UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K/A
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of
Report (date of earliest event reported): October 31, 2006
Sheffield
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in charter)
Delaware
(State
or
other jurisdiction of incorporation)
01-12584
(Commission
File Number)
|
13-3808303
(IRS
Employer Identification No.)
|
3985
Research Park Drive
Ann
Arbor, MI 48108
(Address
of principal executive offices and zip code)
(734)
332-7800
(Registrant’s
telephone number including area code)
Sheffield
Pharmaceuticals, Inc.
1220
Glenmore Drive
Apopka,
FL 32712
(Former
Name and Former Address)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of registrant under any of the following
provisions:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12(b) under the Exchange Act (17
CFR
240.14a-12(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
|
This
amended Form 8-K is being filed in order to correct certain figures in
Footnote
8(E)(2) Private Placement Offering to the December 31, 2005 Consolidated
Financial Statements and Footnote 9(D) Private Placement to the June 30,
2006
Consolidated Financial Statements.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
statements contained in this Form 8-K that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934,
as amended. These include statements about the Registrant’s expectations,
beliefs, intentions or strategies for the future, which are indicated by
words
or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “the
Registrant believes,” “management believes” and similar words or phrases. The
forward-looking statements are based on the Registrant’s current expectations
and are subject to certain risks, uncertainties and assumptions. The
Registrant’s actual results could differ materially from results anticipated in
these forward-looking statements. All forward-looking statements included
in
this document are based on information available to the Registrant on the
date
hereof, and the Registrant assumes no obligation to update any such
forward-looking statements.
Item
1.01 Entry into a Material Definitive Agreement.
On
October 31, 2006 (the “Closing Date”), the Registrant entered into a merger
agreement (the “Merger Agreement”) by and among Pipex Therapeutics, Inc., a
privately owned Delaware corporation (“Pipex”), and Pipex Therapeutics
Acquisition Corp, a Delaware corporation and wholly owned subsidiary of the
Registrant (“Acquisition Sub”). Acquisition Sub was formed on October 27, 2006
for the purpose of pursuing the merger transaction contemplated by the Merger
Agreement (the “Merger”). On October 31, 2006, prior to entry into the Merger
Agreement, Pipex purchased 2,426,300 shares of common stock pursuant to a
Private Stock Purchase Agreement with Michael Manion, an individual holding
a
total of 2,766,300 shares of the Registrant’s common stock. A copy of the Stock
Purchase Agreement is incorporated herein by reference and is filed as an
exhibit to this Form 8-K. Such shares were retired contemporaneous with the
Merger so that at the time of the Merger the Registrant had 737,717 shares
of
common stock issued and outstanding excluding the shares issued to the
shareholders of Pipex. Upon closing of the Merger Agreement, Pipex merged
with
Acquisition Sub with Pipex being the surviving entity. The Merger Agreement
was
duly considered and approved by the board of directors of the Registrant
as well
as the board of directors and majority stockholders of Pipex. A copy of the
Merger Agreement is incorporated herein by reference and is filed as an exhibit
to this Form 8-K.
In
accordance with the Merger Agreement, all outstanding shares of common and
preferred stock of Pipex were converted into the right to receive, at Closing
and thereafter, an aggregate of 34,000,000 shares of newly issued common
stock
of the Registrant. Pursuant to the Merger Agreement, the Registrant also
assumed
the outstanding warrants to purchase an additional 6,893,737 common shares
and
stock options to acquire an additional 4,915,332 common shares. On November
2,
2006, a Certificate of Merger with the State of Delaware was filed consummating
the Merger.
As
a
result of the Merger, Pipex became a wholly-owned subsidiary of the Registrant
and the shareholders of Pipex shall have acquired approximately 97.87% of
the
Registrant’s issued and outstanding stock. The Registrant currently has a total
of 34,737,717 issued and outstanding shares of Common Stock. In the Merger,
the
Registrant also assumed Pipex’s warrants and options. Pipex has three
majority-owned subsidiaries, Effective Pharmaceuticals, Inc, CD4 BioSciences,
Inc. and Solovax, Inc.
In
connection with the Merger and related transactions, the Registrant, pursuant
to
a Registration Rights Agreement has agreed to file, within 45 days of the
Closing Date, a registration statement registering for resale certain shares
exchanged by the Registrant.
Concurrent
with the Merger, the directors and officers of Pipex and Sheffield entered
into
lock-up agreements for a period of 12 months from the date of the
merger.
The
description of the transactions contemplated by the Merger Agreement set
forth
herein does not purport to be complete and is qualified in its entirety by
reference to the full text of the exhibit filed herewith and incorporated
by
this reference.
Overview
A
summary
of the business of Pipex is described herein. As used herein, unless the
context
otherwise requires, “Pipex” refers to the Delaware legal entity having that
name, “Pipex Therapeutics Inc.” and “the Company” (and “we”, “our” and similar
expressions) refer to the business of Pipex before the Merger and the Registrant
after the Merger, and the “Registrant” refers to Sheffield Pharmaceuticals,
Inc.. The Registrant intends to seek stockholder approval in the near future
to
change the name of the Registrant to Pipex Therapeutics, Inc.
ITEM
2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
Prior
to
the merger of Pipex Therapeutics Acquisition Corp. with Pipex Therapeutics,
Inc., Sheffield Pharmaceuticals, Inc. was a shell company as defined in Rule
12b-2 of the Securities Exchange Act of 1934. Pursuant to Item 2.01 (f) of
Form
8-K, we are required to include in this Report the information that we would
be
required to provide if we were filing a general form for registration of
securities on Form 10-SB. This information is set forth below and is organized
in accordance with the Items set forth in Form 10-SB.
Item
4.01
Changes
in Registrant’s Certifying Accountant
(a) On
November 3, 2006, the Registrant ended the engagement of Michael Cronin
CPA
(“Cronin”) as its independent certified public accountants effective as of
December 31, 2005. The decision was approved by the Board of Directors
of the
Registrant.
The
report of Cronin on the Registrant’s financial statements for the fiscal years
ended December 31, 2005 and 2004 did not contain an adverse opinion or
disclaimer of opinion. During the Registrant’s fiscal years ended December 31,
2005 and 2004 and the subsequent interim period preceding the termination,
there
were no disagreements with Cronin on any matter of accounting principles
or
practices, financial statement disclosure, or auditing scope or procedure,
which
disagreements, if not resolved to the satisfaction of Cronin, would have
caused
Cronin to make reference to the subject matter of the disagreements in
connection with its report on the financial statements for such years or
subsequent interim periods.
The
Registrant requested that Cronin furnish it with a letter addressed to
the
Registrant confirming its dismissal and whether or not it agrees with the
Registrant’s financial statements. A copy of the letter furnished by Cronin in
response to that request, dated November 3, 2006, is filed as Exhibit 16.1
to
this Form 8-K.
(b) On
November 3, 2006, Berman & Company, P.A. (“Berman”) was engaged as the
Registrant’s new independent certified accountants. During the two most recent
fiscal years and the interim period preceding the engagement of Berman,
the
Registrant has not consulted with Berman regarding either: (i) the application
of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the
Registrant’s financial statements; or (ii) any matter that was either the
subject of a disagreement or event identified in paragraph (a)(1)(iv) of
Item
304 of Regulation S-B.
ITEM
5.01. CHANGES IN CONTROL OF REGISTRANT.
See
Item
1.01 of this Form 8-K.
ITEM
5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
On
October 16, 2006, Nicholas Stergis, M.S. was appointed to the Board of
Directorsof Sheffield and on October 27, 2006 to the Board of Directors of
Pipex
Therapeutics Corp. Mr. Stergis currently serves as the Chief Operating Officer
of Pipex. A Form 8-K including the biography of Mr. Stergis was filed by
the
Company on October 16, 2006. On November 1, 2006, Mr. Michael Manion tendered
his resignation to the board of directors of the Company effective November
3,
2006 and the board of directors accepted his resignation.
COMPANY
SUMMARY
Pipex
Therapeutics, Inc. (“Pipex”, “we”, or “our”) is a development-stage, specialty
pharmaceutical company that is developing proprietary, late-stage drug
candidates for the treatment of neurologic and fibrotic diseases. Our strategy
is to exclusively in-license proprietary, clinical-stage drug candidates
that
have demonstrated preliminary efficacy in human clinical trials and to complete
the further clinical testing, manufacturing and other regulatory requirements
sufficient to seek marketing authorizations via the filing of a New Drug
Applications (NDA) with the FDA and a potential Marketing Application
Authorization (MAA) with the European Medicines Evaluation Agency (EMEA).
A
key
component of our strategy encompasses the efficient and timely development
of
our clinical-stage drug candidates through the selection of initial indications
representing high unmet medical needs and which may therefore benefit from
both
a fast-track and priority review regulatory review process as well as premium
pricing for such indications. If approved for marketing, we may pursue
additional indications for our investigation la agents via a Supplemental
New
Drug Applications (SNDAs) while benefiting from the expedited and lower clinical
trial costs associated with the clinical testing of already approved agents
as
compared to investigational agents not yet approved. Our lead drug candidate,
COPREXA™, is a novel, oral, anticopper therapeutic that during the last 18 years
has completed two clinical trials in neurologically-presenting Wilson’s disease
that we believe have demonstrated sufficient safety and efficacy to support
a
NDA with the FDA as well as a MAA with the European Medicines Evaluation
Agency.
In
order
to expand the therapeutic utility of our oral agent, COPREXA™ beyond initially
presenting neurological Wilson’s disease our investigators have recently
completed an initial 12 month, 16 patient, open label phase II clinical trial
for the treatment of refractory Idiopathic Pulmonary Fibrosis (IPF), a
preogressive fibrotic lung disease associated with high rates of mortality
and
for which there is no currently approved therapy. IPF is estimated to result
in
30,000 deaths annually in the U.S., which exceeds the annual number of deaths
attributable to breast and prostate cancer
PRODUCT
|
THERAPEUTIC
INDICATION
|
STAGE
OF DEVELOPMENT
|
COPREXA
Ô
(oral
tetrathiomolybdate)
|
Neurologic
Wilson’s Disease
|
Phase
III Clinical Trial (complete)
NDA
in preparation
|
COPREXA
Ô
(oral
tetrathiomolybdate)
|
Refactory
Idiopathic Pulmonary Fibrosis (IPF)
|
Phase
IIa Clinical Trial
(complete)
|
COPREXA
Ô
(oral
tetrathiomolybdate)
|
Primary
Biliary Cirrhosis (PBC)
|
Phase
II Clinical Trial
(on-going)
|
TRIMESTA
Ô
(oral
estriol)
|
Relapsing-Remitting
Multiple Sclerosis
|
Phase
IIb Clinical Trial
|
Anti-CD4
802-2
|
Prevention
of Severe Graft Vs. Host Disease
|
Phase
I/II Clinical Trial
(ongoing)
|
Anti-CD4
802-2
|
Autoimmune
Diseases
|
Preclinical
studies
|
CORRECTAÔ
(clotrimazole
enema)
|
Refractory
Acute Pouchitis
|
Phase
II Clinical Trial
(ongoing)
|
EFFIRMA™
(oral
flupirtine)
|
Fibromyalgia
|
Phase
II Clinical Trial
(planned)
|
SOLOVAX™
(MS
T-cell vaccine)
|
Multiple
Sclerosis Vaccine
|
Phase
II Clinical Trial
(complete)
|
PRODUCT
SUMMARY
The
following is a summary of each of the clinical stage drug candidates that
we are
developing:
COPREXATM
(oral tetrathiomolybdate)
Our
lead
product candidate, COPREXA™, is an oral, small-molecule, anticopper agent that
is highly specific for lowering the levels of free copper in serum. Free
copper
in serum represents the toxic form of copper, as opposed to the essential
form
of copper which is found tightly bound to appropriate copper chaperone proteins,
such as ceruloplasmin. Free copper in serum readily crosses the blood-brain
barrier (BBB) and is generally at equilibrium with free copper levels in
the
central nervous system (CNS). The brain is the organ most sensitive to the
toxic
effects of free copper. By lowering the levels of toxic free copper in serum,
COPREXA™ demonstrated in two phase III clinical trials the ability to reduce
toxic free copper levels and substantially improve clinical outcomes in
initially presenting neurologic Wilson’s disease patients. We believe that
COPREXA’sÔ
unique
mechanism of action and specificity for free copper makes it ideally suited
for
the treatment of CNS diseases in which abnormal serum and CNS copper homeostasis
are implicated, such as Alzheimer’s disease.
COPREXATM for
Wilson’s Disease
COPREXA™
has successfully completed two pivotal clinical trials for the treatment
of
neurologically-presenting Wilson’s disease, a genetic disease characterized by
psychiatric and neurologic disorders caused by impaired hepatic copper excretion
which results in elevated levels of toxic free copper in the systemic
circulation and CNS. Based upon the positive results of these two pivotal
clinical trials, we intend to submit an NDA with the FDA and an MAA with
the
EMEA to market COPREXA™ in the U.S. and Europe for the initial indication of
neurologically-presenting Wilson’s disease. Wilson’s disease is an orphan drug
indication. There are approximately 6,000 Wilson’s disease patients in the U.S.
and it is estimated that several hundred of them annually are newly diagnosed,
neurologically-presenting patients who are suitable candidates for treatment
with COPREXA™.
Wilson’s
disease is an inherited genetic disease in which affected patients have an
impaired ability to properly excrete copper via the liver and stool. There
are
an estimated 6,000 currently diagnosed Wilson’s patients in the U.S. with many
more that are currently misdiagnosed Due
to
the impaired ability to incorporate and excrete copper, elevated
levels of toxic free copper enter the systemic circulation, passively cross
the
blood-brain-barrier and enter the cerebral
spinal fluid (CSF) of the brain and interfere with normal synaptic dysfunction
and ultimately neurodegeneration of the brain typically presenting after
twenty
years of age. Due to the rarity
of
Wilson’s
disease
and the fact that it is easily mistaken for psychosis, patients typically
are
not diagnosed until the presentation of neurodegenerative symptoms..
Currently,
approximately half of newly-diagnosed Wilson’s patients initially present with
neurologic symptoms while Interestingly, the prevalence of neurologic Wilson’s
disease is greatly increased in patients carrying one the apolipoprotein
ε4
(apoE4) phenotype gene, a significant risk factor for Alzheimer’s disease. The
remaining Wilson’s disease patients will generally
initially present with hepatic symptoms. Psychiatric
symptoms of neurologically-presenting Wilson’s patients will generally precede
neurologic symptoms by months or years and may include loss of emotional
control, temper tantrums, emotional outbursts, bouts of crying, severe
depression, suicidal ideation, loss of inhibitions, delusions, hallucinations
and loss of ability to focus on tasks. Neurologic symptoms later develop
as a
result of neurodegeneration in the basal ganglia of the brain and include
impaired speech, tremor, dystonia, incoordination and dysphasia. Crippling
movement disorders may ultimately occur. Without
proper treatment, Wilson’s disease is usually fatal by the age of 30. However,
if treatment is begun early enough, symptomatic recovery is usually complete
and
a life of normal length and quality can be expected.
Current
Therapies for Wilson’s Disease
Therapy
for Wilson’s disease can be divided into two broad categories: (1) initial
therapy in acutely ill patients, and (2) maintenance therapy. Initial therapy
relates to the first few weeks to months of therapy, during which a newly
presenting patient is still suffering from acute copper toxicity. Once the
copper levels have been brought down to a subtoxic threshold, maintenance
therapy is provided for the remainder of the patient’s life to prevent
recurrence of copper accumulation and further copper toxicity. However, the
currently approved therapies for Wilson’s disease offer suboptimal treatment
options for newly-diagnosed Wilson’s patients and indeed the approved chelators,
penicillamine and trientine, may be contraindicated due to the high incidence
of
irreversible neurologic worsening attributable to the mechanism of these
agents.
Three
drugs are currently available for the treatment of Wilson’s disease:
penicillamine (Cupramine®), trientine (Syprine®), and zinc acetate (Galzin®).
Zinc acetate’s use for Wilson’s diease maintenance therapy was invented and
developed by our scientific founder, Dr. George Brewer, the inventor of
COPREXA™
for
neurologic Wilson’s disease Penicillamine, a copper chelator in use since the
1950’s, is currently the first-line therapy. As noted above, approximately 50%
of Wilson’s disease patients initially present with neurologic and psychiatric
symptoms. According to published literature, approximately 50% of patients
who
receive penicillamine as first-line therapy, suffer further neurologic
deterioration upon initiation of the drug. It is estimated that about half
of
these patients who worsen, or about 25% of the neurologically-presenting
Wilson’s patients treated with penicillamine, never recover to their
pre-penicillamine baseline. There is also evidence that even pre-symptomatic
patients can develop neurologic disease after being initiated on penicillamine.
