. For the years ended December 31, 2009
and 2008, the net cash was provided primarily from proceeds from the exercises of employee stock
options. Net cash provided by financing activities for the year ended December 31, 2007 reflected
proceeds of approximately $30.0 million from our private placement of 1,285,347 shares of common
stock to Merck in December 2007 and proceeds of $826,000 from the exercise of employee stock
options.
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We estimate that our current cash and cash equivalent balances, short-term investments,
interest income and product revenue from the sale of FARESTON® will be sufficient to
meet our projected operating requirements for at least the next twelve months. This estimate does
not include costs related to additional clinical development of our toremifene 80 mg product
candidate or SARM program that we may undertake in an effort to obtain FDA approval. 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.
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 Part I, 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 and potential commercialization 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, other research and development activities, and potential
commercialization activities. Our future funding requirements will depend on many factors,
including:
| • | whether and to what extent we determine to continue the development of toremifene 80 mg following discussion with the FDA, including an additional clinical trial to address the deficiencies identified by the FDA in the Complete Response Letter for toremifene 80 mg; | ||
| • | the scope, rate of progress and cost of our, Ipsen’s and/or any potential future collaborators’ clinical trials and other research and development activities; | ||
| • | future clinical trial results; | ||
| • | the terms and timing of any future collaborative, licensing and other arrangements that we may establish; | ||
| • | the cost and timing of regulatory filings and/or approvals to commercialize our product candidates, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate; | ||
| • | potential future licensing fees, milestone payments and royalty payments, including any milestone payments or royalty payments that we may receive under our collaborative arrangement with Ipsen; | ||
| • | the cost and timing of establishing medical education, sales, marketing and distribution capabilities; | ||
| • | the cost of establishing clinical and commercial supplies of our product candidates and any products that we, Ipsen, and/or any potential future collaborator 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 cost of defending any other litigation claims; 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
short-term investments 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. In December 2009, we announced a reduction of
approximately 26% of our workforce in order to reduce our operating expenses in connection with the
receipt of the Complete Response Letter regarding our NDA for toremifene 80 mg and the associated
delay in the potential regulatory approval of toremifene 80 mg. If we are unable to raise
additional funds when needed, we may need to further reduce our expenditures, perhaps
significantly, to preserve our cash. The cost-cutting measures we have taken and may take in the
future may not be sufficient to enable us to meet our cash requirements, and they may
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negatively
affect our business and growth prospects. 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. Our ability to raise additional funds may be adversely impacted by the receipt of
the Complete Response Letter from the FDA in October 2009 regarding our NDA for toremifene 80 mg
and the related uncertainty regarding the continuing development of, and prospects for FDA approval
of toremifene 80 mg, as well as current economic conditions, including the effects of the
disruptions to and continuing volatility in the credit and financial markets in the United States
and worldwide. As a result of these and other factors, we cannot be certain that additional
funding will be available on acceptable terms, or at all. If adequate funds are not available when
we need them, 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.
At December 31, 2009, 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 |
$ | 31 | $ | 7 | $ | 22 | $ | 2 | $ | — | ||||||||||
Operating lease obligations |
4,053 | 1,653 | 2,400 | — | — | |||||||||||||||
Equipment financing obligation |
254 | 85 | 169 | — | — | |||||||||||||||
Purchase obligations |
40 | 40 | — | — | — | |||||||||||||||
Total |
$ | 4,378 | $ | 1,785 | $ | 2,591 | $ | 2 | $ | — | ||||||||||
Our long-term commitments under the operating leases shown above consist of payments
relating to a sublease for laboratory and office space at 3 North Dunlap Street, Memphis, Tennessee
and a sublease for office space at 175 Toyota Plaza, Memphis, Tennessee. Our sublease agreement
for the premises located at 3 North Dunlap Street expires on December 31, 2012, with an option to
extend for two additional years. We amended our original sublease agreement for the premises
located at 175 Toyota Plaza to add additional office space. The amended sublease includes
escalating rental payments and expires on April 30, 2015. We have the ability to cancel the
original sublease beginning on December 31, 2010 and to cancel the sublease for additional space on
December 31, 2012. 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 and investments in certificates of deposit. 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 ten percent in the average yield earned on our cash equivalents and
short-term investments would have resulted in a decrease in our interest income of approximately
$15,000 for the year ended December 31, 2009.
We operate primarily in the United States. However, some of our clinical trial sites are
located in Canada and the United Kingdom which requires us to make payments for certain clinical
trial services in foreign currencies. We are also entitled to receive
from Ipsen up to a total of €39.0
million in milestone payments subject to the successful development and launch of toremifene 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 if we initiate future clinical trials outside the United States and to
the extent we are able to commercialize toremifene 80 mg and toremifene 20 mg because we are
obligated to pay Orion Corporation, our supplier of toremifene, in Euros. However, we do not
expect that our total exposure to changes in foreign currencies will be material to our operating
results in 2010. We do not currently use derivative financial instruments to mitigate this
exposure.
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| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Our financial statements and the reports of our independent registered public accounting firm
are included in this Annual Report on Form 10-K beginning on page F-1. The index to these reports
and our financial statements is included in Part IV, Item 15 below.
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
Not applicable.
| 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, 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, 2009 using the criteria for
effective internal control over financial reporting as described in “Internal Control – Integrated
Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this evaluation, we concluded that, as of December 31, 2009, our internal control over financial
reporting was effective. The effectiveness of our internal control over financial reporting has
been audited by Ernst & Young LLP, an independent registered public accounting firm.
Attestation Report of the Independent Registered Public Accounting Firm
Ernst & Young LLP, an independent registered public accounting firm, has issued an audit
report on the effectiveness of our internal control over financial reporting, which report is
included elsewhere herein.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth
quarter of 2009 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION |
Effective October 1, 2009, we terminated our sublease agreement dated April 1, 2005 (the
“Prior Lease”) with the University of Tennessee Research Foundation (“UTRF”) and entered into a new
sublease agreement (“New Lease”) with UTRF for the lease of approximately 53,000 square feet of
laboratory and office space located at 3 North Dunlap Street, Memphis, Tennessee (the “Premises”).
The Prior Lease, which previously governed the lease of the Premises, was set to expire on December
31, 2009. The monthly base rent was $36,000 per month under the Prior Lease. Under the terms of
the New Lease, the term of the New Lease expires on December 31, 2012, unless sooner terminated in
accordance with the terms of the New Lease. Further, we have an option to extend the New Lease for
an additional two years. The monthly base rent for the Premises during the term (and any extended
term) under the New Lease is $36,000 per month.
Under the terms of the New Lease, we continue to be responsible for our proportionate share of
all operating expenses, including utilities, taxes, and repairs and maintenance. We also continue
to be responsible for maintaining certain insurance policies during the term. In the event of a
default of certain of our obligations under the New Lease, UTRF would have right to terminate the
New Lease. The foregoing is only a brief description of the material terms of the Prior Lease and
New Lease does not purport to be a complete statement of the rights and obligations of the parties
thereunder, and is qualified in its entirety by reference to the Prior Lease that was filed as
Exhibit 10.27 to our Quarterly Report on Form 10-Q, filed with the SEC on July 27, 2005, and the
New Lease that is filed as Exhibit 10.55 to this Annual Report on Form 10-K. For a description of
our contractual relationship with UTRF, other than with respect to the Prior Lease and the New
Lease, please see “Item 1, Business—Licenses and Collaborative Relationships—University of
Tennessee Research Foundation.”
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 2010 Annual Meeting of Stockholders
with the U.S. Securities and Exchange Commission pursuant to Regulation 14A (the “2010 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 2010 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 and nominees for director,
including information with respect to our audit committee and audit committee financial experts,
may be found under the section entitled “Proposal No. 1 – Election of Directors” and “Additional
Information About the Board of Directors and Certain Corporate Governance Matters” appearing in the
2010 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 “Section 16(a) Beneficial
Ownership Reporting Compliance” appearing in the 2010 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 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 “Governance.” We will provide a copy of these
documents to any person, without charge, upon request, by writing to us at GTx, Inc., Director,
Corporate Communications and Financial Analysis, 175 Toyota Plaza, Suite 700, Memphis, Tennessee
38103. We intend to satisfy the disclosure requirement
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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 location 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 2010 Proxy Statement under the
sections entitled “Compensation Discussion and Analysis,” “Executive Compensation” 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 2010 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 our Compensation Discussion and Analysis is incorporated herein by reference to the
information from the 2010 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
2010 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
2010 Proxy Statement under the section entitled “Equity Compensation Plan Information.”
| 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 2010 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 2010 Proxy Statement under the section entitled
“Additional Information About the Board of Directors and Certain Corporate Governance Matters –
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 2010 Proxy Statement under the section entitled “Proposal No. 2 – Ratification of
Appointment of Independent Registered Public Accounting Firm.”
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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, 2009 and 2008 | |
F-6
|
Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007 | |
F-7
|
Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2009, 2008 and 2007 | |
F-8
|
Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007 | |
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
|
Consent, Waiver and Amendment between the Registrant and Oracle Partners, L.P., Oracle Investment Management, Inc. and Oracle Institutional Partners, L.P. dated November 29, 2007(4) | |
4.6*
|
Consent, Waiver and Amendment between Registrant and J. R. Hyde, III and Pittco Associates, L.P. dated December 3, 2007(4) | |
4.7
|
Registration Rights Agreement between Registrant and Merck & Co., Inc. dated December 18, 2007(5) | |
10.1*+
|
Genotherapeutics, Inc. 1999 Stock Option Plan, as amended through December 10, 2009, and Form of Stock Option Agreement | |
10.2*+
|
GTx, Inc. 2000 Stock Option Plan, as amended through December 10, 2009, and Form of Stock Option Agreement | |
10.3*+
|
GTx, Inc. 2001 Stock Option Plan, as amended through November 3, 2009, and Form of Stock Option Agreement | |
10.4*+
|
GTx, Inc. 2002 Stock Option Plan, as amended through November 3, 2009, and Form of Stock Option Agreement | |
10.5*
|
GTx, Inc. 2004 Equity Incentive Plan and Form of Stock Option Agreement(3) | |
10.6*
|
GTx, Inc. 2004 Equity Incentive Plan, as amended effective April 30, 2008(6) | |
10.8*
|
Amended and Restated Employment Agreement dated November 10, 2008, between Registrant and Mitchell S. Steiner, M.D.(7) | |
10.9*
|
Amended and Restated Employment Agreement dated November 10, 2008, between Registrant and Marc S. Hanover(7) | |
10.10*
|
Amended and Restated Employment Agreement dated November 10, 2008, between Registrant and Mark E. Mosteller(7) | |
10.11*
|
Amended and Restated Employment Agreement dated November 10, 2008, between Registrant and Henry P. Doggrell(7) | |
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) |
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| Number | Description | |
10.15†
|
Amended and Restated License and Supply Agreement dated October 22, 2001, between Registrant and Orion Corporation(9) | |
10.16†
|
Amendment No. 1 to the License and Supply Agreement dated March 5, 2003, between Registrant and Orion Corporation(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(9) | |
10.25†
|
Amended and Restated License and Supply Agreement effective January 1, 2005, between Registrant and Orion Corporation(11) | |
10.26
|
Sublease Agreement dated April 1, 2005, as amended, between Registrant and TriStar Enterprises, Inc.(12) | |
10.27*
|
Amended and Restated Employment Agreement dated November 10, 2008 between Registrant and James T. Dalton(7) | |
10.28*+
|
2010 Compensation Information for Registrant’s Executive Officers | |
10.29*
|
2009 Compensation Information for Registrant’s Executive Officers(7) | |
10.30*
|
GTx, Inc. 2004 Non-Employee Directors’ Stock Option Plan and Form of Stock Option Agreement(3) | |
10.31*
|
Amended and Restated GTx, Inc. 2004 Non-Employee Directors’ Stock Option Plan, effective April 26, 2006(13) | |
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(14) | |
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(15) | |
10.34*
|
Form of Stock Option Agreement under the Amended and Restated GTx, Inc. 2004 Non-Employee Directors’ Stock Option Plan(16) | |
10.35†
|
Partial Assignment Agreement among Registrant, Orion Corporation and Ipsen Limited dated September 7, 2006(17) | |
10.36†
|
Collaboration and License Agreement between Registrant and Ipsen Limited dated September 7, 2006(18) | |
10.38*
|
Amended and Restated Employment Agreement dated November 10, 2008, between Registrant and Ronald A. Morton, Jr., M.D.(7) | |
10.40†
|
Consolidated, Amended, and Restated License Agreement dated July 24, 2007, between Registrant and University of Tennessee Research Foundation(8) | |
10.41†
|
Amended and Restated License Agreement dated September 24, 2007, between Registrant and University of Tennessee Research Foundation(8) | |
10.42
|
Stock Purchase Agreement, dated November 5, 2007, between the Registrant and Merck & Co., Inc.(19) | |
10.43†
|
Exclusive License and Collaboration Agreement between the Registrant and Merck & Co., Inc. dated November 5, 2007(20) | |
10.44*
|
Amended and Restated Employment Agreement, dated November 10, 2008, between Registrant and Gregory A. Deener(7) | |
10.46
|
Sublease Agreement, dated December 17, 2007 by and between the Registrant and ESS SUSA Holdings, LLC(20) | |
10.47
|
First Amendment, dated December 29, 2008, to the Consolidated, Amended and Restated License Agreement dated July 24, 2007 between the Registrant and University of Tennessee Research Foundation(7) | |
10.48
|
First Amendment, dated December 29, 2008, to the Amended and Restated License Agreement dated September 24, 2007 between the Registrant and University of Tennessee Research Foundation(7) | |
10.49*
|
Directors’ Deferred Compensation Plan, as amended effective November 4, 2008(7) | |
10.50*
|
Non-Employee Director Compensation Policy of GTx, Inc., effective January 1, 2009(7) | |
10.51*
|
Amended and Restated GTx, Inc. 2004 Non-Employee Directors’ Stock Option Plan, as amended effective November 4, 2008(7) | |
10.52*
|
GTx, Inc. 2004 Equity Incentive Plan, as amended effective November 4, 2008 and Form of Stock Option Agreement(7) | |
10.53*
|
Amended and Restated GTx, Inc. Executive Bonus Compensation Plan, effective November 4, 2008(7) | |
10.54
|
First Amendment, dated July 21, 2008, to the Sublease and Parking Sublicense Agreements dated December 17, 2007 by and between the Registrant and ESS SUSA Holdings, LLC(7) | |
10.55+
|
Sublease Agreement dated October 1, 2009 between Registrant and University of Tennessee Research Foundation | |
12.1+
|
Statement of Computation of Deficiency of Earnings Available to Cover Fixed Charges | |
23.1+
|
Consent of Independent Registered Public Accounting Firm |
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| Number | Description | |
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)(23) | |
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)(23) |
| † | Confidential treatment has been granted with respect to certain portions of this exhibit. This exhibit omits the information subject to this confidentiality request. Omitted portions have been filed separately with the SEC. | |
| * | Indicates a management contract or compensation plan or arrangement. | |
| + | 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 the like numbered Exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-50549), filed with the SEC on July 26, 2007 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 the like numbered Exhibit to the Registrant’s registration statement on Form S-3 (File No. 333-148321), filed with the SEC on December 26, 2007, and incorporated herein by reference. | |
| (5) | Filed as the like numbered Exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-50549), filed with the Securities and Exchange Commission on December 18, 2007, and incorporated herein by reference. | |
| (6) | Filed as the like numbered Exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-50549), filed with the SEC on May 6, 2008, and incorporated herein by reference. | |
| (7) | Filed as the like numbered Exhibit to the Registrant’s Annual Report on Form 10-K (File No. 000-50549), filed with the SEC on March 3, 2009, and incorporated herein by reference. | |
| (8) | Filed as the like numbered Exhibit to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the SEC on November 9, 2007, and incorporated herein by reference. | |
| (9) | Filed as the like numbered Exhibit to the Registrant’s Annual Report on Form 10-K (File No. 000-50549), filed with the SEC on March 9, 2007, and incorporated herein by reference. | |
| (10) | Filed as Exhibit 10.1 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. | |
| (11) | 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. | |
| (12) | 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. | |
| (13) | Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 000-50549), filed with the SEC on April 27, 2006, and incorporated herein by reference. | |
| (14) | 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. | |
| (15) | Filed as 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. | |
| (16) | Filed as Exhibit 10.35 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. | |
| (17) | Filed as Exhibit 10.36 to the Registrant’s Quarterly Report on Form 10-Q (File No. 000-50549), filed with the |
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| SEC on November 3, 2006, and incorporated herein by reference. | ||
| (18) | Filed as 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. | |
| (19) | Filed as the like numbered Exhibit to the Registrant’s Current Report on Form 8-K (File No. 000-50549), filed with the SEC on November 6, 2007, and incorporated herein by reference. | |
| (20) | Filed as the like numbered Exhibit to the Registrant’s Annual Report on Form 10-K (File No. 000-50549), filed with the SEC on March 11, 2008, and incorporated herein by reference. | |
| (21) | 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 | |||
| Chief Executive Officer, Vice Chairman and Director | Date: March 15, 2010 |
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 15, 2010 | ||
/s/ Mitchell S. Steiner
|
Chief Executive Officer, Vice Chairman and Director (Principal Executive Officer) | March 15, 2010 | ||
/s/ Mark E. Mosteller
|
Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | March 15, 2010 | ||
/s/ Marc S. Hanover
|
Director | March 15, 2010 | ||
/s/ Michael G. Carter
|
Director | March 15, 2010 | ||
/s/ J. Kenneth Glass
|
Director | March 15, 2010 | ||
/s/ Robert W. Karr
|
Director | March 15, 2010 |
68
Table of Contents
| Date | ||||
/s/ John H. Pontius
|
Director | March 15, 2010 | ||
/s/ Kenneth S. Robinson
|
Director | March 15, 2010 | ||
/s/ Timothy R. G. Sear
|
Director | March 15, 2010 |
69
Table of Contents
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, 2009 using the criteria for
effective internal control over financial reporting as described in “Internal Control – Integrated
Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this evaluation, we concluded that, as of December 31, 2009, our internal control over financial
reporting was effective. The effectiveness of our internal control over financial reporting has
been audited by Ernst & Young LLP, an independent registered public accounting firm.
/s/ Mitchell S. Steiner
|
/s/ Mark E. Mosteller
|
|||||
Vice Chairman and
|
Vice President, Chief Financial Officer | |||||
Chief Executive Officer
|
and Treasurer |
Memphis, Tennessee
March 15, 2010
March 15, 2010
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of GTx, Inc.
We have audited GTx, Inc.’s internal control over financial reporting as of December 31, 2009,
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 included in the
accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
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, GTx, Inc. maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009, 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 of GTx, Inc. as of December 31,
2009 and 2008, and the related statements of operations, stockholders’ (deficit) equity and cash
flows for each of the three years in the period ended December 31, 2009 and our report dated March
15, 2010 expressed an unqualified opinion thereon.
| /s/ Ernst & Young LLP | ||||
Memphis, Tennessee
March 15, 2010
March 15, 2010
F-3
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of GTx, Inc.
We have audited the accompanying balance sheets of GTx, Inc. as of December 31, 2009 and 2008,
and the related statements of operations, stockholders’ (deficit) equity and cash flows for each of
the three years in the period ended December 31, 2009. 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, 2009 and 2008, and the results of its
operations and its cash flows for each of the three years in the period ended December 31, 2009, in
conformity with U.S. generally accepted accounting principles.
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, 2009, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 15, 2010 expressed an unqualified opinion thereon.
| /s/ Ernst & Young LLP | ||||
Memphis, Tennessee
March 15, 2010
March 15, 2010
F-4
Table of Contents
GTx, Inc.
BALANCE SHEETS
(in thousands, except share data)
(in thousands, except share data)
| December 31, | ||||||||
| 2009 | 2008 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 40,219 | $ | 95,510 | ||||
Short-term investments |
8,825 | 2,157 | ||||||
Accounts receivable, net |
406 | 487 | ||||||
Inventory |
116 | 92 | ||||||
Receivable from collaboration partners |
189 | 777 | ||||||
Prepaid expenses and other current assets |
920 | 1,001 | ||||||
Total current assets |
50,675 | 100,024 | ||||||
Property and equipment, net |
3,291 | 3,988 | ||||||
Intangible and other assets, net |
3,755 | 4,097 | ||||||
Total assets |
$ | 57,721 | $ | 108,109 | ||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 1,268 | $ | 2,821 | ||||
Accrued expenses and other current liabilities |
4,730 | 6,666 | ||||||
Deferred revenue — current portion |
9,954 | 11,490 | ||||||
Total current liabilities |
15,952 | 20,977 | ||||||
Deferred revenue, less current portion |
49,898 | 54,732 | ||||||
Other long-term liabilities |
621 | 382 | ||||||
Commitments and contingencies |
||||||||
Stockholders’ (deficit) equity: |
||||||||
Common stock, $0.001 par value: 60,000,000
shares authorized; 36,420,901 shares issued and
outstanding at December 31, 2009 and 36,392,443
shares issued and outstanding at December 31,
2008 |
36 | 36 | ||||||
Additional paid-in capital |
359,388 | 353,900 | ||||||
Accumulated deficit |
(368,174 | ) | (321,918 | ) | ||||
Total stockholders’ (deficit) equity |
(8,750 | ) | 32,018 | |||||
Total liabilities and stockholders’ (deficit) equity |
$ | 57,721 | $ | 108,109 | ||||
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, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
Revenues: |
||||||||||||
Product sales, net |
$ | 3,289 | $ | 1,088 | $ | 1,076 | ||||||
Collaboration revenue |
11,441 | 12,440 | 6,050 | |||||||||
Total revenues |
14,730 | 13,528 | 7,126 | |||||||||
Costs and expenses: |
||||||||||||
Cost of product sales |
1,290 | 649 | 621 | |||||||||
Research and development expenses |
32,344 | 44,259 | 38,508 | |||||||||
General and administrative expenses |
27,749 | 23,105 | 13,501 | |||||||||
Total costs and expenses |
61,383 | 68,013 | 52,630 | |||||||||
Loss from operations |
(46,653 | ) | (54,485 | ) | (45,504 | ) | ||||||
Interest income |
159 | 2,705 | 5,145 | |||||||||
Loss before income taxes |
(46,494 | ) | (51,780 | ) | (40,359 | ) | ||||||
Income tax benefit |
238 | — | — | |||||||||
Net loss |
$ | (46,256 | ) | $ | (51,780 | ) | $ | (40,359 | ) | |||
Net loss per share: |
||||||||||||
Basic and diluted |
$ | (1.27 | ) | $ | (1.43 | ) | $ | (1.16 | ) | |||
Weighted average shares used in
computing net loss per share: |
||||||||||||
Basic and diluted |
36,415,379 | 36,301,558 | 34,940,151 | |||||||||
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
GTx, Inc.
STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
For the Years Ended December 31, 2009, 2008 and 2007
(in thousands, except share and per share data)
For the Years Ended December 31, 2009, 2008 and 2007
(in thousands, except share and per share data)
| Stockholders’ (Deficit) Equity | ||||||||||||||||||||
| Common | ||||||||||||||||||||
| Stock | Additional Paid-in | Total Stockholders’ | ||||||||||||||||||
| Shares | Amount | Capital | Accumulated Deficit | (Deficit) Equity | ||||||||||||||||
Balances at January 1, 2007 |
34,822,362 | $ | 35 | $ | 326,793 | $ | (229,779 | ) | $ | 97,049 | ||||||||||
Issuance of common stock |
1,285,347 | 1 | 19,176 | — | 19,177 | |||||||||||||||
Exercise of employee stock options |
108,554 | — | 826 | — | 826 | |||||||||||||||
Directors’ deferred compensation |
— | — | 183 | — | 183 | |||||||||||||||
Share-based compensation |
— | — | 2,041 | — | 2,041 | |||||||||||||||
Net loss and comprehensive loss |
— | — | — | (40,359 | ) | (40,359 | ) | |||||||||||||
Balances at December 31, 2007 |
36,216,263 | 36 | 349,019 | (270,138 | ) | 78,917 | ||||||||||||||
Exercise of employee stock options |
176,180 | — | 1,167 | — | 1,167 | |||||||||||||||
Directors’ deferred compensation |
— | — | 178 | — | 178 | |||||||||||||||
Share-based compensation |
— | — | 3,536 | — | 3,536 | |||||||||||||||
Net loss and comprehensive loss |
— | — | — | (51,780 | ) | (51,780 | ) | |||||||||||||
Balances at December 31, 2008 |
36,392,443 | 36 | 353,900 | (321,918 | ) | 32,018 | ||||||||||||||
Exercise of employee stock options |
18,434 | — | 136 | — | 136 | |||||||||||||||
Directors’ deferred compensation |
— | — | 178 | — | 178 | |||||||||||||||
Issuance of common stock under deferred
compensation arrangements |
10,024 | — | — | — | — | |||||||||||||||
Share-based compensation |
— | — | 5,174 | — | 5,174 | |||||||||||||||
Net loss and comprehensive loss |
— | — | — | (46,256 | ) | (46,256 | ) | |||||||||||||
Balances at December 31, 2009 |
36,420,901 | $ | 36 | $ | 359,388 | $ | (368,174 | ) | $ | (8,750 | ) | |||||||||
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, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ | (46,256 | ) | $ | (51,780 | ) | $ | (40,359 | ) | |||
Adjustments to reconcile net loss to net cash used in
operating activities: |
||||||||||||
Depreciation and amortization |
1,785 | 1,562 | 1,150 | |||||||||
Share-based compensation |
5,174 | 3,536 | 2,041 | |||||||||
Directors’ deferred compensation |
178 | 178 | 183 | |||||||||
Deferred revenue amortization |
(11,441 | ) | (10,957 | ) | (6,050 | ) | ||||||
Write off of property and equipment |
114 | — | — | |||||||||
Foreign currency transaction loss (gain) |
— | 34 | (140 | ) | ||||||||
Loss on retirement of property and equipment |
— | — | 9 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Short-term investments, trading |
2,157 | 7,653 | (9,810 | ) | ||||||||
Accounts receivable, net |
81 | (370 | ) | (56 | ) | |||||||
Inventory |
(24 | ) | (14 | ) | 129 | |||||||
Receivable from collaboration partners |
588 | 40,610 | (39,372 | ) | ||||||||
Prepaid expenses and other assets |
85 | 383 | (21 | ) | ||||||||
Accounts payable |
(1,553 | ) | 1,207 | 278 | ||||||||
Accrued expenses and other long-term liabilities |
(1,956 | ) | 33 | 3,561 | ||||||||
Deferred revenue |
5,071 | 5,000 | 50,823 | |||||||||
Net cash used in operating activities |
(45,997 | ) | (2,925 | ) | (37,634 | ) | ||||||
Cash flows from investing activities: |
||||||||||||
Purchase of property and equipment |
(600 | ) | (2,905 | ) | (1,223 | ) | ||||||
Purchase of short-term investments, held to maturity |
(11,275 | ) | — | — | ||||||||
Proceeds from maturities of short-term investments,
held to maturity |
2,450 | — | — | |||||||||
Purchase of intangible assets |
— | — | (513 | ) | ||||||||
Net cash used in investing activities |
(9,425 | ) | (2,905 | ) | (1,736 | ) | ||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from issuance of common stock |
— | — | 19,177 | |||||||||
Proceeds from exercise of employee stock options |
136 | 1,167 | 826 | |||||||||
Payments on capital lease obligation |
(5 | ) | (5 | ) | (5 | ) | ||||||
Net cash provided by financing activities |
131 | 1,162 | 19,998 | |||||||||
Net decrease in cash and cash equivalents |
(55,291 | ) | (4,668 | ) | (19,372 | ) | ||||||
Cash and cash equivalents, beginning of year |
95,510 | 100,178 | 119,550 | |||||||||
Cash and cash equivalents, end of year |
$ | 40,219 | $ | 95,510 | $ | 100,178 | ||||||
Supplemental schedule of non-cash investing
and financing activities: |
||||||||||||
Equipment purchased under debt or capital lease |
$ | 268 | $ | — | $ | — | ||||||
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
Business
GTx, Inc. (“GTx” or the “Company”), 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
prevent and treat cancer, fractures and bone loss, muscle loss and other serious medical
conditions. GTx operates in one business segment.
GTx is developing toremifene citrate, a selective estrogen receptor modulator (“SERM”). GTx
has completed a pivotal Phase III clinical trial evaluating toremifene 80 mg to reduce fractures
and treat other estrogen deficiency side effects of androgen deprivation therapy (“ADT”) in men
with prostate cancer. In December 2008, the Company submitted a New Drug Application (“NDA”) for
toremifene 80 mg to reduce fractures in men with prostate cancer on ADT to the U.S. Food and Drug
Administration (“FDA”). In October 2009, the Company received a Complete Response Letter from the
FDA regarding its NDA for toremifene 80 mg notifying the Company that the FDA would not approve the
Company’s NDA in its present form. The FDA identified two deficiencies in the Complete Response
Letter and recommended that the following information be provided to the FDA to address these
clinical deficiencies: (i) results of a second adequate and well-controlled Phase III clinical
trial demonstrating the safety and efficacy of toremifene 80 mg to reduce fractures in men with
prostate cancer on ADT and (ii) results from an adequate and well-controlled clinical trial
demonstrating that toremifene 80 mg treatment to reduce fractures in men with prostate cancer on
ADT does not have a detrimental effect on either time-to-disease progression or overall survival.
The Company met with the FDA in December 2009 to better understand the Company’s options for
addressing the deficiencies identified by the FDA in the Complete Response Letter. In 2010, the
Company plans to submit to and discuss with the FDA a proposed protocol for a second pivotal Phase
III clinical trial evaluating toremifene 80 mg to reduce fractures in men with prostate cancer on
ADT to address in a single clinical trial the deficiencies identified by the FDA in the Complete
Response Letter. GTx is also developing toremifene 20 mg in an ongoing pivotal Phase III clinical
trial for the prevention of prostate cancer in high risk men with high grade prostatic
intraepithelial neoplasia (“high grade PIN”). GTx licensed to Ipsen Biopharm Limited, formerly
known as Ipsen Developments Limited, (“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 toremifene for all indications which the Company
has licensed from Orion Corporation (“Orion”). The Company is developing selective androgen
receptor modulators (“SARMs”), a new class of drugs with the potential to treat cancer cachexia
(cancer induced muscle loss) and chronic sarcopenia, which is the loss of skeletal muscle mass
resulting in reduced physical strength and ability to perform activities of daily living, as well
as other musculoskeletal wasting or muscle loss conditions. In March 2010, the Company reacquired
full rights to its SARM program, including OstarineTM (previously designated by Merck &
Co., Inc., or “Merck”, as MK-2866), following the termination by the Company and Merck of the
exclusive license and collaboration agreement for SARM compounds and related SARM products. See
Note 14, Subsequent Events, for further discussion. GTx is also developing GTx-758, an oral
luteinizing hormone inhibitor for the first line treatment of advanced prostate cancer. In
February 2010, the Company initiated a Phase II clinical trial evaluating the ability of GTx-758 to
reduce testosterone to castrate levels.
The Company markets FARESTON® (toremifene citrate) 60 mg tablets, approved for the
treatment of metastatic breast cancer in postmenopausal women in the United States.
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.
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)
Cash and Cash Equivalents
The Company considers highly liquid investments with initial maturities of three months or
less to be cash equivalents.
Short-term Investments
At December 31, 2009, short-term investments consisted of certificates of deposit with
original maturities of greater than three months and less than one year. As the Company has the
positive intent and ability to hold the certificates of deposit until maturity, these investments
have been classified as held to maturity investments and are stated at cost, which approximates
fair value.
At December 31, 2008, short-term investments consisted of an investment in Bank of America
Corporation’s Columbia Strategic Cash Portfolio (the “Fund”). The Company’s investment in the Fund
was liquidated in its entirety during September 2009. For the years ended December 31, 2009 and
2008, the Company recognized a gain on its investment in the Fund of approximately $98 and a loss
of approximately $597, respectively.
The fair values of these investments were determined based on quoted market prices in active
markets and other observable market data, or Level 1 and Level 2 inputs. Where quoted market
prices in active markets were not available, inputs other than quoted prices that are observable,
either directly or indirectly, were used to determine the fair values of these investments.
Accounts Receivable
Accounts receivable are recorded net of allowances for cash discounts for prompt payment. The
Company makes judgments as to its ability to collect outstanding receivables and will provide
allowances for the portion of receivables if and when collection becomes doubtful. The Company has
not recorded reserves related to the collectability of its accounts receivable for the years ended
December 31, 2009 and 2008.
Inventory
Inventory consists of FARESTON® tablets that are manufactured by Orion and
delivered to the Company as finished goods. Inventory is stated at the lower of cost (first-in,
first-out method) or market. The Company analyzes its current inventory levels and will write
down inventory if it has become un-saleable or has a cost basis in excess of its expected net
realizable value. To date, there have been no inventory write-downs.
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:
Laboratory and office equipment
|
3 to 5 years | |
Leasehold improvements
|
3 to 7 years | |
Furniture and fixtures
|
5 years | |
Computer equipment and software
|
3 years |
Intangible Assets
The Company amortizes its purchased intangible assets with finite lives over their estimated
economic lives. The Company’s intangible assets consist of license fees and represent the value
of each license acquired by the
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)
Company pursuant to the agreements described in Note 6. The license fees are being amortized
on a straight-line basis over the respective terms of the agreements.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever 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. An impairment loss would be recognized when estimated future cash flows
are less than the carrying amount. The cash flow estimates would be based on management’s best
estimates, using appropriate and customary assumptions and projections at the time.
Fair Value of Financial Instruments
The carrying amounts of the Company’s financial instruments, which include cash, cash
equivalents, short-term investments, accounts receivable and accounts payable approximate their
fair values. The method of determining the fair value for the Company’s short-term investments is
discussed under Short-term Investments in this Note 2.
Concentration of Risk
Financial instruments that potentially subject the Company to a concentration of credit risk
consist of cash and cash equivalents, short-term investments and accounts receivable. The Company
has established guidelines relating to diversification and maturities of its cash equivalents and
short-term investments which are designed to manage risk. The Company’s cash equivalents consist
of bank deposits, certificates of deposit, and money market mutual funds. Bank deposits may at
times be in excess of FDIC insurance limits. The Company’s short-term investments consist of
investments in certificates of deposit with original maturities of greater than 3 months and less
than 1 year as discussed under Short-term Investments in this Note 2.
