ACURA PHARMACEUTICALS, INC - Quarter Report: 2010 June (Form 10-Q)
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SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20649
Form
10-Q
(Mark
One)
þ
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
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For the quarterly period ended June 30,
2010
or
¨
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TRANSACTION REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period from
______________________ to_______________________
Commission
File Number 1-10113
Acura
Pharmaceuticals, Inc.
(Exact name of registrant as
specified in its charter)
New
York
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11-0853640
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(State
or other Jurisdiction of
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(I.R.S.
Employer Identification No.)
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incorporation
or organization)
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616
N. North Court, Suite 120
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Palatine,
Illinois
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60067
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(Address
of Principal Executive Offices)
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(Zip
Code)
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847
705 7709
(Registrant's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90
days. Yes þ No o
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 S-T (§232.405 of this charter) during the preceding 12 months (or to
such shorter period that the registrant was required to submit and post such
files).
Yes o No þ
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large” filer,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated
filer o Accelerated
filer þ
Non-accelerated filer o Smaller
reporting company o
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No þ
As of July 29, 2010 the registrant had
43,894,514 shares of common stock, $.01 par value, outstanding.
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ACURA
PHARMACEUTICALS, INC. AND SUBSIDIARY
INDEX
Page
No.
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PART
1. FINANCIAL INFORMATION
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Item
1.
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Financial
Statements (Unaudited)
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Consolidated
Balance Sheets
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June
30, 2010 and December 31, 2009
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1
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Consolidated
Statements of Operations
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Six
and three months ended June 30, 2010 and June 30, 2009
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2
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Consolidated
Statement of Stockholders’ Equity
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Six
months ended June 30, 2010
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3
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Consolidated
Statements of Cash Flows
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Six
months ended June 30, 2010
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4
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Notes
to Consolidated Financial Statements
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5
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Item
2.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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9
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Item
4.
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Controls
and Procedures
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15
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PART
II. OTHER INFORMATION
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Item
6.
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Exhibits
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16
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Signatures
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16
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PART
I. FINANCIAL INFORMATION
Item
1. Financial Statements
ACURA
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
UNAUDITED
(in
thousands, except par values)
June
30,
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December
31,
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|||||||
2010
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2009
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Assets
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Current
assets
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Cash
and cash equivalents
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$ | 27,014 | $ | 30,174 | ||||
Collaboration
revenue receivable
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387 | 357 | ||||||
Prepaid
insurance
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404 | 193 | ||||||
Prepaid
expenses and other current assets
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33 | 33 | ||||||
Total
current assets
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27,838 | 30,757 | ||||||
Property,
plant and equipment, net
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1,094 | 1,160 | ||||||
Total
assets
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$ | 28,933 | $ | 31,917 | ||||
Liabilities
and Stockholders’ Equity
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Current
liabilities
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Deferred
program fee revenue
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$ | 933 | $ | 1,555 | ||||
Accrued
expenses
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576 | 452 | ||||||
Total
current liabilities
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1,509 | 2,007 | ||||||
Commitments
and contingencies
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Stockholders’
equity
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Common
stock - $.01 par value; 100,000 shares authorized; 43,894 and 43,728
shares issued and outstanding at June 30, 2010 and December 31,
2009
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439 | 437 | ||||||
Additional
paid-in capital
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357,433 | 352,694 | ||||||
Accumulated
deficit
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(330,448 | ) | (323,221 | ) | ||||
Total
stockholders’ equity
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27,424 | 29,910 | ||||||
Total
liabilities and stockholders’ equity
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$ | 28,933 | $ | 31,917 |
See
accompanying notes to the consolidated financial statements.
1
ACURA
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS
UNAUDITED
(in
thousands, except per share data)
Six Months
Ended June 30
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Three Months
Ended June 30,
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|||||||||||||||
2010
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2009
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2010
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2009
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Revenue
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Program
fee revenue
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$ | 622 | $ | 2,105 | $ | 233 | $ | 842 | ||||||||
Collaboration
revenue
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2,038 | 172 | 387 | 55 | ||||||||||||
Total
revenue
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2,660 | 2,277 | 620 | 897 | ||||||||||||
Operating
expense
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Research
and development expense
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4,572 | 2,334 | 1,525 | 1,205 | ||||||||||||
Marketing,
general and administrative expense
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5,309 | 5,396 | 2,281 | 2,948 | ||||||||||||
Total
operating expense
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9,881 | 7,730 | 3,806 | 4,153 | ||||||||||||
Loss
from operations
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(7,221 | ) | (5,453 | ) | (3,186 | ) | (3,256 | ) | ||||||||
Other
income (expense), net
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2 | 111 | (3 | ) | 42 | |||||||||||
Loss
before income tax
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(7,219 | ) | (5,342 | ) | (3,189 | ) | (3,214 | ) | ||||||||
Income
tax expense
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8 | 2,455 | 3 | 3,306 | ||||||||||||
Net
loss
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$ | (7,227 | ) | $ | (7,797 | ) | $ | (3,192 | ) | $ | (6,520 | ) | ||||
Loss
per share - basic and diluted
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$ | (0.15 | ) | $ | (0.17 | ) | $ | (0.07 | ) | $ | (0.14 | ) | ||||
Weighted
average shares – basic and diluted
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46,937 | 45,762 | 47,016 | 45,813 |
See
accompanying notes to the consolidated financial statements.
2
ACURA
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
SIX
MONTHS ENDED JUNE 30, 2010
UNAUDITED
(in
thousands, except par values)
Common
Stock
$0.01
Par
Value
-
Shares
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Common
Stock
$0.01
Par
Value
-
Amount
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Additional
Paid-in
Capital
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Accumulated
Deficit
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Total
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Balance
at December 31, 2009
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43,728 | $ | 437 | $ | 352,694 | $ | (323,221 | ) | $ | 29,910 | ||||||||||
Net
loss
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- | - | - | (7,227 | ) | (7,227 | ) | |||||||||||||
Share-based
compensation
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- | - | 4,349 | - | 4,349 | |||||||||||||||
Exercise
of warrants
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166 | 2 | 390 | - | 392 | |||||||||||||||
Balance
at June 30, 2010
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43,894 | $ | 439 | $ | 357,433 | $ | (330,448 | ) | $ | 27,424 |
See
accompanying notes to the consolidated financial statements.