Accordingly, treatment with penicillamine may induce additional, irreversible
neurological damage.
Trientine
(Syprine®), another copper chelator, is FDA approved as second-line therapy for
Wilson’s disease. The mechanism of action of trientine is similar to that of
penicillamine, and it has been found to cause similar symptoms of neurological
worsening when used as initial therapy. However, the incidence of neurologic
deterioration in patients treated with trientine is approximately 25-30%,
as
compared to 50% incidence in patients treated with penicillamine. The neurologic
worsening attributable to penicillamine and trientine may be explained by
the
fact that penicillamine and trientine are non-selective chelators that mobilize
additional free copper from tissues and organs where copper is normally stored.
Such uncontrolled chelation increases the levels of free copper in the serum,
tissues and CNS, thereby causing further copper toxicity in the brain. The
brain
is very sensitive to the toxic effects of free copper and has adapted a very
tightly regulated system of copper chaperones and copper transporters to
deliver, utilize and clear excess copper.
Galzin®
(zinc acetate capsules) was developed by our scientific founder, Dr. George
Brewer, and was approved by the FDA (1997) and EMEA (2001). Galzin® is the
standard maintenance therapy for Wilson’s disease, but it is not ideal for
patients who initially present with neurologic symptoms because it has a
relatively slow onset of action and may take up to six months to produce
effects. Furthermore, because Galzin® acts by partially blocking the absorption
of additional copper via the intestines, it neither complexes nor chelates
copper and therefore has little or no effect on circulating levels of toxic
free
copper present in the body. Unless circulating levels of toxic free copper
are
brought down to a subtoxic threshold, Wilson’s patients are at risk for further
copper toxicity and worsening of their disease.
Pivotal
Clinical Trials of COPREXATM
in Neurologically-Presenting Wilson’s Disease
The
first
pivotal clinical trial of COPREXA™ was conducted on an open label basis in 55
neurologically-presenting Wilson’s disease patients. Galzin®
maintenance therapy followed for a period of two years. During that follow-up
period, neurologic function was assessed with scored neurologic and speech
tests. A highly statistically significant improvement was achieved in these
patients in annual quantitative neurologic scores (p<0.002) as compared to
baseline. Annual quantitative speech scores also yielded a highly statistically
significant result (p<0.001) as compared to baseline. Importantly, only 2 of
the 55 patients, or 3.6% of the patients treated with COPREXATM,
showed
further neurologic deterioration. This compares very favorably with historical
controls of an estimated 52% incidence of neurologic deterioration in patients
treated with penicillamine, the first line therapy. Brewer GJ et. Al., Treatment
of Wilson disease with ammonium tetrathiomolybdate: III. Initial therapy
in a
total of 55 neurologically affected patients and follow-up with zinc therapy.
Arch
Neurol.
2003
Mar; 60(3):379-85.
In
a
second double-blind, randomized comparator, pivotal clinical trial, 48
newlydiagnosed, neurologically-presenting Wilson’s patients were treated with
either trientine (Syprine®), a copper chelator having a similar mechanism of
action to that of penicillamine and approved for use as second line therapy
for
Wilson’s disease, versus COPREXA™.
The
primary endpoint of this comparator study was the incidence of neurological
worsening between the two groups This comparator trial demonstrated a
statistically significant reduction in the incidence of neurologic worsening
in
favor of COPREXA™ (p<0.05). Twenty-six percent (26%) of trientine treated
patients (6 of 23) experienced neurologic worsening compared to only four
percent (4.0%) of COPREXA™ treated patients (1 of 25).. Importantly, in addition
to the high incidence of irreversible neurologic deterioration associated
with
trientine, this pivotal comparator trial also suggested that neurologic
deterioration during the initial treatment phase with trientine is an important
prognostic indicator of death in this patient group... The reslts of this
trial
were published in April of this year, (Brewer, G.J., Askari, F., Lorincz,
M.T.,
Carlson, M., Schilsky, M., Kluin, K.J., Hedera, P., Moretti, P., Fink, J.K.,
Tankanow, R. 2006. Treatment of Wilson disease with ammonium tetrathiomolybdate:
IV. Comparison of tetrathiomolybdate and trientine in a double-blind study
of
treatment of the neurologic presentation of Wilson disease. Arch
Neurol
63:521-527)
The
clinical development of COPREXA has been supported by grants from the Orphan
Products Division of the FDA.
COPREXATM
for Idiopathic Pulmonary Fibrosis (IPF)
We
are
developing
COPREXA™ as a highly potent oral antifibrotic agent based
upon the observation that the fibrotic
disease process is dependent upon the availability of endogenous free copper.
COPREXA™ has demonstrated the ability to inhibit fibrosis in a
number
of well
established animal models through the sequestration of available copper and
inhibition of key fibrotic cytokines, including secreted protein acid rich
in
cysteine (SPARC), NFκB, TGF-β, FGF-2, IL-1, IL-6, IL-8, connective tissue growth
factor (CTGF)
and
collagen.
IPF
is a
fatal respiratory disease characterized by progressive loss of lung function
due
to extensive fibrosis of lung tissues that are essential for respiration
and
life. It affects an estimated 80,000 patients in the U.S., resulting in
approximately 30,000 deaths in the U.S. annually. This represents more deaths
annually than either breast or prostate cancer.
Preclinical
IPF Model Using COPREXATM
Our
scientific collaborator tested COPREXATM
in the
bleomycin mouse model, a model of pulmonary fibrosis. In this model, bleomycin
is instilled in the trachea of the mouse and produces a marked inflammatory
reaction in the lungs after seven days. By day 21, this inflammatory reaction
is
followed by a marked fibrosis at which point the experiment is terminated.
COPREXATM
treatment was found to strongly inhibit fibrosis in this model, even when
treatment was not initiated until after day 7 (i.e., after the fibrotic disease
process had already begun). These results suggest that COPREXATM
is
capable of specifically inhibiting chronic fibrotic disease processes in
the
lung (which are believed to be analogous to the chronic fibrotic disease
processes that result in the scarring, loss of pulmonary function and
respiratory failure characterized by IPF) as opposed to merely inhibiting
acute
inflammatory reactions caused by acute lung insult.
Phase
II Clinical Trials of COPREXATM
in Refractory IPF Patients
Based
upon the successful animal experiments described above, a 16-patient, one-year,
open-label, phase II clinical trial of COPREXA™ was completed for the treatment
of refractory IPF. The prospectively defined primary endpoint of the study
was
the percentage of patients
capable
of maintaining clinically stable pulmonary
function as determined by forced vital capacity (FVC), the accepted measurement
of pulmonary function in IPF. After six months of therapy with oral COPREXA™,
93.3% of patients had stable disease and after twelve months of therapy with
oral COPREXA™, 75% of patients had stable disease. These results compare
favorably to published historical controls which show stable disease after
six
months in only 68% of patients and stable disease after twelve months in
only
46% of patients. This phase II trial was partially supported by a grant from
the
Coalition for Pulmonary Fibrosis, a non-profit organization.
COPREXATM
for
Primary Biliary Cirrhosis (PBC)
Primary
biliary cirrhosis (PBC) is an autoimmune and fibrotic disease which targets
the
bile ducts of the liver. PBC is a relatively rare disease affecting
approximately 20,000 patients in the U.S. Progression of PBC is somewhat
variable. Some patients die or require transplant within 5 years, while others
have a more protracted course of disease.
Phase
II Clinical Trial of COPREXATM
in Primary Biliary Cirrhosis
Based
on
positive animal experiments, we have initiated a 50-patient, three-year,
double-blind, placebo-controlled, phase II clinical trial of COPREXA™ for the
treatment of PBC. This study is being supported by an $850,000 grant from
the
Orphan Products Division of the FDA. Therapies currently approved for PBC,
such
as ursodiol (Urso®) offer only palliative relief of the symptoms of PBC and do
not alter the course of the disease.
Anti-Copper
therapies and other neurodegenerative diseases
Alzheimer’s
disease (AD) is a disease for which a growing body of evidence implicates
elevated levels of toxic free copper in the serum and CNS as central to the
disease processand severity of disease making AD potentially analogous to
a
latent form of Wilson’s disease. We believe that COPREXA’s specificity and
unique mechanism of action for lowering toxic free copper, combined with
its
history of success in neurologically-presenting Wilson’s disease, may position
COPREXA™ as the first available therapeutic agent capable of correcting the
serum and CNS free copper dyshomeostasis that we believe represents the most
important fundamental cause of neurogenerative diseases, such as AD. AD is
a
growing societal epidemic that currently affects approximately 4.5 million
people in the U.S. and approximately 50% of persons over the age of
85.
TRIMESTA™
(oral estriol)
We
are
developing TRIMESTA™
as
an
oral immunomodulatory and anti-inflammatory agent for the North American
market.
Estriol has been approved and marketed throughout Europe and Asia as a mild
estrogenic agent for over 40 years for the treatment of post-menopausal hot
flashes. Estriol is an important endogenous hormone that is produced in the
placenta by women during pregnancy. Maternal levels of estriol increase in
a
linear fashion throughout the third trimester of pregnancy until birth,
whereupon they abruptly fall to near zero. Our scientific inventor of TRIMESTA™
is a leading authority on the role that estriol plays in affording immunologic
privilege to the fetus so as to prevent its rejection by the mother. It is
a
widely observed phenomenon that pregnant women with Th1-mediated autoimmune
diseases (such as multiple sclerosis) experience high rates of spontaneous
remission during pregnancy (especially in the third trimester) as well as
high
rates of relapse during the post-partum period (especially in the three-month
post-partum period). Based upon these insights, our scientific collaborator
of
TRIMESTA™ has conducted initial clinical trials of TRIMESTA™ in non-pregnant
female multiple sclerosis patients and has demonstrated encouraging
results.
TRIMESTA™ for
Relapsing-Remitting Multiple Sclerosis (MS)
Current
Therapies for Relapsing-Remitting MS.
We
are
developing TRIMESTA™ as an oral immunomodulatory therapy for female
relapsing-remitting MS patients that can be used either alone or in combination
with other agents or during the post-partum period following pregnancy. There
are currently five FDA-approved first line therapies for the treatment of
relapsing-remitting multiple sclerosis: Betaseron®, Rebif®, Avonex® and
Copaxone®. Tysabri®, was reintroduced during 2006 to the marketplace, but is
only approved for refractory MS patients. These therapies provide only a
modest
benefit for patients with relapsing-remitting MS and therefore serve to only
delay progression of the disease. All of these drugs require frequent (daily,
weekly & monthly) injections (or infusions) on an ongoing basis and are
associated with unpleasant side effects (such as flu-like symptoms), high
rates
of non-compliance among users, and eventual loss of efficacy due to the
appearance of resistance in approximately 30% of patients. An estimated
two-thirds of MS patients are women.
Phase
II Clinical Trial Results of TRIMESTA™
in Relapsing-Remitting MS
TRIMESTA™
has
completed an initial 10-patient, 16-month, single-agent, crossover, phase
II
clinical trial in the U.S. for the treatment of MS. The results of this study
were encouraging.
Decrease
in Volume and Number of Myelin Lesions
In
the
relapsing-remitting MS patient group, the total volume and number of pathogenic
gadolinium enhancing myelin lesions (an established neuroimaging measurement
of
disease activity in MS) decreased during the treatment period as compared
to a
six-month pre-treatment baseline period. The median total enhancing lesion
volumes decreased by 79% (p=0.02) and the number of lesions decreased by
82%
(p=0.09) within the first three months of treatment with TRIMESTA™.
Over
the next three months, lesion volumes decreased by 82% (p=0.02) and the number
of lesions decreased by 82% (p=0.02) compared to baseline. During a three-month
re-treatment phase of this clinical trial, relapsing-remitting MS patients
again
showed a decrease in enhancing lesion volumes (88%) (p=0.008) and a decrease
in
the number of lesions (48%) (p=0.04) compared to baseline.
Improvement
in PASAT cognitive testing scores
During
this phase II clinical trial, a 14% improvement in Paced
Auditory Serial Addition Test (“PASAT”) cognitive
testing scores was observed in the relapsing-remitting MS group. PASAT
is
a
routine cognitive test performed
in patients with a wide variety of neuropsychological disorders such as MS.
PASAT cognitive testing was conducted during the three-month period prior
to the
initiation of treatment and again at month 12 following therapy. The PASAT
scores were expressed as a mean percent change from baseline and were
significantly improved in the relapsing-remitting group (p=0.04). PASAT scores
were unchanged in the secondary progressive (SP) group.
Market
Opportunities for TRIMESTA™
Multiple
Sclerosis
MS
is a
progressive neurological disease in which the body loses the ability to transmit
messages along nerve cells, leading to a loss of muscle control, paralysis,
and,
in some cases, death. Currently, more than 2.5 million people worldwide
(approximately 400,000 patients in the US), mainly young adults aged 18-50,
are
afflicted with MS and 66% of these patients are women. The most common form
of
MS is relapsing-remitting MS, which accounts for approximately 75% of MS
patients.
MS
exacts
a heavy toll on our healthcare system. According to a published study, the
total
annual cost for all people with MS in the U.S. is estimated to be more than
$9
billion. The average annual cost of MS is approximately $44,000 to $95,625
per
person. These figures include lost wages and healthcare costs (caregiving,
hospital and physician costs, pharmaceutical therapy and nursing home care).
The
cost of treating patients with later-stage progressive forms of MS is
approximately $65,000 per year per person. The average lifetime costs for
people
with MS are more than $2.2 million per person. During
2005, sales estimates of FDA-approved MS therapies, which include Avonex®,
Betaseron®, Copaxone®, and Rebif®, totaled approximately $5.0 billion, with
Avonex® accounting for $1.5 billion in worldwide sales ($935 million were in the
U.S.).
ANTI-CD4
802-2
(cnsnqic-cyclic)
We
are
developing a series of rationally-designed, small molecule/peptidomimetic
inhibitors of the T-cell CD4 co-receptor. The CD4 co-receptor is central
to a
number of autoimmune disorders such as MS. Our anti-CD4 molecules are designed
to selectively block the dimerization and oligomerization of adjacent CD4
receptors via the D1 domains of such receptors. CD4 dimerization is believed
to
be necessary for the proper formation of the immunological synapse between
antigen presenting cells (APCs) and T-cells, which results in the achievement
of
the critical threshold signaling required for CD4 T-Cell activation.
By
selectively blocking critical threshold signaling, our anti-CD4 molecules
display the important advantage of causing apoptosis (via activation-induced
cell death (AICD)) and/or anergy of CD4 T-cells. Our anti-CD4 molecules are
selective for otherwise active CD4 T-cells and demonstrate the ability to
modify
the course of CD4-mediated diseases through the selective deletion of pathogenic
memory T-cells, thereby inducing immune tolerance. As opposed to monoclonal
antibody approaches, our anti-CD4 molecules are non-T-cell depleting,
non-immunogenic and potentially orally available.
Our
lead
anti-CD4 molecule, 802-2 (cnsnqic-cylic), has demonstrated efficacy in a
number
of animal models of MS and other autoimmune disease models, and it is currently
being evaluated in a phase I/II clinical trial for the prevention of severe
graft-vs.-host disease. Anti-CD4 802-2 may represent the first clinical stage,
non-antibody-based molecule capable of inducing immune tolerance for a variety
of CD4-mediated autoimmune diseases.
Market
Opportunity for Anti-CD4 802-2 and Small Molecule CD4
Inhibitors
From
a
commercial perspective, anti-CD4 802-2 and our other anti-CD4 molecules address
an autoimmune disease market projected to be $21 billion in 2006 with an
anticipated annual growth rate of 15% thereafter. We believe that the recent
withdrawal of several wide-selling anti-inflammatory agents that offered
patients only palliative therapy exemplifies the need to develop new, convenient
approaches to modify the course of CD4-mediated autoimmune diseases through
the
induction of immune tolerance. We believe that our anti-CD4 molecules have
the
lead as nonbiologic agents capable of inducing immune tolerance. In addition,
they are accompanied by broadly issued patents covering the selective inhibition
of CD4 by small molecules. Autoimmune diseases represent the third-largest
category of illness in the industrialized world, after heart disease and
cancer.
A partial list of such diseases includes MS, psoriasis, and rheumatoid
arthritis, as well as “non-typical” CD4-mediated diseases such as allergy and
asthma. The important role of CD4+ T-cells is just beginning to be understood
and appreciated as a therapeutic target to potentially induce tolerance.
CORRECTATM
(clotrimazole enema)
We
are
developing CORRECTATM,
a
proprietary retention enema formulation of the widely used topical antifungal
agent clotrimazole, for the treatment of acute refractory pouchitis, a subset
of
inflammatory bowel disease that is related to ulcerative colitis (UC).
