Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 


 

FORM 20-F

 

o

Registration Statement Pursuant to Section 12(b) or 12(g) of The Securities Exchange Act of 1934

 

OR

 

x

Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 for the fiscal year ended December 31, 2009

 

OR

 

o

Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

OR

 

o

Shell Company Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Commission file number 0-30752

 

ÆTERNA ZENTARIS INC.

(Exact Name of Registrant as Specified in its Charter)

 

Not Applicable
(Translation of Registrant’s Name into English)

 

Canada
(Jurisdiction of Incorporation)

 

1405 du Parc-Technologique Blvd.
Quebec City, Quebec
Canada, G1P 4P5

(Address of Principal Executive Offices)

 

Dennis Turpin

Telephone: 418-652-8525

E-mail: dturpin@aezsinc.com

1405 du Parc-Technologique Blvd.
Quebec City, Quebec
Canada, G1P 4P5

(Name, Telephone, E-mail and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

 

 

Title of Each Class

 

 

 

 

Name of Each Exchange on Which Registered

 

Common Shares

 

NASDAQ Global Market

 

 

Toronto Stock Exchange

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:  NONE

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the ACT:  NONE

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:  63,089,954 common shares as of December 31, 2009.

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o      No  x

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  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 Web site, 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  o      No  x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or, or a non-accelerated filer.  See definitions of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer       o

 

Accelerated filer       x

 

Non-accelerated filer       o

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP       o

 

International Financial Reporting Standards as issued by the International Accounting Standards Board       o

 

Other       x

 

If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.  Item 17  o    Item 18  x

 

If this is an annual report, 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

 

 

 



Table of Contents

 

Basis of Presentation

 

General

 

Except where the context otherwise requires, all references in this annual report on Form 20-F (“Form 20-F”) to the “Company”, “Æterna Zentaris Inc.”, “we”, “us”, “our” or similar words or phrases are to Æterna Zentaris Inc. and its subsidiaries, taken together.  In this annual report, references to “$” and “US$” are to United States dollars and references to “CAN$” are to Canadian dollars.  Unless otherwise indicated, the statistical and financial data contained in this annual report are presented as at December 31, 2009.

 

Forward-Looking Statements

 

This annual report contains forward-looking statements made pursuant to the safe harbor provisions of the U.S. Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which could cause the Company’s actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, among others, the availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, the ability of the Company to take advantage of business opportunities in the pharmaceutical industry, uncertainties related to the regulatory process and general changes in economic conditions. Investors should consult the Company’s quarterly and annual filings with the Canadian and U.S. securities commissions for additional information on risks and uncertainties relating to the forward-looking statements. Investors are cautioned not to rely on these forward-looking statements. The Company does not undertake to update these forward-looking statements and we disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments except if we are requested to do so by a governmental authority or applicable law.

 



Table of Contents

 

TABLE OF CONTENTS

 

GENERAL INFORMATION

 

 

 

 

Page

 

 

 

 

PART I

 

 

1

 

 

 

 

 

Item 1.

Identity of Directors, Senior Management and Advisers

1

 

 

A.

Directors and senior management

1

 

 

B.

Advisors

1

 

 

C.

Auditors

1

 

Item 2.

Offer Statistics and Expected Timetable

1

 

 

A.

Offer statistics

1

 

 

B.

Method and expected timetable

1

 

Item 3.

Key Information

1

 

 

A.

Selected financial data

1

 

 

B.

Capitalization and indebtedness

4

 

 

C.

Reasons for the offer and use of proceeds

4

 

 

D.

Risk factors

4

 

Item 4.

Information on the Company

17

 

 

A.

History and development of the Company

17

 

 

B.

Business overview

18

 

 

C.

Organizational structure

50

 

 

D.

Property, plants and equipment

50

 

Item 4A.

Unresolved Staff Comments

50

 

Item 5.

Operating and Financial Review and Prospects

51

 

Item 6.

Directors, Senior Management and Employees

78

 

 

A.

Directors and senior management

78

 

 

B.

Compensation

81

 

 

C.

Board practices

93

 

 

D.

Employees

94

 

 

E.

Share ownership

95

 

Item 7.

Major Shareholders and Related Party Transactions

95

 

 

A.

Major shareholders

95

 

 

B.

Related party transactions

96

 

 

C.

Interests of experts and counsel

96

 

Item 8.

Financial Information

96

 

 

A.

Consolidated statements and other financial information

96

 

 

B.

Significant changes

96

 

Item 9.

The Offering and Listing

97

 

 

A.

Offer and listing details

97

 

 

B.

Plan of distribution

97

 

 

C.

Markets

97

 

 

D.

Selling shareholders

97

 

 

E.

Dilution

98

 

 

F.

Expenses of the issuer

98

 

Item 10.

Additional Information

98

 

 

A.

Share capital

98

 

 

B.

Memorandum and articles of association

98

 

 

C.

Material contracts

107

 

 

D.

Exchange controls

108

 

 

E.

Taxation

109

 

 

F.

Dividends and paying agents

114

 

 

G.

Statement by experts

114

 

 

H.

Documents on display

114

 



Table of Contents

 

 

 

I.

Subsidiary information

114

 

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

114

 

Item 12.

Description of Securities Other than Equity Securities

116

 

 

A.

Debt securities

116

 

 

B.

Warrants and rights

116

 

 

C.

Other securities

116

 

 

D.

American depositary shares

116

 

 

 

 

 

PART II

 

 

116

 

 

 

 

 

Item 13.

Defaults, Dividend Arrearages and Delinquencies

116

 

Item 14.

Material Modification to the Rights of Security Holders and Use of Proceeds

116

 

Item 15.

Controls and Procedures

116

 

Item 16.

[Reserved]

117

 

Item 16A.

Audit Committee Financial Expert

117

 

Item 16B.

Code of Ethics

117

 

Item 16C.

Principal Accountant Fees and Services

117

 

 

A.

Audit Fees

117

 

 

B.

Audit-related Fees

117

 

 

C.

Tax Fees

118

 

 

D.

All Other Fees

118

 

 

E.

Audit Committee Pre-Approval Policies and Procedures

118

 

Item 16D.

Exemptions from the Listing Standards for Audit Committees

118

 

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

118

 

Item 16F.

Changes in Registrant’s Certifying Accountant

118

 

Item 16G.

Corporate Governance

118

 

 

 

 

PART III

 

119

 

 

 

 

 

Item 17.

Financial Statements

119

 

Item 18.

Financial Statements

119

 

Item 19.

Exhibits

171

 



Table of Contents

 

PART I

 

Item 1.    Identity of Directors, Senior Management and Advisers

 

A.            Directors and senior management

 

Not applicable.

 

B.            Advisors

 

Not applicable.

 

C.            Auditors

 

Not applicable.

 

Item 2.    Offer Statistics and Expected Timetable

 

A.            Offer statistics

 

Not applicable.

 

B.            Method and expected timetable

 

Not applicable.

 

Item 3.    Key Information

 

A.            Selected financial data

 

The selected financial data should be read in conjunction with our audited consolidated financial statements and the related notes included elsewhere in this annual report, and “Item 5. Operating and Financial Review and Prospects” of this annual report.

 

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Table of Contents

 

Consolidated Statements of Operations Data

(in thousands of US dollars, except share and per share data)

Canadian GAAP

 

 

 

Years Ended December 31,

 

 

 

2009

 

2008

 

2007

 

2006

 

2005

 

 

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

63,237

 

38,478

 

42,068

 

38,799

 

44,813

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

Cost of sales, excluding depreciation and amortization

 

16,501

 

19,278

 

12,930

 

11,270

 

8,250

 

Research and development costs

 

44,217

 

57,448

 

39,248

 

27,422

 

25,544

 

Research and development tax credits and grants

 

(403

)

(343

)

(2,060

)

(1,564

)

(317

)

Selling, general and administrative expenses

 

16,040

 

17,325

 

20,403

 

16,478

 

14,403

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

3,285

 

1,515

 

1,562

 

2,816

 

1,665

 

Intangible assets

 

7,555

 

5,639

 

4,004

 

6,148

 

4,279

 

Impairment of long-lived assets held for sale

 

 

 

735

 

 

 

 

 

87,195

 

100,862

 

76,822

 

62,570

 

53,824

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(23,958

)

(62,384

)

(34,754

)

(23,771

)

(9,011

)

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

349

 

868

 

1,904

 

1,441

 

1,235

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

Long-term debt and convertible term loans

 

 

 

(85

)

(1,270

)

(6,979

)

Other

 

(5

)

(118

)

 

(163

)

(31

)

Foreign exchange (loss) gain

 

(1,110

)

3,071

 

(1,035

)

319

 

(87

)

Loss on disposal of long-lived assets held for sale

 

 

(35

)

 

 

 

Loss on disposal of equipment

 

 

(44

)

(28

)

 

 

Gain on disposal of long-term investment

 

 

 

 

409

 

 

 

 

(766

)

3,742

 

756

 

736

 

(5,862

)

 

 

 

 

 

 

 

 

 

 

 

 

Share in the results of an affiliated company

 

 

 

 

1,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes from continuing operations

 

(24,724

)

(58,642

)

(33,998

)

(21,460

)

(14,873

)

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) recovery

 

 

(1,175

)

1,961

 

29,037

 

(609

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings from continuing operations

 

(24,724

)

(59,817

)

(32,037

)

7,577

 

(15,482

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings from discontinued operations

 

 

 

(259

)

25,813

 

26,053

 

Net (loss) earnings for the year

 

(24,724

)

(59,817

)

(32,296

)

33,390

 

10,571

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings per share from continuing operations

 

 

 

 

 

 

 

 

 

 

 

Basic

 

(0.43

)

(1.12

)

(0.61

)

0.14

 

(0.34

)

Diluted

 

(0.43

)

(1.12

)

(0.61

)

0.14

 

(0.34

)

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

0.50

 

0.57

 

Diluted

 

 

 

 

0.48

 

0.57

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings per share

 

 

 

 

 

 

 

 

 

 

 

Basic

 

(0.43

)

(1.12

)

(0.61

)

0.64

 

0.23

 

Diluted

 

(0.43

)

(1.12

)

(0.61

)

0.62

 

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

 

 

 

 

 

 

 

 

 

 

Basic

 

56,864,484

 

53,187,470

 

53,182,803

 

52,099,290

 

46,139,814

 

Diluted

 

56,864,484

 

53,187,470

 

53,182,803

 

52,549,260

 

46,139,814

 

 

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Table of Contents

 

US GAAP

 

 

 

Years ended December 31,

 

 

 

2009

 

2008

 

2007

 

2006

 

2005

 

 

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings for the year

 

(16,794

)

(56,070

)

(37,428

)

34,262

 

15,970

 

Of which:

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings from continuing operations

 

(16,794

)

(56,070

)

(36,415

)

8,449

 

(10,083

)

Net (loss) earnings from discontinued operations

 

 

 

(1,013

)

25,813

 

26,053

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings per share from continuing operations

 

 

 

 

 

 

 

 

 

 

 

Basic

 

(0.30

)

(1.05

)

(0.68

)

0.16

 

(0.22

)

Diluted

 

(0.30

)

(1.05

)

(0.68

)

0.16

 

(0.22

)

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings per share from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

(0.02

)

0.50

 

0.56

 

Diluted

 

 

 

(0.02

)

0.49

 

0.56

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) earnings per share

 

 

 

 

 

 

 

 

 

 

 

Basic

 

(0.30

)

(1.05

)

(0.70

)

0.66

 

0.34

 

Diluted

 

(0.30

)

(1.05

)

(0.70

)

0.65

 

0.34

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

 

 

 

 

 

 

 

 

 

 

Basic

 

56,864,484

 

53,187,470

 

53,182,803

 

52,099,290

 

46,139,814

 

Diluted

 

56,864,484

 

53,187,470

 

53,182,803

 

52,549,260

 

46,139,814

 

 

Consolidated Balance Sheet Data

(in thousands of US dollars)

 

Canadian GAAP

 

 

 

As at December 31,

 

 

 

2009

 

2008

 

2007

 

2006

 

2005

 

 

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

38,100

 

49,226

 

10,272

 

8,939

 

12,234

 

Short-term investments

 

 

493

 

31,115

 

51,550

 

22,370

 

Working capital

 

29,745

 

39,554

 

37,325

 

85,413

 

99,502

 

Restricted cash

 

878

 

 

 

 

 

Total assets

 

86,262

 

108,342

 

123,363

 

223,491

 

419,785

 

Long-term debt and payable

 

143

 

172

 

 

687

 

29,866

 

Share capital

 

41,203

 

30,566

 

30,566

 

168,466

 

130,344

 

Shareholders’ equity

 

9,226

 

21,475

 

88,591

 

178,879

 

109,531

 

 

US GAAP

 

 

 

As at December 31,

 

 

 

2009

 

2008

 

2007

 

2006

 

2005

 

 

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

38,100

 

49,226

 

10,272

 

8,939

 

12,234

 

Short-term investments

 

 

493

 

31,115

 

51,550

 

22,370

 

Working capital

 

29,745

 

39,554

 

37,325

 

85,413

 

99,502

 

Restricted cash

 

878

 

 

 

 

 

Total assets

 

84,116

 

100,001

 

109,182

 

209,143

 

404,587

 

Long-term debt and payable

 

143

 

172

 

 

687

 

30,858

 

Share capital

 

33,226

 

22,589

 

22,589

 

160,489

 

129,750

 

Shareholders’ equity

 

5,729

 

13,134

 

74,410

 

169,704

 

99,797

 

 

3



Table of Contents

 

B.            Capitalization and indebtedness

 

Not applicable.

 

C.            Reasons for the offer and use of proceeds

 

Not applicable.

 

D.            Risk factors

 

Risks Related to Us and Our Business

 

Investments in biopharmaceutical companies are generally considered to be speculative.

 

The prospects for companies operating in the biopharmaceutical industry may generally be considered to be uncertain, given the very nature of the industry and, accordingly, investments in biopharmaceutical companies should be considered to be speculative.

 

We have a history of operating losses and we may never achieve or maintain operating profitability.

 

Our product candidates remain at the development stage and we have incurred substantial expenses in our efforts to develop products. Consequently, we have incurred recurrent operating losses and, as disclosed in our audited consolidated financial statements for the years ended December 31, 2009, 2008 and 2007, we had an accumulated deficit of $127.5 million as of December 31, 2009. Our operating losses have adversely impacted, and will continue to adversely impact, our working capital, total assets and shareholders’ equity. We do not expect to reach operating profitability in the immediate future, and our expenses are likely to increase as we continue to expand our research and development (“R&D”) and clinical study programs and our sales and marketing activities and seek regulatory approval for our product candidates. Even if we succeed in developing new commercial products, we expect to incur additional operating losses for at least the next several years. If we do not ultimately generate sufficient revenue from commercialized products and achieve or maintain operating profitability, an investment in our securities could result in a significant or total loss.

 

Our clinical trials may not yield results which will enable us to obtain regulatory approval for our products, and a setback in any of our clinical trials would likely cause a drop in the price of our securities.

 

We will only receive regulatory approval for a product candidate if we can demonstrate in carefully designed and conducted clinical trials that the product candidate is both safe and effective. We do not know whether our pending or any future clinical trials will demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals or will result in marketable products. Unfavorable data from those studies could result in the withdrawal of marketing approval for approved products or an extension of the review period for developmental products. Clinical trials are inherently lengthy, complex, expensive and uncertain processes and have a high risk of failure. It typically takes many years to complete testing, and failure can occur at any stage of testing. Results attained in preclinical testing and early clinical studies, or trials, may not be indicative of results that are obtained in later studies.

 

None of our product candidates has to date received regulatory approval for its intended commercial sale. We cannot market a pharmaceutical product in any jurisdiction until it has completed rigorous preclinical testing and clinical trials and passed such jurisdiction’s extensive regulatory approval process. In general, significant research and development and clinical studies are required to demonstrate the safety and efficacy of our product candidates before we can submit regulatory applications. Pre-clinical testing and clinical development are long, expensive and uncertain processes. Preparing, submitting and advancing applications for regulatory approval is complex, expensive and time-consuming and entails significant uncertainty. Data obtained from pre-clinical and clinical tests can be interpreted in different ways, which could delay, limit or prevent regulatory approval. It may take us many years to complete the testing of our product candidates and failure can occur at any stage of this process. In addition, we have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approval in the United States, in Canada and abroad and, accordingly, may encounter unforeseen problems and delays in the approval process. Though we may engage a clinical research organization with experience in conducting regulatory trials, errors in the conduct, monitoring and/or auditing could invalidate the results from a regulatory perspective. Even if a product candidate is approved by the U.S. Food and Drug Administration (“FDA”), the Canadian Therapeutic Products Directorate or any other regulatory authority, we may not obtain approval for an indication whose market is large enough to recoup our investment in that product candidate. In addition, there can be no assurance that we will ever obtain all or any required regulatory approvals for any of our product candidates.

 

4



Table of Contents

 

We are currently developing our product candidates based on R&D activities, preclinical testing and clinical trials conducted to date, and we may not be successful in developing or introducing to the market these or any other new products or technology. If we fail to develop and deploy new products successfully and on a timely basis, we may become non-competitive and unable to recoup the R&D and other expenses we incur to develop and test new products.

 

Interim results of preclinical or clinical studies do not necessarily predict their final results, and acceptable results in early studies might not be obtained in later studies. Safety signals detected during clinical studies and pre-clinical animal studies may require us to do additional studies, which could delay the development of the drug or lead to a decision to discontinue development of the drug. Product candidates in the later stages of clinical development may fail to show the desired safety and efficacy traits despite positive results in initial clinical testing. Results from earlier studies may not be indicative of results from future clinical trials and the risk remains that a pivotal program may generate efficacy data that will be insufficient for the approval of the drug, or may raise safety concerns that may prevent approval of the drug. Interpretation of the prior pre-clinical and clinical safety and efficacy data of our product candidates may be flawed and there can be no assurance that safety and/or efficacy concerns from the prior data were overlooked or misinterpreted, which in subsequent, larger studies appear and prevent approval of such product candidates.

 

Furthermore, we may suffer significant setbacks in advanced clinical trials, even after promising results in earlier studies. Based on results at any stage of clinical trials, we may decide to repeat or redesign a trial or discontinue development of one or more of our product candidates. Further, actual results may vary once the final and quality-controlled verification of data and analyses has been completed. If we fail to adequately demonstrate the safety and efficacy of our products under development, we will not be able to obtain the required regulatory approvals to commercialize our product candidates.

 

Clinical trials are subject to continuing oversight by governmental regulatory authorities and institutional review boards and:

 

·                  must meet the requirements of these authorities;

·                  must meet requirements for informed consent; and

·                  must meet requirements for good clinical practices.

 

We may not be able to comply with these requirements in respect of one or more of our product candidates.

 

In addition, we rely on third parties, including Contract Research Organizations (“CROs”) and outside consultants, to assist us in managing and monitoring clinical trials. Our reliance on these third parties may result in delays in completing, or in failing to complete, these trials if one or more third parties fails to perform with the speed and level of competence we expect.

 

A failure in the development of any one of our programs or product candidates could have a negative impact on the development of the others. Setbacks in any phase of the clinical development of our product candidates would have an adverse financial impact (including with respect to any agreements and partnerships that may exist between us and other entities), could jeopardize regulatory approval and would likely cause a drop in the price of our securities.

 

If we are unable to successfully complete our clinical trial programs, or if such clinical trials take longer to complete than we project, our ability to execute our current business strategy will be adversely affected.

 

Whether or not and how quickly we complete clinical trials is dependent in part upon the rate at which we are able to engage clinical trial sites and, thereafter, the rate of enrollment of patients, and the rate we collect, clean, lock and analyze the clinical trial database. Patient enrollment is a function of many factors, including the design of the protocol, the size of the patient population, the proximity of patients to and availability of clinical sites, the eligibility criteria for the study, the perceived risks and benefits of the drug under study and of the control drug, if any, the efforts to facilitate timely enrollment in clinical trials, the patient referral practices of physicians, the existence of competitive clinical trials, and whether existing or new drugs are approved for the indication we are studying. Certain clinical trials are designed to continue until a pre-determined number of events have occurred to the patients enrolled. Trials such as this are subject to delays stemming from patient withdrawal and from lower than expected event rates and may also incur increased costs if enrollment is increased in order to achieve the desired number of events. If we experience delays in identifying and contracting with sites and/or in patient enrollment in our clinical trial programs, we may incur additional costs and delays in our development programs, and may not be able to complete our clinical trials on a cost-effective or timely basis. In addition, conducting multi-national studies adds another level of complexity and risk as we are subject to events affecting countries outside Canada. Moreover, negative or inconclusive results from the clinical trials we conduct or adverse medical events could cause us to have to repeat or terminate the clinical trials. Accordingly, we may not be able to complete the clinical trials within an acceptable time frame, if at all. If we or any third party have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay or terminate ongoing clinical trials.

