UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Fiscal Year Ended December 31, 2013
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ____________ to ____________
Commission File No. 000-16929
SOLIGENIX, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
29 EMMONS DRIVE, SUITE C-10
PRINCETON, NJ
(Address of principal executive offices)
41-1505029
(I.R.S. Employer
Identification Number)
08540
(Zip Code)
(609) 538-8200
(Registrant’s telephone number, including area code)
Securities registered under Section 12 (b) of the Exchange Act:
Title of Each Class
Common Stock, par value $.001 per share
Name of Each Exchange on Which Registered
OTCQB
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No
x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No x
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 (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this 10-K or any amendments to this Form 10-K. x
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 definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-
2 of the Exchange Act. (Check one):
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $29,245,400 (assuming, for this purpose, that
executive officers, directors and holders of 10% or more of the common stock are affiliates), based on the closing price of the registrant’s common stock as
reported on the Over-the-Counter Bulletin Board on March 21, 2014.
As of March 21, 2014, 19,852,260 shares of the registrant’s Common Stock, par value $0.001 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None.
SOLIGENIX, INC.
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2013
Table of Contents
Description
Part I
Part II
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Item
1.
1A.
1B.
2.
3.
5.
6.
7.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Part III
Exhibits and Financial Statement Schedules
15.
Signatures
Consolidated Financial Statements
Part IV
2
Page
3
21
30
30
30
31
31
31
38
38
38
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39
43
47
49
50
51
55
F-1
Item 1. Business
PART I
This Annual Report on Form 10-K contains statements of a forward-looking nature relating to future events or our future financial performance. These
statements are only predictions and actual events or results may differ materially. In evaluating such statements, you should carefully consider the various
factors identified in this report that could cause actual results to differ materially from those indicated in any forward-looking statements, including those set
forth in “Risk Factors” in this Annual Report on Form 10-K. See “Cautionary Note Regarding Forward Looking Statements.”
Our Business Overview
We are a clinical stage biopharmaceutical company that is focused on developing products to treat serious inflammatory diseases where there remains an
unmet medical need, as well as developing several biodefense vaccines and therapeutics. We maintain two active business segments: BioTherapeutics and
Vaccines/BioDefense.
Our BioTherapeutics business segment
the
prevention/treatment of gastrointestinal (“GI”) disorders characterized by severe inflammation, including pediatric Crohn’s disease (SGX203), acute radiation
enteritis (SGX201) and chronic Graft-versus-Host disease (orBec®), as well as developing our novel innate defense regulator (“IDR”) technology (SGX942)
for the treatment of oral mucositis.
is developing proprietary formulations of oral beclomethasone 17,21-dipropionate (“BDP”) for
Our Vaccines/BioDefense business segment includes active development programs for RiVax™, our ricin toxin vaccine, VeloThrax™, our anthrax vaccine,
OrbeShield™, our GI acute radiation syndrome (“GI ARS”) therapeutic and SGX943, our melioidosis therapeutic. The advanced development of our vaccine
programs is currently supported by our heat stabilization technology, known as ThermoVax™, under existing and on-going government grant funding. With
the recently awarded government contracts from the Biomedical Advanced Research and Development Authority (“BARDA”) and the National Institute of
Allergy and Infectious Diseases (“NIAID”), we will attempt to advance the development of OrbeShield™ for the treatment of GI ARS. Additionally, we
entered into a global and exclusive channel collaboration with Intrexon Corporation (“Intrexon”) through which we intend to develop and commercialize a
human monoclonal antibody therapy (SGX101) to treat melioidosis.
An outline for our business strategy follows:
·
·
·
Conduct a Phase 2 clinical trial of SGX942 for the treatment of oral mucositis in head and neck cancer;
Initiate a Phase 2/3 clinical trial of oral BDP, known as SGX203, for the treatment of pediatric Crohn’s disease;
Evaluate the effectiveness of oral BDP in other therapeutic indications involving inflammatory conditions of the GI tract such as prevention of acute
radiation enteritis, and treatment of chronic graft-versus-host disease (“GI GVHD”);
· Develop RiVax™ and VeloThrax™ in combination with our proprietary vaccine heat stabilization technology, known as ThermoVax™, to develop
new heat stable vaccines in biodefense and infectious diseases with the potential to collaborate and/or partner with other companies in these areas;
· Advance the preclinical and manufacturing development of OrbeShield™ as a biodefense medical countermeasure for the treatment of GI ARS;
·
Continue to apply for and secure additional government funding for each of our BioTherapeutics and Vaccines/BioDefense programs through grants,
contracts and/or procurements;
· Acquire or in-license new clinical-stage compounds for development
·
Explore other business development and merger/acquisition strategies, an example of which is our collaboration with Intrexon.
3
Corporate Information
We were incorporated in Delaware in 1987 under the name Immunotherapuetics Inc. In 1987, the Company merged with Biological Therapeutics, Inc., a
North Dakota corporation, with the Company being the surviving corporation. The Company changed its name to “Endorex Corp.” in 1996, to “Endorex
Corporation” in 1998, to “DOR BioPharma, Inc.” in 2001, and finally to “Soligenix, Inc.” in 2009. Our principal executive offices are located at 29 Emmons
Drive, Suite C-10, Princeton, New Jersey 08540 and our telephone number is (609) 538-8200.
Our Products in Development
The following tables summarize the products that we are currently developing:
BioTherapeutic Products
Soligenix Product
Therapeutic Indication
SGX942
Oral Mucositis in Head and Neck Cancer
Stage of Development
IND clearance and Phase 2 trial initiated in the
second half of 2013, with data expected in the
second half of 2014
SGX203
Pediatric Crohn’s disease
SGX201
Acute Radiation Enteritis
Phase 1/2 clinical trial completed June 2013, data pharmacokinetic
(PK)/pharmacodynamic (PD) profile and safety confirmed;
Phase 2/3 clinical trial planned for the second half of 2014, with data
expected in the second half of 2015
Phase 1/2 clinical trial complete;
safety and preliminary efficacy demonstrated;
Phase 2 trial planned for the second half of 2014, with data expected
in the second half of 2015
orBec®
Treatment of Chronic GI GVHD
Phase 2 trial initiated in the second half of 2013, with data expected in
the second half of 2014
Soligenix Product
ThermoVax™
Indication
Thermostability of aluminum
adjuvanted vaccines
Stage of Development
Pre-clinical
Vaccine Thermostability Platform
BioDefense Products
Soligenix Product
Indication
RiVax™
Vaccine against
Ricin Toxin Poisoning
VeloThrax™
Vaccine against Anthrax Poisoning
OrbeShield™
SGX943/SGX101
Therapeutic against GI ARS
Melioidosis
Stage of Development
Phase 1B trial complete;
safety and neutralizing antibodies for protection demonstrated;
Phase 2 trial planned for the first half of 2015
Pre-clinical;
Phase 1 clinical trial planned for second half of 2015
Pre-clinical program initiated
Pre-clinical
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BioTherapeutics Overview
SGX94
In December 2012, we acquired a drug technology, we refer to as SGX94, representing what we believe is a novel approach to modulation of the innate
immune system. SGX94 is an IDR that regulates the innate immune system to simultaneously reduce inflammation, eliminate infection and enhance tissue
healing. As part of the acquisition, we acquired all rights, including composition of matter patents, preclinical and Phase 1 clinical study datasets for SGX94.
We also assumed a license agreement with the University of British Columbia (“UBC”) to advance the research and development of the SGX94 technology.
The license agreement with UBC provides us with exclusive worldwide rights to manufacture, distribute, market sell and/or license or sublicense products
derived or developed from this technology.
SGX94 is the research name for the active ingredient in SGX942, which is the research name for the finished drug product being studied in oral mucositis. It
is a new class of short, synthetic peptides known as IDRs that have a novel mechanism of action in that it is simultaneously anti-inflammatory and anti-
infective. IDRs have no direct antibiotic activity but modulate host responses, increasing survival after infections with a broad range of bacterial Gram-
negative and Gram-positive pathogens including both antibiotic sensitive and resistant strains, as well as accelerating resolution of tissue damage following
exposure to a variety of agents including bacterial pathogens, trauma and chemo- or radiation-therapy. IDRs provide a novel approach to the control of
infection and tissue damage via highly selective binding to an intracellular adaptor protein, sequestosome-1, also known as p62, which has a pivotal function
in signal transduction during activation and control of the innate defense system. Preclinical data indicate that IDRs are active in models of a wide range of
therapeutic indications including life-threatening bacterial infections as well as the severe side-effects of chemo- and radiation-therapy.
We have a strong worldwide IP position on SGX94 and related analogs including composition of matter. SGX94 was developed pursuant to discoveries made
by Professors B. Brett Finlay and Robert Hancock of the UBC and approximately $40 million has been invested towards its development to date, inclusive of
government grants.
SGX94 has demonstrated efficacy in numerous animal disease models including mucositis, colitis, skin infection and other bacterial infections and has been
evaluated in a double-blind, placebo-controlled Phase 1 clinical trial in 84 healthy volunteers with both single ascending dose and multiple ascending dose
components. SGX94 showed a strong safety profile when administered by IV over 7 days and was consistent with safety results seen in pre-clinical studies.
SGX94 is the subject of an open Investigational New Drug (“IND”) application which has been cleared by the United States Food and Drug Administration
(the “FDA”). Market opportunities include, but are not limited to, mucositis, acute bacterial skin and skin structure infections, acinetobacter, melioidosis,
acute radiation syndrome and as a vaccine adjuvant, with potential opportunities for non-dilutive funding to support the development.
SGX942 – for Treating Oral Mucositis in Head and Neck Cancer
We initiated a Phase 2 clinical study of SGX942 in the treatment of oral mucositis in head and neck cancer patients in the second half of 2013. Oral mucositis
in this patient population is an area of unmet medical need where there are currently no approved drug therapies. Accordingly, we received “Fast Track”
designation for the treatment of oral mucositis as a result of radiation and/or chemotherapy treatment in head and neck cancer patients from the FDA in the
first half of 2013. Fast Track is a designation that the FDA reserves for a drug intended to treat a serious or life-threatening condition and one that
demonstrates the potential to address an unmet medical need for the condition. Fast Track designation is designed to facilitate the development and expedite
the review of new drugs. For instance, should events warrant, we will be eligible to submit a New Drug Application (“NDA”) for SGX942 on a rolling basis,
permitting the FDA to review sections of the NDA prior to receiving the complete submission. Additionally, NDAs for Fast Track development programs
ordinarily will be eligible for priority review, which implies an abbreviated review time of six months.
5
We believe the potential worldwide market for SGX942 is in excess of $500 million for all applications, including oral mucositis.
About Oral Mucositis
Mucositis is the clinical term for damage done to the mucosa by anticancer therapies. It can occur in any mucosal region, but is most commonly associated
with the mouth, followed by the small intestine. We estimate, based upon our review of historic studies and reports, and an interpolation of data on the
incidence of mucositis, that mucositis affects approximately 500,000 people in the U.S. per year and occurs in 40% of patients receiving chemotherapy.
Mucositis can be severely debilitating and can lead to infection, sepsis, the need for parenteral nutrition and narcotic analgesia. The gastro-intestinal damage
causes severe diarrhea. These symptoms can limit the doses and duration of cancer treatment, leading to sub-optimal treatment outcomes.
The mechanisms of mucositis have been extensively studied and have been recently linked to the interaction of chemotherapy and/or radiation therapy with
the innate defense system. Bacterial infection of the ulcerative lesions is now regarded as a secondary consequence of dysregulated local inflammation
triggered by therapy-induced cell death, rather than as the primary cause of the lesions.
We estimate, based upon our review of historic studies and reports, and an interpolation of data on the incidence of oral mucositis, that oral mucositis is a
subpopulation of approximately 90,000 patients in the U.S., with a comparable number in Europe. Oral mucositis almost always occurs in patients with head
and neck cancer treated with radiation therapy (>80% incidence of severe mucositis) and is common (40-100% incidence) in patients undergoing high dose
chemotherapy and hematopoietic cell transplantation, where the incidence and severity of oral mucositis depends greatly on the nature of the conditioning
regimen used for myeloablation.
Oral BDP
Oral BDP (beclomethasone 17,21-dipropionate) represents a first-of-its-kind oral, locally acting therapy tailored to treat gastrointestinal inflammation. BDP
has been marketed in the U.S. and worldwide since the early 1970s as the active pharmaceutical ingredient in a nasal spray and in a metered-dose inhaler for
the treatment of patients with allergic rhinitis and asthma. Oral BDP is specifically formulated for oral administration as a single product consisting of two
tablets. One tablet is intended to release BDP in the upper sections of the GI tract and the other tablet is intended to release BDP in the lower sections of the
GI tract.
Based on its pharmacological characteristics, oral BDP may have utility in treating other conditions of the gastrointestinal tract having an inflammatory
component. We have an issued U.S. patent 8,263,582 claiming the use of oral BDP as a method of treating inflammatory disorders of the gastrointestinal
tract, including Crohn’s disease, and an issued U.S. patent 6,096,731 claiming the use of oral BDP as a method for preventing and treating the tissue damage
that is associated with both GI GVHD following hematopoietic cell transplantation, as well as GVHD which also occurs following organ allograft
transplantation. We also have European Patent EP 1392321 claiming the use of topically active corticosteroids in orally administered dosage forms that act
concurrently to treat inflammation in the upper and lower gastrointestinal tract. We are planning to pursue development programs in the treatment of pediatric
Crohn’s disease, acute radiation enteritis, chronic GI GVHD and GI ARS pending further grant funding. We are also exploring the possibility of testing oral
BDP for local inflammation associated with Ulcerative Colitis, among other indications.
We believe the potential worldwide market for oral BDP is in excess of $500 million for all GI applications, namely, pediatric Crohn’s disease, radiation
enteritis, GI ARS, and chronic GI GVHD.
In addition to issued patents and pending worldwide patent applications held by or exclusively licensed to us, oral BDP would benefit from orphan drug
designations in the U.S. and in Europe. Orphan drug designations provide for 7 and 10 years of market exclusivity upon approval in the U.S. and Europe,
respectively.
6
SGX203 –for Treating Pediatric Crohn’s Disease
SGX203 is a two tablet delivery system of BDP specifically designed for oral use that allows for administration of immediate and delayed release BDP
throughout the small bowel and the colon. The FDA has awarded SGX203 orphan drug designation as well as Fast Track designation for the treatment of
pediatric Crohn's disease.
About Pediatric Crohn's Disease
Crohn's disease is an ongoing disorder that causes inflammation of the GI tract. Crohn's disease can affect any area of the GI tract, from the mouth to the
anus, but it most commonly affects the lower part of the small intestine, called the ileum. The swelling caused by the disease extends deep into the lining of
the affected organ. The swelling can induce pain and can make the intestines empty frequently, resulting in diarrhea. Because the symptoms of Crohn's
disease are similar to other intestinal disorders, such as irritable bowel syndrome and ulcerative colitis, it can be difficult to diagnose. People of Ashkenazi
Jewish heritage have an increased risk of developing Crohn's disease.
Crohn's disease can appear at any age, but it is most often diagnosed in adults in their 20s and 30s. However, approximately 30% of people with Crohn's
disease develop symptoms before 20 years of age. We estimate, based upon our review of historic published studies and reports, and an interpolation of data
on the incidence of Pediatric Crohn’s disease, that Pediatric Crohn's disease is a subpopulation of approximately 80,000 patients in the U.S. with a
comparable number in Europe. Crohn’s disease tends to be both severe and extensive in the pediatric population and a relatively high proportion (~40%) of
pediatric Crohn’s patients have involvement of their upper gastrointestinal tract.
Crohn's disease presents special challenges for children and teens. In addition to bothersome and often painful symptoms, the disease can stunt growth, delay
puberty, and weaken bones. Crohn's disease symptoms may sometimes prevent a child from participating in enjoyable activities. The emotional and
psychological issues of living with a chronic disease can be especially difficult for young people.
SGX201 –for Preventing Acute Radiation Enteritis
SGX201 is a delayed-release formulation of BDP specifically designed for oral use. We completed a Phase 1/2 clinical trial testing SGX201 in prevention of
acute radiation enteritis. Patients with rectal cancer scheduled to undergo concurrent radiation and chemotherapy prior to surgery were randomized to one of
four dose groups. The objectives of the study were to evaluate the safety and maximal tolerated dose of escalating doses of SGX201, as well as the
preliminary efficacy of SGX201 for prevention of signs and symptoms of acute radiation enteritis. The study demonstrated that oral administration of
SGX201 was safe and well tolerated across all four dose groups. There was also evidence of a potential dose response with respect to diarrhea, nausea and
vomiting and the assessment of enteritis according to National Cancer Institute Common Terminology Criteria for Adverse Events for selected
gastrointestinal events. In addition, the incidence of diarrhea was lower than that seen in recent published historical control data in this patient population.
This program was supported in part by a $500,000 two-year Small Business Innovation and Research (“SBIR”) grant awarded by the National Institutes of
Health (“NIH”). We are currently working with our Radiation Enteritis medical advisory board to determine potential next steps forward with the clinical
development program.
We have received Fast Track designation from the FDA for SGX201 for acute radiation enteritis.
About Acute Radiation Enteritis
External radiation therapy is used to treat most types of cancer, including cancer of the bladder, uterine, cervix, rectum, prostate, and vagina. During delivery
of treatment, some level of radiation will also be delivered to healthy tissue, including the bowel, leading to acute and chronic toxicities. The large and small
bowels are very sensitive to radiation and the larger the dose of radiation the greater the damage to normal bowel tissue. Radiation enteritis is a condition in
which the lining of the bowel becomes swollen and inflamed during or after radiation therapy to the abdomen, pelvis, or rectum. Most tumors in the abdomen
and pelvis need large doses, and almost all patients receiving radiation to the abdomen, pelvis, or rectum will show signs of acute enteritis.
7
Patients with acute enteritis may have nausea, vomiting, abdominal pain and bleeding, among other symptoms. Some patients may develop dehydration and
require hospitalization. With diarrhea, the gastrointestinal tract does not function normally, and nutrients such as fat, lactose, bile salts, and vitamin B 12 are
not well absorbed.
Symptoms will usually resolve within 2-6 weeks after therapy has ceased. Radiation enteritis is often not a self-limited illness, as over 80% of patients who
receive abdominal radiation therapy complain of a persistent change in bowel habits. Moreover, acute radiation injury increases the risk of development of
chronic radiation enteropathy, and overall 5% to 15% of the patients who receive abdominal or pelvic irradiation will develop chronic radiation enteritis.
We estimate, based upon our review of historic published studies and reports, and an interpolation of data on the treatment courses and incidence of cancers
occurring in the abdominal and pelvic regions, there to be over 100,000 patients annually in the U.S., with a comparable number in Europe, who receive
abdominal or pelvic external beam radiation treatment for cancer, and these patients are at risk of developing acute and chronic radiation enteritis.
orBec® –for Treating Chronic GI GVHD
orBec® is a two tablet delivery system of BDP specifically designed for oral use that allows for delivery of immediate and delayed release BDP to treat the
gastrointestinal manifestation of chronic GVHD, the organ system where GVHD is most frequently encountered and highly problematic. orBec® is intended
to reduce the need for systemic immunosuppressive drugs such as prednisone to treat chronic GI GVHD. The active ingredient in orBec® is BDP, a highly
potent, topically active corticosteroid that has a local effect on inflamed tissue. BDP has been marketed in the U.S. and worldwide since the early 1970s as the
active pharmaceutical ingredient in a nasal spray and in a metered-dose inhaler for the treatment of patients with allergic rhinitis and asthma. orBec® has been
awarded orphan drug designations in the U.S. and in Europe for the treatment of GI GVHD. In September 2012, we received a $300,000 two-year SBIR grant
awarded by the NIH to support a Phase 2 study for the treatment of chronic GI GVHD.
About Chronic GVHD
GVHD is a major complication of allogeneic hematopoietic cell transplantation. GVHD is an inflammatory disease initiated by T cells in the donor graft that
recognize histocompatibility and other tissue antigens of the host, and is mediated by a variety of effector cells and inflammatory cytokines. GVHD presents
in both acute and chronic forms. The symptoms of chronic GVHD typically present at between 100 days and three years post-transplant.
Chronic GVHD has features resembling autoimmune and other immunologic disorders such as scleroderma, Sjögren syndrome, primary biliary cirrhosis,
wasting syndrome, bronchiolitis obliterans, immune cytopenias and chronic immunodeciency. The manifestations of chronic GVHD may be restricted to a
single organ or tissue or may be widespread. Chronic GVHD can lead to debilitating consequences, e.g., joint contractures, loss of sight, end-stage lung
disease, or mortality resulting from profound chronic immune suppression leading to recurrent or life-threatening infections.
Treatment of chronic GVHD is a challenge because it can be refractory to frontline immunosuppression. High-dose systemic corticosteroids are used with
some success but carry significant toxicity. The risks of prolonged immunosuppression include local and disseminated infections, Epstein-Barr virus
associated lymphoproliferative disease, hypothalamic-pituitary-adrenal (“HPA”) axis suppression, myopathy, glucose intolerance, neuropsychiatric disease
and bone demineralization.
8
We estimate, based upon our review of historic published studies and reports, and an interpolation of data on the incidence of chronic GVHD, there to be
6,000 patients annually in the U.S., with a comparable number in Europe that suffer from chronic GVHD.
Vaccines/BioDefense Overview
ThermoVax™ – Thermostability Technology
Our thermostability technology, ThermoVax™, is a novel method of rendering aluminum salt, (known colloquially as Alum), adjuvanted vaccines stable at
elevated temperatures. Alum is the most widely employed adjuvant technology in the vaccine industry. The value of ThermoVax™ lies in its potential ability
to eliminate the need for cold-chain production, transportation, and storage for Alum adjuvanted vaccines. This would relieve companies of the high costs of
producing and maintaining vaccines under refrigerated conditions. Based on historical reports from the World Health Organization and other scientific
reports, a meaningful proportion of vaccine doses globally are wasted due to excursions from required cold chain temperature ranges. This is due to the fact
that most Alum adjuvanted vaccines need to be maintained at between 2 and 8 degrees Celsius (“C”) and even brief excursions from this temperature range
(especially below freezing) usually necessitates the destruction of the product or the initiation of costly stability programs specific for the vaccine lots in
question. The savings realized from the elimination of cold chain costs and related product losses would in turn significantly increase the profitability of
vaccine products. Elimination of the cold chain would also further facilitate the use of these vaccines in the lesser developed parts of the world. ThermoVax™
has the potential to facilitate easier storage and distribution of strategic national stockpile vaccines in emergency settings.
ThermoVax™ development is being supported pursuant to our $9.4 million National Institute of Allergy and Infectious Diseases (“NIAID”) grant enabling
development of thermo-stable ricin (RiVax™) and anthrax (VeloThrax™) vaccines. Proof-of-concept preclinical studies with ThermoVax™ indicate that it is
able to produce stable vaccine formulations using adjuvants, protein immunogens, and other components that ordinarily would not withstand long temperature
variations exceeding customary refrigerated storage conditions. These studies were conducted with our aluminum-adjuvanted ricin toxin vaccine, RiVax™,
made under precise lyophilization conditions using excipients that aid in maintaining native protein structure of the ricin A chain, the immunogenic
compound of the vaccine. When RiVax™ was kept at 40 degrees C (104 degrees Fahrenheit) for up to one year, all of the animals vaccinated with the
lyophilized RiVax™ vaccine developed potent and high titer neutralizing antibodies. Confirmatory results have extended the stability to one year when the
vaccine is kept at 40 degrees C. In contrast, animals that were vaccinated with the liquid RiVax™ vaccine kept at 40 degrees C did not develop neutralizing
antibodies and were not protected against ricin exposure. The ricin A chain is extremely sensitive to temperature and rapidly loses the ability to induce
neutralizing antibodies when exposed to temperatures higher than 8 degrees C.
Near term progress with ThermoVax™ will allow us to seek out potential partnerships with companies marketing FDA/ex-U.S. health authority approved
Alum adjuvanted vaccines that are interested in eliminating the need for cold chain for their products. ThermoVax™ will further enable Soligenix to expand
its vaccine development expertise beyond biodefense into the infectious disease space and also has the potential to allow for the development of multivalent
vaccines (e.g., combination ricin-anthrax vaccine).
ThermoVax™ is the subject of U.S. patent 8,444,991 issued on May 21, 2013 titled “Method of Preparing an Immunologically-Active Adjuvant-Bound Dried
Vaccine Composition” and also U.S. patent application number 13/474,661 filed May 17, 2012 titled “Thermostable Vaccine Compositions and Methods of
Preparing Same.” These patents and their corresponding foreign filings are pending and licensed to Soligenix by the University of Colorado (“UC”) and they
address the use of adjuvants in conjunction with vaccines that are formulated to resist thermal inactivation. The license agreement covers thermostable
vaccines for biodefense as well as other potential vaccine indications.
9
RiVax™ – Ricin Toxin Vaccine
RiVax™ is our proprietary vaccine developed to protect against exposure to ricin toxin, and is the first ricin vaccine. With RiVax™, we are a world leader in
ricin toxin vaccine research. The immunogen in RiVax™ induces a protective immune response in animal models of ricin exposure and functionally active
antibodies in humans. The immunogen consists of a genetically inactivated subunit ricin A chain that is enzymatically inactive and lacks residual toxicity of
the holotoxin. Two Phase 1 human clinical trials have been completed. The development of RiVax™ has been sponsored through a series of overlapping
challenge grants, UC1, and cooperative grants, U01, from the NIH, granted to Soligenix and to the University of Texas Southwestern Medical Center
(“UTSW”) where the vaccine originated. The second clinical trial was supported by a grant from the FDA's Office of Orphan Products to UTSW. Soligenix
and UTSW have collectively received approximately $25 million in grant funding from the NIH for RiVax™. Results of the first Phase 1 human trial of
RiVax™ established that the immunogen was safe and induced antibodies anticipated to protect humans from ricin exposure. The antibodies generated from
vaccination, concentrated and purified, were capable of conferring immunity passively to recipient animals, indicating that the vaccine was capable of
inducing functionally active antibodies in humans. The outcome of this study was published in the Proceedings of the National Academy of Sciences (Vitetta
et al., 2006, A Pilot Clinical Trial of a Recombinant Ricin Vaccine in Normal Humans, PNAS, 103:2268-2273). The second trial, sponsored by UTSW,
evaluated a more potent formulation of RiVax™ that contained an aluminum adjuvant (Alum), was completed in September 2012. The results of the Phase 1B
study indicated that Alum adjuvanted RiVax™ was safe and well tolerated, and induced greater ricin neutralizing antibody levels in humans than adjuvant-
free RiVax™. The outcomes of this second study were published in the Clinical and Vaccine Immunology (Vitetta et al., 2012, Recombinant Ricin Vaccine
Phase 1B Clinical Trial, Clin. Vaccine Immunol. 10:1697-9). We have adapted the original manufacturing process for the immunogen contained in RiVax™
for large scale manufacturing and are further establishing correlates of the human immune response in non-human primates.