Three wholesale drug distributors individually comprised 48%, 33% and 16%, respectively, of
the Company’s accounts receivable as of December 31, 2009. These same three distributors
represented 39%, 37% and 19%, respectively, of the Company’s product sales for the year ended
December 31, 2009.
Revenue Recognition
The Company recognizes revenue from net product sales of FARESTON® less deductions
for estimated sales discounts and sales returns. Revenue from product sales is recognized when
persuasive evidence of an arrangement exists, title passes, the price is fixed or determinable, and
collectability is reasonably assured. 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, 2009 and
2008, the Company’s accrual for product returns was $494 and $815, respectively.
Collaboration revenue consists of non-refundable upfront payments, license fees,
reimbursements for research and development activities, and milestone payments associated with the
Company’s collaboration and license agreements discussed in Note 8. Revenues from licensing
agreements are recognized based on the performance requirements of the specific agreements. The
Company has analyzed agreements with multiple element arrangements to determine whether the
deliverables under the agreement, including license and performance obligations such as joint
steering committee participation and research and development activities, can be separated or
whether all of the deliverables must be accounted for as a single unit of accounting. For these
arrangements, the Company was not able to identify evidence of fair value for the undelivered
elements and therefore recognizes any consideration for a single unit of accounting in the same
manner as revenue is recognized for the final deliverable, which is ratable over the performance
period. The performance period was estimated at the inception of each agreement and is reevaluated
at each reporting period. Revenues from milestone payments for which the Company has no continuing
performance obligations are recognized upon achievement of the performance milestone, as
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)
defined in the related agreement, provided the milestone is substantive and a culmination of
the earnings process has occurred. Performance obligations typically consist of significant
milestones in the development life cycle of the related product candidates and technology, such as
initiation of clinical trials, achievement of specified clinical trial endpoints, filing for
approval with regulatory agencies and approvals by regulatory agencies.
Research and Development Expenses
Research and development expenses include, but are not limited to, the Company’s expenses for
personnel, supplies, and facilities associated with research activities, screening and
identification of product candidates, formulation and synthesis activities, manufacturing,
preclinical studies, toxicology studies, clinical trials, regulatory and medical affairs, quality
assurance activities and license and royalty fees. The Company expenses these costs in the period
in which they are incurred. The Company estimates its liabilities for research and development
expenses in order to match the recognition of expenses to the period in which the actual services
are received. As such, accrued liabilities related to third party research and development
activities are recognized based upon the Company’s estimate of services received and degree of
completion of the services in accordance with the specific third party contract.
The Company purchased approximately $941 of toremifene 80 mg tablets in the fourth quarter of
2009. The cost of this inventory was included in research and development expense for the year
ended December 31, 2009 due to the delay in regulatory approval of toremifene 80 mg to reduce
fractures in men with prostate cancer on ADT. See Note 1 for further discussion.
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, 2009 and 2008, net of the
valuation allowance, the net deferred tax assets were reduced to zero. See Note 9 for further
discussion.
Stock Options
The Company has stock option and equity incentive plans that provide for the purchase or
acquisition of the Company’s common stock by certain of the Company’s employees and directors. The
Company recognizes compensation expense for its share-based payments based on the fair value of the
awards over the period during which an employee or director is required to provide service in
exchange for the award. See Note 3 for further discussion.
Basic and Diluted Net Loss Per Share
Basic net loss per share is calculated based on the weighted average number of common shares
outstanding during the period. Diluted net loss per share gives effect to the dilutive potential
of common stock consisting of stock options.
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)
The following table sets forth the computation of the Company’s basic and diluted net loss per
share for the years ended December 31, 2009, 2008 and 2007:
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
Basic and diluted net loss per share |
||||||||||||
Numerator: |
||||||||||||
Net loss |
$ | (46,256 | ) | $ | (51,780 | ) | $ | (40,359 | ) | |||
Denominator: |
||||||||||||
Common stock outstanding at beginning of period |
36,392,443 | 36,216,263 | 34,822,362 | |||||||||
Issuance of common stock on a weighted average basis |
— | — | 49,301 | |||||||||
Issuance of common stock under deferred compensation arrangements
on a weighted average basis |
9,200 | — | — | |||||||||
Exercise of employee stock options on a weighted average basis |
13,736 | 85,295 | 68,488 | |||||||||
Weighted average shares used in computing basic and diluted net
loss per share |
36,415,379 | 36,301,558 | 34,940,151 | (1) | ||||||||
Basic and diluted net loss per share |
$ | (1.27 | ) | $ | (1.43 | ) | $ | (1.16 | ) | |||
| (1) | The weighted average shares used in computing basic and diluted net loss per share for the year ended December 31, 2007 included 49,301 shares, which represents the weighted average effect during the period of the Company’s issuance of 1,285,347 shares of common stock to Merck on December 18, 2007. |
Weighted average options outstanding to purchase shares of common stock of 3,597,716,
2,638,760, and 1,835,743 were excluded from the calculation of diluted net loss per share for the
years ended December 31, 2009, 2008 and 2007, respectively, as inclusion of the options would have
had an anti-dilutive effect on the net loss per share for the periods. At December 31, 2009, the
Company had outstanding 36,420,901 shares of common stock.
Comprehensive Loss
For all periods presented, there were no differences between net loss and comprehensive loss.
Recent Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a
consensus of the FASB Emerging Issues Task Force) (“ASU No. 2009-13”). ASU No. 2009-13 amends
revenue recognition guidance related to multiple deliverable arrangements to provide new guidance
concerning the determination of whether an arrangement involving multiple deliverables contains
more than one unit of accounting and the manner in which arrangement consideration should be
allocated to such deliverables. The amended guidance is effective for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15, 2010 and may be applied
prospectively or retroactively. The Company does not expect the adoption of ASU No. 2009-13 to
have a material impact on its financial position or results of operations.
3. Share-Based Compensation
Share-based payments include stock option grants under the Company’s stock option and equity
incentive plans and deferred compensation arrangements for the Company’s non-employee directors.
The Company grants to employees and non-employee directors options to purchase common stock
under various plans at prices equal to the fair market value of the stock on the dates the options
are granted as determined in accordance with the terms of the applicable plan. 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
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)
employee options. Employees generally have three months after the employment relationship ends
to exercise all vested options except in the case of voluntary retirement, disability or death,
where exercise periods are generally longer. The Company issues new shares of common stock upon
the exercise of options. 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 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 amount of share-based compensation
expense recognized is reduced ratably over the vesting period by an estimate of the percentage of
options granted that are expected to be forfeited or canceled before becoming fully vested.
Total share-based compensation expense for the year ended December 31, 2009 was $5,352, of
which $2,143 and $3,209 were recorded in the statement of operations as research and development
expenses and general and administrative expenses, respectively. Total share-based compensation
expense for the year ended December 31, 2008 was $3,714, of which $1,682 and $2,032 were recorded
in the statement of operations as research and development expenses and general and administrative
expenses, respectively. Total share-based compensation expense for the year ended December 31,
2007 was $2,224, of which $1,047 and $1,177 were recorded in the statement of operations as
research and development expenses and general and administrative expenses, respectively.
Share-based compensation expense for the years ended December 31, 2009, 2008 and 2007 included
share-based compensation expense related to deferred compensation arrangements for the Company’s
non-employee directors of $178, $178 and $183, respectively. See Note 10 for further discussion of
deferred compensation arrangements for the Company’s non-employee directors.
For the years ended December 31, 2009, 2008 and 2007, the weighted average grant date fair
value per share of options granted was $8.45, $8.54 and $10.41, respectively. The weighted average
for key assumptions used in determining the grant date fair value of options granted in 2009, 2008
and 2007, and a summary of the methodology applied to develop each assumption were as follows:
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
Expected price volatility |
55.0 | % | 51.6 | % | 50.6 | % | ||||||
Risk-free interest rate |
2.04 | % | 3.5 | % | 4.6 | % | ||||||
Weighted average expected life in years |
6.9 years | 6.9 years | 6.9 years | |||||||||
Dividend yield |
0 | % | 0 | % | 0 | % | ||||||
Expected Price Volatility — This is a measure of the amount by which a price has fluctuated or
is expected to fluctuate. The Company based its determination of expected volatility on its
historical stock price volatility. An increase in the expected price volatility will increase
compensation expense.
Risk-Free Interest Rate — This is determined using U.S. Treasury rates where the term is
consistent with the expected life of the stock options. 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 determined by calculating the average of the vesting term and the
contractual term of the options. The Company has utilized this method due to the lack of
historical option exercise information related to the Company’s stock option and equity incentive
plans. Options granted have a maximum term of ten years. An increase in the expected life will
increase compensation expense.
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.
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)
The following is a summary of stock option transactions for all of the Company’s stock option
and equity incentive plans for the three year period ended December 31, 2009:
| Weighted Average | ||||||||
| Number of | Exercise Price Per | |||||||
| Shares | Share | |||||||
Options outstanding at January 1, 2007 |
1,458,289 | $ | 8.33 | |||||
Options granted |
566,417 | 18.23 | ||||||
Options forfeited |
(36,500 | ) | 12.70 | |||||
Options exercised |
(108,554 | ) | 7.61 | |||||
Options outstanding at December 31, 2007 |
1,879,652 | 11.27 | ||||||
Options granted |
1,013,000 | 15.19 | ||||||
Options forfeited or expired |
(42,496 | ) | 14.07 | |||||
Options exercised |
(176,180 | ) | 6.62 | |||||
Options outstanding at December 31, 2008 |
2,673,976 | 13.01 | ||||||
Options granted |
1,118,150 | 15.07 | ||||||
Options forfeited or expired |
(408,821 | ) | 14.52 | |||||
Options exercised |
(18,434 | ) | 7.37 | |||||
Options outstanding at December 31, 2009 |
3,364,871 | 13.55 | ||||||
The following table summarizes information about stock options outstanding at December 31, 2009:
| Options Outstanding | Options Exercisable | |||||||||||||||||||
| Weighted Average | ||||||||||||||||||||
| Remaining | ||||||||||||||||||||
| Contractual Life | Weighted Average | Weighted Average | ||||||||||||||||||
| Exercise Price | Number Outstanding | (years) | Exercise Price | Number Exercisable | Exercise Price | |||||||||||||||
$2.24 — $12.15
|
1,123,129 | 5.07 | $ | 8.17 | 811,315 | $ | 7.76 | |||||||||||||
$12.30 — $16.84
|
1,533,575 | 8.14 | 15.40 | 136,335 | 13.21 | |||||||||||||||
$17.05 — $20.40
|
708,167 | 7.54 | 18.07 | 51,118 | 18.87 | |||||||||||||||
| 3,364,871 | 6.99 | 13.55 | 998,768 | 9.07 | ||||||||||||||||
At December 31, 2009, the aggregate intrinsic value of all outstanding options was $9 with a
weighted average remaining contractual term of 7.0 years, of which 998,768 of the outstanding
options are currently exercisable with an aggregate intrinsic value of $8, a weighted average
exercise price of $9.07 and a weighted average remaining contractual term of 4.22 years. Options
to purchase 18,434 shares were exercised during the year ended December 31, 2009. The total
intrinsic value of options exercised during the years ended December 31, 2009, 2008, and 2007 was
$99, $1,626, and $1,191, respectively. At December 31, 2009, the total compensation cost related
to non-vested options not yet recognized was $12,451, with a weighted average expense recognition
period of 2.23 years. Options available for future issuance under the Company’s stock option and
equity incentive plans were 3,027,159 at December 31, 2009. On January 1, 2010, options available
for future issuance under the Company’s stock option and equity incentive plans increased to
4,918,204 in accordance with the provisions of such plans.
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)
4. Property and Equipment, Net
Property and equipment consisted of the following:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
Laboratory and office equipment |
$ | 4,328 | $ | 4,174 | ||||
Computer equipment and software |
3,076 | 2,465 | ||||||
Furniture and fixtures |
1,355 | 1,355 | ||||||
Leasehold improvements |
1,024 | 1,024 | ||||||
In process equipment and software |
— | 36 | ||||||
| 9,783 | 9,054 | |||||||
Less: accumulated depreciation |
(6,492 | ) | (5,066 | ) | ||||
| $ | 3,291 | $ | 3,988 | |||||
Depreciation and amortization expense for the years ended December 31, 2009, 2008 and 2007 was
$1,447, $1,225 and $841, respectively. Of these amounts, $619, $528 and $388, respectively, were
included in research and development expenses in the statements of operations.
5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
Research and development |
$ | 1,749 | $ | 1,687 | ||||
General and administrative |
1,029 | 609 | ||||||
Sales and marketing |
819 | 1,355 | ||||||
Employee compensation |
605 | 2,131 | ||||||
Clinical trials |
446 | 884 | ||||||
Current portion of capital lease and financed equipment
liabilities |
82 | — | ||||||
| $ | 4,730 | $ | 6,666 | |||||
6. Intangible Assets
Intangible assets consisted of the following:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
License fees |
$ | 5,339 | $ | 5,339 | ||||
Less: accumulated amortization |
(1,584 | ) | (1,246 | ) | ||||
| $ | 3,755 | $ | 4,093 | |||||
In accordance with the terms of the Amended and Restated License and Supply Agreement that the
Company entered into with Orion in December 2004 (“Orion License and Supply Agreement”), the
Company paid a license fee of $4,826. This license fee is being amortized on a straight-line basis
over the term of the Orion License and Supply Agreement which the Company estimates to be 16 years.
In accordance with the terms of the Consolidated, Amended, and Restated License Agreement (“SARM
License Agreement”) and the Amended and Restated License Agreement (“SERM License Agreement”) that
the Company entered into with the University of Tennessee Research Foundation (“UTRF”) in July 2007
and September 2007, respectively, the Company paid a one-time up-front fee of $290 per license.
The license fees under the SARM License Agreement and the SERM License Agreement are being
amortized on a straight-line basis over the respective terms of the agreements, which the Company
estimates to be approximately 14 years and 11.5 years, respectively. Amortization expense for the
years ended December 31,
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)
2009, 2008 and 2007 was $338, $337 and $309, respectively. See Note 8 for additional
information on intangible assets.
Estimated future amortization expense for purchased intangible assets at December 31, 2009 is
as follows:
| Years Ending December 31, | ||||
2010 |
$ | 338 | ||
2011 |
338 | |||
2012 |
338 | |||
2013 |
338 | |||
2014 |
338 | |||
Thereafter |
2,065 | |||
Total |
$ | 3,755 | ||
7. Common and Preferred Stock
The Company’s certificate of incorporation authorizes the Company to issue 60,000,000 shares
of common stock, $0.001 par value per share, and 5,000,000 shares of preferred stock, $0.001 par
value per share.
On December 18, 2007, the Company completed a private placement of 1,285,347 shares of common
stock to Merck at a per share price of $23.34 (see Note 8).
8. Collaboration and License Agreements
Orion Corporation License and Supply Agreement
In December 2004, the Company entered into the Orion License and Supply Agreement pursuant to
which the Company obtained an exclusive license from Orion to develop and commercialize
toremifene-based products for all human indications worldwide, except the treatment and prevention
of breast cancer outside of the United States. Additionally, the Orion License and Supply
Agreement requires that Orion will manufacture and supply all of the Company’s and the Company’s
sublicensees’ needs for clinical trial and commercial grade material for toremifene-based products
developed and marketed in the United States and abroad, including toremifene globally and
FARESTON® in the United States. Orion may terminate its supply obligations at its
election at any time as a result of the Company’s failure to obtain regulatory approval of one of
its toremifene product candidates in the United States prior to December 31, 2009, in which event
the Company will have the right to enter into a contract manufacturing agreement with another
supplier for toremifene-based products. The Orion 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 Orion License”). Under the Orion License and
Supply Agreement, the Company was required to pay a license fee of $4,826. The term of the Orion
License and Supply Agreement lasts, on a country-by-country basis, until the later of expiration of
the Company’s patents claiming processes or methods of use of toremifene for prostate cancer or the
end of all marketing or regulatory exclusivity which the Company may obtain for toremifene-based
products. The term of the Company’s method of use patents extend from 2019 to 2023. Orion may
terminate the Orion License and Supply Agreement as a result of the Company’s uncured material
breach or bankruptcy.
Under the Original Orion 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 Orion 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
royalty payments for toremifene-based products to treat high grade PIN and prevent prostate cancer
and reduce fractures in men with prostate cancer on ADT.
The Company has agreed to achieve specified minimum sales requirements of toremifene in the
United States after commercialization of a 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
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)
use of toremifene to treat high grade PIN and prevent prostate cancer and reduce fractures in
men with prostate cancer on ADT.
University of Tennessee Research Foundation License Agreements
In July 2007, the Company and UTRF entered into the SARM License Agreement to consolidate and
replace the Company’s two previously existing SARM license agreements with UTRF and to modify and
expand certain rights and obligations of each of the parties under both license agreements.
Pursuant to the SARM License Agreement, the Company was granted exclusive worldwide rights in all
existing SARM technologies owned or controlled by UTRF, including all improvements thereto, and
exclusive rights to future SARM technology that may be developed by certain scientists at the
University of Tennessee or subsequently licensed to UTRF under certain existing inter-institutional
agreements with The Ohio State University.
In September 2007, the Company and UTRF entered into the SERM License Agreement to replace its
previously existing exclusive worldwide license agreement for toremifene. Pursuant to the SERM
License Agreement, the Company was granted exclusive worldwide rights to UTRF’s method of use
patents relating to SERMs, including toremifene for chemoprevention of prostate cancer as well as
future related SERM technologies that may be developed by certain scientists at the University of
Tennessee.
Under the SARM License Agreement and the SERM License Agreement (together, the “UTRF License
Agreements”), the Company paid UTRF a one-time, upfront fee of $290 per UTRF License Agreement as
consideration for entering into the UTRF License Agreements. The Company is also obligated to pay
UTRF annual license maintenance fees and royalties on sublicense revenues and net sales of
products.
In December 2008, the Company and UTRF amended the UTRF License Agreements (together, the
“License Amendments”). In consideration for the execution of the License Amendments, the Company
paid UTRF an aggregate of $540, which was included in research and development expense in the
Company’s statement of operations for the year ended December 31, 2008.
Ipsen Collaboration and License Agreement
In September 2006, the Company entered into a collaboration and license agreement with Ipsen
(the “Ipsen Collaboration Agreement”) pursuant to which the Company granted Ipsen exclusive rights
in the European Territory to develop and commercialize toremifene in all indications which the
Company has licensed from 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 Ipsen Collaboration Agreement, Ipsen paid the Company
€23,000 as a license fee and expense reimbursement, of which €1,500 was 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. In September
2009, 2008, and 2007, the Company received €500 (approximately $726, $711, and $688, respectively)
from Ipsen for the three annual installment payments. Pursuant to the Ipsen Collaboration
Agreement, the Company 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 toremifene in certain
countries of the European Territory for the high grade PIN indication, subject to certain
conditions, and the ADT indication. In February 2008, the Company earned a milestone of €1,000
(approximately $1,482) with the achievement of the primary endpoint in the toremifene 80 mg ADT
Phase III clinical trial. This amount was recognized as collaboration revenue in the first quarter
of 2008. Ipsen has agreed to be responsible for and to pay all clinical development, regulatory
and launch activities to commercialize toremifene 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 which rates will be
dependent on whether such sales are for the high grade PIN indication or the ADT indication. The
Company will remain responsible for paying upstream royalties on toremifene to both Orion and 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.
F-18
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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 recorded deferred revenue of $29,330 related to the Ipsen upfront license fee and
expense reimbursements which is being amortized into revenue on a straight-line basis over an
estimated six year development period for toremifene in the European Territory. The estimated
development period was increased in the fourth quarter of 2009 from five years to six years based
upon revised development plans for the toremifene product candidates. The Company recognized as
collaboration revenue $5,777 for the year ended December 31, 2009, and $5,852 for the years ended
December 31, 2008 and 2007, respectively, from the amortization of the Ipsen deferred revenue.
Merck & Co., Inc. Collaboration and License Agreement
In December 2007, GTx and Merck entered into a global exclusive license and collaboration
agreement (the “Merck Collaboration Agreement”) governing the Company’s and Merck’s joint research,
development and commercialization of SARM compounds and related SARM products, including SARMs
currently being developed by the Company and Merck and those yet to be discovered, for all
potential indications of interest. In March 2010, the Company reacquired full rights to its SARM
program, including OstarineTM, following the termination by the Company and Merck of the
Merck Collaboration Agreement. See Note 14, Subsequent Events, for further discussion.
Under the Merck Collaboration Agreement, the Company granted Merck an exclusive worldwide
license under its SARM-related patents and know-how. The Company conducted preclinical research of
SARM compounds and products, and Merck was primarily responsible under the terms of the agreement
for conducting and funding development and commercialization of products developed under the Merck
Collaboration Agreement. Merck paid the Company an upfront licensing fee of $40,000. In addition,
Merck has agreed to pay the Company $15,000 in guaranteed cost reimbursements for research and
development activities in equal annual installments over a three year period beginning on the first
anniversary of the effective date of the Merck Collaboration Agreement. The Company received
$5,000 from Merck in both December 2008 and December 2009 as the first and second annual payments
of cost reimbursements for research and development activities.
The Company and Merck also entered into a Stock Purchase Agreement pursuant to which the
Company sold to Merck on December 18, 2007, 1,285,347 newly-issued shares of the Company’s common
stock for an aggregate purchase price of approximately $30,000, or $23.34 per share.
The Company deferred the recognition of the upfront licensing fee of $40,000 and the $10,800
in equity premium received that represents the difference between the purchase price and the
closing price of the Company’s common stock on the date the stock was purchased by Merck. These
payments were being recognized as revenue over the period of the Company’s performance obligation,
which the Company estimated to be ten years. The $5,000 of cost reimbursements received in both
December 2008 and December 2009 were being recognized as collaboration revenue over the remaining
period of the Company’s performance obligation. The Company recognized as collaboration revenue
$5,664, $5,106, and $198 for the years ended December 31, 2009, 2008, and 2007, respectively, from
the amortization of the Merck deferred revenue.
9. Income Taxes
The Company has incurred net losses since inception and, consequently, has 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.
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 principal components of the Company’s net deferred income tax assets consisted of the
following:
| December 31, | ||||||||
| 2009 | 2008 | |||||||
Deferred income tax assets: |
||||||||
Net federal and state operating loss carryforwards |
$ | 75,280 | $ | 57,719 | ||||
Research and development credits |
8,893 | 7,908 | ||||||
Deferred revenue |
22,984 | 25,904 | ||||||
Share-based compensation |
5,188 | 3,251 | ||||||
Other |
901 | 633 | ||||||
Depreciation and amortization |
121 | — | ||||||
Total deferred tax assets |
113,367 | 95,415 | ||||||
Deferred income tax liabilities: |
||||||||
Depreciation and amortization |
— | 27 | ||||||
Total deferred tax liabilities |
— | 27 | ||||||
Net deferred income tax assets |
113,367 | 95,388 | ||||||
Valuation allowance |
(113,367 | ) | (95,388 | ) | ||||
| $ | — | $ | — | |||||
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 $17,979, $22,765 and $17,027 in 2009,
2008 and 2007, respectively.
At December 31, 2009, the Company had net federal operating loss carryforwards of
approximately $197,000, which expire from 2018 to 2029 if not utilized. The Company had state
operating loss carryforwards of approximately $166,000, which expire from 2013 to 2024 if not
utilized. The Company also had research and development credits of approximately $8,900, which
expire from 2020 to 2029 if not utilized.
Both of the net federal and state operating loss carryforwards include approximately $1,900 of
deductions related to the exercise of stock options. This amount represents an excess tax benefit
and has not been included in the gross deferred tax asset reflected for net federal and state
operating loss carryforwards. If utilized, the benefits from these deductions will be recorded as
an adjustment to additional paid in capital.
The Company will recognize the impact of a tax position in the financial statements if that
position is more likely than not of being sustained on audit based on the technical merits of the
position. As of December 31, 2009, the Company had no unrecognized tax benefits. Utilization of
the Company’s net operating loss 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. The Company has not yet performed a Section 382 change in
control study in order to determine if there is a limitation of its net operating loss
carryforwards. Until this study is performed, the Company cannot be certain of the use of these
loss carryforwards. Additionally, the Company has not yet conducted an in depth study of its
research and development credits. This study may result in an increase or decrease to the
Company’s research and development credits. Until studies are conducted of the Company’s net
operating loss carryforwards and research and development credits, no amounts are being presented
as an uncertain tax position under FIN 48. The Company’s net deferred tax assets have been fully
offset by a valuation allowance. Therefore, future changes to the Company’s unrecognized tax
benefits would be offset by an adjustment to the valuation allowance and there would be no impact
on the Company’s balance sheet, statement of operations, or cash flows. The Company does not
expect its unrecognized tax benefits to change significantly over the next 12 months.
The Company is currently open to audit under the statute of limitations by the Internal
Revenue Service and the appropriate state income taxing authorities for all years due to the net
loss carryforwards from those years. The Company is currently not under examination by the
Internal Revenue Service or any other taxing authorities. The Company has not recorded any
interest and penalties on any unrecognized tax benefits since its inception.
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)
For the year ended December 31, 2009, the Company recognized a federal income tax benefit of
$238,000 due to the adoption of a provision in the Housing and Economic Recovery Act of 2008 that
allowed the Company to claim refunds for portions of its pre-2006 research and development tax
credits.
10. Directors’ Deferred Compensation Plan
Non-employee directors may defer all or a portion of their fees under the Company’s Directors’
Deferred Compensation Plan until termination of their status as directors. Deferrals can be made
into a cash account, a stock account, or a combination of both. Stock accounts will be paid out in
the form of Company common 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. Cash accounts and stock accounts
under the Directors’ Deferred Compensation Plan are credited with interest or the value of any cash
and stock dividends, respectively. Non-employee directors are fully vested in any amounts that
they elect to defer under the Directors’ Deferred Compensation Plan.
For the years ended December 31, 2009, 2008 and 2007, the Company incurred non-employee
director fee expense of $298, $241 and $207, respectively, of which $178, $178 and $183 was
deferred into stock accounts and will be paid in common stock following separation from service as
a director. At December 31, 2009, 72,689 shares of the Company’s common stock had been credited to
individual director stock accounts under the Directors’ Deferred Compensation Plan, and no amounts
had been credited to individual director cash accounts under the Directors’ Deferred Compensation
Plan.
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 $16.5 for employees under age 50 and $22 for employees 50 and
older in calendar year 2009. 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. The Company elected to match a portion of employee’s contributions to the plan
in the amount of $551, $395, and $210 in 2009, 2008 and 2007, respectively.
12. Commitments and Contingencies
Operating Lease Commitments
The Company leases laboratory facilities and office space pursuant to a sublease, which is
accounted for as an operating lease. The sublease expires on December 31, 2012, with an option to
extend the sublease for an additional two years. The Company subleases additional office space
under two subleases that are accounted for as operating leases and have terms that expire on April
30, 2015. These subleases have escalating rent payments and the Company has options to cancel
these subleases beginning December 31, 2010 and December 31, 2012, respectively. Total rent
expense under these real estate leases was approximately $1,458, $1,302 and $765 for the years
ended December 31, 2009, 2008 and 2007, respectively.
As of December 31, 2009, annual minimum payments under operating lease arrangements were as
follows:
2010 |
$ | 1,653 | ||
2011 |
1,145 | |||
2012 |
1,255 | |||
Total |
$ | 4,053 | ||
Equipment Financing and Capital Lease Obligations
The Company has approximately $268 of property and equipment that was financed or acquired
through a capital lease at December 31, 2009. The accumulated amortization related to these assets
was $24 at December 31, 2009.
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)
As of December 31, 2009, the annual minimum payments under these financing and capital lease
arrangements were as follows:
2010 |
$ | 92 | ||
2011 |
92 | |||
2012 |
92 | |||
2013 |
7 | |||
2014 |
2 | |||
Total |
$ | 285 | ||
Purchase Commitments
The Company had outstanding contractual purchase obligations of $40 and $23 at December 31,
2009 and 2008, 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, 2009 and 2008, respectively.
13. Reduction in Force
In December 2009, the Company implemented a reduction in its workforce in connection with the
receipt of the Complete Response Letter from the FDA regarding the Company’s NDA for toremifene 80
mg and the associated delay in the potential regulatory approval of toremifene 80 mg to reduce
fractures in men with prostate cancer on ADT. The reduction in force was effective immediately and
represented approximately 26% of the Company’s total workforce. As a result of the workforce
reductions, the Company incurred expenses of approximately $944, consisting primarily of severance
costs and legal fees, of which $288 was included in research and development expenses and $656 was
included in general and administrative expenses. As of December 31, 2009, the Company had $328 of
these expenses recorded in accrued expenses and other current liabilities as these amounts are
expected to be paid during the first quarter of 2010.
14. Subsequent Events
The Company has evaluated all events or transactions that occurred after December 31, 2009 up
through the date the financial statements were issued.
Merck Collaboration and License Agreement
In March 2010, the Company reacquired full rights to the Company’s SARM program following the
termination by the Company and Merck of the Merck Collaboration Agreement. Merck remains obligated
to pay the Company the final $5,000 payment for research and development activities cost
reimbursement in 2010. In the first quarter of 2010, the Company
expects to recognize as collaboration
revenue all of the remaining $49,856 unamortized revenue that was deferred as of December 31, 2009,
as well as the final $5,000 cost reimbursement, as a result of the termination of the Merck
Collaboration Agreement.
There were no other material recognizable or nonrecognizable subsequent events during the
period evaluated.
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)
15. Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations for the years ended December
31, 2009 and 2008:
| 2009 Quarters Ended | ||||||||||||||||
| March 31 | June 30 | September 30 | December 31 | |||||||||||||
Revenues: |
||||||||||||||||
Product sales, net |
$ | 759 | $ | 949 | $ | 719 | $ | 862 | ||||||||
Collaboration revenue |
2,872 | 2,873 | 2,881 | 2,815 | ||||||||||||
Total revenues |
3,631 | 3,822 | 3,600 | 3,677 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Cost of product sales |
348 | 431 | 344 | 167 | ||||||||||||
Research and development expenses |
8,312 | 7,746 | 8,123 | 8,163 | ||||||||||||
General and administrative expenses |
6,542 | 6,940 | 7,982 | 6,285 | ||||||||||||
Total costs and expenses |
15,202 | 15,117 | 16,449 | 14,615 | ||||||||||||
Loss from operations |
(11,571 | ) | (11,295 | ) | (12,849 | ) | (10,938 | ) | ||||||||
Interest income |
76 | 35 | 29 | 19 | ||||||||||||
Loss before income taxes |
(11,495 | ) | (11,260 | ) | (12,820 | ) | (10,919 | ) | ||||||||
Income tax benefit |
194 | — | — | 44 | ||||||||||||
Net loss |
$ | (11,301 | ) | $ | (11,260 | ) | $ | (12,820 | ) | $ | (10,875 | ) | ||||
Net loss per share: |
||||||||||||||||
Basic and diluted |
$ | (0.31 | ) | $ | (0.31 | ) | $ | (0.35 | ) | $ | (0.30 | ) | ||||
| 2008 Quarters Ended | ||||||||||||||||
| March 31 | June 30 | September 30 | December 31 | |||||||||||||
Revenues: |
||||||||||||||||
Product sales, net |
$ | 257 | $ | 274 | $ | 315 | $ | 242 | ||||||||
Collaboration revenue |
4,216 | 2,734 | 2,734 | 2,756 | ||||||||||||
Total revenues |
4,473 | 3,008 | 3,049 | 2,998 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Cost of product sales |
135 | 155 | 192 | 167 | ||||||||||||
Research and development expenses |
13,999 | 10,370 | 9,244 | 10,646 | ||||||||||||
General and administrative expenses |
4,250 | 6,424 | 6,107 | 6,324 | ||||||||||||
Total costs and expenses |
18,384 | 16,949 | 15,543 | 17,137 | ||||||||||||
Loss from operations |
(13,911 | ) | (13,941 | ) | (12,494 | ) | (14,139 | ) | ||||||||
Interest income |
1,168 | 698 | 568 | 271 | ||||||||||||
Net loss |
$ | (12,743 | ) | $ | (13,243 | ) | $ | (11,926 | ) | $ | (13,868 | ) | ||||
Net loss per share: |
||||||||||||||||
Basic and diluted |
$ | (0.35 | ) | $ | (0.37 | ) | $ | (0.33 | ) | $ | (0.38 | ) | ||||
F-23
Exhibit 10.1
GENOTHERAPEUTICS, INC.
STOCK OPTION PLAN
1. PURPOSE.
(a) The purpose of the Genotherapeutics, Inc. Stock Option Plan (the “Plan”) is to provide a
means by which selected key employees and directors (if declared eligible under paragraph 4) of
Genotherapeutics, Inc. (the “Company”), and its Affiliates, as defined in subparagraph 1(b), may be
given an opportunity to benefit from increases in value of the stock of the Company. The Plan will
be effected solely through the granting of nonstatutory stock options.
(b) The word “Affiliate” as used in the Plan means any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424 (e) and (f), respectively,
of the Internal Revenue Code of 1986, as amended from time to time (the “Code”).
(c) The Company, by means of the Plan, seeks to retain and reward the services of persons now
or later employed by or serving as directors of the Company, to secure and retain the services of
persons capable of filling such positions, and to provide incentives for such persons to exert
maximum efforts for the success of the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by a Committee appointed by the Board of Directors of the
Company composed of not fewer than 3 members, (the “Committee”).
(b) The Committee shall have the power, subject to, and within the limitations of, the express
provisions of the Plan and to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board of Directors:
Page 1 of 13
(i) To determine from time to time which of the persons eligible under the Plan
shall be granted nonqualified stock options (“Option Awards”) and the number of shares with respect to which Option Awards shall be granted to each such person.
(ii) To construe and interpret the Plan and Option Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Committee, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Award, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan as provided in paragraph 11.