3
ACURA
PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30,
UNAUDITED
(in
thousands, except supplemental disclosures)
2010
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2009
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Cash
flows from operating activities
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Net
loss
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$ | (7,227 | ) | $ | (7,797 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities
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Depreciation
and amortization
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68 | 64 | ||||||
Deferred
income taxes
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- | 2,479 | ||||||
Non-cash
share-based compensation expense
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4,349 | 3,854 | ||||||
Loss
on asset dispositions
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14 | - | ||||||
Changes
in assets and liabilities
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Collaboration
revenue receivable
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(29 | ) | 3,468 | |||||
Prepaid
expenses and other current assets
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(220 | ) | (78 | ) | ||||
Accounts
payable
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- | (382 | ) | |||||
Accrued
expenses
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131 | 227 | ||||||
Deferred
program fee revenue
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(622 | ) | (2,105 | ) | ||||
Net
cash used in operating activities
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(3,536 | ) | (267 | ) | ||||
Cash
flows from investing activities
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Capital
expenditures
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(16 | ) | (89 | ) | ||||
Investment
maturities
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- | 5,039 | ||||||
Net
cash (used in) provide by investing activities
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(16 | ) | 4,950 | |||||
Cash
flows from financing activities–proceeds from warrant
exercise
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392 | - | ||||||
(Decrease)
increase in cash and cash equivalents
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(3,160 | ) | 4,683 | |||||
Cash
and cash equivalents at beginning of period
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30,174 | 30,398 | ||||||
Cash
and cash equivalents at end of period
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$ | 27,014 | $ | 35,082 | ||||
Cash
paid during the period for income taxes
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$ | 3 | $ | 86 |
SUPPLEMENTAL
DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Six Months Ended June 30,
2010
1.
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Warrants
to purchase 64,000 shares of common stock were exercised at exercise price
of $1.29 per share in a series of cashless exercise transactions resulting
in the issuance of 14,000 shares of common
stock.
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Six Months Ended June 30,
2009
1.
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Warrants
to purchase 361,000 shares of common stock were exercised at exercise
price of $3.40 per share in a series of cashless exercise transactions
resulting in the issuance of 180,000 shares of common
stock.
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2.
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Stock
options to purchase 100,000 shares of common stock were exercised at
exercise price of $1.30 per share in a cashless exercise transaction and
after withholding shares for $173,000 minimum statutory payroll taxes,
50,000 shares of common stock were
issued.
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See
accompanying notes to the consolidated financial statements.
4
ACURA
PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010 AND 2009
NOTE
1 BASIS OF PRESENTATION
Acura
Pharmaceuticals, Inc., a New York corporation, and its wholly-owned subsidiary
Acura Pharmaceutical Technologies, Inc. (the “Company” or “We”) is a specialty
pharmaceutical company engaged in research, development and manufacture of
product candidates intended to introduce limits and impediments to abuse by
utilizing our proprietary Aversion®
Technology, Impede™ Technology and other novel technologies.
The
accompanying unaudited consolidated financial statements of the Company were
prepared in accordance with generally accepted accounting principles for interim
financial information and instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, these financial statements do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments considered
necessary to present fairly the Company’s financial position as of June 30, 2010
and results of operations and cash flows for the three and six months ended June
30, 2010 and 2009 have been made. The results of operations for the
three and six months ended June 30, 2010 are not necessarily indicative of
results expected for the full year ending December 31, 2010. These
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and footnotes thereto for the year
ended December 31, 2009 included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission. The year-end consolidated
balance sheet presented was derived from the audited consolidated financial
statements, but does not include all disclosures required by generally accepted
accounting principles. Amounts presented are rounded to the nearest thousand,
where indicated, except per share data and par values.
NOTE
2 RESEARCH AND DEVELOPMENT
Research
and Development (“R&D”) expenses include internal R&D activities,
external Contract Research Organization (“CRO”) activities, and other
activities. Internal R&D activity expenses include facility overhead,
equipment and facility maintenance and repairs, laboratory supplies,
pre-clinical laboratory experiments, depreciation, salaries, benefits, and
incentive compensation expenses. CRO activity expenses include preclinical
laboratory experiments and clinical trial studies. Other activity expenses
include clinical trial studies, regulatory consulting, and regulatory
legal counsel. Internal R&D activities and other activity expenses are
charged to operations as incurred. We make payments to the CRO's based on
agreed upon terms and may include payments in advance of the study starting
date. We review and accrue CRO expenses and clinical trial study expenses based
on work performed and rely on estimates of those costs applicable to the stage
of completion of a study as provided by the CRO. Accrued CRO costs are
subject to revisions as such studies progress to completion. Revisions are
charged to expense in the period in which the facts that give rise to the
revision become known. Advance payments are amortized to expense based on work
performed. The Company has entered into several CRO clinical trial agreements
pursuant to which these unfunded CRO commitments were $0.3 million at June 30,
2010 and are expected to be incurred as subjects are enrolled and progress
through the clinical studies.
NOTE
3 REVENUE RECOGNITION AND DEFERRED PROGRAM FEE
REVENUE
We
recognize revenue when there is persuasive evidence that an agreement exists,
performance specified in the agreement has occurred, the price is fixed and
determinable, and collection is reasonably assured. In connection with our
License, Development, and Commercialization Agreement dated October 30, 2007
(the “King Agreement”) with King Pharmaceuticals Research and Development, Inc.
(“King”), we recognize program fee revenue, collaboration revenue and milestone
revenue.
5
Program
fee revenue is derived from amortized upfront payments, such as the $30.0
million upfront payment from King received in December 2007, and license fees,
such as the $3.0 million option exercise fee paid by King to us in each of May
and December 2008 upon the exercise of its option to license a third and fourth
opioid analgesic product candidate under the King Agreement. We have assigned an
equal portion of King’s $30.0 million upfront payment to each of three product
candidates identified in the King Agreement and recognize the upfront payment as
program fee revenue ratably over our estimate of the development period for each
identified product candidate. We expect to recognize the remainder of the
program fee revenue for the third product candidate ratably over its remaining
development period which we currently estimate will extend through June
2011.
Collaboration
revenue is derived from reimbursement of development expenses, which are
invoiced quarterly in arrears, and are recognized when costs are incurred
pursuant to the King Agreement. The ongoing R&D services being
provided to King under the King Agreement are priced at fair value based upon
the reimbursement of expenses incurred pursuant to the King
Agreement.