CORRECTATM
is
currently the subject of a double-blind, placebo-controlled, multi-center,
one-month, phase II clinical trial for acute pouchitis. This study, called
the
“CAPTURE” study, is currently being funded by a $750,000 grant from the FDA’s
Orphan Drug Group. We have expanded this study to five centers and are in
the
process of reviewing CORRECTATM’s
utility for other distal gastrointestinal market opportunity.
Phase
II Clinical Trial for CORRECTATM
in Refractory Pouchitis
A
phase
II clinical trial to test CORRECTATM
is
currently enrolling approximately 30 patients with active pouchitis for whom
currently available standard therapies have failed. The primary goal of this
phase II study is to test the safety and efficacy of CORRECTATM
at four
different dose levels versus the current standard of care in the treatment
of
pediatric and adult patients with pouchitis. The primary endpoint of this
trial
is a reduction in the pouchitis disease activity index (PDAI), a composite
index
of clinical, gross, and histologic parameters that represents an established
and
previously validated continuous-scoring system for this indication. We will
rate
each subject’s pouchitis disease severity before and after study (or placebo)
therapy. As such, the primary outcome for this study will be a determination
of
whether the average change in PDAI scores (measured pre- and post-therapy)
is
different in placebo and active treatment groups. We are currently enrolling
the
cohort B portion of the CAPTURE study, which will treat patients at two
higher dose levels of CORRECTATM,
specifically 6,000mg and 7,500mg per day as compared to placebo.
Market
Opportunity for CORRECTATM
Pouchitis
Pouchitis
is a debilitating complication that can develop following corrective surgical
treatment of ulcerative colitis, wherein an ileal reservoir (or pouch) is
constructed to enable normal bowel movements after removal of the diseased
colon. This ileal reservoir can become inflamed, leading to debilitating
gastrointestinal symptoms including diarrhea, incontinence, bleeding, fever
and
urgency. Currently, there are no approved treatments for pouchitis. Published
scientific data suggest that there are approximately 30,000 to 45,000 pouchitis
patients and between 5,000 to 10,000 refractory pouchitis patients in the
U.S.
EFFIRMATM
(oral flupirtine)
We
are
developing EFFIRMA™ (oral flupirtine), a novel, centrally-active, oral therapy
for the treatment of fibromyalgia syndrome (FMS) and we plan to conduct a
limited, controlled phase II pilot clinical trial in this indication. FMS
is a
common, centrally-mediated pain disorder characterized by chronic diffuse
pain
and other symptoms. We have exclusively licensed an issued U.S. patent and
pending foreign equivalents covering the use of flupirtine for the treatment
of
FMS. The active ingredient of EFFIRMA™, flupirtine, was originally developed by
Asta Medica and has been approved in Europe since 1984 for the treatment
of
chronic lower back pain, although it has never been introduced to the U.S.
market for any indication.
EFFIRMATM
for FMS
Our
scientific collaborator has demonstrated preliminary anecdotal efficacy of
EFFIRMATM
for the
treatment of FMS in a small number of U.S. patients suffering from FMS that
were
refractive to other analgesics and therapies. EFFIRMATM
was well
tolerated by patients with no untoward side effects. In addition, substantial
improvement in signs and symptoms was demonstrated in this difficult-to-treat
FMS patient population.
MATERIAL
AGREEMENTS
University
of Michigan Exclusive License
Agreement
We
have
entered into an exclusive worldwide license agreement with the University
of
Michigan (UM) for all uses of U.S. Patent No. 6,855,340, corresponding
international applications, and a related corresponding patent
application
that relates to various uses of anticopper therapeutics, including
COPREXATM,
to
treat inflammatory and fibrotic diseases, including Alzheimer’s disease.
Pursuant to this agreement, we will use our best efforts to commercialize
COPREXATM
for the
therapeutic uses embodied in the issued patent and pending patent application;
reimburse UM for patent expenses; pay UM royalties equal to 2% of net sales
of
COPREXATM
for uses
covered by the UM patents; issue UM shares of our common stock; pay UM
success-based milestone fees totaling $350,000; the first of which is due
when
we file an NDA and the second of which is due when we receive FDA approval
for
COPREXATM
in an
indication covered by the UM patents, and
indemnify UM and Dr. Brewer against certain claims.
Collaborative
Research and Development Agreement
with UM
During
September 2005, we entered into a three-year sponsored research agreement
with
UM relating to expanding the therapeutic utility of COPREXATM
to treat
other copper mediated diseases. Pursuant to that agreement, we sponsor
approximately $450,000 per annum, payable in monthly installments. This
agreement can be extended for an additional two-year period.
Consulting
Agreement with Dr. George Brewer
We
have
entered into a three-year consulting agreement with Dr. George Brewer, inventor
of the COPREXATM
technology. Pursuant to this agreement, we pay Dr. Brewer a quarterly fee
of
$30,000. We also issued to Dr. Brewer options to acquire 650,540 shares of
our common stock and agreed to pay Dr. Brewer a royalty on sales of
COPREXATM
equal to
3% of net sales for 17 years. At the closing of our Merger, we issued Dr.
Brewer
an additional 650,540 options to acquire our common stock. This agreement
has a
provision for a two-year extension.
McLean
Hospital Exclusive License Agreement
We
have
entered into an exclusive license agreement with the McLean Hospital, a Harvard
University hospital, relating to U.S. Patent No. 6,610,324 and its foreign
equivalents, entitled “Flupirtine in the treatment of fibromyalgia and related
conditions.” Pursuant to this agreement, we agreed to pay McLean royalties on
net sales of flupirtine equal to 3.5% of net sales of flupirtine for indications
covered by the issued patents, reduced to 1.75% if we have a license to other
intellectual property covering those indications; use our best efforts to
commercialize flupirtine for the therapeutic uses embodied in the patent
applications; reimburse back patent costs of approximately $41,830; pay the
following milestone payments: $150,000 upon the initiation of a pivotal phase
III clinical trial of flupirtine; $300,000 upon the filing of a NDA for
flupirtine; and $600,000 upon FDA approval of flupirtine.
University
of Southern California Agreement
During
August 2001, through our majority owned subsidiary Solovax we have an exclusive
option agreement with the University of Southern California (USC) to license
U.S. Patent Application serial nos. 09/156509 and 10/773356 and its foreign
equivalents entitled “T-Cell Vaccination for the Treatment of Multiple
Sclerosis.” Under this agreement we are required to reimburse USC’s patent
expenses and pay USC royalties of 4% of net sales relating to the vaccine.
We
have until December 2007 to exercise our option and enter into an exclusive
license. If we wish to enter into an exclusive license, we will have to issue
to
USC stock representing a 10% ownership interest of our Solovax
subsidiary.
Children’s
Hospital-Boston Agreement
During
August 2005, we have entered into an exclusive worldwide license agreement
with
Children’s Hospital Medical Corporation, an affiliate of Children’s
Hospital-Boston, relating to a certain pending patent application covering
all
gastrointestinal, hepatic, and rectal uses of the clotrimazole technology,
including CORRECTATM.
Pursuant
to this agreement, we paid a $75,000 upfront payment and have agreed to pay
$75,000 on August 31, 2006, as well as annual maintenance fees, milestone
payments totaling $3 million that are payable on issuance of U.S. and
European patents covering the clotrimazole technology, on initiation of a
pivotal phase III clinical trial, on filing of a New Drug Application (NDA),
and
on approval of an NDA with the FDA and European Medical Agency, as well as
royalties on net sales of the clotrimazole technology covered by the licensed
patents. If we become public or are acquired by a public company, we may
be
permitted to partially pay milestone payments in the form of equity. We also
acquired rights to valuable data generated under an investigational new drug
(IND) application filing with the FDA and an orphan drug designation. These
data
include all preclinical and clinical data know-how relating to the clotrimazole
technology. We would also be required to indemnify Children’s Hospital and its
employees against certain liabilities.
Thomas
Jefferson University License Agreement
During
February 2002, our majority-owned subsidiary named CD4 Biosciences Inc.,
we
entered into an exclusive worldwide license agreement with Thomas Jefferson
University (TJU) relating to certain U.S. and foreign issued patents and
patent
applications relating to all uses of anti-CD4 802-2 and CD4 inhibitor
technology. We are obligated to pay annual maintenance fees, milestone payments
upon the filing of an NDA and approval of an NDA with the FDA, as well as
royalties on net sales of anti-CD4 802-2 and other anti-CD4 molecules covered
by
the licensed patents. We also received rights to valuable data generated
under
any IND application filing, which includes toxicology and manufacturing
information relating to anti-CD4 802-2. As partial consideration for this
license, TJU was issued shares representing 5% of the common stock of CD4
Biosciences Inc. We also agreed that TJU would receive antidilution protection
on those CD4 shares through the first $2 million in financing to CD4. We
also
agree to indemnify TJU against certain liabilities.
The
Regents of University of California License Agreement
We
have
an exclusive worldwide license agreement with the Regents of the University
of
California relating to an issued US Patent No. 6,936,599 and pending patent
applications covering the uses of the TRIMESTATM
technology. Pursuant to this agreement, we paid an upfront license fee of
$20,000, reimbursed for patent expenses of $41,000 and agreed to pay a license
fee of $25,000 in September 2006, as well as annual maintenance fees, milestone
payments totaling $750,000 that are payable on filing a NDA, and on
approval of an NDA with the FDA, as well as royalties on net sales of the
TRIMESTATM
technology covered by the licensed patents. If we become public or are acquired
by a public company, we may be permitted to partially pay milestone payments
in
the form of equity.
Oregon
Health & Sciences University License Agreement
During
2005, we have an exclusive worldwide license agreement with Oregon Health
&
Sciences University relating to pending U.S. and international patent
applications covering the use of low dose estrogens to treat immune pathologies
including the active ingredient of TRIMESTATM.
Pursuant to this agreement, we paid an upfront license fee of $1,500, reimbursed
for patent expenses of $41,000; and agreed to pay annual maintenance fees,
potential regulatory and patent milestone payments totaling $375,000, which
are covered by the patent rights, as well as royalties on net sales of
products covered by the licensed patent applications.
Asset
Purchase Agreement for TRIMESTA™
Through
an asset purchase agreement and the approval of the stockholders of EPI and
General Fiber, Inc., a related party company controlled by Accredited Ventures,
we have an option to acquire an exclusive license to TRIMESTA™.
Employment
Agreement with Dr. A. Joseph Rudick
On
September 15, 2004, our majority owned subsidiary EPI entered into, and
subsequently amended, an employment agreement with Dr. A. Joseph
Rudick to serve as the Chief Medical Officer and President of EPI. During
2005,
the company paid Dr. Rudick a $25,000 bonus and we agreed to pay him an annual
base salary of $175,000. In the merger with EPI, we will grant Dr. Rudick
options to acquire 691,235 shares of our common stock, over a ten-year term,
vesting over a three year period being at the closing of the Merger (assuming
Dr. Rudick raises at least $10 million in gross proceeds to Pipex and completes
the EPI acquisition), so long as Dr. Rudick is employed as a director or
officer
of Pipex and issue 53,270 warrants to purchase EPI common stock at $1.10
per
share.
Employment
Agreement with Steve H. Kanzer
In
January 2005, we entered into a four year employment agreement with Steve
H.
Kanzer to serve as our Chairman, President and Chief Executive Officer. Upon
the
consummation of a financing, we agreed to pay him an annual base salary of
$297,000, an annual bonus equal to 30% of his base salary and issue him a
ten-year option to acquire 813,175 shares of our common stock, vesting annually
over a three year period, assuming Mr. Kanzer raises at least $10 million
in
gross proceeds to Pipex.
Letter
of Intent to Merge with BCY LifeSciences, Inc.
On
January 19, 2006, we entered into a letter of intent to merge with BCY
LifeSciences, Inc., a publicly traded biopharmaceutical company listed on
the
TSX Venture Exchange in Canada (TSXV: BCY). Pursuant to this letter of intent,
we provided a bridge loan of $50,000 to BCY. This letter of intent expired
without renewal during June 2006. The $50,000 was not repaid, nor is it expected
to be repaid and represents a failed merger cost expense.
Agreement
to Acquire EPI
Pursuant
to a share exchange agreement, we acquired 65.47% of Effective Pharmaceuticals,
Inc. (EPI). Following the closing of our acquisition by Registrant, we plan
to
consummate a merger with EPI in which Pipex will acquire the 34.53% of EPI’s
outstanding Series B, convertible preferred stock that we do not currently
own.
We plan to complete this merger during the forth quarter of 2006. However,
we
can give no assurances that we will be able to consummate this merger with
EPI
(see “Risk Factors—we may not be able to consummate the merger of EPI into our
company”). Upon the closing of this merger, EPI would become a wholly-owned
subsidiary and there will be no minority interest.
MANUFACTURING
We
plan
to utilize contract manufacturing firms to produce the bulk active ingredients
for COPREXATM,
TRIMESTA™,
CORRECTATM,
Anti-CD4 802-2, and EFFIRMATM
in
accordance with “current good manufacturing processes” (cGMP) guidelines
outlined by the FDA.
SALES
AND MARKETING
We
plan
to establish our own in-house neuroscience sales and marketing effort in
the
United States to market our neurology products, specifically,
COPREXATM
and
TRIMESTA™.
As we
expand the use of COPREXATM
and
TRIMESTA™
into
larger CNS diseases, we will be able to utilize our existing marketing
infrastructure to market these products. We may choose to enter into a
co-promotion or licensing agreement for specific territories with biotechnology
or pharmaceutical companies to market CORRECTA™, Anti-CD4 802-2, EFFIRMA™, and
certain uses of COPREXATM.
FACILITIES
Our
primary offices are located at 3985 Research Park Drive, Ann Arbor, MI 48108.
We
currently rent approximately 5,500 square feet of office, laboratory and
production space on a month-to-month basis for monthly rent of $5,500. Our
phone
number is (734) 332-7800 and our facsimile number is (734) 332-7878. Our
website
is located at www.pipexinc.com. We also have additional offices in Miami,
Florida, which we share with Accredited Ventures, Inc., EPI, and CD4.
CORPORATE
INFORMATION
We
were
incorporated in the State of Delaware on January 8, 2001. We have two majority
owned subsidiaries, Solovax, Inc. (“Solovax”) and Effective Pharmaceuticals,
Inc. (“EPI”). EPI in turn owns 91.6% of the outstanding shares of CD4
Biosciences, Inc. (“CD4”). We currently own an aggregate 65.47% of the
outstanding voting Series B, convertible preferred and common shares of EPI.
Our
primary offices and laboratories are located at 3985 Research Park Drive,
Ann
Arbor, MI 48108. Our phone number is (734) 332-7800 and our facsimile number
is
(734) 332-7878. Our website is located at www.pipexinc.com.
RISK
FACTORS
An
investment in our securities is speculative and involves a high degree of
risk.
You should not invest in our securities if you cannot bear the economic risk
of
your investment for an indefinite period of time and cannot afford to lose
your
entire investment. You should carefully consider the following risk factors
associated with the offering, as well as other information contained elsewhere
in this memorandum, before investing.
This
Form
8-K contains certain forward-looking statements within the meaning of section
27A of the Securities Act and section 21E of the Securities Exchange Act
of
1934, as amended. These forward-looking statements are based on current
expectations, estimates and projections about our industry, management’s
beliefs, and assumptions made by management. Words such as “anticipates,”
“expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of
such words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
are
subject to certain risks, uncertainties and assumptions that are difficult
to
predict. Accordingly, actual results may differ materially from those expressed
or forecasted in any such forward-looking statements. Such risks and
uncertainties include those risk factors and such other uncertainties noted
in
this Form 8-K. We assume no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
RISKS
RELATED TO OUR BUSINESS
We
are a development stage company. We currently have no product revenues and
will
need to raise additional capital to operate our
business.
We
are a
development stage company that has experienced significant
losses
since inception and has a significant accumulated deficit. We expect to incur
additional operating losses in the future and expect our cumulative losses
to
increase. To date, we have generated no product revenues. As of June 30,
2006,
we have expended approximately $5.3 million on a consolidated basis acquiring
and developing our current product
candidates.
Until such time as we receive approval from the U.S. Federal Drug Administration
and other regulatory authorities for our product candidates, we will not
be
permitted to sell our drugs and will not have product revenues. Therefore,
for
the foreseeable future we will have to fund all of our operations and capital
expenditures from the net proceeds of this offering, cash on hand, licensing
fees, and grants. We will need to seek additional sources of financing in
addition to the proceeds of this offering, and such additional financing
may not
be available on favorable terms, if at all. If we do not succeed in raising
additional funds on acceptable terms, we may be unable to complete planned
pre-clinical and clinical trials or obtain approval of our product candidates
from the FDA and other regulatory authorities. In addition, we could be forced
to discontinue product development, reduce or forego sales and marketing
efforts, and forego attractive business opportunities. Any additional sources
of
financing will likely involve the issuance of our equity or debt securities,
which will have a dilutive effect on our stockholders.