(iv) Generally, to exercise such powers and to perform such acts as the Committee
deems necessary or expedient to promote the best interests of the Company.
(c) The Board of Directors may abolish the Committee at any time and revest in the Board of
Directors the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 9 relating to adjustments upon changes in stock,
the stock that may be issued pursuant to Option Awards granted under the Plan shall not exceed in
the aggregate Three Thousand (3,000) shares of the Company’s common stock. If any option or right
granted under the Plan shall for any reason expire or otherwise terminate without having been exercised in full or which is settled in cash, the stock not issued under such
option or right shall again become available to the Plan.
Page 2 of 13
(b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.
4. ELIGIBILITY.
Option Awards may be granted only to directors, officers or employees of the Company or its
Affiliates.
5. TERMS OF OPTION AWARDS.
Each Option Award shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The provisions of separate options need not be identical, but
each option shall include (through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall be ten (10) years from the date it was granted.
(b) The exercise price of each Option Award shall be not less than one hundred percent (100%)
of the fair market value of the stock subject to the option on the date the option is granted;
provided, however, that the Committee shall have the discretion to grant options to one or more
persons and in such proportions and at such higher exercise price as the Committee may determine.
Fair market value shall be determined by the Committee on such basis as it deems appropriate.
(c) The purchase price of stock acquired pursuant to an option shall be paid, to the extent
permitted by applicable statutes and regulations, either (i) in cash at the time the option is
exercised, or (ii) at the discretion of the Committee, determined either at the time of the grant
or exercise of the option, (A) by delivery to the Company of
other common stock of the Company, (B) according to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other common stock of the Company) with the person
Page 3 of 13
to whom the option is granted or to whom the option is transferred pursuant to subparagraph 5(d), or
(C) in any other form of legal consideration that may be acceptable to the Committee.
(d) Unless otherwise expressly stated in the option, an Option Award shall not be transferable
except by will or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the option is granted only by such person, nor shall an Option
Holder have the right or power to anticipate, accelerate, convey, assign or otherwise alienate,
hypothecate, pledge or otherwise encumber any Option Award or the shares subject to the Option
Award.
(e) Shares of stock subject to any Option Award shall vest as follows: (i) one-third (1/3) of
such shares shall vest on the third anniversary of the date of grant of such Option Award; (ii) an
additional one-third (1/3) of such shares shall vest on the fourth anniversary of the date of grant
of such Option Award; and (iii) the final one-third (1/3) of such shares shall vest on the fifth
anniversary of the date of grant of such Option Award. In the case of any Option Award granted to
a person using different exercise prices, this paragraph shall be applied separately to the shares
granted at each option price.
(f) Shares sold to a third party shall be subject to a thirty day right of first refusal by
the Company at the same price and terms as offered by any third party pursuant to a bona fide
offer, and may not be sold prior to an offer of sale to the Company on such terms. Further, shares
acquired through exercise of an Option Award shall be subject to the terms and conditions of the
Voting and Shareholder Agreement dated May 13, 1999, between the Company and its stockholders, as
amended from time to time (the “Stockholders Agreement”).
(g) In the event of a participant’s termination of employment or service as a director, as
applicable, by reason of voluntary retirement (at or after age sixty-five (65) or after age
fifty-
Page 4 of 13
five with no fewer than ten (10) years of service), death, permanent and total disability,
involuntary termination (other than a termination for cause but including any involuntary
termination as the result of a Change in Control, as addressed in paragraph (h) below), with
respect to such participant’s Option Award(s) (i) the Committee may in its sole, absolute and final
discretion elect to vest any or all shares not otherwise vested under the terms of the Plan, and
(ii) any vested shares subject to an Option Award may be exercised within ten (10) years following
the date of grant of such Option Award. In the event of an Option Award holder’s employment or
status as a director, as applicable, is terminated under any other circumstances, (i) any nonvested
Option Award shall be forfeited immediately, and (ii) the date of such termination of employment
shall be the last day on which any vested Option Award may be exercised.
For purposes of this section, a permanent and total disability shall mean the occurrence of
the following conditions: (i) the Option Award holder’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) of properly performing the principal
functions which had been typically assigned to him by the Company, (ii) such incapacity shall exist
or be expected to exist with a reasonable degree of medical certainty for more than ninety (90)
days in the aggregate during any consecutive twelve (12) month period, and (iii) either the Option
Award holder or the Company shall have given the other thirty (30) days written notice of intent to
terminate employment or service as a director because of disability. In the event the Company and
Option Award holder are in material disagreement regarding the Participant’s physical or mental
condition, the Company shall authorize a panel of three (3) physicians selected by the Company to examine the Participant to determine conclusively, by a majority,
whether the Participant is disabled for purposes of the Plan.
Page 5 of 13
For purposes of this section, a termination for cause shall mean the termination of an
individual’s status as an employee or director of the Company, as applicable, as the result of (i)
fraud or dishonesty in connection with the business of the Company; (ii) gross negligence in the
performance of duties for the Company; (iii) willful failure in carrying out duties as an employee
or director; or (iv) arrest and conviction of a felony involving moral turpitude, whether or not in
connection with the business of the Company; provided that (iii) above shall not apply if the
Option Award holder has been assigned by the Company to duties which are not comparable to such
holder’s function and compensation at the Company, or which are non-executive or demeaning
assignments, or if the Company has given such participant demeaning and unreasonable pay cuts.
(h) In the event of a Change in Control of the Company, all shares subject to all Option
Awards shall become one hundred percent (100%) vested and shall be converted to cash, options or
stock of equivalent value in the surviving organization under terms and condition which
substantially preserve the economic status of the participants, as determined by the Committee.
For purposes of this paragraph, a Change in Control shall mean:
(i) a sale or other disposition of more than fifty percent (50%) of the issued and
outstanding voting stock of the Company, in a single transaction or in a series of
transactions. For such purposes, “Voting Stock” shall mean capital stock of the
Company of any class or classes, the holders of which are ordinarily, in the absence
of contingencies, entitled to vote for the election of members of the Board of
Directors (or Persons performing similar functions) of the Company.
(ii) a merger or consolidation of the Company with or into any other entity, if
immediately after giving effect to such transaction more than fifty percent (50%)
Page 6 of 13
of the issued and outstanding Voting Stock of the surviving entity of such transaction
is held by persons who are not holders of the Voting Stock immediately prior to
giving effect to such transaction;
(iii) a sale or other disposition of all or substantially all of the Company’s
assets in a single transaction or in a series of transactions (including, without
limitation, any liquidation or dissolution of the Company).
A Change of Control shall not include any of the following events:
(i) any transfer or issuance of stock of the Company to one or more of the Company’s
lenders (or to any agents or representatives thereof) in exchange for debt of the
Company owed to any such lenders;
(ii) any transfer of stock of the Company to or by any person or entity, including
but not limited to one or more of the Company’s lenders (or to any agents or
representatives thereof), pursuant to the terms of any pledge of said stock as
collateral for any loans or financial accommodations to the Company and/or its
subsidiaries; or
(iii) any transfer or issuance to any person or entity, including but not limited to
one or more of the Company’s lenders (or to any agents or representatives thereof),
in connection with the workout or restructuring of the Company’s debts to any one of
the Company’s lenders, including but not limited to the issuance of new stock in
exchange for any equity contribution to the Company in connection with the workout
or restructuring of such debt.
(iv) any transfer of stock by a stockholder of the Company which is a partnership or
corporation to the partners or stockholders in such stockholder.
Page 7 of 13
(i) In the event of an initial public offering of the Company, Option Awards shall be
convertible to options in shares of the newly public company, under terms and conditions which
substantially preserve the rights and options of the participant. Any resulting registration of
options or shares shall be effected at Company expense.
(j) If provided in the Option Award, each Option Award shall carry the right to receive any
dividend or dividend equivalent on vested shares, under such terms and conditions as may be
specified in the Option Award.
(k) Notwithstanding any other provisions of the Plan, any vested but unexercised Option Award
shares shall be forfeited upon the Option Award holder’s “Competition” with the Company. For this
purpose, Competition shall be determined by the Committee, and shall exist if the Option Award
holder directly or indirectly (i) engages or has a financial interest in, (ii) becomes an officer,
employee, director, partner, advisor or consultant of or to, (iii) has an equity interest in, or
(iv) in any way materially assists any person, corporation, entity or business whose existing or
planned products or activities compete in whole or in part with the existing or planned products or
activities of the Company. The sole fact of ownership by an Option Award holder of less than two
percent (2%) of the stock of a publicly traded company which may have product lines which compete
with product lines of this Company shall not be treated as Competition. Any determination by the
Committee under this section shall be final and conclusive, unless overruled by the Board.
(l) Notwithstanding any other provision of the Plan or any Option Award to the contrary, any
and all sales of shares to the Company or any Affiliate are contingent upon and subject to the
terms and conditions of any bank loan covenants by the Company or any Affiliate.
6. COVENANTS OF THE COMPANY.
Page 8 of 13
(a) During the term of any Option Award granted under the Plan, the Company shall keep
available at all times for issuance or sale the number of shares of stock required to satisfy such
Option Award.
(b) The Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority, if any, as may be required to issue and sell shares of
stock upon grant or exercise of Option Awards under the Plan; provided, however, that this
undertaking shall not require the Company to register under the Securities Act of 1933, as amended
(the “Securities Act”), either the Plan, any Option Award granted under the Plan or any stock
issued or issuable pursuant to any such Option Awards. If, after reasonable efforts, the Company
is unable to obtain from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell stock upon exercise of such
Option Awards unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Option Awards granted under the Plan shall
constitute general funds of the Company.
8. MISCELLANEOUS.
(a) The Committee shall have the power to accelerate the time during which an Option Award may
be exercised or the time during which an option or stock acquired pursuant to an Option Award will
vest, notwithstanding the provisions in the Option Award stating the time during which it may be
exercised or the time during which stock acquired pursuant thereto will vest.
Page 9 of 13
(b) Neither a recipient of an Option Award nor any person to whom an Option Award is
transferred under subparagraph 5(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option Award unless and until such
person has satisfied all requirements for exercise of the Option Award pursuant to its terms and is
thereby entitled to receive shares of stock.
(c) Throughout the term of any Option Award granted pursuant to the Plan, the Company shall
make available to the holder of such Option Award upon request, not later than one hundred twenty
(120) days after the close of each fiscal year of the Company during the option term, upon request,
such financial and other information regarding the Company as comprises the annual report to the
shareholders of the Company provided for in the bylaws of the Company.
(d) Nothing in the Plan or any instrument executed or Option Award granted pursuant thereto
shall confer upon any recipient any right to continue in the employ of the Company or any Affiliate
or to limit the Company’s right to terminate the employment or directorship of any participant with
or without cause. In the event that an Option Award recipient is permitted or otherwise entitled
to take a leave of absence, the Company shall have the unilateral right to (i) determine whether
such leave of absence will be treated as a termination of employment for purposes of his or her Option Award, and (ii) suspend or otherwise delay the time or times at
which the shares subject to the Option Award would otherwise vest.
(e) To the extent provided by the terms of any Option Award, the recipient may satisfy any
federal, state or local tax withholding obligation relating to the exercise or receipt of such
Option Award by any of the following means or by a combination of such means: (i) tendering a cash
payment: (ii) authorizing the Company to withhold from the shares of the
Page 10 of 13
common stock otherwise
issuable to the participant as a result of the exercise or receipt of the Option Award cash or a
number of shares having a fair market value less than or equal to the amount of the withholding tax
obligation; or (iii) delivering to the Company owned and unencumbered shares of the common stock
having a fair market value less than or equal to the amount of the withholding tax obligation.
(f) In connection with each Option Award made pursuant to the Plan, the Company may require as
a condition precedent to its obligation to issue or transfer shares to an eligible participant, or
to evidence the removal of any restrictions on transfers or lapse of any repurchase right, that
such participant make arrangements satisfactory to the Company to insure that the amount of any
federal or other withholding tax required to be withheld with respect to such sale or transfer, or
such removal or lapse, is made available to the Company for timely payment of such tax.
(g) The Company may, as a condition of transferring any stock pursuant to the Plan, require
any person who is to acquire such stock (i) to give written assurances satisfactory to the Company
as to the optionee’s knowledge and experience in financial and business matters, and that he or she
is capable of evaluating, alone or together with the purchaser representative, the merits and risks
of acquiring the stock; and (ii) to give written assurances satisfactory to the Company stating that such person is acquiring the stock for such person’s own account and not
with any present intention of selling or otherwise distributing the stock. These requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares has been registered under a then currently effective registration statement under the
Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for
the
Page 11 of 13
Company that such requirement need not be met in the circumstances under the then applicable
securities laws.
(h) The Committee shall determine or cause to be determined the fair market value of the stock
of the Company from time to time, as required for purposes of this Plan.
9. ADJUSTMENTS UPON CHANGES IN STOCK.
If any change is made in the stock subject to the Plan, or subject to any Option Award granted
under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or otherwise), the Plan and outstanding Option
Awards will be appropriately adjusted in the class(es) and maximum number of shares subject to the
Plan and the class(es) and number of shares and price per share of stock subject to outstanding
Option Awards.
10. AMENDMENT OF THE PLAN.
(a) The Committee at any time, and from time to time, may amend the Plan subject to and within
the limitations of any resolutions approved by the Board of Directors.
(b) The Committee in its discretion shall determine at the time of each amendment of the Plan
whether or not to submit such amendment to the Board of Directors of the Company for approval.
(c) Rights and obligations under any Option Award granted before amendment of the Plan shall
not be altered or impaired by any amendment of the Plan unless (i) the Company requests the consent
of the person to whom the Option Award was granted and (ii) such person consents in writing.
Page 12 of 13
11. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Committee may suspend or terminate the Plan at any time. No Option Awards may be
granted under the Plan while the Plan is suspended or after it is terminated. Upon the termination
of the Plan, all Option Awards shall become fully vested.
(b) Rights and obligations under any Option Award granted while the Plan is in effect shall
not be altered or impaired by suspension or termination of the Plan, except with the consent of the
person to whom the Option Award was granted.
12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of November 18, 1999 upon execution by the President of the
Company, following approval by the Plan Committee.
IN
WITNESS WHEREOF, the President of the Company has executed this Plan
as of the 26th day of
August, 1999.
| GENOTHERAPEUTICS, INC. |
||||
| BY: | /s/ Marc S. Hanover | |||
| Title: CFO / Secretary | ||||
| APPROVED: PLAN COMMITTEE |
||||
| /s/ John H. Pontius | ||||
| /s/ Marc S. Hanover | ||||
| /s/ Mitchell S. Steiner | ||||
Page 13 of 13
First Amendment
GTx, Inc.
1999 Stock Option Plan
GTx, Inc.
1999 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the Genotherapeutics, Inc. Stock Option
Plan (the “1999 Plan”) effective August 26, 1999;
Whereas, Section 5(f) of the 1999 Plan contains a provision that subjects any shares
acquired pursuant to the exercise of an option to a 30 day right of first refusal in favor of the
Company (the “Right of First Refusal”);
Whereas, it was the intent of the Company that the Right of First Refusal would end
at such time as the Company completed its initial public offering of common stock;
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend Section 5(f) of the Company’s 1999 Plan to reflect the Company’s intent; and
Whereas, the Compensation Committee of the Company has approved such amendment.
Now, Therefore, Be it Resolved, the 1999 Plan is hereby amended, effective as of the
date hereof, as follows:
| 1. | That Section 5(f) of the 1999 Plan is hereby deleted in its entirety and replaced with the following: |
(f) Prior to such time as the Company’s shares of common stock are
first sold to the public in an offering registered pursuant to Section 5 of
the Securities Act of 1933, as amended (the “Initial Public Offering”), any
such shares of stock acquired though the exercise of an option shall be
subject to a thirty (30) day right of first refusal by the Company at the
same price and terms as offered by any third party pursuant to a bona fide
offer, and may not be sold prior to an offer to sell to the Company on such
terms. Further, shares acquired through exercise of an Option Award shall be
subject to the terms and conditions of the Voting and Shareholder Agreement
dated April 15, 1999, between the Company and its stockholders, as amended
from time to time (the “Stockholders Agreement”).
In Witness Whereof, the Company has caused this First Amendment to the 1999 Plan to
be executed on October 2, 2003.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | General Counsel/Secretary | |||
Second Amendment
to the GTx, Inc.
1999 Stock Option Plan
to the GTx, Inc.
1999 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the Genotherapeutics, Inc. Stock Option
Plan (the “1999 Plan”) effective August 26, 1999;
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend Section 5(g) of the Company’s 1999 Plan;
Whereas, the Compensation Committee of the Company has approved such amendments; and
Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 4350(i)(1)(A).
Now, Therefore, Be it Resolved, the 1999 Plan is hereby amended, effective as of the
date hereof, as follows:
| 1. | That the last sentence of the first paragraph in Section 5(g) of the 1999 Plan is hereby deleted in its entirety and replaced with the following: |
(g) In the event an Option Award holder’s employment or status as a
director, as applicable, is terminated under any other circumstances, (i)
any nonvested Option Award shall be forfeited immediately, and (ii) the
Option Award holder shall have until the earlier to occur of (A) a period of
ninety (90) days from the date of termination or (B) the expiration of the
term of the Option Award to exercise such Option Award.
In Witness Whereof, the Company has caused this Second Amendment to the 1999 Plan to
be executed on March 18, 2004.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | General Counsel/Secretary | |||
Third Amendment to the
GTx, Inc.
1999 Stock Option Plan
GTx, Inc.
1999 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the Genotherapeutics, Inc. Stock Option
Plan (the “1999 Plan”) effective August 26, 1999;
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend the Company’s 1999 Plan to clarify certain existing provisions in light of final
regulations issued under Section 409A of the Internal Revenue Code of 1986, as amended;
Whereas, the Compensation Committee of the Company has approved such amendments; and
Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 4350(i)(1)(A).
Now, Therefore, Be it Resolved, the 1999 Plan is hereby amended, effective as of the
date hereof, as follows:
| 1. | That Section 1(b) of the 1999 Plan is hereby deleted in its entirety and replaced with the following: |
(b) The word “Affiliate” as used in the Plan means any subsidiary
corporation of the Company, as such term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”).
| 2. | That Section 5(b) of the 1999 Plan is hereby deleted in its entirety and replaced with the following: |
(b) The exercise price of each Option Award shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
option on the date the option is granted; provided, however, that the
Committee shall have the discretion to grant options to one or more persons
in such proportions and at such higher exercise price as the Committee may
determine. Notwithstanding the foregoing, an Option Award may be granted
with an exercise price lower than one hundred percent (100%) of the fair
market value of the stock subject to the option on the date the option is
granted if such Option Award is granted pursuant to an assumption of or
substitution for another option pursuant to a Change in Control (as defined
in section 5(h) of the Plan) and in a manner consistent with the provisions
of Sections 409A and 424(a) of the Code. F Fair market value means, as of
any date, the value of the Company’s common stock determined as follows:
i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq Global Market or any other
established market, the fair market value of a share of common
stock shall be the closing sales price for such stock as quoted
on such exchange or market (or the exchange or market with the
greatest volume of trading in the common stock) on the date of
determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable.
ii) Unless otherwise provided by the Committee, if there is
no closing sales price for the common stock on the date of
determination, then the fair market value shall be the closing
sales price on the last preceding date for which such quotation
exists.
iii) In the absence of such markets for the common stock,
the fair market value shall be determined by the Committee in
good faith and in a manner that complies with Section 409A of the
Code.
| 3. | That the following will be added to the 1999 Plan as Section 8(i): |
(i) To the extent permitted by applicable law, the Committee, in its
sole discretion, may determine that the delivery of common stock upon the
exercise of all or a portion of any Option Award may be deferred and may
establish programs and procedures for deferral elections to be made by
persons receiving options. Deferrals by persons will be made in accordance
with Section 409A of the Code.
| 4. | That the following will be added to the 1999 Plan as Section 8(j): |
(j) To the extent that the Committee determines that any Option Award
granted hereunder is subject to Section 409A of the Code, the agreement
evidencing such Option Award shall incorporate the terms and conditions
necessary to avoid the consequences specified in Section 409A(a)(1) of the
Code. To the extent applicable, this Plan and the agreements evidencing
Option Awards shall be interpreted in accordance with Section 409A of the
Code, including without limitation any applicable guidance that may be
issued or amended in the future.
| 5. | That Section 10(c) of the 1999 Plan is hereby deleted in its entirety and replaced with the following: |
(b) Rights and obligations under any Option Award granted before
amendment of the Plan shall not be altered or impaired by any amendment of
the Plan unless (i) the Company requests the consent of the person to whom
the Option Award was granted and (ii) such person
2.
consents in writing. Notwithstanding the foregoing, subject to the
limitations of applicable law, if any, the Committee may amend the terms of
any one or more Option Awards without the consent of the person to whom the
Option Award was granted if necessary to bring the Option Award into
compliance with Section 409A of the Code.
In Witness Whereof, the Company has caused this Third Amendment to the 1999 Plan to
be executed on November 4, 2008.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | Vice President, General Counsel | |||
3.
Fourth Amendment
to the GTx, Inc.
1999 Stock Option Plan
to the GTx, Inc.
1999 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the Genotherapeutics, Inc. Stock Option
Plan (the “1999 Plan”) effective August 26, 1999;
Whereas, the Compensation Committee believes it to be in the best interest of the
Company to interpret the Plan to provide a consistent definition of the terms “voluntary
retirement” and “Retirement” with respect to any stock option awards granted thereunder;
Whereas, the Compensation Committee believes that this Fourth Amendment will also
benefit the optionees under the 1999 Plan by clarifying the applicable requirements for determining
“voluntary retirement” and “Retirement” and that this Fourth Amendment will not alter or impair any
rights or obligations the optionees have under any stock option award granted thereunder;
Whereas, the Compensation Committee has approved this Fourth Amendment; and
Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 5635(c) and IM-5635-1.
Now, Therefore, Be it Resolved, the 1999 Plan and any stock option award issued
pursuant thereto are hereby interpreted and amended as follows:
The definition of “voluntary retirement” and “Retirement” with respect to the 1999
Plan and any stock option award issued pursuant thereto shall be amended and
interpreted to mean “any voluntary termination of employment by the Optionee after
having reached the age of sixty-five (65) years or after having reached the age of
fifty-five (55) years if the Optionee has no fewer than five (5) years of service
with the Company.”
In Witness Whereof, the Company has caused this Fourth Amendment to the 1999 Plan to
be executed on December 10, 2009.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | General Counsel/Secretary | |||
NONQUALIFIED STOCK OPTION SUBSCRIPTION AGREEMENT
This Nonqualified Stock Option Subscription Agreement (this “Agreement”), dated as of the
___ day of _______, ___, is made by and between GTx, Inc. (the “Company”), a Delaware
corporation, and the Employee of the Company whose name appears on the signature page hereof
(hereinafter referred to as the “Optionee”).
WHEREAS, pursuant to the 1999 Stock Option Plan, as amended (the “Plan”), the terms of which
are hereby incorporated by reference, the Company intends to provide incentives to certain key
Employees of the Company by providing them with opportunities for ownership of shares of Common
Stock; and
WHEREAS, a duly constituted committee of the Board of Directors of the Company (hereinafter
referred to as the “Committee”) appointed to administer the Plan has determined that it would be to
the advantage and best interest of the Company and its stockholders to grant the Option provided
for herein to the Optionee under the Plan and has advised the Company thereof and instructed the
undersigned officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified
below unless the Plan indicates to the contrary.
1.1 — Cause. “Cause” used in connection with the termination of employment of the
Optionee shall mean a termination of employment of the Optionee by the Company or any of its
Subsidiaries due to (i) fraud or dishonesty of the Optionee in connection with the business of the
Company; (ii) gross negligence of the Optionee in the performance of duties for the Company; (iii)
willful failure by the Optionee in carrying out duties as an employee; or (iv) arrest and
conviction of the Optionee for a felony involving moral turpitude, whether or not in connection
with the business of the Company; provided that (iii) above shall not apply if the Optionee has
been assigned by the Company to duties which are not comparable to such Optionee’s function and
compensation at the Company, or which are non-executive or demeaning assignments, or if the Company
has given such Optionee demeaning and unreasonable pay cuts.
1.2 — Change in Control. “Change in Control” shall have the meaning given in
Section 3.3.
1.3 — Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
1.4 — Common Stock. “Common Stock” shall mean the common capital stock of the
Company.
1.5 — Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended, and all rules and regulations promulgated thereunder.
1.6 — Exercise Price. “Exercise Price” shall mean the price per Option Share as
set forth on the signature page hereof.
1.7 — Grant Date. “Grant Date” shall mean the date on which the Option provided
for in this Agreement was granted.
1.8 — IPO. “IPO” shall mean the date on which the Company’s shares of Common
Stock are first sold to the public in an offering registered pursuant to Section 5 of the
Securities Act of 1933, as amended.
1.9 — Option. “Option” shall mean any stock option to purchase Common Stock of
the Company granted under this Agreement.
1.10 — Option Shares. “Option Shares” shall mean the number of shares of Common
Stock for which this Option is granted as set forth upon the signature page hereof.
1.11 — Permanent Disability. “Permanent Disability” of the Optionee shall mean
the occurrence of the following conditions: (i) the optionee’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) prevents the optionee from properly performing
the essential functions of his or her job which had been typically assigned to him or her by the Company,
with or without reasonable accommodation, (ii) such incapacities shall exist or be expected to exist within
a reasonable degree of medical certainty for more than ninety (90) days in the aggregate during any consecutive
twelve (12) month period, (iii) the delivery of a report to the Company determining the existence of the
incapacities with respect to the optionee and describing in detail the incapacities which satisfy the requirements
of the foregoing subsections (i) and (ii), which report shall be signed by a medical doctor duly licensed to
practice medicine in either the state of Tennessee or the state in which the optionee resides and which report must
be received by the Company while the optionee is still employed by the Company, provided, however, if the Committee
determines the report to be inadequate or inaccurate, the Committee may select two additional independent medical
doctors and request each to provide a report meeting the above specifications, and the determination of a majority
of the three medical doctors shall be conclusive and binding on the optionee and the Company, and the optionee shall
cooperate with the Company’s request and submit to such medical examinations, and (iv) either the optionee or the
Company shall have given the other thirty (30) days written notice of intent to terminate employment or service
because of permanent and total disability.
1.12 — Permitted Transferee. “Permitted Transferee” shall have the meaning given
in Section 5.2(b).
1.13 — Person. “Person” means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust or unincorporated
organization.
1.14 — Plan. “Plan” shall mean the 1999 Stock Option Plan of GTx, Inc.
1.15 — Retirement. “Retirement” shall mean any voluntary termination of
employment by the Optionee after having reached the age of sixty-five (65) years (or after having
reached the age of fifty-five (55) years if the Optionee has no fewer than five (5) years of
service with the Company).
ARTICLE II
GRANT OF OPTION
2.1 — Grant of Option. For good and valuable consideration, on and as of the date
hereof, the Company irrevocably grants to the Optionee the Option to purchase any part or all of
2
an aggregate of the number of Option Shares set forth on the signature page hereof upon the
terms and conditions set forth in this Agreement.
2.2 — Consideration to the Company. In consideration of the granting of this
Option by the Company, the Optionee agrees to render faithful and efficient services to the Company
with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ or
service of the Company or shall interfere with or restrict in any way the rights of the Company,
which are hereby expressly reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without Cause.
2.3 — Adjustments in Option. Subject to Section 9 of the Plan, in the event that
the outstanding shares of the Common Stock subject to the Option are changed into or exchanged for
a different number or kind of shares of capital stock or other securities of the Company, or of
another corporation, by reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or otherwise, the Committee
shall make an appropriate adjustment in the number and kind of shares of Option Shares. Such
adjustment in the Option shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the aggregate price resulting from
rounding-off of shares, quantities or prices) and with any necessary corresponding adjustment in
the Exercise Price. No fractional shares shall be issued, and any fractional shares resulting from
computations pursuant to Section 9 of the Plan shall be eliminated from the respective Options.
Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons.
2.4 — Tax Treatment. The Option hereby granted is intended to be a Supplemental
Stock Option as defined in the Plan (hereinafter referred to as a “Nonqualified Stock Option”) and
not an Incentive Stock Option as described in Section 422 of the Code.
ARTICLE III
PERIOD OF EXERCISABILITY
3.1 — General Rule. The Option will become exercisable as to the following
percentages of the Option Shares on the following anniversaries of the Grant Date provided that the
Optionee is then employed by the Company on such anniversary:
Third anniversary |
33 | % | ||
Fourth anniversary |
67 | % | ||
Fifth anniversary |
100 | % |
3.2 — Termination of Employment and Nonvested Options. In the event the
Optionee’s employment or service with the Company is terminated (other than a termination for Cause
but including any involuntary termination as the result of a Change in Control, as described
below), by reason of Retirement, death, or Permanent Disability, the Committee may in its sole,
absolute and final discretion elect to vest any or all shares subject to the Option, that are not
otherwise vested pursuant to the terms of the Plan. In the event the Optionee’s
3
employment or service is terminated under any other circumstances, any portion of the Option
that is has not vested shall be forfeited immediately.
3.3 — Change in Control. Notwithstanding Section 3.1, unless the Optionee is
terminated for Cause, the Option will become exercisable in full in the event of any voluntary or
involuntary termination of the Optionee’s employment or service occurring simultaneously with or at
any time after any of the following events (a “Change in Control”):
| (a) | the sale or other disposition of all or substantially all of the assets of the Company in a single transaction or in a series of transactions (including, without limitation, any liquidation or dissolution of the Company); | ||
| (b) | the sale or other disposition of more than fifty percent (50%) of the issued and outstanding voting stock of the Company, in a single transaction or in a series of transactions. For such purposes, “voting stock” shall mean the capital stock of the Company of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of members of the Board of Directors (or Persons performing similar functions) of the Company; or | ||
| (c) | a merger or consolidation of the Company with or into any other entity, if immediately after giving effect to such transaction more than fifty percent (50%) of the issued and outstanding voting stock of the surviving entity of such transaction is held by persons who were not holders (taking into account their individual and affiliated holdings) as of the date of the grant of this Option of at least 20% of the voting stock of the Company. |
A Change in Control shall not include:
(1) any transfer or issuance of stock of the Company to one or more of the
Company’s lenders (or to any agents or representatives thereof) in exchange for debt
of the Company owed to any such lenders;
(2) any transfer of stock of the Company to or by any person or entity,
including but not limited to one or more of the Company’s lenders (or to any agents
or representatives thereof), pursuant to the terms of any pledge of said stock as
collateral for any loans or financial accommodations to the Company and/or its
subsidiaries;
(3) any transfer or issuance to any person or entity, including but not limited
to one or more of the Company’s lenders (or to any agents or representatives
thereof), in connection with the workout or restructuring of the Company’s debts to
any one of the Company’s lenders, including but not limited to the issuance of new
stock in exchange for any equity contribution to the Company in connection with the
workout or restructuring of such debt; or
(4) any transfer of stock by a stockholder of the Company, which is a
partnership or corporation to the partners, or stockholders in such stockholder.
4
3.4 — Optional Vesting/Accelerated Exercise in connection with a Change of
Control. In the event a Change in Control appears likely to occur, the Committee may, in its
sole and absolute discretion, send written notice to the Optionee at least ten (10) days prior to
the contemplated date of any Change in Control specifying (a) that the Option will become
exercisable in full on the date of the Change in Control, (b) that any portion or all of the Option
which thereby becomes exercisable and any portion or all of the Option which was already
exercisable will immediately thereafter expire on the same date and (c) that to prevent the lapse
of the Option, the Optionee must exercise the Option no later than such date. Except as may
otherwise be expressly provided in such written notice, any acceleration of the exercisability of
the Option and any attempted exercise of the Option by the Optionee shall be null and void if the
Change in Control does not occur within thirty (30) days of the date contemplated in the notice.
3.5 — Expiration of Option. Any portion of the Option, which has become
exercisable will nevertheless expire and will no longer be exercisable to any extent by anyone on
the earliest to occur of the following events:
| (a) | the tenth anniversary of the Grant Date; | ||
| (b) | the earlier of (A) three (3) months after termination of employment (specifically including a termination of employment after a Change in Control), unless such termination is for Cause or results from Retirement, death, Permanent Disability or (B) the term of the Option as set forth in the Plan; | ||
| (c) | twelve (12) months after termination of employment on account of Permanent Disability, provided that if Optionee shall die within such time without having fully exercised all vested Options, Optionee’s estate shall have an additional twelve (12) months from Optionee’s date of death to exercise such Options; | ||
| (d) | eighteen (18) months after termination of employment on account of Optionee’s death or within eighteen (18) months after Optionee’s termination of employment if Optionee qualifies under clause (b) but dies within three (3) months after his or termination of employment without having exercised all of his or her vested Options; | ||
| (e) | the earlier of five (5) years after the date of the Retirement of Optionee, or the term of the Option as set forth in the Plan; | ||
| (f) | at the close of business on the date of the termination of the Optionee’s employment by the Company for Cause; and | ||
| (e) | if the Committee so determines and gives written notice as provided in Section 3.4, upon the Effective Date of any Change in Control. |
3.6 — Non-competition. Notwithstanding any other provisions of this Agreement,
any Option outstanding, including any vested but unexercised Option, shall be forfeited upon the
Optionee’s “Competition” with the Company. For this purpose, Competition shall be determined by
the Committee and shall exist if the Optionee, directly or indirectly (i) engages or has a
financial interest in, (ii) becomes an officer, employee, director, partner, advisor or consultant
of
5
or to, (iii) has an equity interest in, or (iv) in any way materially assists any person,
corporation, entity or business whose existing or planned products or activities compete in whole
or in part with the existing or planned products or activities of the Company. The sole fact of
ownership by an Optionee of less than two percent (2%) of the stock of a publicly traded company
which may have product lines which compete with product lines of the Company shall not be treated
as Competition. Any determination by the Committee under this section shall be final and
conclusive, unless overruled by the Board.