Milestone
revenue is contingent upon the achievement of certain pre-defined events in the
development of Acurox® Tablets
and other product candidates licensed to King under the King Agreement.
Milestone payments from King are recognized as revenue upon achievement of the
“at risk” milestone events, which represent the culmination of the earnings
process related to that milestone. Milestone payments are triggered either by
the results of our R&D efforts or by events external to us, such as
regulatory approval to market a product. As such, the milestones were
substantially at risk at the inception of the King Agreement, and the amounts of
the payments assigned thereto are commensurate with the milestone achieved. In
addition, upon the achievement of a milestone event, we have no future
performance obligations related to that milestone payment. Each milestone
payment is non-refundable and non-creditable when made.
NOTE
4 INCOME TAXES
The
Company accounts for income taxes under the liability method. Under this method,
deferred income tax assets and liabilities are determined based on differences
between financial reporting and income tax basis of assets and liabilities and
are accounted for using the enacted income tax rates and laws that will be in
effect when the differences are expected to reverse. Additionally, net operating
loss and tax credit carryforwards are reported as deferred income tax
assets. The realization of deferred income tax assets is dependent
upon future earnings. A valuation allowance is required against deferred income
tax assets if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred income tax assets may not be realized. At
both June 30, 2010 and December 31, 2009 all our remaining net deferred income
tax assets were offset by a valuation allowance due to uncertainties with
respect to future utilization of net operating loss carryforwards. If in the
future it is determined that additional amounts of our deferred income tax
assets would likely be realized, the valuation allowance would be reduced in the
period in which such determination is made and an additional benefit from income
taxes in such period would be recognized.
NOTE
5 ACCRUED EXPENSES
Accrued
expenses are summarized as follows:
Jun
30,
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Dec
31,
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(in
thousands)
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2010
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2009
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||||||
Payroll,
payroll taxes, bonus and benefits
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$ | 265 | $ | 89 | ||||
Legal
and accountant services
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127 | 160 | ||||||
State
franchise taxes
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35 | 21 | ||||||
Property
taxes
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18 | 19 | ||||||
Clinical
and regulatory services
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36 | 75 | ||||||
Other
fees and services
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95 | 88 | ||||||
$ | 576 | $ | 452 |
6
NOTE
6 SHARE-BASED COMPENSATION
The
Company has share-based compensation plans including stock options and
restricted stock units (“RSUs”) for its employees and directors. The
Company accounts for compensation cost related to share-based payments based on
fair value of the stock options and RSUs when awarded to an employee or
director. The value of the portion of the award that is ultimately
expected to vest is recognized as expense in the relevant accounting periods in
the Company’s consolidated financial statement. The Company uses the straight
line method for determining the value of share-based compensation. The Company
determines the estimated fair value of share-based stock option awards using the
Black-Scholes option pricing model. Option valuation models require the input of
highly subjective assumptions including the expected volatility factor of the
market price of the Company’s common stock (as determined by reviewing its
historical public market closing prices), risk-free interest rate and expected
dividends. The Company did not consider implied volatility because there are no
options traded in its stock. The risk – free interest rate assumption is based
on observed interest rates appropriate for the estimated term of the employee
stock options. The dividend yield assumption is based on the Company’s history
and expectation of dividend payouts on common stock. The expected term of the
award represents the period that the employees and directors are expected to
hold the award before exercise and issuance using historical exercise activity.
The Company’s accounting for share-based compensation for RSUs is also based on
the fair-value method. The fair value of the RSUs is based on the closing market
price of the Company’s common stock on the date of the RSU award.
Restricted Stock Unit Award
Plan
The
Company has RSUs issued and outstanding under a Restricted Stock Unit Award Plan
(“2005 RSU Plan”) for its employees and directors. A RSU represents the
contingent obligation of the Company to deliver a share of its common stock to
the holders of a vested RSU on a specified distribution date. For the
2005 RSU Plan, absent a change of control, one-fourth of vested shares of common
stock underlying an RSU award will be distributed on January 1 of each of 2011,
2012, 2013 and 2014. If a change in control occurs (whether prior to or after
2011), an acceleration of unvested shares will occur and all shares underlying
the RSU award will be distributed at or about the time of the change in control
and any unrecognized share-based compensation expense will be recognized in our
consolidated financial statements.
At June
30, 2010 and December 31, 2009, 3.32 million RSUs were outstanding of which 3.19
million and 3.11 million were fully vested, respectively. During the
three months ended June 30, 2009, awards of 0.3 million RSUs were granted having
a fair value of $2.0 million. There was no RSU award activity during the three
month period ended June 30, 2010. Share-based compensation from
outstanding RSU awards in the amount of $0.1 million and less than $12,000 is
included in R&D expense in the three month period ended June 30, 2010 and
2009, respectively. Share-based compensation from outstanding RSU awards in the
amount of $0.2 million is included in general and administrative expense
(“G&A”) expense in each of the three month periods ended June 30, 2010 and
2009.
During
the six month period ended 2009, awards of 0.33 million RSUs were granted having
a fair value of $2.1 million, respectively. There was no RSU award activity
during the six month period ended June 30, 2010. Share-based compensation from
outstanding RSU awards in the amount of $0.1 million is included in R&D
expense in each of the six month periods ended June 30, 2010 and
2009. Share-based compensation from outstanding RSU awards in the
amount of $0.3 million and $0.2 million is included in G&A expense in the
six month period ended June 30, 2010 and 2009, respectively. As of June 30,
2010, the Company had $0.8 million of unrecognized share-based compensation
expense from RSU awards which will be recognized in our consolidated financial
statements over their remaining vesting periods.
Distribution
of RSU shares to employees may require the Company to make minimum statutory
withholding tax (“withholding tax”) payments for such employee on any gain on
such shares at the time of distribution. The employee is responsible
for providing sufficient funds to the Company to make such withholding tax
payments. However, under the 2005 RSU Plan, the employee may elect to
take a partial distribution of shares and have the Company retain the balance of
the share distribution in satisfaction of the withholding tax
payments. In such an event, the Company becomes obligated to directly
pay the withholding taxes of such employee and will retain a sufficient number
of shares such that the fair market value of the retained shares will cover the
withholding taxes. The Company has not reflected this obligation as a
liability in its consolidated financial statements as the withholding tax
payments are contingent upon both the timing and the distribution of the RSU
shares to the employee and the closing market price of our common stock at the
time of distribution. Such withholding taxes will be paid and charged against
additional paid in capital as the RSU shares are distributed.
