Add
CGRB to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| CGRB > SEC Filings for CGRB > Form 10QSB on 15-May-2007 | All Recent SEC Filings |
15-May-2007
Quarterly Report
Overview
Since the inception of Cougar Biotechnology, Inc. in May 2003, our efforts and resources have been focused primarily on acquiring and developing our pharmaceutical technologies, raising capital and recruiting personnel. We are a development stage company and have no product sales to date and we will not generate any product sales until we receive approval from the FDA or equivalent foreign regulatory bodies to begin selling our pharmaceutical candidates. Developing pharmaceutical products, however, is a lengthy and very expensive process. Assuming we do not encounter any unforeseen safety issues during the course of developing our product candidates, we do not expect to complete the development of a product candidate until approximately 2011. Currently, a large portion of the development expenses have related to our lead product candidate, CB7630 (abiraterone acetate.). As we proceed with the clinical development of CB7630, and as we further develop CB3304 (noscapaine) and CB1089 (seocalcital), our second and third product candidates, respectively, our research and development expenses will further increase. To the extent we are successful in acquiring additional product candidates for our development pipeline, our need to finance further research and development will increase. Accordingly, our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance development of the products. Our major sources of working capital have been proceeds from various private financings, primarily private sales of our common stock and other equity securities.
On April 3, 2006, SRKP Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of SRKP 4, Inc., a Delaware corporation ("SRKP"), merged with and into Cougar (the "Merger"), with Cougar remaining as the surviving corporation and a wholly owned subsidiary of SRKP. Cougar stockholders received, in exchange for all of the outstanding shares of capital stock in Cougar, shares of capital stock of SRKP representing 100% of the outstanding capital stock of SRKP, on a fully-diluted basis, after giving effect to the Merger and a redemption, completed contemporaneous with the closing of the Merger, of all shares of SRKP capital stock held by SRKP's former stockholders immediately prior to the Merger. In addition, at the time of effectiveness of the Merger, the board of directors of SRKP was reconstituted, such that the directors of SRKP immediately prior to the Merger resigned and were replaced by the directors of Cougar immediately prior to the Merger. Further, upon the effective time of the Merger, the business of SRKP was abandoned and the business plan of Cougar was adopted. The transaction was therefore accounted for as a reverse acquisition with Cougar as the acquiring party and SRKP as the acquired party. Accordingly, when we refer to our business and financial information relating to periods prior to the Merger, we are referring to the business and financial information of Cougar, unless otherwise indicated.
Research and development expenses consist primarily of salaries and related personnel costs, fees paid to consultants and outside service providers for regulatory and quality assurance support, licensing of drug compounds, and other expenses relating to the manufacture, development, testing and enhancement of our product candidates. We expense our research and development costs as they are incurred.
Our results include non-cash compensation expense as a result of the issuance of stock and stock option grants. We account for stock-based employee compensation arrangements in accordance with the provisions of and comply with disclosure provisions of Statement of Financial Accounting Standards No. 123(R), "Accounting for Stock-Based Compensation" ("SFAS 123(R)"). In accordance with the provisions of SFAS 123 and Emerging Issues Task Force ("EITF") No. 96-18, "Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services," all other issuances of common stock, stock options or other equity instruments to non-employees (including consultants and all members of the Scientific Advisory Board) as the consideration for goods or services received by us are accounted for based on the fair value of the equity instruments issued (unless the fair value of the consideration received can be more reliably measured). Any options issued to non-employees are recorded in expense and additional paid-in capital in stockholders' equity (deficiency) or current liabilities over the applicable service periods using variable accounting through the vesting date based on the fair value of the options at the end of each period. We expect to record additional non-cash compensation expense in the future, which may be significant.
Critical Accounting Policies
As of the date of the filing of this quarterly report, we believe there have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2007.
