FORM
10-Q
|
ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
SECURITIES
EXCHANGE ACT OF 1934
|
Delaware
|
95-3698422
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
14272
Franklin Avenue, Tustin, California
|
92780-7017
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Class
|
Shares
Outstanding at March 5, 2007
|
|
Common
Stock, $0.001 par value per share
|
196,112,201
shares
|
PART
I - FINANCIAL INFORMATION
|
Page
No.
|
||
Item
1.
|
Consolidated
Financial Statements (unaudited):
|
||
Condensed
Consolidated Balance Sheets
|
1
|
||
Condensed
Consolidated Statements of Operations
|
3
|
||
Condensed
Consolidated Statements of Cash Flows
|
4
|
||
Notes
to Condensed Consolidated Financial Statements
|
5
|
||
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
15
|
|
Company
Overview
|
15
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
24
|
|
Item
4.
|
Controls
and Procedures
|
24
|
|
PART
II - OTHER INFORMATION
|
|||
Item
1.
|
Legal
Proceedings
|
25
|
|
Item
1A.
|
Risk
Factors
|
25
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
37
|
|
Item
3.
|
Defaults
upon Senior Securities
|
37
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
37
|
|
Item
5.
|
Other
Information
|
37
|
|
Item
6.
|
Exhibits
|
37
|
|
SIGNATURES
|
38
|
JANUARY
31,
2007
|
APRIL
30,
2006
|
||||||
Unaudited
|
|||||||
ASSETS
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
20,114,000
|
$
|
17,182,000
|
|||
Trade
and other receivables
|
957,000
|
579,000
|
|||||
Inventories
|
2,871,000
|
885,000
|
|||||
Prepaid
expenses and other current assets
|
1,325,000
|
1,466,000
|
|||||
Total
current assets
|
25,267,000
|
20,112,000
|
|||||
PROPERTY:
|
|||||||
Leasehold
improvements
|
640,000
|
618,000
|
|||||
Laboratory
equipment
|
3,488,000
|
3,444,000
|
|||||
Furniture,
fixtures and office equipment
|
808,000
|
666,000
|
|||||
4,936,000
|
4,728,000
|
||||||
Less
accumulated depreciation and amortization
|
(3,091,000
|
)
|
(2,822,000
|
)
|
|||
Property,
net
|
1,845,000
|
1,906,000
|
|||||
Other
assets
|
1,259,000
|
658,000
|
|||||
TOTAL
ASSETS
|
$
|
28,371,000
|
$
|
22,676,000
|
JANUARY
31,
2007
|
APRIL
30,
2006
|
||||||
Unaudited
|
|||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Accounts
payable
|
$
|
1,439,000
|
$
|
1,233,000
|
|||
Accrued
clinical trial site fees
|
319,000
|
170,000
|
|||||
Accrued
legal and accounting fees
|
185,000
|
250,000
|
|||||
Accrued
royalties and license fees
|
249,000
|
138,000
|
|||||
Accrued
payroll and related costs
|
724,000
|
850,000
|
|||||
Notes
payable, current portion
|
440,000
|
429,000
|
|||||
Capital
lease obligation, current portion
|
16,000
|
15,000
|
|||||
Deferred
revenue
|
2,202,000
|
563,000
|
|||||
Other
current liabilities
|
480,000
|
836,000
|
|||||
Total
current liabilities
|
6,054,000
|
4,484,000
|
|||||
Notes
payable, less current portion
|
168,000
|
498,000
|
|||||
Capital
lease obligation, less current portion
|
35,000
|
47,000
|
|||||
Deferred
license revenue
|
8,000
|
21,000
|
|||||
Commitments
and contingencies
|
|||||||
STOCKHOLDERS'
EQUITY:
|
|||||||
Preferred
stock-$.001 par value; authorized 5,000,000 shares; non-voting;
nil
shares outstanding
|
-
|
-
|
|||||
Common
stock-$.001 par value; authorized 250,000,000 shares;
outstanding
- 196,112,201 and 179,382,191, respectively
|
196,000
|
179,000
|
|||||
Additional
paid-in capital