Stock Option Award Plans
At June
30, 2010, the Company has stock options issued and outstanding under three stock
option plans. The Company’s 1995 and 1998 Stock Option Plans have
expired but stock options awarded under such plans remain outstanding under the
terms of those plans. The Company’s 2008 Stock Option Plan remains in effect.
Under the 1998 and 2008 stock option plans, only one-fourth of vested
non-incentive stock options (“NonISO”) may be exercised during each of calendar
years 2011, 2012, 2013 and 2014.
7
At June
30, 2010, stock options to purchase 3.7 million common shares were outstanding
of which 3.2 million and 2.7 million stock options were vested at June 30, 2010
and December 31, 2009, respectively. During the three months ended June 30, 2010
the only stock option activity was the expiration of 22,000 stock
options. During the three month period ended June 30, 2009, stock
options to purchase 1.1 million shares of common stock having a weighted-average
exercise price of $6.36 were granted, 0.1 million stock options were exercised
at a price of $1.30 per share, and no stock options expired. Share-based
compensation from outstanding stock option awards in the amount of $0.4 million
and $0.5 million is included in R&D expense in the three month period ended
June 30, 2010 and June 30, 2009, respectively. Share-based compensation from
outstanding stock option awards in the amount of $1.3 million and $1.6 million
is included in G&A expense in the three month period ended June 30, 2010 and
June 30, 2009, respectively.
During
the six month period ended June 30, 2010 and 2009, stock options to purchase 0.1
million shares and 1.3 million shares of common stock having a weighted average
exercise price of $5.47 and $6.38 were granted and 50,000 and 17,000 stock
options expired, respectively. During the six month period ended June 30, 2009
stock options of 0.1 million shares were exercised at a price of $1.30 per
share. Share-based compensation from outstanding stock option awards in the
amount of $0.9 million and $0.7 million is included in R&D expense in the
six month period ended June 30, 2010 and June 30, 2009, respectively.
Share-based compensation from outstanding stock option awards in the amount of
$3.0 million and $2.8 million is included in G&A expense in the six month
period ended June 30, 2010 and June 30, 2009, respectively.
Assumptions
used in the Black-Scholes model to determine fair value for the 2010 and 2009
stock option awards were:
2010
|
2009
|
|||||||
Dividend
yield
|
0.0 | % | 0.0 | % | ||||
Average
risk-free interest rate
|
3.85 | % | 2.77 | % | ||||
Average
volatility
|
122 | % | 124 | % | ||||
Expected
forfeitures
|
0.0 | % | 0.0 | % | ||||
Expected
holding period
|
10
years
|
10
years
|
||||||
Weighted
average grant date fair value
|
$ | 5.23 | $ | 6.28 |
As of
June 30, 2010 the Company had $3.0 million of unrecognized stock option
compensation expense, net of estimated forfeitures, which will be recognized in
our consolidated financial statements over their remaining vesting periods.
Under the stock option plans, if a change in control occurs, an acceleration of
unvested shares will occur and any remaining unrecognized share-based
compensation expense will be recognized in our consolidated financial
statements.
Exercise
of NonISO stock option shares by employees may require the Company to make
minimum statutory withholding tax (“withholding tax”) payments for such employee
on any gain on such shares at the time of issuance. The employee is
responsible for providing sufficient funds to the Company to make such
withholding tax payments. However, under the Company’s stock option
plans, the employee may elect to take a partial distribution of the exercised
NonISO shares and have the Company retain the balance of the exercised shares in
satisfaction of the employee’s withholding tax payments. In such an
event, the Company becomes obligated to directly pay the withholding taxes of
such employee and will retain a sufficient number of shares such that the fair
market value of the retained shares will cover the withholding taxes. The
Company has not reflected this obligation as a liability in its consolidated
financial statements as the withholding tax payments are contingent upon both
the timing and exercise of the NonISO stock option shares held by the employee
and the closing market price of our common stock at the time of exercise. Such
withholding taxes will be paid and charged against additional paid in capital as
the NonISO stock options are exercised.
NOTE
7 COMMON STOCK WARRANTS
At June
30, 2010, the Company had common stock warrants outstanding exercisable for 2.2
million shares of common stock at an exercise price of $3.40 per share with an
expiration date of August 2014.
8
NOTE
8 EARNINGS (LOSS) PER SHARE
Computation
of basic earnings (loss) per share of common stock is based on the sum of the
weighted average number of outstanding common shares and vested restricted stock
units (“RSUs”) during the period. Computation of diluted earnings (loss) per
share is based on the sum of the common shares and vested RSUs used in the basic
earnings (loss) computation, adjusted for the effect of other potentially
dilutive securities. Excluded from the diluted earnings (loss) per share
computation at June 30, 2010 and 2009 are 6.0 million and 8.0 million,
respectively, of potentially dilutive securities, as the effect of including
these securities would be antidilutive. Accordingly for the six and three months
ending June 30, 2010 and 2009 the loss per share is the same for both basic and
diluted computations.
Six Months Ended
June 30,
|
Three Months Ended
June 30,
|
|||||||||||||||
(in
thousands, except per share data)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Basic
and diluted loss per share computation
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Net
loss
|
$ | (7,227 | ) | $ | (7,797 | ) | $ | (3,192 | ) | $ | (6,520 | ) | ||||
Denominator:
|
||||||||||||||||
Common
shares (weighted)
|
43,789 | 42,781 | 43,849 | 42,825 | ||||||||||||
Vested
RSUs (weighted)
|
3,148 | 2,981 | 3,167 | 2,988 | ||||||||||||
Weighted
average number of shares outstanding
|
46,937 | 45,762 | 47,016 | 45,813 | ||||||||||||
Basic
and diluted loss per common share
|
$ | (0.15 | ) | $ | (0.17 | ) | $ | (0.07 | ) | $ | (0.14 | ) | ||||
Excluded
potentially dilutive securities:
|
||||||||||||||||
Common
shares issuable (1):
|
||||||||||||||||
Nonvested
RSUs
|
127 | 319 | 127 | 319 | ||||||||||||
Common
stock options (vested and nonvested)
|
3,713 | 4,164 | 3,713 | 4,164 | ||||||||||||
Common
stock warrants
|
2,193 | 3,546 | 2,193 | 3,546 | ||||||||||||
Total
excluded dilutive common stock equivalents
|
6,033 | 8,029 | 6,033 | 8,029 |
(1)
Number of shares issuable represents those securities which were either i)
nonvested at period end or ii) were vested but antidilutive. The number of
shares is based on maximum number of shares issuable on exercise at period
end. Such amounts have not been adjusted for the treasury stock method or
weighted average outstanding calculations as required if the securities
were dilutive.
|
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
This
discussion and analysis should be read in conjunction with the Company's
financial statements and accompanying notes included elsewhere in this
Report. Historical operating results are not necessarily indicative
of results in future periods.