ARTICLE IV
EXERCISE OF OPTION
4.1 — Person Eligible to Exercise. During the lifetime of the Optionee, only the
Optionee or the Optionee’s guardian or conservator may exercise the Option or any portion thereof,
and after the death of the Optionee, any portion of the Option may, prior to the time when the
Option becomes unexercisable under Section 3.5, be exercised by the Optionee’s personal
representative or by any person empowered to do so under the Optionee’s will or under the then
applicable laws of descent and distribution; provided, however, at any time after the transfer of
the Option or any portion thereof pursuant to Section 5.2, the transferred portion of the Option
may be exercised only by the transferee.
4.2 — Partial Exercise. Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the
time when the Option or portion thereof becomes unexercisable under Section 3.5; provided, however,
that any partial exercise shall be for whole shares only.
4.3 — Manner of Exercise. The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or his or her office all of the
following prior to the time when the Option or such portion becomes unexercisable under Section
3.5:
| (a) | Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee; and | ||
| (b) | Full payment of the Exercise Price (as provided in Section 4.4), for the shares with respect to which such Option or portion thereof is exercised; and | ||
| (c) | Such representations and documents as the Committee deems reasonably necessary or advisable to effect compliance with all applicable laws, including provisions of the Securities Act of 1933, as amended, and any other federal, state or foreign securities laws or regulations following an IPO; and | ||
| (d) | Full payment to the Company (as provided in Section 4.4) of all amounts, if any, which, under federal, state or local law, it is required to withhold upon exercise of the Option; and |
6
| (e) | If the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option. |
Notwithstanding the foregoing, the Optionee may give notice exercising the Option subject to the
condition or conditions that any then contemplated Change in Control will actually occur and that
the Option will become exercisable because of the Change in Control with respect to the Option
Shares for which notice of exercise is given. In such an event, full payment of the Exercise Price
with respect to all Option Shares need not be made until the date of the Change in Control.
4.4 — Payment. The Exercise Price and any tax withholding shall be payable in
cash, by check, or by any combination thereof. Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price or any tax withholding
may be paid by delivery of shares of Common Stock acceptable to the Committee and having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash
that would otherwise be required; and (ii) the Exercise Price or any tax withholding may be paid by
authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) to
be acquired upon the exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such
exercise.
4.5 — Conditions to Issuance of Stock Certificates. The shares of Common Stock
deliverable upon the exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares that have then been reacquired by the Company.
Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of
the Option or portion thereof prior to fulfillment of all of the following conditions:
| (a) | The admission of such shares to listing on all stock exchanges, if any, on which such class of Common Stock is then listed; | ||
| (b) | The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the SEC or of any other governmental regulatory body, which the Committee shall, in its absolute discretion deem necessary or advisable; | ||
| (c) | The obtaining of approval or other clearance from any state or federal governmental agency which the Committee shall determine to be necessary or advisable; and | ||
| (d) | The payment to the Company of all amounts, if any, which, under federal, state or local law, it is required to withhold upon exercise of the Option. |
4.6 — Rights as Stockholder. The holder of the Option shall not be, nor have any
of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable
upon the exercise of the Option or any portion thereof unless and until certificates representing
such shares shall have been issued by the Company in the name of such holder. No adjustment
7
shall be made for cash dividends for which the record date is prior to the date such stock
certificate is issued.
4.7 — Issuance of Certificate; Legend. The stock certificate or certificates
deliverable to the Optionee upon the exercise of the Option may, at the request of the Optionee at
the time of exercise, be issued in his or her name alone or in his or her name and the name of
another person as joint tenants with right of survivorship. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any other federal, state
or foreign securities laws or regulations including, without limitation, placing legends on share
certificates and issuing stock-transfer orders to transfer agents and registrars.
ARTICLE V
MISCELLANEOUS
5.1 — Administration. The Committee shall have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration, interpretation and application
of the Plan as are consistent therewith and to interpret or revoke any such rules. No member of
the Committee shall be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Option. The Board of Directors of the Company in its
absolute discretion may at any time and from time to time exercise any and all rights and duties of
the Committee under the Plan and this Agreement.
5.2 — Transferability of Option . (a) Except as provided in subsection (b),
neither the Option nor any interest or right therein or part thereof shall be subject to
disposition by transfer, alienation, anticipation, encumbrance or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided, however, that this Section
5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.
(b) The Committee may, in its discretion, establish forms and procedures for the transfer of
all or any portion of such Option by the Optionee to (i) Immediate Family Members (as defined
hereinafter), (ii) a trust or trusts for the exclusive benefit of the Optionee and such Immediate
Family Members, or (iii) a partnership or limited liability company in which the Optionee and such
Immediate Family Members are the only partners or members (collectively such Optionee’s “Permitted
Transferees”), provided that subsequent transfers shall be prohibited except in accordance with the
laws of descent and distribution, or by will. Notification and approval of all such transfers
shall be in the form specified by the Committee. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Articles IV and V hereof (other than this Section 5.2), the
term “Optionee” shall be deemed to refer to the Permitted Transferee. Notwithstanding the
foregoing, the Committee and the Company shall have no obligation to inform any Permitted
Transferee of any expiration, termination, lapse or acceleration of any such Option and may give
notices required hereunder, if any, to the Optionee. The events of termination of employment of
Article III hereof shall continue to be applied with
8
respect to the original Optionee, following which the Option shall be exercisable by the
Permitted Transferee only to the extent, and for the periods specified at Article III hereof. As
used in this Section 5.2(b) “Immediate Family Member” shall mean, with respect to the Optionee, his
or her spouse, child, stepchild, grandchildren or other descendants, and shall include
relationships arising from legal adoption.
5.3 — Shares of Common Stock to be Reserved. The Company shall at all times
during the term of the Option reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Agreement.
5.4 — Notices. Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any notice to be given to
the Optionee shall be addressed to him or her at the address given beneath his or her signature
hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to him or her. Any notice which is required to be given
to the Optionee shall, if the Optionee is then deceased, be given to the Optionee’s personal
representative if such representative has previously informed the Company of his or her status and
address by written notice under this Section 5.4. Any notice shall have been deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by the United States
Postal Service or when delivered by hand (whether by overnight courier or otherwise).
5.5 — Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
5.6 — No Right to Employment. Nothing in the Plan or this Agreement shall confer
upon the Optionee any right to continue in the employ of the Company or any Affiliate or to limit
the Company’s right to terminate the employment relationship of any eligible employee with or
without Cause. In the event that an Optionee is permitted or otherwise entitled to take a leave of
absence, the Company shall have the unilateral right to (i) determine whether such leave of absence
will be treated as a termination of employment for purposes of his or her Option, or (ii) suspend
or otherwise delay the time or times at which the shares subject to the Option would otherwise
vest.
5.7 — Amendment. This Agreement may be amended only by a writing executed by the
parties hereto, which specifically states that it is amending this Agreement.
5.8 — Governing Law. The laws of the State of Tennessee shall govern the
interpretation, validity and performance of the terms of this Agreement, regardless of the law that
might be applied under principles of conflicts of laws.
5.9 — Jurisdiction. Any suit, action or proceeding against the Optionee with
respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be
brought in any court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Nothing herein shall in any way be deemed to limit the ability of the
Company to serve any such writs, process or summonses in any other manner permitted by
9
applicable law or to obtain jurisdiction over the Optionee, in such other jurisdictions, and
in such manner, as may be permitted by applicable law. The Optionee hereby irrevocably waives any
objections which he or she may now or hereafter have to the laying of the venue of any suit, action
or proceeding arising out of or relating to this Agreement brought in any court of competent
jurisdiction in the State of Tennessee, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in any inconvenient
forum. No suit, action or proceeding against the Company with respect to this Agreement may be
brought in any court, domestic or foreign, or before any similar domestic or foreign authority
other than in a court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
irrevocably waives any right which he or she may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic or foreign authority. The Company
hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or
proceeding.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.
| GTx, INC. |
||||
| By: | ||||
| Title: |
||||
| No. of Option Shares: |
||||
| Exercise Price: |
||||
|
___________________, Optionee Address: |
||||
10
Exhibit 10.2
GTx, INC.
2000 STOCK OPTION PLAN
2000 STOCK OPTION PLAN
1. PURPOSE.
(a) The purpose of the GTx, Inc. 2000 Stock Option Plan (the “Plan”) is to provide a means by
which selected key employees and directors (if declared eligible under paragraph 4) of GTx, Inc.
(the “Company”), and its Affiliates, as defined in subparagraph 1(b), may be given an opportunity
to benefit from increases in value of the stock of the Company. The Plan will be effected solely
through the granting of nonstatutory stock options.
(b) The word “Affiliate” as used in the Plan means any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424 (e) and (f), respectively,
of the Internal Revenue Code of 1986, as amended from time to time (the “Code”).
(c) The Company, by means of the Plan, seeks to retain and reward the services of persons now
or later employed by or serving as directors of the Company, to secure and retain the services of
persons capable of filling such positions, and to provide incentives for such persons to exert
maximum efforts for the success of the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by a Committee appointed by the Board of Directors of the
Company composed of not fewer than 3 members, (the “Committee”).
(b) The Committee shall have the power, subject to, and within the limitations of, the express
provisions of the Plan and to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board of Directors:
Page 1 of 14
(i) To determine from time to time which of the persons eligible under the Plan
shall be granted nonqualified stock options (“Option Awards”) and the number of shares with respect to which Option Awards shall be granted to each such person.
(ii) To construe and interpret the Plan and Option Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Committee, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Award, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan as provided in paragraph 11.
(iv) Generally, to exercise such powers and to perform such acts as the Committee
deems necessary or expedient to promote the best interests of the Company.
(c) The Board of Directors may abolish the Committee at any time and revest in the Board of
Directors the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 9 relating to adjustments upon changes in stock,
the stock that may be issued pursuant to Option Awards granted under the Plan shall not exceed in
the aggregate Twelve Thousand Seven Hundred Fifty (12,750) shares of the Company’s common stock.
If any option or right granted under the Plan shall for any reason expire or
Page 2 of 14
otherwise terminate without having been exercised in full or which is settled in cash, the
stock not issued under such option or right shall again become available to the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.
4. ELIGIBILITY.
Option Awards may be granted only to directors, officers or employees of the Company or its
Affiliates.
5. TERMS OF OPTION AWARDS.
Each Option Award shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The provisions of separate options need not be identical, but
each option shall include (through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall be ten (10) years from the date it was granted.
(b) The exercise price of each Option Award shall be not less than one hundred percent (100%)
of the fair market value of the stock subject to the option on the date the option is granted;
provided, however, that the Committee shall have the discretion to grant options to one or more
persons and in such proportions and at such higher exercise price as the Committee may determine.
Fair market value shall be determined by the Committee on such basis as it deems appropriate.
(c) The purchase price of stock acquired pursuant to an option shall be paid, to the extent
permitted by applicable statutes and regulations, either (i) in cash at the time the option is
exercised, or (ii) at the discretion of the Committee, determined either at the time of the grant
or
Page 3 of 14
exercise of the option, (A) by delivery to the Company of other common stock of the Company,
(B) according to a deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other common stock of the Company) with the person to whom
the option is granted or to whom the option is transferred pursuant to subparagraph 5(d), or (C) in
any other form of legal consideration that may be acceptable to the Committee.
(d) Unless otherwise expressly stated in the option, an Option Award shall not be transferable
except by will or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the option is granted only by such person, nor shall an Option
Holder have the right or power to anticipate, accelerate, convey, assign or otherwise alienate,
hypothecate, pledge or otherwise encumber any Option Award or the shares subject to the Option
Award.
(e) Shares of stock subject to any Option Award shall vest as follows: (i) one-third (1/3) of
such shares shall vest on the third anniversary of the date of grant of such Option Award; (ii) an
additional one-third (1/3) of such shares shall vest on the fourth anniversary of the date of grant
of such Option Award; and (iii) the final one-third (1/3) of such shares shall vest on the fifth
anniversary of the date of grant of such Option Award. In the case of any Option Award granted to
a person using different exercise prices, this paragraph shall be applied separately to the shares
granted at each option price.
(f) Shares sold to a third party shall be subject to a thirty day right of first refusal by
the Company at the same price and terms as offered by any third party pursuant to a bona fide
offer, and may not be sold prior to an offer of sale to the Company on such terms. Further, shares
acquired through exercise of an Option Award shall be subject to the terms and conditions
Page 4 of 14
of the Voting and Shareholder Agreement dated April 15, 1999, between the Company and its
stockholders, as amended from time to time (the “Stockholders Agreement”).
(g) In the event of a participant’s termination of employment or service as a director, as
applicable, by reason of voluntary retirement (at or after age sixty-five (65) or after age
fifty-five with no fewer than ten (10) years of service), death, permanent and total disability,
involuntary termination (other than a termination for cause but including any involuntary
termination as the result of a Change in Control, as addressed in paragraph (h) below), with
respect to such participant’s Option Award(s) (i) the Committee may in its sole, absolute and final
discretion elect to vest any or all shares not otherwise vested under the terms of the Plan, and
(ii) any vested shares subject to an Option Award may be exercised within ten (10) years following
the date of grant of such Option Award. In the event of an Option Award holder’s employment or
status as a director, as applicable, is terminated under any other circumstances, (i) any nonvested
Option Award shall be forfeited immediately, and (ii) the date of such termination of employment
shall be the last day on which any vested Option Award may be exercised.
For purposes of this section, a permanent and total disability shall mean the occurrence of
the following conditions: (i) the Option Award holder’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) of properly performing the principal
functions which had been typically assigned to him by the Company, (ii) such incapacity shall exist
or be expected to exist with a reasonable degree of medical certainty for more than ninety (90)
days in the aggregate during any consecutive twelve (12) month period, and (iii) either the Option
Award holder or the Company shall have given the other thirty (30) days written notice of intent to
terminate employment or service as a director because of disability. In the event the
Page 5 of 14
Company and Option Award holder are in material disagreement regarding the Participant’s
physical or mental condition, the Company shall authorize a panel of three (3) physicians selected
by the Company to examine the Participant to determine conclusively, by a majority, whether the
Participant is disabled for purposes of the Plan.
For purposes of this section, a termination for cause shall mean the termination of an
individual’s status as an employee or director of the Company, as applicable, as the result of (i)
fraud or dishonesty in connection with the business of the Company; (ii) gross negligence in the
performance of duties for the Company; (iii) willful failure in carrying out duties as an employee
or director; or (iv) arrest and conviction of a felony involving moral turpitude, whether or not in
connection with the business of the Company; provided that (iii) above shall not apply if the
Option Award holder has been assigned by the Company to duties which are not comparable to such
holder’s function and compensation at the Company, or which are non-executive or demeaning
assignments, or if the Company has given such participant demeaning and unreasonable pay cuts.
(h) In the event of a Change in Control of the Company, all shares subject to all Option
Awards shall become one hundred percent (100%) vested and shall be converted to cash, options or
stock of equivalent value in the surviving organization under terms and condition which
substantially preserve the economic status of the participants, as determined by the Committee.
For purposes of this paragraph, a Change in Control shall mean:
i) a sale or other disposition of more than fifty percent (50%) of the issued and outstanding
voting stock of the Company, in a single transaction or in a series of transactions. For such
purposes, “Voting Stock” shall mean capital stock of the Company of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
Page 6 of 14
vote for the election of members of the Board of Directors (or Persons performing similar
functions) of the Company.
ii) a merger or consolidation of the Company with or into any other entity, if immediately
after giving effect to such transaction more than fifty percent (50%) of the issued and outstanding
Voting Stock of the surviving entity of such transaction is held by persons who are not holders of
the Voting Stock immediately prior to giving effect to such transaction;
iii) a sale or other disposition of all or substantially all of the Company’s assets in a
single transaction or in a series of transactions (including, without limitation, any liquidation
or dissolution of the Company).
A Change of Control shall not include any of the following events:
i) any transfer or issuance of stock of the Company to one or more of the Company’s lenders
(or to any agents or representatives thereof) in exchange for debt of the Company owed to any such
lenders;
ii) any transfer of stock of the Company to or by any person or entity, including but not
limited to one or more of the Company’s lenders (or to any agents or representatives thereof),
pursuant to the terms of any pledge of said stock as collateral for any loans or financial
accommodations to the Company and/or its subsidiaries; or
iii) any transfer or issuance to any person or entity, including but not limited to one or
more of the Company’s lenders (or to any agents or representatives thereof), in connection with the
workout or restructuring of the Company’s debts to any one of the Company’s lenders, including but
not limited to the issuance of new stock in exchange for any equity contribution to the Company in
connection with the workout or restructuring of such debt.
Page 7 of 14
iv) any transfer of stock by a stockholder of the Company which is a partnership or
corporation to the partners or stockholders in such stockholder.
(i) In the event of an initial public offering of the Company, Option Awards shall be
convertible to options in shares of the newly public company, under terms and conditions which
substantially preserve the rights and options of the participant. Any resulting registration of
options or shares shall be effected at Company expense.
(j) If provided in the Option Award, each Option Award shall carry the right to receive any
dividend or dividend equivalent on vested shares, under such terms and conditions as may be
specified in the Option Award.
(k) Notwithstanding any other provisions of the Plan, any vested but unexercised Option Award
shares shall be forfeited upon the Option Award holder’s “Competition” with the Company. For this
purpose, Competition shall be determined by the Committee, and shall exist if the Option Award
holder directly or indirectly (i) engages or has a financial interest in, (ii) becomes an officer,
employee, director, partner, advisor or consultant of or to, (iii) has an equity interest in, or
(iv) in any way materially assists any person, corporation, entity or business whose existing or
planned products or activities compete in whole or in part with the existing or planned products or
activities of the Company. The sole fact of ownership by an Option Award holder of less than two
percent (2%) of the stock of a publicly traded company which may have product lines which compete
with product lines of this Company shall not be treated as Competition. Any determination by the
Committee under this section shall be final and conclusive, unless overruled by the Board.
Page 8 of 14
(l) Notwithstanding any other provision of the Plan or any Option Award to the contrary, any
and all sales of shares to the Company or any Affiliate are contingent upon and subject to the
terms and conditions of any bank loan covenants by the Company or any Affiliate.
6. COVENANTS OF THE COMPANY.
(a) During the term of any Option Award granted under the Plan, the Company shall keep
available at all times for issuance or sale the number of shares of stock required to satisfy such
Option Award.
(b) The Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority, if any, as may be required to issue and sell shares of
stock upon grant or exercise of Option Awards under the Plan; provided, however, that this
undertaking shall not require the Company to register under the Securities Act of 1933, as amended
(the “Securities Act”), either the Plan, any Option Award granted under the Plan or any stock
issued or issuable pursuant to any such Option Awards. If, after reasonable efforts, the Company
is unable to obtain from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell stock upon exercise of such
Option Awards unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Option Awards granted under the Plan shall
constitute general funds of the Company.
8. MISCELLANEOUS.
Page 9 of 14
(a) The Committee shall have the power to accelerate the time during which an Option Award may
be exercised or the time during which an option or stock acquired pursuant to an Option Award will
vest, notwithstanding the provisions in the Option Award stating the time during which it may be
exercised or the time during which stock acquired pursuant thereto will vest.
(b) Neither a recipient of an Option Award nor any person to whom an Option Award is
transferred under subparagraph 5(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option Award unless and until such
person has satisfied all requirements for exercise of the Option Award pursuant to its terms and is
thereby entitled to receive shares of stock.
(c) Throughout the term of any Option Award granted pursuant to the Plan, the Company shall
make available to the holder of such Option Award upon request, not later than one hundred twenty
(120) days after the close of each fiscal year of the Company during the option term, upon request,
such financial and other information regarding the Company as comprises the annual report to the
shareholders of the Company provided for in the bylaws of the Company.
(d) Nothing in the Plan or any instrument executed or Option Award granted pursuant thereto
shall confer upon any recipient any right to continue in the employ of the Company or any Affiliate
or to limit the Company’s right to terminate the employment or directorship of any participant with
or without cause. In the event that an Option Award recipient is permitted or otherwise entitled
to take a leave of absence, the Company shall have the unilateral right to (i) determine whether
such leave of absence will be treated as a termination of employment for
Page 10 of 14
purposes of his or her Option Award, and (ii) suspend or otherwise delay the time or times at
which the shares subject to the Option Award would otherwise vest.
(e) To the extent provided by the terms of any Option Award, the recipient may satisfy any
federal, state or local tax withholding obligation relating to the exercise or receipt of such
Option Award by any of the following means or by a combination of such means: (i) tendering a cash
payment: (ii) authorizing the Company to withhold from the shares of the common stock otherwise
issuable to the participant as a result of the exercise or receipt of the Option Award cash or a
number of shares having a fair market value less than or equal to the amount of the withholding tax
obligation; or (iii) delivering to the Company owned and unencumbered shares of the common stock
having a fair market value less than or equal to the amount of the withholding tax obligation.
(f) In connection with each Option Award made pursuant to the Plan, the Company may require as
a condition precedent to its obligation to issue or transfer shares to an eligible participant, or
to evidence the removal of any restrictions on transfers or lapse of any repurchase right, that
such participant make arrangements satisfactory to the Company to insure that the amount of any
federal or other withholding tax required to be withheld with respect to such sale or transfer, or
such removal or lapse, is made available to the Company for timely payment of such tax.
(g) The Company may, as a condition of transferring any stock pursuant to the Plan, require
any person who is to acquire such stock (i) to give written assurances satisfactory to the Company
as to the optionee’s knowledge and experience in financial and business matters, and that he or she
is capable of evaluating, alone or together with the purchaser representative, the
Page 11 of 14
merits and risks of acquiring the stock; and (ii) to give written assurances satisfactory to
the Company stating that such person is acquiring the stock for such person’s own account and not
with any present intention of selling or otherwise distributing the stock. These requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares has been registered under a then currently effective registration statement under the
Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the then applicable
securities laws.
(h) The Committee shall determine or cause to be determined the fair market value of the stock
of the Company from time to time, as required for purposes of this Plan.
9. ADJUSTMENTS UPON CHANGES IN STOCK.
If any change is made in the stock subject to the Plan, or subject to any Option Award granted
under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or otherwise), the Plan and outstanding Option
Awards will be appropriately adjusted in the class(es) and maximum number of shares subject to the
Plan and the class(es) and number of shares and price per share of stock subject to outstanding
Option Awards.
10. AMENDMENT OF THE PLAN.
(a) The Committee at any time, and from time to time, may amend the Plan subject to and within
the limitations of any resolutions approved by the Board of Directors.
Page 12 of 14
(b) The Committee in its discretion shall determine at the time of each amendment of the Plan
whether or not to submit such amendment to the Board of Directors of the Company for approval.
(c) Rights and obligations under any Option Award granted before amendment of the Plan shall
not be altered or impaired by any amendment of the Plan unless (i) the Company requests the consent
of the person to whom the Option Award was granted and (ii) such person consents in writing.
11. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Committee may suspend or terminate the Plan at any time. No Option Awards may be
granted under the Plan while the Plan is suspended or after it is terminated. Upon the termination
of the Plan, all Option Awards shall become fully vested.
(b) Rights and obligations under any Option Award granted while the Plan is in effect shall
not be altered or impaired by suspension or termination of the Plan, except with the consent of the
person to whom the Option Award was granted.
12. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of November 21, 2000 upon execution by the President of the
Company, following approval by the Plan Committee.
Page 13 of 14
IN WITNESS WHEREOF, the President of the Company has executed this Plan as of the
21st day of November, 2000.
| GTx, INC. |
||||
| By: | /s/ Mitchell S. Steiner | |||
| Title: Vice Chairman | ||||
| APPROVED: PLAN COMMITTEE |
||||
| /s/ Marc S. Hanover | ||||
| /s/ Mitchell S. Steiner | ||||
| /s/ John H. Pontius | ||||
Page 14 of 14
First Amendment to the
GTx, Inc. 2000 Stock Option Plan
GTx, Inc. 2000 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the GTx, Inc. 2000 Stock Option Plan
effective November 21, 2000 (the “2000 Plan”);
Whereas, Section 5(f) of the 2000 Plan contains a provision that subjects any shares
acquired pursuant to the exercise of an option to a 30 day right of first refusal in favor of the
Company (the “Right of First Refusal”);
Whereas, it was the intent of the Company that the Right of First Refusal would end
at such time as the Company completed its initial public offering of common stock;
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend Section 5(f) of the Company’s 2000 Plan to reflect the Company’s intent; and
Whereas, the Compensation Committee of the Company has approved such amendments.
Now, Therefore, Be it Resolved, the 2000 Plan is hereby amended, effective as of the
date hereof, as follows:
| 1. | That Section 5(f) of the 2000 Plan is hereby deleted in its entirety and replaced with the following: |
(f) Prior to such time as the Company’s shares of common stock are first
sold to the public in an offering registered pursuant to Section 5 of the
Securities Act of 1933, as amended (the “Initial Public Offering”), any such
shares of stock acquired though the exercise of an option shall be subject to
a thirty (30) day right of first refusal by the Company at the same price and
terms as offered by any third party pursuant to a bona fide offer, and may not
be sold prior to an offer to sell to the Company on such terms.
Further, shares acquired through exercise of an Option Award shall be subject to the
terms and conditions of the Voting and Shareholder Agreement dated April 15,
1999, between the Company and its stockholders, as amended from time to time
(the “Stockholders Agreement”).
In Witness Whereof, the Company has caused this First Amendment to the 2000 Plan to
be executed on October 2, 2003.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | General Counsel/Secretary | |||
Second Amendment to the
GTx, Inc.
2000 Stock Option Plan
GTx, Inc.
2000 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the GTx, Inc. 2000 Stock Option Plan on
November 21, 2000 (the “2000 Plan”);
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend Section 5(g) of the Company’s 2000 Plan;
Whereas, the Compensation Committee of the Company has approved such amendments; and
Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 4350(i)(1)(A).
Now, Therefore, Be it Resolved, the 2000 Plan is hereby amended, effective as of the
date hereof, as follows:
| 1. | That the last sentence of the first paragraph in Section 5(g) of the 2000 Plan is hereby deleted in its entirety and replaced with the following: |
(g) In the event an Option Award holder’s employment or status as a
director, as applicable, is terminated under any other circumstances, (i)
any nonvested Option Award shall be forfeited immediately, and (ii) the
Option Award holder shall have until the earlier to occur of (A) a period of
ninety (90) days from the date of termination or (B) the expiration of the
term of the Option Award to exercise such Option Award.
In Witness Whereof, the Company has caused this Second Amendment to the 2000 Plan to
be executed on March 18, 2004.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | General Counsel/Secretary | |||
Third Amendment to the
GTx, Inc.
2000 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the GTx, Inc. 2000 Stock Option Plan (the
“2000 Plan”) on November 21, 2000;
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend the Company’s 2000 Plan to clarify certain existing provisions in light of final
regulations issued under Section 409A of the Internal Revenue Code of 1986, as amended;
Whereas, the Compensation Committee of the Company has approved such amendments; and
Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 4350(i)(1)(A).
Now, Therefore, Be it Resolved, the 2000 Plan is hereby amended, effective as of the
date hereof, as follows:
| 1. | That Section 1(b) of the 2000 Plan is hereby deleted in its entirety and replaced with the following: |
(b) The word “Affiliate” as used in the Plan means any subsidiary
corporation of the Company, as such term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”).
| 2. | That Section 5(b) of the 2000 Plan is hereby deleted in its entirety and replaced with the following: |
(b) The exercise price of each Option Award shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
option on the date the option is granted; provided, however, that the
Committee shall have the discretion to grant options to one or more persons
in such proportions and at such higher exercise price as the Committee may
determine. Notwithstanding the foregoing, an Option Award may be granted
with an exercise price lower than one hundred percent (100%) of the fair
market value of the stock subject to the option on the date the option is
granted if such Option Award is granted pursuant to an assumption of or
substitution for another option pursuant to a Change in Control (as defined
in section 5(h) of the Plan) and in a manner consistent with the provisions
of Sections 409A and 424(a) of the Code. Fair market value means, as of any
date, the value of the Company’s common stock determined as follows:
i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq Global Market or any other
established market, the fair market value of a share of common
stock shall be the closing sales price for such stock as quoted
on such exchange or market (or the exchange or market with the
greatest volume of trading in the common stock) on the date of
determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable.
ii) Unless otherwise provided by the Committee, if there is
no closing sales price for the common stock on the date of
determination, then the fair market value shall be the closing
sales price on the last preceding date for which such quotation
exists.
iii) In the absence of such markets for the common stock,
the fair market value shall be determined by the Committee in
good faith and in a manner that complies with Section 409A of the
Code.
| 3. | That the following will be added to the 2000 Plan as Section 8(i): |
(i) To the extent permitted by applicable law, the Committee, in its
sole discretion, may determine that the delivery of common stock upon the
exercise of all or a portion of any Option Award may be deferred and may
establish programs and procedures for deferral elections to be made by
persons receiving options. Deferrals by persons will be made in accordance
with Section 409A of the Code.
| 4. | That the following will be added to the 2000 Plan as Section 8(j): |
(j) To the extent that the Committee determines that any Option Award
granted hereunder is subject to Section 409A of the Code, the agreement
evidencing such Option Award shall incorporate the terms and conditions
necessary to avoid the consequences specified in Section 409A(a)(1) of the
Code. To the extent applicable, this Plan and the agreements evidencing
Option Awards shall be interpreted in accordance with Section 409A of the
Code, including without limitation any applicable guidance that may be
issued or amended in the future.
| 5. | That Section 10(c) of the 2000 Plan is hereby deleted in its entirety and replaced with the following: |
(b) Rights and obligations under any Option Award granted before
amendment of the Plan shall not be altered or impaired by any amendment of
the Plan unless (i) the Company requests the consent of the person to whom
the Option Award was granted and (ii) such person
2.
consents in writing. Notwithstanding the foregoing, subject to the
limitations of applicable law, if any, the Committee may amend the terms of
any one or more Option Awards without the consent of the person to whom the
Option Award was granted if necessary to bring the Option Award into
compliance with Section 409A of the Code.
In Witness Whereof, the Company has caused this Third Amendment to the 2000 Plan to
be executed on November 4, 2008.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | Vice President, General Counsel | |||
3.
Fourth Amendment
to the GTx, Inc.
2000 Stock Option Plan
to the GTx, Inc.
2000 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the GTx, Inc. 2000 Stock Option Plan on
November 21, 2000 (the “2000 Plan”);
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to interpret the Plan to provide a consistent definition of the terms “voluntary
retirement” and “Retirement” with respect to any stock option awards granted thereunder;
Whereas, the Compensation Committee believes that this Fourth Amendment will also
benefit the optionees under the 2000 Plan by clarifying the applicable requirements for determining
“voluntary retirement” and “Retirement” and that this Fourth Amendment will not alter or impair any
rights or obligations the optionees have under any stock option award granted thereunder;
Whereas, the Compensation Committee has approved this Fourth Amendment; and
Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 5635(c) and IM-5635-1.
Now, Therefore, Be it Resolved, the 2000 Plan and any stock option award issued
pursuant thereto are hereby amended as follows:
The definition of “voluntary retirement” and “Retirement” with respect to the 2000
Plan and any stock option award issued pursuant thereto shall be amended and
interpreted to mean “any voluntary termination of employment by the Optionee after
having reached the age of sixty-five (65) years or after having reached the age of
fifty-five (55) years if the Optionee has no fewer than five (5) years of service
with the Company.”
In Witness Whereof, the Company has caused this Fourth Amendment to the 2000 Plan to
be executed on December 10, 2009.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | General Counsel/Secretary | |||
NONQUALIFIED STOCK OPTION SUBSCRIPTION AGREEMENT
This Nonqualified Stock Option Subscription Agreement (this “Agreement”), dated as of the
day of , , is made by and between GTx, Inc. (the “Company”), a Delaware
corporation, and the Employee of the Company whose name appears on the signature page hereof
(hereinafter referred to as the “Optionee”).
WHEREAS, pursuant to the 2000 Stock Option Plan, as amended (the “Plan”), the terms of which
are hereby incorporated by reference, the Company intends to provide incentives to certain key
Employees of the Company by providing them with opportunities for ownership of shares of Common
Stock; and
WHEREAS, a duly constituted committee of the Board of Directors of the Company (hereinafter
referred to as the “Committee”) appointed to administer the Plan has determined that it would be to
the advantage and best interest of the Company and its stockholders to grant the Option provided
for herein to the Optionee under the Plan and has advised the Company thereof and instructed the
undersigned officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified
below unless the Plan indicates to the contrary.
1.1 — Cause. “Cause” used in connection with the termination of employment of the
Optionee shall mean a termination of employment of the Optionee by the Company or any of its
Subsidiaries due to (i) fraud or dishonesty of the Optionee in connection with the business of the
Company; (ii) gross negligence of the Optionee in the performance of duties for the Company; (iii)
willful failure by the Optionee in carrying out duties as an employee; or (iv) arrest and
conviction of the Optionee for a felony involving moral turpitude, whether or not in connection
with the business of the Company; provided that (iii) above shall not apply if the Optionee has
been assigned by the Company to duties which are not comparable to such Optionee’s function and
compensation at the Company, or which are non-executive or demeaning assignments, or if the Company
has given such Optionee demeaning and unreasonable pay cuts.
1.2 — Change in Control. “Change in Control” shall have the meaning given in
Section 3.3.
1.3 — Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
1.4 — Common Stock. “Common Stock” shall mean the common capital stock of the
Company.
1.5 — Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended, and all rules and regulations promulgated thereunder.
1.6 — Exercise Price. “Exercise Price” shall mean the price per Option Share as
set forth on the signature page hereof.
1.7 — Grant Date. “Grant Date” shall mean the date on which the Option provided
for in this Agreement was granted.
1.8 — IPO. “IPO” shall mean the date on which the Company’s shares of Common
Stock are first sold to the public in an offering registered pursuant to Section 5 of the
Securities Act of 1933, as amended.
1.9 — Option. “Option” shall mean any stock option to purchase Common Stock of
the Company granted under this Agreement.
1.10 — Option Shares. “Option Shares” shall mean the number of shares of Common
Stock for which this Option is granted as set forth upon the signature page hereof.
