Seelos Therapeutics Inc (SEEL)

[califax]

Annual Report (10-K)

Date : 03/31/2010 @ 4:06PM
Source : Edgar (US Regulatory)
Stock : (NEXM)

http://ih.advfn.com/p.php?pid=nmona&cb=1270091713&article=42215627&symbol=N^NEXM

...

#As of March 26, 2010, 126,902,281 shares of the common stock, par value $.001, of the registrant were outstanding.

#On December 14, 2009, we acquired Bio-Quant, Inc. (“Bio-Quant”),...
Bio-Quant has over 300 clients world-wide and performs hundreds of studies a year both in in vitro and in vivo pharmacology, pharmacokinetics (PK) and toxicology to support pre-investigational new drug (“IND”) enabling packages.
As a result of our acquisition of Bio-Quant, we now have two operating segments...

#In March 2010, we acquired PrevOnco™, a marketed anti-ulcer compound, lansoprazole, for the treatment of solid tumors

#Our current cash reserves of approximately $3.25 million as of the date of this report, should provide us with sufficient cash to fund our operations into the second half of 2011

#The net loss was $32,042,562 or $0.36 per share and $5,171,198 or $0.06 per share in 2009 and 2008, respectively. The significant increase in net loss is the result of imputed interest expense recognized as a result of beneficial conversions of the convertible mortgage note as discussed in Note 8 of the Notes to the consolidated financial statements.

#The acquisition of Bio-Quant occurred on December 14, 2009 as discussed in Note 3 above. The revenue and expenses of Bio-Quant for the16 day period ended December 31, 2009 are not material to present as a separate segment in 2009. Total assets of the CRO segment at December 31, 2009 are approximately $15 million.


NM100060 Anti-Fungal Treatment

We had an exclusive global licensing agreement with Novartis International Pharmaceutical Ltd. (“Novartis”) for NM100060, our proprietary topical nail solution for the treatment of onychomycosis (nail fungal infection). Under the agreement, Novartis acquired the exclusive worldwide rights to NM100060 and had assumed all further development, regulatory, manufacturing and commercialization responsibilities as well as costs. Novartis agreed to pay us up to $51 million in upfront and milestone payments on the achievement of specific development and regulatory milestones, including an initial cash payment of $4 million at signing. In addition, we were eligible to receive royalties based upon the level of sales achieved.

The completion of patient enrollment in the Phase 3 clinical trials for NM100060 triggered a $3 million milestone payment from Novartis to be paid 7 months after the last patient enrolled in the Phase 3 studies. However, the agreement also provided that clinical milestones paid to us by Novartis would be reduced by 50% until we received an approved patent claim on the NM100060. As such, we initially received only $1.5 million from Novartis.

On October 17, 2008, the U.S. Patent and Trademark Office issued the Notice of Allowance on our patent application for NM100060. This triggered a $2 million milestone payment from Novartis. On October 30, 2008 we received a payment of $3.5 million from Novartis consisting of the balance of $1.5 million of the patient enrollment milestone and the $2 million patent milestone.

In July 2008, Novartis completed the Phase 3 clinical trials for NM100060. The Phase 3 program required for the filing of the New Drug Application (“NDA”) in the U.S. for NM100060 consisted of two pivotal, randomized, double-blind, placebo-controlled studies. The parallel studies were designed to assess the efficacy, safety and tolerability of NM100060 in patients with mild to moderate toenail onychomycosis. Approximately 1,000 patients completed testing in the two studies, which took place in the U.S., Europe, Canada and Iceland. On August 26, 2008, we announced that based on First Interpretable Results of these two Phase 3 studies, Novartis had decided not to submit the NDA at that time.

In July 2009, Novartis completed final analysis of the comparator study which they had initiated in March 2007 in ten European countries. The study results were insufficient to support marketing approval in Europe. As such, on July 8, 2009, we announced the mutual decision reached with Novartis to terminate the licensing agreement. In accordance with the terms of the termination agreement, Novartis has provided us with all of the requested reports to date for the three Phase 3 studies that they conducted for NM100060 and is assisting and supporting us in connection with the assignment, transfer and delivery to us of all know-how and data relating to the product.