RiVax™ is the subject of three issued U.S. patent numbers 6,566,500, 6,960,652, and 7,829,668, all titled "Compositions and methods for modifying toxic
effects of proteinaceous compounds." This patent family includes composition of matter claims for the modified ricin toxin A chain which is the immunogen
contained in RiVax™, and issued in 2003, 2005 and 2010 respectively. The initial filing date of these patents is March 2000 and they are expected to expire in
March 2020. The issued patents contain claims that describe alteration of sequences within the ricin A chain that affect vascular leak, one of the deadly
toxicities caused by ricin toxin. Another U.S. patent number 7,175,848 titled “Ricin A chain mutants lacking enzymatic activity as vaccines to protect against
aerosolized ricin,” was filed in October of 2000 and is expected to expire in October 2020. RiVax™ has also been granted orphan drug designation by the
FDA for the prevention of ricin intoxication.
Assuming development efforts are successful for RiVax™, we believe potential government procurement contract(s) could reach $200 million.
About Ricin Toxin
Ricin toxin can be cheaply and easily produced, is stable over long periods of time, is toxic by several routes of exposure and thus has the potential to be used
as a biological weapon against military and/or civilian targets. As a bioterrorism agent, ricin could be disseminated as an aerosol, by injection, or as a food
supply contaminant. The potential use of ricin toxin as a biological weapon of mass destruction has been highlighted in a Federal Bureau of Investigations
Bioterror report released in November 2007 titled Terrorism 2002-2005, which states that “Ricin and the bacterial agent anthrax are emerging as the most
prevalent agents involved in WMD investigations” (http://www.fbi.gov/stats-services/publications/terrorism-2002-2005/terror02_05.pdf). In recent years, Al
Qaeda in the Arabian Peninsula has threatened the use of ricin toxin to poison food and water supplies and in connection with explosive devices.
Domestically, the threat from ricin remains a concern for security agencies. As recently as April 2013, letters addressed to the President, a U.S. Senator and a
judge tested positive for ricin.
The Centers for Disease Control has classified ricin toxin as a Category B biological agent. Ricin works by first binding to glycoproteins found on the exterior
of a cell, and then entering the cell and inhibiting protein synthesis leading to cell death. Once exposed to ricin toxin, there is no effective therapy available to
reverse the course of the toxin. The recent ricin threat to government officials has heightened the awareness of this toxic threat. Currently, there is no FDA
approved vaccine to protect against the possibility of ricin toxin being used in a terrorist attack, or its use as a weapon on the battlefield, nor is there a known
antidote for ricin toxin exposure.
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In January of 2012, a Request for Information (“RFI”) was issued by the Chemical Biological Medical Systems – Joint Vaccine Acquisition Program of the
Department of Defense (“DoD”). This RFI was titled “Development of a Ricin Toxin Vaccine to FDA Approval”, and marks the first time any agency of the
U.S. government has specifically indicated an interest in development of a vaccine against ricin toxin. We intend to pursue this avenue of funding to the
fullest extent.
VeloThrax™ – Anthrax Vaccine
VeloThrax™ is our newly acquired proprietary vaccine based on a recombinant Protective Antigen (“rPA”) derivative intended for use against anthrax.
Soligenix has entered into an exclusive license option with Harvard College to license VeloThrax™ (also known as DNI for dominant negative inhibitor) for a
vaccine directed at the prevention of anthrax infection of humans. VeloThrax™ is a translocation-deficient mutant of PA with double mutations of K397D and
D425K that impede the conformational changes necessary for endosomal membrane translocation into the cell cytoplasm. In the absence of that PA
translocation step, anthrax toxin trafficking and function cease. VeloThrax™ is also considered a more immunogenic candidate than native rPA. This apparent
increase in immunogenicity suggests that the DNI rPA is processed and presented to the immune system more efficiently by cellular antigen processing
pathways, which is consistent with known properties of the molecule.
DNI versions of rPA such as VeloThrax™ are also capable of inducing antibodies that neutralize the activity of the anthrax toxin complex. Unlike fully-
functional rPA, VeloThrax™ might be given to a patient post-exposure without risk of enhancing intoxication during an infection, although clinical tests
involving intravenous administration of potentially therapeutic levels of DNI rPA resulted in serious adverse events and so further development of this
product as a therapeutic biological for blocking the effects of infection by B. anthracis was discontinued. Soligenix intends to test VeloThrax™ at a 1,000 fold
lower dose than previously tested for an intramuscular or intradermal vaccine.
VeloThrax™’s greater immunogenicity could lead to a vaccine that can be administered in the fewest possible doses to induce the highest level of toxin
neutralizing antibodies. Utilizing ThermoVax™, we believe that we will be able to develop VeloThrax™ into a vaccine with an improved stability profile, an
issue that has proven challenging in the development of other anthrax vaccines. Extended stability at ambient temperatures would be a significant
improvement for stockpiled vaccines and one which is not expected from conventional vaccines. Further, a large-scale, current Good Manufacturing Practice
(“cGMP”) production methodology has already been completed. Assuming long-term stability can be met, VeloThrax™ could be stockpiled for general
prophylactic as well as a post exposure use.
The overall objective of the VeloThrax™ program is to rapidly and efficiently develop a next generation anthrax vaccine which combines a well-established,
safe and relatively low risk vaccine development and dosing approach with targeted, proven innovative strategies. VeloThrax™ will potentially be a
combination of a stable, readily manufactured mutant rPA subunit antigen with next generation, clinically compatible adjuvants which have been
demonstrated to enhance potency and reduce the time and number of vaccine doses required to achieve protective titer using a variety of vaccine antigens.
This blend of proven yet innovative technologies will provide the Public Health Emergency Medical Countermeasures Enterprise (“PHEMCE”) and the DoD
with a safe and stable alternative to the existing licensed anthrax vaccine product. Soligenix also proposes to adapt newly developed glassification technology
(initially developed under an ongoing NIAID grant to stabilize exceptionally unstable ricin toxin/adjuvant formulations) to enable a thermostable, dried,
single vial, pre-formulated adjuvanted rPA vaccine which is suitable for both long term storage and field use without typical cold chain constraints.
Assuming development efforts are successful for VeloThrax™, we believe potential government procurement contract(s) could reach $500 million.
About Anthrax
Anthrax is an acute infectious disease that is easily transmitted to humans by environmentally durable spores that are produced by Bacillus anthracis. Because
the spores are robust and contagious, anthrax is considered a Category A bioterror threat. Anthrax infection can occur in three forms: cutaneous (skin),
inhalation, and gastrointestinal. Inhaled spores can cause a rapidly progressing form of anthrax since the spores are transported to lymph nodes near the lungs
where they germinate, releasing vegetative bacteria into the bloodstream. Bacteria synthesize a complex series of toxin components that make up anthrax
toxin, resulting in overwhelming toxemia that causes shock and organ failure. Treatment of anthrax involves long-term antibiotic therapy, since ungerminated
spores can lie dormant in the lungs for up to 60 days. Only a few inhaled spores can cause inhalational anthrax. Once the toxin has entered the bloodstream,
antibiotics are ineffective, and only toxin-specific therapy is effective. Passively transferred antibodies can neutralize anthrax toxins and can be used post-
exposure in conjunction with antibiotics. Because of the long residence time of spores in the lung, it is possible to vaccinate post-exposure, but the onset of
neutralizing antibodies must occur during the period of antibiotic therapy.
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OrbeShield™ –for Treating GI ARS
OrbeShield™ (an oral immediate and delayed release formulation of the topically active corticosteroid BDP) is being developed for the treatment of GI ARS.
Corticosteroids are the best understood and most widely used class of anti-inflammatory drugs. BDP is a corticosteroid with predominantly topical activity
that is approved for use in asthma, psoriasis and allergic rhinitis.
OrbeShield™ has demonstrated positive preclinical results in a canine GI ARS model which indicate that dogs treated with OrbeShield™ demonstrated
statistically significant (p=0.04) improvement in survival with dosing at either two hours or 24 hours after exposure to lethal doses of total body irradiation
(“TBI”) when compared to control dogs. OrbeShield™ appears to significantly mitigate the damage to the GI epithelium caused by exposure to high doses of
radiation using a well-established canine model of GI ARS.
The GI tract is highly sensitive to ionizing radiation and the destruction of epithelial tissue is one of the first effects of radiation exposure. The rapid loss of
epithelial cells leads to inflammation and infection that are often the primary cause of death in acute radiation injury. This concept of GI damage also applies
to the clinical setting of oncology, where high doses of radiation cannot be administered effectively to the abdomen because radiation is very toxic to the
intestines. This is the same type of toxicity that occurs in Soligenix’s acute radiation enteritis clinical program with SGX201. As a result, there is a dual
avenue of development for Soligenix, and OrbeShield™ is potentially a “dual use” compound, a desirable characteristic which is a specific priority of
BARDA for ARS and other medical countermeasure indications. In September 2013, we received two government contracts from BARDA and NIAID for the
advanced preclinical and manufacturing development of OrbeShield™ leading to FDA approval to treat GI ARS. The BARDA contract contains a two year
base period with two contract options for a total of five years and up to $26.3 million. The NIAID contract consists of a one year base period and two contract
options for a total of three years and up to $6.4 million.
The FDA has cleared the IND application for OrbeShield™ for the mitigation of morbidity and mortality associated with GI ARS. Previously, development of
OrbeShield™ had been largely supported by a $1 million NIH grant to Soligenix’s academic partner, the Fred Hutchinson Cancer Research Center. In July
2012, we received an SBIR grant from NIAID of approximately $600,000 to support further preclinical development of OrbeShield™ for the treatment of
acute GI ARS. The FDA has awarded OrbeShield™ orphan drug designation and Fast Track designation for the prevention of death following a potentially
lethal dose of total body irradiation during or after a radiation disaster.
Assuming development efforts are successful for OrbeShield™, we believe potential government procurement contract(s) could reach as much as $450
million.
About GI ARS
ARS occurs after toxic radiation exposure and involves several organ systems, notably the bone marrow the GI tract and later the lungs. In the event of a
nuclear disaster or terrorist detonation of a nuclear bomb, casualties exposed to >2 Gy are at high risk for development of clinically significant ARS.
Exposure to high doses of radiation exceeding 10-12 Gy causes acute GI injury which can result in death in 5-15 days. The GI tract is highly sensitive due to
the requirement for incessant proliferation of crypt stem cells and production of mucosal epithelium. The extent of injury to the bone marrow and the GI tract
are the principal determinants of survival after exposure to TBI. Although the hematopoietic syndrome can be rescued by bone marrow transplantation or
growth factor administration, there is no established treatment or preventive measure for the GI damage that occurs after high-dose radiation. Therefore, there
is an urgent need to develop specific medical counter measures against the lethal pathophysiological manifestations of radiation-induced GI injury.
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SGX943/SGX101– for Treating Melioidosis
SGX943 is the research name for the finished drug product, containing the active ingredient SGX94, which is being studied in melioidosis. A preliminary
study with SGX943 has demonstrated efficacy. Further preclinical studies are planned with the pursuit of grant funding. Because SGX943 directly targets the
innate immune system (and does not attempt to kill the bacteria directly), it is particularly relevant for antibiotic-resistant bacteria. The bacteria which causes
melioidosis, Burkholderia pseudomallei, is known to be resistant to most antibiotics and to require prolonged treatment with the few antibiotics that do work.
Thus, SGX943 may represent a much-needed novel and additive therapy for melioidosis. In February 2014, we were awarded a one-year NIAID SBIR grant
award of approximately $300,000 to further evaluate SGX943 as a treatment for melioidosis.
SGX101 is the research name for the human monoclonal antibody therapy for the treatment of melioidosis based upon Intrexon’s advanced human antibody
discovery, isolation, and production technologies. As this research and development program progresses, grant funding will be pursued.
About Melioidosis
Melioidosis is a potentially fatal infection caused by the Gram-negative bacillus, Burkholderia pseudomallei (“Bp”). Highly resistant to many antibiotics, Bp
can cause an acute disease characterized by a fulminant pneumonia and a chronic condition that can recrudesce. There is no preventive vaccine or effective
immunotherapy for melioidosis. Therefore, there is a significant medical need for improved prevention and therapy.
Bp infection (melioidosis) is a major public health concern in the endemic regions of Southeast Asia and Northern Australia. Moreover, the organism has a
worldwide distribution and the full extent of global spread is likely underestimated. In Northeast Thailand, which has the highest incidence of melioidosis
recorded in the world, the mortality rate associated with Bp infection is over 40 percent, making it the third most common cause of death from infectious
disease in that region after HIV/AIDS and tuberculosis. Bp activity is seen in Southeast Asia, South America, Africa, the Middle East, India, and Australia.
The highest pockets of disease activity occur in Northern Australia and Northeast Thailand with increasing recognition of disease activity in coastal regions of
India. Melioidosis has been under recognized and is likely to be under-reported in China.
Beyond its public health significance, Bp and the closely-related Burkholderia mallei (“Bm”) are considered possible biological warfare agents by the DHHS
because of the potential for widespread dissemination through aerosol. Bp like its relative Bm, the cause of Glanders, was studied by the U.S. as a potential
biological warfare agent, but was never weaponized. It has been reported that the Soviet Union was also experimenting with Bp as a biological warfare agent.
Both Bp and Bm have been designated high priority threats by the DHHS in its PHEMCE Strategy released in 2012 and are classified as Category B Priority
Pathogens by NIAID.
The Drug Approval Process
Before marketing, each of our products must undergo an extensive regulatory approval process conducted by the FDA and applicable agencies in other
countries. Testing, manufacturing, commercialization, advertising, promotion, export and marketing, among other things, of the proposed products are subject
to extensive regulation by government authorities in the U.S. and other countries. All products must go through a series of tests, including advanced human
clinical trials, which the FDA is allowed to suspend as it deems necessary to protect the safety of patients.
Our products will require regulatory clearance by the FDA and by comparable agencies in other countries, prior to commercialization. The nature and extent
of regulation differs with respect to different products. In order to test, produce and market certain therapeutic products in the U.S., mandatory procedures and
safety standards, approval processes, manufacturing and marketing practices established by the FDA must be satisfied.
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An IND application is required before human clinical testing in the U.S. of a new drug compound or biological product can commence. The IND application
includes results of pre-clinical animal studies evaluating the safety and efficacy of the drug and a detailed description of the clinical investigations to be
undertaken.
Clinical trials are normally done in three phases, although the phases may overlap. Phase 1 trials are smaller trials concerned primarily with metabolism and
pharmacologic actions of the drug and with the safety of the product. Phase 2 trials are designed primarily to demonstrate effectiveness and safety in treating
the disease or condition for which the product is indicated. These trials typically explore various doses and regimens. Phase 3 trials are expanded clinical
trials intended to gather additional information on safety and effectiveness needed to clarify the product’s benefit-risk relationship and generate information
for proper labeling of the drug, among other things. The FDA receives reports on the progress of each phase of clinical testing and may require the
modification, suspension or termination of clinical trials if an unwarranted risk is presented to patients. When data is required from long-term use of a drug
following its approval and initial marketing, the FDA can require Phase 4, or post-marketing, studies to be conducted.
With certain exceptions, once successful clinical testing is completed, the sponsor can submit an NDA for approval of a drug. The process of completing
clinical trials for a new drug is likely to take a number of years and require the expenditure of substantial resources. Furthermore, the FDA or any foreign
health authority may not grant an approval on a timely basis, if at all. The FDA may deny the approval of an NDA, in its sole discretion, if it determines that
its regulatory criteria have not been satisfied or may require additional testing or information. Among the conditions for marketing approval, is the
requirement that the prospective manufacturer’s quality control and manufacturing procedures conform to good manufacturing practice regulations. In
complying with standards contained in these regulations, manufacturers must continue to expend time, money and effort in the area of production, quality
control and quality assurance to ensure full technical compliance. Manufacturing facilities, both foreign and domestic, also are subject to inspections by, or
under the authority of, the FDA and by other federal, state, local or foreign agencies.
Even after initial FDA or foreign health authority approval has been obtained, further studies, including Phase 4 post-marketing studies, may be required to
provide additional data on safety and will be required to gain approval for the marketing of a product as a treatment for clinical indications other than those
for which the product was initially tested. For certain drugs intended to treat serious, life-threatening conditions that show great promise in earlier testing, the
FDA can also grant conditional approval. However, drug developers are required to study the drug further and verify clinical benefit as part of the conditional
approval provision, and the FDA can revoke approval if later testing does not reproduce previous findings. Also, the FDA or foreign regulatory authority will
require post-marketing reporting to monitor the side effects of the drug. Results of post-marketing programs may limit or expand the further marketing of the
products. Further, if there are any modifications to the drug, including any change in indication, manufacturing process, labeling or manufacturing facility, an
application seeking approval of such changes will likely be required to be submitted to the FDA or foreign regulatory authority.
In the U.S., the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, the Federal Trade Commission Act, and other federal and state statutes
and regulations govern or influence the research, testing, manufacture, safety, labeling, storage, record keeping, approval, advertising and promotion of drug,
biological, medical device and food products. Noncompliance with applicable requirements can result in, among other things, fines, recall or seizure of
products, refusal to permit products to be imported into the U.S., refusal of the government to approve product approval applications or to allow the Company
to enter into government supply contracts, withdrawal of previously approved applications and criminal prosecution. The FDA may also assess civil penalties
for violations of the Federal Food, Drug, and Cosmetic Act involving medical devices.
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For biodefense development, such as with RiVax™ and OrbeShield™, the FDA has instituted policies that are expected to result in shorter pathways to
market. This potentially includes approval for commercial use utilizing the results of animal efficacy trials, rather than efficacy trials in humans. However, the
Company will still have to establish that the vaccine and countermeasures it is developing are safe in humans at doses that are correlated with the beneficial
effect in animals. Such clinical trials will also have to be completed in distinct populations that are subject to the countermeasures; for instance, the very
young and the very old, and in pregnant women, if the countermeasure is to be licensed for civilian use. Other agencies will have an influence over the
benefit-risk scenarios for deploying the countermeasures and in establishing the number of doses utilized in the Strategic National Stockpile. We may not be
able to sufficiently demonstrate the animal correlation to the satisfaction of the FDA, as these correlates are difficult to establish and are often unclear.
Invocation of the animal rule may raise issues of confidence in the model systems even if the models have been validated. For many of the biological threats,
the animal models are not available and the Company may have to develop the animal models, a time-consuming research effort. There are few historical
precedents, or recent precedents, for the development of new countermeasure for bioterrorism agents. Despite the Animal Rule, the FDA may require large
clinical trials to establish safety and immunogenicity before licensure and it may require safety and immunogenicity trials in additional populations. Approval
of biodefense products may be subject to post-marketing studies, and could be restricted in use in only certain populations.
Vaccines are approved under the Biologices Licensing Application (“BLA”) process that exists under the Public Health Service Act. In addition to the greater
technical challenges associated with developing biologics, the potential for generic competition is much less for a BLA product than a small molecule product
subject to an NDA under the Federal Food, Drug and Cosmetic Act. Under the Patient Protection and Affordable Care Act enacted in 2010, a “generic”
version of a biologic is known as a biosimilar and the barriers to entry – whether legal, scientific, or logistical – for a biosimilar version of a biologic
approved under a BLA are much greater. Indeed, almost three years after the enactment of the Patient Protection and Affordable Care Act, no biosimilar
application has even been filed with the FDA.
Marketing Strategies
On December 20, 2012, we re-acquired the North American and European commercial rights to oral BDP through an amendment of our collaboration and
supply agreement with Sigma-Tau Pharmaceuticals, Inc. (“Sigma-Tau”). The amendment requires us to make certain approval and commercialization
milestone payments to Sigma-Tau which could reach up to $6 million. In addition, the Company has agreed to pay Sigma-Tau: (a) a royalty amount equal to
3% of all net sales of oral BDP made directly by the Company, and any third-party partner and/or their respective affiliates in the U.S., Canada, Mexico and in
each country in the European Territory for the later to occur of: (i) a period of ten years from the first commercial sale of oral BDP in each country, or (ii) the
expiration of the Company’s patents and patent applications relating to oral BDP in such country; and (b) 15% of all up-front payments, milestone payments
and any other consideration (exclusive of equity payments) received by the Company and/or a potential partner from the Company’s and/or potential partner’s
licensees, distributors and agents for oral BDP in each relevant country in the territory, which amount will be paid on a product-by-product and a country-by-
country basis for the Payment Period.
We intend to seek partners to out-license all or portions of our programs. We are keen to advance our products through development and into the market in as
many indications as possible.
We have had and are having strategic discussions with a number of pharmaceutical companies regarding the partnering or sale of our biodefense vaccine
products. We may market our biodefense vaccine products directly to government agencies. We believe that both military and civilian health authorities of the
U.S. and other countries will increase their stockpiling of therapeutics and vaccines to treat and prevent diseases and conditions that could ensue following a
bioterrorism attack.
Competition
Our competitors are pharmaceutical and biotechnology companies, most of whom have considerably greater financial, technical, and marketing resources
than we currently have. Another source of competing technologies is universities and other research institutions, including the U.S. Army Medical Research
Institute of Infectious Diseases, and we face competition from other companies to acquire rights to those technologies.
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SGX94/942 Competition
SGX94 has a novel mechanism of action in combating bacterial infections and is complementary to the use of antibiotics. Thus there are no direct competitors
at this time. Bacterial infections are routinely treated with antibiotics and SGX94 treatment is anticipated to be utilized primarily where antibiotics are
insufficient (e.g., due to antibiotic resistance) or contra-indicated (e.g., in situations where the development of antibiotic resistance is a significant concern).
Many groups are working on the antibiotic resistance problem and research into the innate immune system is intensifying, making emerging competition
likely (e.g. Celtaxsys, Innaxon Therapeutics, Innate Pharma).
There is currently one drug approved for the treatment of oral mucositis in hematological cancer only (palifermin). There are currently no approved drugs for
treatment of oral mucositis in cancers with solid tumors (e.g., head and neck cancer). There are at least 5 drugs in clinical development for oral mucositis – 1
in phase 3 (under development by Daewoong Pharmaceutical Co., Ltd), 3 in Phase 2 (under development by ActoGenix N.V., BioAlliance Pharma S.A. and
Alder Biopharmaceuticals Inc.) and 1 in Phase 1 (under development by PolyMedix, Inc.). In addition, there are medical devices approved for the treatment
of oral mucositis including MuGard, GelClair, Episil and Caphosol. These devices attempt to create a protective barrier around the oral ulceration; however,
none of these devices are biologically based.
Oral BDP Competition
There are currently approximately 41 compounds either on the market or in clinical development for Crohn’s disease of which 14 are biologics, six
immunomodulators, three cell-based therapies, two steroids, two anti-inflammatory, two are 5-ASAs, one is antibiotic, and 11 others that are unclassified. In
the U.S., there are 24 compounds on market or in development including four compounds in Phase 3.
There are four compounds currently in development or on the market specifically for pediatric Crohn’s disease. Of these, Remicade (infliximab) is the only
compound currently with an indication in pediatric Crohn’s disease. There are two other marketed biologics, Cimzia (certolizumab) and Tysabri
(natalizumab), in Phase 2 for pediatric Crohn’s. Entocort (enteric-coated budesonide) is also currently in Phase 3 trials in pediatric Crohn’s disease. We
believe that SGX203’s unique release characteristics, intended to deliver topically active therapy to both the upper and lower gastrointestinal systems, should
make SGX203 an attractive alternative to existing therapies for inflammatory diseases of the gastrointestinal tract.
Competition is also intense in the gastroenterology and transplant areas. Companies are attempting to develop technologies to treat GVHD by suppressing the
immune system through various mechanisms. Some companies, including Osiris, Abgenix, and PDL BioPharma, Inc., are developing monoclonal antibodies
to treat GVHD. Novartis, Medimmune, and Ariad are developing both gene therapy products and small molecules to treat GVHD. All of these products are in
various stages of development. Kiadis Pharma is also developing products for the treatment of GVHD. In addition, there are investigator-sponsored clinical
trials exploring the use of approved drugs such as Enbrel®, which has been approved by the FDA for the treatment of rheumatoid arthritis, in the treatment of
GVHD.
Additionally, Chiesi Pharmaceuticals markets, in certain countries in Europe, a delayed-release oral formulation of beclomethasone dipropionate, the active
ingredient of orBec®, called CLIPPER™ for ulcerative colitis.
ThermoVaxTM Competition
Multiple groups and companies are working to address the unmet need of vaccine thermostability using a variety of technologies. In addition, both non-
governmental organizations such as the Bill and Melinda Gates Foundation and PATH, as well as academic organizations such as the Kansas University
Macromolecular and Vaccine Stabilization Center have programs designed to advance technologies which may address this need.