9
Forward-Looking
Statements
Certain
statements in this Report constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. The most significant of
such factors include, but are not limited to, our ability and the ability of
King Pharmaceuticals Research and Development, Inc. (“King”) (to whom we have
licensed our Aversion®
Technology for certain opioid analgesic products in the United States, Canada
and Mexico) and the ability of other pharmaceutical companies, if any, to whom
we may license our Aversion®
Technology or Impede™ Technology, to obtain necessary regulatory approvals and
commercialize products utilizing such technologies, the ability to avoid
infringement of patents, trademarks and other proprietary rights of third
parties, and the ability to fulfill the U.S. Food and Drug Administration’s
(“FDA”) requirements for approving our product candidates for commercial
manufacturing and distribution in the United States, including, without
limitation, the adequacy of the results of the laboratory and clinical studies
completed to date and the results of laboratory and clinical studies we may
complete in the future, to support FDA approval of our product candidates, the
adequacy of the development program for our product candidates, including
whether additional clinical studies will be required to support FDA approval of
our product candidates, changes in regulatory requirements, adverse safety
findings relating to our product candidates, the risk that the FDA may not agree
with our analysis of our clinical studies and may evaluate the results of these
studies by different methods or conclude that the results of the studies are not
statistically significant, clinically meaningful or that there were human errors
in the conduct of the studies or the risk that further studies of our product
candidates are not positive or otherwise do not support FDA approval, whether or
when we are able to obtain FDA approval of labeling for our product candidates
for the proposed indications or for abuse deterrent features, whether our
product candidates will ultimately deter abuse in commercial settings, and the
uncertainties inherent in scientific research, drug development, laboratory and
clinical trials and the regulatory approval process.
Other
important factors that may also affect future results include, but are not
limited to: our ability to attract and retain skilled personnel; our ability to
secure and protect our patents, trademarks and other proprietary rights;
litigation or regulatory action that could require us to pay significant damages
or change the way we conduct our business; our ability to compete successfully
against current and future competitors; our dependence on third-party suppliers
of raw materials; our ability to secure U.S. Drug Enforcement Administration
quotas and source the active ingredients for our products in development;
difficulties or delays in conducting clinical trials for our product candidates
or in the commercial manufacture and supply of our products; and other risks and
uncertainties detailed in this Report and in our 2009 Annual Report on Form 10-K
filed with the Securities and Exchange Commission. When used on this
website, the words "estimate," "project," "anticipate," "expect," "intend,"
"believe," and similar expressions identify forward-looking
statements.
Company
Overview
We are a
specialty pharmaceutical company engaged in research, development and
manufacture of product candidates intended to introduce limits or impediments to
abuse utilizing our proprietary Aversion® and Impede™
Technologies. Our Aversion®
Technology opioid analgesic product candidates are intended to effectively
relieve pain while simultaneously introducing limits or impediments to common
methods of opioid product misuse and abuse, including the:
|
·
|
intravenous
injection of dissolved tablets or
capsules;
|
|
·
|
nasal
snorting of crushed tablets or capsules;
and/or
|
|
·
|
intentional
swallowing of excess quantities of tablets or
capsules.
|
Acurox®
(oxycodone HCl) Tablets
After our
April 22, 2010 FDA Advisory Committee meeting for Acurox® with Niacin (oxycodone
HCl/niacin) Tablets, we and King jointly announced our intentions to develop
product candidates utilizing our Aversion® Technology without niacin including
Acurox® (oxycodone HCl) Tablets, Vycavert® (hydrocodone
bitartrate/acetaminophen) Tablets and Acuracet® (oxycodone HCl/acetaminophen)
Tablets. In a Phase 1 pharmacokinetic (PK) study, Acurox® Tablets
demonstrated fasted bioequivalence to the anticipated reference listed drug. We
expect this PK study will serve as the basis for establishing safety and
analgesic efficacy of Acurox® Tablets. King and Acura have scheduled
a pre-NDA meeting for Acurox® Tablets for late in the 3rd quarter of 2010 to
confirm the contents of an Acurox® Tablets NDA submission acceptable to FDA for
filing. Although we do not expect a Phase 3 safety and efficacy study
will be required for an NDA filing, we expect that additional PK and abuse
liability studies may be required. Subject to the outcome of our
pre-NDA meeting, we expect to submit an NDA for Acurox® Tablets to the FDA in
the first quarter of 2011.
A primary
market research survey of 401 opioid prescribing physicians suggests that
regardless of whether Acurox® Tablets contain niacin or do not contain niacin,
Acurox® has the potential for garnering a substantial share of immediate release
opioid analgesics prescriptions. This finding was confirmed in a
separate primary market research study of 435 physicians which concluded the
particular combination of ingredients [i.e. with or without niacin] does not
appear to have a substantial effect on the estimated brand market share
potential.
10
Acurox®
with Niacin (oxycodone HCl/niacin) Tablets
We and
King are analyzing the results from study AP-ADF-114 (Study 114), an abuse
liability study comparing the like/dislike scores of Acurox® with Niacin Tablets
to oxycodone HCl tablets alone. Study 114 was not included in the
original NDA filing for Acurox® with Niacin Tablets submitted to the FDA in
December 2008 and for which we received an FDA Complete Response letter in June
2009. We intend to complete our Study 114 analyses and submit a
response to the FDA’s June 2009 Complete Response letter for Acurox® with Niacin
Tablets.
All of
our opioid product candidates utilizing Aversion® Technology (with or without
niacin) are encompassed by two issued U.S. patents, which in combination with
our anticipated product labeling and drug product listing strategies are
anticipated to provide our opioid products licensed to King with protection from
generic competition through the expiration of our patents in 2025.