|
224,326,000
|
204,546,000
|
|||||
Deferred
stock compensation
|
-
|
(235,000
|
)
|
||||
Accumulated
deficit
|
(202,416,000
|
)
|
(186,864,000
|
)
|
|||
Total
stockholders' equity
|
22,106,000
|
17,626,000
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
28,371,000
|
$
|
22,676,000
|
THREE
MONTHS ENDED
|
NINE
MONTHS ENDED
|
||||||||||||
January
31,
2007
|
January
31,
2006
|
January
31,
2007
|
January
31,
2006
|
||||||||||
Unaudited
|
Unaudited
|
Unaudited
|
Unaudited
|
||||||||||
REVENUES:
|
|||||||||||||
Contract
manufacturing revenue
|
$
|
347,000
|
$
|
1,505,000
|
$
|
1,381,000
|
$
|
2,227,000
|
|||||
License
revenue
|
16,000
|
23,000
|
87,000
|
65,000
|
|||||||||
Total
revenues, net
|
363,000
|
1,528,000
|
1,468,000
|
2,292,000
|
|||||||||
COSTS
AND EXPENSES:
|
|||||||||||||
Cost
of contract manufacturing
|
223,000
|
1,088,000
|
1,247,000
|
1,820,000
|
|||||||||
Research
and development
|
3,907,000
|
3,294,000
|
11,868,000
|
9,330,000
|
|||||||||
Selling,
general and administrative
|
1,513,000
|
1,628,000
|
4,824,000
|
4,715,000
|
|||||||||
Total
costs and expenses
|
5,643,000
|
6,010,000
|
17,939,000
|
15,865,000
|
|||||||||
LOSS
FROM OPERATIONS
|
(5,280,000
|
)
|
(4,482,000
|
)
|
(16,471,000
|
)
|
(13,573,000
|
)
|
|||||
OTHER
INCOME (EXPENSE):
|
|||||||||||||
Interest
and other income
|
267,000
|
1,381,000
|
955,000
|
1,585,000
|
|||||||||
Interest
and other expense
|
(12,000
|
)
|
(12,000
|
)
|
(36,000
|
)
|
(35,000
|
)
|
|||||
NET
LOSS
|
$
|
(5,025,000
|
)
|
$
|
(3,113,000
|
)
|
$
|
(15,552,000
|
)
|
$
|
(12,023,000
|
)
|
|
WEIGHTED
AVERAGE
COMMON
SHARES OUTSTANDING:
|
|||||||||||||
Basic
and Diluted
|
195,299,586
|
171,355,523
|
191,067,145
|
165,772,373
|
|||||||||
BASIC
AND DILUTED LOSS PER COMMON SHARE
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
$
|
(0.08
|
)
|
$
|
(0.07
|
)
|
NINE
MONTHS ENDED JANUARY 31,
|
|||||||
2007
|
2006
|
||||||
Unaudited
|
Unaudited
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
loss
|
$
|
(15,552,000
|
)
|
$
|
(12,023,000
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
355,000
|
302,000
|
|||||
Stock-based
compensation and issuance of common stock under stock bonus
plan
|
1,153,000
|
361,000
|
|||||
Amortization
of expenses paid in shares of common stock
|
362,000
|
844,000
|
|||||
Recovery
of note receivable
|
-
|
(1,229,000
|
)
|
||||
Loss
(gain) on disposal of property
|
1,000
|
(6,000
|
)
|
||||
Changes
in operating assets and liabilities:
|
|||||||
Trade
and other receivables
|
(378,000
|
)
|
(195,000
|
)
|
|||
Inventories
|
(1,986,000
|
)
|
(433,000
|
)
|
|||
Prepaid
expenses and other current assets
|
(221,000
|
)
|
(193,000
|
)
|
|||
Accounts
payable
|
206,000
|
168,000
|
|||||
Accrued
clinical trial site fees
|
149,000
|
203,000
|
|||||
Deferred
revenue
|
1,626,000
|
70,000
|
|||||
Accrued
payroll and related costs
|
(87,000
|
)
|
(189,000
|
)
|
|||
Other
accrued expenses and current liabilities
|
(310,000
|
)
|
(662,000
|
)
|
|||
Net
cash used in operating activities
|
(14,682,000
|
)
|
(12,982,000
|
)
|
|||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Property
acquisitions
|
(105,000
|
)
|
(423,000
|
)
|
|||
Proceeds
from sale of property
|
-
|
6,000
|
|||||
Recovery
of note receivable
|
-
|
1,229,000
|
|||||
Decrease
(increase) in other assets
|
184,000
|
(199,000
|
)
|
||||
Net
cash provided by investing activities