The majority of stabilization technologies currently being developed involve mixing vaccine antigen +/- adjuvant with various proprietary excipients or co-
factors that either serve to stabilize the vaccine or biological product in a liquid or dried (lyophilized) form. Examples of these approaches include the use of
various plant-derived sugars and macromolecules being developed by companies such as Stabilitech and synthetic polymers such as Pluronic F127 (Endo
Pharmaceuticals under Gates Foundation funding). VBI (Variation Biotechnologies, Inc.) intends to employ a lipid system (resembling liposomes) to stabilize
viral antigens, including virus-like particles (VLPs), and apply it to a conventional influenza vaccine among others
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Other approaches involve process variations to freeze-dry live virus vaccines. For example, PaxVax intends to employ a spray drying technology in concert
with enteric coating to achieve formulations for room temperature stability of live virus vaccines using adenovirus vectors. VBI has the capacity to utilize
their proprietary stabilization technology for a number of vaccines (as a co-development service, similar to the business model being developed by
Stabilitech), whereas PaxVax is applying the technology to their own proprietary vaccine development programs. Stabilitech uses combinations of excipients,
which include glassifying sugars similar to the ThermoVax™ technology, and variations in drying cycles during lyophilization, as does the ThermoVax™
technology. Another competitor, Endo Pharmaceuticals is working to identify Pluronic polymer-based formulations that stabilize measles and hepatitis B
vaccines from -10°C to 45°C.
Additionally, companies like Pharmathene, Panacea Biotech, and Compass Biotech are developing proprietary vaccines with the application of some form of
stabilization technology.
Vaccines/BioDefense Competition
We face competition in the area of biodefense product development from various public and private companies, universities and governmental agencies, such
as the U.S. Army, some of whom may have their own proprietary technologies which may directly compete with the our technologies.
The currently available anthrax vaccine known as BioThrax® (Anthrax Vaccine Adsorbed or AVA) marketed by Emergent BioSolutions, Inc. was developed
nearly 50 years ago from a culture filtrate derived from anthrax bacteria. Consequently, it contains a number of different proteins, some of which are believed
to potentially contribute to the adverse events that have been reported in the literature (up to 7-8% serious adverse events) and which prompted agencies like
the Institute of Medicine to recommend adoption of newer and safer anthrax vaccines. BioThrax® is FDA approved for the prevention of anthrax infection,
but requires five doses over a period of eighteen months to achieve protective immunity.
With respect to the development of PA-based vaccines and therapeutics such as VeloThrax™, there are a number of other companies in preclinical and
clinical development including Emergent, Pharmathene, Dynavax, Panacea Biotech, Paxvax, Elusys, and Pfenex.
Cangene, which was recently acquired by Emergent, is currently developing an anthrax immune globulin therapeutic based on plasma collected from military
personnel who have been vaccinated with BioThrax®. Human Genome Sciences is developing a monoclonal antibody to Bacillus anthracis, referred to as
ABthrax™, as a post-exposure therapeutic for anthrax infection. Elusys Therapeutics is developing a monoclonal antibody to Bacillus anthracis, known as
Anthim™, as a pre-exposure and post-exposure prophylaxis against anthrax infection, as well as an active treatment of the disease. Pharmathene and Medarex
are collaborating to develop a human antibody to anthrax, known as Valortim™. Bavarian Nordic is developing a multivalent combination vaccine against
both anthrax and smallpox.
The only potential competition to RiVax™ is being developed by the U.S. Army Medical Research Institute of Infectious Diseases, the DoD’s lead laboratory
for medical research to counter biological threats. Development of this product, known as RVEc™, is proceeding under a program led by Dr. Len Smith, who
has been working for many years to develop a ricin vaccine candidate. Similar to RiVax™, RVEc™ has been shown to be fully protective in mice exposed to
lethal doses of ricin toxin by the aerosol route. Further studies, in both rabbits and nonhuman primates, were conducted to evaluate RVEc™’s safety as well as
its immunogenicity, with positive results observed.
In the area of radiation-protective antidotes such as OrbeShield™, various companies, such as Cleveland Biolabs, Aeolus Pharmaceuticals, Boulder
Biotechnology, RxBio, Inc., Avaxia Biologics, Exponential Biotherapies Inc., Osiris Therapeutics, Inc., ImmuneRegen BioSciences, Inc., Neumedicines, Inc.,
Cellerant Therapeutics, Onconova Therapeutics, Inc., Araim Pharmaceuticals, Inc., EVA Pharmaceuticals, Terapio, Cangene Corporation, Humanetics
Corporation and the University of Arkansas Medical Sciences Center are developing biopharmaceutical products that may directly compete with
OrbeShield™, even though their approaches to such treatment are different.
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RxBio, Avaxia Biologics and the University of Arkansas have programs specifically for GI ARS. RxBio’s Rx100 is a stem cell protectant designed as a single
dose (oral or injection) which has shown promise in nonhuman primate studies. Avaxia’s is developing an orally delivered anti-TNF antibody as a treatment
agent for exposure to radiation following a nuclear accident, attack or explosion. Pasireotide, a drug in development by Novartis for Cushing’s disease, is
being developed at the University of Arkansas to protect the intestine by reducing pancreatic secretions that exacerbate intestinal inflammation.
Patents and Other Proprietary Rights
Our goal is to obtain, maintain and enforce patent protection for our products, formulations, processes, methods and other proprietary technologies, preserve
our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the U.S. and in other countries. Our policy is to actively
seek to obtain, where appropriate, the broadest intellectual property protection possible for our product candidates, proprietary information and proprietary
technology through a combination of contractual arrangements and patents, both in the U.S. and elsewhere in the world.
We also depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other
contractors, none of which is patentable. To help protect our proprietary knowledge and experience that is not patentable, and for inventions for which patents
may be difficult to enforce, we rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all employees,
consultants, advisors and other contractors to enter into confidentiality agreements, which prohibit the disclosure of confidential information and, where
applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.
We are the exclusive licensee of issued U.S. patents 8,263,582 and 6,096,731 that cover the use of oral BDP for treating inflammatory disorders of the
gastrointestinal tract and the prevention and treatment of GI GVHD, respectively. We also have European patent EP 1392321 claiming the use of topically
active corticosteroids in orally administered dosage forms that act concurrently to treat inflammation in the upper and lower gastrointestinal tract, as well as
European patent EP 2242477 claiming the use of orally ingested BDP for treatment of interstitial lung disease.
The subject of U.S. patent application number 12/633,631 filed December 8, 2009 and corresponding European patent application number 09836727.9 is the
use of topically active BDP in radiation and chemotherapeutics injury.
Recently, we have expanded our patent portfolio to include innate defense regulation through the acquisition of the novel drug technology, known as SGX94.
By binding to the pivotal regulatory protein p62, also known as sequestosome-1, SGX94 regulates the innate immune system to reduce inflammation,
eliminate infection and enhance healing. As part of the acquisition, we acquired all rights, including composition of matter patents for SGX94 as well as other
analogs and crystal structures of SGX94 with its protein target p62, including U.S. patent 8,124,721 and additional pending applications, both in the US and
abroad.
In addition to issued and pending patents, we also have “Orphan Drug” designations for SGX203 in the U.S. for pediatric Crohn’s disease, OrbeShield™ in
the U.S. for GI ARS, orBec® in the U.S. and Europe (E.U.) for GI GVHD, as well as for RiVax™ in the U.S. Our Orphan Drug designations provide for
seven years of post-approval marketing exclusivity in the U.S. and ten years exclusivity in Europe. We have pending patent applications for this indication
that, if granted, may extend our anticipated marketing exclusivity beyond the U.S. seven year or E.U. 10 year post-approval exclusivity provided by Orphan
Drug legislation.
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Oral BDP License Agreement
On November 24, 1998, the Company, known at the time as Enteron Pharmaceuticals, Inc. (“Enteron”) and George B. McDonald (“Dr. McDonald”) entered
into an exclusive license agreement for the rights to intellectual property, including know-how, relating to orBec®/oral BDP. The Company has an exclusive
license to commercially exploit the covered products worldwide, subject to Dr. McDonald’s right to make and use the technology for research purposes and
the U.S. Government’s right to use the technology for government purposes. Pursuant to the license agreement, as amended, the Company is required to (i)
reimburse Dr. McDonald for certain out-of-pocket expenses incurred by Dr. McDonald in connection with the patent applications and issued patents, (ii) pay
Dr. McDonald $300,000 upon approval by the FDA of the Company’s first NDA incorporating oral BDP; (iii) pay Dr. McDonald royalty payments equal to
3% of net sales of the covered products and (iv) pay Dr. McDonald $400,000 in cash upon an approval of orBec® by the European Medicines Agency.
Additionally, in the event that the Company sublicenses its rights under this license agreement, the Company will be required to pay Dr. McDonald 10% of
any sublicense fees and royalty payments paid by the sublicense to the Company.
The term of this agreement expires upon the expiration of the licensed patent applications or patents. After five years from the date of the agreement, Dr.
McDonald has the right to terminate this agreement in its entirety or to terminate exclusivity under the agreement if the Company or its sublicense has not
commercialized or are not actively attempting to commercialize a covered product.
Additionally, the agreement terminates: (i) automatically upon the Company becoming insolvent; (ii) upon 30 days’ notice, if the Company breaches any
obligation under the agreement without curing such breach during the notice period; and (iii) upon 90 days’ notice by the Company. After any termination,
the Company will have the right to sell its inventory for a period not to exceed three months following the date of termination, subject to the payment of the
amounts owed under the agreement.
SGX94 License Agreements
On December 18, 2012, we announced the acquisition of a novel drug technology, known as SGX94, representing a novel approach to modulation of the
innate immune system. SGX94 is an IDR that regulates the innate immune system to reduce inflammation, eliminate infection and enhance tissue healing by
binding to the pivotal regulatory protein p62, also known as sequestosome-1. As part of the acquisition, Soligenix acquired all rights, including composition
of matter patents, preclinical and Phase 1 clinical study datasets for SGX94. We also assumed a license agreement with UBC to advance the research and
development of the SGX94 technology. The license agreement with UBC provides us with exclusive worldwide rights to manufacture, distribute, market sell
and/or license or sublicense products derived or developed from this technology. Under the license agreement we are obligated to pay UBC (i) an annual
license maintenance fee of CAN $1,000, and (ii) milestone payments which could reach up to CAN $1.2 million.
ThermoVaxTM License Agreement
On September 1, 2009, we executed a worldwide exclusive option to license patent applications with the UC for ThermoVax™ which is the subject of U.S.
patent number 8,444,991 filed on May 21, 2013 entitled “Method of Preparing an Immunologically-Active Adjuvant-Bound Dried Vaccine Composition.”
This patent and its corresponding foreign filings are pending and licensed to Soligenix by the UC and they address the use of adjuvants in conjunction with
vaccines that are formulated to resist thermal inactivation. The license agreement also covers thermostable vaccines for biodefense as well as other potential
vaccine indications. In addition, Soligenix in conjunction with UC, filed domestic and foreign patent applications claiming priority back to a provisional
application filed on May 17, 2011 entitled: “Thermostable Vaccine Compositions and Methods of Preparing Same.”
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RiVax™ License Agreement
In January 2003, we executed a worldwide exclusive option to license patent applications with UTSW for the nasal, pulmonary and oral uses of a non-toxic
ricin vaccine. In June 2004, we entered into a license agreement with UTSW for the injectable rights to the ricin vaccine and, in October 2004, we negotiated
the remaining oral rights to the ricin vaccine. Our license obligates us to pay $50,000 in annual license fees. Through this license, we have rights to the issued
patent number 7,175,848 entitled “Ricin A chain mutants lacking enzymatic activity as vaccines to protect against aerosolized ricin.” This patent includes
methods of use and composition claims for RiVax™.
VeloThrax™ License Option Agreement
In December of 2011, we optioned a license to the VeloThrax™ patent from the President and Fellows of Harvard College. VeloThrax™ is the subject of U.S.
patent No. 7,037,503, issued on May 2, 2006 and titled, “Compounds and Methods for the Treatment and Prevention of Bacterial Infection”, along with any
reissue, renewal, reexamination, substitution or extension thereof.
Intrexon Exclusive Channel Collaboration Agreement
On April 27, 2013, we entered into an exclusive channel collaboration agreement with Intrexon (the “Channel Agreement”) that governs an arrangement in
which we intend to use Intrexon’s advanced human antibody discovery, isolation and production technologies for the development of human monoclonal
antibody therapies for a new biodefense application. The target of the channel collaboration will be melioidosis, a potentially lethal disease caused by the
Gram-negative bacteria Burkholderia pseudomallei, which is endemic in Southeast Asia and Northern Australia.
The Channel Agreement grants us an exclusive worldwide license to use specified patents and other intellectual property of Intrexon in connection with the
research, development, use, importing, manufacture, sale and offer for sale of products for the treatment of melioidosis through the use of exogenously
produced human recombinant monoclonal antibodies.
In exchange for the license, we paid Intrexon a one-time technology access fee of $1.5 million in common stock. Additionally, the Channel Agreement
requires us to make certain milestone payments to Intrexon which could reach up to $7 million and to pay Intrexon royalty payments based upon sales of
products based upon Intrexon’s technology.
Research and Development Expenditure
We spent approximately $5.1 million and $2.6 million in the years ended December 31, 2013 and 2012, respectively, on research and development. The
amounts we spent on research and development per product during the years ended December 31, 2013, and 2012 are set forth in “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
Employees
As of December 31, 2013, we had 17 full-time employees, 7 of whom are MDs/PhDs.
Available Investor Information
We file electronically with the Securities and Exchange Commission (“SEC”) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of 15(d) of the Securities Exchange Act of 1934, as
amended. We make available through our website, free of charge, copies of these reports as soon as reasonably practicable after we electronically file or
furnish them to the SEC. Our website is located at http://www.soligenix.com. You can also request copies of such documents by contacting the company at
(609) 538-8200 or sending an email to info@soligenix.com.
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Item 1A. Risk factors
You should carefully consider the risks, uncertainties and other factors described below before you decide whether to buy shares of our common stock. Any of
the factors could materially and adversely affect our business, financial condition, operating results and prospects and could negatively impact the market
price of our common stock. Below are the significant risks and uncertainties of which we are aware. Additional risks and uncertainties that we do not yet
know of, or that we currently think are immaterial, may also impair our business operations. You should also refer to the other information contained in this
Annual Report.
Risks Related to our Business
We have had significant losses and anticipate future losses; if additional funding cannot be obtained, we may reduce or discontinue our product
development and commercialization efforts.
We have experienced significant losses since inception and, at December 31, 2013, had an accumulated deficit of approximately $132.3 million. We expect to
incur additional operating losses in the future and expect our cumulative losses to increase. As of December 31, 2013, we had approximately $5.9 million in
cash available. Based on our projected budgetary needs and funding from existing grants over the next two years and prior to making any sales to Lincoln
Park Capital Fund, LLC relating to the equity facility under the Common Stock Purchase Agreement, we expect to be able to maintain the current level of our
operations for at least the next twelve months.
We have sufficient funds through our existing biodefense grant facilities from the NIAID, a division of the NIH, and BARDA to finance our biodefense
projects for the next several years. In September 2013, we entered into contracts with the NIH and BARDA for the development of OrbeShield™ that would
provide up to $32.7 million of funding in the aggregate if options to extend the contracts are exercised by BARDA and the NIH. In September, 2009, we
received a NIAID grant for approximately $9.4 million for the development of our biodefense programs and, in July 2012, we received an additional SBIR
grant from NIAID for $600,000 and in February 2014, we were awarded a one-year NIAID SBIR grant award of approximately $300,000 to further evaluate
SGX943 as a treatment for melioidosis. Our biodefense grants have an overhead component that allows us an agency-approved percentage over our incurred
costs. We estimate that the overhead component associated with our existing contracts and grants will fund some fixed costs for direct employees working on
the grants and other administrative costs.
Our products are positioned for or are currently in clinical trials, and we have not yet generated any significant revenues from sales or licensing of them. From
inception through December 2013, we have expended approximately $51.8 million developing our current product candidates for pre-clinical research and
development and clinical trials, and we currently expect to spend at least $10.8 million over the next twelve months in connection with the development of
our therapeutic and vaccine products, licenses, employment agreements, and consulting agreements of which approximately $6.8 million will be reimbursed
through our existing government contracts and grants. Unless and until we are able to generate sales or licensing revenue from one of our product candidates,
we will require additional funding to meet these commitments, sustain our research and development efforts, provide for future clinical trials, and continue
our operations. There can be no assurance we can raise such funds. If additional funds are raised through the issuance of equity securities, stockholders may
experience dilution of their ownership interests, and the newly issued securities may have rights superior to those of the common stock. If additional funds are
raised by the issuance of debt, we may be subject to limitations on our operations. If we cannot raise such additional funds, we may have to delay or stop
some or all of our drug development programs.
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If we are unable to develop our products candidates, our ability to generate revenues and viability as a company will be significantly impaired.
In order to generate revenues and profits, our organization must, along with corporate partners and collaborators, positively research, develop and
commercialize our technologies or product candidates. Our current product candidates are in various stages of early clinical and pre-clinical development and
will require significant further funding, research, development, pre-clinical and/or clinical testing, regulatory approval and commercialization, and are subject
to the risks of failure inherent in the development of products based on innovative or novel technologies. Specifically, each of the following is possible with
respect to any of our product candidates:
· we may not be able to maintain our current research and development schedules;
· we may be unable to secure procurement contracts on beneficial economic terms or at all from the U.S. government or others for our biodefense
products;
· we may encounter problems in clinical trials; or
·
the technology or product may be found to be ineffective or unsafe.
If any of the risks set forth above occur, or if we are unable to obtain the necessary regulatory approvals as discussed below, we may be unable to develop our
technologies and product candidates and our business will be seriously harmed. Furthermore, for reasons including those set forth below, we may be unable to
commercialize or receive royalties from the sale of any other technology we develop, even if it is shown to be effective, if:
it is not economical or the market for the product does not develop or diminishes;
the product is not eligible for third-party reimbursement from government or private insurers;
others hold proprietary rights that preclude us from commercializing the product;
·
· we are not able to enter into arrangements or collaborations to manufacture and/or market the product;
·
·
· we are not able to manufacture the product reliably;
·
·
others have brought to market similar or superior products; or
the product has undesirable or unintended side effects that prevent or limit its commercial use.
Our business is subject to extensive governmental regulation, which can be costly, time consuming and subjects us to unanticipated delays.
Our business is subject to very stringent U.S., federal, foreign, state and local government laws and regulations, including the Federal Food, Drug and
Cosmetic Act, the Environmental Protection Act, the Occupational Safety and Health Act, and state and local counterparts to these acts. These laws and
regulations may be amended, additional laws and regulations may be enacted, and the policies of the FDA and other regulatory agencies may change.
The regulatory process applicable to our products requires pre-clinical and clinical testing of any product to establish its safety and efficacy. This testing can
take many years and require the expenditure of substantial capital and other resources. We estimate that the clinical trials of our product candidates that we
have planned will take at least several years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that
cause us to abandon or repeat clinical trials. Even if our clinical trials are initiated and completed as planned, we cannot be certain that the results will
support our product candidate claims. Success in preclinical testing, Phase 1 and Phase 2 clinical trials does not ensure that later Phase 2 or Phase 3 clinical
trials will be successful. We cannot be sure that the results of later clinical trials would replicate the results of prior clinical trials and preclinical testing. In
addition, we, the FDA or other regulatory authorities may suspend clinical trials at any time if it appears that that we are exposing participants to unacceptable
health risks or the FDA or other regulatory authorities find deficiencies in our submissions or conduct of our trials. For example, our confirmatory Phase 3
clinical trial for orBec® (oral BDP) in the treatment of GI GVHD was stopped on September 15, 2011 at the recommendation of an independent Data Safety
Monitoring Board (“DSMB”) as it was highly unlikely to achieve the predetermined end point of efficacy based on the interim results. Although no safety
concerns were raised by the DSMB, preliminary findings indicated that there were no significant differences between the orBec® group and placebo group for
the primary endpoint or for the pre-specified secondary endpoints. Given the outcome of the Phase 3 study, we terminated the development of orBec® for the
treatment of acute GI GVHD. Although we hope to obtain FDA approval for oral BDP in similar indications, such as treatment of chronic GI GVHD,
treatment of pediatric Crohn's disease acute radiation enteritis, and GI ARS, there can be no assurances that the FDA will ever approve oral BDP for market
launch in any of these indications.
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We may not be able to obtain, or we may experience difficulties and delays in obtaining, necessary domestic and foreign governmental clearances and
approvals to market a product. Also, even if regulatory approval of a product is granted, that approval may entail limitations on the indicated uses for which
the product may be marketed.
Following any regulatory approval, a marketed product and its manufacturer are subject to continual regulatory review. Later discovery of problems with a
product or manufacturer may result in restrictions on such product or manufacturer. These restrictions may include withdrawal of the marketing approval for
the product. Furthermore, the advertising, promotion and export, among other things, of a product are subject to extensive regulation by governmental
authorities in the U.S. and other countries. If we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal
of regulatory approvals, product recalls, seizure of products, operating restrictions and/or criminal prosecution.
There may be unforeseen challenges in developing our biodefense products.
For development of biodefense vaccines and therapeutics, the FDA has instituted policies that are expected to result in accelerated approval. This includes
approval for commercial use using the results of animal efficacy trials, rather than efficacy trials in humans. However, we will still have to establish that the
vaccines we are developing are safe in humans at doses that are correlated with the beneficial effect in animals. Such clinical trials will also have to be
completed in distinct populations that are subject to the countermeasures; for instance, the very young and the very old, and in pregnant women, if the
countermeasure is to be licensed for civilian use. Other agencies will have an influence over the risk benefit scenarios for deploying the countermeasures and
in establishing the number of doses utilized in the Strategic National Stockpile. We may not be able to sufficiently demonstrate the animal correlation to the
satisfaction of the FDA, as these correlates are difficult to establish and are often unclear. Invocation of the animal rule may raise issues of confidence in the
model systems even if the models have been validated. For many of the biological threats, the animal models are not available and we may have to develop
the animal models, a time-consuming research effort. There are few historical precedents, or recent precedents, for the development of new countermeasure
for bioterrorism agents. Despite the Animal Rule, the FDA may require large clinical trials to establish safety and immunogenicity before licensure and it may
require safety and immunogenicity trials in additional populations. Approval of biodefense products may be subject to post-marketing studies, and could be
restricted in use in only certain populations. The government’s biodefense priorities can change, which could adversely affect the commercial opportunity for
the products we are developing.
We will be dependent on government funding, which is inherently uncertain, for the success of our biodefense operations.
We are subject to risks specifically associated with operating in the biodefense industry, which is a new and unproven business area. We do not anticipate that
a significant commercial market will develop for our biodefense products. Because we anticipate that the principal potential purchasers of these products, as
well as potential sources of research and development funds, will be the U.S. government and governmental agencies, the success of our biodefense division
will be dependent in large part upon government spending decisions. The funding of government programs is dependent on budgetary limitations,
congressional appropriations and administrative allotment of funds, all of which are inherently uncertain and may be affected by changes in U.S. government
policies resulting from various political and military developments. Our receipt of government funding is also dependent on our ability to adhere to the terms
and provisions of the original grant documents and other regulations. We can provide no assurance that we will receive or continue to receive funding for
grants we have been awarded. The loss of government funds could have a material adverse effect on our ability to progress our biodefense business.
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If the parties we depend on for supplying our drug substance raw materials and certain manufacturing-related services do not timely supply these
products and services, it may delay or impair our ability to develop, manufacture and market our products. We do not have or anticipate having internal
manufacturing capabilities.
We rely on suppliers for our drug substance raw materials and third parties for certain manufacturing-related services to produce material that meets
appropriate content, quality and stability standards, which material will be used in clinical trials of our products and, after approval, for commercial
distribution. To succeed, clinical trials require adequate supplies of drug substance and drug product, which may be difficult or uneconomical to procure or
manufacture. We and our suppliers and vendors may not be able to (i) produce our drug substance or drug product to appropriate standards for use in clinical
studies, (ii) perform under any definitive manufacturing, supply or service agreements with us or (iii) remain in business for a sufficient time to be able to
develop, produce, secure regulatory approval of and market our product candidates. If we do not maintain important manufacturing and service relationships,
we may fail to find a replacement supplier or required vendor or develop our own manufacturing capabilities which could delay or impair our ability to obtain
regulatory approval for our products and substantially increase our costs or deplete profit margins, if any. If we do find replacement manufacturers and
vendors, we may not be able to enter into agreements with them on terms and conditions favorable to us and, there could be a substantial delay before a new
facility could be qualified and registered with the FDA and foreign regulatory authorities.
The manufacturing of our products is a highly exacting process, and if we or one of our materials suppliers encounter problems manufacturing our
products, our business could suffer.
The FDA and foreign regulators require manufacturers to register manufacturing facilities. The FDA and foreign regulators also inspect these facilities to
confirm compliance with cGMP or similar requirements that the FDA or foreign regulators establish. We, or our materials suppliers, may face manufacturing
or quality control problems causing product production and shipment delays or a situation where we or the supplier may not be able to maintain compliance
with the FDA’s cGMP requirements, or those of foreign regulators, necessary to continue manufacturing our drug substance. Any failure to comply with
cGMP requirements or other FDA or foreign regulatory requirements could adversely affect our clinical research activities and our ability to market and
develop our products.
We do not have sales and marketing experience and our lack of experience may restrict our success in commercializing some of our product candidates.
We do not have experience in marketing or selling pharmaceutical products whether in the U.S. or internationally. To obtain the expertise necessary to
successfully market and sell any of our products, the development of our own commercial infrastructure and/or collaborative commercial arrangements and
partnerships will be required. Our ability to make that investment and also execute our current operating plan is dependent on numerous factors, including, the
performance of third party collaborators with whom we may contract.
Our products, if approved, may not be commercially viable due to change in health care practice and third party reimbursement limitations.
Recent initiatives to reduce the federal deficit and to change health care delivery are increasing cost-containment efforts. We anticipate that Congress, state
legislatures and the private sector will continue to review and assess alternative benefits, controls on health care spending through limitations on the growth of
private health insurance premiums and Medicare and Medicaid spending, price controls on pharmaceuticals, and other fundamental changes to the health care
delivery system. Any changes of this type could negatively impact the commercial viability of our products, if approved. Our ability to successfully
commercialize our product candidates, if they are approved, will depend in part on the extent to which appropriate reimbursement codes and authorized cost
reimbursement levels of these products and related treatment are obtained from governmental authorities, private health insurers and other organizations, such
as health maintenance organizations. In the absence of national Medicare coverage determination, local contractors that administer the Medicare program may
make their own coverage decisions. Any of our product candidates, if approved and when commercially available, may not be included within the then
current Medicare coverage determination or the coverage determination of state Medicaid programs, private insurance companies or other health care
providers. In addition, third-party payers are increasingly challenging the necessity and prices charged for medical products, treatments and services.