 

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Additionally, we have never filed a new drug application (“NDA”), or similar application for approval in the United States or in any country for our current product candidates, which may result in a delay in, or the rejection of, our filing of an NDA or similar application. During the drug development process, regulatory agencies will typically ask questions of drug sponsors. While we endeavor to answer all such questions in a timely fashion, or in the NDA filing, some questions may not be answered by the time we file our NDA. Unless the FDA waives the requirement to answer any such unanswered questions, submission of an NDA may be delayed or rejected.

 

Even if we obtain regulatory approvals for our product candidates, we will be subject to stringent ongoing government regulation.

 

Even if regulatory authorities approve any of our product candidates, the manufacture, marketing and sale of such products will be subject to strict and ongoing regulation. Compliance with such regulation will be expensive and consume substantial financial and management resources. For example, an approval for a product may be conditioned on our agreement to conduct costly post-marketing follow-up studies to monitor the safety or efficacy of the products. In addition, as a clinical experience with a drug expands after approval because the drug is used by a greater number and more diverse group of patients than during clinical trials, side effects or other problems may be observed after approval that were not observed or anticipated during pre-approval clinical trials. In such a case, a regulatory authority could restrict the indications for which the product may be sold or revoke the product’s regulatory approval.

 

We and our contract manufacturers will be required to comply with applicable current Good Manufacturing Practice (“cGMP”) regulations for the manufacture of our products. These regulations include requirements relating to quality assurance, as well as the corresponding maintenance of rigorous records and documentation. Manufacturing facilities must be approved before we can use them in the commercial manufacturing of our products and are subject to subsequent periodic inspection by regulatory authorities. In addition, material changes in the methods of manufacturing or changes in the suppliers of raw materials are subject to further regulatory review and approval.

 

If we, or any future marketing collaborators or contract manufacturers, fail to comply with applicable regulatory requirements, we may be subject to sanctions including fines, product recalls or seizures and related publicity requirements, injunctions, total or partial suspension of production, civil penalties, suspension or withdrawals of previously granted regulatory approvals, warning or untitled letters, refusal to approve pending applications for marketing approval of new products or of supplements to approved applications, import or export bans or restrictions, and criminal prosecution and penalties. Any of these penalties could delay or prevent the promotion, marketing or sale of our products.

 

If our products do not gain market acceptance, we may be unable to generate significant revenues.

 

Even if our products are approved for commercialization, they may not be successful in the marketplace. Market acceptance of any of our products will depend on a number of factors including, but not limited to:

 

·                  demonstration of clinical efficacy and safety;

·                  the prevalence and severity of any adverse side effects;

·                  limitations or warnings contained in the product’s approved labeling;

·                  availability of alternative treatments for the indications we target;

·                  the advantages and disadvantages of our products relative to current or alternative treatments;

·                  the availability of acceptable pricing and adequate third-party reimbursement; and

·                  the effectiveness of marketing and distribution methods for the products.

 

If our products do not gain market acceptance among physicians, patients, healthcare payers and others in the medical community, which may not accept or utilize our products, our ability to generate significant revenues from our products would be limited and our financial conditions will be materially adversely affected. In addition, if we fail to further penetrate our core markets and existing geographic markets or successfully expand our business into new markets, the growth in sales of our products, along with our operating results, could be negatively impacted.

 

Our ability to further penetrate our core markets and existing geographic markets in which we compete or to successfully expand our business into additional countries in Europe, Asia or elsewhere is subject to numerous factors, many of which are beyond our control. Our products, if successfully developed, may compete with a number of drugs and therapies currently manufactured and marketed by major pharmaceutical and other biotechnology companies. Our products may also compete with new products currently under development by others or with products which may be less expensive than our products. We cannot assure you that our efforts to increase market penetration in our core markets and existing geographic markets will

 

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be successful. Our failure to do so could have an adverse effect on our operating results and would likely cause a drop in the price of our securities.

 

We may require significant additional financing, and we may not have access to sufficient capital.

 

We may require additional capital to pursue planned clinical trials, regulatory approvals, as well as further R&D and marketing efforts for our product candidates and potential products. Except as expressly described in this document and the documents incorporated by reference herein, we do not anticipate generating significant revenues from operations in the near future and we currently have no committed sources of capital.

 

We may attempt to raise additional funds through public or private financings, collaborations with other pharmaceutical companies or financing from other sources. Additional funding may not be available on terms which are acceptable to us. If adequate funding is not available to us on reasonable terms, we may need to delay, reduce or eliminate one or more of our product development programs or obtain funds on terms less favorable than we would otherwise accept. To the extent that additional capital is raised through the sale of equity securities or securities convertible into or exchangeable for equity securities, the issuance of those securities could result in dilution to our shareholders. Moreover, the incurrence of debt financing could result in a substantial portion of our future operating cash flow, if any, being dedicated to the payment of principal and interest on such indebtedness and could impose restrictions on our operations. This could render us more vulnerable to competitive pressures and economic downturns.

 

We anticipate that our existing working capital, including the proceeds from any sale of securities and anticipated revenues, will be sufficient to fund our development programs, clinical trials and other operating expenses for the near future. However, our future capital requirements are substantial and may increase beyond our current expectations depending on many factors including:

 

·                  the duration and results of our clinical trials for our various product candidates going forward;

·                  unexpected delays or developments in seeking regulatory approvals;

·                  the time and cost in preparing, filing, prosecuting, maintaining and enforcing patent claims;

·                  other unexpected developments encountered in implementing our business development and commercialization strategies;

·                  the outcome of litigation, if any; and

·                  further arrangements, if any, with collaborators.

 

In addition, the ongoing recessionary global market and economic conditions as well as certain continuing difficulties in the credit and capital markets may make it even more difficult for us to raise additional financing in the future.

 

A substantial portion of our future revenues may be dependent upon our agreement with Keryx Biopharmaceuticals, Inc. (“Keryx”).

 

We currently expect that a substantial portion of our future revenues may be dependent upon our strategic partnership with Keryx. Under this strategic partnership, Keryx has significant development and commercialization responsibilities with respect to the development and sale of Perifosine. If Keryx were to terminate its agreement with us, fail to meet its obligations or otherwise decrease its level of efforts, allocation of resources or other commitments under this agreement, our future revenues and/or prospects could be negatively impacted and the development and commercialization of Perifosine would be interrupted. In addition, if Keryx does not achieve some or any of the development, regulatory and commercial milestones or if it does not achieve certain net sales thresholds as set forth in the agreement, we will not fully realize the expected economic benefits of the agreement. Further, the achievement of certain of the milestones under this strategic partnership agreement will depend on factors that are outside of our control and most are not expected to be achieved for several years, if at all. Any failure to successfully maintain our strategic partnership agreement could materially and adversely affect our ability to generate revenues.

 

If we are unsuccessful in increasing our revenues and/or raising additional funding, we may possibly cease to continue operating as we currently do.

 

Although our audited consolidated financial statements for the years ended December 31, 2009, 2008 and 2007 have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations, our ability to continue as a going concern is dependent on the successful execution of our business plan, which will require an increase in revenue and/or additional funding to be provided by potential investors as well as non-traditional sources of financing. Although we stated in our audited consolidated financial statements for the years

 

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ended December 31, 2009, 2008 and 2007 that management believed that the Company had, as at December 31, 2009, sufficient financial resources to fund planned expenditures and other working capital needs for at least the 12-month period following such date, there can be no assurance that management will be able to reiterate such belief in our future financial statements.

 

We have had sustained losses, accumulated deficits and negative cash flows from operations since our inception. We expect that this will continue throughout 2010.

 

Additional funding may be in the form of debt or equity or a hybrid instrument depending on the needs of the investor. Given the prevailing global economic and credit market conditions, we may not be able to raise additional cash resources through these traditional sources of financing. Although we are also pursuing non-traditional sources of financing, the global credit market crisis has also adversely affected the ability of potential parties to pursue such transactions. We do not believe that the ability to access capital markets or these adverse conditions are likely to improve significantly in the near future. Accordingly, as a result of the foregoing, we continue to review traditional sources of financing, such as private and public debt or equity financing alternatives, as well as other alternatives to enhance shareholder value, including, but not limited to, non-traditional sources of financing, such as alliances with strategic partners, the sale of assets or licensing of our technology or intellectual property, a combination of operating and related initiatives or a substantial reorganization of our business. If we do not raise additional capital, we do not expect our operations to generate sufficient cash flow to fund our obligations as they come due.

 

There can be no assurances that we will achieve profitability or positive cash flows or be able to obtain additional funding or that, if obtained, they will be sufficient, or whether any other initiatives will be successful, such that we may continue as a going concern. There are material uncertainties related to certain adverse conditions and events that could cast significant doubt on our ability to remain a going concern.

 

We may not achieve our projected development goals in the time-frames we announce and expect.

 

We set goals and make public statements regarding the timing of the accomplishment of objectives material to our success, such as the commencement, enrollment and completion of clinical trials, anticipated regulatory submission and approval dates and time of product launch. The actual timing of these events can vary dramatically due to factors such as delays or failures in our clinical trials, the uncertainties inherent in the regulatory approval process and delays in achieving manufacturing or marketing arrangements sufficient to commercialize our products. There can be no assurance that our clinical trials will be completed, that we will make regulatory submissions or receive regulatory approvals as planned or that we will be able to adhere to our current schedule for the launch of any of our products. If we fail to achieve one or more of these milestones as planned, the price of our securities would likely decline.

 

If we fail to obtain acceptable prices or adequate reimbursement for our products, our ability to generate revenues will be diminished.

 

The ability for us and/or our partners to successfully commercialize our products will depend significantly on our ability to obtain acceptable prices and the availability of reimbursement to the patient from third-party payers, such as governmental and private insurance plans. These third-party payers frequently require companies to provide predetermined discounts from list prices, and they are increasingly challenging the prices charged for pharmaceuticals and other medical products. Our products may not be considered cost-effective, and reimbursement to the patient may not be available or sufficient to allow us or our partners to sell our products on a competitive basis. It may not be possible to negotiate favorable reimbursement rates for our products.

 

In addition, the continuing efforts of third-party payers to contain or reduce the costs of healthcare through various means may limit our commercial opportunity and reduce any associated revenue and profits. We expect proposals to implement similar government control to continue. In addition, increasing emphasis on managed care will continue to put pressure on the pricing of pharmaceutical and biopharmaceutical products. Cost control initiatives could decrease the price that we or any current or potential collaborators could receive for any of our products and could adversely affect our profitability. In addition, in the United States, in Canada and in many other countries, pricing and/or profitability of some or all prescription pharmaceuticals and biopharmaceuticals are subject to government control.

 

If we fail to obtain acceptable prices or an adequate level of reimbursement for our products, the sales of our products would be adversely affected or there may be no commercially viable market for our products.

 

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Competition in our targeted markets is intense, and development by other companies could render our products or technologies non-competitive.

 

The biomedical field is highly competitive. New products developed by other companies in the industry could render our products or technologies non-competitive. Competitors are developing and testing products and technologies that would compete with the products that we are developing. Some of these products may be more effective or have an entirely different approach or means of accomplishing the desired effect than our products. We expect competition from biopharmaceutical and pharmaceutical companies and academic research institutions to increase over time. Many of our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we do. Our competitors may succeed in developing products earlier and in obtaining regulatory approvals and patent protection for such products more rapidly than we can or at a lower price.

 

We may not obtain adequate protection for our products through our intellectual property.

 

We rely heavily on our proprietary information in developing and manufacturing our product candidates. Our success depends, in large part, on our ability to protect our competitive position through patents, trade secrets, trademarks and other intellectual property rights. The patent positions of pharmaceutical and biopharmaceutical firms, including Æterna Zentaris, are uncertain and involve complex questions of law and fact for which important legal issues remain unresolved. Applications for patents and trademarks in Canada, the United States and in other foreign territories have been filed and are being actively pursued by us. Pending patent applications may not result in the issuance of patents and we may not be able to obtain additional issued patents relating to our technology or products. Even if issued, patents to us or our licensors may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection. The patents issued or to be issued to us may not provide us with any competitive advantage or protect us against competitors with similar technology. In addition, it is possible that third parties with products that are very similar to ours will circumvent our patents by means of alternate designs or processes. We may have to rely on method of use and new formulation protection for our compounds in development, and any resulting products, which may not confer the same protection as claims to compounds per se.

 

In addition, our patents may be challenged by third parties in patent litigation, which is becoming widespread in the biopharmaceutical industry. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. No assurance can be given that our patents would, if challenged, be held by a court to be valid or enforceable or that a competitor’s technology or product would be found by a court to infringe our patents. Our granted patents could also be challenged and revoked in opposition or nullity proceedings in certain countries outside the United States. In addition, we may be required to disclaim part of the term of certain patents.

 

Patent applications relating to or affecting our business have been filed by a number of pharmaceutical and biopharmaceutical companies and academic institutions. A number of the technologies in these applications or patents may conflict with our technologies, patents or patent applications, and any such conflict could reduce the scope of patent protection which we could otherwise obtain. Because patent applications in the United States and many other jurisdictions are typically not published until eighteen months after their first effective filing date, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in our or their issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications. If a third party has also filed a patent application in the United States covering our product candidates or a similar invention, we may have to participate in an adversarial proceeding, known as an interference, declared by the United States Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial and it is possible that our efforts could be unsuccessful, resulting in a loss of our U.S. patent position.

 

In addition to patents, we rely on trade secrets and proprietary know-how to protect our intellectual property. If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected. We seek to protect our unpatented proprietary information in part by requiring our employees, consultants, outside scientific collaborators and sponsored researchers and other advisors to enter into confidentiality agreements. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of our employees, the agreements provide that all of the technology which is conceived by

 

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the individual during the course of employment is our exclusive property. These agreements may not provide meaningful protection or adequate remedies in the event of unauthorized use or disclosure of our proprietary information. In addition, it is possible that third parties could independently develop proprietary information and techniques substantially similar to ours or otherwise gain access to our trade secrets. If we are unable to protect the confidentiality of our proprietary information and know-how, competitors may be able to use this information to develop products that compete with our products and technologies, which could adversely impact our business.

 

We currently have the right to use certain technology under license agreements with third parties. Our failure to comply with the requirements of material license agreements could result in the termination of such agreements, which could cause us to terminate the related development program and cause a complete loss of our investment in that program.

 

As a result of the foregoing factors, we may not be able to rely on our intellectual property to protect our products in the marketplace.

 

We may infringe the intellectual property rights of others.

 

Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties. There could be issued patents of which we are not aware that our products or methods may be found to infringe, or patents of which we are aware and believe we do not infringe but which we may ultimately be found to infringe. Moreover, patent applications and their underlying discoveries are in some cases maintained in secrecy until patents are issued. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products or methods are found to infringe. Moreover, there may be published pending applications that do not currently include a claim covering our products or methods but which nonetheless provide support for a later drafted claim that, if issued, our products or methods could be found to infringe.

 

If we infringe or are alleged to infringe intellectual property rights of third parties, it will adversely affect our business. Our research, development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be accused of infringing one or more claims of an issued patent or may fall within the scope of one or more claims in a published patent application that may subsequently issue and to which we do not hold a license or other rights. Third parties may own or control these patents or patent applications in the United States and abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

 

The biopharmaceutical industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. In the event of infringement or violation of another party’s patent or other intellectual property rights, we may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost. Any inability to secure licenses or alternative technology could result in delays in the introduction of our products or lead to prohibition of the manufacture or sale of products by us or our partners and collaborators.

 

Patent litigation is costly and time consuming and may subject us to liabilities.

 

Our involvement in any patent litigation, interference, opposition or other administrative proceedings will likely cause us to incur substantial expenses, and the efforts of our technical and management personnel will be significantly diverted. In addition, an adverse determination in litigation could subject us to significant liabilities.

 

We may not obtain trademark registrations.

 

We have filed applications for trademark registrations in connection with our product candidates in various jurisdictions, including the United States. We intend to file further applications for other possible trademarks for our product candidates. No assurance can be given that any of our trademark applications will be registered in the United States or elsewhere, or that the use of any registered or unregistered trademarks will confer a competitive advantage in the marketplace. Furthermore, even if we are successful in our trademark registrations, the FDA and regulatory authorities in other countries have their own process for drug nomenclature and their own views concerning appropriate proprietary names. The FDA and other regulatory authorities also have the power, even after granting market approval, to request a company to reconsider the name for a product because of evidence of confusion in the marketplace. No assurance can be given that the FDA or any other regulatory authority will approve of any of our trademarks or will not request reconsideration of one of our trademarks at some time in

 

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the future. The loss, abandonment, or cancellation of any of our trademarks or trademark applications could negatively affect the success of the product candidates to which they relate.

 

Our revenues and expenses may fluctuate significantly, and any failure to meet financial expectations may disappoint securities analysts or investors and result in a decline in the price of our securities.

 

We have a history of operating losses. Our revenues and expenses have fluctuated in the past and are likely to do so in the future. These fluctuations could cause our share price to decline. Some of the factors that could cause our revenues and expenses to fluctuate include but are not limited to:

 

·                  the inability to complete product development in a timely manner that results in a failure or delay in receiving the required regulatory approvals to commercialize our product candidates;

·                  the timing of regulatory submissions and approvals;

·                  the timing and willingness of any current or future collaborators to invest the resources necessary to commercialize our product candidates;

·                  the revenue available from royalties derived from our strategic partners;

·                  licensing fees revenues;

·                  tax credits and grants (R&D);

·                  the outcome of litigation, if any;

·                  changes in foreign currency fluctuations;

·                  the timing of achievement and the receipt of milestone payments from current or future collaborators; and

·                  failure to enter into new or the expiration or termination of current agreements with collaborators.

 

Due to fluctuations in our revenues and expenses, we believe that period-to-period comparisons of our results of operations are not necessarily indicative of our future performance. It is possible that in some future quarter or quarters, our revenues and expenses will be above or below the expectations of securities analysts or investors. In this case, the price of our securities could fluctuate significantly or decline.

 

We will not be able to successfully commercialize our product candidates if we are unable to make adequate arrangements with third parties for such purposes.

 

We currently have a lean sales and marketing staff. In order to commercialize our product candidates successfully, we need to make arrangements with third parties to perform some or all of these services in certain territories.

 

We contract with third parties for the sales and marketing of our products. Our revenues will depend upon the efforts of these third parties, whose efforts may not be successful. If we fail to establish successful marketing and sales capabilities or to make arrangements with third parties for such purposes, our business, financial condition and results of operations will be materially adversely affected.

 

If we had to resort to developing a sales force internally, the cost of establishing and maintaining a sales force would be substantial and may exceed its cost effectiveness. In addition, in marketing our products, we would likely compete with many companies that currently have extensive and well-funded marketing and sales operations. Despite our marketing and sales efforts, we may be unable to compete successfully against these companies.

 

We are currently dependent on strategic partners and may enter into future collaborations for the research, development and commercialization of our product candidates. Our arrangements with these strategic partners may not provide us with the benefits we expect and may expose us to a number of risks.

 

We are dependent on, and rely upon, strategic partners to perform various functions related to our business, including, but not limited to, the research, development and commercialization of some of our product candidates. Our reliance on these relationships poses a number of risks.

 

We may not realize the contemplated benefits of such agreements nor can we be certain that any of these parties will fulfill their obligations in a manner which maximizes our revenue. These arrangements may also require us to transfer certain material rights or issue our equity, voting or other securities to corporate partners, licensees and others. Any license or sublicense of our commercial rights may reduce our product revenue.

 

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These agreements also create certain risks. The occurrence of any of the following or other events may delay product development or impair commercialization of our products:

 

·                  not all of our strategic partners are contractually prohibited from developing or commercializing, either alone or with others, products and services that are similar to or competitive with our product candidates, and, with respect to our strategic partnership agreements that do contain such contractual prohibitions or restrictions, prohibitions or restrictions do not always apply to our partners’ affiliates and they may elect to pursue the development of any additional product candidates and pursue technologies or products either on their own or in collaboration with other parties, including our competitors, whose technologies or products may be competitive with ours;

·                  our strategic partners may under-fund or fail to commit sufficient resources to marketing, distribution or other development of our products;

·                  we may not be able to renew such agreements;

·                  our strategic partners may not properly maintain or defend certain intellectual property rights that may be important to the commercialization of our products;

·                  our strategic partners may encounter conflicts of interest, changes in business strategy or other issues which could adversely affect their willingness or ability to fulfill their obligations to us (for example, pharmaceutical companies historically have re-evaluated their priorities following mergers and consolidations, which have been common in recent years in this industry);

·                  delays in, or failures to achieve, scale-up to commercial quantities, or changes to current raw material suppliers or product manufacturers (whether the change is attributable to us or the supplier or manufacturer) could delay clinical studies, regulatory submissions and commercialization of our product candidates; and

·                  disputes may arise between us and our strategic partners that could result in the delay or termination of the development or commercialization of our product candidates, resulting in litigation or arbitration that could be time-consuming and expensive, or causing our strategic partners to act in their own self-interest and not in our interest or those of our shareholders or other stakeholders.