|
79,000
|
613,000
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Proceeds
from borrowings under notes payable
|
-
|
370,000
|
|||||
Principal
payments on notes payable and capital lease
|
(330,000
|
)
|
(218,000
|
)
|
|||
Proceeds
from issuance of common stock, net of issuance costs of
$46,000
and $47,000, respectively
|
17,865,000
|
18,065,000
|
|||||
Net
cash provided by financing activities
|
17,535,000
|
18,217,000
|
|||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
2,932,000
|
5,848,000
|
|||||
CASH
AND CASH EQUIVALENTS, beginning
of period
|
17,182,000
|
9,816,000
|
|||||
CASH
AND CASH EQUIVALENTS,
end of period
|
$
|
20,114,000
|
$
|
15,664,000
|
|||
NON-CASH
FINANCING ACTIVITIES:
|
|||||||
Common
stock issued for research fees and prepayments for future research
fees
|
$
|
975,000
|
$
|
321,000
|
|||
Property
acquired under capital lease
|
$
|
-
|
$
|
65,000
|
January
31,
2007
|
April
30,
2006
|
||||||
Raw
materials
|
$
|
709,000
|
$
|
565,000
|
|||
Work-in-process
|
2,162,000
|
320,000
|
|||||
Total
inventories
|
$
|
2,871,000
|
$
|
885,000
|
Three
Months Ended
January
31, 2007
|
Nine
Months Ended
January
31, 2007
|
||||||
Research
and development
|
$
|
129,000
|
$
|
472,000
|
|||
Selling,
general and administrative
|
58,000
|
324,000
|
|||||
Total
|
$
|
187,000
|
$
|
796,000
|
Three
Months Ended
January
31,
|
Nine
Months Ended
January
31,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Risk-free
interest rate
|
4.72%
|
|
3.88%
|
|
4.87%
|
|
3.88%
|
|
|||||
Expected
life (in years)
|
6.25
|
5.49
|
6.25
|
5.49
|
|||||||||
Expected
volatility
|
97%
|
|
103%
|
|
99%
|
|
103%
|
|
|||||
Expected
dividend yield
|
-
|
-
|
-
|
-
|
Stock
Options
|
Shares
|
Weighted
Average
Exercisable
Price
|
Weighted
Average
Remaining
Contractual
Term
(years)
|
Aggregate
Intrinsic
Value
|
|||||||||
Outstanding,
May 1, 2006
|
11,307,279
|
$
|
1.56
|
||||||||||
Granted
|
846,680
|
$
|
1.34
|
||||||||||
Exercised
|
(65,350
|
)
|
$
|
0.90
|
|||||||||
Canceled
or expired
|
(480,444
|
)
|
$
|
1.64
|
|||||||||
Outstanding,
January 31, 2007
|
11,608,165
|
$
|
1.54
|
6.02
|
$
|
1,358,000
|
|||||||
Exercisable
and expected to vest
|
11,388,535
|
$
|
1.55
|
5.97
|
$
|
1,348,000
|
|||||||
Exercisable,
January 31, 2007
|
9,087,459
|
$
|
1.60
|
5.34
|
$
|
1,255,000
|
|||||||
THREE
MONTHS ENDED
|
NINE
MONTHS ENDED
|
||||||||||||
January
31,
2007
|
January
31,
2006
|
January
31,
2007
|
January
31,
2006
|
||||||||||
Net
loss, excluding the effect of employee stock-based
compensation
|
$
|
(4,838,000
|
)
|
$
|
(3,113,000
|
)
|
$
|
(14,756,000
|
)
|
$
|
(12,023,000
|
)
|
|
Deduct:
Total stock-based employee compensation determined under the fair
value
based method for all awards
|
(187,000
|
)
|
(291,000
|
)
|
(796,000
|
)
|
(1,504,000
|
)
|
|||||
Net
loss, including the effect of stock-based compensation
|
$
|
(5,025,000
|
)
|
$
|
(3,404,000
|
)
|
$
|
(15,552,000
|
)
|
$
|
(13,527,000
|
)
|
|
Basic
and diluted net loss per share:
|
|||||||||||||
Excluding
the effect of stock-based compensation
|
$
|
(0.02
|
)
|
$
|
(0.02
|
)
|
$
|
(0.08
|
)
|
$
|
(0.07
|
)
|
|
Including
the effect of stock-based compensation
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
$
|
(0.08
|
)
|
$
|
(0.08
|
)
|
Number
of Shares
of
Common Stock
Reserved
For
Issuance
|
||||
Shares