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The technology on which our channel partnering arrangement with Intrexon is based on is early stage technology in the field of Melioidosis.
Our exclusive channel collaboration arrangement with Intrexon contemplates the use of Intrexon’s modular genetic engineering platform for the development
of active pharmaceutical ingredients and drug products targeting the biodefense countermeasure, melioidosis. Such technology has a limited history of use in
the design and development of human therapeutic product candidates and may therefore involve unanticipated risks or delays. Although we plan to leverage
Intrexon’s technology and scientific expertise to develop products for the treatment of melioidosis, an infectious disease caused by bacteria found in soil and
water, we may not be successful in developing and commercializing these products for a variety of reasons. The risk factors set forth herein that apply to our
other product candidates, which are in various stages of development, also apply to product candidates that we seek to develop under our exclusive
partnership with Intrexon.
We will incur additional expenses in connection with our exclusive channel collaboration arrangement with Intrexon.
Pursuant to our exclusive channel collaboration with Intrexon, we are responsible for future research and development expenses of product candidates
developed under such collaboration. Although it is our intent to pursue government funding to support this development, we expect the level of our overall
research and development expenses going forward will increase. Because our collaboration with Intrexon is new, we have yet to assume development
responsibility and costs associated with such program. In addition, because development activities are determined pursuant to a joint steering committee
comprised of representatives from Intrexon and our company, future development costs associated with this program may be difficult to anticipate and exceed
our expectations. Our actual cash requirements may vary materially from our current expectations for a number of other factors that may include, but are not
limited to, unanticipated technical challenges, changes in the focus and direction of our development activities or adjustments necessitated by changes in the
competitive landscape in which we operate. If we are unable to continue to financially support such collaboration due to lack of sufficient government
funding or our own working capital constraints, we may be forced to delay our activities. If we are unable to obtain funding, we may be forced to seek
licensing partners or discontinue development.
Federal and/or state health care reform initiatives could negatively affect our business.
The availability of reimbursement by governmental and other third-party payers affects the market for any pharmaceutical product. These third-party payers
continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative and regulatory proposals to change the healthcare
system and further proposals are likely. Medicare's policies may decrease the market for our products. Significant uncertainty exists with respect to the
reimbursement status of newly approved healthcare products.
In addition, third-party payers are increasingly challenging the price and cost-effectiveness of medical products and services. Once approved, we might not be
able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable or limited in scope,
particularly for product candidates addressing small patient populations. On July 15, 2008, the Medicare Improvements for Patients and Providers Act of
2008 became law with a number of Medicare and Medicaid reforms to establish a bundled Medicare payment rate that includes services and drug/labs that
were separately billed at that time. Bundling initiatives that have been implemented in other healthcare settings have occasionally resulted in lower utilization
of services that had not previously been a part of the bundled payment.
In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing
drug pricing vary widely from country to country. We expect that there will continue to be a number of U.S. federal and state proposals to implement
governmental pricing controls. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could
have a material adverse effect on our business, financial condition and profitability.
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We may not be able to retain rights licensed to us by third parties to commercialize key products or to develop the third party relationships we need to
develop, manufacture and market our products.
We currently rely on license agreements from the University of Texas Southwestern Medical Center, the University of British Columbia, Harvard University,
the University of Colorado, and George B. McDonald, MD for the rights to commercialize key product candidates, and we entered into an exclusive channel
collaboration agreement with Intrexon pursuant to which we acquired a license to Intrexon’s advanced human antibody discovery, isolation, and production
technologies. We may not be able to retain the rights granted under these agreements or negotiate additional agreements on reasonable terms, if at all.
Furthermore, we currently have very limited product development capabilities and no manufacturing, marketing or sales capabilities. For us to research,
develop and test our product candidates, we need to contract or partner with outside researchers, in most cases with or through those parties that did the
original research and from whom we have licensed the technologies. If products are successfully developed and approved for commercialization, then we will
need to enter into additional collaboration and other agreements with third parties to manufacture and market our products. We may not be able to induce the
third parties to enter into these agreements, and, even if we are able to do so, the terms of these agreements may not be favorable to us. Our inability to enter
into these agreements could delay or preclude the development, manufacture and/or marketing of some of our product candidates or could significantly
increase the costs of doing so. In the future, we may grant to our development partners rights to license and commercialize pharmaceutical and related
products developed under the agreements with them, and these rights may limit our flexibility in considering alternatives for the commercialization of these
products. Furthermore, third-party manufacturers or suppliers may not be able to meet our needs with respect to timing, quantity and quality for the products.
Additionally, if we do not enter into relationships with additional third parties for the marketing of our products, if and when they are approved and ready for
commercialization, we would have to build our own sales force or enter into commercialization agreements with other companies. Development of an
effective sales force in any part of the world would require significant financial resources, time and expertise. We may not be able to obtain the financing
necessary to establish a sales force in a timely or cost effective manner, if at all, and any sales force we are able to establish may not be capable of generating
demand for our product candidates, if they are approved.
We may suffer product and other liability claims; we maintain only limited product liability insurance, which may not be sufficient.
The clinical testing, manufacture and sale of our products involves an inherent risk that human subjects in clinical testing or consumers of our products may
suffer serious bodily injury or death due to side effects, allergic reactions or other unintended negative reactions to our products. As a result, product and other
liability claims may be brought against us. We currently have clinical trial and product liability insurance with limits of liability of $10 million, which may
not be sufficient to cover our potential liabilities. Because liability insurance is expensive and difficult to obtain, we may not be able to maintain existing
insurance or obtain additional liability insurance on acceptable terms or with adequate coverage against potential liabilities. Furthermore, if any claims are
brought against us, even if we are fully covered by insurance, we may suffer harm such as adverse publicity.
We may not be able to compete with our larger and better financed competitors in the biotechnology industry.
The biotechnology industry is intensely competitive, subject to rapid change and sensitive to new product introductions or enhancements. Most of our
existing competitors have greater financial resources, larger technical staffs, and larger research budgets than we have, as well as greater experience in
developing products and conducting clinical trials. Our competition is particularly intense in the gastroenterology and transplant areas and is also intense in
the therapeutic area of inflammatory bowel diseases. We face intense competition in the biodefense area from various public and private companies and
universities as well as governmental agencies, such as the U.S. Army, which may have their own proprietary technologies that may directly compete with our
technologies. In addition, there may be other companies that are currently developing competitive technologies and products or that may in the future develop
technologies and products that are comparable or superior to our technologies and products. We may not be able to compete with our existing and future
competitors, which could lead to the failure of our business.
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We may be unable to commercialize our products if we are unable to protect our proprietary rights, and we may be liable for significant costs and
damages if we face a claim of intellectual property infringement by a third party.
Our near and long term prospects depend in part on our ability to obtain and maintain patents, protect trade secrets and operate without infringing upon the
proprietary rights of others. In the absence of patent and trade secret protection, competitors may adversely affect our business by independently developing
and marketing substantially equivalent or superior products and technology, possibly at lower prices. We could also incur substantial costs in litigation and
suffer diversion of attention of technical and management personnel if we are required to defend ourselves in intellectual property infringement suits brought
by third parties, with or without merit, or if we are required to initiate litigation against others to protect or assert our intellectual property rights. Moreover,
any such litigation may not be resolved in our favor.
Although we and our licensors have filed various patent applications covering the uses of our product candidates, patents may not be issued from the patent
applications already filed or from applications that we might file in the future. Moreover, the patent position of companies in the pharmaceutical industry
generally involves complex legal and factual questions, and recently has been the subject of much litigation. Any patents we own or license, now or in the
future, may be challenged, invalidated or circumvented. To date, no consistent policy has been developed in the U.S. Patent and Trademark Office regarding
the breadth of claims allowed in biotechnology patents.
In addition, because patent applications in the U.S. are maintained in secrecy until patents issue, and because publication of discoveries in the scientific or
patent literature often lags behind actual discoveries, we cannot be certain that we and our licensors are the first creators of inventions covered by any
licensed patent applications or patents or that we or they are the first to file. The US Patent and Trademark Office may commence interference proceedings
involving patents or patent applications, in which the question of first inventorship is contested. Accordingly, the patents owned or licensed to us may not be
valid or may not afford us protection against competitors with similar technology, and the patent applications licensed to us may not result in the issuance of
patents.
It is also possible that our owned and licensed technologies may infringe on patents or other rights owned by others, and licenses to which may not be
available to us. We may be unable to obtain a license under such patent on terms favorable to us, if at all. We may have to alter our products or processes, pay
licensing fees or cease activities altogether because of patent rights of third parties.
In addition to the products for which we have patents or have filed patent applications, we rely upon unpatented proprietary technology and may not be able
to meaningfully protect our rights with regard to that unpatented proprietary technology. Furthermore, to the extent that consultants, key employees or other
third parties apply technological information developed by them or by others to any of our proposed projects, disputes may arise as to the proprietary rights to
this information, which may not be resolved in our favor.
Our business could be harmed if we fail to retain our current personnel or if they are unable to effectively run our business.
We currently have seventeen employees and we depend upon these employees (in particular Dr. Christopher Schaber, our President and Chief Executive
Officer) to manage the day-to-day activities of our business. Because we have such limited personnel, the loss of any of them or our inability to attract and
retain other qualified employees in a timely manner would likely have a negative impact on our operations. We may be unable to effectively manage and
operate our business, and our business may suffer, if we lose the services of our employees.
Instability and volatility in the financial markets could have a negative impact on our business, financial condition, results of operations, and cash flows.
During recent months, there has been substantial volatility in financial markets due at least in part to the uncertainty with regard to the global economic
environment and the partial government shutdown due to delays in increasing the U.S. debt limit in October 2013. In addition, there has been substantial
uncertainty in the capital markets and access to additional financing is uncertain. Moreover, customer spending habits may be adversely affected by current
and future economic conditions. These conditions could have an adverse effect on our industry and business, including our financial condition, results of
operations, and cash flows.
27
To the extent that we do not generate sufficient cash from operations, we may need to issue stock or incur indebtedness to finance our plans for growth.
Recent turmoil in the credit markets and the potential impact on the liquidity of major financial institutions may have an adverse effect on our ability to fund
our business strategy through borrowings, under either existing or newly created instruments in the public or private markets on terms we believe to be
reasonable, if at all.
The financial and operational projections that we may make from time to time are subject to inherent risks.
The projections that our management may provide from time to time (including, but not limited to, those relating to potential market size, patient population,
clinical trial enrollment or data dates, and other financial or operational matters) reflect numerous assumptions made by management, including assumptions
with respect to our specific business as well as general business, economic, market and financial conditions and other matters, all of which are difficult to
predict and many of which are beyond our control. Accordingly, there is a risk that the assumptions made in preparing the projections, or the projections
themselves, will prove inaccurate. There will be differences between actual and projected results, and actual results may be materially different from those
contained in the projections. The inclusion of the projections in (or incorporated by reference in) this Annual Report should not be regarded as an indication
that we or our management or representatives considered or consider the projections to be a reliable prediction of future events, and the projections should not
be relied upon as such.
Risks Related to our Common Stock
Our common stock price is highly volatile.
The market price of our common stock, like that of many other research and development public pharmaceutical and biotechnology companies, has been
highly volatile and may continue to be so in the future due to a wide variety of factors, including:
·
·
·
·
·
·
·
·
·
·
·
announcements by us or others of results of pre-clinical testing and clinical trials;
announcements of technological innovations, more important bio-threats or new commercial therapeutic products by us, our collaborative partners or
our present or potential competitors;
our quarterly operating results and performance;
developments or disputes concerning patents or other proprietary rights;
acquisitions;
litigation and government proceedings;
adverse legislation;
changes in government regulations;
our available working capital;
economic and other external factors; and
general market conditions.
Since January 1, 2013, the closing stock price has fluctuated between a high of $2.39 per share to a low of $0.60 per share. As of March 21, 2014, our
common stock closed at $2.41 per share. The fluctuation in the price of our common stock has sometimes been unrelated or disproportionate to our operating
performance. In addition, potential dilutive effects of future sales of shares of common stock by the Company, as well as potential sale of common stock by
the holders of warrants and options, could have an adverse effect on the market price of our shares.
Our common stock trades on the Over-the-Counter Bulletin Board.
Our common stock trades on the OTCQB securities market under the symbol “SNGX.” The OTCQB is a decentralized market regulated by the Financial
Industry Regulatory Authority in which securities are traded via an electronic quotation system that serves more than 3,000 companies. On the OTCQB,
securities are traded by a network of brokers or dealers who carry inventories of securities to facilitate the buy and sell orders of investors, rather than
providing the order matchmaking service seen in specialist exchanges. OTCQB securities include national, regional, and foreign equity issues. Companies
traded on the OTCQB must be current in their reports filed with the SEC and other regulatory authorities.
28
If our common stock is not listed on a national exchange or market, the trading market for our common stock may become illiquid. Our common stock is
subject to the penny stock rules of the SEC, which generally are applicable to equity securities with a price of less than $5.00 per share, other than securities
registered on certain national securities exchanges provided that current price and volume information with respect to transactions in such securities is
provided by the exchange or system. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with bid and ask quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. In
addition, the penny stock rules require that, before a transaction in a penny stock that is not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.
As a result of these requirements, our common stock could be priced at a lower price and our stockholders could find it more difficult to sell their shares.
Shareholders may suffer substantial dilution related to issued stock warrants and options.
As of December 31, 2013, we had a number of agreements or obligations that may result in dilution to investors. These include:
· warrants to purchase a total of approximately 8,156,526 shares of our common stock at a current weighted average exercise price of approximately
$2.17; and
options to purchase approximately 2,051,511 shares of our common stock at a current weighted average exercise price of approximately $2.63.
·
We also have an incentive compensation plan for our management, employees and consultants. We have granted, and expect to grant in the future, options to
purchase shares of our common stock to our directors, employees and consultants. To the extent that warrants or options are exercised, our stockholders will
experience dilution and our stock price may decrease.
29
Additionally, the sale, or even the possibility of the sale, of the shares of common stock underlying these warrants and options could have an adverse effect on
the market price for our securities or on our ability to obtain future financing.
Anti-takeover provisions in our stockholder rights plan and under Delaware law could make a third party acquisition of the Company difficult.
Our stockholder rights plan contains provisions that could make it more difficult for a third party to acquire us, even if doing so might be deemed beneficial
by our stockholders. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. We are also
subject to certain provisions of Delaware law that could delay, deter or prevent a change in control of the Company. The rights issued pursuant to our
stockholder rights plan will become exercisable the tenth day after a person or group announces acquisition of 15% or more of our common stock or
commences, or announces an intention to make, a tender or exchange offer the consummation of which would result in ownership by the person or group of
15% or more of our common stock. If the rights become exercisable, the holders of the rights (other than the person acquiring 15% or more of our common
stock) will be entitled to acquire, in exchange for the rights’ exercise price, shares of our common stock or shares of any company in which we are merged,
with a value equal to twice the rights’ exercise price.
Our shares of common stock are thinly traded, so stockholders may be unable to sell at or near ask prices or at all if they need to sell shares to raise
money or otherwise desire to liquidate their shares.
Our common stock has from time to time been “thinly-traded,” meaning that the number of persons interested in purchasing our common stock at or near ask
prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small
company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence
sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company
such as ours or purchase or recommend the purchase of our shares until such time as we become more seasoned and viable. As a consequence, there may be
periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady
volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give stockholders any assurance
that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We currently lease approximately 5,250 square feet of office space at 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540. This office space
currently serves as our corporate headquarters. On February 7, 2012, we entered into a lease agreement through March 31, 2015 for our existing office space.
The rent for the first 12 months is approximately $8,000 per month, or approximately $18.25 per square foot on an annualized basis. This rent increases to
approximately $8,310 per month, or approximately $19.00 per square foot on an annualized basis, for the remaining 24 months. Our office space is sufficient
to satisfy our current needs.
Item 3. Legal Proceedings
From time to time, we are a party to claims and legal proceedings arising in the ordinary course of business. Our management evaluates our exposure to these
claims and proceedings individually and in the aggregate and allocates additional monies for potential losses on such litigation if it is possible to estimate the
amount of loss and if the amount of the loss is probable.
30
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is quoted on the OTCQB under the symbol "SNGX." The following table sets forth, as adjusted for the reverse stock split of 1-for-20
effective February 1, 2012, for the periods indicated, the high and low sales prices per share of our common stock as reported by the OTCQB.
Period
Year Ended December 31, 2012:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year Ended December 31, 2013:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Price Range
High
Low
$
$
$
$
$
$
$
$
1.01 $
0.53 $
0.55 $
0.77 $
2.13 $
2.05 $
2.48 $
2.36 $
0.44
0.23
0.26
0.38
0.55
0.86
0.98
1.65
As of March 21, 2014, the last reported price of our common stock quoted on the OTCQB was $2.41 per share. The OTCQB prices set forth above represent
inter-dealer quotations, without adjustment for retail mark-up, mark-down or commission, and may not represent the prices of actual transactions. As of
March 21, 2014, we have approximately 649 stockholders of record of our common stock.
Dividends
We have never declared nor paid any cash dividends, and currently intend to retain all our cash and any earnings for use in our business and, therefore, do not
anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon our consolidated financial condition, results of operations, capital requirements and such other factors as the Board of
Directors deems relevant.
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements that reflect our current expectations about our future results, performance, prospects
and opportunities. These forward-looking statements are subject to significant risks, uncertainties, and other factors, including those identified in “Risk
Factors” above, which may cause actual results to differ materially from those expressed in, or implied by, any forward-looking statements. The forward-
looking statements within this Form 10-K may be identified by words such as “believes,” “anticipates,” “expects,” “intends,” “may,” “would,” “will” and
other similar expressions. However, these words are not the exclusive means of identifying these statements. In addition, any statements that refer to
expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Except as expressly required by the
federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances occurring
subsequent to the filing of this Form 10-K with the SEC or for any other reason. You should carefully review and consider the various disclosures we make in
this report and our other reports filed with the SEC that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our
business.
31
Our Business Overview
Soligenix, Inc. was incorporated in Delaware in 1987. We are clinical stage biopharmaceutical company that is focused on developing products to treat the
life-threatening side effects of cancer treatments and serious gastrointestinal diseases where there remains an unmet medical need, as well as developing
several biodefense vaccines and therapeutics. We maintain two active business segments: BioTherapeutics and Vaccines/BioDefense.
Our BioTherapeutics business segment
the
prevention/treatment of gastrointestinal (“GI”) disorders characterized by severe inflammation, including pediatric Crohn’s disease (SGX203), acute radiation
enteritis (SGX201) and chronic Graft-versus-Host disease (orBec®), as well as developing our novel innate defense regulator (“IDR”) technology (SGX942)
for the treatment of oral mucositis.
is developing proprietary formulations of oral beclomethasone 17,21-dipropionate (“BDP”) for
Our Vaccines/BioDefense business segment includes RiVax™, our ricin toxin vaccine, and VeloThrax™, our anthrax vaccine, and OrbeShield™, our
gastrointestinal acute radiation syndrome (“GI ARS”) therapeutic and SGX943, and our melioidosis therapeutic. The advanced development of these
programs will be supported by our existing and on-going government contracts and grants, which include our National Institutes of Health (“NIH”) grant for
our heat stabilization technology ThermoVax™ and contracts from the Biomedical Advanced Research and Development Authority (“BARDA”) and the
National Institute of Allergy and Infectious Diseases (“NIAID”) for GI ARS. Additionally, we entered into a global and exclusive channel collaboration with
Intrexon Corporation (“Intrexon”) through which we intend to develop and commercialize a human monoclonal antibody therapy (SGX101) to treat
melioidosis.
An outline of our business strategy follows:
·
·
·
Conduct a Phase 2 clinical trial of SGX942 for the treatment of oral mucositis in head and neck cancer;
Initiate a Phase 2/3 clinical trial of oral BDP, known as SGX203 for the treatment of pediatric Crohn’s disease;
Evaluate the effectiveness of oral BDP in other therapeutic indications involving inflammatory conditions of the gastrointestinal (“GI”) tract such as
prevention of acute radiation enteritis, prevention of acute radiation syndrome, and treatment of chronic graft-versus-host disease (“GVHD”);
· Develop RiVax™ and VeloThrax™ in combination with our proprietary vaccine heat stabilization technology, known as ThermoVax™, to develop
new heat stable vaccines in biodefense and infectious diseases with the potential to collaborate and/or partner with other companies in these areas;
· Advance the preclinical and manufacturing development of OrbeShield™ as a biodefense medical countermeasure for the treatment of GI ARS;
·
Continue to apply for and secure additional government funding for each of our BioTherapeutics and Vaccines/BioDefense programs through grants,
contracts and/or procurements;
· Acquire or in-license new clinical-stage compounds for development; and
·
Explore other business development and merger/acquisition strategies, an example of which is our collaboration with Intrexon.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosure of contingent assets and liabilities. We evaluate these
estimates and judgments on an on-going basis.
32
Intangible Assets
One of the most significant estimates or judgments that we make is whether to capitalize or expense patent and license costs. We make this judgment based on
whether the technology has alternative future uses, as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 730, Research and Development. Based on this consideration, we capitalized payments made to legal firms that are engaged in filing and protecting
rights to intellectual property rights for our current products in both the domestic and international markets. We believe that patent rights are one of our most
valuable assets. Patents and patent applications are key components of intellectual property, especially in the early stage of product development, as their
purchase and maintenance gives us access to key product development rights from our academic and industrial partners. These rights can also be sold or sub-
licensed as part of our strategy to partner our products at each stage of development as the intangible assets have alternative future use. The legal costs
incurred for these patents consist of work associated with filing new patents designed to protect, preserve, maintain and perhaps extending the lives of the
patents. We capitalize such costs and amortize intangibles over their expected useful life - generally a period of 11 to 16 years.
These intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable
or if the underlying program is no longer being pursued. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset
or group of assets, a loss is recognized for the difference between the fair value and carrying value of the related asset or group of assets.
Fair Value of Financial Instruments
FASB ASC 820 — Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all
financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on
pertinent information available to us on December 31, 2013. Accordingly, the estimates presented in these financial statements are not necessarily indicative
of the amounts that could be realized on disposition of the financial instruments.
FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.
Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable
inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
·
·
Level 1 — Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed
equities.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2
includes financial instruments that are valued using models or other valuation methodologies. These models consider various assumptions, including
volatility factors, current market prices and contractual prices for the underlying financial instruments. Substantially all of these assumptions are
observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the
marketplace.
·
Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using
pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.
33
The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses
approximate their fair value based on the short-term maturity of these instruments. The Company recognizes all derivative financial instruments as assets or
liabilities in the financial statements and measures them at fair value with changes in fair value reflected as current period income or loss unless the
derivatives qualify as hedges. As a result, certain warrants issued in connection with the offering were accounted for as derivatives.
Research and Development Costs
Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and
development includes costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and
materials, salaries stock based compensation, employee benefits, equipment depreciation and allocation of various corporate costs. Purchased in-process
research and development expense represents the value assigned or paid for acquired research and development for which there is no alternative future use as
of the date of acquisition.
Revenue Recognition
Principally our revenues are generated from government contracts and grants. Recording of revenue is applied in accordance with FASB ASC 605, Revenue
Recognition, ASC 605-25 and/or Accounting Standard Update, ASU, 2009-13, Revenue Recognition – Multiple Element Arrangements. The revenue from
government contracts and grants is based upon subcontractor costs and internal costs incurred that are specifically covered by the grants, plus a facilities and
administrative rate that provides funding for overhead expenses. These revenues are recognized when expenses have been incurred by subcontractors or when
we incur internal expenses that are related to the grant.
Accounting for Warrants
We considered FASB ASC 815, Evaluating Whether an Instrument is Considered Indexed to an Entity’s Own Stock, which provides guidance for determining
whether an equity-linked financial instrument (or embedded feature) issued by an entity is indexed to the entity’s stock, and therefore, qualifying for the first
part of the scope exception in paragraph 815-10-15. We evaluated the warrants’ provisions and determined that warrants issued in connection with our June
2013 registered public offering contain provisions that protect holders from a decline in the issue price of our common stock (or “down-round” provisions)
and contain net settlement provisions. Consequently, these warrants are recognized as liabilities at their fair value on the date of grant and remeasured at fair
value on each reporting date. All other warrants issued were indexed to our own stock and therefore are accounted for as an equity instrument for 2013 and
2012.
Stock-Based Compensation
Stock options are issued with an exercise price equal to the market price on the date of issuance. Stock options issued to directors upon re-election vest
quarterly for a period of one year (new director issuances are fully vested upon issuance). Stock options issued to employees vest 25% immediately as of the
grant date, then 25% each subsequent year for a period of three years. Stock options vest over each three month period from the date of issuance to the end of
the three year period. These options have a ten year life for as long as the individuals remain employees or directors. In general, when an employee or director
terminates their position the options will expire within three months, unless otherwise extended by the Board.
From time to time, the Company issues restricted shares of common stock to vendors and consultants as compensation for services performed. Stock-based
compensation expense recognized during the period is based on the fair value of the portion of share-based payment awards that is ultimately expected to vest
during the period. Typically these instruments vest upon issuance and therefore the entire stock compensation expense is recognized upon issuance to the
vendors and/or consultants
34
We determine stock-based compensation expense for options, warrants and shares of common stock granted to non-employees in accordance with FASB ASC
718, Stock Compensation, and FASB ASC 505-50, Equity-Based Payments to Non-Employees, and represents the fair value of the consideration received, or
the fair value of the equity instruments issued, whichever may be more reliably measured. For options that vest over future periods, the fair value of options
granted to non-employees is amortized as the options vest. Stock-based compensation expense recognized during the period is based on the value of the
portion of share-based payment awards that is ultimately expected to vest during the period.