1.11 — Permanent
Disability. “Permanent Disability” of the Optionee shall mean
the occurrence of the following conditions: (i) the optionee’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) prevents the optionee from properly performing
the essential functions of his or her job which had been typically assigned to him or her by the Company,
with or without reasonable accommodation, (ii) such incapacities shall exist or be expected to exist within
a reasonable degree of medical certainty for more than ninety (90) days in the aggregate during any consecutive
twelve (12) month period, (iii) the delivery of a report to the Company determining the existence of the
incapacities with respect to the optionee and describing in detail the incapacities which satisfy the requirements
of the foregoing subsections (i) and (ii), which report shall be signed by a medical doctor duly licensed to
practice medicine in either the state of Tennessee or the state in which the optionee resides and which report must
be received by the Company while the optionee is still employed by the Company, provided, however, if the Committee
determines the report to be inadequate or inaccurate, the Committee may select two additional independent medical
doctors and request each to provide a report meeting the above specifications, and the determination of a majority
of the three medical doctors shall be conclusive and binding on the optionee and the Company, and the optionee shall
cooperate with the Company’s request and submit to such medical examinations, and (iv) either the optionee or the
Company shall have given the other thirty (30) days written notice of intent to terminate employment or service
because of permanent and total disability.
1.12 — Permitted Transferee. “Permitted Transferee” shall have the meaning given
in Section 5.2(b).
1.13 — Person. “Person” means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust or unincorporated
organization.
1.14 — Plan. “Plan” shall mean the 2000 Stock Option Plan of GTx, Inc.
1.15 — Retirement. “Retirement” shall mean any voluntary termination of
employment by the Optionee after having reached the age of sixty-five (65) years (or after having
reached the age of fifty-five (55) years if the Optionee has no fewer than five (5) years of
service with the Company).
ARTICLE II
GRANT OF OPTION
2.1 — Grant of Option. For good and valuable consideration, on and as of the date
hereof, the Company irrevocably grants to the Optionee the Option to purchase any part or all of
2
an aggregate of the number of Option Shares set forth on the signature page hereof upon the
terms and conditions set forth in this Agreement.
2.2 — Consideration to the Company. In consideration of the granting of this
Option by the Company, the Optionee agrees to render faithful and efficient services to the Company
with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ or
service of the Company or shall interfere with or restrict in any way the rights of the Company,
which are hereby expressly reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without Cause.
2.3 — Adjustments in Option. Subject to Section 9 of the Plan, in the event that
the outstanding shares of the Common Stock subject to the Option are changed into or exchanged for
a different number or kind of shares of capital stock or other securities of the Company, or of
another corporation, by reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or otherwise, the Committee
shall make an appropriate adjustment in the number and kind of shares of Option Shares. Such
adjustment in the Option shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the aggregate price resulting from
rounding-off of shares, quantities or prices) and with any necessary corresponding adjustment in
the Exercise Price. No fractional shares shall be issued, and any fractional shares resulting from
computations pursuant to Section 9 of the Plan shall be eliminated from the respective Options.
Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons.
2.4 — Tax Treatment. The Option hereby granted is intended to be a Supplemental
Stock Option as defined in the Plan (hereinafter referred to as a “Nonqualified Stock Option”) and
not an Incentive Stock Option as described in Section 422 of the Code.
ARTICLE III
PERIOD OF EXERCISABILITY
3.1 — General Rule. The Option will become exercisable as to the following
percentages of the Option Shares on the following anniversaries of the Grant Date provided that the
Optionee is then employed by the Company on such anniversary:
Third anniversary |
33 | % | ||
Fourth anniversary |
67 | % | ||
Fifth anniversary |
100 | % |
3.2 — Termination of Employment and Nonvested Options. In the event the
Optionee’s employment or service with the Company is terminated (other than a termination for Cause
but including any involuntary termination as the result of a Change in Control, as described
below), by reason of Retirement, death, or Permanent Disability, the Committee may in its sole,
absolute and final discretion elect to vest any or all shares subject to the Option, that are not
otherwise vested pursuant to the terms of the Plan. In the event the Optionee’s
3
employment or service is terminated under any other circumstances, any portion of the Option
that is has not vested shall be forfeited immediately.
3.3 — Change in Control. Notwithstanding Section 3.1, unless the Optionee is
terminated for Cause, the Option will become exercisable in full in the event of any voluntary or
involuntary termination of the Optionee’s employment or service occurring simultaneously with or at
any time after any of the following events (a “Change in Control”):
| (a) | the sale or other disposition of all or substantially all of the assets of the Company in a single transaction or in a series of transactions (including, without limitation, any liquidation or dissolution of the Company); | ||
| (b) | the sale or other disposition of more than fifty percent (50%) of the issued and outstanding voting stock of the Company, in a single transaction or in a series of transactions. For such purposes, “voting stock” shall mean the capital stock of the Company of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of members of the Board of Directors (or Persons performing similar functions) of the Company; or | ||
| (c) | a merger or consolidation of the Company with or into any other entity, if immediately after giving effect to such transaction more than fifty percent (50%) of the issued and outstanding voting stock of the surviving entity of such transaction is held by persons who were not holders (taking into account their individual and affiliated holdings) as of the date of the grant of this Option of at least 20% of the voting stock of the Company. |
A Change in Control shall not include:
(1) any transfer or issuance of stock of the Company to one or more of the
Company’s lenders (or to any agents or representatives thereof) in exchange for debt
of the Company owed to any such lenders;
(2) any transfer of stock of the Company to or by any person or entity,
including but not limited to one or more of the Company’s lenders (or to any agents
or representatives thereof), pursuant to the terms of any pledge of said stock as
collateral for any loans or financial accommodations to the Company and/or its
subsidiaries;
(3) any transfer or issuance to any person or entity, including but not limited
to one or more of the Company’s lenders (or to any agents or representatives
thereof), in connection with the workout or restructuring of the Company’s debts to
any one of the Company’s lenders, including but not limited to the issuance of new
stock in exchange for any equity contribution to the Company in connection with the
workout or restructuring of such debt; or
(4) any transfer of stock by a stockholder of the Company, which is a
partnership or corporation to the partners, or stockholders in such stockholder.
4
3.4 — Optional Vesting/Accelerated Exercise in connection with a Change of
Control. In the event a Change in Control appears likely to occur, the Committee may, in its
sole and absolute discretion, send written notice to the Optionee at least ten (10) days prior to
the contemplated date of any Change in Control specifying (a) that the Option will become
exercisable in full on the date of the Change in Control, (b) that any portion or all of the Option
which thereby becomes exercisable and any portion or all of the Option which was already
exercisable will immediately thereafter expire on the same date and (c) that to prevent the lapse
of the Option, the Optionee must exercise the Option no later than such date. Except as may
otherwise be expressly provided in such written notice, any acceleration of the exercisability of
the Option and any attempted exercise of the Option by the Optionee shall be null and void if the
Change in Control does not occur within thirty (30) days of the date contemplated in the notice.
3.5 — Expiration of Option. Any portion of the Option, which has become
exercisable will nevertheless expire and will no longer be exercisable to any extent by anyone on
the earliest to occur of the following events:
| (a) | the tenth anniversary of the Grant Date; | ||
| (b) | the earlier of (A) three (3) months after termination of employment (specifically including a termination of employment after a Change in Control), unless such termination is for Cause or results from Retirement, death, Permanent Disability or (B) the term of the Option as set forth in the Plan; | ||
| (c) | twelve (12) months after termination of employment on account of Permanent Disability, provided that if Optionee shall die within such time without having fully exercised all vested Options, Optionee’s estate shall have an additional twelve (12) months from Optionee’s date of death to exercise such Options; | ||
| (d) | eighteen (18) months after termination of employment on account of Optionee’s death or within eighteen (18) months after Optionee’s termination of employment if Optionee qualifies under clause (b) but dies within three (3) months after his or termination of employment without having exercised all of his or her vested Options; | ||
| (e) | the earlier of five (5) years after the date of the Retirement of Optionee, or the term of the Option as set forth in the Plan; | ||
| (f) | at the close of business on the date of the termination of the Optionee’s employment by the Company for Cause; and | ||
| (e) | if the Committee so determines and gives written notice as provided in Section 3.4, upon the Effective Date of any Change in Control. |
3.6 — Non-competition. Notwithstanding any other provisions of this Agreement,
any Option outstanding, including any vested but unexercised Option, shall be forfeited upon the
Optionee’s “Competition” with the Company. For this purpose, Competition shall be determined by
the Committee and shall exist if the Optionee, directly or indirectly (i) engages or has a
financial interest in, (ii) becomes an officer, employee, director, partner, advisor or consultant
of
5
or to, (iii) has an equity interest in, or (iv) in any way materially assists any person,
corporation, entity or business whose existing or planned products or activities compete in whole
or in part with the existing or planned products or activities of the Company. The sole fact of
ownership by an Optionee of less than two percent (2%) of the stock of a publicly traded company
which may have product lines which compete with product lines of the Company shall not be treated
as Competition. Any determination by the Committee under this section shall be final and
conclusive, unless overruled by the Board.
ARTICLE IV
EXERCISE OF OPTION
4.1 — Person Eligible to Exercise. During the lifetime of the Optionee, only the
Optionee or the Optionee’s guardian or conservator may exercise the Option or any portion thereof,
and after the death of the Optionee, any portion of the Option may, prior to the time when the
Option becomes unexercisable under Section 3.5, be exercised by the Optionee’s personal
representative or by any person empowered to do so under the Optionee’s will or under the then
applicable laws of descent and distribution; provided, however, at any time after the transfer of
the Option or any portion thereof pursuant to Section 5.2, the transferred portion of the Option
may be exercised only by the transferee.
4.2 — Partial Exercise. Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the
time when the Option or portion thereof becomes unexercisable under Section 3.5; provided, however,
that any partial exercise shall be for whole shares only.
4.3 — Manner of Exercise. The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or his or her office all of the
following prior to the time when the Option or such portion becomes unexercisable under Section
3.5:
| (a) | Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee; and | ||
| (b) | Full payment of the Exercise Price (as provided in Section 4.4), for the shares with respect to which such Option or portion thereof is exercised; and | ||
| (c) | Such representations and documents as the Committee deems reasonably necessary or advisable to effect compliance with all applicable laws, including provisions of the Securities Act of 1933, as amended, and any other federal, state or foreign securities laws or regulations following an IPO; and | ||
| (d) | Full payment to the Company (as provided in Section 4.4) of all amounts, if any, which, under federal, state or local law, it is required to withhold upon exercise of the Option; and |
6
| (e) | If the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option. |
Notwithstanding the foregoing, the Optionee may give notice exercising the Option subject to the
condition or conditions that any then contemplated Change in Control will actually occur and that
the Option will become exercisable because of the Change in Control with respect to the Option
Shares for which notice of exercise is given. In such an event, full payment of the Exercise Price
with respect to all Option Shares need not be made until the date of the Change in Control.
4.4 — Payment. The Exercise Price and any tax withholding shall be payable in
cash, by check, or by any combination thereof. Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price or any tax withholding
may be paid by delivery of shares of Common Stock acceptable to the Committee and having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash
that would otherwise be required; and (ii) the Exercise Price or any tax withholding may be paid by
authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) to
be acquired upon the exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such
exercise.
4.5 — Conditions to Issuance of Stock Certificates. The shares of Common Stock
deliverable upon the exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares that have then been reacquired by the Company.
Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of
the Option or portion thereof prior to fulfillment of all of the following conditions:
| (a) | The admission of such shares to listing on all stock exchanges, if any, on which such class of Common Stock is then listed; | ||
| (b) | The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the SEC or of any other governmental regulatory body, which the Committee shall, in its absolute discretion deem necessary or advisable; | ||
| (c) | The obtaining of approval or other clearance from any state or federal governmental agency which the Committee shall determine to be necessary or advisable; and | ||
| (d) | The payment to the Company of all amounts, if any, which, under federal, state or local law, it is required to withhold upon exercise of the Option. |
4.6 — Rights as Stockholder. The holder of the Option shall not be, nor have any
of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable
upon the exercise of the Option or any portion thereof unless and until certificates representing
such shares shall have been issued by the Company in the name of such holder. No adjustment
7
shall be made for cash dividends for which the record date is prior to the date such stock
certificate is issued.
4.7 — Issuance of Certificate; Legend. The stock certificate or certificates
deliverable to the Optionee upon the exercise of the Option may, at the request of the Optionee at
the time of exercise, be issued in his or her name alone or in his or her name and the name of
another person as joint tenants with right of survivorship. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any other federal, state
or foreign securities laws or regulations including, without limitation, placing legends on share
certificates and issuing stock-transfer orders to transfer agents and registrars.
ARTICLE V
MISCELLANEOUS
5.1 — Administration. The Committee shall have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration, interpretation and application
of the Plan as are consistent therewith and to interpret or revoke any such rules. No member of
the Committee shall be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Option. The Board of Directors of the Company in its
absolute discretion may at any time and from time to time exercise any and all rights and duties of
the Committee under the Plan and this Agreement.
5.2 — Transferability of Option . (a) Except as provided in subsection (b),
neither the Option nor any interest or right therein or part thereof shall be subject to
disposition by transfer, alienation, anticipation, encumbrance or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided, however, that this Section
5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.
(b) The Committee may, in its discretion, establish forms and procedures for the transfer of
all or any portion of such Option by the Optionee to (i) Immediate Family Members (as defined
hereinafter), (ii) a trust or trusts for the exclusive benefit of the Optionee and such Immediate
Family Members, or (iii) a partnership or limited liability company in which the Optionee and such
Immediate Family Members are the only partners or members (collectively such Optionee’s “Permitted
Transferees”), provided that subsequent transfers shall be prohibited except in accordance with the
laws of descent and distribution, or by will. Notification and approval of all such transfers
shall be in the form specified by the Committee. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Articles IV and V hereof (other than this Section 5.2), the
term “Optionee” shall be deemed to refer to the Permitted Transferee. Notwithstanding the
foregoing, the Committee and the Company shall have no obligation to inform any Permitted
Transferee of any expiration, termination, lapse or acceleration of any such Option and may give
notices required hereunder, if any, to the Optionee. The events of termination of employment of
Article III hereof shall continue to be applied with
8
respect to the original Optionee, following which the Option shall be exercisable by the
Permitted Transferee only to the extent, and for the periods specified at Article III hereof. As
used in this Section 5.2(b) “Immediate Family Member” shall mean, with respect to the Optionee, his
or her spouse, child, stepchild, grandchildren or other descendants, and shall include
relationships arising from legal adoption.
5.3 — Shares of Common Stock to be Reserved. The Company shall at all times
during the term of the Option reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Agreement.
5.4 — Notices. Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any notice to be given to
the Optionee shall be addressed to him or her at the address given beneath his or her signature
hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to him or her. Any notice which is required to be given
to the Optionee shall, if the Optionee is then deceased, be given to the Optionee’s personal
representative if such representative has previously informed the Company of his or her status and
address by written notice under this Section 5.4. Any notice shall have been deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by the United States
Postal Service or when delivered by hand (whether by overnight courier or otherwise).
5.5 — Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
5.6 — No Right to Employment. Nothing in the Plan or this Agreement shall confer
upon the Optionee any right to continue in the employ of the Company or any Affiliate or to limit
the Company’s right to terminate the employment relationship of any eligible employee with or
without Cause. In the event that an Optionee is permitted or otherwise entitled to take a leave of
absence, the Company shall have the unilateral right to (i) determine whether such leave of absence
will be treated as a termination of employment for purposes of his or her Option, or (ii) suspend
or otherwise delay the time or times at which the shares subject to the Option would otherwise
vest.
5.7 — Amendment. This Agreement may be amended only by a writing executed by the
parties hereto, which specifically states that it is amending this Agreement.
5.8 — Governing Law. The laws of the State of Tennessee shall govern the
interpretation, validity and performance of the terms of this Agreement, regardless of the law that
might be applied under principles of conflicts of laws.
5.9 — Jurisdiction. Any suit, action or proceeding against the Optionee with
respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be
brought in any court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Nothing herein shall in any way be deemed to limit the ability of the
Company to serve any such writs, process or summonses in any other manner permitted by
9
applicable law or to obtain jurisdiction over the Optionee, in such other jurisdictions, and
in such manner, as may be permitted by applicable law. The Optionee hereby irrevocably waives any
objections which he or she may now or hereafter have to the laying of the venue of any suit, action
or proceeding arising out of or relating to this Agreement brought in any court of competent
jurisdiction in the State of Tennessee, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in any inconvenient
forum. No suit, action or proceeding against the Company with respect to this Agreement may be
brought in any court, domestic or foreign, or before any similar domestic or foreign authority
other than in a court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
irrevocably waives any right which he or she may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic or foreign authority. The Company
hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or
proceeding.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.
| GTx, INC. |
||||
| By: | ||||
| Title: | ||||
No. of Option Shares: Exercise Price: , Optionee Address: |
||||
10
Exhibit 10.3
GTx, Inc.
2001 STOCK OPTION PLAN
1. PURPOSE.
(a) The purpose of the GTx, Inc. 2001 Stock Option Plan (the “Plan”) is to provide a
means by which selected key employees and directors (if declared eligible under paragraph 4)
of and consultants to GTx, Inc. (the “Company”), and its Affiliates, as defined in
subparagraph 1(b), may be given an opportunity to benefit from increases in value of the
stock of the Company. It is intended that this purpose will be effected through the
granting of (i) incentive stock options and/or, (ii) nonstatutory stock options.
(b) The word “Affiliate” as used in the Plan means any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424 (e) and (f),
respectively, of the Internal Revenue Code of 1986, as amended from time to time (the
“Code”).
(c) The Company, by means of the Plan, seeks to retain the services of persons now
employed by or serving as consultants or directors to the Company, to secure and retain the
services of persons capable of filling such positions, and to provide incentives for such
persons to exert maximum efforts for the success of the Company.
(d) The Company intends that rights granted under the Plan (“Option Awards”) shall, in
the discretion of the Committee or Board of Directors of the Company (the “Board”), as
applicable, be either (i) incentive stock options as that term is used in Section 422 of the
Code (“Incentive Stock Options”), or (ii) stock options which do not qualify as Incentive
Stock Options (“Supplemental Stock Options”).
2. ADMINISTRATION.
(a) The Plan shall be administered by a Committee appointed by the Board of Directors
of the Company composed of not fewer than three (3) Directors (the “Committee”).
(b) The Committee shall have the power, subject to, and within the limitations of, the
express provisions of the Plan and to such resolutions, not inconsistent with the provisions
of the Plan, as may be adopted from time to time by the Board of Directors:
(i) To determine from time to time which of the persons eligible under the Plan
shall be granted Option Awards; when and how Option Awards shall be granted; whether
a Option Award will be an Incentive Stock Option, a Supplemental Stock Option, or a
combination of the foregoing; and the provisions of each Option Award granted (which
need not be identical).
(ii) To construe and interpret the Plan and Option Awards granted under it, and
to establish, amend and revoke rules and regulations for its administration. The
Committee, in the exercise of this power, may correct any
defect, omission or
inconsistency in the Plan or in any Option Award, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective, consistent with
its terms.
(iii) To amend the Plan as provided in paragraph 10.
(iv) Generally, to exercise such powers and to perform such acts as the
Committee deems necessary or expedient to promote the best interests of the Company.
(c) The Board of Directors may abolish the Committee at any time and revest in the
Board of Directors the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 9 relating to adjustments upon changes in
stock, the stock that may be issued pursuant to Option Awards granted under the Plan shall
not exceed in the aggregate thirty five thousand one hundred fifty (35,150) shares of the
Company’s common stock issued and outstanding as of the date of shareholder approval of the
Plan. If any option or right granted under the Plan shall for any reason expire or
otherwise terminate without having been exercised in full, the stock not issued under such
option or right shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired shares, bought
on the market or otherwise.
4. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to employees (including officers) of
the Company or its Affiliates. A director of the Company shall not be eligible to receive
Incentive Stock Options unless such director is also an employee (including an officer) of
the Company or any Affiliate. Option Awards other than Incentive Stock Options may be
granted only to directors, officers or employees of or consultants to the Company or its
Affiliates.
(b) No person shall be eligible for the grant of an Incentive Stock Option under the
Plan if, at the time of grant, such person owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates unless the
exercise price of such option is at least one hundred ten percent (110%) of the fair market
value of such stock at the date of grant and the term of the option does not exceed five (5)
years from the date of grant.
5. TERMS OF STOCK OPTIONS.
Each stock option shall be in such form and shall contain such terms and conditions as the
Board or the Committee shall deem appropriate. All options shall be separately designated
Incentive Stock Options or Supplemental Stock Options at the time of grant, and in such form as
2
issued pursuant to this paragraph, and a separate certificate or certificates shall be issued for
shares purchased on exercise of each type of option. An option designated as a Supplemental Stock
Option shall not be treated as an Incentive Stock Option. The provisions of separate options need
not be identical, but each option shall include (through incorporation of provisions hereof by
reference in the option or otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten (10) years from the date it
was granted or, in the case of any option contemplated by paragraph 4(b), five (5) years
from the date of grant.
(b) The exercise price of each Incentive Stock Option shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the option on the
date the option is granted or, in the case of any option contemplated by paragraph 4(b), one
hundred ten percent (110%) of the fair market value of the stock subject to the option on
the date of grant of the option.
(c) The purchase price of stock acquired pursuant to an option shall be paid, to the
extent permitted by applicable statutes and regulations, either (i) in cash at the time the
option is exercised, or (ii) at the discretion of the Committee either at the time of the
grant or exercise of the option, (A) by delivery to the Company of other common stock of the
Company, (B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the option is granted or to whom the option is transferred
pursuant to subparagraph 5(d), or (C) in any other form of legal consideration that may be
acceptable to the Committee.
(d)
(i) Unless otherwise expressly stated in the option, an option shall not be
transferable except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the option is granted only by
such person, nor shall an option holder have the right or power to anticipate,
accelerate, convey, assign or otherwise alienate, hypothecate, pledge or otherwise
encumber any option award or the shares subject to an option award.
(ii) Except with respect to Incentive Stock Options, the Committee may, in its
discretion, establish forms and procedures for the transfer of all or any portion of
such Option Award by the optionee to (i) Immediate Family Members (as defined
hereinafter), (ii) a trust or trusts for the exclusive benefit of the optionee and
such Immediate Family Members, or (iii) a partnership or limited liability company
in which the optionee and such Immediate Family Members are the only partners or
members (collectively such optionee’s “Permitted Transferees”), provided that
subsequent transfers shall be prohibited except in accordance with the laws of
descent and distribution, or by will. Notification and
approval of all such transfers shall be in the form specified by the Committee.
Following transfer, any such Option Award shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer,
3
provided that
for purposes of this Plan, wherever appropriate, the term “optionee” shall be deemed
to refer to the Permitted Transferee. Notwithstanding the foregoing, the Plan
Committee and the Company shall have no obligation to inform any Permitted
Transferee of any expiration, termination, lapse or acceleration of any such Option
Award and may give notices required hereunder, if any, to the optionee. The events
of termination of employment hereof shall continue to be applied with respect to the
original optionee, following which the Option Award shall be exercisable by the
Permitted Transferee only to the extent, and for the periods specified herein. As
used herein “Immediate Family Member” shall mean, with respect to the optionee, his
or her spouse, child, stepchild, grandchildren or other descendants, and shall
include relationships arising from legal adoption.
(e) The total number of shares of stock subject to an option may, but need not, be
allotted in periodic installments (which may, but need not, be equal). From time to time
during each of such installment periods, the option may become exercisable (“vest”) with
respect to some or all of the shares allotted to that period, and may be exercised with
respect to some or all of the shares allotted to such period and/or any prior period as to
which the option was not fully exercised. During the remainder of the term of the option
(if its term extends beyond the end of the installment periods), the option may be exercised
from time to time with respect to any shares then remaining subject to the option. In the
absence of a specific provision to the contrary in a particular option grant, an option
award shall vest one-third (1/3) on the third anniversary of the date of grant of such
option award, an additional one-third on the fourth anniversary of the date of grant of such
option award, and the final one-third (1/3) shall vest on the fifth anniversary of the date
of grant of such option award. The provisions of this subparagraph 5(e) are subject to any
option provisions governing the minimum number of shares as to which an option may be
exercised.
(f) An option shall terminate three (3) months after termination of the optionee’s
employment or relationship as a director of or consultant to the Company or an Affiliate,
unless (i) such termination is due to such person’s permanent and total disability, within
the meaning of Section 422(c)(6) of the Code, in which case the option may, but need not,
provide that it may be exercised at any time within one (1) year following such termination
of employment or relationship as a director or consultant; or (ii) the optionee dies while
in the employ of or while serving as a director of or consultant to the Company or an
Affiliate, or within not more than three (3) months after termination of such relationship,
in which case the option may, but need not, provide that it may be exercised at any time
within eighteen (18) months following the death of the optionee by the person or persons to
whom the optionee’s rights under such option passes by will or by the laws of descent and
distribution; or (iii) such termination is due to such person’s voluntary retirement in
accordance with subparagraph (h) below, in which case the option may be exercised at any
time within the earlier of five (5) years from the date of termination of such employment or
relationship, as the case may be, or the term of the
option; or (iv) the option by its terms specifies either (a) that it shall terminate
sooner than three (3) months after termination of the optionee’s employment or relationship
as a director or consultant, or (b) that it may be exercised more than three (3) months
after
4
termination of the optionee’s employment or relationship with the Company or an
Affiliate. This subparagraph 5(f) shall not be construed to extend the term of any option
or to permit anyone to exercise the option after expiration of its term, nor shall it be
construed to increase the number of shares as to which any option is exercisable from the
amount exercisable on the date of termination of the optionee’s employment or relationship
as a consultant or director.
(g) Prior to such time as the Company’s shares of common stock are first sold to the
public in an offering registered pursuant to Section 5 of the Securities Act of 1933, as
amended (“Initial Public Offering”), any shares of stock acquired through the exercise of an
option shall be subject to a thirty (30) day right of first refusal by the Company at the
same price and terms as offered by any third party pursuant to a bona fide offer, and may
not be sold prior to an offer to sell to the Company on such terms. Further, shares acquired
through exercise of an option award shall be subject to the terms and conditions of the
Amended and Restated Voting and Shareholder Agreement dated October , 2001, between the
Company and its stockholders, as amended from time to time (the “Stockholders Agreement”).
(h) In the event of a participant’s termination of employment or service as a director,
as applicable, by reason of voluntary retirement (at or after age sixty-five (65) or after
age fifty-five with no fewer than five (5) years of service), death, permanent and total
disability, involuntary termination (other than a termination for cause but including any
involuntary termination as the result of a Change in Control, as addressed below), with
respect to such participant’s Option Award(s), the Committee may in its sole, absolute and
final discretion elect to vest any or all shares not otherwise vested under the terms of the
Plan.
For purposes of this section, a permanent and total disability shall mean the occurrence of
the following conditions: (i) the Option Award holder’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) of properly performing the principal
functions which had been typically assigned to him by the Company, (ii) such incapacity shall exist
or be expected to exist with a reasonable degree of medical certainty for more than ninety (90)
days in the aggregate during any consecutive twelve (12) month period, and (iii) either the Option
Award holder or the Company shall have given the other thirty (30) days written notice of intent to
terminate employment or service as a director because of disability. In the event the Company and
Option Award holder are in material disagreement regarding the Participant’s physical or mental
condition, the Company shall authorize a panel of three (3) physicians selected by the Company to
examine the Participant to determine conclusively, by a majority, whether the Participant is
disabled for purposes of the Plan.
For purposes of this section, a termination for cause shall mean the termination of an
individual’s status as an employee or director of the Company, as applicable, as the result of (i)
fraud or dishonesty in connection with the business of the Company; (ii) gross negligence in the
performance of duties for the Company; (iii) willful failure in carrying out duties as an
employee, director or consultant; or (iv) arrest and conviction of a felony involving moral
turpitude, whether or not in connection with the business of the Company; provided that (iii) above
shall not apply if the Option Award holder has been assigned by the Company to duties
5
which are not
comparable to such holder’s function and compensation at the Company, or which are non-executive or
demeaning assignments, or if the Company has given such participant demeaning and unreasonable pay
cuts.
(i) In the event of a Change in Control of the Company, all shares subject to all
Option Awards shall become one hundred percent (100%) vested and shall be converted to cash,
options or stock of equivalent value in the surviving organization under terms and condition
which substantially preserve the economic status of the Participants, as determined by the
Committee. For purposes of this paragraph, a Change in Control shall mean:
(i) a sale or other disposition of more than fifty percent (50%) of the issued
and outstanding voting stock of the Company, in a single transaction or in a series
of transactions. For such purposes, “Voting Stock” shall mean capital stock of the
Company of any class or classes, the holders of which are ordinarily, in the absence
of contingencies, entitled to vote for the election of members of the Board of
Directors (or Persons performing similar functions) of the Company.
(ii) a merger or consolidation of the Company with or into any other entity, if
immediately after giving effect to such transaction more than fifty percent (50%) of
the issued and outstanding Voting Stock of the surviving entity of such transaction
is held by persons who are not holders of the Voting Stock immediately prior to
giving effect to such transaction;
(iii) a sale or other disposition of all or substantially all of the Company’s
assets in a single transaction or in a series of transactions (including, without
limitation, any liquidation or dissolution of the Company
A Change of Control shall not include any of the following events:
(i) any transfer or issuance of stock of the Company to one or more of
the Company’s lenders (or to any agents or representatives thereof) in
exchange for debt of the Company owed to any such lenders;
(ii) any transfer of stock of the Company to or by any person or
entity, including but not limited to one or more of the Company’s lenders
(or to any agents or representatives thereof), pursuant to the terms of any
pledge of said stock as collateral for any loans or financial accommodations
to the Company and/or its subsidiaries; or
(iii) any transfer or issuance to any person or entity, including but
not limited to one or more of the Company’s lenders (or to any agents or
representatives thereof), in connection with the workout or restructuring of
the Company’s debts to any one of the Company’s lenders, including but
not limited to the issuance of new stock in exchange for any equity
contribution to the Company in connection with the workout or restructuring
of such debt.
6
(iv) any transfer of stock by a stockholder of the Company which is a
partnership or corporation to the partners or stockholders in such
stockholder.
(j) In the event of an Initial Public Offering of the Company, Option Awards shall be
convertible to options in shares of the newly public company, under terms and conditions
which substantially preserve the rights and options of the participant. Any resulting
registration of options or shares shall be effected at Company expense.
(k) If provided in the Option Award, each Option Award shall carry the right to receive
any dividend or dividend equivalent on vested shares, under such terms and conditions as may
be specified in the Option Award.
(l) Notwithstanding any other provisions of the Plan, any vested but unexercised Option
Award shares shall be forfeited upon the Option Award holder’s “Competition” with the
Company. For this purpose, Competition shall be determined by the Committee, and shall
exist if the Option Award holder while employed by or consulting for the Company and for a
period of two (2) years thereafter directly or indirectly (i) engages or has a financial
interest in, (ii) becomes an officer, employee, director, partner, advisor or consultant of
or to, (iii) has an equity interest in, or (iv) in any way materially assists any person,
corporation, entity or business whose existing or planned products or activities compete in
whole or in part with the existing or planned products or activities of the Company. The
sole fact of ownership by an Option Award holder of less than two percent (2%) of the stock
of a publicly traded company which may have product lines which compete with product lines
of this Company shall not be treated as Competition. Any determination by the Committee
under this section shall be final and conclusive, unless overruled by the Board.
(m) Notwithstanding any other provision of the Plan or any Option Award to the
contrary, any and all sales of shares to the Company or any Affiliate are contingent upon
and subject to the terms and conditions of any bank loan covenants by the Company or any
Affiliate.
6. COVENANTS OF THE COMPANY.
(a) During the terms of any Option Awards granted under the Plan, the Company shall
keep available at all times the number of shares of stock required to satisfy such Option
Awards.
(b) The Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to issue and sell shares of
stock upon grant or exercise of Option Awards under the Plan; provided, however, that this
undertaking shall not require the Company to register under the
Securities Act of 1933, as amended (the “Securities Act”), either the Plan, any Option
Award granted under the Plan or any stock issued or issuable pursuant to any such Option
Awards. If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company deems
7
necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such Option Awards unless
and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Option Awards granted under the Plan shall
constitute general funds of the Company.
8. MISCELLANEOUS.
(a) The Committee shall have the power to accelerate the time during which a Option
Award may be exercised or the time during which an option or stock acquired pursuant to a
Option Award will vest, notwithstanding the provisions in the Option Award stating the time
during which it may be exercised or the time during which stock acquired pursuant thereto
will vest.
(b) Neither a recipient of a Option Award nor any person to whom a Option Award is
transferred under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such Option Award unless and
until such person has satisfied all requirements for exercise of the Option Award pursuant
to its terms and is thereby entitled to receive shares of stock.
(c) Throughout the term of any Option Award granted pursuant to the Plan, the Company
shall make available to the holder of such Option Award, not later than one hundred twenty
(120) days after the close of each of the Company’s fiscal years during the option term,
upon request, such financial and other information regarding the Company as comprises the
annual report to the shareholders of the Company provided for in the bylaws of the Company.
(d) Nothing in the Plan or any instrument executed or Option Award granted pursuant
thereto shall confer upon any recipient any right to continue in the employ of the Company
or any Affiliate or to limit the Company’s right to terminate the employment or consulting
relationship or directorship of any eligible employee or recipient with or without cause.
In the event that an Option Award recipient is permitted or otherwise entitled to take a
leave of absence, the Company shall have the unilateral right to (i) determine whether such
leave of absence will be treated as a termination of employment for purposes of his or her
Option Award, or (ii) suspend or otherwise delay the time or times at which the shares
subject to the Option Award would otherwise vest.
(e) To the extent provided by the terms of any Option Award, the recipient may satisfy
any federal, state or local tax withholding obligation relating to the exercise or receipt
of such Option Award by any of the following means or by a combination of
such means: (1) tendering a cash payment; (2) authorizing the Company to withhold from
the shares of the common stock otherwise issuable to the participant as a result of the
exercise of receipt of the Option Award cash or a number of shares having a fair market
value less than or equal to the amount of the withholding tax obligation; or (3)
8
delivering
to the Company owned and unencumbered shares of common stock of the Company having a fair
market value less than or equal to the amount of the withholding tax obligation.