The Company adopted Financial Standards Board Interpretation No. 48 "Accounting
for Uncertainty in Income Taxes" ("FIN 48") an interpretation of FASB Statement
109 ("SFAS 109") in December 2006. The implementation of FIN 48 resulted in a
reduction of deferred tax assets and the corresponding valuation allowance of
approximately $70,000. The Company's policy is to recognize interest and
penalties related to income tax matters in income tax expense. As of January 1
and March 31, 2007, the Company had no accruals for interest or penalties
related to income taxes.
Results of Operations
Three months ended March 31, 2007 Compared to Three Months Ended March 31, 2006
General and administrative expenses: For the three months ended March 31, 2007, general and administrative expenses were $1,183,183 compared to $1,784,596 for the three months ended March 31, 2006. This decrease of approximately $601,000 is primarily attributable to a decrease in stock-based compensation which was partially offset by increases in normal operating expenses. Employee stock-based compensation decreased approximately $635,200, while non-employee stock-based compensation decreased by approximately $705,700. For the three months ended March 31, 2006, we granted options to an employee for prior services that were valued at approximately $705,600. We also granted a consultant stock options for prior services in the first quarter of 2006 that were valued at approximately $705,700. Compensation expense increased approximately $91,300 resulting from the hiring of four additional employees (approximately $66,300) and the restructuring of the CEO's employment contract (approximately $25,000). Additionally, the CEO was paid a one time bonus of $350,000 upon our fully diluted market capitalization equaling or exceeding $250 million for at least 20 trading days resulting in a quarter to quarter increase of approximately $331,500 in bonus expense. We implemented a director compensation plan in June 2006 and as a result, recorded compensation expense of approximately $59,600, which consisted mainly of stock-based compensation, for the three months ending March 31, 2007. Accounting fees for the three months ended March 31, 2007 were approximately $49,100 higher than the same period last year as a result of Cougar becoming a publicly traded company. Expenses for office supplies were approximately $43,100 higher for the period ending March 31, 2007 compared to the same period last year. This increase in office supplies reflects the growth in personnel from two people in the general and administrative area to six and the production of our annual report. We experienced an increase in rent expense of approximately $33,200 reflecting the move into our current location in April 2006. Our business insurance expense increased approximately $27,900 compared to the same time period last year. This increase reflects the increased insurance requirements of being a public biotechnology company. Our fringe benefit cost increased approximately $18,700 compared to the first quarter of 2006, reflecting the increase in staffing and improvements made to our fringe benefit package. Legal expenses were approximately $28,000 higher in the quarter ended March 31, 2007,
Research and development expenses: For the three months ended March 31, 2007, research and development expenses were $6,041,946 compared to $1,192,563 for the three months ended March 31, 2006, representing an increase of approximately $4,849,400. Non-employee stock-based compensation increased approximately $2,495,800 for the three months ended March 31, 2007 compared to the same period last year. Non-employee stock options are revalued using the Black-Scholes option pricing model each reporting period to reflect the then current market value of the Company's common stock. Accordingly, an increase in the Company's fair value of common stock from $4.50 per share to $18 per share in the revaluation of prior non-employee stock option grants caused an increase of approximately $2,495,800. Manufacturing expenses for the first quarter of 2007 were approximately $1,496,400 higher than the same period in 2006 due to increased drug manufacturing costs necessary to support our clinical trials. Costs associated with preclinical studies during the first three months of 2007 were approximately $54,800 higher than during the same period in 2006 due to completion of several preclinical toxicology and other non-clinical programs. Clinical expenses in the first three months of 2007 were approximately $357,400 higher than in the first three months of 2006 due to an increase in sponsored clinical trials. Licensing fees increased approximately $32,200 in 2007 resulting from an increase in our license maintenance fee due to a weaker dollar as the fee is paid in British pounds sterling. Contract regulatory affairs/quality assurance costs were approximately $110,000 higher than we experienced in the first three months of 2006 as we required heavy contract regulatory affairs/quality assurance assistance in preparing regulatory submissions. Compensation expense increased by approximately $104,800 as staffing has increased from one full-time employee to six full-time and two part-time employees. With the increase in staffing, we also experienced an increase in bonus expense of approximately $19,000 compared to the same period last year. We also experienced an increase in employee stock-based compensation of approximately $22,100 for the quarter ended March 31, 2007 compared to the same quarter in 2006. Fringe benefits cost increased approximately $24,200 compared to the same period last year. This increase is a result of the increase in full-time staff and improvements in our fringe benefits package. Compared to the first quarter of 2006, relocation expense increased approximately $54,000 and recruiting fees increased approximately $10,700 associated with new hires.