Impede™
PSE Tablets
We have
developed a pseudoephedrine hydrochloride (PSE) tablet product candidate
utilizing our Impede™ Technology. Impede™ Technology utilizes a
proprietary mixture of functional inactive ingredients intended to limit or
impede extraction of PSE from the tablets for use as a starting material in
producing the illicit drug methamphetamine. The unique mixture of
inactive ingredients in the Impede™ PSE product candidate are generally
recognized as safe.
We
sponsored an independent pharmaceutical laboratory test of our Impede™ PSE
tablets compared to Sudafed®* brand PSE tablets in an attempt to extract PSE
from 100 x 30 mg tablets for conversion to methamphetamine using what we believe
to be the three most commonly used conversion processes. The results
of these tests demonstrated that while PSE was readily extracted from Sudafed®
tablets, Impede™ PSE effectively impeded the extraction of the PSE for
conversion into methamphetamine. The results of these tests are
summarized in the table below:
% Pseudoephedrine HCl extracted
from 100 x 30mg tablets
|
||||||||||||
Product Tested
|
Method 1
|
Method 2
|
Method 3
|
|||||||||
Impede™
PSE Tablets
|
0 | % | 0 | % | 0 | % | ||||||
Sudafed®
Tablets
|
96 | % | 89 | % | 79 | % |
*Sudafed®
is a registered trademark of McNeil PPC, Inc.
We are
currently optimizing our tablet formulation and evaluating commercialization and
regulatory strategies for Impede™ PSE Tablets.
Additional
Product Candidates
We are
developing a benzodiazepine tablet product candidate utilizing our Aversion®
Technology. The primary active ingredient in this product candidate is
intended for the treatment of anxiety disorders. Benzodiazepine products
are classified as Schedule IV controlled substances by the U.S. Drug Enforcement
Administration (“DEA”).
King
Agreement
We have
entered into a license agreement (the “King Agreement”) with King to develop and
commercialize in the United States, Canada and Mexico (the "King Territory")
Acurox® Tablets,
Acuracet®
Tablets, Vycavert® Tablets
and a fourth undisclosed opioid analgesic product candidate utilizing our
proprietary Aversion®
Technology. King has an option to license in the King Territory
certain future opioid analgesic products developed utilizing our Aversion®
Technology.
We are
responsible, using commercially reasonable efforts, for all Acurox® Tablet
development activities through FDA approval of a 505(b)(2) NDA, for which
certain expenses are reimbursed to us by King. After NDA approval King will be
responsible for manufacturing and commercializing Acurox® Tablets
in the U.S. With respect to all other products licensed by King
pursuant to the King Agreement in all King Territories, King will be
responsible, at its own expense, for development, regulatory, manufacturing and
commercialization activities.
11
As of
June 30, 2010 we have received aggregate payments of $57.9 million from King,
consisting of a $30.0 million non-refundable upfront cash payment, $16.9 million
in reimbursed R&D expenses relating to Acurox® Tablets,
$6.0 million in fees relating to King’s exercise of its option to license each
of an undisclosed opioid analgesic tablet product and Vycavert® Tablets,
and a $5.0 million milestone fee for successful achievement of the primary
endpoints for our pivotal Phase III clinical study for Acurox®
Tablets. The King Agreement provides for King to pay us: (a) a $3.0
million option exercise fee for each future opioid product candidate King
licenses, (b) up to $23 million in regulatory milestone payments for each King
licensed product candidate, including Acurox® Tablets,
in specific countries in the King Territory, and (c) a one-time $50 million
sales milestone payment upon the first attainment of an aggregate of $750
million in net sales of all of our licensed products combined in all King
Territories. In addition, for sales occurring following the one year
anniversary of the first commercial sale of the first licensed product sold,
King will pay us a royalty at one of six rates ranging from 5% to 25% based on
the level of combined annual net sales for all products licensed by us to King
in all King Territories, with the highest applicable royalty rate applied to
such combined annual sales. No minimum annual fees are payable by
either party under the King Agreement.
Under the
terms of the King Agreement, King may terminate the Agreement in its entirety by
providing notice to Acura or King may terminate the Agreement with respect to an
individual product by providing 12 month advance notice to Acura.
The
foregoing description of the King Agreement contains forward-looking statements
about Acurox® Tablets,
and other product candidates pursuant to the King Agreement. As with
any pharmaceutical products under development or proposed to be developed,
substantial risks and uncertainties exist in development, regulatory review and
commercialization process. There can be no assurance that any product
developed, in whole or in part, pursuant to the King Agreement will receive
regulatory approval or prove to be commercially
successful. Accordingly, investors in the Company should recognize
that there is no assurance that the Company will receive the milestone payments
or royalty revenues described in the King Agreement or even if such milestones
are achieved, that the related products will be successfully commercialized and
that any royalty revenues payable to us by King will materialize.
Patents
and Patent Applications
In April
2007, the United States Patent and Trademark Office (“USPTO”), issued to us a
patent titled “Methods and Compositions for Deterring Abuse of Opioid Containing
Dosage Forms” (the “920 Patent”). The 54 allowed claims in the 920
Patent encompass certain pharmaceutical compositions intended to deter the most
common methods of prescription opioid analgesic product misuse and abuse. These
patented pharmaceutical compositions include specific opioid analgesics such as
oxycodone HCl and hydrocodone bitartrate among others.
In
January 2009, the USPTO issued to us a patent (the “402 Patent”) with 18 allowed
claims. The 402 Patent encompasses certain combinations of kappa and mu opioid receptor agonists
and other ingredients intended to deter opioid analgesic product misuse and
abuse.
In March
2009, the USPTO issued to us a patent (the “726 Patent”) with 20 allowed
claims. The 726 Patent encompasses a wider range of abuse deterrent
compositions than our 920 Patent.
In
addition to our issued U.S. patents, we have filed multiple U.S. patent
applications and international patent applications relating to compositions
containing abuseable active pharmaceutical ingredients. Except for
those rights conferred in the King Agreement, we have retained all intellectual
property rights to our Aversion® Technology, Impede™ Technology, and related
product candidates.
Company’s
Present Financial Condition
At July
29, 2010, we had cash and cash equivalents of approximately $26.5 million. We
estimate that our current cash reserves will be sufficient to fund operations
and the development of Aversion® Technology and Impede™ Technology and related
product candidates through at least the next 12 months.
