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| IDMI > SEC Filings for IDMI > Form 10-Q on 11-May-2009 | All Recent SEC Filings |
11-May-2009
Quarterly Report
quarter of 2009. We have engaged JMP Securities, LLC, an investment bank, to
advise us in exploring alternatives available to us with respect to a possible
merger or acquisition transaction.
The timing of potential marketing approval of mifamurtide in the U.S. is
subject to risks and uncertainties beyond our control. These risks and
uncertainties regarding product approval and commercialization include the
timing of submission and FDA review of the amendment to the NDA, our ability to
respond to questions and concerns raised by the FDA in a satisfactory manner,
the time needed to respond to any issues raised by the FDA during the review of
our amended NDA for mifamurtide and the possibility that the FDA may not
consider existing safety and efficacy data, the Phase 3 study design, conduct
and analysis, available nonclinical studies, or the existing drug comparability
studies between the drug used in the Phase 3 study and the drug manufactured by
us as adequate or valid for their assessment of the marketing approval of
mifamurtide. These factors may cause delays in submission or review of the NDA
amendment, may result in the FDA requiring us to conduct or complete additional
clinical trials, nonclinical and drug comparability studies, or may result in a
determination by the FDA that the data in the to be submitted NDA amendment do
not support marketing approval. As a result, we may not receive approval from
the FDA for the marketing and commercialization of mifamurtide in the U.S. when
expected or at all.
In addition, we currently do not have operational sales and marketing
infrastructure for MEPACT and do not currently have plans or sufficient funds to
secure this capability. We would need to complete a strategic collaboration or
other transaction with a strategic partner that has EU and/or U.S.
commercialization abilities or otherwise arrange for the commercialization
ourselves. If we are unable to commercialize MEPACT ourselves or with or through
a partner, any delay would materially adversely affect our business and
financial position due to reduced or delayed revenues from MEPACT sales.
We have an agreement with Novartis granting us an exclusive, worldwide
license to intellectual property rights relating to MEPACT. We have exclusive
worldwide sales and marketing rights for MEPACT, except in Israel and South East
Europe where we granted distribution rights to third parties.
We had been jointly developing UVIDEM, a cell-based therapeutic vaccine
product candidate based on dendritic cells, with sanofi-aventis S.A., or
sanofi-aventis. UVIDEM is based on dendritic cells, a type of specialized immune
cells derived from a patient's own white blood cells, exposed to tumor cell
antigens in our production facility and then reinjected into the patient in
order to stimulate the immune system to recognize and kill tumor cells that
display these antigens on their surface. We completed patient enrollment in two
Phase 2 clinical trials of UVIDEM for the treatment of melanoma and in the
fourth quarter of 2007 started a new Phase 2 clinical trial of UVIDEM.
On December 26, 2007, sanofi-aventis notified us of its decision to terminate
its participation in the UVIDEM development program and we have put on hold
further development of the program. In March 2008, we and sanofi-aventis entered
into an agreement, referred to as the Settlement Agreement, aimed at resolving
the various pending or potential issues related to the UVIDEM development
program. All rights to the UVIDEM development program have reverted to us, and
sanofi-aventis has no further rights to that program, including any right of
first refusal. In accordance with the terms of the Settlement Agreement,
sanofi-aventis retains its options with respect to our other cell therapy
programs under an existing collaboration agreement for the development and
commercialization of up to 20 Cell Drugs, a term we use to refer to therapeutic
products derived from a patient's own white blood cells, over a 10-year period,
although we do not currently have any such programs in development, or plans to
conduct any further development. The Settlement Agreement also provided that
sanofi-aventis would pay $8.1 million (€5.2 million converted at the average
exchange rate in the second quarter of 2008). Of the $8.1 million, $2.4 million
was for the research and development costs of the UVIDEM development program for
the first quarter of 2008, which was received and recognized as revenue in that
quarter, and $5.7 million was related to the shut down of the UVIDEM program,
which was received and recognized as contract settlement income in the second
quarter of 2008.
We have also been developing IDM-2101 for non-small cell lung cancer, or
NSCLC. IDM-2101 is composed of multiple tumor-specific cytotoxic T-lymphocyte
(CTL), epitopes that were selected from tumor-associated antigens. Some of the
epitopes have been modified to create analogs in order to enhance the potency of
the T cell response induced by the vaccine. We reported on early Phase 2 results
of IDM-2101 at the ASCO meeting in June 2007 and the iSBTc meeting in
November 2007, and reported on Phase 2 follow-up data at the ASCO meeting in
June 2008. A manuscript of the study results were submitted, accepted and
published in the September 20, 2008 issue of the Journal of Clinical Oncology.
To conserve capital, we have put all further development of IDM-2101 on hold.