Material Changes in Results of Operations
Year Ended December 31, 2013 Compared to 2012
For the year ended December 31, 2013, we had a net loss of $10,058,996 as compared to a net loss of $4,163,008 for the prior year, representing an increased
loss of $5,895,988 or 142%. Included in the net loss for December 31, 2013 is a non-cash charge of $3,654,770 which represents the change in the fair value
of the warrant liability related to warrants issued in connection with our registered public offering. During the second quarter of 2013, we entered into an
exclusive channel collaboration agreement with Intrexon Corporation under which we issued common stock with a value of $1,500,000 which was
recognized as a research and development expense. Additionally, we initiated a Phase 2 clinical trial with SGX942 and continued efforts for initiating a
clinical trial with SGX203.
For the year ended December 31, 2013, revenues and associated costs relate to government grants and contracts awarded in support of the development of
ThermoVax™, GI-ARS, orBec® and OrbeShield™ in GI ARS. For the year ended December 31, 2013, we had revenues of $3,224,152 as compared to
$3,144,620 for the prior year, representing an increase of $79,532. The slight increase in revenues was a result of initiating the OrbeShield™ contracts during
the fourth quarter of 2013 offset by minor delays in ThermoVax™ grant.
We incurred costs related to grant and contract revenue in the year ended December 31, 2013 and 2012 of $2,544,285 and $2,593,075, respectively,
representing a decrease of $48,790, or 2%. These costs primarily relate to payments made to subcontractors in connection with research performed pursuant
to grants. The fluctuations are due to the development activity performed on the contracts and grants discussed above.
Our gross profit for the year ended December 31, 2013 was $679,867 as compared to $551,545 for the prior year, representing an increase of $128,322 or
23%. This increase is due primarily to the OrbeShield™ contracts which provide a management fee and higher negotiated reimbursement for fixed overhead.
Research and development spending increased by $2,461,938 or 94%, to $5,071,179 for the year ended December 31, 2013 as compared to $2,609,241 for the
prior year. This increase is related to the exclusive channel collaboration agreement with Intrexon Corporation under which we issued common stock with a
value of $1,500,000, the initiation of the Phase 2 clinical trial with SGX942 and continued efforts for initiating a clinical trial with SGX203.
General and administrative expenses increased by $132,258, or 5%, to $2,765,230 for the year ended December 31, 2013, as compared to $2,632,972 for the
prior year. This increase is primarily related to non-cash expenses for stock based compensation from stock options issued to existing and newly hired
employees.
Other income (expense) for the year ended December 31, 2013 was $(3,652,810) as compared to $6,202 for the prior year. The increased expense is primarily
related to a non-cash charge of $3,654,770 which represents the change in the fair value of the warrant liability related to warrants issued in connection with
our registered public offering.
During the year ended December 31, 2013, in accordance with the State of New Jersey’s Technology Business Tax Certificate Program, which allowed
certain high technology and biotechnology companies to sell unused net operating loss (“NOL”) carryforwards to other New Jersey-based corporate taxpayers
based in New Jersey, we sold New Jersey NOL carryforwards, resulting in the recognition of $750,356 of income tax benefit, net of transaction costs. There
can be no assurance as to the continuation or magnitude of this program in future years.
35
Business Segments
We maintain two active business segments for the year ended December 31, 2013 and December 31, 2012: Vaccines/BioDefense and BioTherapeutics.
Revenues for the Vaccines/BioDefense business segment for the year ended December 31, 2013 were $3,003,822 as compared to $2,919,677 for the year
ended December 31, 2012, representing an increase of $84,145 or 3%. The increases in revenues were a result of initiating the OrbeShield™ contracts during
the fourth quarter of 2013. Revenues for the BioTherapeutics business segment for the year ended December 31, 2013 were $220,330 as compared to
$224,943 for the year ended December 31, 2012, representing a slight decrease of $4,613. This decrease is primarily related to the expiration in August 2013
of a 3-year orphan grant received in 2010.
Loss from operations for the Vaccines/BioDefense business segment for the year ended December 31, 2013 was $1,666,130 as compared to $33,636 for the
year ended December 31, 2012, representing an increased loss of $1,632,494. This increase is primarily attributable to the exclusive channel collaboration
agreement with Intrexon Corporation under which we issued common stock with a value of $1,500,000. Loss from operations for the BioTherapeutics
business segment for the year ended December 31, 2013 was $3,069,998 as compared to $2,203,721 for the year ended December 31, 2012, representing an
increase of $866,277. This increased loss is due primarily due to the initiation of the Phase 2 clinical trial with SGX942, continued efforts for initiating a
clinical trial with SGX203 and increased headcount to support these programs.
Amortization and depreciation expense for the Vaccines/BioDefense business segment for the year ended December 31, 2013 was $37,981 as compared to
$38,589 for the year ended December 31, 2012. Amortization and depreciation expense for the BioTherapeutics business segment for the year ended
December 31, 2013 was $190,033 as compared to $190,003 for the year ended December 31, 2012.
Financial Condition and Liquidity
Cash and Working Capital
As of December 31, 2013, we had cash and cash equivalents of $5,856,242 as compared to $3,356,380 as of December 31, 2012, representing an increase of
$2,499,862 or 74%. As of December 31, 2013, we had working capital of $5,855,046, which excludes a non-cash warrant liability of $8,281,247, as
compared to working capital of $2,682,383 as of December 31, 2012, representing an increase of $3,172,663 or 118%. The increase in working capital was
primarily the result of net proceeds of $6,738,588 received from our registered public offering, Lincoln Park equity line and proceeds of $235,975 from the
exercise of stock options and warrants offset by the cash used in operating and investing activities over the period. For the year ended December 31, 2013, the
Company’s cash used in operating activities was $4,456,973 as compared to $2,635,533 for the same period in 2012, representing an increase of $1,821,440.
This increase was attributable to the initiation of clinical trials with SGX942 for the treatment of oral mucositis, preparation for clinical trials with SGX203
for the treatment of pediatric Crohn’s disease, increased headcount to support these programs and the delay in receiving the proceeds related to the State of
New Jersey Technology Business Tax Certificate Transfer Program for 2013, which were received prior to year end in the prior year.
Based on the Company’s current rate of cash outflows, cash on hand, proceeds from government grant and contract programs, proceeds available from the
Lincoln Park equity line and proceeds from the State of New Jersey Technology Business Tax Certificate Transfer Program, management believes that its
current cash will be sufficient to meet the anticipated cash needs for working capital and capital expenditures for at least the next twelve months.
36
Our plans with respect to our liquidity management include, but are not limited to, the following:
· We have up to $33.2 million in active contract and grant funding still available to support our associated research programs in 2014 and beyond. We
plan to submit additional grant applications for further support of these programs with various funding agencies.
· We have continued to use equity instruments to provide a portion of the compensation due to vendors and collaboration partners and expect to
continue to do so for the foreseeable future.
· We will pursue NOL sales in the State of New Jersey, pursuant to its Technology Business Tax Certificate Transfer Program. Based on the receipt of
$750,356 in proceeds from the sale of NJ NOL in 2013, we expect to participate in this program during 2014 and beyond as the program is available;
and
· We may seek additional capital in the private and/or public equity markets to continue our operations, respond to competitive pressures, develop new
products and services, and to support new strategic partnerships. We are currently evaluating additional equity financing opportunities and may
execute them when appropriate. However, there can be no assurances that we can consummate such a transaction, or consummate a transaction at
favorable pricing.
Expenditures
Under our budget and based upon our existing product development agreements and license agreements pursuant to letters of intent and option agreements,
we expect our total research and development expenditures for the next 12 months to be approximately $10.8 million before any grant reimbursements, of
which $3.9 million relates to the BioTherapeutics business and $6.9 million relates to the Vaccines/BioDefense business. We anticipate contract and grant
reimbursements in the next 12 months of approximately $6.8 million to offset research and development expenses in the Vaccines/BioDefense business
segment.
The table below details our costs for research and development by program and amounts reimbursed for the years ended December 31, 2013 and 2012:
Research & Development Expenses
orBec®
RiVax™ & ThermoVax™ Vaccines
SGX94
SGX943/101
Other
Total
Reimbursed under Government Contracts and Grants
orBec®
RiVax™ & ThermoVax™ Vaccines
Total
Grand Total
Contractual Obligations
2013
2012
1,467,077
1,113,430
659,809
1,500,000
330,863
5,071,179
672,194
1,872,091
2,544,285
7,615,464
$
$
$
$
$
903,820
1,307,589
269,328
-
128,504
2,609,241
209,152
2,383,923
2,593,075
5,202,316
$
$
$
$
$
The Company has commitments of approximately $400,000 at December 31, 2013 for agreements with consultants and universities. Additionally, the
Company has collaboration and license agreements, which upon clinical or commercialization success, may require the payment of milestones of up to $7.9
million and/or royalties up to 6% of net sales of covered products, if and when achieved. However, there can be no assurance that clinical or
commercialization success will occur.
On February 7, 2012, we entered into a lease agreement through March 31, 2015 for our existing office space. The rent for the first 12 months is
approximately $8,000 per month, or approximately $18.25 per square foot. This rent increases to approximately $8,310 per month, or approximately $19.00
per square foot on, for the remaining 24 months. Rent expense is recognized on a straight-line basis.
In February 2007, our Board of Directors authorized the issuance of the following number of shares to each of Dr. Schaber and Dr. Brey immediately prior to
completion of a transaction, or series or a combination of related transactions negotiated by our Board of Directors whereby, directly or indirectly, a majority
of our capital stock or a majority of our assets are transferred from us and/or our stockholders to a third party: 50,000 common shares to Dr. Schaber; and
10,000 common shares to Dr. Brey. The amended agreement with Dr. Schaber includes our obligation to issue shares if such event occurs.
37
Employees with employment contracts have severance agreements that will provide separation benefits from the Company if they are involuntarily separated
from employment.
As a result of the above agreements, we have future contractual obligations over the next five years as follows:
Year
2014
2015
2016
2017
2018
Total
Research and
Development
Property and
Other Leases
Total
$
$
100,000
75,000
75,000
75,000
75,000
400,000
$
$
101,200
25,000
-
-
-
126,200
$
$
201,200
100,000
75,000
75,000
75,000
526,200
Item 8. Financial Statements and Supplementary Data
The information required by this Item 8 is contained on pages F-1 through F-20 of this Annual Report on Form 10-K and is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are the Company’s controls and other procedures that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our
management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and
operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in
evaluating the possible controls and procedures.
Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the
effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our management, including our
principal executive officer and principal financial officer, has concluded that, as of the end of the period covered by this report, the
Company’s disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Annual Report on Internal Control over Financial Reporting
Company management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial
officers and effected by the Company’s Board of Directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:
·
·
·
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control-Integrated Framework.
Based on our assessment, management has concluded that, as of December 31, 2013, the Company’s internal control over financial
reporting is effective.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of
such internal control that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
None.
38
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The table below contains information regarding the current members of the Board of Directors and executive officers. The ages of individuals are provided as
of March 21, 2014:
Name
Christopher J. Schaber, PhD
Keith L. Brownlie, CPA
Marco M. Brughera, DVM
Gregg A. Lapointe, CPA
Robert J. Rubin, MD
Jerome Zeldis, MD, PhD
Robert N. Brey, PhD
Richard Straube, MD
Joseph M. Warusz, CPA
Age
47
61
58
55
68
63
63
62
57
Position
Chairman of the Board, Chief Executive Officer and President
Director
Director
Director
Director
Director
Chief Scientific Officer and Senior Vice President
Chief Medical Officer and Senior Vice President
Vice President of Finance, Acting Chief Financial Officer and Corporate Secretary
Christopher J. Schaber, PhD has over 25 years of experience in the pharmaceutical and biotechnology industry. Dr. Schaber has been our President
and Chief Executive Officer and a director since August 2006. He was appointed Chairman of the Board on October 8, 2009. He also serves on the board of
directors of the Biotechnology Council of New Jersey (“BioNJ”) since January 2009, and is a member of the corporate councils of both the National
Organization for Rare Diseases (“NORD”) and the American Society for Blood and Marrow Transplantation (“ASBMT”) since October 2009 and July 2009,
respectively. Prior to joining Soligenix, Dr. Schaber served from 1998 to 2006 as Executive Vice President and Chief Operating Officer of Discovery
Laboratories, Inc., where he was responsible for overall pipeline development and key areas of commercial operations, including regulatory affairs, quality
control and assurance, manufacturing and distribution, pre-clinical and clinical research, and medical affairs, as well as coordination of commercial launch
preparation activities. During his tenure at Discovery Laboratories, Inc., Dr. Schaber played a significant role in raising over $150 million through both public
offerings and private placements. From 1996 to 1998, Dr. Schaber was a co-founder of Acute Therapeutics, Inc., and served as its Vice President of
Regulatory Compliance and Drug Development. From 1994 to 1996, Dr. Schaber was employed by Ohmeda PPD, Inc., as Worldwide Director of Regulatory
Affairs and Operations. From 1989 to 1994, Dr. Schaber held a variety of regulatory, development and operations positions with The Liposome Company,
Inc., and Elkins-Sinn Inc., a division of Wyeth-Ayerst Laboratories. Dr. Schaber received his BA degree from Western Maryland College, his MS degree in
Pharmaceutics from Temple University School of Pharmacy and his PhD degree in Pharmaceutical Sciences from the Union Graduate School. Dr. Schaber
was selected to serve as a member of our Board of Directors because of his extensive experience in drug development and pharmaceutical operations,
including his experience as an executive senior officer with our Company and Discovery Laboratories, Inc., and as a member of the board of directors of
BioNJ; because of his proven ability to raise funds and provide access to capital; and because of his advanced degrees in science and business.
Keith L. Brownlie, CPA has been a director since June 2011. Mr. Brownlie currently serves on the Board of Directors of RXi Pharmaceuticals Corporation, a
publicly traded biotechnology company involved in the research and development of RNAi products for the diagnosis, prevention and treatment of human
diseases, a position he has held since June 2012. In July 2013, Mr. Brownlie was appointed to the Board of Cancer Genetics, Inc., a publicly traded, early
stage diagnostics company. Mr. Brownlie served as a member of the Board of Directors of Epicept Corporation, a publicly traded, specialty pharmaceutical
company focused on the clinical development and commercialization of pharmaceutical products for the treatment of cancer and pain, from April 2011 to
August 2013 when Epicept Corporation merged with Immune Pharmaceuticals, Inc. Mr. Brownlie worked with the accounting firm of Ernst & Young LLP
where he served as audit partner for numerous public companies and was the Life Sciences Industry Leader for the New York metro area where he was
involved with over 100 public and private financings and M&A transactions. Mr. Brownlie received a BS in Accounting from Lehigh University and is a
Certified Public Accountant in the state of New Jersey. Mr. Brownlie co-founded the New Jersey Entrepreneur of the Year Program and was Vice President
and Trustee of the New Jersey Society of CPAs. In addition, he served as accounting advisor to the board of the Biotechnology Council of New Jersey. Mr.
Brownlie was selected to serve as a member of our Board of Directors because of his vast experience as an audit partner for numerous public companies and
as a director of a publicly traded specialty pharmaceutical and biotechnology companies.
39
Marco Brughera, DVM joined the Board of Directors in October 2013. He is the Global Head of the Rare Disease Franchise for Sigma-Tau SpA. Since
January 2011, Dr. Brughera has held several positions for the Sigma-Tau Group, including Corporate Research and Development Managing Director of
Sigma-Tau SpA, President of Sigma-Tau Research and Board Member of Sigma-Tau Pharmaceuticals. From 2004 to 2010, Dr. Brughera served as the Vice
President of Preclinical Development at Nerviano Medical Sciences (NMS), a pharmaceutical oncology-focused integrated discovery and development
company. He also served as the Managing Director at Accelera, an independent contract research organization with the NMS Group. From 1999 to 2004, Dr.
Brughera held several senior level positions in the areas of discovery and development toxicology with Pharmacia and Pfizer. Prior to 1999, he held various
positions at Pharmacia & Upjohn and Farmitalia Carlo Erba SpA, an Italian pharmaceutical company. He currently serves on the Board of Gentium SpA. Dr.
Brughera earned his degree in veterinary medicine from the University of Milan and is a European Registered Toxicologist.
Dr. Brughera was selected to serve as a member of our Board of Directors because of his experience in the areas of drug discovery and development and his
experience as an executive officer and a director in the pharmaceutical industry.
Gregg Lapointe, CPA has been a director since March 2009. Mr. Lapointe is currently CEO of Cerium Pharmaceuticals, Inc. and serves on the Board of
Directors of SciClone Pharmaceuticals, Inc. and Cambrooke Therapeutics, Inc., and the Board of Trustees of the Keck Graduate Institute of Applied Life
Sciences. He has previously served on the Board of Directors of athe Pharmaceuticals Research and Manufacturers of America (PhRMA) and Questor
Pharmaceuticals, Inc., and has been a member of the Corporate Council of NORD for several years. He previously served in varying roles for Sigma-Tau
Pharmaceuticals, Inc, a private biopharmaceutical company, from September 2001 through February 2012, including Chief Operating Officer from November
2003 to April 2008 and Chief Executive Officer from April 2008 to February 2012. From May, 1996 to August, 2001, he served as Vice President of
Operations and Vice President, Controller of AstenJohnson, Inc. (formerly JWI Inc.). Prior to that, Mr. Lapointe spent several years in the Canadian medical
products industry in both distribution and manufacturing. Mr. Lapointe began his career at Price Waterhouse. Mr. Lapointe received his B.A. degree in
Commerce from Concordia University in Montreal, Canada, a graduate diploma in Accountancy from McGill University and his M.B.A. degree from Duke
University. He is a C.P.A. in the state of Illinois and a Chartered Accountant in Ontario, Canada. Mr. Lapointe was selected to serve as a member of our Board
of Directors because of his significant experience in the areas of global strategic planning and implementation, business development, corporate finance, and
acquisitions, and his experience as an executive officer and board member in the pharmaceutical and medical products industries.
Robert J. Rubin, MD has been a director since October 2009. Dr. Rubin was a clinical professor of medicine at Georgetown University from1995 until 2012
when he was appointed a Distinguished Professor of Medicine. From 1987 to 2001, he was president of the Lewin Group (purchased by Quintiles
Transnational Corp. in 1996), an international health policy and management consulting firm. From 1994 to 1996, Dr. Rubin served as Medical Director of
ValueRx, a pharmaceutical benefits company. From 1992 to 1996, Dr. Rubin served as President of Lewin-VHI, a health care consulting company. From 1987
to 1992, he served as President of Lewin-ICF, a health care consulting company. From 1984 to 1987, Dr. Rubin served as a principal of ICF, Inc., a health care
consulting company. From 1981 to 1984, Dr. Rubin served as the Assistant Secretary for Planning and Evaluation at the Department of Health and Human
Services and as the Assistant Surgeon General in the United States Public Health Service. Dr. Rubin has served on the Board of CardioNet, Inc. since 2007.
He is a board certified nephrologist and internist. Dr. Rubin received an undergraduate degree in Political Science from Williams College and his medical
degree from Cornell University Medical College. Dr. Rubin was selected to serve as a member of our Board of Directors because of his vast experience in the
health care industry, including his experience as a nephrologist, internist, clinical professor of medicine and Assistant Surgeon General, and his business
experience in the pharmaceutical industry.
40
Jerome Zeldis, MD, PhD has been a director since June 2011. Dr. Zeldis is currently Chief Executive Officer of Celgene Global Health and Chief Medical
Officer of Celgene Corporation, a publicly traded, fully integrated biopharmaceutical company, where he has been employed since 1997. From September
1994 to February 1997, Dr. Zeldis worked at Sandoz Research Institute and the Janssen Research Institute in both clinical research and medical development.
He has been a board member of several biotechnology companies and is currently on the boards of the NJ Chapter of the Arthritis Foundation, the
Castleman’s Disease Organization and PTC Therapeutics. Additionally, he has served as Assistant Professor of Medicine at the Harvard Medical School
(from July 1987 to September 1988), Associate Professor of Medicine at University of California, Davis from (September 1988 to September 1994), Clinical
Associate Professor of Medicine at Cornell Medical School (January 1995 to December 2003) and Professor of Clinical Medicine at the Robert Wood
Johnson Medical School (July 1998 to June 2010). Dr. Zeldis received a BA and an MS from Brown University, and an M Phil, an MD, and a PhD in
Molecular Biophysics and Biochemistry from Yale University. Dr. Zeldis trained in Internal Medicine at the UCLA Center for the Health Sciences and in
Gastroenterology at the Massachusetts General Hospital and Harvard Medical School. He has published 116 peer reviewed articles and 24 reviews, book
chapters, and editorials. Dr. Zeldis was selected to serve as a member of our Board of Directors because of his experience as an executive officer of a publicly
traded biopharmaceutical company and in clinical research and medical development, and his experience in the health care industry, including his experience
as an internist, gastroenterologist and professor of medicine.
Robert N. Brey, PhD has been with the Company since January 1996 and is currently our Chief Scientific Officer and Senior Vice President. He has also
held the positions of Vice President Vaccine Development and Vice President of Research and Development. He also has held Scientific, Management and
Project Management positions in the Lederle-Praxis division of American Cyanamid, now a division of Wyeth, in which he participated in the successful
development of a vaccine for Haemophilius nfluenza meningitis, and a vaccine for pneumonia. While at Lederle-Praxis, Dr. Brey was Manager of Molecular
Biology Research for vaccines and Project Manager for development of oral vaccines from 1985 through 1993. From 1993 through 1994, Dr. Brey served as
Director of Research and Development of Vaxcel, in which he was responsible for developing adjuvant technology and formulations for improved vaccines.
From 1994 through 1996, Dr. Brey established an independent consulting group, Vaccine Design Group, to identify and develop novel vaccine technologies
and platforms. Before entering into drug and vaccine delivery, he held senior scientific positions at Genex Corporation from 1982 through 1986. Dr. Brey
received a B.S. degree in Biology from Trinity College in Hartford, Connecticut, his PhD degree in Microbiology from the University of Virginia and
performed postdoctoral studies at MIT with Nobel Laureate Salvador Luria.
Richard Straube, MD has been with our company since January 2014 and is currently our Senior Vice President and Chief Medical Officer. Dr. Straube is a
board-certified pediatrician with 35 years’ experience in both academia and industry, including clinical research experience in host-response
modulation. Prior to joining the Company, Dr. Straube served from 1988 to 1993 in various capacities, including most recently as Senior Director, Infectious
Diseases and Immunology, Clinical Research, for Centocor, Inc., a privately-held biopharmaceutical company focused on developing monoclonal antibody-
based diagnostics. While at Centocor, Inc., Dr. Straube was responsible for the initial anti-cytokine and anti-endotoxin programs targeted at ameliorating
inappropriate host responses to infectious and immunologic challenges. Programs that he managed at Centocor, Inc. include assessments of
immunomodulation using monoclonal removal of inciting molecular triggers, removal of internal immune-messengers, augmentation of normal host defenses,
and maintenance of normal sub-cellular function in the face of injury. From 1993 to 1995, Dr. Straube was Director of Medical Affairs at T-cell Sciences,
Inc., a privately-held biotechnology company. From 1995 to 1997, he was Director of Clinical Investigations of the Pharmaceutical Products Division of
Ohmeda Corp., a privately-held biopharmaceutical company. He served from 1998 to 2007 as Executive Vice President of Research and Development and
Chief Scientific Officer at INO Therapeutics LLC, a privately-held biotherapeutics company, where he was responsible for the clinical trials and subsequent
approval of inhaled nitric oxide for the treatment of persistent pulmonary hypertension of the newborn. From 2007 to 2009, Dr. Straube was the Chief
Medical Officer at Critical Biologics Corporation, a privately-held biotechnology company. From 2009 until joining the Company, he was Chief Medical
Officer of Stealth Peptides Incorporated, a privately-held, clinical stage, biopharmaceutical company. Dr. Straube received his medical degree and residency
training at the University of Chicago, completed a joint adult and pediatrician infectious diseases fellowship at the University of California, San Diego
(“UCSD”), and as a Milbank Scholar completed training in clinical trial design at the London School of Hygiene and Tropical Medicine. While on the faculty
at the UCSD Medical Center, his research focused on interventional studies for serious viral infections.
41
Joseph M. Warusz, CPA has been with the company since June 2011 and is currently our Vice President and Acting Chief Financial Officer. He has more
than 30 years of financial management experience in public and private life science companies as well as large pharma. Prior to joining Soligenix on June 1,
2011 as Vice President of Administration and Controller, he held senior financial positions with Amicus Therapeutics, Inc., Orchid Cellmark, Inc., and
NexMed, Inc., as well as consulting assignments at Ardea BioSciences, Inc., and NovaDel Pharma, Inc., all R&D-focused companies in the biotechnology
and specialty pharmaceuticals arenas. Prior to 1998, Mr. Warusz also held management positions in financial analysis, accounting, reporting and auditing at
Bristol-Myers Squibb and Peat Marwick Main & Company. He received his BS in accounting and MBA in finance at Drexel University and is a Certified
Public Accountant.
Board Leadership Structure
Our Board of Directors believes that Dr. Schaber’s service as both the Chairman of our Board of Directors and our Chief Executive Officer is in the best
interest of our Company and our stockholders. Dr. Schaber possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing our
Company and our business and, therefore, is best positioned to develop agendas that ensure that the Board of Directors’ time and attention are focused on the
most important matters. His combined role enables decisive leadership, ensures clear accountability, and enhances our ability to communicate our message
and strategy clearly and consistently to our stockholders, employees, and collaborative partners.
Messrs. Brownlie, Lapointe Dr. Rubin, and Dr. Zeldis are independent and the Board of Directors believes that the independent directors provide effective
oversight of management. Moreover, in addition to feedback provided during the course of meeting of the Board of Directors, the independent directors hold
executive sessions. Following an executive session of independent directors, the independent directors’ report back to the full Board of Directors regarding
any specific feedback or issues, provides the Chairman with input regarding agenda items for Board of Directors and Committee meetings, and coordinates
with the Chairman regarding information to be provided to the independent directors in performing their duties. The Board of Directors believes that this
approach appropriately and effectively complements the combined Chairman/Chief Executive Officer structure.
Although the Company believes that the combination of the Chairman and Chief Executive Officer roles is appropriate under the current circumstances, our
corporate governance guidelines do not establish this approach as a policy, and the Board of Directors may determine that it is more appropriate to separate
the roles in the future.