In consideration of such assistance and support, we will pay to Novartis 15% of any upfront and/or milestone payments that we receive from any future third party licensee of NM100060, as well as a royalty fee ranging from 2.8% to 6.5% of annual net sales of products developed from NM100060 (collectively, “Products”), with such royalty fee varying based on volume of such annual net sales. In the event that the Company, or a substantial part of our assets, is sold, we will pay to Novartis 15% of any upfront and/or milestone payments received by us or our successor relating to the Products, as well as a royalty fee ranging from 3% to 6.5% of annual net sales of any Products, with such royalty fee varying based on volume of such annual net sales. If the acquirer makes no upfront or milestone payments, the royalty fees payable to Novartis will range from 4% to 6.5% of annual net sales of any Products.

We have completed our analysis of the two pivotal Phase 3 studies completed by Novartis. Based on this analysis, we believe the product’s potential for treating patients with mild onychomycosis and warrants further studies for regulatory approval. We are sharing the clinical database and our conclusion with potential partners interested in licensing NM100060 for further development or for Over The Counter (OTC) direct approval due to its safety profile.

Vitaros ®

We also have under development a topical alprostadil-based cream treatment intended for patients with erectile dysfunction (“Vitaros ® ”), which was previously known as Alprox-TD ® . Our NDA was filed and accepted for review by the FDA in September and November 2007, respectively. During a teleconference with the FDA in early July 2008, our use of the name Vitaros ® for the ED Product was verbally approved by the FDA.

On November 1, 2007, we licensed the U.S. rights of Vitaros ® to Warner Chilcott Company, Inc. (“Warner”). Warner paid us $500,000 upon signing and agreed to pay us up to $12.5 million on the achievement of specific regulatory milestones and to undertake the manufacturing investment and any other investment for further product development that may be required for product approval. Additionally, Warner was responsible for the commercialization and manufacturing of Vitaros ® .

On July 21, 2008, we received a not approvable action letter (the “Action Letter”) from the FDA in response to our NDA. The major regulatory issues raised by the FDA were related to the results of the transgenic (“TgAC”) mouse carcinogenicity study which NexMed completed in 2002. The TgAC concern raised by the FDA is product specific, and does not affect the dermatological products in our pipeline, specifically NM100060.

On October 15, 2008, we met with the FDA to discuss the major deficiencies cited in the Action Letter and to reach consensus on the necessary actions for addressing these deficiencies for our Vitaros ® NDA. Several key regulatory concerns were addressed and agreements were reached at the meeting. The FDA agreed to: (a) a review by the Carcinogenicity Advisory Committee (“CAC”) of the 2 two-year carcinogenicity studies which were recently completed; (b) one Phase 1 study in healthy volunteers to assess any transfer to the partner of the NexACT ® technology and (c) one animal study to assess the transmission of sexually transmitted diseases with the design of the study to be determined. The FDA also confirmed the revision on the status of our manufacturing facility from “withhold” to “acceptable”, based on our having adequately addressed the deficiencies cited in their Pre-Approval Inspection (“PAI”) of our facility in January 2008. It is also our understanding that at this time the FDA does not require a one-year open-label safety study for regulatory approval. After the meeting we estimated that an additional $4 to $5 million would be needed to be spent to complete the above mentioned requirements prior to the resubmission of the NDA.

On February 3, 2009, we announced the sale of the U.S. rights for Vitaros ® and the specific U.S. patents covering Vitaros ® to Warner which terminated the previous licensing agreement. Under the terms of the agreement, we received gross proceeds of $2.5 million as an up-front payment and are eligible to receive an additional payment of $2.5 million upon Warner’s receipt of an NDA approval from the FDA. In addition, Warner has paid us a total of $350,000 for the manufacturing equipment for Vitaros ® . The purchase agreement with Warner gives us the right to reference their work on Vitaros ® in our future filings outside the U.S., which may benefit us in international partnering opportunities because the additional data may further validate the safety of the product and enhance its potential value. While Warner is not obligated by the purchase agreement to continue with the development of Vitaros ® and the filing of the NDA, as of the date of this report, Warner submitted the CAC assessment package to the FDA during the 4 th quarter of 2009. Based on previous discussion with the FDA, we had expected them to make their decision during the first quarter of 2010. However, as of the date of this report, we have nothing new to report.

In Canada, we filed the New Drug Submission (“NDS”) for Vitaros in February 2008 and received a Notice of Non-Compliance (“Notice”) on January 19, 2010. The Notice was an end-of-review communication from Health Canada when additional information was needed to reach final decision on product approval. The deficiencies cited in the Notice were related specifically to the product’s CMC (Chemistry, Manufacturing and Controls), and no pre-clinical or clinical deficiencies cited in the Notice. In February 2010, we met with Health Canada to discuss their concerns and were able to reach agreement with them on the necessary action steps which would be completed and included in our response to the Notice due on or before April 14, 2010. Assuming that we successfully submit our response before the 90 day deadline, our NDS would then undergo a 45 day screening process by Heath Canada’s Regulatory Project Management group to determine the adequacy of our response and if deemed adequate, our response to the Notice would then go through a 150 day review cycle by the NDS reviewers.