reserved under two effective shelf registration statements
|
5,030,634
|
|||
Options
issued and outstanding
|
11,608,165
|
|||
Options
available for future grant
|
4,616,329
|
|||
Warrants
issued and outstanding
|
422,865
|
|||
Total
shares reserved
|
21,677,993
|
Per
Share
Exercise
Price
|
Number
of
Warrants
Outstanding
|
Weighted
Average
Per
Share
Exercise
Price
|
Expiration
Date
|
|||||||
$0.86
|
62,865
|
6/8/07
|
||||||||
$1.47
|
350,000
|
3/31/08
|
||||||||
$2.50
|
10,000
|
3/25/08
|
||||||||
$0.86
- $2.50
|
422,865
|
|
$
1.40
|
6/8/07
- 3/31/08
|
Three
Months Ended January 31,
|
|||||||
2007
|
2006
|
||||||
Net
Revenues:
|
|||||||
Contract
manufacturing and development of biologics
|
$
|
347,000
|
$
|
1,505,000
|
|||
Products
in research and development
|
16,000
|
23,000
|
|||||
Total
revenues, net
|
$
|
363,000
|
$
|
1,528,000
|
|||
Gross
Profit:
|
|||||||
Contract
manufacturing and development of biologics
|
$
|
124,000
|
$
|
417,000
|
|||
Products
in research and development
|
16,000
|
23,000
|
|||||
Total
gross profit
|
140,000
|
440,000
|
|||||
Research
and development expense
|
(3,907,000
|
)
|
(3,294,000
|
)
|
|||
Selling,
general and administrative expense
|
(1,513,000
|
)
|
(1,628,000
|
)
|
|||
Other
income, net
|
255,000
|
1,369,000
|
|||||
Net
loss
|
$
|
(5,025,000
|
)
|
$
|
(3,113,000
|
)
|
Three
Months Ended January 31,
|
|||||||
2007
|
2006
|
||||||
Customer
revenues as a % of net revenues:
|
|||||||
United
States (customer A)
|
77%
|
|
72%
|
|
|||
United
States (customer B)
|
18%
|
|
0%
|
|
|||
Germany
(one customer)
|
3%
|
|
20%
|
|
|||
Other
customers
|
2%
|
|
8%
|
|
|||
Total
customer revenues as a % of net revenues
|
100%
|
|
100%
|
|
Nine
Months Ended January 31,
|
|||||||
2007
|
2006
|
||||||
Net
Revenues:
|
|||||||
Contract
manufacturing and development of biologics
|
$
|
1,381,000
|
$
|
2,227,000
|
|||
Products
in research and development
|
87,000
|
65,000
|
|||||
Total
net revenues
|
$
|
1,468,000
|
$
|
2,292,000
|
|||
Gross
Profit (Loss):
|
|||||||
Contract
manufacturing and development of biologics
|
$
|
134,000
|
$
|
407,000
|
|||
Products
in research and development
|
87,000
|
65,000
|
|||||
Total
gross profit
|
221,000
|
472,000
|
|||||
Research
and development expense
|
(11,868,000
|
)
|
(9,330,000
|
)
|
|||
Selling,
general and administrative expense
|
(4,824,000
|
)
|
(4,715,000
|
)
|
|||
Other
income, net
|
919,000
|
1,550,000
|
|||||
Net
loss
|
$
|
(15,552,000
|
)
|
$
|
(12,023,000
|
)
|
|
Nine
Months Ended January 31,
|
|||||||
2007
|
2006
|
||||||
Customer
revenues as a % of net revenues:
|
|||||||
United
States (customer A)
|
22%
|
|
75%
|
|
|||
United
States (customer B)
|
12%
|
|
0%
|
|
|||
Germany
(one customer)
|
1%
|
|
13%
|
|
|||
Australia
(one customer)
|
36%
|
|
3%
|
|
|||
China
(one customer)
|
25%
|
|
0%
|
|
|||
Other
customers
|
4%
|
|
9%
|
|
|||
Total
customer revenues as a % of net revenues
|
100%
|
|
100%
|
|
January
31,
2007
|
April
30,
2006
|
||||||
Long-lived
Assets, net:
|
|||||||
Contract
manufacturing and development of biologics
|
$
|
1,510,000
|
$
|
1,516,000
|
|||
Products
in research and development
|
335,000
|
390,000
|
|||||
Total
long-lived assets, net
|
$
|
1,845,000
|
$
|
1,906,000
|
Product
|
Indication
|
Trial
Design
|
Status
|
Bavituximab
|
Solid
tumor cancers
|
Phase
Ia repeat dose monotherapy safety study to treat up to 28 patients.