We
are not currently profitable and may never become
profitable.
We
have a
history of losses and expect to incur substantial losses and negative operating
cash flow for the foreseeable future, and we may never achieve or maintain
profitability. Even if we succeed in developing and commercializing one or
more
of our product candidates, we expect to incur substantial losses for the
foreseeable future and may never become profitable. We also expect to continue
to incur significant operating and capital expenditures and anticipate that
our
expenses will increase substantially in the foreseeable future as we do the
following:
· |
continue
to undertake pre-clinical development and clinical trials for our
product
candidates;
|
· |
seek
regulatory approvals for our product
candidates;
|
· |
implement
additional internal systems and
infrastructure;
|
· |
lease
additional or alternative office facilities;
and
|
· |
hire
additional personnel, including members of our management
team.
|
We
also
expect to experience negative cash flow for the foreseeable future as we
fund
our technology development with capital expenditures. As a result, we will
need
to generate significant revenues in order to achieve and maintain profitability.
We may not be able to generate these revenues or achieve profitability in
the
future. Our failure to achieve or maintain profitability could negatively
impact
the value of our common stock and underlying securities.
We
have a limited operating history on which investors can base an investment
decision.
We
are a
development-stage company and have not demonstrated our ability to perform
the
functions necessary for the successful commercialization of any of our product
candidates. The successful commercialization of our product candidates will
require us to perform a variety of functions, including:
· |
continuing
to undertake pre-clinical development and clinical
trials;
|
· |
participating
in regulatory approval processes;
|
· |
formulating
and manufacturing products; and
|
· |
conducting
sales and marketing activities.
|
Our
operations have been limited to organizing and staffing our company, acquiring,
developing, and securing our proprietary technology, and undertaking
pre-clinical trials and Phase I/II and Phase II clinical trials of our
principal product candidates. These operations provide a limited basis for
you
to assess our ability to commercialize our product candidates and the
advisability of investing in our securities.
We
may not obtain the necessary U.S. or worldwide regulatory approvals to
commercialize our product candidates.
We
will
need FDA approval to commercialize our product candidates in the U.S. and
approvals from equivalent regulatory authorities in foreign jurisdictions
to
commercialize our product candidates in those jurisdictions. In order to
obtain
FDA approval for any of our product candidates, we must submit to the FDA
a new
drug application, or “NDA,” demonstrating that the product candidate is safe for
humans and effective for its intended use. This demonstration requires
significant research and animal tests, which are referred to as “pre-clinical
studies,” as well as human tests, which are referred to as “clinical trials.” We
will also need to file additional investigative new drug applications and
protocols in order to initiate clinical testing of our drug candidates in
new
therapeutic indications and delays in obtaining required FDA and institutional
review board approvals to commence such studies may delay our initiation
of such
planned additional studies.
Satisfying
the FDA’s regulatory requirements typically takes many years, depending on the
type, complexity, and novelty of the product candidate, and requires substantial
resources for research, development, and testing. We cannot predict whether
our
research and clinical approaches will result in drugs that the FDA considers
safe for humans and effective for indicated uses. The FDA has substantial
discretion in the drug approval process and may require us to conduct additional
pre-clinical and clinical testing or to perform post-marketing studies. The
approval process may also be delayed by changes in government regulation,
future
legislation or administrative action, or changes in FDA policy that occur
prior
to or during our regulatory review. Delays in obtaining regulatory approvals
may
do the following:
· |
delay
commercialization of, and our ability to derive product revenues
from, our
product candidates;
|
· |
impose
costly procedures on us; and
|
· |
diminish
any competitive advantages that we may otherwise
enjoy.
|
Even
if
we comply with all FDA requests, the FDA may ultimately reject one or more
of
our NDAs. We cannot be sure that we will ever obtain regulatory clearance
for
our product candidates. Failure to obtain FDA approval of any of our product
candidates will severely undermine our business by reducing our number of
salable products and, therefore, corresponding product revenues.
In
foreign jurisdictions, we must receive approval from the appropriate regulatory
authorities before we can commercialize our drugs. Foreign regulatory approval
processes generally include all of the risks associated with the FDA approval
procedures described above. We cannot assure you that we will receive the
approvals necessary to commercialize our product candidate for sale outside
the
United States.
We
may not be able to retain rights licensed to us by others to commercialize
key
products and may not be able to establish or maintain the relationships we
need
to develop, manufacture, and market our products.
We
currently rely on an exclusive worldwide license agreement with the University
of Michigan relating to various uses of COPREXATM.
We also
have an exclusive license agreement with the McLean Hospital relating to
the use
of EFFIRMATM
to treat
fibromyalgia syndrome; an exclusive license agreement with Thomas Jefferson
University relating to our anti-CD4 inhibitors; an exclusive license agreement
with the Regents of the University of California and Oregon Health and Science
University relating to our TRIMESTA™
technology;
an exclusive license agreement with the Children’s Hospital-Boston relating to
our CORRECTATM
technology and an exclusive option agreement to license our T-cell vaccine
program from the University of Southern California (USC). Each of these
agreements requires us to use our best efforts to commercialize each of the
technologies as well as meet certain diligence requirements and timelines
in
order to keep the license agreement in effect. In the event we are not able
to
meet our diligence requirements, we may not be able to retain the rights
granted
under our agreements or renegotiate our arrangement with these institutions
on
reasonable terms, or at all.
Furthermore,
we currently have very limited product development capabilities and no
manufacturing, marketing or sales capabilities. For us to research, develop,
and
test our product candidates, we would need to contract with outside researchers,
in most cases those parties that did the original research and from whom
we have
licensed the technologies.
We
can
give no assurances that any of our issued patents licensed to us will or
any of
our other patent applications will provide us with significant proprietary
protection or be of commercial benefit to us. Furthermore, the issuance of
a
patent is not conclusive as to its validity or enforceability, nor does the
issuance of a patent provide the patent holder with freedom to operate without
infringing the patent rights of others.
Developments
by competitors may render our products or technologies obsolete or
non-competitive.
Companies
that currently sell both generic and proprietary pharmaceutical compounds
to
treat central-nervous-system, inflammatory, autoimmune and fibrotic diseases
include: Pfizer, Inc., GlaxoSmithKline Pharmaceuticals, Shire Pharmaceuticals,
Plc., Merck & Co., Eli Lilly & Co., Serono, SA, Biogen Idec, Inc.,
Achillion, Ltd., Active Biotech, Inc., Panteri Biosciences, Meda, Merrimack
Pharmaceuticals, Inc., Schering AG, Forest Laboratories, Inc., Attenuon,
LLC,
Cypress Biosciences, Inc., Axcan Pharma, Inc., Teva Pharmaceuticals, Inc.,
Intermune, Inc. Fibrogen, Inc., Rare Disease Therapeutics, Inc., Prana
Biotechnology, Inc., Merz & Co., AstraZeneca Pharmaceuticals, Inc., Chiesi
Pharmaceuticals, Inc., Targacept, Inc., and Johnson & Johnson, Inc.
Alternative technologies are being developed to treat inflammatory, fibrotic,
Alzheimer’s and Wilson’s diseases, several of which are in early and advanced
clinical trials, such as, pirfenidone, milnacipram, Actimmune®
and
other interferon preparations. Unlike us, many of our competitors have
significant financial and human resources. In addition, academic research
centers may develop technologies that compete with our CORRECTATM,
TRIMESTA™,
anti-CD4 inhibitors, flupirtine and COPREXATM
technologies. We are aware that Pharmafrontiers and BayHill Therapeutics
are
developing competitive T-cell vaccine therapies for the treatment of multiple
sclerosis and are planning to initiate a phase II and phase III clinical
trials.
We
may not succeed in enforcing our orphan drug
designations.
COPREXATM
has been
designated by the FDA as an “orphan drug” for the treatment of Wilson’s disease
patients presenting with neurologic complications. CORRECTATM
has also
been designated by the FDA as an “orphan drug” for the treatment of pouchitis
patients. We intend to file an “orphan drug” designation from the EMEA (the
European equivalent of the FDA) for both COPREXATM
and
CORRECTATM
for
similar uses. Pursuant to our agreements with our scientific inventors, we
have
acquired these designations. Orphan drug designation is an important element
of
our competitive strategy because there is no composition of matter patent
for
COPREXATM TRIMESTA™
or
CORRECTATM.
Any
company that obtains the first FDA approval for a designated orphan drug
for a
rare disease generally receives marketing exclusivity for use of that drug
for
the designated condition for a period of seven years in the United States
and
ten years in the European Union.
To
be
successful in enforcing this designation, our new drug application would
need to
be the first NDA approved to use the COPREXATM
to treat
this indication. While we are not aware of any other companies that have
sought
orphan drug designation for COPREXATM
or its
active ingredient, tetrathiomolybdate, for this indication, other companies
may
in the future seek it and may obtain FDA marketing approval before we do.
In
addition, the FDA may permit other companies to market a form of
tetrathiomolybdate to treat Wilson’s disease patients with neurologic
complication if their product demonstrates clinical superiority. This could
create a more competitive market for us.
Competitors
could develop and gain FDA approval of our
products for a different indication.
A
competitor could develop our products in a similar format, but for a different
indication. For example, other companies could manufacture and develop
COPREXATM
and its
active ingredient, tetrathiomolybdate and secure approvals for different
indications. We are aware that a potential competitor has an exclusive license
from
the
University of Michigan to an issued U.S. patent that relates to the use of
tetrathiomolybdate, to treat angiogenic diseases (the “Angiogenic Patent”) and
is currently in phase I and phase II clinical trials for the treatment of
various forms of cancer. To our knowledge, this competitor and UM have filed
additional patent applications claiming various analog structures and
formulations of tetrathiomolybdate to treat various diseases. While our use
of
COPREXATM
and its
active ingredient, tetrathiomolybdate, is in more advanced states of clinical
development, having completed two phase III clinical trials, we cannot predict
whether or not one or more U.S. patents will be issued corresponding to the
Angiogenic Patent and patent applications which might prevent us from expanding
the commercial applications of COPREXATM.
Further, we cannot predict whether our competitor might seek to develop their
version of tetrathiomolybdate for Wilson’s disease and file for FDA or EMEA
approval before us and saturate the market. We also cannot predict whether,
if
issued, any patent corresponding to the Angiogenic Patent may prevent us
from
conducting our business or result in lengthy and costly litigation or the
need
for a license. Furthermore, if we need to obtain a license to these or other
patents in order to conduct our business, we may find that it is not available
to us on commercially reasonable terms, or is not available to us at
all.
If
the
FDA approves other tetrathiomolybdate products to treat indications other
than
those covered by our issued or pending patent applications, physicians may
elect
to prescribe a competitor’s tetrathiomolybdate to treat Wilson’s disease—this is
commonly referred to as “off-label” use. While under FDA regulations a
competitor is not allowed to promote off-label uses of its product, the FDA
does
not regulate the practice of medicine and, as a result, cannot direct physicians
as to which source it should use for the tetrathiomolybdate they prescribe
to
their patients. Consequently, we might be limited in our ability to prevent
off-label use of a competitor’s tetrathiomolybdate to treat Wilson’s disease or
inflammatory or fibrotic disease, even if we have orphan drug exclusivity.
Our
competitor might seek FDA or EMEA approval to market tetrathiomolybdate for
any
therapeutic indication, including Wilson’s disease or idiopathic pulmonary
fibrosis (IPF). It may be more difficult to establish contributory infringement
of methods of formulation or use patents as compared to a patent on a compound.
If we are not able to obtain and enforce these patents, a competitor could
use
tetrathiomolybdate for a treatment or use not covered by any of our
patents.
We
rely primarily on method patents and patent applications
and
various regulatory exclusivities to protect the development of our technologies,
and our ability to compete may decrease or be eliminated if we are not able
to
protect our proprietary technology.
Our
competitiveness may be adversely affected if we are unable to protect our
proprietary technologies. Currently, there are no composition of matter patents
for TRIMESTATM,
EFFIRMATM,
CORRECTATM,
COPREXATM
or their
respective active ingredient, estriol, flupirtine, clotrimazole and
tetrathiomolybdate. Additionally, we do not have an issued patent for
COPREXATM’s
use to
treat Wilson’s disease, although we do have Orphan Drug Designation for this
indication. If granted by the FDA, Orphan Drug Designation would provide
protection for seven years of marketing exclusivity for that product in that
disease indication in the U.S. We also expect to rely on patent protection
from
an issued U.S. Patent for the use of COPREXATM
and
related compounds to treat inflammatory and fibrotic diseases (U.S. Patent
No
6,855,340) and we have received a notice of allowance for the use of
COPREXATM
and
related compounds to treat Alzheimer’s disease. Both of these patents have been
exclusively licensed to us. We have also filed various pending patent
applications which if issue, would cover various formulations, packaging,
distribution & monitoring methods for COPREXATM.
We rely
on issued patent and pending-patent applications for use of TRIMESTATM
to treat
MS (issued U.S. Patent No. 6,936,599) and various other therapeutic indications
which have been exclusively licensed to us. We have exclusively licensed
an
issued patent for the treatment of fibromyalgia with EFFIRMA™ and have pending
patent applications for our uses of CORRECTA™.
We
also
expect to rely on regulatory exclusivities, such as the Orphan Drug Act with
the
FDA and EMEA (“Orphan Drug”) to protect COPREXATM,
and
CORRECTATM
for
certain therapeutic indications and our other future products. Orphan Drug
protection provides for seven years of marketing exclusivity for that disease
indication
in the U.S. and ten years of marketing exclusivity for that disease indication
in Europe. We have received an Orphan Drug Designation for the use of
CORRECTATM
to treat
pouchitis as well as an Orphan Drug Designation for the use of
COPREXATM
to treat
neurologically presenting Wilson’s disease and are in the process of filing
similar designations in Europe. Orphan drug designation is an important element
of our competitive strategy for COPREXATM
and
CORRECTATM.
To be
successful in enforcing this designation, our NDA would need to be the first
NDA
approved to use COPREXATM
and
CORRECTATM
for that
indication. While we are not aware of any other companies that have sought
orphan drug designation for COPREXATM
and
CORRECTATM
for any
indication, other companies may in the future seek it and may obtain FDA
marketing approval before we do.
After
the
Orphan Drug exclusivity period expires, assuming our patents are validly
issued,
we still expect to rely on our issued and pending method of use patent
applications to protect our proprietary technology with respect to the
development of COPREXATM,
TRIMESTATM
and
CORRECTATM.
The
patent positions of pharmaceutical companies are uncertain and may involve
complex legal and factual questions. We may incur significant expense in
protecting our intellectual property and defending or assessing claims with
respect to intellectual property owned by others. Any patent or other
infringement litigation by or against us could cause us to incur significant
expense and divert the attention of our management.
We
may
also rely on the United States Drug Price Competition and Patent Term
Restoration Act, commonly known as the “Hatch-Waxman Amendments,” to protect
some of our current product candidates, specifically COPREXATM,
TRIMESTATM,
Anti-CD4 802-2, EFFIRMATM
and
other future product candidates we may develop. Once a drug containing a
new
molecule is approved by the FDA, the FDA cannot accept an abbreviated NDA
for a
generic drug containing that molecule for five years, although the FDA may
accept and approve a drug containing the molecule pursuant to an NDA supported
by independent clinical data. Recent amendments have been proposed that would
narrow the scope of Hatch-Waxman exclusivity and permit generic drugs to
compete
with our drug.
Others
may file patent applications or obtain patents on similar technologies or
compounds that compete with our products. We cannot predict how broad the
claims
in any such patents or applications will be, and whether they will be allowed.
Once claims have been issued, we cannot predict how they will be construed
or
enforced. We may infringe intellectual property rights of others without
being
aware of it. If another party claims we are infringing their technology,
we
could have to defend an expensive and time consuming lawsuit, pay a large
sum if
we are found to be infringing, or be prohibited from selling or licensing
our
products unless we obtain a license or redesign our product, which may not
be
possible.
We
also
rely on trade secrets and proprietary know-how to develop and maintain our
competitive position. Some of our current or former employees, consultants,
or
scientific advisors, or current or prospective corporate collaborators, may
unintentionally or willfully disclose our confidential information to
competitors or use our proprietary technology for their own benefit.
Furthermore, enforcing a claim alleging the infringement of our trade secrets
would be expensive and difficult to prove, making the outcome uncertain.
Our
competitors may also independently develop similar knowledge, methods, and
know-how or gain access to our proprietary information through some other
means.
We
may fail to retain or recruit necessary personnel, and we may be unable to
secure the services of consultants.