As previously announced, we are evaluating our research and development
programs, including related assets and costs, and strategic alternatives
available to us. We are focusing our current research and development activities
primarily on mifamurtide. In order to contain our expenses, we have discontinued
further development of our other product candidates, including UVIDEM for
treatment of melanoma, COLLIDEM for treatment of colorectal cancer and BEXIDEM,
a product candidate for which we completed the Phase 2 stage of a Phase 2/3
clinical trial in Europe for the treatment of superficial bladder cancer, until
collaborative partners can be found or other funding for those programs becomes
available.
We completed a $12.9 million equity financing in February 2007 and a
$25.0 million equity financing in June 2007 (see Note 5 to the Condensed
Consolidated Financial Statements included in this report). These proceeds and
savings from continued cost management initiatives are expected to provide
sufficient working capital for our currently planned operations into the third
quarter of 2009.
Results of Operations for the Three Months Ended March 31, 2009 and 2008
Revenues. We had total revenues of $4,000 for the three months ended
March 31, 2009, compared to total revenues of $2.4 million for the three months
ended March 31, 2008. Revenue for the three months ended March 31, 2009 were
from amortization of deferred revenues related to the distribution agreements
for MEPACT. For the three months ended March 31, 2008, substantially all of our
revenues were generated from our research and development activities under our
collaboration agreement with sanofi-aventis for the UVIDEM program, which we
placed on hold in December 2007 following sanofi-aventis' notification that it
was discontinuing its participation in the development of the program.
Research and Development Expenses. Total research and development expenses
were $3.0 million and $3.9 million for the three months ended March 31, 2009 and
March 31, 2008, respectively. The decrease in research and development expenses
were primarily due to a $0.8 million reduction in spending related to clinical
development of UVIDEM, which we placed on hold in December 2007 following
sanofi-aventis' notification that it was discontinuing its participation in the
development of the program, $0.2 million in savings due to the closing of our
Paris, France facility, and $0.2 million decrease in spending associated with
development activities related to products currently on hold, partially offset
by higher spending of $0.3 million related to regulatory filings and
manufacturing of MEPACT clinical supplies for our compassionate use program.
Direct research and development expenses related to our product candidates to
destroy residual cancer cells were approximately $2.4 million and $2.1 million
for the three months ended March 31, 2009 and 2008, respectively. Direct
research and development expenses related to our product candidates to prevent
tumor recurrence were approximately $0.1 million and $1.0 million for the three
months ended March 31, 2009 and 2008, respectively.
Selling and Marketing Expenses. Selling and marketing expenses were
$0.5 million and $0.2 million for the three months ended March 31, 2009 and
2008, respectively. These expenses consisted primarily of costs related to our
participation in trade conferences and to the employment costs of our business
development employees. Higher expenses in 2009 were the result of additional
consulting fees in connection with pricing and reimbursement analysis of MEPACT
in Europe.
General and Administrative Expenses. General and administrative expenses were
$1.3 million and $2.6 million for the three months ended March 31, 2009 and
2008, respectively. Expenses for the 2009 period were lower primarily due to
$0.5 million savings from the closing of our Paris facility, a $0.5 million
reduction in finance-related consulting fees, as well as a decrease of
$0.2 million in stock compensation expense during the 2009 period.
Restructuring Expenses. There were no restructuring expenses recorded for the
three months ended March 31, 2009 as we recorded all charges related to the
January 2008 restructuring plan as of December 31, 2008. Restructuring expenses
were $2.6 million for the three months ended March 31, 2008, which included
$2.3 million of severance benefits and $0.3 million of shutdown costs related to
the closing of our facility in Paris, France.
Interest Income. Interest income for the three months ended March 31, 2009
and 2008 were $28,000 and $0.2 million, respectively. The decrease in interest
income during the 2009 period was due to lower average investment balances and
lower rates of return.
Interest Expense related to Warrants. Interest expense for the three months
ended March 31, 2009 and 2008 was $0.5 million and $4.7 million, respectively,
substantially all of which is a non-cash interest expense to record the net
change in the fair value of warrants issued in connection with the February and
June 2007 financings. The lower increase in the fair value during the 2009
period is primarily due to a smaller increase in our stock price during the 2009
period compared to the 2008 period.
Foreign Exchange Gain or Loss. We have an inter-company loan from our
subsidiary in France to our subsidiary in the United States. This loan is
denominated in U.S. dollars and is revalued each quarter based on changes in the
value of the U.S. dollar versus the euro and all related changes are recognized
in earnings. For the three months ended March 31, 2009, we recorded a foreign
exchange gain of $0.1 million compared to a loss of $0.9 million for the three
months ended March 31, 2008. The gain in the 2009 period was due to the decrease
in the exchange rate between the U.S. dollar and the euro with no change to the
inter-company loan balance during the quarter ended March 31, 2009, compared to
an increase in the exchange rate between the U.S. dollar and the euro with a
decreasing inter-company loan balance during the quarter ended March 31, 2008.