(f) In connection with each Option Award made pursuant to the Plan, the Company may
require as a condition precedent to its obligation to issue or transfer shares to an
eligible participant, or to evidence the removal of any restrictions on transfers or lapse
of any repurchase right, that such participant make arrangements satisfactory to the Company
to insure that the amount of any federal or other withholding tax required to be withheld
with respect to such sale or transfer, or such removal or lapse, is made available to the
Company for timely payment of such tax.
(g) The Company may, as a condition of transferring any stock pursuant to the Plan,
require any person who is to acquire such stock (1) to give written assurances satisfactory
to the Company as to the optionee’s knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experienced in financial and business matters, and that he or she
is capable of evaluating, alone or together with the purchaser representative, the merits
and risks of acquiring the stock; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock for such person’s own account and
not with any present intention of selling or otherwise distributing the stock. These
requirements, and any assurances given pursuant to such requirements, shall be inoperative
if (i) the issuance of the shares has been registered under a then currently effective
registration statement under the Securities Act, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not be met in
the circumstances under the then applicable securities laws.
9. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to any Option
Award granted under the Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock split,
liquidating dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan and outstanding Option Awards will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es)
and number of shares and price per share of stock subject to outstanding Option Awards.
(b) In the event of: (1) a merger or consolidation in which the Company is not the
surviving corporation, or (2) a reverse merger in which the Company is the surviving
corporation but the shares of the Company’s common stock outstanding immediately preceding
the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, then to the extent
permitted by applicable law: (i) any surviving corporation shall assume any Option Awards
outstanding under the Plan or shall substitute similar rights for those outstanding under
the Plan, or (ii) such Option Awards shall continue in full force and effect. In the event
9
any surviving corporation refuses to assume or continue such Option Awards, or to substitute
similar Option Awards for those outstanding under the Plan, then, with respect to Option
Awards held by persons then performing services as employees or as consultants or directors
for the Company, as the case may be, the time during which such Option Awards shall vest
shall be accelerated and the Option Awards terminated if not exercised prior to such event.
In the event of a dissolution or liquidation of the Company, any options outstanding under
the Plan shall terminate if not exercised prior to such event.
10. AMENDMENT OF THE PLAN.
(a) The Committee at any time, and from time to time, may amend the Plan, subject to
and within limitations of any resolutions approved by the Board of Directors. However,
except as provided in paragraph 9 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the shareholders of the Company within
twelve (12) months before or after the adoption of the amendment, where the amendment will
increase the number of shares reserved for issuance under the Plan.
(b) With a view to making available the benefits provided by Section 422 of the Code,
if deemed desirable by the Board, the Board in its discretion shall determine at the time of
each amendment of the Plan whether or not to submit such amendment to the shareholders of
the Company for approval.
(c) Rights and obligations under any Option Award granted before amendment of the Plan
shall not be altered or impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Option Award was granted and (ii) such person
consents in writing.
11. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Committee may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is adopted by the
Board or approved by the shareholders of the Company, whichever is earlier. Upon
termination of the Plan, all Option Awards shall become fully vested. No Option Awards may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option Award granted while the Plan is in effect
shall not be altered or impaired by suspension or termination of the Plan, except with the
consent of the person to whom the Option Award was granted.
12. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as of October , 2001, but no Option Award granted under
the Plan shall be exercised and no stock shall otherwise be issued under the Plan unless and until
the Plan has been approved by the shareholders of the Company.
10
IN WITNESS WHEREOF, the authorized officer of the Company has executed this Plan on this
1st day of October, 2001.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Title: General Counsel and Secretary | ||||
11
AMENDMENT TO THE
GTX, INC.
2001 STOCK OPTION PLAN
GTX, INC.
2001 STOCK OPTION PLAN
WHEREAS, GTx, Inc. (the “Company”) adopted the 2001 Stock Option Plan (the “Plan”) effective
October 1, 2001 and granted the Committee the right to amend the Plan;
WHEREAS, it has been determined that the Plan should be amended for the purpose of changing
the definition of the terms “permanent and total disability” and “Change in Control”;
WHEREAS, the Committee of the Company has approved such amendments;
NOW, THEREFORE, the Plan is hereby amended, effective as of the date hereof, as follows:
1. The definition of the term “permanent and total disability” set forth in Section 5 of the
Plan is hereby amended to have the following meaning: (A) the inability of the optionee to perform
substantially all of his or her duties and responsibilities to the Company by reason of a physical
or mental disability or infirmity (excluding, however, infrequent and temporary absences due to
ordinary illness) (i) for a continuous period of more than ninety (90) days or (ii) at such time as
the optionee submits satisfactory medical evidence that he or she has a permanent physical or
mental disability or infirmity which will likely prevent him from returning to the performance of
his work duties for more than ninety (90) days, and (B) either the optionee or the Company shall
have given the other at least thirty (30) days prior written notice of intent to terminate
employment. The date of such permanent and total disability shall be on the last day of such ninety
(90) day period or the day on which the optionee submits such satisfactory medical evidence, as the
case might be.
2. The definition of the term “Change in Control” set forth in Section 5(i) of the Plan is
hereby amended to have the following meaning: (a) the sale or other disposition of all or
substantially all of the assets of the Company in a single transaction or in a series of
transactions (including, without limitation, any liquidation or dissolution of the Company); (b)
the sale or other disposition of more than fifty percent (50%) of the issued and outstanding voting
stock of the Company, in a single transaction or in a series of transactions. For such purposes,
“voting stock” shall mean the capital stock of the Company of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for the election of members
of the Board of Directors (or Persons performing similar functions) of the Company; or (3) a merger
or consolidation of the Company with or into any other entity, if immediately after giving effect
to such transaction more than fifty percent (50%) of the issued and outstanding voting stock of the
surviving entity of such transaction is held by persons who were not holders (taking into account
their individual and affiliated holdings) as of the date of the grant of this Option of at least
20% of the voting stock of the Company. Notwithstanding the foregoing, a “Change in Control” shall
not include: (i) any transfer or issuance of stock of the Company to one or more of the Company’s
lenders (or to any agents or representatives thereof) in exchange for debt of the Company owed to
any such lenders; (ii) any transfer of stock of the Company to or by any person or entity,
including but not limited to one or more of the Company’s lenders (or to any agents or
representatives thereof), pursuant to the terms of any pledge of said stock as collateral
12
for any loans or financial accommodations to the Company and/or its subsidiaries; (iii) any
transfer or issuance to any person or entity, including but not limited to one or more of the
Company’s lenders (or to any agents or representatives thereof), in connection with the workout or
restructuring of the Company’s debts to any one of the Company’s lenders, including but not limited
to the issuance of new stock in exchange for any equity contribution to the Company in connection
with the workout or restructuring of such debt; or (iv) any transfer of stock by a stockholder of
the Company which is a partnership or corporation to the partners or stockholders in such
stockholder.
IN
WITNESS WHEREOF, the Company has caused this Amendment to be executed
on November 15, 2001.
| GTx, Inc. |
||||
| By: | /s/ Marc S. Hanover | |||
| Name: | Marc S. Hanover | |||
| Title: | President and COO | |||
13
Second Amendment to the
GTx, Inc.
2001 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the GTx, Inc. 2001 Stock Option Plan (the
“2001 Plan”) effective October 1, 2001;
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend the Company’s 2001 Plan to clarify certain existing provisions in light of final
regulations issued under Section 409A of the Internal Revenue Code of 1986, as amended;
Whereas, the Compensation Committee of the Company has approved such amendments; and
Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 4350(i)(1)(A).
Now, Therefore, Be it Resolved, the 2001 Plan is hereby amended, effective as of the
date hereof, as follows:
| 1. | That Section 4(a) of the 2001 Plan is hereby deleted in its entirety and replaced with the following: |
(a) Incentive Stock Options may be granted only to employees (including
officers) of the Company or its Affiliates. A director of the Company shall
not be eligible to receive Incentive Stock Options unless such director is
also an employee (including an officer) of the Company or any Affiliate.
Option Awards other than Incentive Stock Options may be granted only to
directors, officers or employees of or consultants to the Company or its
Affiliates; provided that such Option Awards may not be granted to
directors, officers or employees who are providing services only to a
“parent” of the Company, as such term is defined in Section 424(f) of the
Code, unless such Option Awards comply with the distribution requirements of
Section 409A of the Code.
| 2. | That Section 5(b) of the 2001 Plan is hereby deleted in its entirety and replaced with the following: |
(b) The exercise price of each Option Award shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
option on the date the option is granted or, in the case of any option
contemplated by paragraph 4(b), one hundred ten percent (110%) of the fair
market value of the stock subject to the option on the date of grant of the
option. Notwithstanding the foregoing, an Option Award may be granted with
an exercise price lower than one hundred percent (100%)
of the fair market value of the stock subject to the option on the date the
option is granted if such Option Award is granted pursuant to an assumption
of or substitution for another option pursuant to a Change in Control (as
defined in section 5(i) of the Plan) and in a manner consistent with the
provisions of Sections 409A and 424(a) of the Code. Fair market value
means, as of any date, the value of the Company’s common stock determined as
follows:
i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq Global Market or any other
established market, the fair market value of a share of common
stock shall be the closing sales price for such stock as quoted
on such exchange or market (or the exchange or market with the
greatest volume of trading in the common stock) on the date of
determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable.
ii) Unless otherwise provided by the Committee, if there is
no closing sales price for the common stock on the date of
determination, then the fair market value shall be the closing
sales price on the last preceding date for which such quotation
exists.
iii) In the absence of such markets for the common stock,
the fair market value shall be determined by the Committee in
good faith and in a manner that complies with Section 409A of the
Code.
| 3. | That the following will be added to the 2001 Plan as Section 8(h): |
(h) To the extent permitted by applicable law, the Committee, in its
sole discretion, may determine that the delivery of common stock upon the
exercise of all or a portion of any Option Award may be deferred and may
establish programs and procedures for deferral elections to be made by
persons receiving options. Deferrals by persons will be made in accordance
with Section 409A of the Code.
| 4. | That the following will be added to the 2001 Plan as Section 8(i): |
(i) To the extent that the Committee determines that any Option Award
granted hereunder is subject to Section 409A of the Code, the agreement
evidencing such Option Award shall incorporate the terms and conditions
necessary to avoid the consequences specified in Section 409A(a)(1) of the
Code. To the extent applicable, this Plan and the agreements evidencing
Option Awards shall be interpreted in accordance with Section 409A of the
Code, including without limitation any applicable guidance that may be
issued or amended in the future.
2.
| 5. | That Section 10(c) of the 2001 Plan is hereby deleted in its entirety and replaced with the following: |
(b) Rights and obligations under any Option Award granted before
amendment of the Plan shall not be altered or impaired by any amendment of
the Plan unless (i) the Company requests the consent of the person to whom
the Option Award was granted and (ii) such person consents in writing.
Notwithstanding the foregoing, subject to the limitations of applicable law,
if any, the Committee may amend the terms of any one or more Option Awards
without the consent of the person to whom the Option Award was granted if
necessary to bring the Option Award into compliance with Section 409A of the
Code.
In Witness Whereof, the Company has caused this Second Amendment to the 2001 Plan to
be executed on November 4, 2008.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | Vice President, General Counsel | |||
3.
THIRD AMENDMENT TO THE
GTX, INC.
2001 STOCK OPTION PLAN
GTX, INC.
2001 STOCK OPTION PLAN
WHEREAS, GTx, Inc. (the “company”) adopted the GTx, Inc. 2001 Stock Option Plan (the “2001
Plan”) effective October 1, 2001;
WHEREAS, the Compensation Committee believes it to be in the best interest of the Company to
interpret the Plan to provide a consistent definition of the terms “permanent and total disability”
and “permanent disability” with respect to Supplemental Stock Options and to provide a consistent
mechanism for administering the determination of whether a Participant has suffered a “permanent
and total disability” and “permanent disability” as those terms are used in the 2001 Plan and the
award agreements pursuant to the 2001 Plan;
WHEREAS, the Compensation Committee believes that this Third Amendment will also benefit the
optionees under the 2001 Plan by clarifying the applicable requirements for determining “permanent
and total disability” and “permanent disability” and that this Third Amendment will not alter or
impair any rights or obligations the optionees have under the Option Award;
WHEREAS, the Compensation Committee has approved this Third Amendment; and
WHEREAS, the contemplated amendments are not “material amendments” as contemplated by Rule
5635 of the Nasdaq Manual.
NOW, THEREFORE, BE IT RESOLVED, the 2001 Plan and the Option Awards issued pursuant thereto
are hereby interpreted and amended as follows:
1. The definition of “permanent and total disability” and “permanent disability” with respect
to the 2001 Plan and the Option Awards issued pursuant thereto shall be amended and interpreted to
require the occurrence of all of the following conditions:
(i) the optionee’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) prevents
the optionee from properly performing the essential functions of his
or her job which had been typically assigned to him or her by the
Company, with or without reasonable accommodation, (ii) such
incapacities shall exist or be expected to exist within a reasonable
degree of medical certainty for more than ninety (90) days in the
aggregate during any consecutive twelve (12) month period, (iii) the
delivery of a report to the Company determining the existence of the
incapacities with respect to the optionee and describing in detail
the incapacities which satisfy the requirements of the foregoing
subsections (i) and (ii), which report shall be signed by a medical
doctor duly licensed to practice medicine in either the state of
Tennessee or the state in which the optionee resides and which
report must be received by the Company while the optionee is still
employed by the Company,
provided, however, if the Committee determines the report to be
inadequate or inaccurate, the Committee may select two additional
independent medical doctors and request each to provide a report
meeting the above specifications, and the determination of a
majority of the three medical doctors shall be conclusive and
binding on the optionee and the Company, and the optionee shall
cooperate with the Company’s request and submit to such medical
examinations, and (iv) either the optionee or the Company shall have
given the other thirty (30) days written notice of intent to
terminate employment or service because of permanent and total
disability.
IN WITNESS WHEREOF, the Company has caused this Third Amendment to be executed on November
3, 2009.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | Vice President, General Counsel and Secretary | |||
NONQUALIFIED STOCK OPTION SUBSCRIPTION AGREEMENT
This Nonqualified Stock Option Subscription Agreement (this “Agreement”), dated as of the
___ day of _________, ___, is made by and between GTx, Inc. (the “Company”), a Delaware
corporation, and the Employee of the Company whose name appears on the signature page hereof
(hereinafter referred to as the “Optionee”).
WHEREAS, pursuant to the 2001 Stock Option Plan, as amended (the “Plan”), the terms of which
are hereby incorporated by reference, the Company intends to provide incentives to certain key
Employees of the Company by providing them with opportunities for ownership of shares of Common
Stock; and
WHEREAS, a duly constituted committee of the Board of Directors of the Company (hereinafter
referred to as the “Committee”) appointed to administer the Plan has determined that it would be to
the advantage and best interest of the Company and its stockholders to grant the Option provided
for herein to the Optionee under the Plan and has advised the Company thereof and instructed the
undersigned officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified
below unless the Plan indicates to the contrary.
1.1 — Cause. “Cause” used in connection with the termination of employment of the
Optionee shall mean a termination of employment of the Optionee by the Company or any of its
Subsidiaries due to (i) fraud or dishonesty of the Optionee in connection with the business of the
Company; (ii) gross negligence of the Optionee in the performance of duties for the Company; (iii)
willful failure by the Optionee in carrying out duties as an employee; or (iv) arrest and
conviction of the Optionee for a felony involving moral turpitude, whether or not in connection
with the business of the Company; provided that (iii) above shall not apply if the Optionee has
been assigned by the Company to duties which are not comparable to such Optionee’s function and
compensation at the Company, or which are non-executive or demeaning assignments, or if the Company
has given such Optionee demeaning and unreasonable pay cuts.
1.2 — Change in Control. “Change in Control” shall have the meaning given in
Section 3.3.
1.3 — Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
1.4 — Common Stock. “Common Stock” shall mean the common capital stock of the
Company.
1.5 — Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended, and all rules and regulations promulgated thereunder.
1.6 — Exercise Price. “Exercise Price” shall mean the price per Option Share as
set forth on the signature page hereof.
1.7 — Grant Date. “Grant Date” shall mean the date on which the Option provided
for in this Agreement was granted.
1.8 — IPO. “IPO” shall mean the date on which the Company’s shares of Common
Stock are first sold to the public in an offering registered pursuant to Section 5 of the
Securities Act of 1933, as amended.
1.9 — Option. “Option” shall mean any stock option to purchase Common Stock of
the Company granted under this Agreement.
1.10 — Option Shares. “Option Shares” shall mean the number of shares of Common
Stock for which this Option is granted as set forth upon the signature page hereof.
1.11 — Permanent Disability. “Permanent Disability” of the Optionee shall mean
the occurrence of the following conditions: (i) the optionee’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) prevents the optionee from properly performing
the essential functions of his or her job which had been typically assigned to him or her by the Company,
with or without reasonable accommodation, (ii) such incapacities shall exist or be expected to exist within
a reasonable degree of medical certainty for more than ninety (90) days in the aggregate during any consecutive
twelve (12) month period, (iii) the delivery of a report to the Company determining the existence of the
incapacities with respect to the optionee and describing in detail the incapacities which satisfy the requirements
of the foregoing subsections (i) and (ii), which report shall be signed by a medical doctor duly licensed to
practice medicine in either the state of Tennessee or the state in which the optionee resides and which report must
be received by the Company while the optionee is still employed by the Company, provided, however, if the Committee
determines the report to be inadequate or inaccurate, the Committee may select two additional independent medical
doctors and request each to provide a report meeting the above specifications, and the determination of a majority
of the three medical doctors shall be conclusive and binding on the optionee and the Company, and the optionee shall
cooperate with the Company’s request and submit to such medical examinations, and (iv) either the optionee or the
Company shall have given the other thirty (30) days written notice of intent to terminate employment or service
because of permanent and total disability.
1.12 — Permitted Transferee. “Permitted Transferee” shall have the meaning given
in Section 5.2(b).
1.13 — Person. “Person” means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust or unincorporated
organization.
1.14 — Plan. “Plan” shall mean the 2001 Stock Option Plan of GTx, Inc.
1.15 — Retirement. “Retirement” shall mean any voluntary termination of
employment by the Optionee after having reached the age of sixty-five (65) years (or after having
reached the age of fifty-five (55) years if the Optionee has no fewer than five (5) years of
service with the Company).
ARTICLE II
GRANT OF OPTION
2.1 — Grant of Option. For good and valuable consideration, on and as of the date
hereof, the Company irrevocably grants to the Optionee the Option to purchase any part or all of
2
an aggregate of the number of Option Shares set forth on the signature page hereof upon the
terms and conditions set forth in this Agreement.
2.2 — Consideration to the Company. In consideration of the granting of this
Option by the Company, the Optionee agrees to render faithful and efficient services to the Company
with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ or
service of the Company or shall interfere with or restrict in any way the rights of the Company,
which are hereby expressly reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without Cause.
2.3 — Adjustments in Option. Subject to Section 9 of the Plan, in the event that
the outstanding shares of the Common Stock subject to the Option are changed into or exchanged for
a different number or kind of shares of capital stock or other securities of the Company, or of
another corporation, by reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or otherwise, the Committee
shall make an appropriate adjustment in the number and kind of shares of Option Shares. Such
adjustment in the Option shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the aggregate price resulting from
rounding-off of shares, quantities or prices) and with any necessary corresponding adjustment in
the Exercise Price. No fractional shares shall be issued, and any fractional shares resulting from
computations pursuant to Section 9 of the Plan shall be eliminated from the respective Options.
Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons.
2.4 — Tax Treatment. The Option hereby granted is intended to be a Supplemental
Stock Option as defined in the Plan (hereinafter referred to as a “Nonqualified Stock Option”) and
not an Incentive Stock Option as described in Section 422 of the Code.
ARTICLE III
PERIOD OF EXERCISABILITY
3.1 — General Rule. The Option will become exercisable as to the following
percentages of the Option Shares on the following anniversaries of the Grant Date provided that the
Optionee is then employed by the Company on such anniversary:
Third anniversary |
33 | % | ||
Fourth anniversary |
67 | % | ||
Fifth anniversary |
100 | % |
3.2 — Termination of Employment and Nonvested Options. In the event the
Optionee’s employment or service with the Company is terminated (other than a termination for Cause
but including any involuntary termination as the result of a Change in Control, as described
below), by reason of Retirement, death, or Permanent Disability, the Committee may in its sole,
absolute and final discretion elect to vest any or all shares subject to the Option, that are not
otherwise vested pursuant to the terms of the Plan. In the event the Optionee’s
3
employment or service is terminated under any other circumstances, any portion of the Option
that is has not vested shall be forfeited immediately.
3.3 — Change in Control. Notwithstanding Section 3.1, unless the Optionee is
terminated for Cause, the Option will become exercisable in full in the event of any voluntary or
involuntary termination of the Optionee’s employment or service occurring simultaneously with or at
any time after any of the following events (a “Change in Control”):
| (a) | the sale or other disposition of all or substantially all of the assets of the Company in a single transaction or in a series of transactions (including, without limitation, any liquidation or dissolution of the Company); | ||
| (b) | the sale or other disposition of more than fifty percent (50%) of the issued and outstanding voting stock of the Company, in a single transaction or in a series of transactions. For such purposes, “voting stock” shall mean the capital stock of the Company of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of members of the Board of Directors (or Persons performing similar functions) of the Company; or | ||
| (c) | a merger or consolidation of the Company with or into any other entity, if immediately after giving effect to such transaction more than fifty percent (50%) of the issued and outstanding voting stock of the surviving entity of such transaction is held by persons who were not holders (taking into account their individual and affiliated holdings) as of the date of the grant of this Option of at least 20% of the voting stock of the Company. |
A Change in Control shall not include:
(1) any transfer or issuance of stock of the Company to one or more of the
Company’s lenders (or to any agents or representatives thereof) in exchange for debt
of the Company owed to any such lenders;
(2) any transfer of stock of the Company to or by any person or entity,
including but not limited to one or more of the Company’s lenders (or to any agents
or representatives thereof), pursuant to the terms of any pledge of said stock as
collateral for any loans or financial accommodations to the Company and/or its
subsidiaries;
(3) any transfer or issuance to any person or entity, including but not limited
to one or more of the Company’s lenders (or to any agents or representatives
thereof), in connection with the workout or restructuring of the Company’s debts to
any one of the Company’s lenders, including but not limited to the issuance of new
stock in exchange for any equity contribution to the Company in connection with the
workout or restructuring of such debt; or
(4) any transfer of stock by a stockholder of the Company, which is a
partnership or corporation to the partners, or stockholders in such stockholder.
4
3.4 — Optional Vesting/Accelerated Exercise in connection with a Change of
Control. In the event a Change in Control appears likely to occur, the Committee may, in its
sole and absolute discretion, send written notice to the Optionee at least ten (10) days prior to
the contemplated date of any Change in Control specifying (a) that the Option will become
exercisable in full on the date of the Change in Control, (b) that any portion or all of the Option
which thereby becomes exercisable and any portion or all of the Option which was already
exercisable will immediately thereafter expire on the same date and (c) that to prevent the lapse
of the Option, the Optionee must exercise the Option no later than such date. Except as may
otherwise be expressly provided in such written notice, any acceleration of the exercisability of
the Option and any attempted exercise of the Option by the Optionee shall be null and void if the
Change in Control does not occur within thirty (30) days of the date contemplated in the notice.
3.5 — Expiration of Option. Any portion of the Option, which has become
exercisable will nevertheless expire and will no longer be exercisable to any extent by anyone on
the earliest to occur of the following events:
| (a) | the tenth anniversary of the Grant Date; | ||
| (b) | the earlier of (A) three (3) months after termination of employment (specifically including a termination of employment after a Change in Control), unless such termination is for Cause or results from Retirement, death, Permanent Disability or (B) the term of the Option as set forth in the Plan; | ||
| (c) | twelve (12) months after termination of employment on account of Permanent Disability, provided that if Optionee shall die within such time without having fully exercised all vested Options, Optionee’s estate shall have an additional twelve (12) months from Optionee’s date of death to exercise such Options; | ||
| (d) | eighteen (18) months after termination of employment on account of Optionee’s death or within eighteen (18) months after Optionee’s termination of employment if Optionee qualifies under clause (b) but dies within three (3) months after his or termination of employment without having exercised all of his or her vested Options; | ||
| (e) | the earlier of five (5) years after the date of the Retirement of Optionee, or the term of the Option as set forth in the Plan; | ||
| (f) | at the close of business on the date of the termination of the Optionee’s employment by the Company for Cause; and | ||
| (e) | if the Committee so determines and gives written notice as provided in Section 3.4, upon the Effective Date of any Change in Control. |
3.6 — Non-competition. Notwithstanding any other provisions of this Agreement,
any Option outstanding, including any vested but unexercised Option, shall be forfeited upon the
Optionee’s “Competition” with the Company. For this purpose, Competition shall be determined by
the Committee and shall exist if the Optionee, directly or indirectly (i) engages or has a
financial interest in, (ii) becomes an officer, employee, director, partner, advisor or consultant
of
5
or to, (iii) has an equity interest in, or (iv) in any way materially assists any person,
corporation, entity or business whose existing or planned products or activities compete in whole
or in part with the existing or planned products or activities of the Company. The sole fact of
ownership by an Optionee of less than two percent (2%) of the stock of a publicly traded company
which may have product lines which compete with product lines of the Company shall not be treated
as Competition. Any determination by the Committee under this section shall be final and
conclusive, unless overruled by the Board.
ARTICLE IV
EXERCISE OF OPTION
4.1 — Person Eligible to Exercise. During the lifetime of the Optionee, only the
Optionee or the Optionee’s guardian or conservator may exercise the Option or any portion thereof,
and after the death of the Optionee, any portion of the Option may, prior to the time when the
Option becomes unexercisable under Section 3.5, be exercised by the Optionee’s personal
representative or by any person empowered to do so under the Optionee’s will or under the then
applicable laws of descent and distribution; provided, however, at any time after the transfer of
the Option or any portion thereof pursuant to Section 5.2, the transferred portion of the Option
may be exercised only by the transferee.
4.2 — Partial Exercise. Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the
time when the Option or portion thereof becomes unexercisable under Section 3.5; provided, however,
that any partial exercise shall be for whole shares only.
4.3 — Manner of Exercise. The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or his or her office all of the
following prior to the time when the Option or such portion becomes unexercisable under Section
3.5:
| (a) | Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee; and | ||
| (b) | Full payment of the Exercise Price (as provided in Section 4.4), for the shares with respect to which such Option or portion thereof is exercised; and | ||
| (c) | Such representations and documents as the Committee deems reasonably necessary or advisable to effect compliance with all applicable laws, including provisions of the Securities Act of 1933, as amended, and any other federal, state or foreign securities laws or regulations following an IPO; and | ||
| (d) | Full payment to the Company (as provided in Section 4.4) of all amounts, if any, which, under federal, state or local law, it is required to withhold upon exercise of the Option; and |
6
| (e) | If the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option. |
Notwithstanding the foregoing, the Optionee may give notice exercising the Option subject to the
condition or conditions that any then contemplated Change in Control will actually occur and that
the Option will become exercisable because of the Change in Control with respect to the Option
Shares for which notice of exercise is given. In such an event, full payment of the Exercise Price
with respect to all Option Shares need not be made until the date of the Change in Control.
4.4 — Payment. The Exercise Price and any tax withholding shall be payable in
cash, by check, or by any combination thereof. Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price or any tax withholding
may be paid by delivery of shares of Common Stock acceptable to the Committee and having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash
that would otherwise be required; and (ii) the Exercise Price or any tax withholding may be paid by
authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) to
be acquired upon the exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such
exercise.
4.5 — Conditions to Issuance of Stock Certificates. The shares of Common Stock
deliverable upon the exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares that have then been reacquired by the Company.
Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of
the Option or portion thereof prior to fulfillment of all of the following conditions:
| (a) | The admission of such shares to listing on all stock exchanges, if any, on which such class of Common Stock is then listed; | ||
| (b) | The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the SEC or of any other governmental regulatory body, which the Committee shall, in its absolute discretion deem necessary or advisable; | ||
| (c) | The obtaining of approval or other clearance from any state or federal governmental agency which the Committee shall determine to be necessary or advisable; and | ||
| (d) | The payment to the Company of all amounts, if any, which, under federal, state or local law, it is required to withhold upon exercise of the Option. |
4.6 — Rights as Stockholder. The holder of the Option shall not be, nor have any
of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable
upon the exercise of the Option or any portion thereof unless and until certificates representing
such shares shall have been issued by the Company in the name of such holder. No adjustment
7
shall be made for cash dividends for which the record date is prior to the date such stock
certificate is issued.
4.7 — Issuance of Certificate; Legend. The stock certificate or certificates
deliverable to the Optionee upon the exercise of the Option may, at the request of the Optionee at
the time of exercise, be issued in his or her name alone or in his or her name and the name of
another person as joint tenants with right of survivorship. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any other federal, state
or foreign securities laws or regulations including, without limitation, placing legends on share
certificates and issuing stock-transfer orders to transfer agents and registrars.
ARTICLE V
MISCELLANEOUS
5.1 — Administration. The Committee shall have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration, interpretation and application
of the Plan as are consistent therewith and to interpret or revoke any such rules. No member of
the Committee shall be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Option. The Board of Directors of the Company in its
absolute discretion may at any time and from time to time exercise any and all rights and duties of
the Committee under the Plan and this Agreement.
5.2 — Transferability of Option . (a) Except as provided in subsection (b),
neither the Option nor any interest or right therein or part thereof shall be subject to
disposition by transfer, alienation, anticipation, encumbrance or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided, however, that this Section
5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.
(b) The Committee may, in its discretion, establish forms and procedures for the transfer of
all or any portion of such Option by the Optionee to (i) Immediate Family Members (as defined
hereinafter), (ii) a trust or trusts for the exclusive benefit of the Optionee and such Immediate
Family Members, or (iii) a partnership or limited liability company in which the Optionee and such
Immediate Family Members are the only partners or members (collectively such Optionee’s “Permitted
Transferees”), provided that subsequent transfers shall be prohibited except in accordance with the
laws of descent and distribution, or by will. Notification and approval of all such transfers
shall be in the form specified by the Committee. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Articles IV and V hereof (other than this Section 5.2), the
term “Optionee” shall be deemed to refer to the Permitted Transferee. Notwithstanding the
foregoing, the Committee and the Company shall have no obligation to inform any Permitted
Transferee of any expiration, termination, lapse or acceleration of any such Option and may give
notices required hereunder, if any, to the Optionee. The events of termination of employment of
Article III hereof shall continue to be applied with
8
respect to the original Optionee, following which the Option shall be exercisable by the
Permitted Transferee only to the extent, and for the periods specified at Article III hereof. As
used in this Section 5.2(b) “Immediate Family Member” shall mean, with respect to the Optionee, his
or her spouse, child, stepchild, grandchildren or other descendants, and shall include
relationships arising from legal adoption.
5.3 — Shares of Common Stock to be Reserved. The Company shall at all times
during the term of the Option reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Agreement.
5.4 — Notices. Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any notice to be given to
the Optionee shall be addressed to him or her at the address given beneath his or her signature
hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to him or her. Any notice which is required to be given
to the Optionee shall, if the Optionee is then deceased, be given to the Optionee’s personal
representative if such representative has previously informed the Company of his or her status and
address by written notice under this Section 5.4. Any notice shall have been deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by the United States
Postal Service or when delivered by hand (whether by overnight courier or otherwise).
5.5 — Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
5.6 — No Right to Employment. Nothing in the Plan or this Agreement shall confer
upon the Optionee any right to continue in the employ of the Company or any Affiliate or to limit
the Company’s right to terminate the employment relationship of any eligible employee with or
without Cause. In the event that an Optionee is permitted or otherwise entitled to take a leave of
absence, the Company shall have the unilateral right to (i) determine whether such leave of absence
will be treated as a termination of employment for purposes of his or her Option, or (ii) suspend
or otherwise delay the time or times at which the shares subject to the Option would otherwise
vest.
5.7 — Amendment. This Agreement may be amended only by a writing executed by the
parties hereto, which specifically states that it is amending this Agreement.
5.8 — Governing Law. The laws of the State of Tennessee shall govern the
interpretation, validity and performance of the terms of this Agreement, regardless of the law that
might be applied under principles of conflicts of laws.
5.9 — Jurisdiction. Any suit, action or proceeding against the Optionee with
respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be
brought in any court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Nothing herein shall in any way be deemed to limit the ability of the
Company to serve any such writs, process or summonses in any other manner permitted by
9
applicable law or to obtain jurisdiction over the Optionee, in such other jurisdictions, and
in such manner, as may be permitted by applicable law. The Optionee hereby irrevocably waives any
objections which he or she may now or hereafter have to the laying of the venue of any suit, action
or proceeding arising out of or relating to this Agreement brought in any court of competent
jurisdiction in the State of Tennessee, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in any inconvenient
forum. No suit, action or proceeding against the Company with respect to this Agreement may be
brought in any court, domestic or foreign, or before any similar domestic or foreign authority
other than in a court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
irrevocably waives any right which he or she may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic or foreign authority. The Company
hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or
proceeding.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.
| GTx, INC. |
||||
| By: | ||||
| Title: | ||||
No. of Option Shares: __________________________ |
||||
Exercise Price: _______________________________ |
||||
| _______________________________, Optionee | ||||
Address: |
||||
10
Exhibit 10.4
GTx, Inc.
2002 STOCK OPTION PLAN
1. PURPOSE.
(a) The purpose of the GTx, Inc. 2002 Stock Option Plan (the “Plan”) is to provide a
means by which selected key employees and directors (if declared eligible under paragraph 4)
of and consultants to GTx, Inc. (the “Company”), and its Affiliates, as defined in
subparagraph 1(b), may be given an opportunity to benefit from increases in value of the
stock of the Company. It is intended that this purpose will be effected through the
granting of (i) incentive stock options and/or, (ii) nonstatutory stock options.
(b) The word “Affiliate” as used in the Plan means any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424 (e) and (f),
respectively, of the Internal Revenue Code of 1986, as amended from time to time (the
“Code”).
(c) The Company, by means of the Plan, seeks to retain the services of persons now
employed by or serving as consultants or directors to the Company, to secure and retain the
services of persons capable of filling such positions, and to provide incentives for such
persons to exert maximum efforts for the success of the Company.