We
currently have eight full-time employees, including Steve H. Kanzer, our
co-founder, Chairman and CEO and Dr. Charles Bisgaier, our President. We
have
also engaged regulatory consultants to advise us on our dealings with the
FDA.
Following the completion of this offering, we intend to recruit certain key
executive officers, including a vice president of finance, a vice president
of
regulatory affairs, and other executive officers. Our future performance
will
depend in part on our ability to successfully integrate newly hired executive
officers into our management team and our ability to develop an effective
working relationship among senior management.
Certain
of our officers, directors, (including Mr. Stergis, our Chief Operating Officer
and Dr. Rudick, our Chief Medical Officer) scientific advisors, and consultants
serve as officers, directors, scientific advisors, or consultants of other
biopharmaceutical or biotechnology companies. We can expect this to also
be the
case with personnel that we engage in the future. We can give no assurances
that
any such other companies will not have interests that are in conflict with
our
interests.
Losing
key personnel or failing to recruit necessary additional personnel would
impede
our ability to attain our development objectives. There is intense competition
for qualified personnel in the drug-development field, and we may not be
able to
attract and retain the qualified personnel we would need to develop our
business.
We
rely
on independent organizations, advisors, and consultants to perform certain
services for us, including handling substantially all aspects of regulatory
approval, clinical management, manufacturing, marketing, and sales. We expect
that this will continue to be the case. Such services may not always be
available to us on a timely basis when we need them.
We
may experience difficulties in obtaining sufficient quantities of our products
or other compounds.
In
order
to successfully commercialize our product candidates, we must be able to
manufacture our products in commercial quantities, in compliance with regulatory
requirements, at acceptable costs, and in a timely manner. Manufacture of
the
types of biopharmaceutical products that we propose to develop present various
risks. For example, manufacture of the active ingredient in COPREXATM
is a
complex process that can be difficult to scale up for purposes of producing
large quantities. This process can also be subject to delays, inefficiencies,
and poor or low yields of quality products. Furthermore, the active ingredient
of COPREXA™ is known to be subject to a loss of potency as a result of prolonged
exposure to moisture and other normal atmospheric conditions. We are developing
proprietary formulations and specialty packaging solutions to overcome this
stability issue, but we can give no assurances that we will be successful
in
meeting the stability requirements required for approval by regulatory
authorities such as the FDA. Additionally, our SOLOVAX T-cell vaccine technology
is complex to manufacture. The vaccine is manufactured through the procurement
of a patients own T-cells derived from the patient’s plasma. This manufacturing
process involves incubation of T-cells, irradiation and refrigeration of
the
cells. We plan to develop a revised manufacturing procedure which will
streamline quality control of the vaccine.
Historically,
our manufacturing has been handled by contract manufacturers and compounding
pharmacies. We can give no assurances that we will be able to continue to
use
our current manufacturer or be able to establish another relationship with
a
manufacturer quickly enough so as not to disrupt commercialization of any
of our
products, or that commercial quantities of any of our products, if approved
for
marketing, will be available from contract manufacturers at acceptable costs.
In
addition, any contract manufacturer that we select to manufacture our product
candidates might fail to maintain a current “good manufacturing practices”
(cGMP) manufacturing facility.
If
we
decide to establish a full-scale commercial manufacturing facility, we would
require substantial additional funds, we would need to hire and train
significant numbers of employees and comply with the extensive regulations
applicable to such a facility. We might find that we are unable to develop
a
cGMP manufacturing facility that is able to manufacture quantities of products
required for all clinical trials, as well as commercial-scale
manufacturing.
The
cost
of manufacturing certain products may make them prohibitively expensive.
In
order to successfully commercialize our product candidates we may be required
to
reduce the costs of production, and we may find that we are unable to do
so. We
may be unable to obtain, or may be required to pay high prices for compounds
manufactured or sold by others that we need for comparison purposes in clinical
trials and studies for our products.
Clinical
trials are very expensive, time-consuming, and difficult to design and
implement.
Human
clinical trials are very expensive and difficult to design and implement,
in
part because they are subject to rigorous regulatory requirements. The clinical
trial process is also time-consuming. We estimate that clinical trials of
our
product candidates would take at least several years to complete. Furthermore,
failure can occur at any stage of the trials, and we could encounter problems
that cause us to abandon or repeat clinical trials. Commencement and completion
of clinical trials may be delayed by several factors, including:
· |
unforeseen
safety issues;
|
· |
determination
of dosing issues;
|
· |
lack
of effectiveness during clinical
trials;
|
· |
slower
than expected rates of patient
recruitment;
|
· |
inability
to monitor patients adequately during or after treatment;
and
|
· |
inability
or unwillingness of medical investigators to follow our clinical
protocols.
|
In
addition, we or the FDA may suspend our clinical trials at any time if it
appears that we are exposing participants to unacceptable health risks or
if the
FDA finds deficiencies in our submissions or conduct of our trials.
The
results of our clinical trials may not support our product candidate
claims.
Even
if
our clinical trials are completed as planned, we cannot be certain that the
results will support our product-candidate claims. Success in pre-clinical
testing and phase II clinical trials does not ensure that later clinical
trials will be successful. We cannot be sure that the results of later clinical
trials would replicate the results of prior clinical trials and pre-clinical
testing. Clinical trials may fail to demonstrate that our product candidates
are
safe for humans and effective for indicated uses. Any such failure could
cause
us to abandon a product candidate and might delay development of other product
candidates. Any delay in, or termination of, our clinical trials would delay
our
obtaining FDA approval for the affected product candidate and, ultimately,
our
ability to commercialize that product candidate.
Physicians
and patients may not accept and use our technologies.
Even
if
the FDA approves our product candidates, physicians and patients may not
accept
and use them. Acceptance and use of our product will depend upon a number
of
factors, including the following:
· |
the
perception of members of the health care community, including physicians,
regarding the safety and effectiveness of our
drugs;
|
· |
the
cost-effectiveness of our product relative to competing
products;
|
· |
availability
of reimbursement for our products from government or other healthcare
payers; and
|
· |
the
effectiveness of marketing and distribution efforts by us and our
licensees and distributors, if any.
|
Because
we expect sales of our current product candidates, if approved, to generate
substantially all of our product revenues for the foreseeable future, the
failure of any of these drugs to find market acceptance would harm our business
and could require us to seek additional financing.
We
depend on researchers who are not under our control.
We
depend
upon independent investigators and scientific collaborators, such as
universities and medical institutions, to conduct our pre-clinical and clinical
trials under agreements with us. These collaborators are not our employees
and
we cannot control the amount or timing of resources that they devote to our
programs or the timing of their procurement of clinical-trial data. They
may not
assign as great a priority to our programs or pursue them as diligently as
we
would if we were undertaking those programs ourselves. Failing to devote
sufficient time and resources to our drug-development programs, or if their
performance is substandard, that could result in delay of any FDA applications
and our commercialization of the drug candidate involved.
These
collaborators may also have relationships with other commercial entities,
some
of which may compete with us. Our collaborators assisting our competitors
at our
expense, could harm our competitive position. For example, we depend on
scientific collaborators for our TRIMESTA™,
CORRECTATM,
anti-CD4 802-2, EFFIRMATM
and
COPREXATM
development programs. Specifically, all of the clinical trials have been
conducted under physician-sponsored investigational new drug applications
(INDs), not corporate-sponsored INDs. We have experienced difficulty in
collecting the data or transferring these programs to corporate-sponsored
INDs.
Additionally, we are aware that all of our scientific collaborators also
act as
advisors to our competitors.
We
have no experience selling, marketing, or distributing products and do not
have
the capability to do so.
We
currently have no sales, marketing, or distribution capabilities. We do not
anticipate having resources in the foreseeable future to allocate to selling
and
marketing our proposed products. Our success will depend, in part, on whether
we
are able to enter into and maintain collaborative relationships with a
pharmaceutical or a biotechnology company charged with marketing one or more
of
our products. We may not be able to establish or maintain such collaborative
arrangements or to commercialize our products in foreign territories, and
even
if we do, our collaborators may not have effective sales forces.
If
we do
not, or are unable to, enter into collaborative arrangements to sell and
market
our proposed products, we will need to devote significant capital, management
resources, and time to establishing and developing an in-house marketing
and
sales force with technical expertise. We may be unsuccessful in doing
so.
If
we fail to maintain positive relationships with particular individuals, we
may
be unable to successfully develop our product candidates, conduct clinical
trials, and obtain financing.
If
we
fail to maintain positive relationships with members of our management team
or
if these individuals decreases their contributions to the Company, our business
could be adversely impacted. We do not carry key employee insurance policies
for
any of our key employees.
We
also
rely greatly on employing and retaining other highly trained and experienced
senior management and scientific personnel. The competition for these and
other
qualified personnel in the biotechnology field is intense. If we are not
able to
attract and retain qualified scientific, technical, and managerial personnel,
we
probably will be unable to achieve our business objectives.
We
may not be able to compete successfully for market share against other drug
companies.
The
markets for our product candidates are characterized by intense competition
and
rapid technological advances. If our product candidates receive FDA approval,
they will compete with existing and future drugs and therapies developed,
manufactured, and marketed by others. Competing products may provide greater
therapeutic convenience or clinical or other benefits for a specific indication
than our products, or may offer comparable performance at a lower cost. If
our
products fail to capture and maintain market share, we may not achieve
sufficient product revenues and our business will suffer.
We
will
compete against fully integrated pharmaceutical companies and smaller companies
that are collaborating with larger pharmaceutical companies, academic
institutions, government agencies, or other public and private research
organizations. Many of these competitors have therapies to treat autoimmune
and
central nervous systems already approved or in development. In addition,
many of
these competitors, either alone or together with their collaborative partners,
operate larger research-and-development programs than we do, have substantially
greater financial resources than we do, and have significantly greater
experience in the following areas:
· |
undertaking
pre-clinical testing and human clinical
trials;
|
· |
obtaining
FDA and other regulatory approvals of
drugs;
|
· |
formulating
and manufacturing drugs; and
|
· |
launching,
marketing and selling drugs.
|
We
may incur substantial costs as a result of litigation or other proceedings
relating to patent and other intellectual property rights, as well as costs
associated with frivolous lawsuits.
If
any
other person files patent applications, or is issued patents, claiming
technology also claimed by us in pending applications, we may be required
to
participate in interference proceedings in the U.S. Patent and Trademark
Office
to determine priority of invention. We, or our licensors, may also need to
participate in interference proceedings involving our issued patents and
pending
applications of another entity.
We
cannot
guarantee that the practice of our technologies will not conflict with the
rights of others. In some foreign jurisdictions, we could become involved
in
opposition proceedings, either by opposing the validity of another’s foreign
patent or by persons opposing the validity of our foreign patents.
We
may
also face frivolous litigation or lawsuits from various competitors or from
litigious securities attorneys. The cost to us of any litigation or other
proceeding relating to these areas, even if resolved in our favor, could
be
substantial. Uncertainties resulting from initiation and continuation of
any
litigation could have a material adverse effect on our ability to continue
our
operations.
If
we infringe the rights of others we could be prevented from selling products
or
forced to pay damages.
If
our
products, methods, processes, and other technologies are found to infringe
the
proprietary rights of other parties, we could be required to pay damages,
or we
may be required to cease using the technology or to license rights from the
prevailing party. Any prevailing party may be unwilling to offer us a license
on
commercially acceptable terms.
Our
ability to generate product revenues will be diminished if our drugs sell
for
inadequate prices or patients are unable to obtain adequate levels of
reimbursement.
Our
ability to commercialize our drugs, alone or with collaborators, will depend
in
part on the extent to which reimbursement is available from government and
health administration authorities, private health maintenance organizations,
health insurers, and other healthcare payers.
Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products. Healthcare payers, including Medicare, are challenging the prices
charged for medical products and services. Government and other healthcare
payers increasingly attempt to contain healthcare costs by limiting both
coverage and the level of reimbursement for drugs. Even if our product
candidates are approved by the FDA, insurance coverage may not be available,
or
may be inadequate, to cover the cost of our drugs. This could affect our
ability
to commercialize our products.
Certain
interlocking relationships may present potential conflicts of
interest.
Members
of our management are also officers of the placement agent or its affiliate,
Accredited Ventures, Inc., a merchant banking and venture capital firm that
identifies, evaluates, and pursues investment opportunities in the biomedical
and biopharmaceutical sectors, whether technologies, products, or
companies.
Steve
H.
Kanzer, our co-founder, Chairman, President and Chief Executive Officer and
an
affiliate of our largest stockholder, is Chairman and Chief Executive Officer
of
the placement agent and Accredited Ventures. Nicholas Stergis, our Chief
Operating Officer, Treasurer, Secretary, and director, is also a managing
director of Accredited Ventures and managing director of the Placement Agent.
Additionally, Dr. A. Joseph Rudick, a member of our board of directors and
Chief
Medical Officer, is a registered representative of the placement agent.
None
of
our affiliates, including Accredited Ventures, the placement agent, or any
of
our directors or officers, is obligated under any agreement or understanding
with us to make any additional products or technologies available to us.
Similarly, we can give no assurances, and we do not expect and purchasers
of our
shares should not expect, that any biomedical or pharmaceutical product or
technology identified by any of our affiliates in the future would be made
available to us.
Certain
of our current or future officers and directors may from time to time serve
as
officers or directors of other biopharmaceutical or biotechnology companies
that
are developing products and technologies to treat central nervous system,
autoimmune, and fibrotic diseases. We can give no assurances that such other
companies will not have interests that conflict with ours.
We
may not be able to obtain adequate insurance coverage against product liability
claims.
Our
business exposes us to the product liability risks inherent in the testing,
manufacturing, marketing, and sale of human therapeutic technologies and
products. Even if it is available, product liability insurance for the
pharmaceutical and biotechnology industry generally is expensive. Adequate
insurance coverage may not be available at a reasonable cost.
RISKS
RELATED TO OUR
Merger with Registrant
We
will seek to raise additional funds in the future, which may be dilutive
to
shareholders or impose operational restrictions.
We
expect
to seek to raise additional capital in the future to help fund development
of
our proposed products. If we raise additional capital through the issuance
of
equity or debt securities, the percentage ownership of our current shareholders
will be reduced. Our shareholders may experience additional dilution in net
book
value per share and any additional equity securities may have rights,
preferences and privileges senior to those of the holders of our common stock.
If we cannot raise additional funds, we will have to delay development
activities of our products candidates.
We
are controlled by our current officers, directors, and principal
stockholders.
Currently,
our directors, executive officers, and principal stockholders beneficially
own a
majority of our common stock. As a result, they will be able to exert
substantial influence over the election of our board of directors and the
vote
on issues submitted to our stockholders.
We
may not be able to consummate the merger of EPI into our
company.
We
intend
to complete the merger of our majority owned subsidiary EPI into Pipex. That
merger would require the approval of the 34.53% of the aggregate outstanding
series B convertible, preferred and common stock of IP that we do not currently
own. If holders of these Series B shares do not approve the merger, they
will
remain outstanding. These shares of Series B are entitled to an annual 10%
paid-in kind dividend on June 30, 2005 and June 30, 2006. The holders of
the
series B, convertible preferred stock are also entitled to a one time 30%
payment-in-kind dividend of shares of Series B preferred stock that is
payable December 2006. EPI is required to pay these dividends until a merger
or
trading event of the common stock of EPI in which the shares of Series B
preferred stock would be automatically converted. Payment of that dividend
will
result in a reduction in our ownership interest in EPI and could result in
our
losing voting control of EPI.
There
is a limited public market for the Registrant’s common stock and there is no
assurance that one will develop.
The
Registrant is required to file a registration statement on Form SB-2 within
45
days of the closing of our Merger under the Securities Act to permit the
resale
of shares received by Pipex shareholders in the acquisition by Registrant.
Former Pipex shareholders would, however, only be able to sell their Registrant
shares under the registration statement once it becomes effective, and we
can
give no assurances as to when the registration statement would become effective,
if at all. In the event that we do not file a registration statement within
45
days and cause it to go effective within 150 days, we will pay a 2% penalty
payable in cash per month to the subscribers in this offering. We are required
to maintain this registration statement effective for a period of 2 years
from
the date of closing.
The
shares of Registrant common stock that has been issued to Pipex shareholders
in
the merger with Registrant has not be registered under the Securities Act
of
1933. Therefore, these shares would have to be held indefinitely unless they
were subsequently registered under the Securities Act or unless an exemption
from the registration requirements of the Securities Act was available. Rule
144
promulgated under the Securities Act, which provides an exemption from
registration for dispositions of unregistered securities under certain
circumstances, would not then be available with respect to any of Registrant
securities, at the time of the merger Registrant will not be a reporting
company
under the Securities Exchange Act. Certificates representing Registrant shares
issued to Pipex shareholders in the acquisition would bear a legend with
respect
to such restrictions on subsequent transfers.