 

In addition, our strategic partners can terminate our agreements with them for a number of reasons based on the terms of the individual agreements that we have entered into with them. If one or more of these agreements were to be terminated, we would be required to devote additional resources to developing and commercializing our product candidates, seek a new partner or abandon this product candidate which would likely cause a drop in the price of our securities.

 

We have entered into important strategic partnership agreements relating to certain of our product candidates for various indications. Detailed information on our research and collaboration agreements is available in our various reports and disclosure documents filed with the Canadian securities regulatory authorities and filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”), including the documents incorporated into this annual report on Form 20-F. See, for example, Notes 4 and 26 to our audited consolidated balance sheets as at December 31, 2009 and 2008 and our audited consolidated statements of operations, changes in shareholders’ equity, comprehensive income (loss) and cash flows for each of the years in the three-year period ended December 31, 2009, which are included elsewhere in this annual report on Form 20-F.

 

We have also entered into a variety of collaborative licensing agreements with various universities and institutes under which we are obligated to support some of the research expenses incurred by the university laboratories and pay royalties on future sales of the products. In turn, we have retained exclusive rights for the worldwide exploitation of results generated during the collaborations.

 

In particular, we have entered into an agreement with the Tulane Educational Fund (“Tulane”), which provides for the payment by us of single-digit royalties on future worldwide net sales of cetrorelix and including Cetrotide®. Tulane is also entitled to receive a low double-digit participation payment on any lump-sum, periodic or other cash payments received by us from sub-licensees (see Note 26 to our audited consolidated financial statements for the years ended December 31, 2009, 2008 and 2007 included in this annual report on Form 20-F).

 

We rely on third parties to conduct, supervise and monitor our clinical trials, and those third parties may not perform satisfactorily.

 

We rely on third parties such as CROs, medical institutions and clinical investigators to enroll qualified patients and conduct, supervise and monitor our clinical trials. Our reliance on these third parties for clinical development activities reduces our control over these activities. Our reliance on these third parties, however, does not relieve us of our regulatory responsibilities, including ensuring that our clinical trials are conducted in accordance with Good Clinical Practice (“GCP”) guidelines and the investigational plan and protocols contained in an Investigational New Drug application, or comparable

 

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foreign regulatory submission. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. In addition, they may not complete activities on schedule, or may not conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our trial design. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, our efforts to obtain regulatory approvals for, and commercialize, our product candidates may be delayed or prevented.

 

In carrying out our operations, we are dependent on a stable and consistent supply of ingredients and raw materials.

 

There can be no assurance that we, our contract manufacturers or our partners, will be able, in the future, to continue to purchase products from our current suppliers or any other supplier on terms similar to current terms or at all. An interruption in the availability of certain raw materials or ingredients, or significant increases in the prices paid by us for them, could have a material adverse effect on our business, financial condition, liquidity and operating results.

 

The failure to perform satisfactorily by third parties upon which we rely to manufacture and supply products may lead to supply shortfalls.

 

We rely on third parties to manufacture and supply marketed products. We also have certain supply obligations vis-à-vis our licensing partners who are responsible for the marketing of the products. To be successful, our products have to be manufactured in commercial quantities in compliance with quality controls and regulatory requirements. Even though it is our objective to minimize such risk by introducing alternative suppliers to ensure a constant supply at all times, we cannot guarantee that we will not experience supply shortfalls and, in such event, we may not be able to perform our obligations under contracts with our partners.

 

We are subject to intense competition for our skilled personnel, and the loss of key personnel or the inability to attract additional personnel could impair our ability to conduct our operations.

 

We are highly dependent on our management and our clinical, regulatory and scientific staff, the loss of whose services might adversely impact our ability to achieve our objectives. Recruiting and retaining qualified management and clinical, scientific and regulatory personnel is critical to our success. Competition for skilled personnel is intense, and our ability to attract and retain qualified personnel may be affected by such competition.

 

Our strategic partners’ manufacturing capabilities may not be adequate to effectively commercialize our product candidates.

 

Our manufacturing experience to date with respect to our product candidates consists of producing drug substance for clinical studies. To be successful, these product candidates have to be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable costs. Our strategic partners’ current manufacturing facilities have the capacity to produce projected product requirements for the foreseeable future, but we will need to increase capacity if sales continue to grow. Our strategic partners may not be able to expand capacity or to produce additional product requirements on favorable terms. Moreover, delays associated with securing additional manufacturing capacity may reduce our revenues and adversely affect our business and financial position. There can be no assurance that we will be able to meet increased demand over time.

 

We are subject to the risk of product liability claims, for which we may not have or be able to obtain adequate insurance coverage.

 

The sale and use of our products, in particular our biopharmaceutical products, involve the risk of product liability claims and associated adverse publicity. Our risks relate to human participants in our clinical trials, who may suffer unintended consequences, as well as products on the market whereby claims might be made directly by patients, healthcare providers or pharmaceutical companies or others selling, buying or using our products. We manage our liability risks by means of insurance. We maintain liability insurance covering our liability for our preclinical and clinical studies and for our pharmaceutical products already marketed. However, we may not have or be able to obtain or maintain sufficient and affordable insurance coverage, including coverage for potentially very significant legal expenses, and without sufficient coverage any claim brought against us could have a materially adverse effect on our business, financial condition or results of operations.

 

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Our business involves the use of hazardous materials which requires us to comply with environmental and occupational safety laws regulating the use of such materials. If we violate these laws, we could be subject to significant fines, liabilities or other adverse consequences.

 

Our discovery and development processes involve the controlled use of hazardous and radioactive materials. We are subject to federal, provincial and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. The risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of an accident or a failure to comply with environmental or occupational safety laws, we could be held liable for any damages that result, and any such liability could exceed our resources. We may not be adequately insured against this type of liability. We may be required to incur significant costs to comply with environmental laws and regulations in the future, and our operations, business or assets may be materially adversely affected by current or future environmental laws or regulations.

 

Legislative actions, new accounting pronouncements and higher insurance costs are likely to impact our future financial position or results of operations.

 

Changes in financial accounting standards or implementation of accounting standards may cause adverse, unexpected revenue or expense fluctuations and affect our financial position or results of operations. New pronouncements and varying interpretations of pronouncements have occurred with greater frequency and are expected to occur in the future, and we may make or be required to make changes in our accounting policies in the future. Compliance with changing regulations of corporate governance and public disclosure, notably with respect to internal controls over financial reporting, may result in additional expenses. Changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for companies such as ours, and insurance costs are increasing as a result of this uncertainty.

 

We are subject to additional reporting requirements under applicable Canadian securities laws and the Sarbanes-Oxley Act in the United States. We can provide no assurance that we will at all times in the future be able to report that our internal controls over financial reporting are effective.

 

As a public company, we are required to comply with Section 404 of the Sarbanes-Oxley Act (“Section 404”) and National Instrument 52-109 — Certification of Disclosure in Issuers’ Annual and Interim Filings, and we have to obtain an annual attestation from our independent auditors regarding our internal control over financial reporting. In any given year, we cannot be certain as to the timing of completion of our internal control evaluation, testing and remediation actions or of their impact on our operations. Upon completion of this process, we may identify control deficiencies of varying degrees of severity under applicable SEC and Public Company Accounting Oversight Board rules and regulations. As a public company, we are required to report, among other things, control deficiencies that constitute material weaknesses or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual financial statements will not be prevented or detected on a timely basis. If we fail to comply with the requirements of Section 404, Canadian requirements or report a material weakness, we might be subject to regulatory sanction and investors may lose confidence in our financial statements, which may be inaccurate if we fail to remedy such material weakness.

 

It is possible that we may be a passive foreign investment company, which could result in adverse tax consequences to U.S. investors.

 

Adverse U.S. federal income tax rules apply to “U.S. Holders” (as defined in “Item 10.E. — Taxation — Certain U.S. Federal Income Tax Considerations”) that directly or indirectly hold common shares or warrants of a passive foreign investment company (“PFIC”). We will be classified as a PFIC for U.S. federal income tax purposes for a taxable year if (i) at least 75 percent of our gross income is “passive income” or (ii) at least 50 percent of the average value of our assets, including goodwill (based on annual quarterly average), is attributable to assets which produce passive income or are held for the production of passive income.

 

We believe that we were not a PFIC for the 2009 taxable year. However, since the fair market value of our assets may be determined in large part by the market price of our Common Shares, which is likely to fluctuate, and the composition of our income and assets will be affected by how, and how quickly, we spend any cash that is raised in any financing transaction, no assurance can be provided that we will not be classified as a PFIC for the 2010 taxable year and for any future taxable year.

 

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PFIC characterization could result in adverse U.S. federal income tax consequences to U.S. Holders. In particular, absent certain elections, a U.S. Holder would be subject to U.S. federal income tax at ordinary income tax rates, plus a possible interest charge, in respect of a gain derived from a disposition of our common shares, as well as certain distributions by us. If we are treated as a PFIC for any taxable year, a U.S. Holder may be able to make an election to “mark to market” Common Shares each taxable year and recognize ordinary income pursuant to such election based upon increases in the value of the Common Shares. However, a mark-to-market election is not available to be made in respect of a warrant.

 

Under recently enacted U.S. tax legislation and subject to future guidance, if we are a PFIC, U.S. Holders will be required to file, for returns due after March 18, 2010, an annual information return with the IRS relating to their ownership of our Common Shares. Although expected, no guidance has yet been issued about such return, including on the information required to be reported on such return, the form of the return, or the due date for the return.

 

For a more detailed discussion of the potential tax impact of us being a PFIC, see “Item 10.E. — Taxation — Certain U.S. Federal Income Tax Considerations.”

 

We will report under International Financial Reporting Standards for our interim and annual consolidated financial statements for the financial year ending December 31, 2011.

 

The Accounting Standards Board of the Canadian Institute of Chartered Accountants has announced that Canadian publicly accountable enterprises are required to adopt International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board, effective January 1, 2011. We will be required to report under IFRS for our interim and annual consolidated financial statements for the financial year ending December 31, 2011.

 

Although IFRS uses a conceptual framework similar to Canadian GAAP, we will need to address differences in accounting policies. We are currently considering the impact that IFRS will have on our financial statements. See “Item 5. —  Operating and Financial Review and Prospects”.

 

We may incur losses associated with foreign currency fluctuations.

 

Our operations are in many instances conducted in currencies other than the euro, our functional currency. Fluctuations in the value of currencies could cause us to incur currency exchange losses. We do not currently employ a hedging strategy against exchange rate risk. We cannot assert with any assurance that we will not suffer losses as a result of unfavorable fluctuations in the exchange rates between the United States dollar, the euro, the Canadian dollar and other currencies.

 

We may not be able to successfully integrate acquired businesses.

 

Future acquisitions may not be successfully integrated. The failure to successfully integrate the personnel and operations of businesses which we may acquire in the future with ours could have a material adverse effect on our operations and results.

 

Risks Related to the Securities

 

Our share price is volatile, which may result from factors outside of our control. If our common shares are delisted from the TSX or NASDAQ, investors may have difficulty in disposing of our common shares held by them.

 

Our common shares are currently listed and traded only on the Toronto Stock Exchange (the “TSX”) and National Association of Securities Dealers Automated Quotations (“NASDAQ”). Our valuation and share price since the beginning of trading after our initial listings, first in Canada and then in the United States, have had no meaningful relationship to current or historical financial results, asset values, book value or many other criteria based on conventional measures of the value of shares.

 

During the year ended December 31, 2009, the closing price of our common shares ranged from CAN$0.57 to CAN$3.11 per share on the TSX, and from $0.46 to $2.83 on the NASDAQ. Our share price may be affected by developments directly affecting our business and by developments out of our control or unrelated to us. The biopharmaceutical sector in particular, and the stock market generally, are vulnerable to abrupt changes in investor sentiment. Prices of shares and trading volume of companies in the biopharmaceutical industry can swing dramatically in ways unrelated to, or that bear a disproportionate relationship to, operating performance. Our share price and trading volume may fluctuate based on a number of factors including, but not limited to:

 

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·                  clinical and regulatory developments regarding our product candidates;

·                  delays in our anticipated development or commercialization timelines;

·                  developments regarding current or future third-party collaborators;

·                  other announcements by us regarding technological, product development or other matters;

·                  arrivals or departures of key personnel;

·                  governmental or regulatory action affecting our product candidates and our competitors’ products in the United States, Canada and other countries;

·                  developments or disputes concerning patent or proprietary rights;

·                  actual or anticipated fluctuations in our revenues or expenses;

·                  general market conditions and fluctuations for the emerging growth and biopharmaceutical market sectors; and

·                  economic conditions in the United States, Canada or abroad.

 

Our listing on both the TSX and NASDAQ may increase price volatility due to various factors including: different ability to buy or sell our common shares; different market conditions in different capital markets; and different trading volumes. In addition, low trading volume may increase the price volatility of our common shares. A thin trading market could cause the price of our common shares to fluctuate significantly more than the stock market as a whole.

 

In the past, following periods of large price declines in the public market price of a company’s securities, securities class action litigation has often been initiated against that company. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which would adversely affect our business. Any adverse determination in litigation could also subject us to significant liabilities.

 

We must meet continuing listing requirements to maintain the listing of our common shares on the TSX and NASDAQ. For continued listing, NASDAQ requires, among other things, that listed securities maintain a minimum closing bid price of not less than $1.00 per share. On January 22, 2010, we announced that we had received a letter from the NASDAQ Listing Qualifications Department indicating that the minimum closing bid price of the common shares had fallen below $1.00 for 30 consecutive trading days, and therefore, Æterna Zentaris was not in compliance with NASDAQ Listing Rule 5450(a)(1) (the “Rule”). In accordance with NASDAQ Listing Rule 5810(C)(3)(a), we have been provided a grace period of 180 calendar days, or until July 20, 2010, to regain compliance with this requirement. We can regain compliance with the Rule if the bid price of our common shares closes at $1.00 or higher for a minimum of ten consecutive business days during the grace period, although NASDAQ may, in its discretion, require us to maintain a minimum closing bid price of at least $1.00 per share for a period in excess of ten consecutive business days before determining that we have demonstrated the ability to maintain long-term compliance.

 

If we are unsuccessful in meeting the minimum bid requirement by July 20, 2010, NASDAQ will provide notice to us that our common shares will be subject to delisting from the NASDAQ Global Market. If the Company receives a delisting notification, we may appeal to the Listing Qualifications Panel or apply to transfer the listing of our common hares to the NASDAQ Capital Market if we satisfy at such time all of the initial listing standards on the NASDAQ Capital Market, other than compliance with the minimum closing bid price requirement. If the application to the NASDAQ Capital Market is approved, then we will have an additional 180-day grace period in order to regain compliance with the minimum bid price requirement while listed on the NASDAQ Capital Market. There can be no assurance that we will meet the requirements for continued listing on the NASDAQ Global Market or whether our application to the NASDAQ Capital Market will be approved or that any appeal would be granted by the Listing Qualifications Panel.

 

Our largest shareholders have influence over our business and corporate matters, including those requiring shareholder approval. This could delay or prevent a change in control. Sales of common shares by such shareholders could have an impact on the market price of our Securities.

 

Our two largest shareholders, which held 13.97% and 12.94% of our outstanding common shares as of the date of this annual report on Form 20-F, have certain rights to nominate members of our Board of Directors as well as influence over our business and corporate matters, including those requiring shareholder approval. This could delay or prevent a change in control. Sales of common shares by such shareholders could have an impact on the price of our securities.

 

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We do not intend to pay dividends in the near future.

 

To date, we have not declared or paid any dividends on our common shares. We currently intend to retain our future earnings, if any, to finance further research and the expansion of our business. As a result, the return on an investment in our securities will, for the foreseeable future, depend upon any future appreciation in value. There is no guarantee that our securities will appreciate in value or even maintain the price at which shareholders have purchased their securities.

 

Item 4.    Information on the Company

 

A.            History and development of the Company

 

Æterna Zentaris Inc. is a late-stage drug development company specialized in oncology and endocrine therapy.

 

We were incorporated on September 12, 1990 under the Canada Business Corporations Act (the “CBCA”) and continue to be governed by the CBCA. Our registered office is located at 1405 du Parc-Technologique Blvd., Quebec City, Quebec, Canada G1P 4P5, our telephone number is (418) 652-8525 and our website is www.aezsinc.com. None of the documents or information found on our website shall be deemed to be included in or incorporated into this annual report.

 

On December 30, 2002, we acquired Zentaris AG, a biopharmaceutical company based in Frankfurt, Germany. Zentaris was a spin-off of Degussa AG and Asta Medica GmbH, a former pharmaceutical company. With this acquisition, the Company changed its risk profile and inherited an extensive and robust product pipeline with capabilities from drug discovery to commercialization with a particular focus on endocrine therapy and oncology. As part of the acquisition, we also inherited a very experienced pharmaceutical team along with a network of strategic pharmaceutical partners. The total consideration paid for the acquisition of Zentaris was $51.9 million, net of cash and cash equivalents acquired of $2.3 million, of which an amount of $26.7 million was paid in cash and the remaining amount of $25.2 million as a balance of purchase price.

 

In May 2004, we changed our name to Æterna Zentaris Inc. and on May 11, 2007, Zentaris GmbH was renamed Æterna Zentaris GmbH. Æterna Zentaris GmbH is our principal operating subsidiary.

 

On April 6, 2005, our former subsidiary Atrium Biotechnologies Inc. (now Atrium Innovations Inc.) (“Atrium”), completed its initial public offering in Canada and began trading on the TSX under the ticker symbol “ATB.”

 

Throughout 2006, as part of a thorough, strategic planning process, our management and Board of Directors (the “Board”) made the decision to spin off Atrium in two phases. On September 19, 2006, we initiated the first phase, a secondary offering in which we sold 3,485,000 Subordinate Voting Shares of Atrium at a price of CAN$15.80 per share. This secondary offering closed on October 18, 2006, generating net proceeds of nearly $45 million to Æterna Zentaris. With this transaction closed, our remaining interest in Atrium was 11,052,996 Subordinate Voting Shares representing 36.1% of its issued and outstanding shares. Therefore, we no longer had a controlling interest in Atrium as of October 18, 2006.

 

The second phase was to distribute our remaining interest in Atrium to our shareholders concurrently with a reduction of the stated capital of our common shares.

 

On December 15, 2006, our shareholders approved a reduction of the stated capital of our common shares in an amount equal to the fair market value of our remaining interest in Atrium by way of a special distribution in kind to all our shareholders. This special distribution was completed on January 2, 2007. For each common share held as of the record date of December 29, 2006, our shareholders received 0.2078824 Subordinate Voting Shares of Atrium. In May 2007, we opened an office in the United States, located at 20 Independence Boulevard, Warren, New Jersey 07059-2731.

 

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We currently have three wholly-owned direct and indirect subsidiaries, Æterna Zentaris GmbH (“AEZS Germany”), based in Frankfurt, Germany, Æterna Zentaris, Inc., based in Warren, New Jersey in the United States, and Zentaris IVF GmbH, a direct wholly-owned subsidiary of AEZS Germany based in Frankfurt, Germany.

 

 

 

 

 

Æterna Zentaris Inc.

 

 

(Canada)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100%

 

 

100%

 

 

 

 

Æterna Zentaris GmbH

 

Æterna Zentaris, Inc

(Germany)

 

(Delaware)

 

 

 

 

 

 

 

 

100%

 

 

 

Zentaris IVF GmbH

(Germany)

 

 

 

 

From the formation of Atrium as our subsidiary in 1999 until the distribution of our remaining interest in Atrium on January 2, 2007, Atrium did not declare or pay any dividends to its shareholders. Since the disposition of our entire interest in Atrium, we have not had access to the liquidity or cash flows generated by Atrium. Our current drug development strategy focuses mainly on our late-stage compounds perifosine (Phase 3 in multiple myeloma) and our Phase 2 program in multiple cancers, AEZS-108 (Phase 2 in ovarian and endometrial cancer) and AEZS-130 (SolorelTM) (Phase 3 as diagnostic test for adult growth hormone deficiency), as well as on targeted earlier-stage compounds, as depicted in the chart reproduced under the heading, “Our Product Pipeline”.

 

Our common shares are listed for trading on the TSX under the trading symbol “AEZ” and on the NASDAQ under the trading symbol “AEZS.”

 

The Company’s agent for SEC matters in the United States is its wholly-owned subsidiary, Æterna Zentaris, Inc., located at 20 Independence Boulevard, Warren, New Jersey 07059-2731.