Section 16(a) Beneficial Ownership Reporting Compliance
We are required to identify each person who was an officer, director or beneficial owner of more than 10% of our registered equity securities during our most
recent fiscal year and who failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934.
To our knowledge, based solely on review of these filings and written representations from the certain reporting persons, we believe that during the year
ended December 31, 2013, our officers, directors and significant stockholders have timely filed the appropriate form under Section 16(a) of the Exchange
Act.
Code of Ethics
We have adopted a code of ethics that applies to all of our executive officers and senior financial officers (including our chief executive officer, chief financial
officer, chief accounting officer and any person performing similar functions). A copy of our code of ethics is publicly available on our website at
http://www.soligenix.com under the “Investors” section. If we make any substantive amendments to our code of ethics or grant any waiver, including any
implicit waiver, from a provision of the code to our chief executive officer, chief financial officer or chief accounting officer, we will disclose the nature of
such amendment or waiver in a Current Report on Form 8-K.
42
Diversity Considerations in Identifying Director Nominees
We do not have a formal diversity policy or set of guidelines in selecting and appointing directors that comprise our Board of Directors. However, when
making recommendations to our Board of Directors regarding the size and composition of our Board of Directors, our Nominating Committee does consider
each individual director’s qualifications, skills, business experience and capacity to serve as a director and the diversity of these attributes for the Board of
Directors as a whole.
Audit Committee Financial Expert
We have an audit committee comprised of Messrs. Brownlie (Chair) and Lapointe and Dr. Rubin. The board of directors has determined that Mr. Brownlie
qualifies as an “audit committee financial expert,” as defined under the rules of the Securities and Exchange Commission. The board of directors has also
determined that the members of the Audit Committee are qualified to serve on the committee and have the experience and knowledge to perform the duties
required of the committee.
The board of directors has determined that Messrs. Brownlie and Lapointe and Dr. Rubin are “independent directors” within the meaning of The NASDAQ
Stock Market LLC (“Nasdaq”) corporate governance rules and the regulations under the Securities Exchange Act of 1934 (“Exchange Act”) applicable to
audit committees.
Item 11. Executive Compensation
Summary Compensation
The following table contains information concerning the compensation paid during each of the two years ended December 31, 2013 to our Chief Executive
Officer and each of the four other most highly compensated executive officers during 2013 (collectively, the “Named Executive Officers”).
Summary Compensation
Name
Position
Christopher J. Schaber1 CEO & President
Robert N. Brey2
CSO & Senior
Joseph M. Warusz3
VP
VP & Acting
CFO
Year
2013
2012
2013
2012
2013
2012
Salary
Bonus
Option
Awards
All Other
Compensation
Total
$
$
$
$
$
$
402,000 $
390,000
239,000 $
- $
199,000 $
88,400 $
214,000 $
210,000
186,000 $
180,000
30,000 $
- $
90,000 $
- $
19,900 $
23,800 $
89,550 $
37,400 $
33,896
38,006
20,978
23,375
32,641
38,006
$
$
$
$
$
$
873,896
516,406
284,878
257,175
398,191
255,406
1
2
3
Dr. Schaber deferred a portion of the payment of his 2013 bonus of $130,000 until January 15, 2014. Option award figures include the value of
common stock option awards at grant date as calculated under FASB ASC 718. Other compensation represents health insurance costs paid by the
Company. In 2012, no bonus was awarded.
Dr. Brey deferred payment a portion of his 2013 bonus of $10,000 until January 15, 2014. Option award figures include the value of common stock
option awards at grant date as calculated under FASB ASC 718. Other compensation represents health insurance costs paid by the Company. In
2012, no bonus was awarded.
Mr. Warusz deferred a portion of the payment of his 2013 bonus of $50,000 until January 15, 2014. Option award figures include the value of
common stock option awards at grant date as calculated under FASB ASC 718. Other compensation represents health insurance costs paid by the
Company. In 2012, no bonus was awarded.
43
Employment and Severance Agreements
In August 2006, we entered into a three-year employment agreement with Christopher J. Schaber, PhD. Pursuant to this employment agreement we agreed to
pay Dr. Schaber a base salary of $300,000 per year and a minimum annual bonus of $100,000. This employment agreement was renewed in December 27,
2007 for an additional term of three years. We agreed to issue him options to purchase 125,000 shares of our common stock, with one third immediately
vesting and the remainder vesting over three years. Upon termination without “Just Cause” as defined by this agreement, we would pay Dr. Schaber nine
months of severance, as well as any accrued bonuses, accrued vacation, and we would provide health insurance and life insurance benefits for Dr. Schaber
and his dependants. No unvested options shall vest beyond the termination date. Dr. Schaber’s monetary compensation (base salary of $300,000 and bonus of
$100,000) remained unchanged from 2006 with the 2007 renewal. Upon a change in control of the Company due to merger or acquisition, all of Dr. Schaber’s
options shall become fully vested, and be exercisable for a period of five years after such change in control (unless they would have expired sooner pursuant
to their terms). In the event of his death during the term of the agreement, all of his unvested options shall immediately vest and remain exercisable for the
remainder of their term and become the property of Dr. Schaber’s immediate family. This agreement automatically renewed in December 2013 for an
additional term of three years.
On June 22, 2011, the Compensation Committee approved the increase in salary for Dr. Schaber to $390,000. Additionally, his fixed minimum annual bonus
payable was eliminated and revised to an annual targeted bonus of his annual base salary. Dr. Schaber’s targeted bonus is 40%. On December 6, 2012, the
Compensation Committee approved the increase in salary for Dr. Schaber to $402,000. On December 4, 2013, the Compensation Committee approved the
increase in salary for Dr. Schaber to $412,000.
We do not currently have an employment agreement with Dr. Robert N. Brey, our Chief Scientific Officer and Senior Vice President. Dr. Brey’s compensation
is determined by our Board of Directors and our Compensation Committee. On December 6, 2012, the Compensation Committee approved the increase in
salary for Dr. Brey to $214,000.
In May 2011, we entered into a one-year employment agreement with Mr. Joseph M. Warusz, our Acting Chief Financial Officer, Vice President Finance and
Chief Accounting Officer. Pursuant to the agreement, we have agreed to pay Mr. Warusz $175,000 per year and a targeted annual bonus of 20% of base
salary. We also agreed to issue him options to purchase 40,000 shares of our common stock with one-third immediately vesting and the remainder vesting
over three years. Upon termination without “Just Cause”, as defined in this agreement, we would pay Mr. Warusz three months of severance, accrued bonuses
and vacation, and health insurance benefits. No unvested options vest beyond the termination date. On December 1, 2011, the Compensation Committee
increased the salary of Mr. Warusz to $180,000. On December 6, 2012, the Compensation Committee approved the increase in salary for Mr. Warusz to
$186,000. On December 4, 2013, the Compensation Committee approved the increase in salary for Mr. Warusz to $191,000.
In February 2007, our Board of Directors authorized the issuance of the following number of shares to each of Dr. Schaber and Dr. Brey immediately prior to
the completion of a transaction, or series or a combination of related transactions negotiated by our Board of Directors whereby, directly or indirectly, a
majority of our capital stock or a majority of our assets are transferred from the Company and/or our stockholders to a third party: 50,000 common shares to
Dr. Schaber and 10,000 common shares to Dr. Brey. The amended agreement with Dr. Schaber includes our obligation to issue such shares to him if such
event occurs.
44
Outstanding Equity Awards at Fiscal Year-End
The following table contains information concerning unexercised options, stock that has not vested, and equity incentive plan awards for the Named
Executive Officers outstanding at December 31, 2013. We have never issued Stock Appreciation Rights.
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Number of Securities
Underlying Unexercised
Options
(#)
Name
Exercisable Unexercisable Options (#)
-
-
-
-
30,000
65,000
75,000
-
-
-
-
8,746
17,498
7,500
5,000
7,500
27,498
33,750
-
-
-
-
30,000
65,000
75,000
-
-
-
-
8,746
17,498
7,500
2,500
7,500
27,498
33,750
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
125,000
45,000
140,000
110,000
90,000
65,000
25,000
30,000
10,000
40,000
42,500
26,254
17,502
2,500
35,000
22,500
27,502
11,250
45
Option
Exercise
Price
($)
5.40
9.40
1.20
4.64
0.64
0.68
2.01
6.60
9.40
1.20
4.64
0.64
0.68
2.01
4.10
0.64
0.68
2.01
Option
Expiration
Date
8/28/2016
8/9/2017
12/17/2018
6/30/2020
11/30/2021
12/04/2022
12/04/2023
5/10/2016
8/9/2017
12/17/2018
6/30/2020
11/30/2021
12/04/2022
12/04/2023
5/30/2021
11/30/2021
12/04/2022
12/04/2023
Christopher J. Schaber
Robert N. Brey
Joseph M. Warusz
Compensation of Directors
Outstanding Equity Awards at Fiscal Year-End
The following table contains information concerning the compensation of the non-employee directors during the fiscal year ended December 31, 2013.
Keith Brownlie
Marco Brughera3
Gregg A. Lapointe
Robert J. Rubin
Jerry Zeldis
Compensation of Directors
Name
Fees Earned
Paid in Cash1
Option
Awards2
$
$
$
$
$
60,000 $
8,750 $
47,500 $
52,500 $
50,000 $
30,000 $
30,150 $
30,000 $
30,000 $
30,000 $
Total
90,000
38,900
77,500
82,500
80,000
1 Directors who are compensated as full-time employees receive no additional compensation for service on our Board of Directors. Each independent
director who is not a full-time employee is paid $35,000 annually, on a prorated basis, for their service on our Board of Directors, the chairman of
our Audit Committee is paid $15,000 annually, on a prorated basis, and the chairmen of our Compensation and Nominating Committees will be paid
$10,000 annually, on a prorated basis. Additionally, Audit Committee members are paid $7,500 annually and Compensation and Nominating Committee
members are paid $5,000 annually. This compensation is paid quarterly.
2 We maintain a stock option grant program pursuant to the nonqualified stock option plan, whereby members of our Board of Directors or its committees
who are not full-time employees receive an initial grant of fully vested options to purchase 15,000 shares of common stock. Upon re-election to the
Board, each Board member will receive stock options with a value of $30,000, calculated using the closing price of the common stock on the trading day
prior to the date of the annual meeting of the Company’s stockholders, which vest at the rate of 25% per quarter, commencing with the first quarter after
each annual meeting of stockholders.
3 Mr. Marco Brughera was appointed to our Board of Directors on October 21, 2013.
Stock Ownership Policy
In April 2012, our Board of Directors adopted a stock ownership policy applicable to our non-employee directors to strengthen the link between director and
stockholder interests. Pursuant to the stock ownership policy, each non-employee director is required to hold a minimum ownership position in the common
stock equal to the annual cash compensation paid for service on the Board of Directors, exclusive of cash compensation paid for service as a chair or member
of any committees of the Board of Directors.
Stock counted toward the ownership requirement includes common stock held by the director, unvested and vested restricted stock, and all shares of common
stock beneficially owned by the director held in a trust and by a spouse and/or minor children of the director. The policy provides that the ownership
requirement must be attained within three years after the later of June 21, 2012 and the date a director is first elected or appointed to the Board of Directors.
To monitor progress toward meeting the requirement, the Nominating Committee will review director ownership levels at the end of March of each year.
Non-employee directors are prohibited from selling any shares of common stock unless such director is in compliance with the stock ownership policy. A
copy of our director compensation and stock ownership policy is publicly available on our website at www.soligenix.com under the “Investors” section.
46
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The table below provides information regarding the beneficial ownership of the common stock as of April 28, 2014, of (1) each person or entity who owns
beneficially 5% or more of the shares of our outstanding common stock, (2) each of our directors, (3) each of the Named Executive Officers, and (4) our
directors and officers as a group. Except as otherwise indicated, and subject to applicable community property laws, we believe the persons named in the table
have sole voting and investment power with respect to all shares of common stock held by them.
Beneficial Ownership
Name of Beneficial Owner
Randall J. Kirk (1)
NRM VII Holdings I, LLC (1)
Paolo Cavazza (2)
Sigma-Tau Pharmaceuticals, Inc (2)
Intrexon Corporation (1)
Christopher J. Schaber (3)
Robert N. Brey (4)
Gregg A. Lapointe (5)
Jerry Zeldis (6)
Richard Straube (7)
Robert J. Rubin (8)
Keith Brownlie (9)
Joseph Warusz (10)
Marco Brughera (11)
All directors and executive officers as a group (8 persons)
Shares of
Common
Stock
Beneficially
Owned
Percent of
Class
6,867,816
5,833,333
30.97%
26.26%
3,379,950
16.77%
3,068,461
1,034,483
690,675
173,757
145,524
88,304
31,250
83,237
79,971
106,878
15,000
1,414,596
15.29%
5.25%
3.40%
*
*
*
*
*
*
*
*
6.76%
(1) On June 26, 2013, Randal J. Kirk, on his own behalf and on behalf of Third Security, LLC, NYM VII Holdings I, LLC and Intrexon Corporation, filed
Amendment No. 1 to Schedule 13D with the Securities and Exchange Commission (the “SEC”), which amends the Schedule 13D filed May 9, 2013
with the SEC (as amended, “Schedule 13D”). The Schedule 13D states that Mr. Kirk is Senior Managing Director of, and controls, Third Security, LLC,
which is the Manager of an affiliate that manages NRM VII Holdings I, LLC, and that Mr. Kirk serves as the Chairman and Chief Executive Officer of
Intrexon Corporation. The Schedule 13D indicates that (a) Mr. Kirk, Third Security, LLC and NRM VII Holdings I, LLC have sole voting and
dispositive power with respect to 3,333,333 shares of Common Stock and warrants to purchase 2,500,000 shares of Common Stock exercisable within
60 days of the date of this prospectus held by NRM VII Holdings I, LLC, and (b) Mr. Kirk and Intrexon Corporation have shared voting and dispositive
power with respect to 1,034,483 shares of Common Stock held by Intrexon Corporation. The address of the principal business office of Mr. Kirk is
2875 South Ocean Boulevard, Suite 214, Palm Beach, Florida 33480. The address of the principal business office of NRM VII Holdings I, LLC is c/o
Third Security, LLC, 1881 Grove Avenue, Redford, Virginia 24141. The address of the principal business office of Intrexon Corporation is 20358
Seneca Meadows Parkway, Germantown, Maryland 20876.
(2) On May 16, 2013, Paolo Cavazza, on his own behalf and on behalf of Sigma-Tau Finanziaria S.p.A., Sigma-Tau International S.A., Sigma-Tau America
S.A. and Sigma-Tau Pharmaceuticals, Inc., filed Amendment No. 4 to Schedule 13D with the SEC, which amends the Schedule 13D filed with the SEC
on February 20, 2009 as amended by Amendment No. 1 filed with the SEC on October 2, 2009, Amendment No. 2 filed with the SEC on June 28, 2010
and Amendment No. 3 filed with the SEC on January 2, 2013 (the “Schedule 13D”). The Schedule 13D indicates that (a) Mr. Cavazza has sole voting
and dispositive power with respect to (i) 59,539 shares held by Mr. Paolo Cavazza and (ii) 164,146 shares of common stock and warrants to purchase
87,804 shares held by SINAF SA, and (b) Mr. Cavazza, Sigma-Tau Finanziaria S.p.A., Sigma-Tau International S.A., Sigma-Tau America S.A. and
Sigma-Tau Pharmaceuticals, Inc. have shared voting and dispositive power with respect to 2,711,392 shares of common stock and warrants to purchase
357,069 shares of common stock exercisable within 60 days of the date of this prospectus held by Sigma-Tau Pharmaceuticals, Inc. Sigma-Tau
Pharmaceuticals, Inc. is a direct wholly-owned subsidiary of Sigma-Tau America S.A., which is a direct wholly-owned subsidiary of Sigma-Tau
International S.A., which is a direct wholly-owned subsidiary of Sigma-Tau Finanziaria S.p.A. Mr. Paolo Cavazza directly and indirectly owns 38% of
Sigma-Tau Finanziaria S.p.A. SINAF SA is an indirect wholly owned subsidiary of Aptafin S.p.A., which is owned by Mr. Paolo Cavazza and members
of his family. Mr. Paolo Cavazza’s address is Via Tesserte, 10, Lugano, Switzerland. The business address of Sigma-Tau Finanziaria S.p.A. is Via
Sudafrica, 20, Rome, Italy 00144. The business address of Sigma-Tau International S.A. is 19-21 Boulevard du Prince Henri, L-1724 Luxembourg. The
business address of Sigma-Tau America S.A. is 19-21 Boulevard du Prince Henri, L-1724 Luxembourg. The business address of Sigma-Tau
Pharmaceuticals, Inc. is 9841 Washingtonian Boulevard, Suite 500, Gaithersburg, Maryland 20878.
47
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Includes 59,681 shares of common stock owned by Dr. Schaber, options to purchase 621,875 shares of common stock exercisable within 60 days of the
date of this prospectus, and warrants to purchase 9,119 shares of common stock exercisable within 60 days of the date of this prospectus. The address of
Dr. Schaber is c/o Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
Includes options to purchase 173,444 shares of common stock exercisable within 60 days of the date of this prospectus. The address of Dr. Brey is c/o
Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
Includes 48,781 shares of common stock, options to purchase 64,156 shares of common stock exercisable within 60 days of the date of this prospectus,
and warrants to purchase 29,268 shares of common stock exercisable within 60 days of the date of this prospectus. The address of Mr. Lapointe is c/o
Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
Includes 48,809 shares of Common Stock, options to purchase 21,638 shares of common stock exercisable within 60 days of the date of this prospectus
and warrants to purchase 17,857 shares of Common Stock exercisable within 60 days of the date of this prospectus. The address of Mr. Zeldis is c/o
Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
Includes options to purchase 25,000 shares of common stock exercisable within 60 days of the date of this prospectus. The address of Dr. Straube is c/o
Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
Includes 12,195 shares of common stock, options to purchase 63,725 shares of common stock exercisable within 60 days of the date of this prospectus,
and warrants to purchase 7,317 shares of common stock exercisable within 60 days of the date of this prospectus. The address of Dr. Rubin is c/o
Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
Includes 19,047 shares of Common Stock, options to purchase 46,638 shares of common stock exercisable within 60 days of the date of this prospectus
and warrants to purchase 14,286 shares of Common Stock exercisable within 60 days of the date of this prospectus. The address of Mr. Brownlie is c/o
Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
(10) Includes options to purchase 106,878 shares of common stock owned by Mr. Warusz exercisable within 60 days of the date of this prospectus. The
address of Mr. Warusz is c/o Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
(11) Includes options to purchase 15,000 shares of common stock owned by Dr. Brughera exercisable within 60 days of the date of this prospectus. The
address of Dr. Brughera is c/o Soligenix, 29 Emmons Drive, Suite C-10, Princeton, New Jersey 08540.
*
Indicates less than 1%.
** Beneficial ownership is determined in accordance with the rules of the SEC. Shares of common stock subject to options or warrants currently
exercisable or exercisable within 60 days of April 28, 2014 are deemed outstanding for computing the percentage ownership of the stockholder holding
the options or warrants, but are not deemed outstanding for computing the percentage ownership of any other stockholder. Percentage of ownership is
based on 19,710,328 shares of common stock outstanding as of February 28, 2014.
48
Equity Compensation Plan Information
In December 2005, our Board of Directors approved the 2005 Equity Incentive Plan, which was approved by stockholders on December 29, 2005. In
September 2007, our stockholders approved an amendment to the 2005 Equity Incentive Plan to increase the maximum number of shares of our common
stock available for issuance under the plan by 1,000,000 shares, bringing the total shares reserved for issuance under the plan to 2,000,000 shares. In
September 2010, our stockholders approved a second amendment to the 2005 Equity Incentive Plan to increase the maximum number of shares of our
common stock available for issuance under the plan by 750,000 shares, bringing the total shares reserved for issuance under the plan to 1,750,000 shares. In
September 2013, our stockholders approved a third amendment to the 2005 Equity Incentive Plan to increase the maximum number of shares of our common
stock available for issuance under the plan by 1,250,000 shares, bringing the total shares reserved for issuance under the plan to 3,000,000 shares. The
following table provides information, as of December 31, 2013 with respect to options outstanding under our 1995 Amended and Restated Omnibus Incentive
Plan and our 2005 Equity Incentive Plan.
Number of
Securities
to be Issued
upon Exercise
of
Outstanding
Options,
Warrants and
Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of
Securities
Remaining
Available for
Future
Issuance
Under Equity
Compensation
Plans
(excluding
securities
reflected in
the first
column)
2,051,511
-
2,051,511
$
$
2.63
-
2.63
775,924
-
775,924
Plan Category
Equity compensation plans approved by security holders1
Equity compensation plans not approved by security holders
Total
1 Includes our 1995 Amended and Restated Omnibus Incentive Plan and our 2005 Equity Incentive Plan. Our 1995 Plan expired in 2005 and thus no
securities remain available for future issuance under that plan.
Item 13. Certain Relationships and Related Transactions and Director Independence
Related Party Transactions
Other than the employment agreements and compensation paid to our directors, we did not engage in any transactions with related
parties since January 1, 2011. For a discussion of our employment agreements and compensation paid to our directors, see “Item
11. Executive Compensation.”
Director Independence
The Board of Directors has determined that Keith Brownlie, Gregg Lapointe, Dr. Robert Rubin and Dr. Jerome Zeldis are
“independent” as such term is defined by the applicable listing standards of Nasdaq. Our Board of Directors based this
determination primarily on a review of the responses of the Directors to questionnaires regarding their employment, affiliations and
family and other relationships.
49
Item 14. Principal Accountant Fees and Services
The following table highlights the aggregate fees billed during each of the two years ended December 31, 2013 by EisnerAmper LLP.
Audit fees
Tax fees
Total
Other Fees
2013
2012
169,150
9,700
$
121,590
8,400
178,850
$
129,990
$
$
Our principal accountants did not bill us for any services or products other than as reported above in this Item 14 during each of the two years ended
December 31, 2013.
Pre-Approval Policies and Procedures
The audit committee has adopted a policy that requires advance approval of all audit services and permitted non-audit services to be provided by the
independent auditor as required by the Exchange Act. The audit committee must approve the permitted service before the independent auditor is engaged to
perform it. The audit committee approved all of the services described above in accordance with its pre-approval policies and procedures.
50
Item 15. Exhibits and Financial Statements Schedules
a. (1) Consolidated Financial Statements:
Part IV
The financial statements required to be filed by Item 8 of this Annual Report on Form 10-K and filed in this Item 15, are as follows:
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Operations for the Years Ended December 31, 2013 and 2012
Consolidated Statements of Stockholders’ Equity (Deficiency) for the Years Ended December 31, 2013 and 2012 F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
F-2
F-3
F-4
F-5
F-6
F-20
(2) Financial Statement Schedules
Schedules are omitted because they are not applicable, or are not required, or because the information is included in the consolidated financial statements
and notes thereto.
(3) Exhibits:
2.1
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Agreement and Plan of Merger, dated May 10, 2006 by and among the Company, Corporate Technology Development, Inc., Enteron
Pharmaceuticals, Inc. and CTD Acquisition, Inc. (incorporated by reference to Exhibit 2.1 included in our Registration Statement on Form SB-2
(File No. 333-133975) filed on May 10, 2006).
Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 included in our current report on Form 8-K
filed on June 22, 2012).
By-laws (incorporated by reference to Exhibit 3.1 included in our Quarterly Report on Form 10-QSB, as amended, for the fiscal quarter ended June
30, 2003).
Rights Agreement dated June 22, 2007, between the Company and American Stock Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4.1 included in our current report on Form 8-K filed on June 22, 2007).
Form of Right Certificate (incorporated by reference to Exhibit 4.2 included in our current report on Form 8-K filed on June 22, 2007).
Form of Warrant issued to each investor in the January 2009 private placement (incorporated by reference to Exhibit 4.18 included in our
Registration Statement on Form S-1 (File No. 333-149239) filed on February 14, 2008).
Form of Warrant issued to each investor in the September 2009 private placement (incorporated by reference to Exhibit 10.2 included in our current
report on Form 8-K filed on September 29, 2009).
Warrant dated April 19, 2010, issued to Fusion Capital Fund II, LLC (incorporated by reference to Exhibit 4.10 included in our Post-Effective
Amendment to Registration Statement on Form S-1 filed on April 20, 2010).
Form of Common Stock Purchase Warrant issued to each investor in the June 2010 private placement (incorporated by reference to Exhibit 10.2
included in our current report on Form 8-K filed on June 18, 2010).
Form of Common Stock Purchase Warrant issued to each investor in the June 2013 registered public offering (incorporated by reference to Exhibit
10.3 included in our current report on Form 8-K filed on June 18, 2010).
Form of Warrant issued to Maxim Group LLC (incorporated by reference to Exhibit 10.4 included in our current report on Form 8-K filed on June
24, 2013).
51
10.1
10.2
10.3
10.4
10.5
Amended and Restated 1995 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 included in our Quarterly Report on Form 10-QSB,
as amended, for the fiscal quarter ended September 30, 2003). **
License Agreement between the Company and the University of Texas Southwestern Medical Center (incorporated by reference to Exhibit 10.9
included in our Annual Report on Form 10-KSB filed March 30, 2004, as amended, for the fiscal year ended December 31, 2004).
License Agreement between the Company and Thomas Jefferson University (incorporated by reference to Exhibit 10.9 included in our Annual
Report on Form 10-KSB, as amended, for the fiscal year ended December 31, 2004).
License Agreement between the Company and the University of Texas Medical Branch (incorporated by reference to Exhibit 10.10 included in our
Annual Report on Form 10-KSB, as amended, for the fiscal year ended December 31, 2004).
Consulting Agreement between the Company and Lance Simpson of Thomas Jefferson University. (incorporated by reference to Exhibit 10.43
included in our Annual Report on Form 10-KSB as amended for the fiscal year ended December 31, 2002).
10.6
2005 Equity Incentive Plan (incorporated by reference to Appendix D to our Proxy Statement filed December 12, 2005). **
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
Form S-8 Registration of Stock Options Plan dated December 30, 2005 (incorporated by reference to our registration statement on Form S-8 filed on
December 30, 2005).