For Europe, we are currently pursuing a decentralized filing strategy and our first Marketing Authorization Application (“MAA”) is planned for the United Kingdom. The Medicines and Healthcare Products Regulatory Agency (the “MHRA”) has confirmed that due to the backlog of MAA filings, they would not be able to receive and start reviewing our MAA until October 2010. Our intention is to pursue filing of the MAA with a local European partner. With that goal in mind, we are actively pursuing licensing partners and have engaged a business development consultant to assist us in that endeavour. There is no assurance that we will be able to find a partner, file our MAA on a timely basis or obtain regulatory approval.

Femprox ® and Other Products

Our product pipeline also includes Femprox ® , which is an alprostadil-based cream product intended for the treatment of female sexual arousal disorder. We have completed nine clinical studies to date, including one 98-patient Phase 2 study in the U.S. for Femprox ® , and also a 400-patient study for Femprox ® in China, where the cost for conducting clinical studies was significantly lower than in the U.S. We do not intend to conduct additional studies for this product until we have secured a co-development partner, which we are actively seeking.

We have also continued early stage development work for our product pipeline with the goal of focusing our attention on product opportunities that would replicate the model of our previously licensed anti-fungal nail treatment. We have in our pipeline a viable topical treatment for psoriasis, a common dermatological condition . Since the acquisition on December 14, 2009, our Bio-Quant team has been reviewing and studying the pre-clinical stage topical products in our pipeline to determine if additional value can be created through further testing in-house. These products include the above-mentioned treatment for psoriasis, cancer inflammation and also treatments for pain and wound healing.

Bio-Quant CRO Business

Bio-Quant has over 300 clients world-wide and performs hundreds of studies a year both in in vitro and in vivo pharmacology, pharmacokinetics (PK) and toxicology to support pre-IND enabling packages. Bio-Quant performs studies for its clients in the early stages of drug development and discovery. To provide the needed flexibility, this discovery work is best performed by Bio-Quant’s highly experienced and trained scientists who know how to recognize and address the unusual and unexpected outcomes that are the norm during discovery. Because the path to success at the discovery stage is through the process of failing fast and failing often, the optimal discovery research methodology focuses on the fastest and most cost-effective methods for getting correct scientific answers to direct further research.

To date, approximately 80% of Bio-Quant’s revenue has been generated from pre-clinical contract services. The CRO industry in general continues to be dependent on the research and development efforts of pharmaceutical and biotechnology companies as major customers, and we believe this dependence will continue. The current uncertain economic conditions have caused customers to re-evaluate priorities resulting in increases in contracts for the more promising projects, scaling back and/or canceling other GLP projects towards clinical trials. The biopharmaceutical industry is reducing costs and, often, their workforce. Bio-Quant may benefit from increased outsourcing on the part of its customers, or it may be harmed by a reduction in spending if the biopharmaceutical industry scales back on pre-clinical projects. Bio-Quant views the current conditions as an opportunity to attract well qualified candidates to strengthen and improve its operations. Another trend in the industry is the decline in prescription drug sales caused by cost conscious patients opting for less expensive generic drugs or none at all. This presents both an opportunity and a challenge to Bio-Quant, as its customers will need to find less costly, or more efficient research options often through the establishment of strategic alliances or partnerships. Bio-Quant believes it is well positioned for this development.

With access to our NexACT technology, we intend to differentiate the Bio-Quant business from its competitors because it now can offer a proprietary drug delivery technology as a service to current and potential clients who need innovative alternatives and solutions to their development problems.

Bio-Quant has two labs and housing facilities along with an experienced scientific staff of 19 employees.

There are many different types of clients that need these types of studies performed during these early stages of drug discovery and development. Bio-Quant’s clients range from larger global pharmaceutical companies to midsize and small biotechnology companies.

Patents

We hold ten U.S. patents out of a series of patent applications that we have filed in connection with our NexACT ® technology and our NexACT ® -based products under development. To further strengthen our global patent position on our proprietary products under development, and to expand the patent protection to other markets, we have filed under the Patent Cooperation Treaty corresponding international applications for our issued U.S. patents and pending U.S. patent applications.

...