 

There have been no public takeover offers by third parties with respect to the Company or by the Company in respect of other companies’ shares during the last or current fiscal year.

 

B.            Business overview

 

We are a late-stage drug development company specialized in oncology and endocrine therapy. Our pipeline encompasses compounds at all stages of development, from drug discovery through marketed products. The highest priorities in oncology are our Phase 3 program with perifosine in multiple myeloma and our Phase 2 program in multiple cancers, including metastatic colon cancer, as well as our Phase 2 program with AEZS-108 in advanced endometrial and advanced ovarian cancer combined with potential developments in other cancer indications. In endocrinology, our lead program is the reactivation of a Phase 3 trial with AEZS-130 (SolorelTM) as a growth hormone (“GH”) stimulation test for the diagnosis of GH deficiency in adults (“AGHD”).

 

Recent Developments

 

For a complete description of our recent corporate and pipeline developments, refer to Item 5, “Operating and Financial Review and Prospects—Highlights”.

 

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Our Business Strategy

 

Our primary business strategy is to advance, with the collaboration of our strategic partners, our product development pipeline with a focus on our flagship product candidates in oncology and endocrinology. In addition, we also continue to advance certain other clinical and pre-clinical programs as described below. Our vision is to become a fully-integrated specialty biopharmaceutical company.

 

Oncology

 

Our highest oncology priorities are our perifosine Phase 3 program in multiple myeloma and Phase 2 program in multiple cancers including metastatic colon cancer, as well as our Phase 2 program with AEZS-108 in advanced endometrial and advanced ovarian cancer combined with potential development in other cancer indications.

 

Perifosine

 

Perifosine is an orally active PI3K/Akt pathway inhibitor in a Phase 3 registration trial in multiple myeloma conducted by our North American partner Keryx for the territories of North America and Mexico under a Special Protocol Assessment reached with the Food and Drug Administration (“FDA”), which has also granted perifosine Orphan Drug and Fast Track designations. Perifosine is also in current multiple Phase 2 clinical studies, including metastatic colon cancer, renal cell carcinoma and various other cancers.

 

Furthermore, our partner Keryx announced on February 3, 2010 that it has reached another special protocol assessment in refractory metastatic colon cancer with the FDA and is planning the initiation of a registration Phase 3 trial in this indication.

 

AEZS-108

 

AEZS-108 represents a new targeting concept in oncology leading to personalized medicine using a cytotoxic peptide conjugate which is a hybrid molecule composed of a synthetic peptide carrier and doxorubicin. The design of AEZS-108 allows for the specific binding and selective uptake of the cytotoxic conjugate by LHRH-receptor-positive tumors. Phase 2 trials in advanced endometrial cancer and advanced ovarian cancer have met their predefined primary efficacy endpoints.

 

Endocrinology

 

In endocrinology, aside from Cetrotide®, we intend to further advance the development of our lead program by the reactivation and further advancement of a Phase 3 trial with AEZS-130 (Solorel ) as a GH stimulation test for the diagnosis of AGHD.

 

AEZS-130

 

AEZS-130, a growth hormone secretagogue (GHS), is a novel synthetic small molecule acting as a ghrelin mimetic that is orally active and stimulates the secretion of GH. A pivotal Phase 3 trial was initiated in the United States to investigate its safety and efficacy as a GH stimulation test for the diagnosis of AGHD for which Orphan Drug status has been granted by the FDA. In addition to the diagnostic indication, we believe that AEZS-130, based on the results of Phase 1 studies, has potential applications for the treatment of cachexia, a condition frequently associated with severe chronic diseases such as cancer, chronic obstructive pulmonary disease and AIDS.

 

Clinical and Preclinical Programs

 

Additionally, we are advancing in Phase 1, AEZS-112, an oral anticancer agent which involves three mechanisms of action, tubulin and topoisomeras II and angiogenesic inhibition, as well as several preclinical programs with targeted potential development candidates. Among the targets for which we expect to propose clinical development candidates in the coming years are: AEZS-120 (prostate cancer vaccine), AEZS-127 (erucylphosphocholine derivatives), AEZS-129 (Erk and PI3K inhibitor), AEZS-115 (non-peptide LHRH antagonists) and AEZS-123 (ghrelin receptor antagonist).

 

We also continue to perform targeted drug discovery activities from which we are able to derive pre-clinical candidates. This drug discovery includes high throughput screening systems and a library of more than 120,000 compounds.

 

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We are currently in a stage in which some of our products and product candidates are being further developed or marketed jointly with strategic partners. We expect we will continue to seek strategic partnerships in the future as we move to realize our vision of becoming a fully-integrated specialty biopharmaceutical company.

 

Our product pipeline

 

Pipeline table

 

Status of our drug pipeline as at March 22, 2010

 

Discovery

 

Preclinical

 

Phase 1

 

Phase 2

 

Phase 3

 

Commercial

120,000 compound library

 

AEZS-120

Prostate cancer vaccine

(oncology)

 

AEZS-129

Erk & PI3K Inhibitors (oncology)

 

AEZS-127

ErPC (oncology)

 

AEZS-123

Ghrelin receptor antagonist (endocrinology)

 

AEZS-115

Non-peptide LHRH antagonists

(endometriosis & urology)

 

AEZS-112 (oncology)

 

AEZS-130

Therapeutic in tumor induced cachexia

(endocrinology)

 

Perifosine

· Metastatic colon cancer

· Kidney cancer

· AEZS-108

· Ovarian cancer

· Endometrial cancer

 

Perifosine

· Multiple myeloma

 

AEZS-130 (SolorelTM)

· Diagnostic in adult growth hormone deficiency (endocrinology)

 

Cetrotide®

(in vitro fertilization)

Partners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Perifosine:
Keryx
North America

 

Handok
Korea (oncology)

 

Perifosine:
Keryx
North America

 

Handok
Korea (oncology)

 

Cetrotide®:
Merck Serono

(World ex-Japan)

 

Nippon Kayaku  /  Shionogi
Japan

 

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ONCOLOGY

 

SIGNAL TRANSDUCTION INHIBITORS

 

Perifosine

 

Perifosine is an alkylphosphocholine compound with structural similarity to phospholipids, which are the main constituents of cellular membranes, and it is an active ingredient with anti-tumor capacities. In tumor cells, perifosine has demonstrated interactions with vital signal transduction mechanisms and induction of programmed cell death (apoptosis).

 

 

Perifosine exerts a marked cytotoxic effect in animal and human tumor cell lines. The most sensitive cancer cell lines were larynx carcinoma, breast, small cell lung, prostate and colon. Based on the in vitro trials, the mode of action of perifosine appears to be fundamentally different from that of currently available cytotoxics. Pharmacodynamic data have demonstrated that perifosine possesses anti-tumor activity, including tumor models that are resistant to currently available agents for cancer therapy. This activity is based on a direct and relatively specific action on tumors.

 

In preclinical and clinical Phase 1 trials (solid tumors), this orally administered agent has been found to have good tolerability. Five Phase 1 trials have been conducted on perifosine, including one trial of perifosine in combination with radiotherapy.

 

Based on findings in various tumor models, the U.S. National Cancer Institute, along with our North American partner, Keryx, investigated additional dosage regimens of perifosine in oncology patients. A number of screening Phase 2 studies examined perifosine as a single agent or in combination in several tumor types. Encouraging results lead to further development in specific indications.

 

Perifosine, the first-in-class AKT inhibitor in multiple Phase 2 studies, is being developed as an orally active anti-cancer agent.

 

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Perifosine — Anti-cancer agent

 

Perifosine — Multiple myoloma (“MM”)

 

In June and December 2007, Keryx announced preliminary positive Phase 1 and Phase 2 data on perifosine in patients with relapsed/refractory MM. Data demonstrated clinical activity of perifosine in combination with bortezomib and dexamethasone, and with lenalidomide plus dexamethasone.

 

In December 2008, Keryx presented final results of the Phase 1 clinical trial in which patients with relapsed or refractory MM were administered a combination of perifosine + lenalidomide and dexamethasone. Four cohorts  of > 6 patients each were enrolled and perifosine dose was 50 or 100 mg (daily), lenalidomide dose was 15 or 25 mg for days 1 to 21 and dexamethasone dose was 20 mg (for days 1-4; 9-12; and 17-20 for 4 cycles, followed by 20 mg for days 1-4) in 28-day cycles. To limit dexamethasone-related toxicities, the protocol was amended to use weekly dexamethasone (40 mg), applying to cohorts 3, 4, and the Maximal Tolerated Dose (MTD) cohort.  Dose Limiting Toxicity (DLT) was defined as grade (G) 3 non-hematologic toxicity, G4 neutropenia for 5 days and/or neutropenic fever, or platelets <25,000/mm3 on >1 occasion despite transfusion. Response was assessed by modified EBMT criteria. To be enrolled, patients had to have received at least one but no more than four prior therapies. Patients refractory to lenalidomide/dexamethasone were excluded.  32 patients (17 men and 15 women, median age 61 years old, range 37-80) were enrolled; 6 patients in cohort 1 (Perifosine 50 mg, lenalidomide 15 mg, Dexamethasone 20 mg); 6 patients in cohort 2 (Perifosine 50 mg, lenalidomide 25 mg, Dexamethasone 20 mg); 8 patients in cohort 3 (Perifosine 100 mg, lenalidomide 15 mg, Dexamethasone 40mg/week); 6 patients in cohort 4 (Perifosine 100 mg, lenalidomide 25 mg, Dexamethasone 40 mg/week) and 6 patients at MTD (Cohort 4). Median prior lines of treatment was 2 (range 1-4).  Prior therapy included dexamethasone (94%), thalidomide (83%), bortezomib (47%), and stem cell transplant (47%).  37% of patients had progressed on prior Thalidomide/Dexamethasone.  Two patients did not complete one full cycle (non-compliance and adverse event not related to study drugs — both in cohort 3) and were not included in the safety and efficacy analysis.  Of the 30 patients evaluable for safety, the most common (> 10%) grade 1 / 2 events included nausea (13%); diarrhea (17%); weight loss (17%); upper respiratory infection (23%); fatigue (30%); thrombocytopenia (20%); neutropenia (20%); hypophosphatemia (23%); increased creatinine (23%); anemia (36%); hypercalcemia (47%).  Grade 3 / 4 adverse events > 5% included neutropenia (20%); hypophosphatemia (17%); thrombocytopenia (13%); anemia (10%), fatigue (7%).  There was one reported DLT in cohort 3 (nausea).  Lenalidomide was reduced in 8 patients, Perifosine reduced in 8 patients and Dexamethasone reduced in 6 patients.  All 30 patients in the analysis were evaluable for response, with best response as follows:

 

Response:  N = 30

 

N (%)

 

Duration (wks)

 

ORR ( >PR)

Near Complete Response (nCR)

 

2 (7%)

 

79+, 15+

 

 

Very Good Partial Response (VGPR)

 

3 (10%)

 

62+, 34, 17

 

15 (50%)

Partial Response (PR)

 

10 (33%)

 

26+ (range 11 – 54+)

 

 

Minimal Response (MR)

 

6 (20%)

 

17+ (range 9 - 30+)

 

 

Stable Disease (SD)

 

7 (23%)

 

14+ (range 8 – 19)

 

 

Progression (PD)

 

2 (7%)

 

8, 4

 

 

stable disease: < 25% reduction in M-protein

 

Patients have tolerated the treatment regimen of Perifosine + Lenalidomide + Dexamethasone well with manageable toxicity, and with encouraging clinical activity demonstrated by an overall response rate (“ORR”) (> PR) of 50%.

 

Updated results of this study were presented in February 2009 at the 12th International Multiple Myeloma Meeting by our partner Keryx. Results indicated that Perifosine in combination with Lenalidomide (Revlimid) + dexamethasone continues to be well tolerated, with a median progression-free survival in responding patients of 10.9 months. Median overall survival still has not been reached now at 17 months. Nine patients remain on active treatment.

 

Also in December 2008 during the meeting of the American Society of Hematology, Keryx presented results of a Phase 1/2 multicenter trial of perifosine + bortezomib in patients with relapsed or relapsed/refractory MM who were previously relapsed from or refractory to bortezomib ± dexamethasone. The Phase I stage of the study enrolled a total of 18 patients in 4 cohorts of 3 patients each with dosing of Perifosine 50 mg or 100 mg (daily) and bortezomib 1.0 or 1.3 mg/m2 (on day 1, 4, 8, 11) in 21-day cycles. The selected dose for Phase 2 was perifosine 50 mg once daily + bortezomib 1.3 mg/m2 (on day 1, 4, 8, 11) in 21-day cycles, with a planned enrollment of 64 patients. Dexamethasone 20 mg (on day of and after each bortezomib dose) could be added in patients with progressive disease (PD). For the Phase 1 portion, Dose limiting toxicity (DLT) was defined as any grade (G) 3 non-hematologic toxicity, G4 neutropenia for 5 day and/or neutropenic fever, or platelets <10,000/mm3 on more than one occasion despite transfusion. Response was assessed by modified EBMT and Uniform criteria. A total of 76 patients have been enrolled (18 patients in Phase 1 and 58 patients in Phase 2) comprised of 45 men and

 

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31 women, median age 63 years old, (range 41-89). 84% of patients had relapsed/refractory MM, with a median of 6 lines of prior treatment (range 2-13).  Prior therapy included bortezomib (100%), dexamethasone (95%), thalidomide (79%), lenalidomide (71%) and stem cell transplant (57%).  63 patients have completed at least one cycle and were evaluable for safety (13 patients are currently not evaluable; 3 were removed in cycle 1 and 10 are too early in their treatment). Most common (>10%) grade 1 / 2 events were nausea, diarrhea, fatigue and myelosuppression, which were manageable with supportive care and growth factors. Grade 3 / 4 adverse events >5% included thrombocytopenia (40%); lymphopenia (36%); neutropenia (21%); anemia (14%); hyponatremia (13%); leukopenia (11%); proteinuria (8%), and upper respiratory infection (6%).  No deep vein thrombosis has been seen, and only one worsening peripheral neuropathy from grade 1 to 3 has been reported to date.  Two patients had perifosine reduced to 50 mg (nausea, fatigue) in the Phase 1 cohort, and 7 patients had bortezomib dose reductions primarily due to hematologic toxicity.  57 patients have completed at least 2 cycles and are evaluable for response, with best response to perifosine + bortezomib (+/- dexamethasone) as follows:

 

 

 

 

 

CR

 

PR

 

MR

 

ORR

 

SD

 

All Patients: Best Response

 

N=57

 

2

 

4%

 

7

 

12%

 

14

 

25%

 

23

 

40%

 

23

 

40%

 

perifosine + bortezomib

 

57

 

1

 

2%

 

5

 

9%

 

8

 

14%

 

14

 

24%

 

17

 

30%

 

With dexamethasone added*

 

31

 

1

 

2%

 

2

 

3%

 

6

 

11%

 

9

 

16%

 

6

 

11%

 

 


(* as a subset of the evaluable population)

 

9 of 76 patients (12%) rapidly progressed without response or stable disease, including 6 patients in whom dexamethasone was also added.  As of August 2008, the median time to progression (TTP) for patients achieving > PR is 34 weeks, and for all patients achieving > MR is 33 weeks. Perifosine in combination with bortezomib (+/- dexamethasone) was generally well tolerated and is remarkably active in a heavily pre-treated Bortezomib-exposed patient population, with an ORR of 40%, including an ORR of 37% and a median TTP of 9.25 months in responding but previously bortezomib-refractory patients.

 

Updated data for the effect of perifosine in combination with bortezomib +/- dexamethosone were reported at the 12th International Multiple Myeloma Meeting in February 2009 by our partner Keryx. Eighty-four patients were enrolled in a combined Phase I/II study (18 patients in the Phase I component and 66 patients in the Phase II component). At the time of this analysis, 73 patients were evaluable for response. Median prior lines of therapy was 5 (range 1 - 13), including; 100% of patients had been treated with bortezomib (50% of the patients were previously treated with at least 2 bortezomib-based therapies and 81% were previously treated with bortezomib plus dexamethasone); 98% of patients were previously treated with dexamethasone; 99% of patients were previously treated with lenalidomide (Revlimid) and/or thalidomide (Thalomid); and 57% of patients had prior stem cell transplant. No unexpected adverse events have been seen. Toxicities were manageable with supportive care and/or dose reductions as required.

 

Best response (MR or better) and stable disease (no progression for 3 months) to either perifosine + bortezomib (+/-dexamethasone) for patients previously relapsed from or refractory to prior bortezomib treatment was as follows:

 

Evaluable Patients

 

CR

 

PR

 

MR

 

ORR

 

SD > 3 mos

 

Bortezomib Relapsed (n=20)

 

2

 

10%

 

6

 

30%

 

3

 

15%

 

11

 

55%

 

9

 

45%

 

Bortezomib Refractory (n=53)

 

1

 

2%

 

6

 

11%

 

10

 

19%

 

17

 

32%

 

24

 

45%

 

All Evaluable Patients (n=73)

 

3

 

4%

 

12

 

16%

 

13

 

18%

 

28

 

38%

 

33

 

45%

 

 

Patients who had previously relapsed on a bortezomib-based treatment had a median time to progression (TTP) of 8.5 months. The median TTP for all 73 evaluable study patients (both bortezomib relapsed and refractory) was 6.4 months. As stated in Keryx’s February 26, 2009 press release, there were 16 patients remain on active treatment.

 

Updated efficacy and safety data as well as new survival data on the clinical activity of perifosine in combination with bortezomib (Velcade®) +/- dexamethasone in patients with relapsed/refractory multiple myeloma were presented by our partner Keryx during the ASH 2009 meeting in December 2009. Of the 73 evaluable patients, 53 patients (73%) were previously refractory to bortezomib (defined as progression on or within 60 days of treatment to a bortezomib-based regimen), including 44 patients who were refractory to the combination of bortezomib + dexamethasone. Twenty evaluable patients (27%) were relapsed to a prior bortezomib-based regimen. Best response for all 73 evaluable patients was as follows:

 

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Evaluable Patients

 

CR /nCR*

 

PR

 

MR

 

ORR

 

SD**

 

All Evaluable Patients (n=73)

 

3

 

4%

 

13

 

18%

 

14

 

19%

 

30

 

41%

 

30

 

41%

 

Bortezomib Relapsed (n=20)

 

2

 

10%

 

7

 

35%

 

4

 

20%

 

13

 

65%

 

7

 

35%

 

Bortezomib Refractory (n=53)

 

1

 

2%

 

6

 

11%

 

10

 

19%

 

17

 

32%

 

23

 

43%

 

 


*                 nCR = Near Complete Response is defined as meeting the criteria for CR (non-detectable monoclonal protein by serum and urine), except with detectable monoclonal protein by immunofixation.

**          SD = Stable Disease for a minimum of 3 months.

 

Approximately 60% (45 / 73) of patients demonstrated progression (or SD for 4 cycles) at some point in their treatment and received 20 mg dexamethasone, four times per week, in addition to perifosine plus bortezomib. Responses occurred both with patients taking perifosine in combination with bortezomib and with patients receiving the combination plus dexamethasone. Best response for each group was as follows:

 

Best Response

 

CR /nCR

 

PR

 

MR

 

ORR

 

SD

 

Perifosine + Bortezomib (n=73)

 

2

 

3%

 

10

 

14%

 

6

 

8%

 

18

 

25%

 

19

 

26%

 

Dexamethasone added (n=45)

 

1

 

2%

 

6

 

13%

 

10

 

23%

 

17

 

38%

 

14

 

31%

 

 

Five patients achieved an initial response on perifosine + bortezomib alone, and subsequently responded again with the addition of dexamethasone. Three additional patients achieved stable disease on perifosine + bortezomib alone, and subsequently achieved stable disease again with the addition of dexamethasone.

 

Reported for the first time was median Progression-Free Survival (PFS) and Overall Survival (OS) data for all evaluable patients, as follows:

 

Evaluable Patients

 

Median PFS*

 

Median OS**

All Evaluable Patients (n=73)

 

6.4 months
95% CI (5.3, 7.1)

 

25 months
95% CI (15.5, NR)

 


NR = Not Reached

*                 Median PFS and median TTP were identical, as no patient deaths occurred prior to progression.

**          Kaplan Meier methodology was used to determine overall survival figures.

 

Of particular interest was the comparison of evaluable patients who were previously refractory and the patients who were relapsed to a bortezomib-based regimen. Median PFS and OS for bortezomib relapsed vs. refractory were as follows:

 

Bortezomib Relapsed vs. Refractory

 

Median PFS*

 

Median OS**

Bortezomib Relapsed (n=20)

 

8.8 months

95% CI (6.3, 11.2)

 

Not Reached at 38+ months

95% CI (25, NR)

Bortezomib Refractory (n=53)

 

5.7 months

95% CI (4.3, 6.4)

 

22.5 months

95% CI (12.3, NR)

 


*                 Median PFS and median TTP were identical, as no patient deaths occurred prior to progression.