Furthermore,
we can give no assurances that a market for our common stock will develop
or
that the price of the shares in the market will be equal to or greater than
the
price per share investors pay in this offering. In fact, the price of our
shares
in any market that may develop could be significantly lower.
Our
common stock may be thinly traded and its price volatile. This may make it
difficult for shareholders to sell their shares of our common
stock.
There
may
be significant volatility in the market price for our common stock. The stock
market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices of
pharmaceuticals companies and that may be unrelated to our operating
performance. General market conditions could materially affect the market
price
of our common stock. The market price of our shares could also be subject
to
significant fluctuations in response to, and may be adversely effected by,
among
other factors, government regulatory actions, variations in our quarterly
operating results, developments in the global pharmaceuticals industry, and
general stock market conditions.
Because
we
will be subject to the “penny stock” rules, broker-dealers may find it harder to
sell the shares of Registrant common stock issued in the merger with
Registrant.
Our
Registrant’s common stock is quoted on the OTCBB (as opposed to NASDAQ or AMEX)
and the price of the common stock is below $5.00 per share, we are be subject
to
“penny stock” regulation. The penny stock rules impose additional sales practice
requirements on broker-dealers who sell such securities to persons other
than
established customers and accredited investors (generally those with assets
in
excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together
with a spouse). For transactions covered by these rules, the broker-dealer
must
make a special suitability determination for the purchase of such securities
and
have received the purchaser’s written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prescribed by the Securities and Exchange Commission
relating to the penny stock market. The broker-dealer also must disclose
the
commissions payable to both the broker-dealer and the registered representative
and current quotations for the securities. Finally, monthly statements must
be
sent disclosing recent price information on the limited market in penny stocks.
Consequently, the “penny stock” rules may restrict the ability of broker-dealers
to sell shares of our common stock. The market price of our common stock
would
likely suffer as a result.
We
are subject to the reporting requirements of federal securities laws, which
can
be expensive.
We
are a
public reporting company in the U.S. and, accordingly, subject to the
information and reporting requirements of the Exchange Act and other federal
securities laws, and the compliance obligations of the Sarbanes-Oxley Act.
The
costs of preparing and filing annual and quarterly reports, proxy statements
and
other information with the SEC and furnishing audited reports to stockholders
will cause our expenses to be higher than they would be if we remained a
privately-held company. In addition, we will incur substantial expenses in
connection with the preparation of the registration statement and related
documents with respect to the registration of resales of the shares and the
reporting of the ,Merger.
Because
we became public by means of a “reverse merger”, we may not be able to attract
the attention of major brokerage firms.
Additional
risks may exist since we will become public through a “reverse merger.”
Securities analysts of major brokerage firms may not provide coverage of
us
since there is little incentive to brokerage firms to recommend the purchase
of
our common stock. No assurance can be given that brokerage firms will want
to
conduct any secondary offerings on behalf of our company in the
future.
Our
compliance with the Sarbanes-Oxley Act and SEC rules concerning internal
controls may be time consuming, difficult and costly.
Although
individual members of our management team have experience as officers of
publicly-traded companies, much of that experience came prior to the adoption
of
the Sarbanes-Oxley Act of 2002. It may be time consuming, difficult and costly
for us to develop and implement the internal controls and reporting procedures
required by Sarbanes-Oxley after the closing of the Merger. We may need to
hire
additional financial reporting, internal controls and other finance staff
in
order to develop and implement appropriate internal controls and reporting
procedures. If we are unable to comply with Sarbanes-Oxley’s internal controls
requirements, we may not be able to obtain the independent accountant
certifications that Sarbanes-Oxley Act requires publicly-traded companies
to
obtain.
When
the Registration Statement becomes effective, there will be a significant
number
of shares of common stock eligible for sale, which could depress the market
price of such stock.
Following
the effective date of the Registration Statement, a large number of shares
of
common stock will become available for sale in the public market, which could
harm the market price of our stock. Further, shares may be offered from time
to
time in the open market pursuant to Rule 144, and these sales may have a
depressive effect as well. In general, a person who has held restricted shares
for a period of one year may, upon filing a notification with the SEC on
Form
144, sell common stock into the market in an amount equal to the greater
of one
percent of the outstanding shares or the average weekly trading volume during
the last four weeks prior to such sale.
There
is not now, and there may not ever be, an active market for our common
stock.
There
currently is no market for our common stock. Further, although our common
stock
may be quoted on the OTC Bulletin Board, trading of our common stock may
be
extremely sporadic. For example, several days may pass before any shares
may be
traded. There can be no assurance that a more active market for the common
stock
will develop.
We
cannot assure you that the common stock will become liquid or that it will
be
listed on a securities exchange.
We
plan
to list our common stock on the American Stock Exchange or the NASDAQ National
Market as soon as practicable. However, we cannot assure you that we will
be
able to meet the initial listing standards of either of those or of any other
stock exchange, or that it will be able to maintain any such listing. Until
the
common stock is listed on an exchange, we expect that it would be eligible
to be
quoted on the OTC Bulletin Board, another over-the-counter quotation system,
or
in the “pink sheets.” In those venues, however, an investor may find it
difficult to obtain accurate quotations as to the market value of the common
stock. In addition, if we failed to meet the criteria set forth in SEC
regulations, various requirements would be imposed by law on broker-dealers
who
sell our securities to persons other than established customers and accredited
investors. Consequently, such regulations may deter broker-dealers from
recommending or selling the common stock, which may further affect its
liquidity. This would also make it more difficult for us to raise additional
capital.
There
may be issuances of shares of preferred stock in the
future.
Although
we currently do not have preferred shares outstanding, the board of directors
could authorize the issuance of a series of preferred stock that would grant
holders preferred rights to our assets upon liquidation, the right to receive
dividends before dividends would be declared to common stockholders, and
the
right to the redemption of such shares, possibly together with a premium,
prior
to the redemption of the common stock. To the extent that we do issue preferred
stock, the rights of holders of common stock could be impaired thereby,
including without limitation, with respect to liquidation.
We
have never paid dividends.
We
have
never paid cash dividends on our common stock and do not anticipate paying
any
for the foreseeable future.
RISKS
RELATED TO OUR INDUSTRY
Government
Regulation
The
FDA,
comparable foreign regulators and state and local pharmacy regulators impose
substantial requirements upon clinical development, manufacture and marketing
of
pharmaceutical products. These and other entities regulate research and
development and the testing, manufacture, quality control, safety,
effectiveness, labeling, storage, record keeping, approval, advertising,
and
promotion of our products.
· |
The
drug approval process required by the FDA under the Food, Drug,
and
Cosmetic Act generally involves:
|
· |
Preclinical
laboratory and animal tests;
|
· |
Submission
of an IND, prior to commencing human clinical
trials;
|
· |
Adequate
and well-controlled human clinical trials to establish safety and
efficacy
for intended use;
|
· |
Submission
to the FDA of a NDA; and
|
· |
FDA
review and approval of a NDA.
|
The
testing and approval process requires substantial time, effort, and financial
resources, and we cannot be certain that any approval will be granted on
a
timely basis, if at all.
Preclinical
tests include laboratory evaluation of the product candidate, its chemistry,
formulation and stability, and animal studies to assess potential safety
and
efficacy. Certain preclinical tests must be conducted in compliance with
good
laboratory practice regulations. Violations of these regulations can, in
some
cases, lead to invalidation of the studies, requiring them to be replicated.
In
some cases, long-term preclinical studies are conducted concurrently with
clinical studies.
We
will
submit the preclinical test results, together with manufacturing information
and
analytical data, to the FDA as part of an IND, which must become effective
before we begin human clinical trials. The IND automatically becomes effective
30 days after filing, unless the FDA raises questions about conduct of the
trials outlined in the IND and imposes a clinical hold, in which case, the
IND
sponsor and FDA must resolve the matters before clinical trials can begin.
It is
possible that our submission may not result in FDA authorization to commence
clinical trials.
Clinical
trials must be supervised by a qualified investigator in accordance with
good
clinical practice regulations, which include informed consent requirements.
An
independent Institutional Review Board (“IRB”) at each medical center reviews
and approves and monitors the study, and is periodically informed of the
study’s
progress, adverse events and changes in research. Progress reports are submitted
annually to the FDA and more frequently if adverse events occur.
Human
clinical trials typically have three sequential phases that may
overlap:
Phase
I:
The drug is initially tested in healthy human subjects or patients for safety,
dosage tolerance, absorption, metabolism, distribution, and
excretion.
Phase
II:
The drug is studied in a limited patient population to identify possible
adverse
effects and safety risks, determine efficacy for specific diseases and establish
dosage tolerance and optimal dosage.
Phase
III: When phase II evaluations demonstrate that a dosage range is effective
with
an acceptable safety profile, phase III trials to further evaluate dosage,
clinical efficacy and safety, are undertaken in an expanded patient population,
often at geographically dispersed sites.
We
cannot
be certain that we will successfully complete phase I, phase II, or phase
III
testing of our product candidates within any specific time period, if at
all.
Furthermore, the FDA, an IRB or the IND sponsor may suspend clinical trials
at
any time on various grounds, including a finding that subjects or patients
are
exposed to unacceptable health risk.
Concurrent
with these trials and studies, we also develop chemistry and physical
characteristics data and finalize a manufacturing process in accordance with
good manufacturing practice (“GMP”) requirements. The manufacturing process must
conform to consistency and quality standards, and we must develop methods
for
testing the quality, purity, and potency of the final products. Appropriate
packaging is selected and tested, and chemistry stability studies are conducted
to demonstrate that the product does not undergo unacceptable deterioration
over
its shelf-life.
Results
of the foregoing are submitted to the FDA as part of a NDA for marketing
and
commercial shipment approval. The FDA reviews each NDA submitted and may
request
additional information. Once the FDA accepts the NDA for filing, it begins
its
in-depth review. The FDA has substantial discretion in the approval process
and
may disagree with our interpretation of the data submitted. The process may
be
significantly extended by requests for additional information or clarification
regarding information already provided. As part of this review, the FDA may
refer the application to an appropriate advisory committee, typically a panel of
clinicians. Manufacturing establishments often are inspected prior to NDA
approval to assure compliance with GMPs and with manufacturing commitments
made
in the application.
Submission
of a NDA with clinical data requires payment of a fee (for fiscal year 2004,
$573,500). In return, the FDA assigns a goal of ten months for issuing its
“complete response,” in which the FDA may approve or deny the NDA, or require
additional clinical data. Even if these data are submitted, the FDA may
ultimately decide the NDA does not satisfy approval criteria. If the FDA
approves the NDA, the product becomes available for physicians prescription.
Product approval may be withdrawn if regulatory compliance is not maintained
or
safety problems occur. The FDA may require post-marketing studies, also known
as
phase IV studies, as a condition of approval, and requires surveillance programs
to monitor approved products that have been commercialized. The agency has
the
power to require changes in labeling or prohibit further marketing based
on the
results of post-marketing surveillance.
Satisfaction
of these and other regulatory requirements typically takes several years,
and
the actual time required may vary substantially based upon the type, complexity
and novelty of the product. Government regulation may delay or prevent marketing
of potential products for a considerable period of time and impose costly
procedures on our activities. We cannot be certain that the FDA or other
regulatory agencies will approve any of our products on a timely basis, if
at
all. Success in preclinical or early-stage clinical trials does not assure
success in later-stage clinical trials. Data obtained from pre-clinical and
clinical activities are not always conclusive and may be susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. Even
if
a product receives regulatory approval, the approval may be significantly
limited to specific indications or uses. Even after regulatory approval is
obtained, later discovery of previously unknown problems with a product may
result in restrictions on the product or even complete withdrawal of the
product
from the market. Delays in obtaining, or failures to obtain regulatory approvals
would have a material adverse effect on our business.
Any
products manufactured or distributed by us pursuant to FDA approvals are
subject
to pervasive and continuing FDA regulation, including record-keeping
requirements, reporting of adverse experiences, submitting periodic reports,
drug sampling and distribution requirements, manufacturing or labeling changes,
record-keeping requirements, and compliance with FDA promotion and advertising
requirements. Drug manufacturers and their subcontractors are required to
register their facilities with the FDA and state agencies, and are subject
to
periodic unannounced inspections for GMP compliance, imposing procedural
and
documentation requirements upon us and third-party manufacturers. Failure
to
comply with these regulations could result, among other things, in suspension
of
regulatory approval, recalls, suspension of production or injunctions, seizures,
or civil or criminal sanctions. We cannot be certain that we or our present
or
future subcontractors will be able to comply with these
regulations.
The
FDA
regulates drug labeling and promotion activities. The FDA has actively enforced
regulations prohibiting the marketing of products for unapproved uses. The
FDA
permits the promotion of drugs for unapproved uses in certain circumstances,
subject to stringent requirements. We and our product candidates are subject
to
a variety of state laws and regulations which may hinder our ability to market
our products. Whether or not FDA approval has been obtained, approval by
foreign
regulatory authorities must be obtained prior to commencing clinical trials,
and
sales and marketing efforts in those countries. These approval procedures
vary
in complexity from country to country, and the processes may be longer or
shorter than that required for FDA approval. We may incur significant costs
to
comply with these laws and regulations now or in the future.
The
FDA’s
policies may change, and additional government regulations may be enacted
which
could prevent or delay regulatory approval of our potential products. Increased
attention to the containment of health care costs worldwide could result
in new
government regulations materially adverse to our business. We cannot predict
the
likelihood, nature or extent of adverse governmental regulation that might
arise
from future legislative or administrative action, either in the U.S. or
abroad.
Other
Regulatory Requirements
The
U.S.
Federal Trade Commission and the Office of the Inspector General of the U.S.
Department of Health and Human Services (“HHS”) also regulate certain
pharmaceutical marketing practices. Government reimbursement practices and
policies with respect to our products are important to our success.
We
are
subject to numerous federal, state and local laws relating to safe working
conditions, manufacturing practices, environmental protection, fire hazard
control, and disposal of hazardous or potentially hazardous substances. We
may
incur significant costs to comply with these laws and regulations. The
regulatory framework under which we operate will inevitably change in light
of
scientific, economic, demographic and policy developments, and such changes
may
have a material adverse effect on our business.
European
Product Approval
Prior
regulatory approval for human healthy volunteer studies (phase I studies)
is
required in member states of the E.U. Summary data from successful phase
I
studies are submitted to regulatory authorities in member states to support
applications for phase II studies. E.U. authorities typically have one to
three
months (which often may be extended in their discretion) to raise objections
to
the proposed study. One or more independent ethics committees (similar to
U.S.
IRBs) review relevant ethical issues.
For
E.U.
marketing approval, we submit to the relevant authority for review a dossier,
or
MAA (Market Authorization Application), providing information on the quality
of
the chemistry, manufacturing and pharmaceutical aspects of the product as
well
as non-clinical and clinical data.
The
E.U.
provides two different, elective authorization routes: centralized and
decentralized. For NB S101 we have selected the centralized route, leading
in
one marketing authorization the entire E.U, in which our application will
be
reviewed by members of the Committee for Proprietary Medicinal Products
(“CPMP”), on behalf of EMEA. Based on that review, EMEA will provide an opinion
on safety, quality and efficacy to the European Commission, which makes the
decision to grant or refuse authorization.
Approval
can take several months to several years, and can be denied, depending on
whether additional studies or clinical trials are requested (which may delay
marketing approval and involve unbudgeted costs) or regulatory authorities
conduct facilities (including clinical investigation site) inspections and
review manufacturing procedures, operating systems and personnel qualifications.
In many cases, each drug manufacturing facility must be approved, and further
inspections may occur over the product’s life. The regulatory agency may require
post-marketing surveillance to monitor for adverse effects or other studies.
Further clinical studies are usually necessary for approval of additional
indications. The terms of any approval, including labeling content, may be
more
restrictive than expected and could affect the marketability of a
product.
Failure
to comply with these ongoing requirements can result in suspension of regulatory
approval and civil and criminal sanctions. European renewals may require
additional data, resulting in a license being withdrawn. E.U. regulators
have
the authority to revoke, suspend or withdraw approvals, prevent companies
and
individuals from participating in the drug approval process, request recalls,
seize violative products, obtain injunctions to close non-compliant
manufacturing plants and stop shipments of violative products.
Pricing
Controls
Pricing
for products under approval applications is also subject to regulation.
Requirements vary widely between countries and can be implemented disparately
intra-nationally.
The
E.U.
generally provides options for member states to control pricing of medicinal
products for human use, ranging from specific price-setting to systems of
direct
or indirect controls on the producer’s profitability. U.K. regulation, for
example, generally provides controls on overall profits derived from sales
to
the U.K. National Health Service that are based on profitability targets
or a
function of capital employed in servicing the National Health Service market.