|
Patients
are currently being screened and enrolled at up to 5 centers in the
U.S.
|
Bavituximab
plus chemotherapy
|
Solid
tumor cancers
|
Phase
Ib repeat dose combination therapy safety study to treat up to 12
patients
with 8 weekly doses of bavituximab in combination with chemotherapy
agents.
|
Patients
are currently being screened and enrolled at up to 3 centers in India.
|
Cotara®
|
Brain
cancer (glioblastoma multiforme)
|
Dosimetry
and dose confirmation study designed to treat up to 12 patients at
1st
and 2nd
relapse in collaboration with New Approaches to Brain Tumor Therapy
consortium.
|
Patients
are currently being screened and enrolled at up to 4 centers in the
U.S.
|
Cotara®
|
Brain
cancer (glioblastoma multiforme)
|
Phase
II safety and efficacy study to treat up to 40 patients at 1st
relapse.
|
Regulatory
approval has been received for the protocol in India. Manufacturing
development is proceeding in India and approval is anticipated in
the near
term.
|
Bavituximab
|
Chronic
Hepatitis C Virus (“HCV”) infection
|
Phase
Ib repeat dose safety study in 24 patients.
|
Phase
Ib study is complete. We are currently evaluating the data in designing
the next set of studies. We expect to initiate these studies in the
coming
months.
|
Three
Months Ended
January
31,
|
Nine
Months Ended
January
31,
|
||||||||||||||||||
2007
|
2006
|
$
Change
|
2007
|
2006
|
$
Change
|
||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||||
REVENUES:
|
|||||||||||||||||||
Contract
manufacturing revenue
|
$
|
347
|
$
|
1,505
|
$
|
(1,158
|
)
|
$
|
1,381
|
$
|
2,227
|
$
|
(846
|
)
|
|||||
License
revenue
|
16
|
23
|
(7
|
)
|
87
|
65
|
22
|
||||||||||||
Total
revenues
|
363
|
1,528
|
(1,165
|
)
|
1,468
|
2,292
|
(824
|
)
|
|||||||||||
COST
AND EXPENSES:
|
|||||||||||||||||||
Cost
of contract manufacturing
|
223
|
1,088
|
(865
|
)
|
1,247
|
1,820
|
(573
|
)
|
|||||||||||
Research
and development
|
3,907
|
3,294
|
613
|
11,868
|
9,330
|
2,538
|
|||||||||||||
Selling,
general and administrative
|
1,513
|
1,628
|
(115
|
)
|
4,824
|
4,715
|
109
|
||||||||||||
Total
cost and expenses
|
5,643
|
6,010
|
(367
|
)
|
17,939
|
15,865
|
2,074
|
||||||||||||
LOSS
FROM OPERATIONS
|
(5,280
|
)
|
(4,482
|
)
|
(798
|
)
|
(16,471
|
)
|
(13,573
|
)
|
(2,898
|
)
|
|||||||
OTHER
INCOME (EXPENSE):
|
|||||||||||||||||||
Interest
and other income
|
267
|
1,381
|
(1,114
|
)
|
955
|
1,585
|
(630
|
)
|
|||||||||||
Interest
and other expense
|
(12
|
)
|
(12
|
)
|
-
|
(36
|
)
|
(35
|
)
|
(1
|
)
|
||||||||
NET
LOSS
|
$
|
(5,025
|
)
|
$
|
(3,113
|
)
|
$
|
(1,912
|
)
|
$
|
(15,552
|
)
|
$
|
(12,023
|
)
|
$
|
(3,529
|
)
|
R&D
Expenses -
Three
Months Ended
January
31,
|
R&D
Expenses -
Nine
Months Ended
January
31,
|
||||||||||||||||||
2007
|
2006
|
$
Change
|
2007
|
2006
|
$
Change
|
||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||||
Technology
Platform:
|
|||||||||||||||||||
Anti-PS
Immunotherapeutics
(bavituximab)
|
$
|
1,974
|
$
|
2,174
|
$
|
(200
|
)
|
$
|
7,081
|
$
|
6,290
|
$
|
791
|
||||||
TNT
(Cotara®)
|
1,301
|
641
|
660
|
2,829
|
1,710
|
1,119
|
|||||||||||||
VTA
and Anti-Angiogenesis Agents
|
487
|
369
|
118
|
1,531
|
1,033
|
498
|
|||||||||||||
VEA