**          Kaplan Meier methodology was used to determine overall survival figures.

 

No unexpected adverse events have been observed. Toxicities were manageable with supportive care.

 

In August 2009, our partner Keryx announced that it has reached an agreement with the FDA regarding a Special Protocol Assessment (“SPA”) on the design of a Phase 3 trial for perifosine, in relapsed or relapsed/refractory multiple myeloma patients previously treated with bortezomib (Velcade®). The SPA provides agreement that the Phase 3 study design adequately addresses objectives in support of a regulatory submission. The study, entitled, “A Phase 3 Randomized Study to Assess the Efficacy and Safety of Perifosine Added to the Combination of Bortezomib and Dexamethasone in Multiple Myeloma Patients Previously Treated with Bortezomib”, will be a double-blind, placebo-controlled study comparing the efficacy and safety of perifosine vs. placebo when combined with bortezomib and dexamethasone. The trial, powered at 90%, will enroll approximately 400 patients with relapsed or relapsed/refractory multiple myeloma (patients can be relapsed from and refractory to all non-bortezomib based therapies, however, patients can only be relapsed (progressed > 60 days after

 

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discontinuing therapy) from prior bortezomib-based therapies). The primary endpoint is progression-free survival and secondary endpoints include overall response rate, overall survival and safety. The Phase 3 trial is a randomized (1:1), double-blind trial comparing the efficacy and safety of perifosine to placebo when combined with bortezomib and dexamethasone. Patients must have been previously treated with both bortezomib (Velcade®) and an immunomodulatory agent (Revlimid® or Thalidomid®) and previously treated with one to four prior lines of therapy. The primary endpoint is progression-free survival and secondary endpoints include overall response rate, overall survival and safety.  We announced the initiation, by our partner Keryx, of the enrollment of patients for this Phase 3 trial on December 16, 2009. Enrolled patients will be randomized to bortezomib (Velcade®) at 1.3 mg/m2 days 1, 4, 8 and 11 every 21 days in combination with dexamethasone 20 mg on the day of and day after bortezomib (Velcade®) treatment, and either perifosine 50 mg daily or placebo. We expect a patient recruitment period of approximately 16-18 months, with study completion expected within approximately 20-22 months from today. Approximately 265 events (defined as disease progression or death) will trigger the un-blinding of the data.

 

In September 2009, our partner Keryx announced that it had received orphan-drug designation for perifosine from the FDA for the treatment of multiple myeloma. Orphan-drug designation is granted by the FDA Office of Orphan Drug Products to novel drugs or biologics that treat a rare disease or condition affecting fewer than 200,000 patients in the U.S. The designation provides the drug developer with a seven-year period of U.S. marketing exclusivity if the drug is the first of its type approved for the specified indication or if it demonstrates superior safety, efficacy or a major contribution to patient care versus another drug of its type previously granted the designation for the same indication.

 

On December 2, 2009, we announced that the FDA had granted Fast Track designation for perifosine for the treatment of relapsed/refractory multiple myeloma. The Fast Track program of the FDA is designed to facilitate the development and expedite the review of new drugs that are intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs. Fast Track designated drugs ordinarily qualify for priority review, thereby expediting the FDA review process.

 

In March 2010, we announced that we had received a positive opinion for orphan medicinal product designation for perifosine from the Committee for Orphan Medicinal Products of the European Medicines Agency, for the treatment of multiple myeloma. Orphan medicinal product designation is granted by the European Commission, following a positive opinion from the COMP, to a medicinal product that is intended for the diagnosis, prevention or treatment of a life-threatening or a chronically debilitating condition affecting not more than five in 10,000 persons in the European Community when the application for designation is submitted.

 

Orphan medicinal product designation provides the sponsor with access to the Centralized Procedure for the application for marketing authorization, protocol assistance, up to a 100% reduction in fees related to a marketing authorization application, pre-authorization inspection and post-authorization activities, and could provide ten years of market exclusivity in EU, once approved for the treatment of multiple myeloma.

 

Competitors for Perifosine in Multiple Myeloma Indication

 

Products on the market:

 

Major products available on the market for the treatment of multiple myeloma are the following:

 

Velcade® (bortezomib — manufactured by Millenium: The Takeda Oncology Company), a proteasome inhibitor approved in combination with melphalan (Alkeran® - manufactured by Celgene) and prednisone as a 1st-line treatment and as a monotherapy for 2nd-line treatment in both U.S. and E.U. Millennium reported more than $1 billion in global Velcade® sales in 2008. [Velcade® is co-developed by Millennium Pharmaceuticals, Inc. and Johnson & Johnson Pharmaceutical Research & Development, L.L.C. Millennium is responsible for commercialization of VELCADE in the U.S., Janssen-Cilag is responsible for commercialization in Europe and the rest of the world. Janssen Pharmaceutical K.K. is responsible for commercialization in Japan.]

 

Caelyx®/Doxil® (pegylated liposomal doxorubicin — manufactured by Schering Plough), a topoisomerase II inhibitor and DNA intercalating agent, is approved as a 2nd-line treatment in combination with Velcade® in patients with advanced multiple myeloma.

 

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Thalomid® (thalidomide — manufactured by Celgene), an antiangiogenic compound has been approved by the FDA for use in combination with dexamethasone for the treatment of patients with newly diagnosed multiple myeloma. The Australian Therapeutic Goods Administration, or TGA, approved a supplemental filing granting Thalomid® marketing approval for use in combination with melphalan and prednisone for patients with untreated multiple myeloma or ineligible for high-dose chemotherapy, and also granted Thalomid® marketing approval in combination with dexamethasone for induction therapy prior to high-dose chemotherapy with autologous stem cell rescue, for the treatment of patients with untreated multiple myeloma. In addition, Thalomid® was granted full marketing authorization by the European Commission, or EC, for use in combination with melphalan and prednisone as a treatment for patients with newly diagnosed multiple myeloma. Internationally, Thalomid® is also distributed under mandatory risk-management distribution programs tailored to meet local competent authorities’ specifications to help ensure the safe and appropriate distribution and use of Thalomid®. According to Celgene’s 2009 Annual Report, Thalomid® sales were down 13.4% to approximately $436.9 million in 2009.

 

Revlimid® (lenalidomide — manufactured by Celgene): Revlimid® is an oral immunomodulatory drug approved by the FDA and a number of other regulatory agencies in Europe, Latin America, Middle East and Asia/Pacific for treatment in combination with dexamethasone for multiple myeloma patients who have received at least one prior therapy and in Australia and New Zealand in combination with dexamethasone for the treatment of patients whose disease has progressed after one therapy. Revlimid® is distributed internationally under mandatory risk-management distribution programs tailored to meet local competent authorities’ specifications to help ensure the safe and appropriate distribution and use of Revlimid®.  Revlimid® continues to be evaluated in numerous clinical trials worldwide either alone or in combination with one or more other therapies in the treatment of a broad range of hematological malignancies, including multiple myeloma, MDS, non-Hodgkin’s lymphoma, or NHL, chronic lymphocytic leukemia, or CLL, other cancers and other diseases. According to Celgene’s 2009 Annual Report, Revlimid® sales were up 28.8% to approximately $1.7 billion in 2009.

 

Products in Phase 3 development:

 

Panobinostat (LBH5893) — Novartis: Panobinostat is a highly potent pan-deacetlyase inhibitor (pan-DACi) developed by Novartis. Panobistat’s mechanism of action involves disrupting aggresome function, promoting accumulation of cytotoxic misfolded protein aggregates and triggering of myloma cell death. Combination of pan-DAC and protease inhibition by co-treatment with panobinostat and bortezomib as demonstreated synergistic cytotoxicity in vitro and in vivo in preclinical experiments. Clinical experience in advanced multiple myeloma patients treated by oral panobinostat and i.v. bortezomib +/- dexamethasone showed efficacy and manageable toxicity profile. Panobinostat is currently in Phase 3 trial in patients with relapsed multiple myeloma in combination with Bortezomib.

 

Idamycin (Idarubicin) — Pfizer: Idarubicin is an oral anthracyclines and an analogue of daunorubicin (but 5 to 6 times more potent than daunorubicin) developed by Pfizer. The mechanism of action of anthracyclines is poorly understood and cytotoxicity is generally attributed to intercalation of the drug into DNA and inhibition of DNA topoisomerase II activity resulting in double and single strand DNA breaks. Idarubicin is already approved in Canada for Acute lymphocytic leukemia in adults and children as a second-line treatment and in Acute non-lyphocytic leukemia in adults as a front-line treatment or for refractory/relapsed disease. Idarubicin is currently in Phase 3 clinical trial for patients with Stage I or Stage II multiple myeloma in combination with dexamethasone.

 

Zolinza (vorinostat — MK0683) — Merck: Zolanza is an oral histone deacetylase (HDAC) inhibitor developed by Merck. Zolinza works by inhibiting the enzymatic activity of HDAC1, HDAC2, HDAC3 (Class 1) and HDAC6 (Class II). Inhibition of HDAC may result in anti-cancer effects since HDAC inhibitors, like zolinza, have the ability to induce antiproliferative effects including cyto-differentiation, cell cycle growth arrest or apoptosis in various cancer cell lines. The exact mechanism of the anticancer effect of Zolinza has not been fully characterized. Phase 1 results showed early anti-tumor activity in patients with releaspsed and/or refractory multiple myeloma when zolenza was administered in combination with bortezomib, including in patients previously treated with and no longer responding to bortezomib. A Phase 3 randomized, double-blind, placebo-controlled trial of zolinza in combination with bortezomib in patients with relapsed and/or refractory multiple myeloma is currently enrolling patinents. Pulmonary embolism and deep vein thrombosis have been reported as adverse reactions following treatment with zolenza.

 

Carfilzomib — Onyx Pharmaceuticals: Carfilzomib is the first in a new class of selective, irreversible proteasome inhibitors being developed by Proteolix (now part of Onyx Pharmaceuticals) for the treatment of hematologic malignancies and solid tumors. Carfilzomib produces specific and sustained inhibition of the proteasome, leading to apoptosis in cancer cells with minimal off-target effects. In Phase 1 and Phase 2 clinical trials, carfilzomib has demonstrated single-agent activity in hematologic malignancies and solid tumors, including multiple myeloma, Waldenstrom’s macroglobulinemia, mantle cell lymphoma and renal cell carcinoma. Carfilzomib was generally well tolerated and toxicities were manageable. A Phase 3 international randomized trial evaluating the efficacy of carfilzomib in combination with lenalidomide and dexamethasone

 

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versus lenalidomide and dexamethasone as a potential treatment option for patients with relapsed multiple myeloma is expected to begin in April 2010. Orphan Drug designation was granted by EMA in June 2008 for the treatment of multiple myeloma.

 

Multiple myeloma is the second most-common hematologic cancer, representing 1% of all cancer diagnoses and 2% of all cancer deaths.

 

According to the International Myeloma Foundation, more than 85,000 men and women in Europe underwent treatment for multiple myeloma in 2007 and 25,000 people were expected to die from multiple myeloma in 2007. According to the American Cancer Society, an estimated 20,580 new cases of multiple myeloma were diagnosed in the United States and 10,500 people were expected to die from multiple myeloma in the United States in 2009.

 

Perifosine — Colon Cancer

 

In June 2009, our partner Keryx presented results of a randomized Phase 2 study of perifosine in combination with capecitabine versus capecitabine alone in patients with second- or third-line metastatic colon cancer.

 

This randomized, double-blind, placebo-controlled study was conducted at 11 centers across the United States. Patients with 2nd or 3rd line metastatic colon cancer were randomized to receive capecitabine (Xeloda®), an approved drug for metastatic colon cancer, at a dose of 825 mg/m2 BID (total daily dose of 1650 mg/m2) on days 1 - 14 every 21 days, plus either perifosine or placebo at 50 mg daily. Treatment was continued until progression. The study enrolled a total of 38 patients, 34 of which were third-line or greater. Of the 38 patients enrolled, 35 were evaluable for response (20 patients on the capecitabine + perifosine arm and 15 patients on the capecitabine + placebo arm). The three patients not evaluable for response were all in the capecitabine + placebo arm; 2 patients were inevaluable due to toxicity (days 14, 46) and 1 patient was inevaluable due to a new malignancy on day 6. All patients in the perifosine + capecitabine arm were evaluable for response.

 

The patients in the study were heavily pre-treated, with the arms well-balanced in terms of prior treatment regimens. The median number of prior treatment regimens for all 38 patients was two, with prior treatment regimens as follows: 91% of the patients received prior FOLFIRI (Irinotecan + 5FU + Leucovorin); 74% prior FOLFOX (Oxaliplatin + 5FU + Leucovorin); 63% were previously treated with both FOLFIRI and FOLFOX; 77% received prior Avastin; and 43% prior Erbitux®. Prior treatment with single agent capecitabine was excluded.

 

The primary endpoints of this study were to measure 1) Time to Progression (TTP); 2) Overall Response Rate (ORR), defined as the percentage of patients achieving a Complete Response (CR) or Partial Response (PR) by RECIST, and 3) Clinical Benefit Rate (CBR) defined as the percentage of patients on treatment for greater than three months with at least stable disease. Safety of perifosine + capecitabine vs. capecitabine + placebo in this patient population was evaluated as a secondary endpoint. Perifosine in combination with capecitabine was well tolerated with hand/foot syndrome (14%) and anemia (11%) as the highest reported grade 3/4 adverse events.

 

Best response and median time to progression of capecitabine + perifosine vs. capecitabine + placebo were as follows:

 

Group

 

N

 

CR
N(%)

 

PR
N(%)

 

ORR
N(%)

 

SD > 12
wks N(%)

 

CBR
N(%)

 

Median TTP
(wks)

 

Capecitabine + Perifosine

 

20

 

1

(5%)

 

3

(15%)

 

4

(20%)

 

11

(55%)

 

15

(75%)

 

28.9 weeks
{95% CI (13, 48.1)}

 

Capecitabine + Placebo

 

15

 

0

 

1

(7%)

 

1

(7%)

 

5

(33%)

 

6

(40%)

 

11 weeks
{95% CI (9, 15.9)}

 

 

Perifosine + capecitabine more than doubled time to progression vs. capecitabine + placebo with a statistically significant p-value = 0.0006. In addition, perifosine + capecitabine more than doubled the ORR and almost doubled the Clinical Benefit Rate vs. capecitabine + placebo.

 

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Although not a primary endpoint in the study, overall survival was analyzed with results as follows:

 

Group

 

Median Overall Survival*(months)

 

% change

Capecitabine + Perifosine

 

22 {95% CI (12.1, NR)}

 

26% Increase**

Capecitabine + Placebo

 

16.3 {95% CI (5.3, 17.1)}

 

 

 


*                 Survival calculated from date of randomization until date of death from any cause, whether or not additional therapies were received after removal from treatment.

**          As of May 2009, median overall survival in the perifosine + capecitabine patient group is ongoing with 10 of the 20 patients in this arm still alive.

 

Updated results of this Phase 2 study were presented in January 2010 by our partner Keryx during the ASCO Gastrointestinal Cancers symposium. The primary endpoint of this study was to measure TTP. ORR, defined as CR+PR by RECIST, and overall survival (OS) was measured as a secondary endpoint. Updated results demonstrated a statistically significant advantage in the combination arm of perifosine + capecitabine for TTP and OS, as well as for the percentage of patients achieving Stable Disease (SD) lasting 12 or more weeks or better, as compared to the capecitabine arm. The perifosine + capecitabine arm demonstrated a greater than 60% improvement in OS, a more than doubling of median TTP, and almost a doubling of the percentage of patients achieving SD or better. In addition, the ORR was 20% (including one CR, and durable responses) in the perifosine + capecitabine arm vs 7% in the capecitabine arm. The updated efficacy results for all evaluable patients are as follows:

 

Group

 

N

 

ORR %
CR / PR

(Duration of Response)

 

> SD (min 12 wks)
N (%)
p=0.036

 

Median TTP
Weeks
p=0.0012

 

Median OS*
Months

p=0.0136

Perifosine + Capecitabine

 

20

 

20%
1 CR (34 mos - ongoing)
3 PR (21, 19, 11 mos)

 

15 (75%)

 

28 [95% CI (12-48)]

 

18 [95% CI (10.8-25.7)]

Capecitabine

 

15

 

7%
1 PR (7 mos)

 

6 (40%)

 

11 [95% CI (9-15.9)]

 

11 [95% CI (5.3-16.9)]

 

Of notable interest, and for the first time presented, were data showing a highly statistically significant benefit in median OS (more than doubling) and TTP for the subset of patients who were refractory to a 5-FU (Fluorouracil) chemotherapy-based treatment regimen. 5-FU is a core component of the standard of care FOLFIRI and FOLFOX regimens, and capecitabine is a 5-FU pro-drug. These results are shown below:

 

Group

 

5-FU Ref
N (%)

 

> SD (min 12 wks)
N (%)
p=0.066

 

Median TTP
Weeks
p=0.0004

 

Median OS
Months

p=0.0088

Perifosine + Capecitabine

 

14 (70%)

 

1 PR / 8 SD (64%)

 

18 [95% CI (12-36)]

 

15.3 [95% CI (8.4-26)]

Capecitabine

 

11 (73%)

 

0 PR / 3 SD (27%)

 

10 [95% CI (6.6-11)]

 

6.8 [95% CI (4.8-11.7)]

 

All 38 patients were evaluable for safety. The perifosine + capecitabine combination was well-tolerated with Grade 3 and Grade 4 adverse events of > 10% incidence for perifosine + capecitabine arm versus capecitabine arm as follows: anemia (15% vs. 0%), fatigue (0% vs. 11%), abdominal pain (5% vs. 11%) and hand-foot syndrome (30% vs. 0%). Of note, incidence of Grade 1 and Grade 2 hand-foot syndrome was similar in both the perifosine + capecitabine and capecitabine arms (25% vs. 22%, respectively). Hand-foot syndrome is a reported adverse event with capecitabine monotherapy. Patients who remained on treatment longer in the Phase 2 study had a greater chance to develop hand-foot syndrome as illustrated by a median time to onset of Grade 3 and Grade 4 hand-foot syndrome in the perifosine + capecitabine arm of 19 weeks.

 

On February 3, 2010, our  partner Keryx announced that it had reached an agreement with the FDA regarding a SPA on the design of a Phase 3 trial for perifosine in patients with refractory metastatic colorectal cancer. The Phase 3 X-PECT (Xeloda® + Perifosine Evaluation in Colorectal cancer Treatment) trial will be a randomized (1:1), double-blind trial comparing the efficacy and safety of perifosine + capecitabine (Xeloda®) vs. placebo + capecitabine in approximately 430 patients with refractory metastatic colorectal cancer. Patients must have failed available therapy including 5-fluorouracil, oxaliplatin (Eloxatin®), irinotecan, bevacizumab (Avastin®) and, if K-Ras wild-type, failed therapy with prior cetuximab (Erbitux®) or panitumumab (Vectibix®). For oxaliplatin-based therapy, failure of therapy will also include patients who discontinued due to toxicity. The primary endpoint is overall survival, with secondary endpoints including overall response rate (complete

 

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responses + partial responses), progression-free survival and safety.  Approximately 40 to 50 U.S. sites will participate in the study. The study is expected to begin in 2Q 2010, and enrollment is expected to take approximately 12 months, with  study completion expected in 2H 2011. Dr. Johanna Bendell, Director of GI Oncology Research for the Sarah Cannon Research Institute, Nashville, Tennessee, will lead the Phase 3 investigational team.

 

Competitors for Perifosine in colon cancer indication:

 

Products on the market:

 

Standard 1st-line therapies for treatment of colon cancer are usually the FOLFOX (5-fluorouracil; leucovorin; oxaliplatin) or the FOLFIRI (5-fluorouracil; leucovorin; irinotecan) combination.

 

The current therapies also include:

 

Xeloda® (Capecitabine — manufacture by Roche) is an oral fluoropyrimidine which generates fluorouracil preferentially in tumor tissues by enzymatic cascade and is used in 1st or 2nd-line setting for treatment of metastatic colorectal or colon cancer in monotherapy and also in combination with any chemotherapy in all lines with or without Avastin. According to Roche’s 2009 Annual Report, sales of Xeloda for colorectal, stomach and breast cancer increased 7% to 1.3 billion Swiss francs in 2009.

 

Avastin® (Bevacizumab, a humanized monoclonal antibody targeting vascular endothelial growth factor — manufactured by Genentech/Roche) is also used in 1st or 2nd —line treatment of metastatic colorectal cancer combined with available Standard therapy FOLFOX. According to Roche’s 2009 Annual Report, sales of Avastin® for advanced colorectal, breast, lung and kidney cancer, and for relapsed glioblastoma (a type of brain tumour), rose 21% to 6.2 billion Swiss francs in 2009.