Income Tax Benefit. We recorded $17,000 and $20,000 of tax benefit for the
three months ended March 31, 2009 and 2008, respectively. The 2009 and 2008
periods reflect an adjustment of the provision for income tax in accordance with
FIN 48 for uncertain income tax positions (see Note 10 to the Condensed
Consolidated Financial Statements included in this report). Due to our
historical losses, we maintain a full valuation allowance for all deferred tax
assets with the exception of research and development tax credits generated by
our Paris, France subsidiary, which are payable to us in cash if the credits are
not utilized three years after they are generated.
As of March 31, 2009, we had research and development tax credits of
$0.7 million that represent an account receivable corresponding to our
accumulated income tax benefit from the French government, of which $0.2 million
is recoverable during the next nine months.
Net Loss. Our net loss decreased to $5.2 million for the three months ended
March 31, 2009, compared to $12.1 million for the three months ended March 31,
2008, as a result of the factors described above.
Liquidity and Capital Resources
Our continuing operating losses, operating cash flow deficits, uncertainty in
funding sources and plans for pre-launch commercial activities of MEPACT,
together raise substantial doubt about our ability to continue as a going
concern. The accompanying condensed consolidated financial statements have been
prepared assuming that we will continue as a going concern and do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
We will continue to spend significant amounts on pre-commercial activities
for mifamurtide, including amounts spent for manufacturing clinical and
commercial supplies. On January 10, 2008, our Board of Directors authorized an
organizational restructuring that resulted in a workforce reduction in Irvine,
California on January 29, 2008, and the closure of our operations in Paris,
France as of the end of the second quarter of 2008. This organizational
restructuring resulted primarily from the discontinued development of UVIDEM,
our investigational therapy for the treatment of melanoma. We continue to
maintain IDM Pharma S.A. as a French subsidiary and conduct its business, now
solely related to MEPACT, both directly and through the use of consultants and
contracted activity.
As of March 31, 2009, our cash and cash equivalents totaled $7.4 million,
compared to $12.8 million as of December 31, 2008. In February 2007, we
completed a private placement of our common stock and warrants to purchase
common stock and received approximately $12.9 million in gross proceeds. In
June 2007, we completed a registered direct offering of our common stock and
warrants to purchase common stock and received approximately $25.0 million in
gross proceeds. Cash and cash equivalents include principally cash and
money-market funds denominated in both euros and U.S. dollars. We use our cash
and cash equivalents to cover research and development
expenses and corporate expenses related to selling and marketing and general and
administrative activities. If we enter into collaborations for certain of our
products, we expect that our strategic partners would assume most, if not all,
of the costs of further product development. Unless we find a strategic partner
for a product, we bear all costs related to its development. We expect to incur
significant expenses as we continue to pursue regulatory approval and potential
commercialization of MEPACT.
Net cash used in operating activities decreased to $4.7 million for the three
months ended March 31, 2009, compared to $6.9 million for the three months ended
March 31, 2008. This decrease in cash used by operating activities was primarily
the result of lower losses including the effects from the shut down of our
operations in Paris, France.
Net cash used in investing activities was $3,000 during the three month ended
March 31, 2009, compared to $0.1 million of net cash provided by investing
activities during the three months ended March 31, 2008. The proceeds from
investing activities in 2008 is from sale of property and equipment from our
Paris facility.
As of March 31, 2009, our current liabilities were $9.8 million, which
includes the current portion of deferred revenues of $0.4 million, $2.8 million
in accounts payable and accrued liabilities, $0.7 million in accrued
compensation for employees and $4.0 million related to common stock warrant
liabilities. Current liabilities also include $1.5 million in tax obligations,
$0.1 million relating to the current portion of an interest-free loan from the
French government, which is due and payable upon request and $0.3 million of
accrued restoration costs for our Irvine, California facility.
Our long-term liabilities as of March 31, 2009 were $1.2 million, which
includes the $0.8 million Novartis milestone payment accrual, the non-current
portion of deferred revenues of $0.1 million, and the non-current portion of an
interest-free loan of $0.3 million from the French government that provides
support to French companies for research and development. We must repay the
remaining $0.3 million balance of the French government loan in 2011.
Our financial requirements to date have been met primarily through sales of
equity securities, payments received under our collaboration agreement with
sanofi-aventis and other partners, together with grants received from
governmental agencies.