|
145
|
110
|
35
|
427
|
297
|
130
|
|||||||||||||
Total
R&D Expenses
|
$
|
3,907
|
$
|
3,294
|
$
|
613
|
$
|
11,868
|
$
|
9,330
|
$
|
2,538
|
o
|
Vascular
Targeting Agents (“VTAs”) and Anti-Angiogenesis Agents -
Three and Nine Months: The increase in VTA and Anti-Angiogenesis
Agents
program expenses during the three and nine-months ended January 31,
2007
compared to the same periods in the prior year is primarily due to
increases in payroll and related expenses, sponsored research fees,
manufacturing expenses, and outside research studies associated with
increased efforts to advance the pre-clinical development of our
VTA and
Anti-Angiogenesis Agents programs. These increases were further
supplemented by an increase in non-cash stock-based compensation
expense
associated with the amortization of the fair value of options granted
to
employees in accordance with the adoption of SFAS No. 123R on May
1,
2006.
|
§
|
the
uncertainty of our capital resources to fund research, development
and
clinical studies beyond November 2007;
|
§
|
the
uncertainty of future costs associated with our pre-clinical candidates,
including Vascular Targeting Agents, Anti-Angiogenesis Agents,
and
Vasopermeation Enhancement Agents, which costs are dependent on
the
success of pre-clinical development. We are uncertain whether or
not these
product candidates will be successful and we are uncertain whether
or not
we will incur any additional costs beyond pre-clinical
development;
|
§
|
the
uncertainty of future clinical trial results;
|
§
|
the
uncertainty of the ultimate number of patients to be treated in
any
current or future clinical trial;
|
§
|
the
uncertainty of the Food and Drug Administration allowing our studies
to
move forward from Phase I clinical studies to Phase II and Phase
III
clinical studies;
|
§
|
the
uncertainty of the rate at which patients are enrolled into any
current or
future study. Any delays in clinical trials could significantly
increase
the cost of the study and would extend the estimated completion
dates;
|
§
|
the
uncertainty of terms related to potential future partnering or
licensing
arrangements; and
|
§
|
the
uncertainty of protocol changes and modifications in the design
of our
clinical trial studies, which may increase or decrease our future
costs.
|
NINE
MONTHS ENDED
|
||||||
January
31,
2007
|
January
31,
2006
|
|||||
Net
loss, as reported
|
$
|
(15,552,000
|
)
|
$
|
(12,023,000
|
)
|
Less
non-cash expenses and adjustments to net loss:
Depreciation
and amortization
Stock-based
compensation and common stock issued under stock
bonus
plan
Amortization
of expenses paid in shares of common stock
Recovery
of note receivable
Loss (gain)
on disposal of property
|
355,000
1,153,000
362,000
-
1,000
|
302,000
361,000
844,000
(1,229,000
(6,000
|
)
)
|
|||
Net
cash used in operating activities before changes in operating assets
and
liabilities
|
$
|
(13,681,000
|
)
|
$
|
(11,751,000
|
)
|
Net
change in operating assets and liabilities
|
$
|
(1,001,000
|
)
|
$
|
(1,231,000
|
)
|
Net
cash used in operating activities
|
$
|
(14,682,000
|
)
|
$
|
(12,982,000
|
)
|
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
ITEM
1A.