 

Erbitux® (Cetuximab) is a chimeric monoclonal antibody that specifically blocks the epidermal growth factor receptor (EGFR). Cetuximab is indicated for the treatment of patients with EGFR-expressing, KRAS wild-type metastatic colorectal cancer in combination with Standard chemotherapy FOLFIRI, and in patients who have failed oxaliplatin- and irinotecan-based therapy. Erbitux® is manufactured and distributed in North America by ImClone and Bristol-Myers Squibb, while in the rest of the world distribution is by Merck KGaA.

 

Vectibix® (Panitumumab) is a recombinant, human IgG2 kappa monoclonal antibody manufactured by Amgen that binds specifically to the human epidermal growth factor receptor (EGFR). Vectibix® is indicated as a single agent for the treatment of EGFR-expressing, metastatic colorectal carcinoma with disease progression on or following fluoropyrimidine-, oxaliplatin-, and irinotecan-containing chemotherapy regimens. There are 2 boxed warnings for Vectibix®: dermatologic toxicity and infusion reactions.

 

Product in Phase 3 development:

 

Aflibercept — Sanofi + Regeneron: Aflibercept is an anti-angiogenesis inhibitor with a unique mechanism of action being developed by Sanofi and Regeneron. This fusion protein binds all forms of Vascular Endothelial Growth Factor-A (VEGF-A), as well as VEGF-B and placental growth factor (PIGF), additional angiogenic growth factors that appear to play a role in tumor angiogenesis and inflammation. Aflibercept has been shown to bind VEGF-A, VEGF-B, and PlGF with higher affinity than their natural receptors. Three Phase 3 studies are actually ongoing, each of which is currently over 70 percent enrolled:

 

·                  VELOUR study: 2nd-line metastatic colorectal cancer in combination with fluorouracil, leucovorin, and irinotecan (FOLFIRI);

·                  VITAL study: 2nd-line non-small cell lung cancer in combination with docetaxel;

·                  VENICE study: 1st-line hormone-refractory metastatic prostate cancer in combination with docetaxel and prednisone.

 

Aptocine — Light Sciences Oncology: Aptocine is a water-soluble drug targeted by a single-use, disposable drug activator included with the drug. Aptocine has three mechanisms of action: direct tumor cytotoxicity, apoptosis caused by vascular shutdown and potential anti-tumor immune stimulation. Enrollment of a Phase 3 trial for aptocine in metastatic colorectal cancer is nearly completed. This Phase 3 trial is a 450-patient trial, conducted primarily at sites in Europe and India, to assess the progression-free survival and overall survival of patients treated with Aptocine plus chemotherapy versus chemotherapy alone.

 

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Brivanib — Bristol-Myers Squibb: Brivanib, developed by Bristol-Myers Squibb, is an oral prodrug of BMS-540215, a dual tyrosine kinase inhibitor of VEGFR and FGFR signaling. Brivanib strongly binds to and inhibits VEGFR2, a tyrosine kinase receptor expressed almost exclusively on vascular endothelial cells. The inhibition of VEGFR2 may result in inhibition of tumor angiogenesis, inhibition of tumor cell growth, and tumor regression. Brivanib is currently in Phase 3 randomized trial investigating Brivanib Alaninate in combination with cetuximab (Erbitux®) vs. placebo in combination with cetuximab (Erbitux®) in patients with K-RAS tumors previously treated with combination chemotherapy for metastatic colorectal carcinoma. It is not yet known whether giving brivanib together with cetuximab is more effective than cetuximab alone in treating patients with metastatic colorectal cancer.

 

OncoVax — Vaccinogen: OncoVax is an autologous tumour cell vaccine and prepared for each patient using the patient’s own surgically removed tumor. The active specific immunotherapy falls within the classification of Advanced Therapeutic Medicinal Product (ATMP). The patient received the first of four vaccinations several weeks after surgery. The vaccine consists of a portion of the tumor cells that has been thawed and combined with a proprietary formulation of BCG that serves as an immunogenic enhancer. This formulation is also used for the 2nd inoculation. The 3rd and the final booster incolucations are prepared the same way but without the addition of BCG. Phase 3a results demonstrated efficacy of Oncovax® in Stage II colon cancer patients with a statistical significant increased 5-year overall survival rate and increased recurrence-free survival by log-rank analysis. OncoVAX® currently has a marketing authorization from Swissmedic, Switzerland’s medical authority, in the category of “procedes therapeutiques”. A pre-submission meeting to request Scientific Advice from the EMA for submission of a Conditional Marketing Autorization was done in December 2009.

 

According to the American Cancer Society, colorectal cancer is the third most common form of cancer diagnosed in the United States. It is estimated that over 146,000 people were diagnosed with some form of colorectal cancer with over 49,000 patients dying from colorectal cancer in 2009. Surgery is often the main treatment for early stage colorectal cancer. When colorectal cancer metastasizes (spreads to other parts of the body such as the liver), chemotherapy is commonly used. Treatment of patients with recurrent or advanced colorectal cancer depends on the location of the disease. Chemotherapy regimens (i.e. FOLFOX or FOLFIRI either with or without bevacizumab) have been shown to increase survival rates in patients with metastatic/advanced colorectal cancer. Currently, there are seven approved drugs for patients with metastatic colorectal cancer: 5-fluorouracil (5-FU), capecitabine (Xeloda®), irinotecan (Camptosar®), oxaliplatin (Eloxatin®), bevacizumab (Avastin®), cetuximab (Erbitux®), and panitumumab (Vectibix®). Depending on the stage of the cancer, two or more of these types of treatment may be combined at the same time or used after one another. For example, FOLFOX combines 5-FU, leucovorin and oxaliplatin, and FOLFIRI combines 5-FU, leucovorin and irinotecan. Bevacizumab, a VEGF monoclonal antibody, is commonly administered with chemotherapy. Typically, patients who fail 5-FU, oxaliplatin, irinotecan, and bevacizumab-containing therapies, and who have wild-type KRAS status receive EGFR monoclonal antibody therapy with either cetuximab or panitumumab. Once patients progress on these agents, there are no further standard treatment options.

 

Perifosine — Waldenstrom’s Macroglubulinemia

 

Results of a Phase 2 study on perifosine in patients with Waldenstrom’s Macroglubulinemia (“WM”) were presented by Keryx in June 2008 at ASCO and in December 2008 during the ASH meeting. Perifosine showed clinical activity as a single agent in patients with relapsed/refractory WM, with an ORR (partial response [PR] + minimal response [MR]) of 36%. PR occurred in 2 patients (6%), with a median duration of response of 9+ and 18+ months, MR occurred in 11 patients (30%), with a median duration of response of 7 months (2-21+ months). Stable disease [SD] occurred in 21 patients (58%) and progressive disease [PD] in 2 patients (6%) at 2 and 4 months. The most common adverse events were GI toxicities (nausea, vomiting and diarrhea) with grade 1 and 2 in 36% of the patients. Grade 3 and 4 events included anemia (9%) and leucopenia (9%). Grade 3 arthritis occurred in 9% of the patients; was considered likely related to therapy, (especially in rapidly responding patients), and reversed with symptomatic treatment as well as dose reduction. Dose reductions to 100 mg occurred in a total of 36% of the patients and were otherwise due to GI toxicity or cytopenias. Perifosine monotherapy induces a prolonged time to progression in relapsed or refractory WM, with a promising response rate of 36%, stabilization of disease in 58% of patients, and manageable toxicity, as well as the convenience of oral administration. Future clinical trials in combination with rituximab are planned.

 

In January 2010, we announced that an article entitled “Clinical and Translational Studies of a Phase II Trial of the Novel Oral Akt Inhibitor Perifosine in Relapsed or Relapsed/Refractory Waldenstrom’s Macroglobulinemia,” reporting Phase 2 data demonstrating the single agent activity of perifosine for the treatment of advanced Waldenstrom’s Macroglobulinemia, appeared in the February 1, 2010 issue of the Journal of Clinical Cancer Research.  Dr. Irene Ghobrial, Assistant Professor of Medicine, Bing Center for Waldenstrom’s Macroglobulinemia at Dana-Farber Cancer Institute, led the Phase 2 study, in which 37 patients were treated with perifosine 150 mg daily for 6 cycles. In this study, 41% of the patients had 3 or more lines of prior therapy and 78% had 2 or more prior lines of therapy. Such prior therapies include nucleoside analogues,

 

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bortezomib, alkylating agents and rituximab, which are not approved for, but are often used in the treatment of Waldenstrom’s. Stable or responding patients were allowed to continue therapy until progression. Of the 37 patients, 4 achieved a partial response (11%), 9 achieved a minimal response (24%), and 20 showed stable disease (54%). Overall, 89% (33/37) of patients treated with single agent perifosine were reported to have stable disease or better, while 11% (4 patients) demonstrated progression. The median progression-free survival in the study was 12.6 months (90% C.I. (10.2, 22.7)), with a median overall survival of 26 months (90% C.I. (26 — upper limit not reached)). Perifosine was generally well tolerated with gastrointestinal symptoms and fatigue reported as the most common adverse events related to therapy.

 

Perifosine — Renal Cell Carcinoma

 

In June 2006, we announced positive data of perifosine in patients with advanced renal cell carcinoma (“RCC”). Keryx disclosed results from an interim analysis performed at the end of the first year of accrual, from a Phase 2, multi-center trial of perifosine that included multiple types of tumor and the results of the RCC group met protocol requirements for expansion of this cohort. Of the 13 patients with RCC, seven were evaluable for response. Three of them (43%) had a partial response and an additional two patients (29%) achieved long-term stable disease. Two patients (29%) had progressive disease. Results of a Phase 1 multicenter trial of perifosine in combination with sorafenib or in combination with sunitinib for patients with advanced cancers including RCC were disclosed by Keryx in June 2007 during the ASCO meeting and in November 2007.  The trial was designed to accrue 3-6 patients in each of four cohorts. Response by RECIST criteria was a secondary endpoint. Perifosine was escalated from 50 mg once per day to 50 mg three times per day; sorafenib dose was escalated from 400 mg once per day to 400 mg twice per day; and sunitinib dose was escalated from 25 mg to 50 mg once per day for 4 weeks of treatment out of 6. Dose limiting toxicity (“DLT”) was defined as grade (G) 3 non-hematologic or G4 hematologic toxicity. Maximal tolerated dose (“MTD”) was the dose below that at which 2 out of 6 patients experienced a DLT.

 

For the combination perifosine + sorafenib, 20 patients were enrolled (12 males / 8 females, median age 64 (range 44-87)) with a median number of 2 prior therapies (range 1-4). Three patients were inevaluable due to rapid disease progression. Diagnosis was as follows; RCC (11 pts), sarcoma (5), colorectal (2), hepatocellular (1) and neuroendocrine (1). 17 patients were evaluable for toxicity: no drug related Grade 4 adverse events (AE) were seen. Suspected DLT of hand-foot syndrome was seen in cohort 4 and additional patients were enrolled. There was no increase in hand-foot syndrome compared to sorafenib alone. Of interest, 6/9 evaluable RCC patients (67%) had stable disease (SD) >12 weeks (median 26 weeks, range 12-62+). One hepatocellular patient had SD for 36 weeks. The combination of perifosine + sorafenib was well tolerated with no increased hand-foot syndrome compared to sorafenib alone. Six out of 9 RCC patients (67%) achieved SD up to 62+ weeks. Future studies are currently in development.

 

For the combination perifosine + sunitinib, 14 patients (8 males / 6 females; media range 62 years old, range 28-81) were enrolled. Disease type was as follows: RCC (3), Sarcoma (3), Other (8).  Six patients were evaluable for response. After 2 treatment cycles, one patient had a partial response (PR), 3 patients showed a SD and 2 patients had disease progression (PD). In the sub-group RCC, three out of three patients were evaluable for response: one patient had a PR, 1 patient showed a SD and 1 patient had a PD. Results indicated that patients to date have tolerated well the treatment combination of perifosine + sunitinib with no unexpected toxicities and clinical activity has been noted within the first 3 cohorts with 4 of 6 (67%) evaluable patients with advanced cancer achieving at least SD for more than 6 months.

 

Results from a Phase II trial of perifosine in patients with advanced RCC who have failed tyrosine kinase inhibitors (TKI) were also presented at the ASCO meeting in June 2009 by our partner Keryx. The goal of this multi-center Phase II trial was to determine the safety and efficacy of perifosine in patients with advanced RCC refractory to VEGFR TKI.

 

The study enrolled a total of 50 patients, of which 46 patients were evaluable for response. Evaluable patients were defined as those who had greater than 7 days of treatment. The primary endpoint of this study was clinical benefit, defined as response rate (RECIST), and progression-free survival (PFS) in RCC patients who failed a prior VEGF receptor inhibitor (sunitinib or sorafenib). Safety of perifosine in this patient population was evaluated as a secondary endpoint. The best response to single-agent perifosine was as follows:

 

Group

 

N

 

PR
N (%)

 

SD > 12 wks
N (%)

 

CBR*
N (%)

 

Median PFS
(SD or >)

All Pts

 

46

 

5 (11%)

 

16 (35%)

 

21 (46%)

 

33 weeks
[95% CI (24, 60)]

 


*                 CBR: Clinical Benefit Rate defined as patients with Stable Disease or Partial Response

 

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The median PFS for all 46 patients was 12.5 weeks [95% CI (11.9, 19)]. The median overall survival has not been reached with 33 of 46 patients (72%) still alive.

 

Also of interest was the patient subgroup who had failed both a VEGF receptor inhibitor (sunitinib or sorafenib) and an mTOR inhibitor (either everolimus or temsirolimus). For this group, the best response and median PFS to single agent perifosine was as follows:

 

Group

 

N

 

PR
N (%)

 

SD > 12 wks
N (%)

 

CBR
N (%)

 

Median PFS

VEGF + mTOR

 

16

 

1 (6%)

 

7 (44%)

 

8 (50%)

 

16 weeks
[95% CI (11.7, 33.6)]

 

Three patients out of the group of patients previously treated with and failed both a VEGF and an mTOR inhibitor remain on active treatment, now out 5, 9 and 17 months.

 

Updated clinical results of this Phase II study of perifosine as a single-agent treatment for advanced metastatic RCC were presented in September 2009 by our partner Keryx at the 8th International Kidney Cancer Symposium. Those updated data included results from a subgroup of patients who failed both a VEGF receptor inhibitor (sunitinib or sorafenib) and an mTOR inhibitor (temsirolimus or everolimus). Evaluable patients (n=16) were defined as those who had greater than 7 days of treatment (2 additional patients withdrew consent within 7 days). Patients received 100 mg of perifosine daily until progression or unacceptable toxicity. The primary endpoint of this study was clinical benefit, defined as response rate (CR / PR by RECIST) or percent of patients progression-free for at least 3 months. Median progression-free survival (PFS) and overall survival were also analyzed for efficacy. Safety was a secondary endpoint. Perifosine was well-tolerated with the most common adverse events being gastrointestinal discomfort and fatigue. Best response to single agent perifosine was as follows:

 

N

 

PR
N (%)

 

SD > 12 wks
N (%)

 

PD < 12 wks
N (%)

 

Median PFS

 

Overall Survival

16

 

1 (6%)

 

7 (44%)

 

8 (50%)

 

16 wks [95% CI (11.7, 28)]

 

Not Reached (14/16 alive)

 

 

Median PFS for patients SD or >

 

33 wks [95% CI (19, NR)]

 

at 22+ months

 

Perifosine — Sarcoma

 

In June 2007, our partner Keryx presented results of Phase 1 and 2 studies for the treatment of patients with advanced sarcoma at the ASCO meeting. The dose schedules in the Phase 1 trials were weekly 100-800mg or loading dose 300-1800mg on Day 1 followed by 50-150 mg daily for Days 2-21 every 28 days or loading dose 400-900 mg and daily 50-100 mg continuously. In the Phase 2 trial, doses were loading dose 900 mg on Day 1 and 150mg daily for days 2-21 every 28 days; loading dose 900 mg and 100 mg daily continuously; 50 mg daily continuously without a loading dose; and 900-1,500 mg weekly. 145 patients with sarcoma were entered into studies and were assessed for clinical benefit rate (“CBR”). Partial responses were seen, in one patient each, with chondrosarcoma, extra-skeletal myxoid chondrosarcoma, leiomyosarcoma and a desmoid tumor. At lower doses with 52 patients fully evaluable for CBR, the CBR was 52% with four partial responses and 23 stable diseases at > 4 months. At higher doses with 30 patients fully evaluable for CBR, CBR was 53% with 16 stable diseases at > 4 months. Toxicities were mainly gastrointestinal and/or fatigue. The percentage of patients with grade 0 nausea, vomiting, diarrhea and fatigue for lower dose perifosine (76 patients) was 46%, 49%, 38% and 55%, respectively, compared to 26%, 32%, 20%, and 58% for higher dose perifosine (69 patients). The proportion of patients with grade 2+ nausea, vomiting, diarrhea and fatigue was 20%, 13%, 15%, and 21% for lower dose perifosine and 49%, 35%, 42%, and 25% for higher dose perifosine.

 

In November 2007, Keryx announced positive preliminary Phase 2 data of perifosine in patients with chemo-insensitive sarcoma. Data demonstrated the tolerability and clinical activity of perifosine as a single agent with an overall clinical benefit of 40% (stable disease > 3 months) in patients with refractory rare sarcomas. Perifosine was well tolerated with the most common grade 1 & 2 adverse events reported as nausea, vomiting, diarrhea and fatigue.

 

Perifosine — Gliomas

 

In November 2007, Keryx announced early results of a Phase 2 trial of perifosine as a single agent for the treatment of recurrent malignant gliomas (malignant glioblastoma and malignant anaplastic gliomas). Twenty-five patients with advanced malignant gliomas were treated with a loading dose of 600 mg (150 mg x4) followed by a 100 mg daily dose of perifosine.

 

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The median progression free survival and overall survival in the anaplastic glioma group was nine weeks (range 2-50 weeks) and 49 weeks, respectively. Toxicity was minimal with the following reported events: one grade 1 nausea, one grade 1 diarrhea, one grade 2 pain, and one grade 4 gout exacerbation. The study was designed to enroll at least 12 evaluable malignant glioblastoma patients and at least 10 evaluable malignant anaplastic gliomas patients. If at least one patient achieves six month progression free survival, the study would continue to enroll an additional subset of patients. Therefore, the malignant glioblastoma arm has been halted and the malignant anaplastic gliomas arm will continue to enroll.

 

Perifosine — Other indications

 

On March 2, 2006, our North American partner, Keryx, announced the initiation of a corporate-sponsored Phase 2 trial, multi-cancer, clinical program to evaluate perifosine as a treatment for leukemia. Dr. Frank Giles, Professor, Department of Leukemia, at the MD Anderson Cancer Center in Houston, TX, is the principal investigator. This Phase 2 trial will assess the objective response rate and evaluate the pharmacokinetics and safety and tolerability of perifosine as a single agent in relapsed or refractory acute myeloid leukemia, acute lymphocytic leukemia, chronic lymphocytic leukemia, high-risk myelodysplastic syndrome and chronic myeloid leukemia in the blastic phase.

 

In November 2006, Keryx presented intermediary results of the Phase 2 study of imatinib plus perifosine in patients with imatinib-resistant gastrointestinal stromal tumor (“GIST”). The primary endpoint of this study is to evaluate the efficacy and toxicity of the combination imatinib and perifosine in patients with imatinib-resistant GIST. To date, 16 patients have been enrolled in the current study. Of the 12 patients with evaluable disease, there were two partial responses by Choi criteria (17% objective response rate (ORR)) and one partial response by RECIST criteria (8% objective response rate). Grade 3 and 4 adverse events were rare and included fatigue, myalgias, ocular toxicity and nausea/emesis. The early data from the current study suggest that the addition of perifosine to imatinib is well-tolerated and may have efficacy in the treatment of patients with imatinib-resistant GIST.