Italy generally utilizes a price monitoring system based on the European
average
price over the reference markets of France, Spain, Germany and the U.K. Italy
typically establishes price within a therapeutic class based on the lowest
price
for a medicine belonging to that category. Spain generally establishes selling
price based on prime cost plus a profit margin within a range established
yearly
by the Spanish Commission for Economic Affairs.
There
can
be no assurance that price controls or reimbursement limitations will result
in
favorable arrangements for our products.
Third-Party
Reimbursements
In
the
U.S., the E.U. and elsewhere, pharmaceutical sales are dependent in part
on the
availability and adequacy of reimbursement from third party payers such as
governments and private insurance plans. Third party payers are increasingly
challenging established prices, and new products that are more expensive
than
existing treatments may have difficulty finding ready acceptance unless there
is
a clear therapeutic benefit.
In
the
U.S., consumer willingness to choose a self-administered outpatient prescription
drug over a different drug or other form of treatment often depends on the
manufacturer’s success in placing the product on health plan formulary or drug
list, which results in lower out-of-pocket costs. Favorable formulary placement
typically requires the product to be less expensive than what the health
plan
determines to be therapeutically equivalent products, and often requires
manufacturers to offer rebates. Federal law also requires manufacturers to
pay
rebates to state Medicaid programs in order to have their products reimbursed
by
Medicaid. Medicare, which covers most Americans over age 65 and the disabled,
has adopted a new insurance regime that will offer eligible beneficiaries
limited coverage for outpatient prescription drugs effective January 1, 2006.
The prescription drugs that will be covered under this insurance will be
specified on a formulary published by Medicare. As part of these changes,
Medicare is adopting new payment formulas for prescription drugs administered
by
providers, such as hospitals or physicians, that are generally expected to
lower
reimbursement.
The
E.U.
generally provides options for member states to restrict the range of medicinal
products for which their national health insurance systems provide
reimbursement. Member states can opt for a “positive” or “negative” list, with
the former listing all covered medicinal products and the latter designating
those excluded from coverage. The E.U., the U.K. and Spain have negative
lists,
while France uses a positive list. Canadian
provinces
establish their own reimbursement measures. In some countries, products may
also
be subject to clinical and cost effectiveness reviews by health technology
assessment bodies. Negative determinations in relation to our products could
affect prescribing practices. In the U.K., the National Institute for Clinical
Excellence (“NICE”) provides such guidance to the National Health Service, and
doctors are expected to take it into account when choosing drugs to prescribe.
Health authorities may withhold funding from drugs not given a positive
recommendation by NICE. A negative determination by NICE may mean fewer
prescriptions. Although NICE considers drugs with orphan status, there is
a
degree of tension on the application of standard cost assessment for orphan
drugs, which are often priced higher to compensate for a limited market.
It is
unclear whether NICE will adopt a more relaxed approach toward the assessment
of
orphan drugs.
We
cannot
assure you that any of our products will be considered cost effective, or
that
reimbursement will be available or sufficient to allow us to sell them
competitively and profitably.
Fraud
and Abuse Laws
The
U.S.
federal Medicare/Medicaid anti-kickback law and similar state laws prohibit
remuneration intended to induce physicians or others either to refer patients,
or to acquire or arrange for or recommend the acquisition of health care
products or services. While the federal law applies only to referrals, products
or services receiving federal reimbursement, state laws often apply regardless
of whether federal funds are involved. Other federal and state laws prohibit
anyone from presenting or causing to be presented false or fraudulent payment
claims. Recent federal and state enforcement actions under these statutes
have
targeted sales and marketing activities of prescription drug manufacturers.
As
we begin to market our products to health care providers, the relationships
we
form, such as compensating physicians for speaking or consulting services,
providing financial support for continuing medical education or research
programs, and assisting customers with third-party reimbursement claims,
could
be challenged under these laws and lead to civil or criminal penalties,
including the exclusion of our products from federally-funded reimbursement.
Even an unsuccessful challenge could cause adverse publicity and be costly
to
respond to, and thus could have a material adverse effect on our business,
results of operations and financial condition. We intend to consult counsel
concerning the potential application of these and other laws to our business
and
to our sales, marketing and other activities to comply with them. Given their
broad reach and the increasing attention given them by law enforcement
authorities, however, we cannot assure you that some of our activities will
not
be challenged.
Patent
Restoration and Marketing Exclusivity
The
U.S.
Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman)
permits the FDA to approve Abbreviated New Drug Applications (“ANDAs”) for
generic versions of innovator drugs, as well as NDAs with less original clinical
data, and provides patent restoration and exclusivity protections to innovator
drug manufacturers.
The
ANDA
process permits competitor companies to obtain marketing approval for drugs
with
the same active ingredient and for the same uses as innovator drugs, but
does
not require the conduct and submission of clinical studies demonstrating
safety
and efficacy. As a result, a competitor could copy any of our drugs and only
need to submit data demonstrating that the copy is bioequivalent to gain
marketing approval from the FDA.
Hatch-Waxman
requires a competitor that submits an ANDA, or otherwise relies on safety
and
efficacy data for one of our drugs, to notify us and/or our business partners
of
potential infringement of our patent rights. We and/or our business partners
may
sue the company for patent infringement, which would result in a 30-month
stay
of approval of the competitor’s application. The discovery, trial and appeals
process in such suits can take several years. If the litigation is resolved
in
favor of the generic applicant or the challenged patent expires during the
30-month period, the stay is lifted and the FDA may approve the
application.
Hatch-Waxman
also allows competitors to market copies of innovator products by submitting
significantly less clinical data outside the ANDA context. Such applications,
known as “505(b)(2) NDAs” or “paper NDAs,” may rely on clinical investigations
not conducted by or for the applicant and for which the applicant has not
obtained a right of reference or use and are subject to the ANDA notification
procedures described above.
The
law
also restores a portion of a product’s patent term that is lost during clinical
development and NDA review, and provides statutory protection, known as
exclusivity, against FDA approval or acceptance of certain competitor
applications. Restoration can return up to five years of patent term for
a
patent covering a new product or its use to compensate for time lost during
product development and regulatory review. The restoration period is generally
one-half the time between the effective date of an IND and submission of
an NDA,
plus the time between NDA submission and its approval (subject to the five-year
limit), and no extension can extend total patent life beyond 14 years after
the
drug approval date. Applications for patent term extension are subject to
U.S.
Patent and Trademark Office (“USPTO”) approval, in conjunction with FDA.
Approval of these applications takes at least six months, and there can be
no
guarantee that it will be given at all.
Hatch-Waxman
also provides for differing periods of statutory protection for new drugs
approved under an NDA. Among the types of exclusivity are those for a “new
molecular entity” and those for a new formulation or indication for a
previously-approved drug. If granted, marketing exclusivity for the types
of
products that Pipex is developing, which include only drugs with innovative
changes to previously-approved products using the same active ingredient,
would
prohibit the FDA from approving an ANDA or 505(b)(2) NDA relying on safety
and
efficacy data for three years. This three-year exclusivity, however, covers
only
the innovation associated with the original NDA. It does not prohibit the
FDA
from approving applications for drugs with the same active ingredient but
without our new innovative change. These marketing exclusivity protections
do
not prohibit FDA from approving a full NDA, even if it contains the innovative
change.
MANAGEMENT
AND BOARD OF DIRECTORS
Our
management will succeed the management of Sheffield. Pipex’s directors, Steve H.
Kanzer, Dr. Charles L. Bisgaier, Jeffrey Wolf, Jeffrey Kraws, Nicholas Stergis,
and Dr. A. Joseph Rudick, will continue to serve as directors of the
surviving company.
The
following table states who are directors and officers of Sheffield, as well
as
biographical information regarding our directors and management.
Name
|
Age
|
Position
|
Steve
H. Kanzer, CPA, Esq.
|
42
|
Chairman
and Chief Executive Officer
|
Charles
L. Bisgaier, Ph.D.
|
52
|
President
and Director
|
Jeffrey
J. Kraws
|
41
|
Vice
President, Business Development and Director
|
A.
Joseph Rudick, M.D.
|
49
|
Chief
Medical Officer and Director
|
Nicholas
Stergis, M.S.
|
32
|
Chief
Operating Officer and Director
|
John
S. Althaus, M.S., M.B.A.
|
52
|
Vice
President, Advanced Technology
|
Jeff
Wolf, Esq.
|
41
|
Director
|
Steve
H. Kanzer, CPA, Esq.
Mr.
Kanzer, 42, is a co-founder of Pipex Therapeutics, Inc. and has served as
President since our inception in February 2001. In September 2004, Mr. Kanzer
assumed the additional roles of Chairman, President and Chief Executive Officer
and serves on a full-time basis at our corporate headquarters in Ann Arbor,
Michigan. Mr. Kanzer has also been a director and officer of our subsidiaries,
including Solovax, Inc., Effective Pharmaceuticals, Inc. and CD4 Biosciences,
Inc. Since December 2000, he has served as co-founder and Chairman of Accredited
Ventures Inc. and Accredited Equities Inc., a venture capital firm and
NASD-member investment bank, respectively, which both specialize in the
biotechnology industry. Accredited Ventures has funded substantially all
of our
operations to date. Mr. Kanzer was co-founder, Chairman, President and Chief
Executive Officer of Developmental Therapeutics, Inc., a cardiovascular drug
development company which was developing an oral thyroid hormone analog,
DITPA,
for congestive heart failure. Developmental Therapeutics was acquired in
October
2003 by Titan Pharmaceuticals, Inc., a publicly traded biopharmaceutical
company. Prior to founding Accredited Ventures and Accredited Equities in
December 2000, Mr. Kanzer co-founded Paramount Capital, Inc. in 1991 and
served
as Senior Managing Director-Head of Venture Capital at Paramount Capital
until
December 2000. While at Paramount Capital, Mr. Kanzer was involved in the
formation and financing of a number of biotechnology companies and held various
positions in these companies. Mr. Kanzer was founding Chairman of the Board
of
Discovery Laboratories, Inc. from 1995 through 1999. From 1997 until 2000,
Mr.
Kanzer was founding President of PolaRx Biopharmaceuticals, Inc., a
biopharmaceutical company that licensed and developed TRISENOX® (arsenic
trioxide), a leukemia drug that was approved by the FDA in 2000 and which
currently holds the FDA record for fastest drug ever developed from IND filing
until NDA approval (30 months). PolaRx was merged with Cell Therapeutics
Inc.
(NASDAQ:CTIC) in January 2000, resulting in CTIC becoming the second best
performing stock for the year 2000. Cephalon acquired the rights to TRISENOX® in
2005 for $165 million and currently markets the drug. Since 1996, Mr. Kanzer
has
served as a member of the board of directors of DOR BioPharma, Inc., a public
biotechnology company that is preparing to file an NDA for orBec® (oral
beclomethasone dipropionate), a drug that Mr. Kanzer licensed in 1997. Mr.
Kanzer currently serves as non-executive Vice Chairman of the Board of DOR
and
also served as Interim President from June 2002 until January 2003. In March
1998, Mr. Kanzer led the privatization of the Institute for Drug Research
Kft.
(IDR) in Budapest, Hungary, a 400-employee, 26 acre pharmaceutical research
and
development center. Since 1950, IDR operated as the central pharmaceutical
R&D center for the country of Hungary, served the active pharmaceutical
ingredients (API) needs of Eastern Europe, and performed original drug discovery
research, resulting in the registration of over 80 API products. Mr. Kanzer
served as Chief Executive Officer of IDR from March 1998 and led the sale
of IDR
to IVAX Corporation in October 1999. Mr. Kanzer has also been a co-founder
and
director of 23 biotechnology companies, including Avigen, Inc., XTLBio, Boston
Life Sciences, Inc. and Titan Pharmaceuticals, Inc., all publicly traded
companies. Prior to joining Paramount Capital in 1992, Mr. Kanzer was an
attorney at the law firm of Skadden, Arps, Slate, Meagher & Flom in New York
where he specialized in mergers and acquisitions. Mr. Kanzer received his
J.D.
from New York University School of Law in 1988 and a B.B.A. in Accounting
from
Baruch College in 1985, where he was a Baruch Scholar. Mr. Kanzer is active
in
university-based pharmaceutical technology licensing and has served as Co-Chair
of the New York Chapter of the Licensing Executives Society (LES).
Charles
L. Bisgaier, Ph.D.
Dr.
Bisgaier, 52, is our President and a director. Prior to joining Pipex, Dr.
Bisgaier was the Senior Director of Pharmacology at Esperion Therapeutics,
a
Division of Pfizer Global Research and Development in Ann Arbor, Michigan.
In
1998, Dr. Bisgaier co-founded Esperion Therapeutics and served as the Vice
President of Pharmacology. At Esperion he played an active role in the
discovery, pre-clinical or clinical development of product candidates, including
ETC-216 (ApoA-IMilano), ETC-588, ETC-642 and small molecule lipid regulators,
that may have utility for the treatment and prevention of cardiovascular
diseases. ETC-216 was the first agent every to show rapid regression of artery
plaques in humans. In 2004, Esperion Therapeutics was acquired by Pfizer
for
$1.3 billion.
Prior
to
Esperion Therapeutics, Dr. Bisgaier was an Associate Research Fellow in the
Department of Vascular and Cardiac Disease at Warner-Lambert/Parke-Davis,
where
he played a role in discovery and development of pharmaceuticals that modulate
lipoprotein and cholesterol metabolism. There he participated in the discovery
and development of pharmaceutical agents including Gemfibrozil (Lopid®),
Atorvastatin calcium (Lipitor®), Avasimibe and Gemcabene. He also lead the
discovery efforts for lipid regulating agents including cholesteryl ester
transfer protein inhibitors, fatty acid mimetics and cholesterol esterase
inhibitors. He has carried out basic research on HDL and its associated proteins
including studies on apolipoprotein synthesis, paraoxonase, oxidation, and
cholesteryl ester transfer protein function.
He
has
published over 70 peer reviewed articles and reviews and is a named inventor
on
numerous patents and patent applications. He currently holds an adjunct position
in Pharmacology at the University of Michigan. He is also the Editor-in-Chief
of
Current Medicinal Chemistry Immunology, Endocrine and Metabolic Agents. Dr.
Bisgaier serves as a member of the Michigan Society of Medical Research Board
as
well as the ProNAI Therapeutics Scientific Board (Kalamazoo, MI).
Dr.
Bisgaier received a B.A. (1974) in Biology from the State University College
at
Oneonta, NY, and a M.S. (1977) and Ph.D. (1981) in Biochemistry from George
Washington University. Following his doctorate, he studied lipoprotein
metabolism within a Specialized Center of Research (SCOR) for atherosclerosis
at
Columbia University College of Physicians and Surgeons prior to joining
Warner-Lambert/Parke-Davis in 1990.
Jeffrey
J. Kraws
Mr.
Kraws
is a director of Pipex and our Vice President of Business Development. Mr.
Kraws
is Chief Executive Officer and co-founder of Crystal Research Associates.
Well
known and respected on Wall Street, Mr. Kraws has received some of the most
prestigious awards in the industry. Among other awards, he was given a “5-Star
Rating” in 2001 by Zacks and was ranked the number one analyst among all
pharmaceutical analysts for stock performance in 2001 by Starmine.com. Prior
to
founding Crystal Research Associates, Mr. Kraws served as co-president of
The
Investor Relations Group (IRG), a firm representing primarily under-followed,
small-capitalization companies. Previously, Mr. Kraws served as a managing
director of healthcare research for Ryan Beck & Co. and as director of
research/senior pharmaceutical analyst and managing director at Gruntal &
Co., LLC (prior to its merger with Ryan Beck & Company). Mr. Kraws served as
managing director of the healthcare research group and senior pharmaceutical
analyst at First Union Securities (formerly EVEREN Securities); as senior
U.S.
pharmaceutical analyst for the Swedish-Swiss conglomerate Asea Brown Boveri;
and
as managing director and president of the Brokerage/Investment Banking operation
of ABB Aros Securities, Inc. He also served as senior pharmaceutical analyst
at
Nationsbanc Montgomery Securities, BT Alex Brown & Sons, and Buckingham
Research. Mr. Kraws also has industry experience, having been responsible
for
competitive analysis within the treasury group at Bristol-Myers-Squibb Company.
He holds an MBA from Cornell University and a B.S. degree from State University
of New York-Buffalo. Mr. Kraws only devotes a portion of his time to our
business.
A.
Joseph Rudick, M.D.
Dr. Rudick
was appointed to the board of directors of Pipex during December 2004.
Dr. Rudick currently serves as our Chief Medical Officer and is president
and chief medical officer of our majority-owned subsidiary Effective
Pharmaceuticals, Inc.
Dr. Rudick
was Chief Executive Officer and President of Atlantic Technology Ventures,
Inc.