Interest income: For the three months ended March 31, 2007 we recognized approximately $382,300 in interest income compared to approximately $7,700 of interest income for the same period last year. The increase is attributed to the proceeds of private placement funds being placed in an asset management account.
Interest expense: For the three months ended March 31, 2007 we incurred no interest expense compared to approximately $231,600 for the same period last year. During the first quarter of 2006 we paid interest on a line of credit, a series of convertible notes and a series of promissory notes. These notes and the credit facility were paid in full in April 2006.
Other expense: For the three months ended March 31, 2007 we recorded liquidated damage expense of approximately $486,300, of which approximately $453,400 were paid in common stock to stockholders who participated in the April 3, 2006 private equity placement as a result of our registration statement not being declared effective by the SEC until February 2, 2007.
Liquidity and capital resources: As of March 31, 2007 the Company had approximately $9.2 million in cash and cash equivalents and $18.9 million in available-for-sale investment securities that may be liquidated to provide cash if needed; however, it is still a development stage company that has not generated any revenues from operations. We reported a net loss of $7,343,109 and negative cash flows from operating activities of $2,838,075 for the three months ended March 31, 2007. The net loss from date of inception, May 14, 2003, to March 31, 2007 amounted to $30,554,342.
We have financed our operations since inception primarily through equity and debt financing. During the three months ended March 31, 2007, we had a net decrease in cash and cash equivalents of $4,888,249. Net cash used in operating activities was $2,838,075 and the net purchase of short-term investments of approximately $2,046,300 account for the major portion of the decrease. The net cash used in operating activities was comprised of
Management believes that we will continue to incur losses for the foreseeable future and will need additional equity or debt financing or will need to generate revenue from licensing of our products or by entering into strategic alliances to sustain our operations until it can achieve profitability and positive cash flows, if ever.
Our continued operations will depend on whether we are able to raise additional funds through various potential sources, such as equity and debt financing. Such additional funds may not become available on acceptable terms and there can be no assurance that any additional funding that we obtain will be sufficient to meet our needs in the long term. Through March 31, 2007, a significant portion of our financing has been through private placements of common stock and debt financing.
We will continue to fund operations from cash on hand and through similar sources of capital previously described. We can give no assurances that any additional capital we are able to obtain will be sufficient to meet our needs. There can be no assurance that such capital will be available to us on favorable terms or at all. If we are unable to raise additional funds in the future on acceptable terms, or at all, we may be forced to curtail our desired development. In addition, we could be forced to delay or discontinue product development and forego attractive business opportunities. Any additional sources of financing will likely involve the sale of our equity securities, which will have a dilutive effect on our stockholders.