 

Updated results of this trial were presented in June 2009 by our partner Keryx, during the ASCO meeting. Patients with Kit (+) advanced GIST who have progressed on imatinib were eligible. Patients continued their current dose of imatinib and were randomized to one of two dosing schedules of perifosine (Arm A: 100 mg p.o. qd x 28 + imatinib or Arm B: 900 mg [300 mg p.o. tid] qweekly + qd imatinib). A Bayesian approach was utilized to assess a target response rate of 20% with an unacceptable toxicity rate of 15% or less. Response was measured every 8 weeks by RECIST and Choi criteria. The primary endpoint was to determine the efficacy of perifosine with imatinib in patients with advanced GIST who progressed while receiving imatinib. 41 patients were enrolled from August 2005 to July 2008. After 1 patient exclusion and 2 cross-overs, 22 patients were in Arm A and 18 patients in Arm B. Median age was 58 (range, 32-82), 51% were male, and median ECOG performance status was 1. The most common primary site of disease and metastasis was the stomach (29%) and liver (66%), respectively. KIT genotype was available for 22 patients (54%); 5(12%) WT, 13(32%) exon 11 mutations, and 4(10%) exon 9 mutations. The median number of cycles was 2 (range, 1-24). By Choi and RECIST, 30 patients (73%) and 36 patients (87%) were available for response, respectively. No complete response (CR) was identified but the partial response (PR) rate was 4/36 (11%) by Choi (4 PR, 9 stable disease (SD)) and 0/36 (0%) by RECIST (16 SD). 4/5 (80%) of patients with WT KIT appeared to benefit (Choi: 1 PR, 3 SD; RECIST: 4 SD). Median PFS and OS for 40 patients were 2.2 months and 18.3 months. No difference in PFS was noted for the 2 schedules. Toxicity was assessed in 39 patients; 46 grade 3 events and 4 grade 4 events (ALT elevation, blurred vision, fatigue, and mood alteration) were noted. The most common grade 3 event was fatigue (20%). Three patients (7%) were removed from the study for toxicity (Arm A:1 patient, Arm B:2 patients).

 

On July 14, 2009, our partner Keryx announced the initiation of a Phase 1 clinical study to evaluate perifosine as a single agent treatment for recurrent solid tumors in pediatric patients. This single-center open-label study, fully funded by an external grant provided by a private organization, will be conducted at Memorial Sloan-Kettering Cancer Center in New York City. Oren Becher, MD, Instructor, Department of Pediatrics, in coordination with Eric Holland, MD, PhD, Director of the Brain Tumor group at Memorial Sloan-Kettering Cancer Center, will act as the study’s Principal Investigator. Perifosine is being evaluated as a single-agent in pediatric patients with any solid tumor that has failed standard therapy. Patients up to 18 years of age with a performance status of greater than 40% are eligible for this study. The study has been designed as a dose escalation study to determine the maximum tolerated dose (MTD) of perifosine alone in recurrent/progressive pediatric tumors. A standard 3+3 dose escalation design will be employed with 3 to 6 patients at each dose level. All patients will receive perifosine at a loading dose on the first day, followed by a maintenance dose to start on day two until progression of disease. A minimum of 4 and a maximum of 24 patients will be required to complete the study.

 

On October 8, 2009, Keryx announced the initiation of a Phase 2 clinical study to evaluate perifosine as a single agent treatment for relapsed or refractory Chronic Lymphocytic Leukemia (CLL) and Small Lymphocytic Lymphoma (SLL). This externally funded Phase 2 study was designed by Daphne Friedman, MD, Instructor and Principal Investigator, in coordination with J. Brice Weinberg, Professor, and Mark Lanasa, Assistant Professor, Divisions of Medical Oncology and

 

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Hematology, Duke University Medical Center, and is open for enrollment at Duke University. The single-center, open-label, study entitled, “Phase 2 Trial of Perifosine in Patients with Relapsed or Refractory Chronic Lymphocytic Leukemia/Small Lymphocytic Lymphoma”, will enroll approximately 30 patients. Perifosine will be given orally at a dose of 50 mg twice daily, for a total of six 28-day cycles. The patients will be formally restaged upon completion of the trial. Overall Response Rate is the primary endpoint with overall survival, progression-free survival and safety as secondary endpoints. Correlative studies will also be conducted and evaluated as a secondary endpoint.

 

Perifosine — Radio-enhancer

 

A proof-of-concept Phase 1 study of perifosine in combination with radiotherapy conducted by the National Cancer Institute of the Netherlands was completed in 2004. Results from this trial were presented at ASCO 2004. A total of 21 radiotherapy-naïve patients, of whom 17 had advanced non-small cell lung cancer (NSCLC) and 14 had become refractory to prior chemotherapy, received oral perifosine doses ranging from 50 mg to 200 mg/day concurrently with standard doses of radiotherapy. The trial data demonstrated an acceptable safety and tolerability profile, with 150 mg/day established as the dose recommended for use in subsequent clinical trials. Also demonstrated was preliminary evidence of anti-tumor activity at all dosage levels, including complete or partial responses (complete disappearance and decreased tumor size, respectively), or stable disease, with a median follow-up for responders of eight months. Importantly, in the cohort of 10 patients who were treated with 150 mg/day, the established dose recommended for use in subsequent clinical trials, there were three complete responses, three partial responses and four patients with stable disease.

 

On September 22, 2005, we announced the initiation of a multi-center Phase 2 randomized, double-blind, placebo-controlled trial with perifosine in combination with radiotherapy for NSCLC.  Patients received perifosine 150 mg daily for five to six weeks and are followed for at least 12 months. The primary endpoint of this trial is the extent and duration of local control, i.e., the absence of tumor recurrence or progression in the area that has been irradiated. The trial is being conducted in collaboration with the Netherlands Cancer Institute. The lead investigator is Marcel Verheij, M.D., Ph.D., of the Department of Radiation Oncology / Division of Cellular Biochemistry, at the Netherlands Cancer Institute in Amsterdam.  We announced completion of recruitment of 160 patients with inoperable Stage III NSCLC on November 14, 2007.

 

We disclosed preliminary results for this European multi-center Phase 2 trial in NSCLC in June 2009. Starting one week before the onset of a 4-week course of radiotherapy (51 Gy in 17 fractions), 177 patients with non-metastatic but inoperable NSCLC, mainly Stage III, received a 5-week course of 150 mg perifosine daily or placebo. After end of radiotherapy, patients were followed up to determine the time to tumor recurrence or progression in the area that had been irradiated, the so called “local control”. The primary endpoint of this trial was the extent and duration of local control, specifically the proportion of patients with absence of recurrence or progression 12 months after the end of treatment. The study was planned under the basic assumption that radiotherapy alone would result in a 35% local control rate, one year after end of therapy in the placebo group. It was hypothesized that the addition of perifosine would sensitize tumor cells to the tumor-killing effect of the radiotherapy, leading to a 15% higher rate of local control. Secondary efficacy parameters included the times to loco-regional or distant/systemic failure, the tumor response rate, and overall survival. Safety investigations included the monitoring of clinical laboratory, electrocardiograms, lung function, and adverse events.

 

In all, 22 study sites in The Netherlands, Bulgaria, Romania, Macedonia, and Belarus participated in this trial. A total of 177 patients were randomized and treated, of whom only 26 reached the milestone of one year post-treatment follow-up without disease relapse or progression, 14 of 95 patients (14.7%) in the perifosine and 12 of 82 patients (14.6%) in the placebo control group. No difference between treatment groups could be shown for local, loco-regional and overall disease control. Also, the tumor response rate, as assessed after the end of the radiotherapy, was not different between the groups.

 

In contrast to the lack of an observed local effect, patients in the perifosine group, particularly the subgroup of patients who entered the study without prior chemotherapy, showed a trend towards longer survival than patients of the placebo control group despite the short duration of treatment (5-week course of 150 mg perifosine daily).

 

There were no safety signals that would lead to an amendment of the current safety data or risk benefit assessments of perifosine. The type and severity of side effects were in the expected range. Following  these neutral results and an unchanged safety profile, we announced that we will concentrate our efforts for perifosine on the disease targets of both multiple myeloma and metastatic colon cancer.

 

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Partners for perifosine

 

A Cooperative Research and Development Agreement (CRADA) was put in place with the National Institute of Health/the National Cancer Institute in May 2000. A cooperation and license agreement was signed in September 2002 with Access Oncology, Inc. (“AOI”), for the use of perifosine as an anti-cancer agent covering the United States, Canada and Mexico. In January 2004, AOI was acquired by Keryx, which is pursuing the clinical development of perifosine under the same conditions as AOI. The agreement, in particular, provides us free access to all data from Keryx and its partner’s studies, as well as milestone payments and scale-up royalties to be paid to us on future net sales of perifosine in the United States, Canada and Mexico. In April 2009 we entered into an agreement to out-license the rights of perifosine to Handok in South Korea. We own rest of the world rights to perifosine.

 

AEZS-127 erucylphosphocholine

 

On January 6, 2005, we announced the initiation of preclinical development of erucylphosphocholine (AEZS-127), an analog of perifosine which is suitable for i.v. administration. Like perifosine, AEZS-127 belongs to a new class of compounds based on alkylphosphocholines. AEZS-127 possesses distinctive reduced haemolytic activity thus allowing for i.v. injection.

 

On January 6, 2005, we also licensed to Keryx certain rights to develop and market AEZS-127 in North America, South Africa, Israel, Australia and New Zealand while keeping rights for the rest of the world. According to the agreement with Keryx, the preclinical development costs of AEZS-127 are shared between Keryx (50%) and us (50%). In Q4 2008, we repatriated all rights for AEZS-127 from Keryx.

 

In 2006, studies for acute toxicity and dose range finding of erucylphosphocholine were actively pursued. The 4-week toxicity studies in rats and dogs as well as the safety pharmacology package was completed in 2007. These preclinical data are a prerequisite for the performance of a Phase 1 clinical study.

 

Erk/PI3K inhibitors and dual kinase inhibitors

 

In addition to our activities with alkylphosphocholines, we are screening small molecules for activity as agonists and antagonists to lipid-protein signaling interactions, which are seen as new and potentially important therapeutic targets.

 

We are focusing our efforts on single and dual inhibitors of Ras-Raf-Mek-Erk and PI3K-Akt pathways. The Ras-Raf-Mek-Erk and the PI3K-Akt pathways are constitutively activated in many cancer types, and influence both tumor development and progression.

 

Both signaling pathways represent promising therapeutic targets for the treatment of tumors. We have now identified a new compound class with inhibitory activity against both the Erk and PI3K kinases. These small molecules inhibit the kinases at nanomolar concentrations in a dose-dependent manner by competing directly at the ATP binding site. In a broad kinase panel, the molecules are very selective against other kinases. In cellular experiments the compounds inhibit the activation of downstream targets Akt and Rsk1, and can stop the proliferation of various human cancer cell lines. Moreover, a new generation of aniline-substituted pyridopyrazine-urea derivative shows highly selective PI3K inhibition. We are currently performing in vivo studies with front-runner compounds in four mouse xenograft models (HCT116, U87, A549 and PC3) as well as pharmacokinetic studies in rodents using an oral pre-formulation. On the basis of these studies, AEZS-126 was selected as a preclinical development candidate for in vivo pharmacology and pharmacokinetic studies.

 

AEZS-126

 

The first in vitro and in vivo data for AEZS-126 were presented in April 2009 at the AACR meeting. The first poster, entitled, “AEZS-126, a new orally bioavailable PI3K inhibitor with antitumor effects”, focuses on ADMET and safety profiling of the compound, as well as in vivo pharmacokinetic experiments and mouse xenograft antitumor studies. Results indicated that AEZS-126 was identified as a potent inhibitor of class I PI3Ks in biochemical and cellular assays and demonstrated favorable properties in early in vitro ADMET screening including microsomal stability, plasma stability and screening against a large safety profile composed of receptors, enzymes and cardiac ion-channels. During the course of in vivo pharmacokinetic experiments and mouse xenograft antitumor studies, the oral bioavailability in mice was determined to be about 60%, leading to micromolar plasma levels which are well above the nanomolar IC50 values in vitro studies. Significant antitumor activity was observed at 30mg/kg daily oral administration in Hct116 and A549 models. These data suggest that AEZS-126 is a promising compound for clinical intervention of the PI3K/Akt pathway in human tumors.

 

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The 2nd poster, entitled “In vitro profiling of the potent and selective PI3K inhibitor, AEZS-126”, outlines the key in vitro characteristics of this compound that led to its selection for in vivo development. AEZS 126 inhibits PI3Ka with an IC50 value of 10nM and proved to be a potent inhibitor of Akt phosphorylation in cellular assays. Mode-of-action studies showed that AEZS-126 acts as an ATP competitive compound. The in vitro antiproliferative activity against different human tumor cell lines (MDA-MB 468, U87, Hct116, PC-3, A549 and others) was determined, with EC50 values in the nanomolar range.

 

Based on those results presenting a favorable in vitro pharmacologic profile for AEZS-126, further in vivo profiling experiment will be performed.

 

AEZS-129

 

On April 21, 2009, we presented two posters on AEZS-129, a promising compound for clinical intervention of the PI3K/ Akt pathway in human tumors, at the American Association for Cancer Research (“AACR”) Annual Meeting. In vivo and in vitro data showed significant antitumor activity and a favorable in vitro pharmacologic profile which could lead to further in vivo profiling.

 

TUMOR TARGETING CYTOTOXIC CONJUGATES AND CYTOTOXICS

 

Cytotoxic conjugates

 

In view of the non-specific toxicity of most chemotherapeutic agents against normal cells, targeting such drugs to cancerous tissue offers a potential benefit for patients with advanced or metastatic tumors. Targeted cytotoxic peptide conjugates are hybrid molecules composed of a cytotoxic moiety linked to a peptide carrier which binds to receptors on tumors. Cytotoxic conjugates are designed to achieve differential delivery, or targeting, of the cytotoxic agent to cancer vs. normal cells.

 

Our cytotoxic conjugates represent a novel oncological strategy to control and reduce toxicity and improve the effectiveness of cytotoxic drugs. The development strategy was to create targeted conjugates with high cytotoxic activity based on doxorubicin, an approved and commercialized product or 2-pyrrolino-doxorubicin which is 500 to 1,000 times more active than the parent compound. We are exploring several candidates in which doxorubicin or 2-pyrrolino-doxorubicin are coupled to the peptide carriers targeting LHRH (AEZS-108 & AN-207), somatostatin (AN-238 & AN-162) or bombesin (AN-215) receptors. These conjugates are less toxic and more effective in vivo than the respective radicals in inhibiting tumor growth in LHRH receptor positive models of human ovarian, mammary or prostatic cancer.

 

 

In AEZS-108, the most advanced of the cytotoxic conjugates, doxorubicin is chemically linked to an LHRH agonist, a modified natural hormone with affinity for the LHRH receptor. This design allows for the specific binding and selective uptake of the cytotoxic conjugate by LHRH receptor positive tumors. Potential benefits of this targeted approach include a more favorable safety profile with lower incidence and severity of side effects, as normal tissues are spared from toxic effects of doxorubicin. In addition, the targeted approach may enable treatment of LHRH receptor positive cancers that have become refractory to doxorubicin which has been administered in its non-targeted form.

 

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In preclinical studies conducted to date in several animal models of LHRH receptor positive human cancer cell lines, AEZS-108 anti-tumor activity and tolerability were shown to be superior to that of doxorubicin. As would be expected, AEZS-108 was not active or was significantly less active than doxorubicin in LHRH receptor negative cancer cell lines. On January 18, 2005, we announced the initiation of a company-sponsored Phase 1 dose-ranging study with the targeted anti-cancer agent AEZS-108.

 

In June 2006, we announced positive Phase 1 results for AEZS-108 in patients with gynaecological and breast cancers which showed that the compound has a good safety profile and no dose-limiting toxicities. Eight patients received AEZS-108 by i.v. infusion. Infusion was well tolerated at all dosages, without supportive treatment. Pharmacokinetic analyses showed dose-dependent plasma levels of AEZS-108 and only minor (10-20%) release of doxorubicin. Stabilization of disease was observed in one out of eight patients in the ongoing Phase 1 study.

 

On November 27, 2006, we disclosed additional positive Phase 1 results regarding AEZS-108 in patients with gynaecological and breast cancers. Further data showed the compound’s good safety profile and established the maximum tolerated dose at 267 mg/m2, which is equimolar to a doxorubicin dose of 77 mg/m2. This dose will be the recommended dose for a Phase 2 trial. The Phase 1 open-label, multi-center, dose-escalation, safety and pharmacokinetic study conducted in Europe included 17 patients suffering from breast, endometrial and ovarian cancers with proven LHRH receptor status. Evidence of anti-tumor activity was found at 160 mg/m2 and 267 mg/m2 doses of AEZS-108, where 7 out of 13 patients showed signs of tumor response, including 3 patients with complete or partial responses. The Phase 2 trials will focus on advanced or recurrent ovarian and endometrial cancers, two forms of cancer where LHRH receptors are highly expressed. Recommended dose will be 267 mg/m2 given once every three weeks.

 

AEZS-108 — Ovarian and Endometrium Cancer

 

In 2007, a Phase 2 open-label, non-comparative, multicenter two indication trial stratified with two stages Simon Design was prepared. The enrollment of 82 patients is planned for this trial with up to 41 patients with either a diagnosis of platinum-resistant ovarian cancer (stratum A) or disseminated endometrial cancer (stratum B). Under coordination by Prof. Günter Emons, MD, Chairman of the Department of Obstetrics & Gynaecology at the University of Göttingen, Germany, this open-label, multi-center and multi-national Phase 2 study “AGO-GYN 5” is being conducted by the German AGO Study Group (Arbeitsgemeinschaft Gynäkologische Onkologie / Gynaecological Oncology Working Group), in cooperation with clinical sites in Europe. Patients with tumors expressing LHRH receptors administered will be an i.v. infusion of 267 mg/m2 of AEZS-108 over a period of 2 hours, every Day 1 of a 21-day (3-week) cycle. The proposed duration of the study treatment is 6, 3-week cycles. Study AGO GYN 5 will be performed with 14 centers of the German Gynaecological Oncology Working Group, in cooperation with 3 clinical sites in Europe. The primary efficacy endpoint at the end of stage 2 was defined as 5 or more patients with partial or complete tumor responses according to Response Evaluation Criteria in Solid Tumors (RECIST) and/or Gynaecologic Cancer Intergroup (GCIG) guidelines. Secondary endpoints include time to progression, survival, toxicity, as well as adverse effects. On February 12, 2008, we reported that the treatment of first patients had commenced in this Phase 2 trial.  In October 2008, we announced that we have entered the second stage of patient recruitment for the Phase 2 trial in platinum-resistant ovarian cancer indication. This decision was taken following the report of two partial responses among patients with a diagnosis of platinum-resistant ovarian cancer.  The second stage of patient recruitment for the endometrial cancer indication was reached in November 2008 and was based on the report of one complete response and two partial responses among 14 patients with a diagnosis of disseminated endometrial cancer.

 

In November 2009, we announced positive efficacy data from this Phase 2 study in patients with platinum-resistant and taxane-pretreated ovarian cancer. In a personalized healthcare approach, the study selected patients with tumors expressing LHRH receptors, the key element in the targeting mechanism of AEZS-108. All 43 patients with LHRH-receptor positive ovarian cancer who entered study AGO-GYN 5 have completed their study treatment. A preliminary evaluation shows that the study met its primary efficacy endpoint of 5 or more responders in 41 evaluable patients. Responders, as well as patients with stable disease after completion of treatment with AEZS-108, will now be followed to assess the duration of progression-free survival and, ultimately, overall survival.

 

We announced positive efficacy data from the Phase 2 study with the targeted cytotoxic peptide conjugate, AEZS-108, in patients with advanced or recurrent endometrial cancer on November 24, 2009. A preliminary evaluation has shown that the study AGO-GYN 5 met its predefined primary efficacy endpoint of 5 or more responder patients with endometrial cancer. The study is currently ongoing, and responders, as well as patients with stable disease after completion of treatment with AEZS-108, will be followed to assess the duration of progression-free survival and, ultimately, overall survival.

 

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AEZS-108 — Prostate Cancer

 

In May 2009, we announced that results supporting the evaluation of AEZS-108, in prostate cancer, will be presented as a poster at the ASCO 2009 meeting.  Expression of LHRH receptors was determined using immunohistochemistry and the intensity was graded on a scale from zero to 3. The expression was analyzed in three cohorts of patients: (1) 47 men with localized prostate cancer treated with radical prostatectomy with no hormone therapy, (2) 61 men with localized prostate cancer treated with neoadjuvant LHRH agonists for varying duration prior to prostatectomy, and (3) 22 men with metastatic prostate cancer who received a palliative transurethral resection of the prostate after clinical progression. In the final cohort, 15 men were treated with castration and 7 were treated with LHRH agonists. 45 of 47 hormone naïve samples (95.7%) demonstrated LHRH receptor expression. Statistical analysis revealed a correlation between strong receptor expression and higher pathologic tumor stage as well as shorter overall survival. 60 of 61 samples treated with neoadjuvant LHRH agonist therapy (98.4%) demonstrated LHRH receptor expression. All 22 samples from patients with metastatic disease demonstrated LHRH receptor expression. The majority of these samples demonstrated moderate to strong intensity. LHRH receptors are expressed on prostate cancers cells of hormone naïve and castrated patients. The expression of these receptors appears to persist despite prolonged treatment with LHRH agonists. The new results show continued expression of LHRH receptors in prostate cancer specimens after prolonged use of LHRH agonists; these data provide further support to the investigation of the drug in hormone-refractory prostate cancer, a major genitourinary cancer indication in male patients.