(Atlantic), a public drug-development company, as well as a member of it
board
of directors from May 1999 until its merger with Manhattan Pharmaceuticals,
Inc.
in February 2003. He was also a founder of Atlantic and two of its
majority-owned subsidiaries, Optex Opthalmalogics, Inc. and Channel
Therapeutics, Inc. During his tenure at Atlantic, he structured a corporate
partnership with Bausch & Lomb for development of Atlantic’s novel cataract
removal device, named CatarexTM,
as well
as a partnership with Indevus Pharmaceuticals, Inc. for development of their
novel clinical-stage neuropathic pain compound, now known as IP-571. From
1994
to 2001, Dr. Rudick was a vice president of Paramount Capital, Inc., an
investment bank specializing in the biotechnology and biopharmaceutical
industries, where he participated in numerous private equity
financings.
Since
1988, he has been a partner of Associate Ophthalmologists P.C., a private
ophthalmology practice located in New York, and from 1993 to 1998 he served
as a
director of Healthdesk Corporation, a publicly traded medical information
company of which he was a co-founder. Dr. Rudick earned a B.A. in
Chemistry, with the distinction of Phi Beta Kappa, from Williams College
and a
Doctorate of Medicine, with the distinction of Alpha Omega Alpha, from the
University of Pennsylvania. Dr. Rudick is also a registered representative
of the placement agent.
John
S. Althaus, M.S., M.B.A.
Mr.
Althaus currently serves as the Vice President, Advanced Technology for Pipex.
Mr. Althaus’ professional career spans 30+ years of scientific research and
development in academia and industry and business development in industry.
His
industry experience includes employment in pharmaceutical, biotechnology
and
medical device businesses. Mr. Althaus was a faculty research associate at
the
University of Virginia, Department of Anesthesiology, where he investigated
the
impact of anesthesia on neurotransmitter mechanisms in peripheral and central
nervous systems. While at Pharmacia & Upjohn and the Upjohn Companies, Mr.
Althaus became an expert in free-radical-dependent drug therapies in the
treatment of neurological diseases and traumatic brain injury. He was a member
of the discovery, research and development team that produced the drug Mirapex,
a treatment for Parkinson’s disease. He was also a member of the discovery,
research and development team that produced the drug Freedox, a treatment
for
brain hemorrhage. Mr. Althaus presented lectures nationally and internationally
as the scientific liaison for marketing regarding the promotion of Freedox.
While
at
Parke-Davis/Pfizer, Mr. Althaus designed, built and managed a bioanalytical
research laboratory. The goal of the laboratory was the discovery, development
and use of biomarkers to evaluate drug efficacy in clinical trials. Tyrosine
nitration and halogenation as biomarkers of disease-dependent free radical
injury were found to be diagnostic in atherosclerosis, Parkinson’s disease and
broncopulmonary dysplasia. Mr. Althaus next joined HandyLab, Inc., a
microfluidic biotechnology company that manufactures DNA diagnostic medical
devices. Mr. Althaus was the main author and principal investigator of a
$2
million NIST ATP grant to develop and commercialize electrochemical detection
of
DNA diagnostic medical devices.
Prior
to
his position with Pipex, Mr. Althaus was the founder of Holomics, Inc., a
diagnostic device company. In addition, he was also the President of General
Fiber, a biotechnology company that develops innovative fibers to address
unmet
health needs. Mr. Althaus is a co-inventor on eight patents and patent
applications and a co-author on 52 peer-reviewed publications. Mr. Althaus
received his MS in biochemistry from the University of Maryland and his MBA
in
general studies from Western Michigan University.
Nicholas
Stergis, M.S.
Mr.
Stergis is a co-founder, Chief Operating Officer and a member of the board
of
directors of Pipex and was appointed to the board of directors of Sheffield
on
October 14, 2006. Mr. Stergis is also a co-founder and Interim Chief Operating
Officer and director of our majority-owned subsidiary Effective Pharmaceuticals,
Inc. Prior to co-founding Pipex, Mr. Stergis was a co-founder, Chief Operating
Officer and director of Developmental Therapeutics, Inc., a cardiovascular
drug
development company, until its acquisition in October 2003 by Titan
Pharmaceuticals, Inc. (AMEX: TTP), a publicly-traded pharmaceutical company.
Mr.
Stergis is also a co-founder and Managing Director of Accredited Ventures
Inc.,
a venture capital firm specializing in the biotechnology and pharmaceutical
industries. Mr. Stergis is also Managing Director of Accredited Equities,
Inc.,
an NASD member firm. Prior to co-founding Accredited Ventures, Mr. Stergis
was
the Interim Director of Corporate Development for Corporate Technology
Development, Inc. (CTD), a biopharmaceutical company based in Miami, Florida,
until its merger with DOR BioPharma, Inc. (DOR), a publicly traded biotechnology
company. During his tenure at CTD, he was responsible for all development
tasks
associated with the company’s lead product, orBec®, which has completed a
pivotal Phase III clinical trial and is pending NDA submission. He was also
instrumental in CTD’s divestiture of important botulinum toxin intellectual
property to Allergan, Inc. (NYSE:AGN), a publicly traded specialty
pharmaceutical companies. Prior to joining CTD, Mr. Stergis was a Technology
Associate at Paramount Capital, a New York based private equity, venture
capital, investment banking and asset management group specializing in the
biotechnology and pharmaceutical industries. There, he participated in the
startup, acquisition and financing of various biotechnology companies, including
CTD. Mr. Stergis received his M.S. in Biology from New York University as
well
as a B.S. in Biology from the University at Albany, State University of New
York. Mr. Stergis is also a director and interim officer of several privately
held biopharmaceutical companies such as General Fiber, Inc. which are engaged
in the in-licensing of biopharmaceutical candidates. As such, Mr. Stergis
devotes a portion of his time to the business of the company.
Jeffrey
Wolf, Esq.
Mr.
Wolf
currently serves as one of the directors of Pipex. Mr. Wolf has substantial
experience in creating, financing, nurturing and growing new ventures based
upon
breakthrough research and technology. Mr. Wolf is a co-founding partner of
Seed-One Venture Partners, LLC, a venture capital group focused on seed-stage
biomedical investments. Mr. Wolf has been a co-founder of Elusys Therapeutics,
Inc., an antibody-based therapeutic company, Tyrx Pharma, Inc., a
biopolymer-based company and Sensatex, Inc., a medical device company. Prior
to
founding Seed-One Venture Partners, Mr. Wolf served as the Managing Director
of
The Castle Group, Ltd., a biomedical venture capital firm. At both
organizations, Mr. Wolf was responsible for supervising the formation and
funding of new technology, biomedical, and service oriented ventures. Mr.
Wolf
currently sits on the board of Elusys Therapeutics, Tyrx Pharma and Sensatex.
Mr. Wolf received his MBA from Stanford Business School, his JD from New
York
University School of Law and his BA with honors in Economics from the University
of Chicago.
PROPRIETARY
RIGHTS
Our
goal
is to obtain, maintain and enforce patent protection for our products,
formulations, processes, methods and other relevant proprietary technologies,
and to preserve our trade secrets and operate without infringing on the
proprietary rights of other parties, both in the United States and in other
countries. Our policy has been to actively seek to obtain, where appropriate,
the broadest intellectual property protection possible for our product
candidates, proprietary information and proprietary technology through a
combination of contractual arrangements and patents.
We
also
depend upon the skills, knowledge, and experience of our scientific and
technical personnel, as well as that of our advisors, consultants, and other
contractors, none of which is patentable. To help protect our proprietary
know-how which is not patentable, and for inventions for which patents may
be
difficult to enforce, we rely on trade secret protection and confidentiality
agreements to protect our interests. To this end, we require all employees,
consultants, advisors and other contractors to enter into confidentiality
agreements that prohibit the disclosure of confidential information and,
where
applicable, require disclosure and assignment to us of the ideas, developments,
discoveries and inventions important to our business.
We
currently have certain exclusive license agreements with the University of
Michigan, Thomas Jefferson University, the Regents of the University of
California, Children’s Hospital, Boston and the McLean Hospital, and an
exclusive option agreement with the University of Southern California under
We
also have similar rights to a number of related foreign patents and patent
applications filed under Patent Cooperation Treaties (PCT).
Item
5.06 Change
in Shell Company Status.
On
October 31, 2006, the Registrant entered a Merger Agreement pursuant to which
the parties agreed that the Registrant acquired all of the issued and
outstanding shares of stock of Pipex Therapeutics, Inc. in exchange for the
issuance in the aggregate of 34 million of the Registrant’s shares of common
stock (the “Exchange”).
Pipex
Therapeutics, Inc. became a wholly-owned operating subsidiary of the Registrant
and, upon the issuance of the Shares and completion of related transactions.
The
Registrant currently has a total of 34,737,717 issued and outstanding shares
of
Common Stock and 46,546,786 shares outstanding on a fully diluted basis
including shares of Common Stock issuable upon the exercise of options and
warrants.
As
the
result of the completion of the Exchange, the Registrant believes it is no
longer a shell company as that term is defined in Rule 405 of the Securities
Act
and Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
LEGAL
PROCEEDINGS
Pipex
is
not a party to any material legal proceedings nor is Pipex aware of any
circumstance that may reasonably lead a third party to initiate legal
proceedings against Pipex.
PRINCIPAL
STOCKHOLDERS
The
following table sets forth certain information regarding beneficial ownership
of
Pipex’s common stock and warrants to purchase shares of common stock as of
October 31, 2006 following the Merger by (i) each person (or group of affiliated
persons) who is known by us to own more than five percent of the outstanding
shares of our common stock, (ii) each director and executive officer, and
(iii)
all of our directors and executive officers as a group.
Beneficial
ownership is determined in accordance with SEC rules and generally includes
voting or investment power with respect to securities. The principal address
of
each of the stockholders listed below except as indicated is c/o Pipex
Therapeutics, Inc., 3985 Research Park Drive, Suite 4, Ann Arbor, MI 48108.
We
believe that all persons named in the table have sole voting and investment
power with respect to shares beneficially owned by them. All share ownership
figures include shares issuable upon exercise of options or warrants exercisable
within 60 days of October 31, 2006, which are deemed outstanding and
beneficially owned by such person for purposes of computing his or her
percentage ownership, but not for purposes of computing the percentage ownership
of any other person.
Principal
Stockholders Table
|
Name
of Owner
|
Shares
Owned
|
Percentage
of Shares Outstanding (1)(2)
|
Accredited
Venture Capital, LLC (1)
|
23,756,955
|
63.80%
|
Steve
H. Kanzer (1)
|
23,756,955
|
63.80%
|
Firebird
Capital (2)
|
4,459,648
|
12.57%
|
Nicholas
Stergis (3)
|
4,065,876
|
11.70%
|
Charles
Bisgaier, Ph.D. (4)
|
612,028
|
1.75%
|
Jeffrey
J. Kraws (5)
|
363,160
|
*
|
A.
Joseph Rudick, M.D. (6)
|
81,318
|
*
|
Jeffrey
Wolf, Esq. (7)
|
32,527
|
*
|
All
officers and directors as a group (6 persons)
|
28,891,864
|
83.17%
|
*
represents less than 1% of our common stock
____________________________________________________
(1) |
Consist
of 21,259,138 shares of common stock and a warrant to purchase
2,497,817
shares of common stock issued to Accredited Venture Capital, LLC,
a
company in which Pharmainvestors, LLC, is the managing member and
a
partial beneficial owner. Steve H. Kanzer is the Managing Member
of
Pharmainvestors, LLC. As such, Mr. Kanzer may be considered to have
control over the voting and disposition of those shares. Mr. Kanzer
disclaims beneficial ownership of those shares, except to the extent
of
his pecuniary interest. Excludes an unvested option to purchase
250,000
shares of common stock at $2 per share (which will vest if Mr.
Kanzer
raises at least $10 million in this financing), which will vest
annually
over three years. Excludes Placement Agent warrants to purchase
common
stock. Mr. Kanzer’s business address is 3985 Research Park Drive, Suite 4,
Ann Arbor, MI 48108.
|
(2) |
Consists
of 1,486,549 of shares of common stock and 743,275 warrants to
purchase
common stock issued to Firebird Global Master Fund, Ltd and 1,486,549
of
shares of common stock and 743,275 warrants to purchase common
stock
issued to Firebird Global Master Fund II,
Ltd.
|
(3) |
Consists
of 4,065,876 shares of common stock issued to Mr. Stergis. Excludes
Placement Agent warrants to purchase common stock. Mr. Stergis’s business
address is 801 Brickell Avenue, 9th Floor, Miami, Florida
33131.
|
(4) |
Consists
of 166,063 vested options to purchase common stock, 148,655 shares
of
common stock and 74,327 warrant to common stock issued to Bisgaier
Family
LLC, a company Dr. Bisgaier is the managing member; 148,655 shares
of
common stock and 74,327 warrant to common stock issued to two trusts
for
which Dr. Bisgaier has control of. Excludes 1,826,681 unvested
options to common stock vesting over three years. Dr. Bisgaier’s business
address is 3985 Research Park Drive, Suite 4, Ann Arbor, MI
48108.
|
(5) |
Assumes
the exercise of a vested option to purchase 343,160 shares of our
common
stock. This option is exercisable within 60 days of the date of
this
filing. Excludes an unvested option to purchase 343,160 common
stock which
will vest annually over three years. Mr. Kraws’s business address is 800
Third Avenue, 17th
Fl., New York, NY 10022.
|
(6) |
Includes
an option to purchase 81,318 shares of common stock. This does
not include
an option to purchase 691,235 shares of common stock, vesting annually
over three years if Dr. Rudick raises at least $10 million in gross
proceeds to Pipex and Dr. Rudick completes the EPI acquisition.
This
option is not exercisable within 60 days of the date of this report.
Dr.
Rudick’s business address is 150 Broadway, Suite 1800, New York, NY
10128.
|
(7) |
Assumes
the exercise of an option to purchase 32,527 shares of our common
stock.
This option is exercisable within 60 days of the date of this report.
Mr.
Wolf’s business address is c/o Seed-One Ventures, LLC, 1205 Lincoln
Road,
Suite 216, Miami Beach, Florida
33139.
|
Item
9.01 Financial
Statements and Exhibits.
(a) Financial
statements of business acquired.
Audited
consolidated financial statements of the Company as of and for the years
ended
December 31, 2005 and 2004 and for the period from January 8, 2001 (Inception)
to December 31, 2005 and unaudited condensed consolidated financial statements
as of June 30, 2006 appear elsewhere herein, commencing on page
F-1.
(b)
Pro
Forma Financial Information.
Pro
forma
financial statements are not required to be filed with this Current
Report.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Sheffield
Pharmaceuticals, Inc.
(Registrant)
By:
/s/ Steve H. Kanzer
Name:
Steve H. Kanzer
Title:
Chief Executive Officer
November
7, 2006
List
of
Exhibits
2.1 |
Merger
Agreement with the Registrant and Pipex Therapeutics
Inc.*
|
10.1 |
Employment
Agreement between Pipex Therapeutics, Inc. and Charles L.
Bisgaier*
|
10.2 |
Consulting
Agreement between Pipex, Inc. and George J.
Brewer*
|
10.3 |
License
Agreement between Pipex, Inc. the Regents of the University of
Michigan*
|
10.4 |
Research
Agreement between Pipex, Inc. and the Regents of the University
of
Michigan*
|
10.5 |
Option
and License Agreement between University of Southern California
and
Autoimmune Vaccines, Inc.*
|
10.6 |
First
Amendment to Option and License Agreement between University of
Southern
California and Solovax, Inc. (formerly Autoimmune Vaccines,
Inc.)*
|
10.7 |
License
Agreement between Children’s Medical Center Corporation and Effective
Pharmaceuticals, Inc.*
|
10.8 |
License
agreement between Thomas Jefferson University and Quantas
Biopharmaceuticals, Inc.*
|
10.9 |
First
Amendment to License Agreement between Thomas Jefferson University
and CD4
Biosciences, Inc.*
|
10.10 |
Private
Stock Purchase Agreement between Pipex Therapeutics Inc and Michael
Manion*
|
10.11 |
Lock-Up
Agreement with Mr. Michael Manion*
|
10.12 |
Lock-Up
Agreement with Accredited Venture Capital,
LLC*
|
10.13 |
Lock-Up
Agreement with Nicholas Stergis*
|
10.14 |
Lock-Up
Agreement with Joseph Rudick, M.D.*
|
10.15 |
Lock-Up
Agreement with Jeffrey Kraws*
|
10.16 |
Lock-Up
Agreement with Jeffrey Wolf*
|
10.17 |
Lock-Up
Agreement with Charles Bisgaier,
PhD.*
|
*
Incorporated by reference to the Form 8-K filed with
the Commission on November 6, 2006.