As a result of sanofi-aventis' decision to terminate its participation in the
UVIDEM development program, and our decision to discontinue operations in Paris,
France, we expect to generate little, if any, revenues in the near term. We
expect to receive revenues from sales of our lead product candidate, MEPACT, in
Europe assuming that we choose to market MEPACT ourselves. However, we may have
to spend significant amounts of capital to commercialize MEPACT, and these
efforts may not be successful.
As previously announced, we are evaluating our research and development
programs, including related assets and costs, and strategic alternatives
available to us. The options we are considering include various strategic
transactions, including merger or acquisition opportunities, which may involve a
change in control of our company. We have engaged JMP Securities, LLC, an
investment bank, to advise us in exploring alternatives available to us with
respect to a possible merger or acquisition transaction. In the event we do not
complete a strategic transaction, we will likely seek additional funding, which
may be accomplished through equity or debt financings, and/or collaboration and
license agreements. We may not be able to obtain additional financing or
accomplish any other business transaction we decide to pursue on terms that are
favorable to us or at all. In addition, we may not be able to enter into
additional collaborations to reduce our funding requirements. Given the current
volatility in the capital markets and the weakening economy, obtaining
additional funding in the near future, whether through equity or debt financing
and/or collaboration and license agreements, or otherwise completing a merger or
acquisition transaction, may be difficult or impossible. If we acquire funds by
issuing securities, dilution to existing stockholders will result. If we raise
funds through additional collaborations and license agreements, we will likely
have to relinquish some or all of the rights to our product candidates or
technologies that we may have otherwise developed ourselves. We do not have
committed sources of additional funding and may not be able to obtain additional
funding, particularly if volatile conditions in the capital markets, and more
particularly in the markets for biotechnology company stocks, persist. Our
failure to obtain additional funding may require us to delay, reduce the scope
of or eliminate one or more of our current research and development projects,
sell certain of our assets (including one or more of our drug programs or
technologies), sell our company, or dissolve and liquidate all of our assets.
Our capital expenditures include purchase of property and equipment,
including research and development laboratory equipment and product
manufacturing facilities. Capital expenditures also include purchase of
intangible assets, including payment of patent development costs, and
acquisition of third party licenses, patents, and other intangibles.
Our major outstanding contractual obligations relate to our long-term debt,
operating lease obligations, obligations under a number of our collaboration,
licensing and consulting agreements and certain cash settlement provisions in
our warrant agreements. As a result of sanofi-aventis' decision to terminate its
participation in the UVIDEM development program and our decision to shut down
our operations in Paris, France, we have terminated and transferred our leases
to third parties with respect to our facilities in Paris, France, and terminated
various contractual arrangements in order to minimize the financial impact of
the program termination. In addition, the lease for our facility in Irvine,
California terminates November 30, 2009. In connection with the termination of
the lease we are required to restore certain portions of the facility, which we
made modifications to in support of our business needs at the time, to their
pre-existing condition. We have estimated that the restoration would cost
approximately $0.3 million, which we have recorded as a current liability as of
March 31, 2009.
Under certain of our collaboration and licensing agreements, such as our
agreement with Novartis, we are obligated to make specified payments upon
achieving certain milestones relating to the development and approval of our
products, or on the basis of net sales of our products. As of March 31, 2009, we
believe that we have achieved two milestones totaling $750,000 due to Novartis
that would be payable in the event MEPACT is successfully commercialized in
Europe. As such, we have recorded this amount as Patents, Trademarks and Other
Licenses with a corresponding non-current liability on our balance sheet as of
the quarter ended March 31, 2009. In addition, under certain of our agreements
with clinical sites for the conduct of our clinical trials, we make payments
based on the number of patients enrolled. There is significant variability
associated with these agreements which are impacted by a variety of estimates
and assumptions, including future sales volumes and timing of clinical trials
and regulatory processes, which may not be accurate, may not be realized, and
are inherently subject to various risks and uncertainties that are difficult to
predict and are beyond our control.
In order to focus on those areas we believe can provide the most near term
value to our stockholders and to ensure we have adequate cash to complete our
review of strategic options for the Company, we are concentrating our near-term
efforts on certain MEPACT pre-launch commercial activities in Europe and the
review of such strategic options, including merger or acquisition opportunities,
which may involve a change in control of our company. Consequently, we have
placed the U.S. mifamurtide NDA amendment submission on hold until we complete
our strategic review, which will allow us to operate into the third quarter of
2009. Our future capital requirements, the timing and amount of expenditures and
the adequacy of available capital will depend upon a number of factors. These
factors include the scope and progress of our research and development programs,
our ability to sign new collaboration agreements, our progress in developing and
commercializing new products resulting from our development programs and
collaborations including the achievement of milestones, the cost of launching,
. . .
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