Letter of Intent dated January 3, 2007 by and between the Company and Sigma-Tau Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1
included in our current report on Form 8-K filed on January 4, 2007).
Letter from Sigma-Tau Pharmaceuticals, Inc. dated February 21, 2007 (incorporated by reference to Exhibit 10.1 included in our current report on
Form 8-K filed on February 23, 2007).
Letter dated May 3, 2007 between the Company and Sigma-Tau Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 included in our
current report on Form 8-K filed on May 4, 2007).
Employment Agreement dated December 27, 2007, between Christopher J. Schaber, PhD and the Company (incorporated by reference to Exhibit
10.30 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008). **
Employment Agreement dated December 27, 2007, between Evan Myrianthopoulos and the Company (incorporated by reference to Exhibit 10.31
included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008). **
Common Stock Purchase Agreement dated February 14, 2008, between the Company and Fusion Capital Fund II, LLC (incorporated by reference to
Exhibit 10.35 included in our Registration Statement on Form S-1 filed on February 14, 2008).
Registration Rights Agreement dated February 14, 2008, between the Company and Fusion Capital Fund II, LLC (incorporated by reference to
Exhibit 10.35 included in our Registration Statement on Form S-1 (File No. 333-149239) filed on February 14, 2008).
Letter dated December 1, 2008, between the Company and Sigma-Tau Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 included in
our current report on Form 8-K filed on December 1, 2008).
Exclusive License Agreement dated November 24, 1998, between Enteron Pharmaceuticals, Inc. and George B. McDonald, MD and amendments
(incorporated by reference to Exhibit 10.42 included in our Registration Statement on Form S-1 (File No. 333-157322) filed on February 13, 2009).
Collaboration and Supply Agreement dated February 11, 2009, between the Company and Sigma-Tau Pharmaceuticals, Inc. (incorporated by
reference to Exhibit 10.43 included in our Registration Statement on Form S-1 (File No. 333-157322) filed on February 13, 2009). †
52
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
First Amendment to Common Stock Purchase Agreement dated April 19, 2010 between the Company and Fusion Capital Fund II, LLC
(incorporated by reference to Exhibit 10.34 included in our Post-Effective Amendment to Registration Statement on Form S-1 (File No. 333-
149239) filed on April 20, 2010).
Amendment to Employment Agreement dated as of January 4, 2011, between The Company and Evan Myrianthopoulos (incorporated by reference
to Exhibit 10.1 included in our current report on Form 8-K filed on January 6, 2011). **
Employment Agreement dated as of January 31, 2011 between Kevin Horgan, M.D., and The Company (incorporated by reference to Exhibit 10.1
included in our current report on Form 8-K filed on February 2, 2011). **
Employment Agreement dated as of May 31, 2011, between Joseph M. Warusz and The Company (incorporated by reference to Exhibit 10.1 of our
current report on Form 8-K filed on May 31, 2011).**
First Amendment to Employment Agreement dated as of July 12, 2011, between The Company and Christopher J. Schaber, PhD (incorporated by
reference to Exhibit 10.1 of our current report on Form 8-K filed on July 14, 2011).**
Second Amendment to Employment Agreement dated as of July 12, 2011, between The Company and Evan Myrianthopoulos (incorporated by
reference to Exhibit 10.2 of our current report on Form 8-K filed on July 14, 2011).**
Amendment to the Collaboration and Supply Agreement dated July 26, 2011, between Sigma-Tau Pharmaceuticals, Inc. and The Company
(incorporated by reference to Exhibit 10.1 of our current report on Form 8-K filed on July 28, 2011).
Amendment to the Exclusive License Agreement dated as of July 26, 2011, between George McDonald, MD and The Company (incorporated by
reference to Exhibit 10.2 of our current report on Form 8-K filed on July 28, 2011).
Lease Agreement dated as of February 7, 2012, between CPP II , LLC and the Company (incorporated by reference to Exhibit 10.40 included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2011).
Separation Agreement dated February 15, 2012, between Evan Myrianthopoulos and The Company (incorporated by reference to Exhibit 10.28
included in our Registration Statement on Form S-1 (File No. 333-184762) filed on November 5, 2012). **
First Amendment to Separation Agreement dated July 2, 2012, between Evan Myrianthopoulos and The Company (incorporated by reference to
Exhibit 10.29 included in our Registration Statement on Form S-1 (File No. 333-184762) filed on November 5, 2012). **
Amendment No. 2 to the Collaboration and Supply Agreement between the Company, Enteron and Sigma-Tau dated as of December 20, 2012
(incorporated by reference to Exhibit 10.1 of our current report on Form 8-K filed on December 27, 2012). †
10.30 Warrant dated December 20, 2012 and issued to Sigma-Tau to purchase 357,069 shares of the Company’s common stock (incorporated by reference
to Exhibit 10.2 of our current report on Form 8-K filed on December 27, 2012).
10.31 Warrant dated December 20, 2012 and issued to SINAF S.A. to purchase 87,804 shares of the Company’s common stock (incorporated by reference
to Exhibit 10.3 of our current report on Form 8-K filed on December 27, 2012).
10.32
10.33
Amendment to Exclusive License Agreement dated as of December 20, 2012 between Enteron and McDonald (incorporated by reference to Exhibit
10.4 of our current report on Form 8-K filed on December 27, 2012).
Amendment to Consulting Agreement dated as of December 20, 2012 between Enteron and McDonald (incorporated by reference to Exhibit 10.5 of
our current report on Form 8-K filed on December 27, 2012).
53
10.34 Warrant dated December 20, 2012 and issued to McDonald to purchase 280,000 shares of the Company’s common stock (incorporated by reference
to Exhibit 10.6 of our current report on Form 8-K filed on December 27, 2012).
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
Exclusive Channel Collaboration Agreement dated as of April 27, 2013 between the Company and Intrexon Corporation (incorporated by reference
to Exhibit 10.1 of our current report on Form 8-K filed on May 1, 2013). †
Stock Issuance Agreement dated as of April 27, 2013 between the Company and Intrexon Corporation (incorporated by reference to Exhibit 10.2 of
our current report on Form 8-K filed on May 1, 2013). †
Form of Securities Purchase Agreement among the Company and investors in the June 2013 registered public offering (incorporated by reference to
Exhibit 10.2 included in our current report on Form 8-K filed on June 24, 2013).
Contract HHSO100201300023C dated September 18, 2013 between the Company the the U.S. Department of Health and Human Services
Biomedical Advanced Research and Development Authority (incorporated by reference to Exhibit 10.1 of our current report on Form 8-K filed on
September 24, 2013). †
Contract HHSN272201300030C dated September 24, 2013 by and between the Company and the National Institutes of Health (incorporated by
reference to Exhibit 10.1 of our current report on Form 8-K filed on September 30, 2013). †
Purchase Agreement dated as of November 18, 2013 between the Company and Lincoln Park Capital Fund , LLC (incorporated by reference to
Exhibit 10.1 of our current report on Form 8-K filed on November 21, 2013).
Registration Rights Agreement dated as of November 18, 2013 between the Company and Lincoln Park Capital Fund, LLC (incorporated by
reference to Exhibit 10.2 of our current report on Form 8-K filed on November 21, 2013).
Employment Agreement dated as of January 6, 2014 between the Company and Richard Straube, M.D. (incorporated by reference to Exhibit 10.1
of our current report on Form 8-K filed on January 8, 2014).
21.1
Subsidiaries of the Company. *
23.1
Consent of EisnerAmper LLP. *
31.1
Certification of the Chief Executive Officer pursuant to Exchange Act rule 13(a)-14(a) (under Section 302 of the Sarbanes-Oxley Act of 2002). *
31.2
Certification of the Chief Financial Officer pursuant to Exchange Act rule 13(a)-14(a) (under Section 302 of the Sarbanes-Oxley Act of 2002). *
32.1
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
*
**
†
Filed herewith.
Indicates management contract or compensatory plan.
Portions of this exhibit have been omitted pursuant to a request for confidential treatment.
54
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURES
SOLIGENIX, INC.
By: /s/ Christopher J. Schaber
Christopher J. Schaber, PhD
Chief Executive Officer and President
Date: March 26, 2014
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated
and on the dates indicated.
Name
Capacity
/s/ Christopher J. Schaber
Christopher J. Schaber, PhD
/s/ Keith L. Brownlie
Keith L. Brownlie, CPA
/s/ Marco Brughera
Marco Brughera, DVM
/s/ Gregg A. Lapointe
Gregg A. Lapointe, CPA
/s/ Robert J. Rubin
Robert J. Rubin, MD
/s/ Jerome Zeldis
Jerome Zeldis, MD, PhD
/s/ Joseph M. Warusz
Joseph M. Warusz, CPA
Chairman of the Board, Chief Executive Officer and President
(principal executive officer)
Director
Director
Director
Director
Director
Vice President of Finance, Acting Chief Financial Officer and Corporate
Secretary
(principal accounting officer)
55
Date
March 26, 2014
March 26, 2014
March 26, 2014
March 26, 2014
March 26, 2014
March 26, 2014
March 26, 2014
SOLIGENIX, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Operations for the Years Ended December 31, 2013 and 2012
Consolidated Statements of Changes in Shareholders’ Equity (Deficiency) for the Years Ended December 31, 2013 and 2012
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-20
Soligenix, Inc. and Subsidiaries
Consolidated Balance Sheets
As of December 31,
Assets
Current assets:
Cash and cash equivalents
Grants and contracts receivable
Taxes receivable
Prepaid expenses
Total current assets
Office furniture and equipment, net
Intangible assets, net
Total assets
Liabilities and shareholders’ equity (deficiency)
Current liabilities:
Accounts payable
Warrant liability
Accrued compensation
Total current liabilities
Commitments and contingencies
Shareholders’ equity (deficiency):
Preferred stock; 350,000 shares authorized; none issued or outstanding
Common stock, $.001 par value; 50,000,000 shares authorized in 2013 and 2012, respectively; 19,626,439 shares
and 11,168,905 shares issued and outstanding in 2013 and 2012, respectively
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity (deficiency)
Total liabilities and shareholders’ equity (deficiency)
2013
2012
$
$
$
$
$
$
5,856,242
867,086
750,356
135,391
7,609,075
23,868
632,512
8,265,455
1,520,290
8,281,247
233,739
10,035,276
3,356,380
339,308
-
140,693
3,836,381
12,995
855,728
4,705,104
1,124,503
-
29,495
1,153,998
-
-
19,626
130,549,930
(132,339,377)
(1,769,821)
$
8,265,455
11,169
125,820,318
(122,280,381)
3,551,106
4,705,104
$
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Soligenix, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Years Ended December 31,
Revenues:
Grant revenue
Contract revenue
Total revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Change in fair value of warrant liability
Interest income
Total other (expense) income
Net loss before income taxes
Income tax benefit
Net loss
Basic and diluted net loss per share
Basic and diluted weighted average common shares outstanding
2013
2012
$
2,658,836
565,316
$
3,144,620
-
3,224,152
(2,544,285)
679,867
3,144,620
(2,593,075)
551,545
5,071,179
2,765,230
7,836,409
2,609,241
2,632,972
5,242,213
(7,156,542)
(4,690,668)
(3,654,770)
1,960
(3,652,810)
(10,809,352)
-
6,202
6,202
(4,684,466)
$
$
750,356
(10,058,996) $
521,458
(4,163,008)
(0.65) $
(0.37)
15,463,256
11,136,484
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Soligenix, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)
For the Years Ended December 31, 2013 and 2012
Common Stock
Additional
Accumulated
Balance, December 31, 2011
Issuance of common stock to vendors
Issuance of common stock to employee
Fair value of common stock warrants to vendors
Stock-based compensation expense
Net loss
Balance, December 31, 2012
Common stock issued in Unit offering, net of offering costs of
$902,158
Warrants issued in Unit offering
Reclassification of warrant liability upon partial exercise of
warrants issued in unit offering
Issuance of common stock to collaboration partner
Issuance of common stock pursuant to Lincoln Park equity
line, net of costs of $71,949
Issuance of shares from exercise of stock options and warrants
Issuance of common stock to vendor
Fair value of common stock warrants to vendors
Stock-based compensation expense
Net loss
Balance, December 31, 2013
Shares
11,105,532
$
46,706
16,667
-
-
-
11,168,905
6,773,995
-
-
1,034,483
383,370
210,582
55,104
-
-
-
19,626,439
$
$
Par Value
11,106
46
17
-
-
-
11,169
6,774
-
-
1,034
Paid–In
Capital
$ 124,897,309
20,954
9,983
429,902
462,170
-
$ 125,820,318
Deficit
$ (118,117,373) $
-
-
-
-
(4,163,008)
$ (122,280,381) $
6,203,763
(4,827,788)
201,311
1,498,966
383
211
55
-
-
-
19,626
527,668
235,764
82,093
4,775
803,060
-
$ 130,549,930
(10,058,996)
$ (132,339,377) $
Total
6,791,042
21,000
10,000
429,902
462,170
(4,163,008)
3,551,106
6,210,537
(4,827,788)
201,311
1,500,000
528,051
235,975
82,148
4,775
803,060
(10,058,996)
(1,769,821)
-
-
-
-
-
-
-
-
-
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Soligenix, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31,
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation
Common stock issued to employee
Charge for common stock issued for collaboration agreement
Common stock issued in exchange for services
Warrants replaced in exchange for renegotiated agreement
Warrants issued to vendor
Stock-based compensation
Change in fair value of warrant liability
Change in operating assets and liabilities:
Grants and contracts receivable
Taxes receivable
Prepaid expenses
Accounts payable
Accrued compensation
Total adjustments
Net cash used in operating activities
Investing activities:
Purchases of office equipment
Net cash used in investing activities
Financing activities:
Net proceeds from sale of units containing common stock and warrants
Net proceeds from issuance of common stock pursuant to the equity line
Proceeds from exercise of options and warrants
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of non cash investing and financing activities:
Fair Value of warrants issued in Unit Offering
Reclassification of warrant liability to additional paid in capital upon partial exercise of warrants issued in unit
offering
Supplemental information:
Cash paid for state income taxes
2013
2012
$
(10,058,996) $
(4,163,008)
230,071
-
1,500,000
82,148
-
4,775
803,060
3,654,770
230,630
10,000
-
21,000
429,902
-
462,170
-
(527,778)
(750,356)
5,302
395,787
204,244
5,602,023
(4,456,973)
23,165
574,157
55,069
(179,053)
(99,565)
1,527,475
(2,635,533)
(17,728)
(17,728)
(4,755)
(4,755)
6,210,537
528,051
235,975
6,974,563
-
-
-
2,499,862
3,356,380
5,856,242
$
(2,640,288)
5,996,668
3,356,380
4,827,788
$
201.311
$
-
-
3,080
$
2,730
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Soligenix, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Nature of Business
Basis of Presentation
Soligenix, Inc. (the “Company”) is a clinical stage biopharmaceutical company that was incorporated in 1987 and is focused on developing products to treat
the life-threatening side effects of cancer treatments and serious gastrointestinal diseases where there remains an unmet medical need, as well as developing
several biodefense vaccines and therapeutics. The Company maintains two active business segments: BioTherapeutics and Vaccines/BioDefense. Soligenix’s
BioTherapeutics business segment is developing proprietary formulations of oral beclomethasone 17,21-dipropionate (“BDP”) for the prevention/treatment of
gastrointestinal (“GI”) disorders characterized by severe inflammation, including pediatric Crohn’s disease (SGX203), acute radiation enteritis (SGX201) and
chronic Graft-versus-Host disease (orBec®), as well as developing our novel innate defense regulator (“IDR”) technology (SGX942) for the treatment of oral
mucositis. The Vaccines/BioDefense business segment includes RiVax™, a ricin toxin vaccine, and VeloThrax™, an anthrax vaccine, and OrbeShield™, a
gastrointestinal acute radiation syndrome (“GI ARS”) program and SGX943, a melioidosis therapeutic. The advanced development of these programs will be
supported by existing and on-going government contracts and grants, which include the National Institutes of Health (“NIH”) grant for the heat stabilization
technology ThermoVax™ and contracts from the Biomedical Advanced Research and Development Authority (“BARDA”) and the National Institute of
Allergy and Infectious Diseases (“NIAID”) for GI ARS. Additionally, the Company entered into a global and exclusive channel collaboration with Intrexon
Corporation (“Intrexon”) through which it intends to develop and commercialize a human monoclonal antibody therapy (SGX101) to treat melioidosis.
The Company generates revenues under four grants from the NIH and government contracts from the Biomedical Advanced Research and Development
Authority (“BARDA”) and the National Institute of Allergy and Infectious Diseases (“NIAID”).
The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, development of new technological
innovations, dependence on key personnel, protections of proprietary technology, compliance with FDA regulations, litigation, and product liability.
Liquidity
As of December 31, 2013, the Company had cash and cash equivalents of $5,856,242 as compared to $3,356,380 as of December 31, 2012, representing an
increase of $2,499,862 or 74%. As of December 31, 2013, the Company had working capital of $5,855,046, which excludes a non-cash warrant liability of
$8,281,247, as compared to working capital of $2,682,383 as of December 31, 2012, representing an increase of $3,172,663 or 118%. The increase in
working capital was primarily the result of net proceeds of $6,738,588 received from our registered public offering, Lincoln Park equity line and proceeds of
$235,975 from the exercise of stock options and warrants offset primarily by the cash used in operating activities over the period. For the year ended
December 31, 2013, the Company’s cash used in operating activities was $4,456,973 as compared to $2,635,533 for the same period in 2012, representing an
increase of $1,821,440. This increase was attributable to the initiation of clinical trials with SGX942 for the treatment of oral mucositis, preparation for
clinical trials with SGX203 for the treatment of pediatric Crohn’s disease, increased headcount to support these programs and the delay in receiving the
proceeds related to the State of New Jersey Technology Business Tax Certificate Transfer Program for 2013, which were received prior to year end in the
prior year.
Based on the Company’s current rate of cash outflows, cash on hand, proceeds from its grant programs, proceeds expected from the Lincoln Park transaction
and proceeds from the State of New Jersey Technology Business Tax Certificate Transfer Program, management believes that its current cash will be
sufficient to meet the anticipated cash needs for working capital and capital expenditures for at least the next twelve months.
F-6
Management’s business plan can be outlined as follows:
·
·
·
·
·
·
·
·
Conduct a Phase 2 clinical trial of SGX942 for the treatment of oral mucositis in head and neck cancer;
Initiate Phase 2/3 clinical trial of oral BDP, known as SGX203, for the treatment of pediatric Crohn’s disease;
Evaluate the effectiveness of oral BDP in other therapeutic indications involving inflammatory conditions of the GI tract such as prevention of acute
radiation enteritis, prevention of acute radiation syndrome, and treatment of chronic GVHD;
Develop RiVax™ and VeloThrax™ in combination with our proprietary vaccine heat stabilization technology, known as ThermoVax™, to develop new
heat stable vaccines in biodefense and infectious diseases with the potential to collaborate and/or partner with other companies in these areas;
Advance the preclinical and manufacturing development of OrbeShield™ as a biodefense medical countermeasure for the treatment of GIARS;
Continue to apply for and secure additional government funding for each of our BioTherapeutics and Vaccines/BioDefense programs through grants,
contracts and/or procurements;
Acquire or in-license new clinical-stage compounds for development; and
Explore other business development and merger/acquisition strategies, an example of which is our collaboration with Intrexon.
The Company’s plans with respect to its liquidity management include, but are not limited to the following:
·
·
·
·
The Company has up to $33.2 million in active grant funding still available to support its associated research programs through 2014 and beyond. The
Company plans to submit additional grant applications for further support of its programs with various funding agencies.
The Company has continued to use equity instruments to provide a portion of the compensation due to vendors and collaboration partners and expects to
continue to do so for the foreseeable future.
The Company will pursue Net Operating Losses (“NOLs”) sales in the State of New Jersey pursuant to its Technology Business Tax Certificate Transfer
Program. Based on the receipt, in January 2014, of $750,356 in proceeds pursuant to NOLs sales in 2013, the Company expects to participate in the
program during 2014 and beyond; and
The Company may seek additional capital in the private and/or public equity markets to continue its operations, respond to competitive pressures,
develop new products and services, and to support new strategic partnerships. The Company is currently evaluating additional equity financing
opportunities and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction, or
consummate a transaction at favorable pricing.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include Soligenix, Inc., and its wholly and majority owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated as a result of consolidation.
Operating Segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by
the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the
performance of the segment. The Company divides its operations into two operating segments: BioTherapeutics and Vaccines/BioDefense.
Grants and Contracts Receivable
Grants and contracts receivable consist of unbilled amounts due from various grants from the NIH and contracts from BARDA and NIAID for costs incurred
prior to the period end under reimbursement contracts. The amounts were billed to the respective governmental agencies in the month subsequent to period
end and collected shortly thereafter. Accordingly, no allowance for doubtful amounts has been established. If amounts become uncollectible, they are charged
to operations.
F-7
Intangible Assets
One of the most significant estimates or judgments that the Company makes is whether to capitalize or expense patent and license costs. The Company makes
this judgment based on whether the technology has alternative future uses, as defined in Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 730, Research and Development. Based on this consideration, the Company capitalizes payments made to legal firms that are
engaged in filing and protecting rights to intellectual property and rights for its current products in both the domestic and international markets. The Company
believes that patent rights are one of its most valuable assets. Patents and patent applications are a key component of intellectual property, especially in the
early stage of product development, as their purchase and maintenance gives the Company access to key product development rights from Soligenix’s
academic and industrial partners. These rights can also be sold or sub-licensed as part of its strategy to partner its products at each stage of development as the
intangible assets have alternative future use. The legal costs incurred for these patents consist of work associated with filing new patents and perhaps
extending the lives of the patents. The Company capitalizes such costs and amortizes intangibles over their expected useful life – generally a period of 11 to
16 years.
The Company did not capitalize any patent related costs during the year ended December 31, 2013 or 2012.
Impairment of Long-Lived Assets
Office furniture and equipment and intangible assets are evaluated and reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. The Company recognizes impairment of long-lived assets in the event the net book value of such assets exceeds
the estimated future undiscounted cash flows attributable to such assets. If the sum of the expected undiscounted cash flows is less than the carrying value of
the related asset or group of assets, a loss is recognized for the difference between the fair value and the carrying value of the related asset or group of assets.
Such analyses necessarily involve significant judgment.
The Company did not record any impairment of long-lived assets for the years ended December 31, 2013 or 2012.
Fair Value of Financial Instruments
FASB ASC 820 — Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all
financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on
pertinent information available to us on December 31, 2013. Accordingly, the estimates presented in these financial statements are not necessarily indicative
of the amounts that could be realized on disposition of the financial instruments.
FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.
Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable
inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
·
·
·
Level 1 — Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed
equities.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2
includes financial instruments that are valued using models or other valuation methodologies. These models consider various assumptions, including
volatility factors, current market prices and contractual prices for the underlying financial instruments. Substantially all of these assumptions are
observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the
marketplace.
Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using
pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.
F-8
The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses
approximate their fair value based on the short-term maturity of these instruments. The Company recognizes all derivative financial instruments as assets or
liabilities in the financial statements and measures them at fair value with changes in fair value reflected as current period income or loss unless the
derivatives qualify as hedges. As a result, certain warrants issued in connection with the offering were accounted for as derivatives. See Note 4, Warrant
Liabilities.
Revenue Recognition
Principally the Company’s revenues are generated from government contracts and grants. Recording of revenue is applied in accordance with FASB ASC
605, Revenue Recognition, ASC 605-25 and/or Accounting Standard Update, ASU, 2009-13, Revenue Recognition – Multiple Element Arrangements. The
revenue from government contracts and grants is based upon subcontractor costs and internal costs incurred that are specifically covered by the grants, plus a
facilities and administrative rate that provides funding for overhead expenses and management fee. These revenues are recognized when expenses have been
incurred by subcontractors or when the Company incurs internal expenses that are related to the government contracts and grants.
Research and Development Costs
Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and
development includes costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and
materials, salaries, stock based compensation, employee benefits, equipment depreciation and allocation of various corporate costs. Purchased in-process
research and development expense represents the value assigned or paid for acquired research and development for which there is no alternative future use as
of the date of acquisition.
Stock-Based Compensation
Stock options are issued with an exercise price equal to the market price on the date of issuance. Stock options issued to directors upon re-election vest
quarterly for a period of one year (new director issuances are fully vested upon issuance). Stock options issued to employees vest 25% immediately as of the
grant date, then 25% each subsequent year for a period of three years. Stock options vest over each three month period from the date of issuance to the end of
the three year period. These options have a ten year life for as long as the individuals remain employees or directors. In general, when an employee or director
terminates their position the options will expire within three months, unless otherwise extended by the Board.
From time to time, the Company issues restricted shares of common stock to vendors and consultants as compensation for services performed. Stock-based
compensation expense recognized during the period is based on the fair value of the portion of share-based payment awards that is ultimately expected to vest
during the period. Typically these instruments vest upon issuance and therefore the entire stock compensation expense is recognized upon issuance to the
vendors and/or consultants
Stock compensation expense for options, warrants and shares of common stock granted to non-employees has been determined in accordance with FASB
ASC 718, Stock Compensation, and FASB ASC 505-50, Equity-Based Payments to Non-Employees, and represents the fair value of the consideration
received, or the fair value of the equity instruments issued. For options that vest over future periods, the fair value of options granted to non-employee
directors is amortized as the options vest.
F-9
The fair value of options in accordance with FASB ASC 718, Stock Compensation, was estimated using the Black-Scholes option-pricing model and the
following assumptions:
·
·
·
·
·
a dividend yield of 0%;
an expected life of 4 years;
volatilities of 136% - 167% and 160% for 2013 and 2012, respectively;
forfeitures at a rate of 12%; and
risk-free interest rates of 0.96% to 1.17% and 0.51% for 2013 and 2012, respectively.