Financings
In connection with a private placement which closed on April 3, 2006 we issued 9,486,752 shares of Series A, the terms of which are set forth in a Certificate of Designation for the Series A filed with the Secretary of The State of Delaware, for an aggregate amount of $42,728,037 in cash and debt conversion. The Series A had a stated value of $4.50 per share. Commencing on the date of issue, the holders of the Series A were entitled to receive cumulative dividends on each share of Series A, payable at the election of the Company in kind or in cash, at the rate of 4% per annum of the stated value, payable annually in arrears on each anniversary of the original issuance date. Cumulative dividends as of March 31, 2007, were $1,583,496, or $0.167 per share. The Series A was convertible at any time at the option of the stockholder in whole or in part into shares of common stock at an initial conversion price per share of common stock of $4.50 at any time. Each share of Series A was automatically convertible into shares of common stock at a conversion price of $4.50, subject to adjustment, in the event that the closing price of the our common stock exceeded 200% of the conversion price for twenty consecutive trading days. At the close of trading on March 8, 2007, our stock had traded on the OTCBB for at least twenty consecutive trading days in excess of 200% of the conversion price of the Series A and all outstanding shares of our Series A were automatically converted into our common stock on a one for one basis.
On May 2, 2007, we entered a securities purchase agreement with certain accredited institutional investors pursuant to which we agreed to sell a total of 2,500,000 shares of common stock in a private placement at a price of $20 per share for gross proceeds of $50 million before deducting selling commissions and expenses. This transaction was completed May 8, 2007.
Current and Future Financing Needs
We have incurred negative cash flow from operations since we started our business. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our planned product development efforts, our clinical trials, and our research and development efforts. Given the current and desired pace of clinical development of our three product candidates, over the next 12 months we estimate that our research and development expenses will be approximately $23 million. We will need approximately $5 million for general and administrative expenses over the next 12 months.
• the progress of our research activities;
• the number and scope of our research programs;
• the progress of our pre-clinical and clinical development activities;
• the progress of the development efforts of parties with whom we have entered into research and development agreements;
• our ability to maintain current research and development programs and to establish new research and development and licensing arrangements;
• the cost involved in prosecuting and enforcing patent claims and other intellectual property rights; and
• the cost and timing of regulatory approvals.
We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner than planned or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of equity or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interests of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed.
Plan of Operation
Our plan of operation for the next twelve months is to continue implementing our business strategy of in-licensing novel clinical stage products in order to accelerate clinical development and time to commercialization, and continue the clinical development of our three product candidates. We expect our principal expenditures during the next 12 months to include:
• operating expenses, including expanded research and development and general and administrative expenses; and
• product development expense, including the costs incurred with respect to applications to conduct clinical trials of our three products in the United States.
As part of our planned expansion, we have budgeted hiring up to 5 additional full-time employees devoted to research and development activities and up to 3 additional full-time employees for general and administrative activities. We anticipate hiring additional professional research and development staff in the first half of 2007. These positions will require an advanced degree in medicine and/or bioscience and significant experience in the pharmaceutical or biotechnology industries. Our annual payroll expense will increase by approximately $1.3 million and our annual benefits and payroll taxes will increase by approximately $160,000. We anticipate spending approximately $470,000 on recruiting and relocation expenses for these positions. In addition, we intend to use contract research organizations and third parties to perform our clinical studies and manufacturing. As indicated above, at our current and desired pace of clinical development of our three product candidates, during the next 12 months we expect to spend approximately $23 million on clinical development and research and development activities and approximately $5 million on general and administrative expenses.
CB7630. In April 2004, we exclusively licensed the worldwide rights to CB7630 (abiraterone acetate) from BTG plc. CB7630 is an orally active targeted inhibitor of the steroidal enzyme 17†-hydroxylase/C17,20 lyase, a cytochrome p450 complex that is involved in testosterone production. In preclinical studies, CB7630 has demonstrated the ability to selectively inhibit the target enzyme, reducing levels of testosterone production in both the adrenals and the testes, that is believed to stimulate the growth of prostate cancer cells.
In December 2005, we initiated a Phase I/II trial of CB7630 for the treatment of advanced prostate cancer. The Phase I/II trial was conducted at The Institute of Cancer Research, in the Cancer Research UK Centre for Cancer Therapeutics, and at The Royal Marsden Hospital in the United Kingdom. The Phase I/II study was an open label, dose escalating study to evaluate the safety and efficacy of CB7630 administered daily as a second-line hormonal agent to patients with chemotherapy-naïve hormone refractory prostate cancer with a rising prostate-specific antigen, (PSA), despite hormonal therapy. The Phase I portion of this trial was completed and the Phase II portion was initiated in December 2006. In April 2007, we announced the results of the Phase I portion of this clinical trial and the interim results of the Phase II portion of the study.