(d) The Company intends that rights granted under the Plan (“Option Awards”) shall, in
the discretion of the Committee or Board of Directors of the Company (the “Board”), as
applicable, be either (i) incentive stock options as that term is used in Section 422 of the
Code (“Incentive Stock Options”), or (ii) stock options which do not qualify as Incentive
Stock Options (“Supplemental Stock Options”).
2. ADMINISTRATION.
(a) The Plan shall be administered by a Committee appointed by the Board of Directors
of the Company composed of not fewer than three (3) Directors (the “Committee”).
(b) The Committee shall have the power, subject to, and within the limitations of, the
express provisions of the Plan and to such resolutions, not inconsistent with the provisions
of the Plan, as may be adopted from time to time by the Board of Directors:
(i) To determine from time to time which of the persons eligible under the Plan
shall be granted Option Awards; when and how Option Awards shall be granted; whether
a Option Award will be an Incentive Stock Option, a Supplemental Stock Option, or a
combination of the foregoing; and the provisions of each Option Award granted (which
need not be identical).
(ii) To construe and interpret the Plan and Option Awards granted under it, and
to establish, amend and revoke rules and regulations for its administration. The
Committee, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Award, in a
manner and to the extent it shall deem necessary or expedient to make the Plan fully
effective, consistent with its terms.
(iii) To amend the Plan as provided in paragraph 10.
(iv) Generally, to exercise such powers and to perform such acts as the
Committee deems necessary or expedient to promote the best interests of the Company.
(c) The Board of Directors may abolish the Committee at any time and revest in the
Board of Directors the administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 9 relating to adjustments upon changes in
stock, the stock that may be issued pursuant to Option Awards granted under the Plan shall
not exceed in the aggregate One Hundred Thousand (100,000) shares of the Company’s common
stock issued and outstanding as of the date of shareholder approval of the Plan. If any
option or right granted under the Plan shall for any reason expire or otherwise terminate
without having been exercised in full, the stock not issued under such option or right shall
again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired shares, bought
on the market or otherwise.
4. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to employees (including officers) of
the Company or its Affiliates. A director of the Company shall not be eligible to receive
Incentive Stock Options unless such director is also an employee (including an officer) of
the Company or any Affiliate. Option Awards other than Incentive Stock Options may be
granted only to directors, officers or employees of or consultants to the Company or its
Affiliates.
(b) No person shall be eligible for the grant of an Incentive Stock Option under the
Plan if, at the time of grant, such person owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates unless the
exercise price of such option is at least one hundred ten percent (110%) of the fair market
value of such stock at the date of grant and the term of the option does not exceed five (5)
years from the date of grant.
5. TERMS OF STOCK OPTIONS.
Each stock option shall be in such form and shall contain such terms and conditions as the
Board or the Committee shall deem appropriate. All options shall be separately designated
2
Incentive Stock Options or Supplemental Stock Options at the time of grant, and in such form
as issued pursuant to this paragraph, and a separate certificate or certificates shall be issued
for shares purchased on exercise of each type of option. An option designated as a Supplemental
Stock Option shall not be treated as an Incentive Stock Option. The provisions of separate options
need not be identical, but each option shall include (through incorporation of provisions hereof by
reference in the option or otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten (10) years from the date it
was granted or, in the case of any option contemplated by paragraph 4(b), five (5) years
from the date of grant.
(b) The exercise price of each Incentive Stock Option shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the option on the
date the option is granted or, in the case of any option contemplated by paragraph 4(b), one
hundred ten percent (110%) of the fair market value of the stock subject to the option on
the date of grant of the option.
(c) The purchase price of stock acquired pursuant to an option shall be paid, to the
extent permitted by applicable statutes and regulations, either (i) in cash at the time the
option is exercised, or (ii) at the discretion of the Committee either at the time of the
grant or exercise of the option, (A) by delivery to the Company of other common stock of the
Company, (B) according to a deferred payment or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the option is granted or to whom the option is transferred
pursuant to subparagraph 5(d), or (C) in any other form of legal consideration that may be
acceptable to the Committee.
(d)
(i) Unless otherwise expressly stated in the option, an option shall not be
transferable except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the option is granted only by
such person, nor shall an option holder have the right or power to anticipate,
accelerate, convey, assign or otherwise alienate, hypothecate, pledge or otherwise
encumber any option award or the shares subject to an option award.
(ii) Except with respect to Incentive Stock Options, the Committee may, in its
discretion, establish forms and procedures for the transfer of all or any portion of
such Option Award by the optionee to (i) Immediate Family Members (as defined
hereinafter), (ii) a trust or trusts for the exclusive benefit of the optionee and
such Immediate Family Members, or (iii) a partnership or limited liability company
in which the optionee and such Immediate Family Members are the only partners or
members (collectively such optionee’s “Permitted Transferees”), provided that
subsequent transfers shall be prohibited except in accordance with the laws of
descent and distribution, or by will. Notification and approval of all such
transfers shall be in the form specified by the Committee. Following transfer, any
such Option Award shall continue to be subject to the
3
same terms and conditions as were applicable immediately prior to transfer,
provided that for purposes of this Plan, wherever appropriate, the term “optionee”
shall be deemed to refer to the Permitted Transferee. Notwithstanding the
foregoing, the Plan Committee and the Company shall have no obligation to inform any
Permitted Transferee of any expiration, termination, lapse or acceleration of any
such Option Award and may give notices required hereunder, if any, to the optionee.
The events of termination of employment hereof shall continue to be applied with
respect to the original optionee, following which the Option Award shall be
exercisable by the Permitted Transferee only to the extent, and for the periods
specified herein. As used herein “Immediate Family Member” shall mean, with respect
to the optionee, his or her spouse, child, stepchild, grandchildren or other
descendants, and shall include relationships arising from legal adoption.
(e) The total number of shares of stock subject to an option may, but need not, be
allotted in periodic installments (which may, but need not, be equal). From time to time
during each of such installment periods, the option may become exercisable (“vest”) with
respect to some or all of the shares allotted to that period, and may be exercised with
respect to some or all of the shares allotted to such period and/or any prior period as to
which the option was not fully exercised. During the remainder of the term of the option
(if its term extends beyond the end of the installment periods), the option may be exercised
from time to time with respect to any shares then remaining subject to the option. In the
absence of a specific provision to the contrary in a particular option grant, an option
award shall vest one-third (1/3) on the third anniversary of the date of grant of such
option award, an additional one-third on the fourth anniversary of the date of grant of such
option award, and the final one-third (1/3) shall vest on the fifth anniversary of the date
of grant of such option award. The provisions of this subparagraph 5(e) are subject to any
option provisions governing the minimum number of shares as to which an option may be
exercised.
(f) An option shall terminate three (3) months after termination of the optionee’s
employment or relationship as a director of or consultant to the Company or an Affiliate,
unless (i) such termination is due to such person’s permanent and total disability, within
the meaning of Section 422(c)(6) of the Code, in which case the option may, but need not,
provide that it may be exercised at any time within one (1) year following such termination
of employment or relationship as a director or consultant; or (ii) the optionee dies while
in the employ of or while serving as a director of or consultant to the Company or an
Affiliate, or within not more than three (3) months after termination of such relationship,
in which case the option may, but need not, provide that it may be exercised at any time
within eighteen (18) months following the death of the optionee by the person or persons to
whom the optionee’s rights under such option passes by will or by the laws of descent and
distribution; or (iii) such termination is due to such person’s voluntary retirement in
accordance with subparagraph (h) below, in which case the option may be exercised at any
time within the earlier of five (5) years from the date of termination of such employment or
relationship, as the case may be, or the term of the option; or (iv) the option by its terms
specifies either (a) that it shall terminate sooner
4
than three (3) months after termination of the optionee’s employment or relationship as
a director or consultant, or (b) that it may be exercised more than three (3) months after
termination of the optionee’s employment or relationship with the Company or an Affiliate.
This subparagraph 5(f) shall not be construed to extend the term of any option or to permit
anyone to exercise the option after expiration of its term, nor shall it be construed to
increase the number of shares as to which any option is exercisable from the amount
exercisable on the date of termination of the optionee’s employment or relationship as a
consultant or director.
(g) Prior to such time as the Company’s shares of common stock are first sold to the
public in an offering registered pursuant to Section 5 of the Securities Act of 1933, as
amended (“Initial Public Offering”), any shares of stock acquired through the exercise of an
option shall be subject to a thirty (30) day right of first refusal by the Company at the
same price and terms as offered by any third party pursuant to a bona fide offer, and may
not be sold prior to an offer to sell to the Company on such terms. Further, shares acquired
through exercise of an option award shall be subject to the terms and conditions of the
Amended and Restated Voting and Shareholder Agreement dated October 5, 2001, between the
Company and its stockholders, as amended from time to time (the “Stockholders Agreement”).
(h) In the event of a participant’s termination of employment or service as a director,
as applicable, by reason of voluntary retirement (at or after age sixty-five (65) or after
age fifty-five with no fewer than five (5) years of service), death, permanent and total
disability, involuntary termination (other than a termination for cause but including any
involuntary termination as the result of a Change in Control, as addressed below), with
respect to such participant’s Option Award(s), the Committee may in its sole, absolute and
final discretion elect to vest any or all shares not otherwise vested under the terms of the
Plan.
For purposes of this section, a permanent and total disability shall mean (A) the inability of
the optionee to perform substantially all of his or her duties and responsibilities to the Company
by reason of a physical or mental disability or infirmity (excluding, however, infrequent and
temporary absences due to ordinary illness) (i) for a continuous period of more than ninety (90)
days or (ii) at such time as the optionee submits satisfactory medical evidence that he or she has
a permanent physical or mental disability or infirmity which will likely prevent him from returning
to the performance of his work duties for more than ninety (90) days, and (B) either the optionee
or the Company shall have given the other at least thirty (30) days prior written notice of intent
to terminate employment. The date of such permanent and total disability shall be on the last day
of such ninety (90) day period or the day on which the optionee submits such satisfactory medical
evidence, as the case might be.
For purposes of this section, a termination for cause shall mean the termination of an
individual’s status as an employee or director of the Company, as applicable, as the result of (i)
fraud or dishonesty in connection with the business of the Company; (ii) gross negligence in the
performance of duties for the Company; (iii) willful failure in carrying out duties as an employee,
director or consultant; or (iv) arrest and conviction of a felony involving moral
5
turpitude, whether or not in connection with the business of the Company; provided that (iii)
above shall not apply if the Option Award holder has been assigned by the Company to duties which
are not comparable to such holder’s function and compensation at the Company, or which are
non-executive or demeaning assignments, or if the Company has given such participant demeaning and
unreasonable pay cuts.
(i) In the event of a Change in Control of the Company, all shares subject to all
Option Awards shall become one hundred percent (100%) vested and shall be converted to cash,
options or stock of equivalent value in the surviving organization under terms and condition
which substantially preserve the economic status of the Participants, as determined by the
Committee. For purposes of this paragraph, a Change in Control shall mean:
(a) The sale or other disposition of all or substantially all of the assets of
the Company in a single transaction or in a series of transactions (including,
without limitation, any liquidation or dissolution of the Company); (b) the sale or
other disposition of more than fifty percent (50%) of the issued and outstanding
voting stock of the Company, in a single transaction or in a series of transactions;
or (c) a merger or consolidation of the Company with or into any other entity, if
immediately after giving effect to such transaction more than fifty percent (50%) of
the issued and outstanding voting stock of the surviving entity of such transaction
is held by persons who were not holders (taking into account their individual and
affiliated holdings) as of the date of the grant of this Option of at least 20% of
the voting stock of the Company. For such purposes, “voting stock” shall mean the
capital stock of the Company of any class or classes, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election of
members of the Board of Directors (or Persons performing similar functions) of the
Company. Notwithstanding the foregoing, a “Change in Control” shall not include:
(i) any transfer or issuance of stock of the Company to one or more of the Company’s
lenders (or to any agents or representatives thereof) in exchange for debt of the
Company owed to any such lenders; (ii) any transfer of stock of the Company to or by
any person or entity, including but not limited to one or more of the Company’s
lenders (or to any agents or representatives thereof), pursuant to the terms of any
pledge of said stock as collateral for any loans or financial accommodations to the
Company and/or its subsidiaries; (iii) any transfer or issuance to any person or
entity, including but not limited to one or more of the Company’s lenders (or to any
agents or representatives thereof), in connection with the workout or restructuring
of the Company’s debts to any one of the Company’s lenders, including but not
limited to the issuance of new stock in exchange for any equity contribution to the
Company in connection with the workout or restructuring of such debt; or (iv) any
transfer of stock by a stockholder of the Company which is a partnership or
corporation to the partners or stockholders in such stockholder.
(j) In the event of an Initial Public Offering of the Company, Option Awards shall be
convertible to options in shares of the newly public company, under terms and
6
conditions which substantially preserve the rights and options of the participant. Any
resulting registration of options or shares shall be effected at Company expense.
(k) If provided in the Option Award, each Option Award shall carry the right to receive
any dividend or dividend equivalent on vested shares, under such terms and conditions as may
be specified in the Option Award.
(l) Notwithstanding any other provisions of the Plan, any vested but unexercised Option
Award shares shall be forfeited upon the Option Award holder’s “Competition” with the
Company. For this purpose, Competition shall be determined by the Committee, and shall
exist if the Option Award holder while employed by or consulting for the Company and for a
period of two (2) years thereafter directly or indirectly (i) engages or has a financial
interest in, (ii) becomes an officer, employee, director, partner, advisor or consultant of
or to, (iii) has an equity interest in, or (iv) in any way materially assists any person,
corporation, entity or business whose existing or planned products or activities compete in
whole or in part with the existing or planned products or activities of the Company. The
sole fact of ownership by an Option Award holder of less than two percent (2%) of the stock
of a publicly traded company which may have product lines which compete with product lines
of this Company shall not be treated as Competition. Any determination by the Committee
under this section shall be final and conclusive, unless overruled by the Board.
(m) Notwithstanding any other provision of the Plan or any Option Award to the
contrary, any and all sales of shares to the Company or any Affiliate are contingent upon
and subject to the terms and conditions of any bank loan covenants by the Company or any
Affiliate.
6. COVENANTS OF THE COMPANY.
(a) During the terms of any Option Awards granted under the Plan, the Company shall
keep available at all times the number of shares of stock required to satisfy such Option
Awards.
(b) The Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority as may be required to issue and sell shares of
stock upon grant or exercise of Option Awards under the Plan; provided, however, that this
undertaking shall not require the Company to register under the Securities Act of 1933, as
amended (the “Securities Act”), either the Plan, any Option Award granted under the Plan or
any stock issued or issuable pursuant to any such Option Awards. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for failure to issue
and sell stock upon exercise of such Option Awards unless and until such authority is
obtained.
7
7. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Option Awards granted under the Plan shall
constitute general funds of the Company.
8. MISCELLANEOUS.
(a) The Committee shall have the power to accelerate the time during which a Option
Award may be exercised or the time during which an option or stock acquired pursuant to a
Option Award will vest, notwithstanding the provisions in the Option Award stating the time
during which it may be exercised or the time during which stock acquired pursuant thereto
will vest.
(b) Neither a recipient of a Option Award nor any person to whom a Option Award is
transferred under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such Option Award unless and
until such person has satisfied all requirements for exercise of the Option Award pursuant
to its terms and is thereby entitled to receive shares of stock.
(c) Throughout the term of any Option Award granted pursuant to the Plan, the Company
shall make available to the holder of such Option Award, not later than one hundred twenty
(120) days after the close of each of the Company’s fiscal years during the option term,
upon request, such financial and other information regarding the Company as comprises the
annual report to the shareholders of the Company provided for in the bylaws of the Company.
(d) Nothing in the Plan or any instrument executed or Option Award granted pursuant
thereto shall confer upon any recipient any right to continue in the employ of the Company
or any Affiliate or to limit the Company’s right to terminate the employment or consulting
relationship or directorship of any eligible employee or recipient with or without cause.
In the event that an Option Award recipient is permitted or otherwise entitled to take a
leave of absence, the Company shall have the unilateral right to (i) determine whether such
leave of absence will be treated as a termination of employment for purposes of his or her
Option Award, or (ii) suspend or otherwise delay the time or times at which the shares
subject to the Option Award would otherwise vest.
(e) To the extent provided by the terms of any Option Award, the recipient may satisfy
any federal, state or local tax withholding obligation relating to the exercise or receipt
of such Option Award by any of the following means or by a combination of such means: (1)
tendering a cash payment; (2) authorizing the Company to withhold from the shares of the
common stock otherwise issuable to the participant as a result of the exercise of receipt of
the Option Award cash or a number of shares having a fair market value less than or equal to
the amount of the withholding tax obligation; or (3) delivering to the Company owned and
unencumbered shares of common stock of the Company having a fair market value less than or
equal to the amount of the withholding tax obligation.
8
(f) In connection with each Option Award made pursuant to the Plan, the Company may
require as a condition precedent to its obligation to issue or transfer shares to an
eligible participant, or to evidence the removal of any restrictions on transfers or lapse
of any repurchase right, that such participant make arrangements satisfactory to the Company
to insure that the amount of any federal or other withholding tax required to be withheld
with respect to such sale or transfer, or such removal or lapse, is made available to the
Company for timely payment of such tax.
(g) The Company may, as a condition of transferring any stock pursuant to the Plan,
require any person who is to acquire such stock (1) to give written assurances satisfactory
to the Company as to the optionee’s knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experienced in financial and business matters, and that he or she
is capable of evaluating, alone or together with the purchaser representative, the merits
and risks of acquiring the stock; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock for such person’s own account and
not with any present intention of selling or otherwise distributing the stock. These
requirements, and any assurances given pursuant to such requirements, shall be inoperative
if (i) the issuance of the shares has been registered under a then currently effective
registration statement under the Securities Act, or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not be met in
the circumstances under the then applicable securities laws.
9. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to any Option
Award granted under the Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock split,
liquidating dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan and outstanding Option Awards will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es)
and number of shares and price per share of stock subject to outstanding Option Awards.
(b) In the event of: (1) a merger or consolidation in which the Company is not the
surviving corporation, or (2) a reverse merger in which the Company is the surviving
corporation but the shares of the Company’s common stock outstanding immediately preceding
the merger are converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation shall assume any Option Awards outstanding under the Plan or shall
substitute similar rights for those outstanding under the Plan, or (ii) such Option Awards
shall continue in full force and effect. In the event any surviving corporation refuses to
assume or continue such Option Awards, or to substitute similar Option Awards for those
outstanding under the Plan, then, with respect to Option Awards held by persons then
performing services as employees or as
9
consultants or directors for the Company, as the case may be, the time during which
such Option Awards shall vest shall be accelerated and the Option Awards terminated if not
exercised prior to such event. In the event of a dissolution or liquidation of the Company,
any options outstanding under the Plan shall terminate if not exercised prior to such event.
10. AMENDMENT OF THE PLAN.
(a) The Committee at any time, and from time to time, may amend the Plan, subject to
and within limitations of any resolutions approved by the Board of Directors. However,
except as provided in paragraph 9 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the shareholders of the Company within
twelve (12) months before or after the adoption of the amendment, where the amendment will
increase the number of shares reserved for issuance under the Plan.
(b) With a view to making available the benefits provided by Section 422 of the Code,
if deemed desirable by the Board, the Board in its discretion shall determine at the time of
each amendment of the Plan whether or not to submit such amendment to the shareholders of
the Company for approval.
(c) Rights and obligations under any Option Award granted before amendment of the Plan
shall not be altered or impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Option Award was granted and (ii) such person
consents in writing.
11. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Committee may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years from the date the Plan is adopted by the
Board or approved by the shareholders of the Company, whichever is earlier. Upon
termination of the Plan, all Option Awards shall become fully vested. No Option Awards may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option Award granted while the Plan is in effect
shall not be altered or impaired by suspension or termination of the Plan, except with the
consent of the person to whom the Option Award was granted.
12. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as of August 28, 2002, upon approval of the Plan by the Board
of Directors of the Corporation.
10
IN WITNESS WHEREOF, the authorized officer of the Company has executed this Plan on this 28th
day of August, 2002.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Title: General Counsel and Secretary | ||||
11
First Amendment to the
GTx, Inc.
2002 Stock Option Plan
Whereas, GTx, Inc. (the “Company”) adopted the GTx, Inc. 2002 Stock Option Plan (the
“2002 Plan”) effective August 28, 2002;
Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend the Company’s 2002 Plan to clarify certain existing provisions in light of final
regulations issued under Section 409A of the Internal Revenue Code of 1986, as amended;
Whereas, the Compensation Committee of the Company has approved such amendments; and
Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 4350(i)(1)(A).
Now, Therefore, Be it Resolved, the 2002 Plan is hereby amended, effective as of the
date hereof, as follows:
| 1. | That Section 4(a) of the 2002 Plan is hereby deleted in its entirety and replaced with the following: |
(a) Incentive Stock Options may be granted only to employees (including
officers) of the Company or its Affiliates. A director of the Company shall
not be eligible to receive Incentive Stock Options unless such director is
also an employee (including an officer) of the Company or any Affiliate.
Option Awards other than Incentive Stock Options may be granted only to
directors, officers or employees of or consultants to the Company or its
Affiliates; provided that such Option Awards may not be granted to
directors, officers or employees who are providing services only to a
“parent” of the Company, as such term is defined in Section 424(f) of the
Code, unless such Option Awards comply with the distribution requirements of
Section 409A of the Code.
| 2. | That Section 5(b) of the 2002 Plan is hereby deleted in its entirety and replaced with the following: |
(b) The exercise price of each Option Award shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
option on the date the option is granted or, in the case of any option
contemplated by paragraph 4(b), one hundred ten percent (110%) of the fair
market value of the stock subject to the option on the date of grant of the
option. Notwithstanding the foregoing, an Option Award may be granted with
an exercise price lower than one hundred percent (100%)
of the fair market value of the stock subject to the option on the date the
option is granted if such Option Award is granted pursuant to an assumption
of or substitution for another option pursuant to a Change in Control (as
defined in section 5(i) of the Plan) and in a manner consistent with the
provisions of Sections 409A and 424(a) of the Code. Fair market value
means, as of any date, the value of the Company’s common stock determined as
follows:
i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq Global Market or any other
established market, the fair market value of a share of common
stock shall be the closing sales price for such stock as quoted
on such exchange or market (or the exchange or market with the
greatest volume of trading in the common stock) on the date of
determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable.
ii) Unless otherwise provided by the Committee, if there is
no closing sales price for the common stock on the date of
determination, then the fair market value shall be the closing
sales price on the last preceding date for which such quotation
exists.
iii) In the absence of such markets for the common stock,
the fair market value shall be determined by the Committee in
good faith and in a manner that complies with Section 409A of the
Code.
| 3. | That the following will be added to the 2002 Plan as Section 8(h): |
(h) To the extent permitted by applicable law, the Committee, in its
sole discretion, may determine that the delivery of common stock upon the
exercise of all or a portion of any Option Award may be deferred and may
establish programs and procedures for deferral elections to be made by
persons receiving options. Deferrals by persons will be made in accordance
with Section 409A of the Code.
| 4. | That the following will be added to the 2002 Plan as Section 8(i): |
(i) To the extent that the Committee determines that any Option Award
granted hereunder is subject to Section 409A of the Code, the agreement
evidencing such Option Award shall incorporate the terms and conditions
necessary to avoid the consequences specified in Section 409A(a)(1) of the
Code. To the extent applicable, this Plan and the agreements evidencing
Option Awards shall be interpreted in accordance with Section 409A of the
Code, including without limitation any applicable guidance that may be
issued or amended in the future.
2.
| 5. | That Section 10(c) of the 2002 Plan is hereby deleted in its entirety and replaced with the following: |
(b) Rights and obligations under any Option Award granted before
amendment of the Plan shall not be altered or impaired by any amendment of
the Plan unless (i) the Company requests the consent of the person to whom
the Option Award was granted and (ii) such person consents in writing.
Notwithstanding the foregoing, subject to the limitations of applicable law,
if any, the Committee may amend the terms of any one or more Option Awards
without the consent of the person to whom the Option Award was granted if
necessary to bring the Option Award into compliance with Section 409A of the
Code.
In Witness Whereof, the Company has caused this First Amendment to the 2002 Plan to
be executed on November 4, 2008.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | Vice President, General Counsel | |||
3.
SECOND AMENDMENT TO THE
GTX, INC.
2002 STOCK OPTION PLAN
GTX, INC.
2002 STOCK OPTION PLAN
WHEREAS, GTx, Inc. (the “company”) adopted the GTx, Inc. 2002 Stock Option Plan (the “2002
Plan”) effective August 28, 2002;
WHEREAS, the Compensation Committee believes it to be in the best interest of the Company to
interpret the Plan to provide a consistent definition of the terms “permanent and total disability”
and “permanent disability” with respect to Supplemental Stock Options and to provide a consistent
mechanism for administering the determination of whether a Participant has suffered a “permanent
and total disability” and “permanent disability” as those terms are used in the 2002 Plan and the
award agreements pursuant to the 2002 Plan;
WHEREAS, the Compensation Committee believes that this Second Amendment will also benefit the
optionees under the 2002 Plan by clarifying the applicable requirements for determining “permanent
and total disability” and “permanent disability” and that this Second
Amendment will not alter or impair any rights or obligations the optionees have under the
Option Award;
WHEREAS, the Compensation Committee has approved this Second Amendment; and
WHEREAS, the contemplated amendments are not “material amendments” as contemplated by Rule
5635 of the Nasdaq Manual.
NOW, THEREFORE, BE IT RESOLVED, the 2002 Plan and the Option Awards issued pursuant thereto
are hereby interpreted and amended as follows:
1. The definition of “permanent and total disability” and “permanent disability” with respect
to the 2002 Plan and the Option Awards issued pursuant thereto shall be amended and interpreted to
require the occurrence of all of the following conditions:
(i) the optionee’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) prevents
the optionee from properly performing the essential functions of his
or her job which had been typically assigned to him or her by the
Company, with or without reasonable accommodation, (ii) such
incapacities shall exist or be expected to exist within a reasonable
degree of medical certainty for more than ninety (90) days in the
aggregate during any consecutive twelve (12) month period, (iii) the
delivery of a report to the Company determining the existence of the
incapacities with respect to the optionee and describing in detail
the incapacities which satisfy the requirements of the foregoing
subsections (i) and (ii), which report shall be signed by a medical
doctor duly licensed to practice medicine in either the state of
Tennessee or the state in which the optionee resides and which
report must be received by the Company while the optionee is still
employed by the Company,
provided, however, if the Committee
determines the report to be inadequate or inaccurate, the Committee
may select two additional independent medical doctors and request
each to provide a report meeting the above specifications, and the
determination of a majority of the three medical doctors shall be
conclusive and binding on the optionee and the Company, and the
optionee shall cooperate with the Company’s request and submit to
such medical examinations, and (iv) either the optionee or the
Company shall have given the other thirty (30) days written notice
of intent to terminate employment or service because of permanent
and total disability.
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be executed on November
3, 2009.
| GTx, Inc. |
||||
| By: | /s/ Henry P. Doggrell | |||
| Name: | Henry P. Doggrell | |||
| Title: | Vice President, General Counsel and Secretary | |||
NONQUALIFIED STOCK OPTION SUBSCRIPTION AGREEMENT
This Nonqualified Stock Option Subscription Agreement (this “Agreement”), dated as of the
day of , , is made by and between GTx, Inc. (the “Company”), a Delaware
corporation, and the Employee of the Company whose name appears on the signature page hereof
(hereinafter referred to as the “Optionee”).
WHEREAS, pursuant to the 2002 Stock Option Plan, as amended (the “Plan”), the terms of which
are hereby incorporated by reference, the Company intends to provide incentives to certain key
Employees of the Company by providing them with opportunities for ownership of shares of Common
Stock; and
WHEREAS, a duly constituted committee of the Board of Directors of the Company (hereinafter
referred to as the “Committee”) appointed to administer the Plan has determined that it would be to
the advantage and best interest of the Company and its stockholders to grant the Option provided
for herein to the Optionee under the Plan and has advised the Company thereof and instructed the
undersigned officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified
below unless the Plan indicates to the contrary.
1.1 — Cause. “Cause” used in connection with the termination of employment of the
Optionee shall mean a termination of employment of the Optionee by the Company or any of its
Subsidiaries due to (i) fraud or dishonesty of the Optionee in connection with the business of the
Company; (ii) gross negligence of the Optionee in the performance of duties for the Company; (iii)
willful failure by the Optionee in carrying out duties as an employee; or (iv) arrest and
conviction of the Optionee for a felony involving moral turpitude, whether or not in connection
with the business of the Company; provided that (iii) above shall not apply if the Optionee has
been assigned by the Company to duties which are not comparable to such Optionee’s function and
compensation at the Company, or which are non-executive or demeaning assignments, or if the Company
has given such Optionee demeaning and unreasonable pay cuts.
1.2 — Change in Control. “Change in Control” shall have the meaning given in
Section 3.3.
1.3 — Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.
1.4 — Common Stock. “Common Stock” shall mean the common capital stock of the
Company.
1.5 — Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended, and all rules and regulations promulgated thereunder.
1.6 — Exercise Price. “Exercise Price” shall mean the price per Option Share as
set forth on the signature page hereof.
1.7 — Grant Date. “Grant Date” shall mean the date on which the Option provided
for in this Agreement was granted.
1.8 — IPO. “IPO” shall mean the date on which the Company’s shares of Common
Stock are first sold to the public in an offering registered pursuant to Section 5 of the
Securities Act of 1933, as amended.
1.9 — Option. “Option” shall mean any stock option to purchase Common Stock of
the Company granted under this Agreement.
1.10 — Option Shares. “Option Shares” shall mean the number of shares of Common
Stock for which this Option is granted as set forth upon the signature page hereof.
1.11 — Permanent Disability. “Permanent Disability” of the Optionee shall mean
the occurrence of the following conditions: (i) the optionee’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) prevents the optionee from properly performing
the essential functions of his or her job which had been typically assigned to him or her by the Company,
with or without reasonable accommodation, (ii) such incapacities shall exist or be expected to exist within
a reasonable degree of medical certainty for more than ninety (90) days in the aggregate during any consecutive
twelve (12) month period, (iii) the delivery of a report to the Company determining the existence of the
incapacities with respect to the optionee and describing in detail the incapacities which satisfy the requirements
of the foregoing subsections (i) and (ii), which report shall be signed by a medical doctor duly licensed to
practice medicine in either the state of Tennessee or the state in which the optionee resides and which report must
be received by the Company while the optionee is still employed by the Company, provided, however, if the Committee
determines the report to be inadequate or inaccurate, the Committee may select two additional independent medical
doctors and request each to provide a report meeting the above specifications, and the determination of a majority
of the three medical doctors shall be conclusive and binding on the optionee and the Company, and the optionee shall
cooperate with the Company’s request and submit to such medical examinations, and (iv) either the optionee or the
Company shall have given the other thirty (30) days written notice of intent to terminate employment or service
because of permanent and total disability.
1.12 — Permitted Transferee. “Permitted Transferee” shall have the meaning given
in Section 5.2(b).
1.13 — Person. “Person” means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust or unincorporated
organization.
1.14 — Plan. “Plan” shall mean the 2002 Stock Option Plan of GTx, Inc.
1.15 — Retirement. “Retirement” shall mean any voluntary termination of
employment by the Optionee after having reached the age of sixty-five (65) years (or after having
reached the age of fifty-five (55) years if the Optionee has no fewer than five (5) years of
service with the Company).
ARTICLE II
GRANT OF OPTION
2.1 — Grant of Option. For good and valuable consideration, on and as of the date
hereof, the Company irrevocably grants to the Optionee the Option to purchase any part or all of
2
an aggregate of the number of Option Shares set forth on the signature page hereof upon the
terms and conditions set forth in this Agreement.
2.2 — Consideration to the Company. In consideration of the granting of this
Option by the Company, the Optionee agrees to render faithful and efficient services to the Company
with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ or
service of the Company or shall interfere with or restrict in any way the rights of the Company,
which are hereby expressly reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without Cause.
2.3 — Adjustments in Option. Subject to Section 9 of the Plan, in the event that
the outstanding shares of the Common Stock subject to the Option are changed into or exchanged for
a different number or kind of shares of capital stock or other securities of the Company, or of
another corporation, by reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or otherwise, the Committee
shall make an appropriate adjustment in the number and kind of shares of Option Shares. Such
adjustment in the Option shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the aggregate price resulting from
rounding-off of shares, quantities or prices) and with any necessary corresponding adjustment in
the Exercise Price. No fractional shares shall be issued, and any fractional shares resulting from
computations pursuant to Section 9 of the Plan shall be eliminated from the respective Options.
Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons.
2.4 — Tax Treatment. The Option hereby granted is intended to be a Supplemental
Stock Option as defined in the Plan (hereinafter referred to as a “Nonqualified Stock Option”) and
not an Incentive Stock Option as described in Section 422 of the Code.
ARTICLE III
PERIOD OF EXERCISABILITY
3.1 — General Rule. The Option will become exercisable as to the following
percentages of the Option Shares on the following anniversaries of the Grant Date provided that the
Optionee is then employed by the Company on such anniversary:
Third anniversary |
33 | % | ||
Fourth anniversary |
67 | % | ||
Fifth anniversary |
100 | % |
3.2 — Termination of Employment and Nonvested Options. In the event the
Optionee’s employment or service with the Company is terminated (other than a termination for Cause
but including any involuntary termination as the result of a Change in Control, as described
below), by reason of Retirement, death, or Permanent Disability, the Committee may in its sole,
absolute and final discretion elect to vest any or all shares subject to the Option, that are not
otherwise vested pursuant to the terms of the Plan. In the event the Optionee’s
3
employment or service is terminated under any other circumstances, any portion of the Option
that is has not vested shall be forfeited immediately.