|
RISK
FACTORS
|
·
|
delays
in product development, clinical testing or
manufacturing;
|
·
|
unplanned
expenditures in product development, clinical testing or
manufacturing;
|
·
|
failure
in clinical trials or failure to receive regulatory
approvals;
|
·
|
emergence
of superior or equivalent products;
|
·
|
inability
to manufacture on our own, or through others, product candidates
on a
commercial scale;
|
·
|
inability
to market products due to third party proprietary rights;
and
|
·
|
failure
to achieve market acceptance.
|
Net
Loss
|
||||
Nine
months ended January 31, 2007 (unaudited)
|
$
|
15,552,000
|
||
Fiscal
Year 2006
|
$
|
17,061,000
|
||
Fiscal
Year 2005
|
$
|
15,452,000
|
||
Fiscal
Year 2004
|
$
|
14,345,000
|
·
|
slower
than expected rates of patient recruitment due to narrow screening
requirements;
|
·
|
the
inability of patients to meet FDA imposed protocol
requirements;
|
·
|
the
inability to manufacture sufficient quantities of qualified materials
under current good manufacturing practices, or cGMPs, for use in
clinical
trials;
|
·
|
the
need or desire to modify our manufacturing processes;
|
·
|
the
inability to adequately observe patients after
treatment;
|
·
|
changes
in regulatory requirements for clinical trials;
|
·
|
the
lack of effectiveness during the clinical trials;
|
·
|
unforeseen
safety issues;
|
·
|
delays,
suspension, or termination of the clinical trials due to the institutional
review board responsible for overseeing the study at a particular
study
site; and
|
·
|
government
or regulatory delays or “clinical holds” requiring suspension or
termination of the trials.
|
·
|
production
yields;
|
·
|
quality
control and quality assurance;
|
·
|
shortages
of qualified personnel;
|
·
|
compliance
with FDA regulations, including the demonstration of purity and
potency;
|
·
|
changes
in FDA requirements;
|
·
|
production
costs; and/or
|
·
|
development
of advanced manufacturing techniques and process
controls.
|
1.
|
Net
tangible assets of at least $2,500,000 or market capitalization of
at
least $35,000,000 or net income of at least $500,000 in either our
latest
fiscal year or in two of our last three fiscal
years;
|
2.
|
Public
float of at least 500,000 shares;
|
3.
|
Market
value of our public float of at least
$1,000,000;
|
4.
|
A
minimum closing bid price of $1.00 per share of common stock, without
falling below this minimum bid price for a period of thirty consecutive
trading days;
|
5.
|
At
least two market makers; and
|
6.
|
At
least 300 stockholders, each holding at least 100 shares of common
stock.
|
Number
of Shares
of
Common Stock
Reserved
For
Issuance
|
||||
Shares
reserved for under two effective shelf
registration statements
|
5,030,634
|
|||
Common
shares reserved for issuance under stock option plans
|
11,608,165
|
|||
Common
shares available for future grant under option plans
|
4,616,329
|
|||
Common
shares issuable upon exercise of outstanding warrants
|
422,865
|
|||
21,677,993
|
Common
Stock
Sales
Price
|
Common
Stock Daily
Trading
Volume
(000’s
omitted)
|
||||||||||||
High
|
Low
|
High
|
Low
|
||||||||||
Fiscal
Year 2007
|
|||||||||||||
Quarter
Ended January 31, 2007
|
$
|
1.39
|
$
|
1.09
|
4,299
|
203
|
|||||||
Quarter
Ended October 31, 2006
|
$
|
1.49
|
$
|
1.12
|
3,761
|
277
|
|||||||
Quarter
Ended July 31, 2006
|
$
|
1.99
|
$
|
1.30
|
23,790
|
429
|
|||||||
Fiscal
Year 2006
|
|||||||||||||
Quarter
Ended April 30, 2006
|
$
|
1.76
|
$
|
1.20
|
9,922
|
391
|
|||||||
Quarter
Ended January 31, 2006
|
$
|
1.40
|
$
|
0.88
|
12,152
|
251
|
|||||||
Quarter
Ended October 31, 2005
|
$
|
1.28
|
$
|
0.91
|
4,619
|
156
|
|||||||
Quarter
Ended July 31, 2005
|
$
|
1.31
|
$
|
0.92
|
7,715
|
178
|
|||||||
Fiscal
Year 2005
|
|||||||||||||
Quarter
Ended April 30, 2005
|
$
|
1.64
|
$
|
1.11
|
5,945
|
223
|
|||||||
Quarter
Ended January 31, 2005
|
$
|
1.45
|
$
|
0.99
|
6,128
|