We have
yet to generate any royalty revenues from product sales. We expect to
rely on our current cash resources and additional payments that may be made
under the King Agreement and under similar license agreements with other
pharmaceutical company partners, of which there can be no assurance, in funding
our continued operations. Our cash requirements for operating
activities may increase in the future as we continue to conduct pre-clinical
studies and clinical trials for our product candidates, maintain, defend, if
necessary and expand the scope of our intellectual property, hire additional
personnel, or invest in other areas.
12
Results of Operations for
the Six Months Ended June 30, 2010 and 2009
June 30,
|
Change
|
|||||||||||||||
($ in thousands):
|
2010
|
2009
|
Dollars
|
%
|
||||||||||||
Revenue
|
||||||||||||||||
Program
fee revenue
|
$ | 622 | $ | 2,105 | $ | (1,483 | ) | (70 |
)%
|
|||||||
Collaboration
revenue
|
2,038 | 172 | 1,866 | 1085 | ||||||||||||
Total
revenue
|
2,660 | 2,277 | 383 | 17 | ||||||||||||
Operating
expense
|
||||||||||||||||
Research
and development expense
|
4,572 | 2,334 | 2,238 | 96 | ||||||||||||
Marketing,
general and administrative expense
|
5,309 | 5,396 | (87 | ) | (2 | ) | ||||||||||
Total
operating expense
|
9,881 | 7,730 | 2,151 | 28 | ||||||||||||
Loss
from operations
|
(7,221 | ) | (5,453 | ) | 1,768 | 32 | ||||||||||
Other
income, net
|
2 | 111 | (109 | ) | (98 | ) | ||||||||||
Loss
before income tax
|
(7,219 | ) | (5,342 | ) | 1,877 | 35 | ||||||||||
Income
tax expense
|
8 | 2,455 | (2,447 | ) | (100 | ) | ||||||||||
Net
loss
|
$ | (7,227 | ) | $ | (7,797 | ) | $ | (570 | ) | (7 | )% |
Revenue
King paid
us a $30.0 million upfront fee in connection with the closing of the King
Agreement in December 2007. Revenue recognized in the six months ended June 30,
2010 and 2009 from amortization of this upfront fee was $0.6 million and $2.1
million, respectively. We have assigned a portion of the program fee revenue to
each of three product candidates identified under the King Agreement and expect
to recognize the remainder of the program fee revenue ratably over our estimate
of the development period for each of these product candidates identified in the
King Agreement. We currently estimate the development period will extend through
June 2011.
Collaboration
revenue recognized in the six months ended June 30, 2010 and 2009 was $2.0
million and $0.2 million, respectively, for billed reimbursement of our Acurox®
Tablet development expenses incurred pursuant to the King Agreement. We invoice
King in arrears on a calendar quarter basis for our reimbursable development
expenses under the King Agreement. We expect the amount and timing of
collaboration revenue to fluctuate in relation to the amount and timing of the
underlying R&D expenses.
Operating
Expense
R&D
expense during the six months ended June 30, 2010 and 2009 were for product
candidates utilizing our Aversion® and
Impede™ Technologies, including costs of preclinical, clinical trials, clinical
supplies and related formulation and design costs, salaries and other personnel
related expenses, and facility costs. Included in the 2010 and 2009
results are non-cash share-based compensation expenses of $1.0 million and $0.8
million, respectively. Excluding the share-based compensation expense, there is
a $2.0 million increase in development expenses primarily attributable to
conducting Study 114 for Acurox® with
Niacin Tablets, our ongoing development activities for the benzodiazepine tablet
product candidate, the initiation of development of an extended release opioid
product candidate and our continuing research efforts with a product candidate
using our novel Impede™ Technology.
Marketing
expenses during the six months ended June 30, 2010 and 2009 primarily consisted
of market research studies on our Aversion® and
Impede™ Technologies. Our G&A expenses primarily consisted of legal, audit
and other professional fees, corporate insurance, and payroll. Included in the
2010 and 2009 results are non-cash share-based compensation expenses of $3.3
million and $3.1 million, respectively. Excluding the share-based compensation
expense, our marketing, general and administrative expenses overall decreased
$0.3 million.
Other
Income
During
the six months ended June 30, 2010 and 2009, our cash was invested in accordance
with the investment policy approved by our Board of Directors resulting in
nominal interest income earned in 2010 and $0.1 million in 2009 due to the
prevailing low interest rates.
13
Net Loss
The
Company records its tax provision using a 40% effective tax rate. The net loss
for the six months ended June 30, 2010 includes no federal or state income tax
benefit provisions due to uncertainty of their future utilization. A nominal
state tax provision is being recorded for the Company’s subsidiary operations
apportioned to one state jurisdiction. The Company’s net loss for the six months
ended June 30, 2009 included income tax expense of $2.5 million recorded when we
increased our deferred income tax asset valuation reserve. The Company
determined it was more likely than not that a portion of the Company’s net
operating loss carryforwards may not be realized in the near term and
accordingly a valuation allowance was provided.
Results of Operations for
the Three Months Ended June 30, 2010 and 2009
June
30,
|
Change
|
|||||||||||||||
($ in thousands):
|
2010
|
2009
|
Dollars
|
%
|
||||||||||||
Revenue
|
||||||||||||||||
Program
fee revenue
|
$ | 233 | $ | 842 | $ | (609 | ) | (72 | )% | |||||||
Collaboration
revenue
|
387 | 55 | 332 | 604 | ||||||||||||
Total
revenue
|
620 | 897 | (277 | ) | (31 | ) | ||||||||||
Operating
expense
|
||||||||||||||||
Research
and development expense
|
1,525 | 1,205 | 320 | 27 | ||||||||||||
Marketing,
general and administrative expense
|
2,281 | 2,948 | (667 | ) | (23 | ) | ||||||||||
Total
operating expense
|
3,806 | 4,153 | (347 | ) | (8 | ) | ||||||||||
Loss
from operations
|
(3,186 | ) | (3,256 | ) | (70 | ) | (2 | ) | ||||||||
Other
income (expense), net
|
(3 | ) | 42 | (45 | ) | (107 | ) | |||||||||
Loss
before income tax
|
(3,189 | ) | (3,214 | ) | (25 | ) | (1 | ) | ||||||||
Income
tax expense
|
3 | 3,306 | (3,303 | ) | (100 | ) | ||||||||||
Net
loss
|
$ | (3,192 | ) | $ | (6,520 | ) | $ | (3,328 | ) | (51 | )% |
Revenue
King paid
us a $30.0 million upfront fee in connection with the closing of the King
Agreement in December 2007. Revenue recognized in the three months ended June
30, 2010 and 2009 from amortization of this upfront fee was $0.2 million and
$0.8 million, respectively. We have assigned a portion of the program fee
revenue to each of three product candidates identified under the King Agreement
and expect to recognize the remainder of the program fee revenue ratably over
our estimate of the development period for each of these product candidates
identified in the King Agreement. We currently estimate the development period
will extend through June 2011.