The results from the Phase I/II trial showed that in the 38 patients tested,
CB7630 was well tolerated at doses as high as 2000 mg/day with no dose limiting
toxicity observed. Of the 30 patients that were evaluable for antitumor
activity, 18 patients (60%) experienced confirmed declines in PSA levels of
greater than 50%, with 10 of the 30 patients (33%) experiencing PSA declines of
greater than 90%. Of the 20 evaluable patients with measurable tumor lesions,
treatment with CB7630 resulted in partial radiological responses (as measured by
the Response Evaluation Criteria in Solid Tumors Group, or RECIST, criteria) in
11 (55%) patients, while 3 patients experienced regressing bone disease and 7
other patients have ongoing stable disease. Individual patients treated with
CB7630 also experienced relief of pain. Circulating tumor cells (CTC) were
detected in 14 of 31 patients and changes in CTC counts were shown to correlate
with changes in PSA. Additionally, 27 (90%) of the 30 patients in the Phase I/II
trial were reported to still be on the study and continued to be treated with
CB7630. Of the 15 patients in the Phase I portion of the trial, 12 patients
(80%) were still receiving treatment with CB7630, with the average patient
having received the drug for over 8.5 months and 4 patients having received the
drug for over 12 months.
Also in December 2006, we initiated a Phase II trial of CB7630 to evaluate the efficacy of the drug in patients with advanced prostate cancer who have failed treatment with first line chemotherapy (e.g. Taxotere). In April 2007, we announced the interim results of this Phase II trial. More specifically, we announced that 19 patients had been treated in this Phase II trial, with 13 of the patients having been treated for over 3 months. Of the 19 patients who have been treated, CB7630 was well tolerated with only minimal toxicity in this post-docetaxel population. In the 13 patients who had been on study for over 3 months, 8 patients (62%) experienced confirmed declines in PSA levels of greater than 50%, with 2 of the 13 patients (15%) experiencing PSA declines of greater than 90%. All 19 patients in this trial were still receiving treatment with CB7630 at the time of the announcement. Individual patients treated with CB7630 also experienced improvement in pain and a reduction in opioid use. CTC were detected in 14 of 19 patients and changes in CTC counts were shown to correlate with changes in PSA.
In July 2006, we initiated an additional Phase I trial of CB7630 at the University of California, San Francisco Comprehensive Cancer Center. In this trial, CB7630 is administered once daily to chemotherapy-naïve patients with hormone refractory prostate cancer (HRPC), who had progressive disease despite treatment with LHRH analogues and multiple other hormonal therapies.
In February 2007, we announced the interim results of this Phase I trial. Of the 9 patients who had been enrolled in the study, 2 patients had "PSA only" disease and 7 patients had bone metastases. 8 of 9 patients had received prior treatment with ketoconazole. Treatment with CB7630 was found to be well tolerated at doses up to 500 mg/day and no dose limiting toxicity had been observed in the trial as of such date. Of the 6 patients who had completed the initial 28 day treatment cycle, 6 (100%) have experienced a decline in PSA and 5 of 6 patients (83%) have experienced a greater than 50% decline in PSA.
CB3304. In March 2004, we exclusively licensed the worldwide rights to CB3304, an orally active alkaloid derived from opium. Preclinical studies have demonstrated that CB3304 has anti-tumor activity and acts as an inhibitor of microtubule dynamics. Therefore, we believe that CB3304 has potential applications in the treatment of a number of different tumor types where tubulin binding agents are known to have activity. These tumor types include, but are . . .
|
|