160
|
|||||||
Quarter
Ended October 31, 2004
|
$
|
1.96
|
$
|
0.95
|
2,141
|
148
|
|||||||
Quarter
Ended July 31, 2004
|
$
|
1.92
|
$
|
0.88
|
1,749
|
131
|
|||||||
Fiscal
Year 2004
|
|||||||||||||
Quarter
Ended April 30, 2004
|
$
|
2.85
|
$
|
1.56
|
3,550
|
320
|
|||||||
Quarter
Ended January 31, 2004
|
$
|
3.14
|
$
|
2.01
|
6,062
|
201
|
|||||||
Quarter
Ended October 31, 2003
|
$
|
2.44
|
$
|
1.25
|
18,060
|
314
|
|||||||
Quarter
Ended July 31, 2003
|
$
|
2.19
|
$
|
0.60
|
12,249
|
255
|
·
|
Announcements
of technological innovations or new commercial products by us or
our
competitors;
|
·
|
publicity
regarding actual or potential clinical trial results relating to
products
under development by us or our
competitors;
|
·
|
our
financial results or that of our
competitors;
|
·
|
published
reports by securities analysts;
|
·
|
announcements
of licensing agreements, joint ventures, strategic alliances, and
any
other transaction that involves the sale or use of our technologies
or
competitive technologies;
|
·
|
developments
and/or disputes concerning our patent or proprietary
rights;
|
·
|
regulatory
developments and product safety
concerns;
|
·
|
general
stock trends in the biotechnology and pharmaceutical industry
sectors;
|
·
|
public
concerns as to the safety and effectiveness of our
products;
|
·
|
economic
trends and other external factors, including but not limited to,
interest
rate fluctuations, economic recession, inflation, foreign market
trends,
national crisis, and disasters; and
|
·
|
healthcare
reimbursement reform and cost-containment measures implemented by
government agencies.
|
·
|
the
pending patent applications we have filed or to which we have exclusive
rights may not result in issued patents or may take longer than we
expect
to result in issued patents;
|
·
|
the
claims of any patents that issue may not provide meaningful
protection;
|
·
|
we
may be unable to develop additional proprietary technologies that
are
patentable;
|
·
|
the
patents licensed or issued to us may not provide a competitive
advantage;
|
·
|
other
parties may challenge patents licensed or issued to
us;
|
·
|
disputes
may arise regarding the invention and corresponding ownership rights
in
inventions and know-how resulting from the joint creation or use
of
intellectual property by us, our licensors, corporate partners and
other
scientific collaborators; and
|
·
|
other
parties may design around our patented
technologies.
|
·
|
no
stockholder action may be taken without a meeting, without prior
notice
and without a vote; solicitations by consent are thus
prohibited;
|
·
|
special
meetings of stockholders may be called only by our Board of Directors;
and
|
·
|
our
Board of Directors has the authority, without further action by the
stockholders, to fix the rights and preferences, and issue shares,
of
preferred stock. An issuance of preferred stock with dividend and
liquidation rights senior to the common stock and convertible into
a large
number of shares of common stock could prevent a potential acquiror
from
gaining effective economic or voting
control.
|
(a)
|
Exhibits:
|
31.1
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant
to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
PEREGRINE
PHARMACEUTICALS, INC.
|
||
Date:
March 12, 2007
|
By:
/s/ STEVEN W.
KING
|
|
Steven
W. King
|
||
President
and Chief Executive Officer, Director
|
||
Date:
March 12, 2007
|
By:
/s/ PAUL J.
LYTLE
|
|
Paul
J. Lytle
|
||
Chief
Financial Officer
|
||
(signed
both as an officer duly authorized to sign
on
behalf of the Registrant and principal financial
officer
and chief accounting officer)
|
By:
|
/s/
STEVEN W. KING
|
Name:
|
Steven
W. King
|
Title:
|
President
and Chief Executive Officer, Director
|
Date:
|
March
12, 2007
|
By:
|
/s/
PAUL J. LYTLE
|
Name:
|
Paul
J. Lytle
|
Title:
|
Chief
Financial Officer
|
Date:
|
March
12, 2007
|