The fair value of each option grant made during 2013 and 2012 was estimated on the date of each grant using the Black-Scholes option pricing model and
amortized ratably over the option’s vesting periods, which approximates the service period.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. A valuation allowance is established when it is more likely than not that all or a portion of a
deferred tax asset will not be realized. A review of all available positive and negative evidence is considered, including the Company’s current and past
performance, the market environment in which the Company operates, the utilization of past tax credits, and the length of carryback and carryforward
periods. Deferred tax assets and liabilities are measured utilizing tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. No current or deferred income taxes have been provided through December 31, 2013 due to the net
operating losses incurred by the Company since its inception. The Company recognizes accrued interest and penalties associated with uncertain tax positions,
if any, as part of income tax expense. There were no tax related interest and penalties recorded for 2013 and 2012. Additionally, the Company has not
recorded an asset for unrecognized tax benefits or a liability for uncertain tax positions at December 31, 2013 and 2012. Tax years beginning in 2011 for
federal purposes are generally subject to examination by taxing authorities, although net operating losses from those years are subject to examinations and
adjustments for at least three years following the year in which the tax attributes are utilized.
Earnings Per Share
Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in the earnings of the entity. Since
there is a significant number of options and warrants outstanding, fluctuations in the actual market price can have a variety of results for each period
presented. No options and warrants were included in the 2013 and 2012 computations of diluted earnings per share because their effect would be anti-dilutive
as a result of losses or options and warrants for which the strike price exceeds the quoted market value at period end.
Basic & Diluted EPS
$
For the Year Ended
December 31, 2013
Shares
15,463,256 $
Net Loss
(10,058,996)
EPS
Net Loss
(0.65) $
(4,163,008)
For the Year Ended
December 31, 2012
Shares
11,136,484 $
EPS
(0.37)
Shares issuable upon the exercise of options and warrants outstanding at December 31, 2013 and 2012 were 2,051,511 and 1,457,724 shares issuable upon the
exercise of options, and 8,156,526 and 2,843,338 shares issuable upon the exercise of warrants, respectively. The weighted average exercise price of the
Company’s stock options and warrants outstanding at December 31, 2013 were $2.63 and $2.17 per share, respectively. No options or warrants were included
in the 2013 and 2012 computations of diluted earnings per share because their effect would be anti-dilutive as a result of losses in each of those years.
F-10
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and
assumptions such as the fair value of warrants, stock options and recovery of the useful life of intangibles that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those estimates.
Note 3. Intangible Assets
The following is a summary of intangible assets which consists of licenses and patents:
December 31, 2013
Licenses
Patents
Total
December 31, 2012
Licenses
Patents
Total
Weighted
Average
Remaining
Amortization
period
(years)
Cost
Accumulated
Amortization
Net Book
Value
6.72
2.6
3.4
7.72
3.3
4.2
$
$
$
$
462,234
1,893,185
2,355,419
462,234
1,893,185
2,355,419
$
$
$
$
279,258
1,443,649
1,722,907
252,019
1,247,672
1,499,691
$
$
$
$
182,976
449,536
632,512
210,215
645,513
855,728
Amortization expense was $223,216 and $223,838 in 2013 and 2012, respectively.
Based on the balance of licenses and patents at December 31, 2013, the annual amortization expense for each of the succeeding five years is estimated to be
as follows:
Year
2014
2015
2016
2017
2018
Amortization
Expense
$
$
$
$
$
222,800
172,500
61,800
61,800
20,800
License fees and royalty payments are expensed annually as incurred as the Company does not attribute any future benefits other than within that period.
F-11
Note 4. Warrant Liabilities
Warrants issued in connection with the Company’s registered public offering contain provisions that protect holders from a decline in the issue price of its
common stock (or “down-round” provisions) and contain net settlement provisions. The Company accounts for these warrants as liabilities instead of equity.
Down-round provisions reduce the exercise or conversion price of a warrant if a company issues equity shares for a price that is lower than the exercise or
conversion price of the warrants. Net settlement provisions allow the holder of the warrant to surrender shares underlying the warrant equal to the exercise
price as payment of its exercise price, instead of exercising the warrant by paying cash. The Company evaluates whether warrants to acquire its common
stock contain provisions that protect holders from declines in the stock price or otherwise could result in modification of the exercise price and/or shares to be
issued under the respective warrant agreements based on a variable that is not an input to the fair value of a “fixed-for-fixed” option.
The Company recognizes these warrants as liabilities at their fair value on the date of grant and remeasures them at fair value on each reporting date.
The Company recognized an initial warrant liability for the warrants issued in connection with the registered public offering completed in June 2013. The
initial warrant liability recognized on the related warrants totaled $4,827,788, which was based on the June 25, 2013 closing price of a share of our common
stock as reported on OTC Markets of $0.96. On December 31, 2013, the closing price of our common stock as reported on OTC Markets was $1.80. Due to
the fluctuations in the market value of our common stock from June 25, 2013 through December 31, 2013, we recognized a non-cash charge of $3,654,770
for the change in the fair value of the warrant liability during the year ended December 31, 2013.
The assumptions used in connection with the valuation of warrants issued utilizing the Monte Carlo method were as follows:
Number of shares underlying the warrants
Exercise price
Volatility
Risk-free interest rate
Expected dividend yield
Expected warrant life (years)
Stock Price
Recurring Level 3 Activity and Reconciliation
December 31,
2013
Initial
Measurement
June 25,
2013
5,309,438
1.65
$
135%
1.75%
0
4.50
1.80
$
5,416,851
1.65
140%
1.49%
0
5
0.96
$
$
The table below provides a reconciliation of the beginning and ending balances for the liability measured at fair value using significant unobservable inputs
(Level 3). The table reflects losses for the year ended December 31, 2013 for the financial liability categorized as Level 3 as of December 31, 2013.
Fair Value Measurements Using Significant Unobservable Inputs (Level 3):
Warrant liability
F-12
Initial
Measurement
June 25,
2013
4,827,788 $
$
Decrease from
Warrants
Exercised
in 2013
Increase in
Fair Value
December 31,
2013
8,281,247
(201,311) $
3,654,770 $
Note 5. Income Taxes
Deferred tax assets consisted of the following as of December 31:
Net operating loss carry forwards
Orphan drug and research and development credit carry forwards
Other
Total
Valuation allowance
Net deferred tax assets
$
$
$
2013
27,974,000
2,986,000
3,310,000
34,270,000
(34,270,000)
$
-
2012
27,872,000
3,068,000
1,443,000
32,383,000
(32,383,000)
-
At December 31, 2013, the Company had NOL carry forwards of approximately $80,793,000 for federal tax purposes and approximately $5,599,000 of New
Jersey NOL carry forwards remaining after the sale of unused net operating loss carry forwards, portions of which are currently expiring each year through
2033. In addition, the Company has $2,986,000 of various tax credits that expire from 2013 to 2033. The Company may be able to utilize their NOLs to
reduce future federal and state income tax liabilities. However, these NOLs are subject to various limitations under Internal Revenue Code (“IRC”) Section
382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percentage points. In addition, the NOL carry
forwards are subject to examination by the taxing authority and could be adjusted or disallowed due to such exams. Although the Company has not undergone
an IRC Section 382 analysis, it is likely that the utilization of the NOLs may be substantially limited.
The Company and one or more of its subsidiaries files income tax returns in the U.S. Federal jurisdiction, and various state and local jurisdictions. The
Company is no longer subject to Federal income tax assessment for years before 2011 for Federal and 2010 for New Jersey income tax assessment. However,
since the Company has incurred net operating losses in every tax year since inception, all its income tax returns are subject to examination and adjustments by
the Internal Revenue Service for at least three years following the year in which the tax attributes are utilized.
The net change in the valuation allowance for the years ended December 31, 2013 and 2012 was an increase of approximately $1,887,000 and $1,949,000,
respectively, resulting primarily from net operating losses expiring and generated. As a result of the Company’s continuing tax losses, the Company has
recorded a full valuation allowance against a net deferred tax asset.
Reconciliations of the difference between income tax benefit computed at the federal and state statutory tax rates and the provision for income tax benefit for
the years ended December 31, 2013 and 2012 was as follows:
Income tax loss at federal statutory rate
State tax benefits, plus sale of NJ NOLs, net of federal benefit
Subtotal
Valuation allowance
Income tax benefit
2013
2012
(34.00)%
(6.00)
(40.00)
32.54
(7.46)%
(34.00)%
(6.00)
(40.00)
28.87
(11.13)%
During the years ended December 31, 2013 and 2012, in accordance with the State of New Jersey’s Technology Business Tax Certificate Program, which
allowed certain high technology and biotechnology companies to sell unused net operating loss carryforwards to other New Jersey-based corporate taxpayers
based in New Jersey, the Company sold New Jersey net operating loss carryforwards, resulting in the recognition of $750,356 and $521,458 of income tax
benefit, net of transaction costs, respectively. There can be no assurance as to the continuation or magnitude of this program in the future.
F-13
The Company follows FASB ASC 740-10, Uncertainty in Income Taxes. The Company recognizes interest and penalties associated with uncertain tax
positions as a component of income tax expense. The Company does not expect that there will be any amounts of unrecognized tax benefits in the next 12
months. This standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. The Company did not have any unrecognized tax benefits or a liability for uncertain tax positions at December
31, 2013 and 2012. The Company does not expect to have any unrecognized tax benefits within the next twelve months. The Company recognizes accrued
interest and penalties associated with uncertain tax positions, if any, as part of income tax expense. There were no tax related interest and penalties recorded
for 2013 and 2012.
Note 6. Shareholders’ Equity
Preferred Stock
The Company has 350,000 shares of preferred stock authorized, none of which are issued or outstanding.
Common Stock
The following items represent transactions in the Company’s common stock for the year ended December 31, 2013:
· In April 2013, the Company issued 1,034,483 shares of common stock related to the execution of an Exclusive Channel Collaboration agreement
with Intrexon Corporation.
· In June 2013, the Company issued 6,773,995 shares of common stock pursuant to a registered direct unit offering of common stock and warrants.
· In October 2013, the Company issued 107,143 shares of common stock for stock warrants exercised.
· In November, the Company issued 383,370 shares of common stock pursuant to the Lincoln Park Capital equity facility.
· In two separate transactions, the Company issued 103,439 shares of common stock for stock options exercised.
· In five separate transactions, the Company issued 55,104 shares of common stock as part of consideration for services performed.
The following items represent transactions in the Company’s common stock for the year ended December 31, 2012:
· In January 2012, the Company issued 16,667 shares of common stock as part of an employee’s 2011 bonus from the Company.
· In four separate transactions, the Company issued 46,706 shares of common stock as part of consideration for services performed.
Warrants
During 2013, the Company issued warrants to purchase 5,416,581 shares of common stock pursuant to a registered direct offering of common stock and
warrants. Additionally, the Company issued 5,000 warrants to a consultant in exchange for services. During 2012, the Company issued warrants to purchase
50,000 shares of common stock to a consultant in exchange for services. Additionally, in December 2012, the Company replaced previously issued warrants
to purchase 724,873 shares of common stock for new warrants. These new warrants were issued to Sigma Tau upon the Company reacquiring the rights to
orBec® and to Dr. George McDonald upon the renegotiation of our orBec® license agreement.
A charge of $3,654,770, related to the warrants issued in the registered direct offering, was incurred for the change in the fair value of the warrant liability
during the year ended December 31, 2013. Additionally, warrant expense charges of $4,775 and $429,902 were recorded during the years ended December
31, 2013 and 2012, respectively. These expenses represented the estimated fair value of services performed during these periods and renegotiated
agreements, in 2012, with Sigma Tau and Dr. McDonald pertaining to the rights of orBec® .
F-14
Equity Line
In November 2013, the Company entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”). The Lincoln
Park equity facility allows the Company to require Lincoln Park to purchase up to 75,000 shares (“Regular Purchase”) of the Company’s common stock every
two business days, up to an aggregate of $10.0 million over approximately a 36-month period depending on certain conditions, including the quoted market
price of the Company’s common stock on such date. The purchase price for the Regular Purchase shall be equal to the lesser of (i) the lowest sale price of the
common shares during the purchase date, or (ii) the average of the three lowest closing sale prices of common shares during the twelve business days prior to
the purchase date. Each Regular Purchase shall not exceed $750,000. Furthermore, for each additional purchase by Lincoln Park, additional commitment
shares in commensurate amounts up to total of 122,070 shares will be issued based upon the relative proportion of the aggregate amount of $10.0 million. The
Regular Purchase amount may be increased up to 100,000 shares of common stock if the closing price of the common shares is not below $2.50. In addition
to the Regular Purchase and provided that the closing price of the common shares is not below $1.50 on the purchase date, the Company in its sole discretion
may direct Lincoln Park on each purchase date to purchase on the next stock trading day (Accelerate Purchase Date”) additional shares of Company stock up
to the lesser of (i) two times the number of shares purchased following a Regular Purchase or (ii) 30% of the trading volume of shares traded on the
Accelerated Purchase Date as a price equal to the lesser of the closing sale price on the Accelerated Purchase Date or 95% of the Accelerated Purchase Date’s
volume weighted average price.
As part of the agreement, the Company received gross proceeds of $600,000 for the issuance of 383,370 shares of common stock to Lincoln Park. Associated
costs of $71,949 were incurred resulting in net proceeds of $528,051.
Note 7. Stock Option Plans and Warrants to Purchase Common Stock
Stock Option Plans
The Amended and Restated 1995 Omnibus Plan was replaced by the 2005 Equity Incentive Plan and is divided into four separate equity programs:
1) the Discretionary Option Grant Program, under which eligible persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of common stock,
2) the Salary Investment Option Grant Program, under which eligible employees may elect to have a portion of their base salary invested each year in
options to purchase shares of common stock,
3) the Automatic Option Grant Program, under which eligible nonemployee Board members will automatically receive options at periodic intervals to
purchase shares of common stock, and
4) the Director Fee Option Grant Program, under which non-employee Board members may elect to have all, or any portion, of their annual retainer fee
otherwise payable in cash applied to a special option grant.
The 2005 Equity Incentive Plan (“2005 Plan”) is divided into four separate equity programs:
1) the Discretionary Option Grant Program, under which eligible persons may, at the discretion of the Plan Administrator, be issued common stock or
granted options to purchase shares of common stock,
2) the Salary Investment Option Grant Program, under which eligible employees may elect to have a portion of their base salary invested each year in
options to purchase shares of common stock,
3) the Automatic Option Grant Program, under which eligible nonemployee Board members will automatically receive options at periodic intervals to
purchase shares of common stock, and
4) the Director Fee Option Grant Program, under which non-employee Board members may elect to have all, or any portion, of their annual retainer fee
otherwise payable in cash applied to a special option grant.
In addition, under the 2005 Plan, the Board may elect to pay certain consultants, directors, and employees in common stock. The 2005 Plan was amended in
September 2007 to increase the number of options available under the plan to 1,000,000, in 2010 to increase the number of shares under the plan to 1,750,000
and again in 2013 to increase the number shares available under the plan to 3,000,000.
F-15
The table below only accounts for transactions occurring as part of the amended 2005 Equity Incentive Plan.
Shares available for grant at beginning of year
Increase in shares available for the plan
Options granted
Options exercised
Options forfeited or expired
Shares available for grant at end of year
December 31,
2013
2012
129,711
1,250,000
(791,100)
103,439
83,874
60,692
-
(100,000)
-
169,019
775,924
129,711
The total option activity for the 1995 Omnibus Plan and the amended 2005 Plan for the years ended December 31, 2013 and 2012 was as follows:
Balance at December 31, 2011
Granted
Exercised
Forfeited
Balance at December 31, 2012
Granted
Exercised
Forfeited
Balance at December 31, 2013
Weighted
Average
Options
Exercise Price
3.75
$
0.30
-
6.22
3.19
1.35
0.57
2.84
2.63
Options
1,544,242
100,000
(186,518)
$
1,457,724
791,100
(103,439)
(93,874)
$
2,051,511
As of December 31, 2013, there were 1,549,693 options exercisable with a weighted average exercise price of $3.01, a weighted average remaining
contractual term of 6.4 years and an intrinsic value of $712,000. As of December 31, 2013, there were 2,051,511 options outstanding and expected to vest
with a weighted average exercise price of $2.63, weighted average remaining term of 7.3 years and an intrinsic value of $1,157,000. The aggregate intrinsic
value represents the total pre-tax intrinsic value (the difference between the closing price of our common stock on the last trading day on December 31, 2013
and the exercise price, multiplied by the number of in-the-money options) what would have been received by the option holders had all option holders
exercised their options on December 31, 2013. This amount changes based on the fair market value of our common stock.
The Company awarded 791,100 and 100,000 stock options to new employees and new and existing Board members during 2013 and 2012, respectively. In
2013, under the 2005 Equity Incentive plan, 723,000 option grants were issued to employees and 68,100 option grants were issued to Board members.
F-16
The weighted-average exercise price, by price range, for outstanding options to purchase common stock at December 31, 2013 was:
Price
Range
$0.30-$2.20
$2.26-$4.10
$4.64-$8.60
$9.40-$11.60
$18.00-$25.60
Total
Weighted
Average
Remaining
Contractual
Life in Years
8.2
8.0
4.9
3.2
0.1
7.3
Outstanding
Options
Exercisable
Options
1,299,302
229,459
426,500
93,750
2,500
2,051,511
842,305
184,638
426,500
93,750
2,500
1,549,693
The Company’s stock-based compensation for the years ended December 31, 2013 and 2012 was $803,060 and $462,170, respectively. At December 31,
2013, the total compensation cost for stock options not yet recognized was approximately $732,000 and will be expensed over the next three years.
Warrants to Purchase Common Stock
Warrant activity for the years ended December 31, 2013 and 2012 was as follows:
Balance at December 31, 2011
Granted
Exercised
Expired/Cancelled
Balance at December 31, 2012
Granted
Exercised
Expired/Cancelled
Balance at December 31, 2013
Weighted
Average
Warrant
Exercise Price
4.40
$
0.56
-
5.40
3.13
1.65
1.65
15.00
2.17
Warrants
2,701,569
774,873
-
(633,104)
$
2,843,338
5,421,581
(107,143)
(1,250)
$
8,156,526
During 2013, the Company issued warrants to purchase 5,416,581 shares of common stock pursuant of a registered direct offering of common stock and
warrants. Additionally, the Company issued 5,000 warrants to a consultant in exchange for services. Warrants of 1,250 either expired or were cancelled by the
Company with an exercise price of $15.00. A charge of $3,654,770, related to the warrants issued in the registered direct offering, was incurred for the change
in the fair value of the warrant liability and a warrant expense charge of $4,775 was recorded during the year ended December 31, 2013 for the warrants
issued for services.
The weighted-average exercise price, by price range, for outstanding warrants at December 31, 2013 was:
Price
Range
$.53-$2.05
$2.80-$3.96
$5.50-$5.56
$5.60-$6.06
Total
Weighted
Average
Remaining
Contractual
Life in Years
4.4
0.05
0.77
2.0
3.44
Outstanding
Warrants
Exercisable
Warrants
6,091,811
1,103,202
379,561
581,952
8,156,526
6,091,811
1,103,202
379,561
581,952
8,156,526
During 2014, warrants to purchase approximately 1.5 million shares of the Company’s common stock will expire.
F-17
Note 8. Concentrations
At December 31, 2013 and 2012, the Company had deposits in major financial institutions that exceeded the amount under protection by the Securities
Investor Protection Corporation (“SIPC”). Currently, the Company is covered up to $1,000,000 by the SIPC. The excess amounts at December 31, 2013 and
2012 were $4,856,242 and $2,356,380, respectively.
Note 9. Commitments and Contingencies
The Company has commitments of approximately $400,000 at December 31, 2013 for agreements with consultants and universities. Additionally, the
Company has collaboration and license agreements, which upon clinical or commercialization success, may require the payment of milestones of up to $7.9
million and/or royalties up to 6% of net sales of covered products, if and when achieved. However, there can be no assurance that clinical or
commercialization success will occur.
On April 27, 2013, the Company entered into an exclusive channel collaboration agreement with Intrexon (the “Channel Agreement”) to use Intrexon’s
advanced human antibody discovery, isolation and production technologies for the development of human monoclonal antibody therapies for a new
biodefense application targeting melioidosis. The Channel Agreement grants an exclusive worldwide license to use specified patents and other intellectual
property of Intrexon in connection with the research, development, use, importing, manufacture, sale and offer for sale of products for the treatment of
melioidosis through the use of exogenously produced human recombinant monoclonal antibodies. The Channel Agreement, upon clinical or
commercialization success, may require the payment of certain milestones up to $7 million, if and when achieved.
On February 7, 2012, the Company entered into a lease agreement through March 31, 2015 for existing office space. The rent for the first 12 months is
approximately $8,000 per month, or approximately $18.25 per square foot. This rent increases to approximately $8,310 per month, or approximately $19.00
per square foot, for the remaining 24 months.
In February 2007, the Company’s Board of Directors authorized the issuance of the following number of shares to each of Dr. Schaber and Dr. Brey
immediately prior to the completion of a transaction, or series or a combination of related transactions negotiated by its Board of Directors whereby, directly
or indirectly, a majority of its capital stock or a majority of its assets are transferred from the Company and/or its stockholders to a third party: 50,000
common shares to Dr. Schaber and 10,000 common shares to Dr. Brey. The amended agreement with Dr. Schaber includes its obligation to issue such shares
if such event occurs.
Employees with employment contracts have severance agreements that will provide separation benefits from the Company if they are involuntarily separated
from employment. On February 15, 2012, Mr. Myrianthopoulos’ employment agreement was terminated. The Company recognized an expense of $95,625 at
March 31, 2012 and at December 31, 2012 there are no severance and healthcare benefits due to Mr. Myrianthopoulos. In connection with the termination of
Mr. Myrianthopoulos’ employment agreement, we accelerated the vesting of options to purchase 53,908 shares of common stock and Mr. Myrianthopoulos
forfeited options to purchase 72,500 shares of common stock, resulting in Mr. Myrianthopoulos holding vested options to purchase 192,500 shares of
common stock with expiration dates ranging from November 14, 2012 to November 30, 2021. In connection with the acceleration of vesting, the Company
recognized $68,032 of stock-based compensation expense during the year ended December 31, 2012.
As a result of the above agreements, the Company has future contractual obligations over the next five years as follows:
Year
2014
2015
2016
2017
2018
Total
F-18
Research and
Development
Property and
Other Leases
Total
$
$
100,000
75,000
75,000
75,000
75,000
400,000
$
$
101,200
25,000
-
-
-
126,200
$
$
201,200
100,000
75,000
75,000
75,000
526,200
Note 10. Operating Segments
The Company maintains two active operating segments: BioTherapeutics and Vaccines/BioDefense. Each segment includes an element of overhead costs
specifically associated with its operations, with its corporate shared services group responsible for support functions generic to both operating segments.
Revenues
Vaccines/BioDefense
BioTherapeutics
Total
Loss from Operations
Vaccines/BioDefense
BioTherapeutics
Corporate
Total
Amortization and Depreciation Expense
Vaccines/BioDefense
BioTherapeutics
Corporate
Total
Interest Income
Corporate
Stock-Based Compensation
Vaccines/BioDefense
BioTherapeutics
Corporate
Total
Identifiable Assets
Vaccines/BioDefense
BioTherapeutics
Corporate
Total
F-19
For the Year Ended December
31,
2013
2012
$
$
$
$
$
$
$
$
$
$
$
3,003,822
220,330
3,224,152
$
$
2,919,677
224,943
3,144,620
(1,666,130) $
(3,069,998)
(2,420,414)
(7,156,542) $
(33,636)
(2,203,721)
(2,453,311)
(4,690,668)
37,981
190,033
2,057
230,071
$
$
38,589
190,003
2,038
230,630
1,960
$
6,202
80,432
250,431
472,197
803,060
$
$
44,484
84,020
333,666
462,170
As of December 31,
2013
2012
1,870,414
386,721
6,008,320
8,265,455
$
$
628,494
566,111
3,510,499
4,705,104
The Board of Directors and Shareholders
Soligenix, Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheets of Soligenix, Inc. and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and
the related consolidated statements of operations, shareholders’ equity (deficiency), and cash flows for each of the years in the two-year period ended
December 31, 2013. The financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Soligenix, Inc. and
subsidiaries as of December 31, 2013, and the consolidated results of their operations and their cash flows for each of the years in the two-year period ended
December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.
/s/ EisnerAmper LLP
Jenkintown, PA
March 26, 2014
F-20
SUBSIDIARIES OF SOLIGENIX, INC.
EXHIBIT 21.1
The following represents a list of Soligenix, Inc.’s subsidiaries:
Name
Enteron Pharmaceuticals, Inc.
Orasomal Technologies Inc.
BioDefense Corp.
Soligenix BioPharma Canada Incorporated
Soligenix UK Limited
Ownership
100.00%
75.30%
100.00%
100.00%
100.00%
State of
Incorporation
Delaware
Delaware
Delaware
Canada
United
Kingdom
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements of Soligenix, Inc. and subsidiaries on Form S3 (Nos. 333-162375 and 333-
167792) and Form S8 (Nos, 333-157322, 333-149239, 333-162375, and 333-167792) of our report dated March 26, 2014, on our audits of the consolidated
financial statements as of December 31, 2013 and 2012 and for each of the years in the two-year period ended December 31, 2013, which report is included in
this Annual Report on Form 10-K to be filed on or about March 26, 2014.
Exhibit 23.1
/s/ EisnerAmper LLP
Jenkintown, PA
March 26, 2014
EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Christopher J. Schaber, Ph.D., certify that:
1. I have reviewed this Form 10-K of the Soligenix, Inc. for the fiscal year ended December 31, 2013;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
March 26, 2014
/s/ Christopher J. Schaber
Christopher J. Schaber, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Joseph M. Warusz, certify that:
1. I have reviewed this Form 10-K of the Soligenix, Inc. for the fiscal year ended December 31, 2013;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
March 26, 2014
/s/ Joseph M. Warusz
Joseph M. Warusz, CPA
Vice Presient of Finance, Acting Chief Financial
Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with this Form 10-K of Soligenix, Inc. (the “Company”) for the fiscal year ended December 31, 2013, as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
March 26, 2014
/s/ Christopher J. Schaber
Christopher J. Schaber, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with this Form 10-K of Soligenix, Inc. (the “Company”) for the fiscal year ended December 31, 2013, as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
March 26, 2014
/s/ Joseph M. Warusz
Joseph M. Warusz, CPA
Vice Presient of Finance, Acting Chief Financial
Officer
(Principal Financial Officer)