3.3 — Change in Control. Notwithstanding Section 3.1, unless the Optionee is
terminated for Cause, the Option will become exercisable in full in the event of any voluntary or
involuntary termination of the Optionee’s employment or service occurring simultaneously with or at
any time after any of the following events (a “Change in Control”):
| (a) | the sale or other disposition of all or substantially all of the assets of the Company in a single transaction or in a series of transactions (including, without limitation, any liquidation or dissolution of the Company); | ||
| (b) | the sale or other disposition of more than fifty percent (50%) of the issued and outstanding voting stock of the Company, in a single transaction or in a series of transactions. For such purposes, “voting stock” shall mean the capital stock of the Company of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of members of the Board of Directors (or Persons performing similar functions) of the Company; or | ||
| (c) | a merger or consolidation of the Company with or into any other entity, if immediately after giving effect to such transaction more than fifty percent (50%) of the issued and outstanding voting stock of the surviving entity of such transaction is held by persons who were not holders (taking into account their individual and affiliated holdings) as of the date of the grant of this Option of at least 20% of the voting stock of the Company. |
A Change in Control shall not include:
(1) any transfer or issuance of stock of the Company to one or more of the
Company’s lenders (or to any agents or representatives thereof) in exchange for debt
of the Company owed to any such lenders;
(2) any transfer of stock of the Company to or by any person or entity,
including but not limited to one or more of the Company’s lenders (or to any agents
or representatives thereof), pursuant to the terms of any pledge of said stock as
collateral for any loans or financial accommodations to the Company and/or its
subsidiaries;
(3) any transfer or issuance to any person or entity, including but not limited
to one or more of the Company’s lenders (or to any agents or representatives
thereof), in connection with the workout or restructuring of the Company’s debts to
any one of the Company’s lenders, including but not limited to the issuance of new
stock in exchange for any equity contribution to the Company in connection with the
workout or restructuring of such debt; or
(4) any transfer of stock by a stockholder of the Company, which is a
partnership or corporation to the partners, or stockholders in such stockholder.
4
3.4 — Optional Vesting/Accelerated Exercise in connection with a Change of
Control. In the event a Change in Control appears likely to occur, the Committee may, in its
sole and absolute discretion, send written notice to the Optionee at least ten (10) days prior to
the contemplated date of any Change in Control specifying (a) that the Option will become
exercisable in full on the date of the Change in Control, (b) that any portion or all of the Option
which thereby becomes exercisable and any portion or all of the Option which was already
exercisable will immediately thereafter expire on the same date and (c) that to prevent the lapse
of the Option, the Optionee must exercise the Option no later than such date. Except as may
otherwise be expressly provided in such written notice, any acceleration of the exercisability of
the Option and any attempted exercise of the Option by the Optionee shall be null and void if the
Change in Control does not occur within thirty (30) days of the date contemplated in the notice.
3.5 — Expiration of Option. Any portion of the Option, which has become
exercisable will nevertheless expire and will no longer be exercisable to any extent by anyone on
the earliest to occur of the following events:
| (a) | the tenth anniversary of the Grant Date; | ||
| (b) | the earlier of (A) three (3) months after termination of employment (specifically including a termination of employment after a Change in Control), unless such termination is for Cause or results from Retirement, death, Permanent Disability or (B) the term of the Option as set forth in the Plan; | ||
| (c) | twelve (12) months after termination of employment on account of Permanent Disability, provided that if Optionee shall die within such time without having fully exercised all vested Options, Optionee’s estate shall have an additional twelve (12) months from Optionee’s date of death to exercise such Options; | ||
| (d) | eighteen (18) months after termination of employment on account of Optionee’s death or within eighteen (18) months after Optionee’s termination of employment if Optionee qualifies under clause (b) but dies within three (3) months after his or termination of employment without having exercised all of his or her vested Options; | ||
| (e) | the earlier of five (5) years after the date of the Retirement of Optionee, or the term of the Option as set forth in the Plan; | ||
| (f) | at the close of business on the date of the termination of the Optionee’s employment by the Company for Cause; and | ||
| (e) | if the Committee so determines and gives written notice as provided in Section 3.4, upon the Effective Date of any Change in Control. |
3.6 — Non-competition. Notwithstanding any other provisions of this Agreement,
any Option outstanding, including any vested but unexercised Option, shall be forfeited upon the
Optionee’s “Competition” with the Company. For this purpose, Competition shall be determined by
the Committee and shall exist if the Optionee, directly or indirectly (i) engages or has a
financial interest in, (ii) becomes an officer, employee, director, partner, advisor or consultant
of
5
or to, (iii) has an equity interest in, or (iv) in any way materially assists any person,
corporation, entity or business whose existing or planned products or activities compete in whole
or in part with the existing or planned products or activities of the Company. The sole fact of
ownership by an Optionee of less than two percent (2%) of the stock of a publicly traded company
which may have product lines which compete with product lines of the Company shall not be treated
as Competition. Any determination by the Committee under this section shall be final and
conclusive, unless overruled by the Board.
ARTICLE IV
EXERCISE OF OPTION
4.1 — Person Eligible to Exercise. During the lifetime of the Optionee, only the
Optionee or the Optionee’s guardian or conservator may exercise the Option or any portion thereof,
and after the death of the Optionee, any portion of the Option may, prior to the time when the
Option becomes unexercisable under Section 3.5, be exercised by the Optionee’s personal
representative or by any person empowered to do so under the Optionee’s will or under the then
applicable laws of descent and distribution; provided, however, at any time after the transfer of
the Option or any portion thereof pursuant to Section 5.2, the transferred portion of the Option
may be exercised only by the transferee.
4.2 — Partial Exercise. Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the
time when the Option or portion thereof becomes unexercisable under Section 3.5; provided, however,
that any partial exercise shall be for whole shares only.
4.3 — Manner of Exercise. The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or his or her office all of the
following prior to the time when the Option or such portion becomes unexercisable under Section
3.5:
| (a) | Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee; and | ||
| (b) | Full payment of the Exercise Price (as provided in Section 4.4), for the shares with respect to which such Option or portion thereof is exercised; and | ||
| (c) | Such representations and documents as the Committee deems reasonably necessary or advisable to effect compliance with all applicable laws, including provisions of the Securities Act of 1933, as amended, and any other federal, state or foreign securities laws or regulations following an IPO; and | ||
| (d) | Full payment to the Company (as provided in Section 4.4) of all amounts, if any, which, under federal, state or local law, it is required to withhold upon exercise of the Option; and |
6
| (e) | If the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option. |
Notwithstanding the foregoing, the Optionee may give notice exercising the Option subject to the
condition or conditions that any then contemplated Change in Control will actually occur and that
the Option will become exercisable because of the Change in Control with respect to the Option
Shares for which notice of exercise is given. In such an event, full payment of the Exercise Price
with respect to all Option Shares need not be made until the date of the Change in Control.
4.4 — Payment. The Exercise Price and any tax withholding shall be payable in
cash, by check, or by any combination thereof. Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price or any tax withholding
may be paid by delivery of shares of Common Stock acceptable to the Committee and having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash
that would otherwise be required; and (ii) the Exercise Price or any tax withholding may be paid by
authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) to
be acquired upon the exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such
exercise.
4.5 — Conditions to Issuance of Stock Certificates. The shares of Common Stock
deliverable upon the exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares that have then been reacquired by the Company.
Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of
the Option or portion thereof prior to fulfillment of all of the following conditions:
| (a) | The admission of such shares to listing on all stock exchanges, if any, on which such class of Common Stock is then listed; | ||
| (b) | The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the SEC or of any other governmental regulatory body, which the Committee shall, in its absolute discretion deem necessary or advisable; | ||
| (c) | The obtaining of approval or other clearance from any state or federal governmental agency which the Committee shall determine to be necessary or advisable; and | ||
| (d) | The payment to the Company of all amounts, if any, which, under federal, state or local law, it is required to withhold upon exercise of the Option. |
4.6 — Rights as Stockholder. The holder of the Option shall not be, nor have any
of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable
upon the exercise of the Option or any portion thereof unless and until certificates representing
such shares shall have been issued by the Company in the name of such holder. No adjustment
7
shall be made for cash dividends for which the record date is prior to the date such stock
certificate is issued.
4.7 — Issuance of Certificate; Legend. The stock certificate or certificates
deliverable to the Optionee upon the exercise of the Option may, at the request of the Optionee at
the time of exercise, be issued in his or her name alone or in his or her name and the name of
another person as joint tenants with right of survivorship. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any other federal, state
or foreign securities laws or regulations including, without limitation, placing legends on share
certificates and issuing stock-transfer orders to transfer agents and registrars.
ARTICLE V
MISCELLANEOUS
5.1 — Administration. The Committee shall have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration, interpretation and application
of the Plan as are consistent therewith and to interpret or revoke any such rules. No member of
the Committee shall be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Option. The Board of Directors of the Company in its
absolute discretion may at any time and from time to time exercise any and all rights and duties of
the Committee under the Plan and this Agreement.
5.2 — Transferability of Option . (a) Except as provided in subsection (b),
neither the Option nor any interest or right therein or part thereof shall be subject to
disposition by transfer, alienation, anticipation, encumbrance or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided, however, that this Section
5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.
(b) The Committee may, in its discretion, establish forms and procedures for the transfer of
all or any portion of such Option by the Optionee to (i) Immediate Family Members (as defined
hereinafter), (ii) a trust or trusts for the exclusive benefit of the Optionee and such Immediate
Family Members, or (iii) a partnership or limited liability company in which the Optionee and such
Immediate Family Members are the only partners or members (collectively such Optionee’s “Permitted
Transferees”), provided that subsequent transfers shall be prohibited except in accordance with the
laws of descent and distribution, or by will. Notification and approval of all such transfers
shall be in the form specified by the Committee. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Articles IV and V hereof (other than this Section 5.2), the
term “Optionee” shall be deemed to refer to the Permitted Transferee. Notwithstanding the
foregoing, the Committee and the Company shall have no obligation to inform any Permitted
Transferee of any expiration, termination, lapse or acceleration of any such Option and may give
notices required hereunder, if any, to the Optionee. The events of termination of employment of
Article III hereof shall continue to be applied with
8
respect to the original Optionee, following which the Option shall be exercisable by the
Permitted Transferee only to the extent, and for the periods specified at Article III hereof. As
used in this Section 5.2(b) “Immediate Family Member” shall mean, with respect to the Optionee, his
or her spouse, child, stepchild, grandchildren or other descendants, and shall include
relationships arising from legal adoption.
5.3 — Shares of Common Stock to be Reserved. The Company shall at all times
during the term of the Option reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Agreement.
5.4 — Notices. Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any notice to be given to
the Optionee shall be addressed to him or her at the address given beneath his or her signature
hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to him or her. Any notice which is required to be given
to the Optionee shall, if the Optionee is then deceased, be given to the Optionee’s personal
representative if such representative has previously informed the Company of his or her status and
address by written notice under this Section 5.4. Any notice shall have been deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by the United States
Postal Service or when delivered by hand (whether by overnight courier or otherwise).
5.5 — Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
5.6 — No Right to Employment. Nothing in the Plan or this Agreement shall confer
upon the Optionee any right to continue in the employ of the Company or any Affiliate or to limit
the Company’s right to terminate the employment relationship of any eligible employee with or
without Cause. In the event that an Optionee is permitted or otherwise entitled to take a leave of
absence, the Company shall have the unilateral right to (i) determine whether such leave of absence
will be treated as a termination of employment for purposes of his or her Option, or (ii) suspend
or otherwise delay the time or times at which the shares subject to the Option would otherwise
vest.
5.7 — Amendment. This Agreement may be amended only by a writing executed by the
parties hereto, which specifically states that it is amending this Agreement.
5.8 — Governing Law. The laws of the State of Tennessee shall govern the
interpretation, validity and performance of the terms of this Agreement, regardless of the law that
might be applied under principles of conflicts of laws.
5.9 — Jurisdiction. Any suit, action or proceeding against the Optionee with
respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be
brought in any court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Nothing herein shall in any way be deemed to limit the ability of the
Company to serve any such writs, process or summonses in any other manner permitted by
9
applicable law or to obtain jurisdiction over the Optionee, in such other jurisdictions, and
in such manner, as may be permitted by applicable law. The Optionee hereby irrevocably waives any
objections which he or she may now or hereafter have to the laying of the venue of any suit, action
or proceeding arising out of or relating to this Agreement brought in any court of competent
jurisdiction in the State of Tennessee, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in any inconvenient
forum. No suit, action or proceeding against the Company with respect to this Agreement may be
brought in any court, domestic or foreign, or before any similar domestic or foreign authority
other than in a court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
irrevocably waives any right which he or she may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic or foreign authority. The Company
hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or
proceeding.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.
| GTx, INC. |
||||
| By: | ||||
| Title: |
||||
No. of Option Shares: |
||||
| Exercise Price: |
||||
|
___________________________, Optionee Address: |
||||
10
Exhibit 10.28
2010 COMPENSATION INFORMATION FOR REGISTRANT’S EXECUTIVE OFFICERS
The table below provides information regarding (i) the base salary of each executive officer
of GTx, Inc. (the “Company”), effective as of January 1, 2010, and (ii) the target cash bonus award
for each of the Company’s executive officers under the Company’s Executive Bonus Compensation Plan
for Fiscal 2010, expressed as a percentage of applicable base salary:
| 2010 | 2010 | |||||||||
| Annual | Target | |||||||||
| Executive Officer | Title | Salary ($) | Bonus (%) | |||||||
Mitchell S. Steiner
|
Chief Executive Officer and Vice-Chairman of the Board of Directors | 525,000 | 65 | |||||||
Marc S. Hanover
|
President and Chief Operating Officer | 456,750 | 55 | |||||||
Ronald A. Morton,
Jr.
|
Vice President, Chief Medical Officer | 452,025(1) | 30 | |||||||
James T. Dalton
|
Vice President, Preclinical Research and Development | 400,000 | 30 | |||||||
Henry P. Doggrell
|
Vice President, General Counsel and Secretary | 301,281 | 30 | |||||||
Mark E. Mosteller
|
Vice President, Chief Financial Officer and Treasurer | 298,083 | 30 | |||||||
Gregory A. Deener
|
Vice President, Sales and Marketing | 257,985 | 30 | |||||||
| (1) | Dr. Morton will also be eligible for tax gross-up payments related to certain travel expenses paid by the Company during 2010 on his behalf. |
Exhibit
10.55
SUBLEASE
This Sublease made and entered into as of this 1st day of October, 2009 (the “Effective Date”)
by and between UNIVERSITY OF TENNESSEE RESEARCH FOUNDATION, a Tennessee nonprofit corporation
(“SUBLESSOR”) and GTx Inc., a Delaware corporation (“SUBLESSEE”).
RECITALS
WHEREAS, the SUBLESSOR and The University of Tennessee (the “LESSOR”) have entered into a
Lease dated March 7, 2001 and last amended on July 20, 2009 (the “Lease”). A copy of the Lease, as
amended, is attached hereto as Exhibit A;
WHEREAS, the SUBLESSEE desires to sublease the majority of the premises leased to the
SUBLESSOR pursuant to the Lease.
NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration set
forth herein, the parties agree as follows:
1. DESCRIPTION: Subject to the terms of the Lease, the SUBLESSOR hereby subleases unto
the SUBLESSEE, and SUBLESSEE accepts from SUBLESSOR, the Premises (as defined below) situated in
the State of Tennessee, County of Shelby, and City of Memphis, located at 3 North Dunlap Street.
Premises is defined as the Van Vleet Building, including the “Old Van Vleet Building” but excluding
the 1st and 2nd floors in the “Old Van Vleet Building”, as shown in the floor
plans attached as Exhibit B.
2. RENT: The SUBLESSEE shall pay annual rent equal to 98% of LESSOR’S actual cost of
operation of the Van Vleet Building, including utilities of the Van Vleet Building, as shown on
Exhibit C hereto. “Actual cost of operation” shall mean all the costs and expenses paid or
incurred by or on behalf of LESSOR in owning, maintaining, operating and repairing the Premises and
the building in which the Premises are located, including but not limited to the costs of capital
improvements to the building, depreciation charges, custodial services, if any, utilities, elevator
maintenance, pest control services, steam boiler inspection, hot water boiler inspection, chiller
maintenance, trash disposal, lighting and other building maintenance and repair costs. At the
beginning of each month during the term, SUBLESSOR shall submit (or cause to be submitted) to
SUBLESSEE a bill for rent due, which shall be equal to 98% of the LESSOR’S actual costs of
operation incurred during the immediately preceding month, and shall include a statement detailing
such costs. After the last month of the term, SUBLESSOR shall submit (or cause to be submitted) to
SUBLESSEE a bill for final rent due, which shall be equal to 98% of the LESSOR’S actual costs of
operation incurred during that last month of the term, and shall include a statement detailing such
costs. SUBLESSEE shall remit payment to SUBLESSOR no later than 30 days after receipt of such
bills and required statements.
3. TERM: Subject to and upon the conditions set forth herein, the term of the Sublease
shall commence on October 1, 2009 and shall terminate December 31, 2012, unless SUBLESSEE renews
the Sublease in accordance with this Section 3. SUBLESSEE shall have
1
the option to extend this Sublease for an additional two-year period terminating on December
31, 2014. SUBLESSEE shall notify SUBLESSOR in writing ninety (90) days prior to the expiration of
the Sublease, if exercise of the option is desired. Such writing shall also describe to SUBLESSOR
the plans of SUBLESSEE to vacate the Premises and move its operations to another location. Upon
execution of this Sublease, the sublease between SUBLESSOR and SUBLESSEE dated April 1, 2005, as
amended, shall terminate and be of no further force and effect.
4. CREDIT FOR TENANT IMPROVEMENTS: SUBLESSEE will be granted credit against monthly
installments of rent for Tenant Improvements (hereinafter defined) made to the Premises by
SUBLESSEE, upon compliance with this Section 4. Tenant Improvements shall mean reconfigurations of
and other improvements to office and laboratory spaces within the Premises that are permanent in
nature and which will remain in the Premises upon termination of the Sublease and vacation of the
Premises by SUBLESSEE.
SUBLESSEE shall submit construction documents, plans and specifications, including expense
estimates, covering all phases of the proposed Tenant Improvements to SUBLESSOR for approval prior
to the commencement of any Tenant Improvements in the Premises.
All credit for Tenant Improvements will be dollar for dollar and will be distributed over a
12-month period starting with the submission of a statement of completed work to SUBLESSOR;
provided, however, that credit shall not be granted for those expenses which exceed the estimate
provided to SUBLESSOR unless consented to by SUBLESSOR. Total credit for Tenant Improvements is
not currently expected to exceed $500,000.00.
5. PARKING: SUBLESSEE shall arrange for parking directly with the LESSOR. LESSOR will
make all efforts to meet the needs of the SUBLESSEE, which currently entail at least 80 parking
spaces in the “R” Lot directly north of the Van Vleet Building and 40 spaces in the “G” parking
garage.
6. RELATIONSHIP TO LEASE. This Sublease and all of SUBLESSEE’S rights hereunder are
expressly subject to and subordinate to all of the terms and provisions of the Lease, as modified
or amended from time to time. SUBLESSEE hereby acknowledges that it has received a copy of the
Lease and has read all of the terms and conditions thereof. SUBLESSOR warrants and represents that
the Lease is in full force and effect. SUBLESSEE acknowledges that any termination of the Lease
will result in a termination of this Sublease. SUBLESSEE further acknowledges that in the event
that LESSOR exercises the remedy of re-entry or repossession of the Premises, without terminating
the Lease, this Sublease shall terminate, provided that LESSOR agrees that if the Sublease shall be
terminated by LESSOR at any time prior to SUBLESSEE receiving full credit for its Tenant
Improvements, SUBLESSOR and/or LESSOR shall immediately pay to SUBLESSEE the amount of such
difference. Also, LESSOR and SUBLESSEE agree to use their respective best efforts to give SUBLESSEE
at least a full years advance notice of LESSOR’S intent to exercise its rights to terminate the
Lease at any time prior to the expiration of the Term hereunder.
2
7. ENTRY BY SUBLESSOR. SUBLESSEE agrees that SUBLESSOR’s and LESSOR’s representatives
shall have the right to enter all parts of the Premises at all reasonable hours to inspect, test,
clean, make repairs, alterations and additions to the Premises that SUBLESSOR or LESSOR, as
applicable, may deem necessary or desirable or to provide any service which it or LESSOR, as
applicable, is obligated to furnish to the Premises.
8. COMPLIANCE WITH LEASE. Except as set forth herein, SUBLESSEE hereby assumes all
obligations of SUBLESSOR, as tenant or lessee under the Lease, with respect to the Premises and
agrees to be bound by the terms of the Lease as fully and to the same extent as if SUBLESSEE were
tenant or lessee of the Premises under the Lease. SUBLESSOR covenants that it will pay all Rent
(as such term is defined in the Lease) due under the Lease to the LESSOR, provided that LESSOR and
SUBLESSOR agree that payment of the rent hereunder to SUBLESSOR shall be deemed to be payment of
the Rent to LESSOR and the credits to be applied against the rent to be paid by SUBLESSEE on
account of Tenant Improvements shall be deemed to be credits of Rent under the Lease.
9. PERFORMANCE OF LESSOR’S OBLIGATIONS UNDER LEASE. SUBLESSEE hereby acknowledges
that it shall look solely to LESSOR for the performance of all the LESSOR’s obligations under the
Lease with respect to the Premises. SUBLESSOR agrees that it shall, when necessary and when
requested by SUBLESSEE, endeavor to cause LESSOR to perform its obligations under the Lease and
this Sublease, but shall not be liable to SUBLESSEE for LESSOR’s failure to do so. SUBLESSEE
agrees to notify SUBLESSOR in writing of the need for repairs to the Premises that are the LESSOR’s
responsibility pursuant to Paragraph 6 of the Lease.
10. QUIET ENJOYMENT AND COVENANT OF TITLE. Subject to Section 12 below, SUBLESSOR
covenants that it has full right, power and authority to execute this Sublease and to grant the
estate demised herein, and that SUBLESSEE, upon payment of the rent herein reserved and performance
of the terms, conditions and covenants herein contained with respect to SUBLESSEE, shall peacefully
and quietly have, hold, and enjoy the Premises during the full term, and any extension hereof, from
the adverse claims by all persons, parties, or entities claiming through or as a result of
SUBLESSOR.
11. INSURANCE: SUBLESSEE will maintain commercial general liability insurance against
claims for bodily injury and death, personal injury, and/or property damage that occur in or about
the Premises which names SUBLESSOR as an additional insured. Such insurance will provide at least
$1,000,000.00 coverage with respect to any one occurrence and will include fire legal liability
endorsement. SUBLESSEE will provide proof of such insurance to SUBLESSOR within 30 days after the
Effective Date. Such insurance shall be maintained with insurance companies licensed to do business
in Tennessee and reasonably acceptable to SUBLESSOR. SUBLESSEE will submit to SUBLESSOR on the
policy renewal date each year a Certificate of Insurance to confirm the required coverage. Such
Certificate shall include a statement that SUBLESSOR will be given a 30-day written notice of
cancellation or reduction in coverage. Such insurance shall also comply with Paragraph 11 of the
Lease. SUBLESSEE will maintain throughout the term of this Sublease statutory worker’s compensation
insurance including employer’s liability for all employees as required by applicable state and
federal regulations.
3
12. DELIVERY AND RETURN OF PREMISES.
(a) SUBLESSOR will deliver the Premises to SUBLESSEE in an “as is” condition. SUBLESSEE shall
have the right to make alterations to the Premises, subject to Section 4 of this Sublease, all at
SUBLESSEE’s sole cost and expense.
(b) At the termination of SUBLESSEE’s right to possession hereunder, SUBLESSEE shall surrender
possession of the Premises to SUBLESSOR and deliver all keys and security access instruments to the
Premises to SUBLESSOR, and shall subject to the provisions of Sections 12(c) and (d) hereunder
return to SUBLESSOR the Premises and all equipment and fixtures of SUBLESSOR broom clean, with all
rubbish removed, in at least as good condition and state of repair as when SUBLESSEE originally
took possession, ordinary wear and tear excepted and loss or damage by fire, or other insured
casualty excepted, failing which SUBLESSOR may restore the Premises, equipment and fixtures to such
condition and state of repair and SUBLESSEE shall, upon demand, pay to SUBLESSOR the cost thereof.
(c) All installations, additions, fixed partitions, hardware, light fixtures, supplementary
heating or air conditioning units, non-trade fixtures and improvements temporary or permanent,
except movable furniture and equipment belonging to SUBLESSEE, in or upon the Premises, whether
placed there by SUBLESSEE or SUBLESSOR, shall be SUBLESSOR’s property and shall remain upon the
Premises upon expiration of SUBLESSEE’s possession hereunder, all without compensation, allowance
or credit to SUBLESSEE, except as provided in Sections 4 and 6 hereof. However, if required by
SUBLESSOR in writing prior to SUBLESSEE making such improvements, SUBLESSEE, at SUBLESSEE’s sole
cost and expense, shall promptly remove the installations, additions, partitions, hardware, light
fixtures, supplementary heating or air conditioning units, non-trade fixtures and improvements
placed in or upon the Premises by SUBLESSEE, and repair any damage to the Premises caused by such
removal, failing which SUBLESSOR may remove the same and SUBLESSEE shall, upon demand, pay to
SUBLESSOR the cost of such removal and of any necessary restoration of the Premises. All fixtures,
installations and personal property belonging to SUBLESSEE not removed from the Premises upon
termination of this Sublease and not required by SUBLESSOR to have been removed as provided herein
shall be conclusively presumed to have been abandoned by SUBLESSEE and title thereto shall pass to
SUBLESSOR under this Sublease as by a bill of sale.
(d) SUBLESSEE shall remove SUBLESSEE’s furniture, machinery, equipment, safes, trade fixtures
and other items of movable personal property of every kind and description from the Premises and
restore any damage to the Premises caused thereby, such removal and restoration to be performed
prior to the expiration of the term of this Sublease, failing which SUBLESSOR may do so and
SUBLESSEE shall, upon demand, pay to SUBLESSOR the cost thereof.
13. INDEMNITY. SUBLESSEE agrees to indemnify, defend, and hold harmless SUBLESSOR
from and against any and all liabilities, losses, damages, expenses, demands, suits, judgments or
claims, including attorneys fees and other expenses in connection therewith, incurred by SUBLESSOR
and in any way related to SUBLESSEE, this Sublease or the Premises. This indemnity provision shall
survive the expiration or earlier termination of this Sublease.
4
14. DEFAULT; REMEDIES. Any action or omission by the SUBLESSEE that results in a
default under the Lease shall be a default under this Sublease. In the event of SUBLESSEE’s
failure to pay rent according to the terms of this Sublease, or any other default under this
Sublease, the SUBLESSOR is entitled to exercise each and every remedy against SUBLESSEE to which it
is entitled by law or in equity, including, without limitation, any right or remedy against
SUBLESSEE to which the LESSOR is entitled under the Lease.
15. COLLECTION COSTS; ATTORNEY’S FEES. In the event of any default by SUBLESSEE and
should it become necessary for SUBLESSOR to bring an action against SUBLESSEE to enforce this
Sublease or to sue for its default, SUBLESSOR shall be entitled to recover all costs of enforcement
of suit, including, but not limited to, court costs and reasonable attorney’s fees.
16. BROKERAGE COMMISSIONS. SUBLESSEE warrants that it has had no dealings with any
broker or agent in connection with the negotiation and execution of this Sublease, and SUBLESSEE
agrees to indemnify SUBLESSOR and LESSOR and hold SUBLESSOR and LESSOR harmless from and against
any and all costs, expenses, or liability for commissions or other compensation or charges claimed
by or awarded to any broker or agent with respect to this Sublease.
17. HOLDING OVER. In the event of holding over by SUBLESSEE after the expiration or
other termination of this Sublease, SUBLESSEE shall be a tenant at sufferance. No holding over by
SUBLESSEE after the expiration of the term of this Sublease shall be construed so as to extend or
renew the term of this Sublease.
18. TERMINATION. SUBLESSEE shall have the right to terminate this Sublease in the
event of a casualty to the Premises effective as of the date of such casualty.
19. BINDING AGREEMENT. This Sublease shall be binding upon and shall inure to the
benefit of the SUBLESSOR and SUBLESSEE, and their respective permitted assigns.
20. ASSIGNMENT. Neither this Sublease nor the rights or obligations of the SUBLESSEE
may be assigned, subleased or transferred (by operation of law or otherwise) by SUBLESSEE without
the express written consent of SUBLESSOR and LESSOR, provided that SUBLESSEE shall have the right
to assign this Sublease to any person or entity which acquires through purchase or otherwise a
controlling interest in SUBLESSEE or any entity into which SUBLESSEE shall be merged or
consolidated. The parties hereto acknowledge that this Sublease will be assigned by SUBLESSOR to
LESSOR immediately following its execution by the parties hereto.
21. INVALIDITY. If any provision of this Sublease shall be held to be invalid,
whether generally or as to specific facts or circumstances, the same shall not affect in any
respect whatsoever the validity of the remainder of this Sublease, which shall continue in full
force and effect. Any provision held invalid as to any particular facts and circumstances shall
remain in full force and effect as to all other facts and circumstances, and any invalid provision,
if invalid because it transcends applicable limits of law shall be deemed ipso facto to be reduced
to such permitted level or limit.
5
22. GOVERNING LAW. This Sublease and the rights of the parties hereunder shall be
interpreted in accordance with the laws of the State of Tennessee, as the same shall exist from
time to time.
23. ENTIRE AGREEMENT; AMENDMENTS. This Sublease embodies the entire agreement of the
parties hereto with respect to the subject matter discussed herein. This Sublease may be modified
or amended only by the mutual written agreement of the parties hereto.
24. COUNTERPART SIGNATURE. This Sublease may be executed in one or more counterparts
and each of which shall constitute one and the same instrument.
25. TIME IS OF THE ESSENCE. Time is of the essence of this Sublease.
26. SMOKING. Smoking is strictly prohibited in all areas within the Van Vleet
Building.
27. APPROVAL: The effectiveness of this Sublease is subject to the written consent of
LESSOR approving this Sublease, as evidenced by LESSOR’s execution hereof.
28. NOTICES: All notices required under this Sublease shall be sent to the following
addresses:
To the SUBLESSOR:
UT Research Foundation
910 Madison Ave., Suite 827
Memphis, TN 38163
910 Madison Ave., Suite 827
Memphis, TN 38163
To the SUBLESSEE:
GTx, Inc.
3 North Dunlap
Memphis, TN 38163
3 North Dunlap
Memphis, TN 38163
To the LESSOR:
UT Health Science Center
Business Contracts Office
62 South Dunlap, Suite 320
Memphis, TN 38163
Business Contracts Office
62 South Dunlap, Suite 320
Memphis, TN 38163
IN WITNESS WHEREOF, the parties have executed this Sublease in duplicate on the date written
below.
6
| GTx, INC. (SUBLESSEE) | UNIVERSITY OF TENNESSEE RESEARCH FOUNDATION (SUBLESSOR) |
||||||
By:
|
/s/ Henry P. Doggrell | By: | /s/ Richard Magid | ||||
| Name: Henry P. Doggrell | Name: Richard Magid | ||||||
| Title: Vice President, General Counsel | Title: Vice President | ||||||
| Date: October 28, 2009 | Date: October 20, 2009 | ||||||
THE UNIVERSITY OF TENNESSEE (LESSOR) |
||||
| By: | /s/ Anthony A. Ferrara | |||
| Name: | Anthony A. Ferrara | |||
| Title: | Vice Chancellor — Finance & Operations | |||
Date: October 27, 2009
7
EXHIBIT A
LEASE
8
EXHIBIT B
DESCRIPTION OF PREMISES (Floor Plans)
9
EXHIBIT C
DETAILS REGARDING ACTUAL COST OF OPERATION
10
Exhibit 12.1
GTx, Inc.
Computation of Deficiency of Earnings Available to Cover Fixed Charges
Computation of Deficiency of Earnings Available to Cover Fixed Charges
| Year Ended December 31, | ||||||||||||||||||||
| 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||
Loss: |
||||||||||||||||||||
Pretax loss from continuing operations |
$ | (46,494 | ) | $ | (51,780 | ) | $ | (40,359 | ) | $ | (35,510 | ) | $ | (36,839 | ) | |||||
Fixed charges (from below) |
104 | 89 | 35 | 32 | 32 | |||||||||||||||
Total loss |
$ | (46,390 | ) | $ | (51,691 | ) | $ | (40,324 | ) | $ | (35,478 | ) | $ | (36,807 | ) | |||||
Fixed charges: |
||||||||||||||||||||
Estimated interest portion of rent expenses |
$ | 104 | $ | 89 | $ | 35 | $ | 32 | $ | 32 | ||||||||||
Total fixed charges |
$ | 104 | $ | 89 | $ | 35 | $ | 32 | $ | 32 | ||||||||||
Coverage deficiency |
$ | (46,494 | ) | $ | (51,780 | ) | $ | (40,359 | ) | $ | (35,510 | ) | $ | (36,839 | ) | |||||
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, | ||
| (3) | Registration Statement (Form S-8 No. 333-136527) pertaining to the GTx, Inc. Amended and Restated 2004 Non-Employee Directors’ Stock Option Plan, | ||
| (4) | Registration Statement (Form S-3 No. 333-148321) pertaining to the offer and sale by GTx, Inc. of shares of its common stock and preferred stock, various series of debt securities and/or warrants to purchase any of such securities, either individually or in units, in one or more offerings, up to a total dollar amount of $100,000,000, | ||
| (5) | Registration Statement (Form S-8 No. 333-149661) pertaining to the GTx, Inc. 2004 Equity Incentive Plan and the Amended and Restated 2004 Non-Employee Directors’ Stock Option Plan; |
of our
reports dated March 15, 2010, with respect to the financial statements of GTx, Inc. and with
respect to the effectiveness of internal control over financial reporting of GTx, Inc., included in
this Annual Report (Form 10-K) of GTx, Inc. for the year ended December 31, 2009.
Memphis, Tennessee
March 15, 2010
March 15, 2010
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 15, 2010
| /s/ Mitchell S. Steiner | ||||
| 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 15, 2010
| /s/ Mark E. Mosteller | ||||
| 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, 2009, 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 15, 2010
| /s/ Mitchell S. Steiner | ||||
| 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, 2009, 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 15, 2010
| /s/ Mark E. Mosteller | ||||
| 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.