Collaboration
revenue recognized in the three months ended June 30, 2010 and 2009 was $0.4
million and $0.1 million, respectively, for billed reimbursement of our Acurox®
Tablet development expenses incurred pursuant to the King Agreement. We invoice
King in arrears on a calendar quarter basis for our reimbursable development
expenses under the King Agreement. We expect the amount and timing of
collaboration revenue to fluctuate in relation to the amount and timing of the
underlying R&D expenses.
Operating
Expense
R&D
expense during the three months ended June 30, 2010 and 2009 were for product
candidates utilizing our Aversion® and
Impede™ Technologies, including costs of preclinical, clinical trials, clinical
supplies and related formulation and design costs, salaries and other personnel
related expenses, and facility costs. Included in the 2010 and 2009
results are non-cash share-based compensation expenses of $0.5 million each.
Excluding the share-based compensation expense, there is a $0.3 million increase
in development expenses primarily attributable to conducting Study 114 for
Acurox® with
Niacin Tablets, our ongoing development activities for the benzodiazepine tablet
product candidate, the initiation of development of an extended release opioid
product candidate and our continuing research efforts with a product candidate
using our novel Impede™ Technology.
Marketing
expenses during the three months ended June 30, 2010 and 2009 primarily
consisted of market research studies on our Aversion® and
Impede™ Technologies. Our G&A expenses primarily consisted of legal, audit
and other professional fees, corporate insurance, and payroll. Included in the
2010 and 2009 results are non-cash share-based compensation expenses of $1.5
million and $1.8 million, respectively. Excluding the share-based compensation
expense, our marketing, general and administrative expenses overall decreased
$0.3 million.
14
Other
Income
During
the three months ended June 30, 2010 and 2009, our cash was invested in
accordance with the investment policy approved by our Board of Directors
resulting in nominal interest income earned in 2010 and 2009 due to the
prevailing low interest rates.
Net Loss
The
Company records its tax provision using a 40% effective tax rate. The net loss
for the three months ended June 30, 2010 includes no federal or state income tax
benefit provisions due to uncertainty of their future utilization. A nominal
state tax provision is being recorded for the Company’s subsidiary operations
apportioned to one state jurisdiction. The Company’s net loss for the six months
ended June 30, 2009 included income tax expense of $3.3 million recorded when we
increased our deferred income tax asset valuation reserve. The Company
determined it was more likely than not that a portion of the Company’s net
operating loss carryforwards may not be realized in the near term and
accordingly a valuation allowance was provided.
Liquidity
and Capital Resources
At June
30, 2010, the Company had unrestricted cash and cash equivalents of $27.0
million compared to $30.2 million at December 31, 2009. The Company had working
capital of $26.3 million at June 30, 2010 compared to $28.8 million at December
31, 2009. The decrease in our cash position of $3.2 million is primarily due to
the period’s net loss adjusted for certain non-cash items such as deferred
program fee revenue and expenses for stock compensation offset by the collection
of our collaboration revenue receivable. Cash flows used in operating activities
were $0.3 million for the six months ended June 30, 2009 primarily
representing the collection of the collaboration revenue receivable offset by
the period’s net loss adjusted for certain non-cash items such as deferred
program fee revenue, deferred income taxes, and expenses for stock compensation.
Cash flows provided by investing activities were $5.0 million for the six months
ended June 30, 2009 generated from the maturities of our short term investments.
Cash flows provided by financing activities were $0.4 million for the six months
ended June 30, 2010 generated from the cash exercise of outstanding
warrants.
At July
29, 2010, the Company had cash and cash equivalents of approximately $26.5
million. The Company estimates that such cash reserves will be sufficient to
fund the development of Aversion® Technology and Impede™ Technology product
candidates and related operating expenses at least through the next 12
months.
Critical
Accounting Policies
Note A of
the Notes to Consolidated Financial Statements, in the Company’s 2009 Annual
Report on Form 10-K, includes a summary of the Company's significant accounting
policies and methods used in the preparation of the financial statements. The
application of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, actual results
could differ from these estimates. The Company's critical accounting policies
described in the 2009 Annual Report are also applicable to 2010.
Item
4. Controls and Procedures
(a) Disclosure
Controls and Procedures. The Company’s
management, with the participation of the Company’s Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of the Company’s
disclosure controls and procedures (as such term is defined on Rules 13a – 13(e)
and 15(d) – 15(e) under the Exchange Act) as of the end of the period covered by
this Report. The Company’s disclosure controls and procedures are designed to
provide reasonable assurance that information is recorded, processed, summarized
and reported accurately and on a timely basis in the Company’s periodic reports
filed with the SEC. Based upon such evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer have concluded that, as of the end of such
period, the Company's disclosure controls and procedures are effective to
provide reasonable assurance. Notwithstanding the foregoing, a control system,
no matter how well designed and operated, can provide only reasonable, not
absolute assurance that it will detect or uncover failures within the Company to
disclose material information otherwise require to be set forth in the Company’s
periodic reports.
15
(b) Changes
in Internal Controls over Financial Reporting. There were no changes in
our internal controls over financial reporting during the second fiscal quarter
of 2010 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.
PART
II. OTHER INFORMATION
Item
6. Exhibits
The exhibits required to be filed as
part of this Report are listed below.
31.1
|
Certification
of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14 and
15d-14 of the Securities Exchange Act of 1934.
|
31.2
|
Certification
of Periodic Report by Chief Financial Officer pursuant to Rule 13a-14 and
15d-14 of the Securities Exchange Act of 1934.
|
32.1
|
Certification
of Periodic Report by the 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.
|
|
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 thereunto
duly authorized.
July
29, 2010
|
ACURA
PHARMACEUTICALS, INC.
|
/s/
Andrew D. Reddick
|
|
Andrew
D. Reddick
|
|
President
& Chief Executive Officer
|
|
/s/
Peter A. Clemens
|
|
Peter
A. Clemens
|
|
Senior
VP & Chief Financial
Officer
|
16