 

AEZS-105 - Lobaplatin

 

Lobaplatin is a platinum derivative that has demonstrated lower toxicity in preclinical studies compared with cisplatinum, specifically renal toxicity, and incomplete cross-resistance with other platinum derivatives suggesting potential therapeutic use even in tumor indications not routinely treated with platinum derivatives.

 

Clinically, lobaplatin was well tolerated at recommended dosages. Treatment was not associated with typical side effects often seen with cisplatinum, such as nephrotoxocity (impairment of kidney function), otoxicity (loss of hearing capacity), and neurotoxicity (effects on sensory function). In addition, vomiting was less severe than published data from both cisplatinum and carboplatinum. Characteristic toxicity of lobaplatin is a short-lasting, spontaneously reversible drop in thrombocyte count (blood platelets).

 

In a Phase 2 study conducted in China that included 284 patients with a broad range of solid and non-solid tumors, safety and particularly good therapeutic efficacy were demonstrated in patients with breast cancer, small cell lung cancer (“SCLC”), and chronic myeloid leukemia (“CML”) (a cancer of the hematopoietic system). The primary endpoint in solid tumor patients was the remission rate according to WHO criteria, while response in CML was assessed according to the disease-specific criteria of Talpaz. The favorable results of this study were the basis for approval of lobaplatin by the Chinese health authorities for the treatment of inoperable, advanced breast cancer, SCLC and CML.

 

In December 2002, we signed a contract with Hainan Chang An Pharmaceuticals Ltd. for the marketing in China of lobaplatin. The contract includes the worldwide manufacturing rights of lobaplatin by Hainan Chang An Pharmaceuticals. The technology transfer agreement provided us with a first payment upon signature and a later manufacturing-related payment.

 

In 2007, lobaplatin was licensed to Atani for the territory of Japan. The license agreement was terminated in 2009.

 

TUBULIN INHIBITORS / VASCULAR TARGETING AGENTS

 

AEZS-112 - Development of a low molecular weight tubulin inhibitor with anti-angiogenic properties

 

Tubulin is a protein found in all cells that plays an important role during cell division, in that it helps to transmit genetic information to the daughter cells. Inhibition of this process leads to the death of the affected cell. The anti-tumor agent taxol and vincristine, which are widely used in cancer therapy, are based on this principle. Both compounds are expensive natural substances and cause severe side effects when used in humans.

 

We are currently identifying and developing novel tubulin inhibitors which, compared with currently used products, exhibit in animal models improved efficacy, have a more acceptable side effect profile, an incomplete or no cross-resistance and are administered orally.

 

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AEZS-112 is a drug development candidate with an excellent tolerability profile showing excellent in vivo activity in various tumor models including mammary, colon, melanoma and leukemia cancers after oral administration. This compound acts through three mechanisms of action. Strong anti-cancer activity is combined with pro-apoptotic and anti-angiogenic properties. AEZS-112 inhibits the polymerization of cancer tubulin rather than bovine brain tubulin, it destroys the mitotic spindle of the cancer cells and it inhibits topoisomerase II activity. AEZS-112 arrests the cancer cells in the G2M phase at a nanomolar concentration and induced apoptosis. AEZS-112 is not cross-resistant to cisplatin, vincristine and doxorubicine in cell lines resistant to these drugs. Given orally once weekly, AEZS-112 proved to be a potent inhibitor of in vivo tumor growth in melanoma, mammary, colon, lung, renal as well as in leukemia cancers at acceptable and very well tolerated doses. Furthermore AEZS-112 showed favorable safety and toxicity profiles. No findings with respect to cardiotoxicity and neurotoxicology parameters could be observed during the toxicological evaluation in mice, rats and dogs. With this profile of activity, AEZS-112 is a promising candidate for further clinical development.

 

On January 8, 2007, we announced the initiation of a Phase 1 trial for AEZS-112 in patients with solid tumors and lymphoma. This open-label, dose-escalation, multi-center, intermittent treatment Phase 1 trial is being conducted in the United States with Daniel D. Von Hoff, MD, Senior Investigator at the Translational Genomics Research Institute in Phoenix, AZ, as the lead investigator. The trial includes up to 50 patients with advanced solid tumors and lymphoma who have either failed standard therapy or for whom no standard therapy exists. Patients will receive a once-a-week oral administration of AEZS-112 for three consecutive weeks, followed by a one-week period without treatment. The cycles will be repeated every four weeks based on tolerability and response, basically planned for up to four cycles, but allowing for continuation in case of potential benefit for the patient. The starting dose of AEZS-112 in this study is 13 mg/week, with doubling of doses in subsequent cohorts in the absence of significant toxicity. Primary endpoint of the Phase 1 trial focuses on determining the safety and tolerability of AEZS-112 as well as establishing the recommended Phase 2 dose and regimen. Secondary endpoints are aimed at establishing the pharmacokinetics and determining the efficacy based on standard response criteria.

 

Results of this Phase I study were presented in April 2009 at the AACR meeting.  In part I, 22 patients (12 men / 10 women) were studied on 7 dose levels ranging from 13 to 800 mg/week. In all, 62 treatment cycles were administered. In part II, the weekly dose was split into 3 doses taken 8 hours apart. Ultimately, 22 patients (12 men / 10 women) were studied on 5 dose levels ranging from 120 to 600 (=200x3) mg/week. As of April 1, 2009, 62 treatment cycles were administered (mean 3.2/patient); treatment was ongoing in 8 patients. Stable disease (SD) for more than 12 weeks was observed in 16 patients; 4 more patients were ongoing at less than 12 weeks. Prolonged courses of SD ranging from 20 to 39+ weeks were observed in 9 patients with the following primary cancer types: trachea (39+), tongue (30+), thyroid (29+), prostate and melanoma (28), non-small cell lung cancer (26+), pancreas and 2x colorectal (20).  Except for one patient with a background of gastrointestinal problems (GI) who had dose-limiting GI reactions and electrolyte loss at a dose of 200x3mg/week, no clinically relevant drug-related adverse events or changes in laboratory parameters were observed. AEZS-112 was shown to be metabolically stable in human plasma. As predicted by pharmacokinetic modelling based on data from part I of the study, the split-dose scheme leads to a higher Cmax and trough values after administration of comparable doses. Those preliminary results showed that a maximum tolerated dose for weekly dosing has not been defined so far. However, prolonged courses of stable disease in both parts of the study are an encouraging observation.

 

Completion of this Phase 1 trial was announced on September 21, 2009. Stable disease with time to failure ranging from 20 to 60+ weeks was achieved in 12 patients with various cancer types, including melanoma and cancers of the colon/rectum, lung, pancreas, prostate, tongue, trachea and thyroid. In several of these patients, the duration of stabilization exceeded the duration of disease control on previous treatment regimens. Except for a dose-limiting gastrointestinal reaction in a patient with pre-existing GI problems, no clinically relevant drug-related adverse events or changes in laboratory safety parameters were observed.

 

IMMUNOTHERAPY / VACCINES

 

Cellular proteins expressed by oncogenes have been recognized as a major cause of tumor development. One of the central oncoproteins involved in cancer formation are the Raf proteins. Based on these proteins, new unique therapeutic strategies, new predictive animal models and new development products have been generated to efficiently combat cancer. These consist of virulence attenuated, genetically modified bacteria expressing tumor antigens, including oncoproteins or enzymes. Such bacteria are used for vaccination as well as tumor targeting and delivery of antitumoral compounds towards the tumor tissues. Therefore, this new vaccine approach exploits the ability of bacteria to induce potent immune responses as well as direct these responses against malignancies. The immunogenicity of the vaccine will be further enhanced by the capacity of bacteria to colonize tumor tissues. This property will be used to transport substances, e.g. proteins, into the tumor tissue, which are capable of converting non-toxic pro-drugs into active drugs. The use of bacterial carriers for therapeutic vaccination against tumors and the concept of bacterial tumor targeting will be further developed with the Julius-

 

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Maximilians-University of Würzburg, including the highly recognized researchers Prof. Dr. Ulf R. Rapp, who is a member of our Scientific Advisory Board, and Prof. Dr. Werner Goebel. Prof. Rapp is a known expert in the field of cell and tumor biology and Prof. Goebel is a pioneer in the field of vaccines based on recombinant bacteria.

 

The preclinical proof of principle has already been shown in a transgenic animal model and is supported by several patent applications that we have filed. The most advanced products are bacterial tumor vaccines which are based on the approved human vaccine strain Salmonella typhi Ty21a. The principle of these recombinant vaccine strains is the secretion of the tumor antigen using a so-called Type I secretion machinery derived from Escherichia coli. To date, two different vaccine strains have been generated up to GMP scale production — a melanoma vaccine encompassing a mutated form of the oncogene B-Raf, which is present in more than 65% of melanomas, and a prostate cancer vaccine strain expressing and secreting PSA. For both vaccines, the preclinical proof of principle has been demonstrated in distinct animal models and the immunogenicity could be further enhanced compared to our already published strains (patent application filed in November 2006).

 

In 2007, the PSA vaccine (AEZS-120) was selected as the first preclinical development candidate of an anti-tumor vaccine. In September, scientific advice from the Paul Ehrlich Institute, the German health authority for vaccines, was sought and the preclinical development program presented by us was in principle accepted.

 

A grant application was filed in Germany and was approved in 2008. In accordance with this grant, 50% of our preclinical development costs and 100% of those of our university partner will be reimbursed by the German Ministry of Science and Education. The preclinical development and manufacture of material for clinical trial was initiated in 2008.

 

ENDOCRINOLOGY

 

Growth hormone secretagogue

 

Ghrelin ligand AEZS-130 (“ghrelin agonist”)

 

Growth hormone secretagogues (“GHS”) represent a new class of pharmacological agents that directly stimulate growth hormone (“GH”) secretion from the pituitary gland without the involvement of growth hormone-releasing hormone (GH-RH) or somatostatin. We believe that there is currently no GHS on the pharmaceutical market. Since GH is a potent regulator of lipid, sugar and protein metabolism, the potential clinical uses of GHS are numerous. They include growth retardation in children and treatment of cachexia in AIDS patients, which are currently the only approved uses of therapy of GH. The administration of GH, which has to be injected every day, is cumbersome. Therefore, we believe that there would be a demand for new orally active drugs like GHS.

 

As part of our university collaboration, we accessed new peptidomimetic compounds with GH secretagogue properties. The lead development candidate, AEZS-130, is a novel peptidomimetic GHS with potent and selective GH-releasing activity in humans. AEZS-130 underwent limited clinical pharmacology tests that demonstrated a potent stimulation of the GH secretion after oral administration in human volunteers. This product has been licensed to Ardana Bioscience Ltd. (“Ardana”) (ARD-07), which initiated an open, randomized, placebo-controlled Phase 1 dose-ranging study in April 2004. Thirty-six healthy subjects were included in this study to receive either the reference hormone GH RH by i.v. route or one of the following dose levels of AEZS-130: 0.005, 0.05 or 0.5 mg/kg by oral route. AEZS-130 at the dose of 0.5 mg/kg orally caused an increase in growth hormone release equivalent to that induced by GH RH i.v.. The compound was well tolerated and no other hormones showed a significant modification after any dose of AEZS-130.

 

In June 2006, Ardana presented results regarding AEZS-130 at the 2006 Endo Convention. These results referred to the Phase 1 trial regarding the stimulating effects of AEZS-130 on growth hormone following both oral and intra-duodenal administration in healthy males. This study showed that AEZS-130 was well tolerated by the 36 volunteers enrolled and no adverse events were reported. Administration of AEZS-130 either orally or via intra-duodenal infusion results in increased levels of growth hormone in the blood. This stimulation of growth hormone appears to be selective as no other hormones/analytes that were measured (cortisol, ghrelin, prolactin, insulin, glucose and ACTH (adrenocorticotropic hormone)) were affected in a dose-dependent or statistically significant way by administration of AEZS-130 either orally or via intra-duodenal infusion.

 

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In May 2007, Ardana gained orphan drug status for AEZS-130 (SolorelTM) as a diagnostic for growth hormone deficiency in adults. The clinical development and toxicology programs for this indication are ongoing and Ardana announced the commencement in the United States of the planned pivotal registration study and the enrolment of the first patient in August 2007.

 

In June 2008, Ardana announced that the company stopped its operations and entered into voluntary administration. Consequently, the clinical study of AEZS-130 (SolorelTM) as a diagnostic test for adult growth hormone deficiency (“AGHD”) was suspended.

 

We announced the recovery of worldwide rights from Ardana for the compound AEZS-130 in the third quarter of 2008. Future development options are currently being evaluated for the use of this compound in growth hormone deficiencies therapy. In June 2009, we reported that, after regaining from Ardana the worldwide rights to the growth hormone secretagogue, AEZS-130, we had entered into an agreement with the administrators of Ardana to acquire all Ardana assets relating to AEZS-130 for $232,000. These assets include development data, inventory of compound, regulatory authorizations, including IND and orphan drug status as a diagnostic test granted in the United States, as well as a patent application protecting the use of AEZS-130 (SolorelTM) for the diagnostic of growth hormone secretion deficiency.

 

During the same month, the first clinical data relating to the use of AEZS-130 (SolorelTM) as a simple diagnostic test for adult growth hormone deficiency were presented at the ENDO 2009 meeting by the main investigators Dr G. Merriam and Dr B.M.K. Biller. Data showed that in adult growth hormone deficient patients, the responses to the orally administered AEZS-130 (SolorelTM) compound were comparable to currently validated agents and clearly separated patients from normal control subjects.

 

In October 2009, we announced that we have initiated activities intended to complete the clinical development of AEZS-130 (SolorelTM) which could be the first oral diagnostic test approved for growth hormone deficiency (“GHD”). Æterna Zentaris has already assumed the sponsorship of the Investigational New Drug application (IND) and is discussing with the FDA the best way to complete the ongoing Phase 3 clinical trial, and subsequently file a New Drug Application for approval of AEZS-130 (SolorelTM) as a diagnostic test for GHD in adults.

 

The pivotal Phase 3 trial (listed in clinicaltrials.gov, study # NCT00448747) is designed to investigate the safety and efficacy of the oral administration of AEZS-130 (SolorelTM)  as a growth hormone stimulation diagnostic test compared to GHRH + L-arginine, administered i.v. Currently available results from this study demonstrated no safety issues and better discrimination between adult GHD patients and normal controls with AEZS-130 (SolorelTM)  oral solution, compared to the currently used test with GHRH-Arginine i.v. administration.

 

Oral administration of AEZS-130 (SolorelTM) offers more convenience and simplicity over the current GHD tests used, requiring either i.v. or i.m. administration. Additionally, AEZS-130 (SolorelTM) may demonstrate a more favorable safety profile than existing diagnostic tests, some of which may be inappropriate for certain patient populations e.g. diabetes mellitus or renal failure, and have demonstrated a variety of side effects which AEZS-130 (SolorelTM) has not thus far. These factors may be limiting the use of GHD testing and may enable AEZS-130 (SolorelTM) to become the diagnostic test of choice for GHD. AEZS-130 (SolorelTM) has been granted Orphan Drug Designation for the diagnosis of growth hormone deficiency by the FDA, and Æterna Zentaris is now the sponsor of this orphan designation.

 

Competition for AEZS-130

 

Competitors for AEZS-130 (SolorelTM)

 

Competitors for AEZS-130 (SolorelTM) as a diagnostic test for adult GHD are principally the diagnostic tests currently performed by endocrinologists. Most commonly used diagnostics tests for GHD are:

 

Measurement of blood levels of Insulin Growth Factor (“IGF”)-1, which is often used as the first test when GHD is suspected. However, this test is not used to definitively rule out GHD as many growth hormone deficient patient show normal IGF-1 levels.

 

Insulin Tolerance Test (ITT), which is considered to be the “gold standard” for GH secretion provocative tests but requires constant monitoring and is contra-indicated in patients with seizure disorders, with cardiovascular disease and in brain injured patients and elderly patients. ITT is administered i.v.

 

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GHRH+Arginine test, which is an easier test to perform in an office setting and has a very good safety profile but is considered to be costly to administer compared to ITT and Glucagon. This test is contra-indicated in patients with renal failure. GHRH +Arginine is approved in the EU and has been proposed to be the best alternative to ITT, but it is not frequently used in the U.S. This test is administered i.v.

 

Glucagon test, which is simple to perform and is considered very safe by endocrinologists but is contraindicated in malnourished patients and patients who have not eaten for more than 48 hours. Since there is a suspicion that this test may cause hypoglycemia, it may not be appropriate in diabetic populations. This test is administered i.m.

 

Ghrelin receptor ligands

 

Ghrelin is a peptide predominantly produced by the stomach.  Apart from a potent GH-releasing action, ghrelin has other activities including stimulation of lactotroph and corticotroph function, influence on the pituitary gonadal axis, stimulation of appetite, control of energy balance, influence on sleep and behavior, control of gastric motility and acid secretion, and influence on pancreatic exocrine and endocrine function as well as on glucose metabolism. The recent discovery of ghrelin and its receptors opens up new opportunities for the development of drugs that will treat metabolic disorders. There is indeed a possibility that ghrelin analogs, acting as either agonists or antagonists, might have a clinical impact without affecting GH level.  The use of ghrelin antagonists as appetite suppressants or inhibitors of lipogenesis could open up new opportunities for the treatment of obesity and associated diseases (e.g. diabetes, cardiovascular diseases).  The use of ghrelin agonists could have therapeutic benefits which are expected to offer hope for cachexic or anorexic patients.

 

In 2004, we established a research and license collaboration agreement with Le Centre National de la Recherche Scientifique and University Montpellier I and II, France, acting in their own names, as well as in the name and on behalf of the Laboratoire des Aminoacides, Peptides et Protéines (LAPP) (UMR 5810), directed by Dr. Jean Martinez, for the synthesis and characterization of new chemical entities acting as ghrelin receptor ligands. According to the agreement, we have the worldwide rights to develop and exploit the new compounds for any indication. Compounds with the most potent affinity for the ghrelin receptors will be investigated further through an international network of academic investigators with expertise in the field of endocrinology in order to identify clinical development candidates.

 

Additionally, we also established a research contract with the Department of Experimental and Environmental Medicine of the University of Milan, Italy, under the direction of Prof. Vittorio Locatelli, for the pharmacological characterization of potentially ghrelin receptor ligands.

 

In August 2005, we filed a first patent application to protect a series of new chemical entities characterized as ghrelin receptor ligands.

 

In May 2006, we established a research project agreement with the University of Montreal. This research project will focus on the characterization of ghrelin receptor ligands on fat tissue. This project is led by Huy Ong, Professor at the Faculty of Pharmacy, at the University of Montreal.

 

In August 2006, we also initiated a research collaboration with the Centre de recherche de l’Hôpital Laval (Québec) under the direction of Dr. Denis Richard. This research collaboration will focus on the pharmacological characterization of ghrelin receptor ligands in vivo (e.g. the effects in diet-induced obesity models).

 

In October 2006, we presented for the first time our in vivo data on the capacity of ghrelin antagonists of selectively inhibiting food intake. This study, using a rat model, outlined the capacity of ghrelin antagonists’ ability to inhibit appetite without affecting growth hormone secretion and represents evidence that ghrelin antagonist compounds can selectively inhibit food intake. It further supports the hope that ghrelin antagonist compounds have the potential to be useful for the treatment of obesity.

 

In 2007 and 2008, we presented at scientific meetings preclinical candidates having the interesting property to decrease body weight gain and fat accumulation in diet induced obesity models. The ongoing work will focus on the improvement of oral bioavailability.

 

In July 2009, new data supporting the use of AEZS-123 (JMV-2959), a ghrelin receptor antagonist, for the treatment of alcohol dependence that involved ghrelin were published. Data were published in the renowned American scientific journal, Proceedings of the National Academy of Sciences (PNAS). Data show that mice treated with ghrelin increase their alcohol consumption. When ghrelin’s actions are blocked by administering ghrelin receptor antagonists such as AEZS-123, mice no longer show preference for an alcohol-associated environment - in other words, alcohol is no longer able to produce its

 

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addictive effects that include reward searching behaviour (akin to craving in alcoholic patients). The work, coordinated by Æterna Zentaris, emerged from an international collaboration between the research groups of Prof. Suzanne Dickson and Prof. Jörgen Engel who performed the pharmacology work at the Sahlgrenska Academy, Gothenburg, Sweden, and the research group of Prof. Jean Martinez who synthesized the tested compound AEZS-123 at the Institut des biomolécules Max Mousseron, Montpellier, France.

 

LHRH ANTAGONISTS

 

Cetrorelix

 

Cetrorelix is a peptide-based active substance which was developed in cooperation with Nobel Laureate Professor Andrew Schally presently of the United States Veterans Administration-Miami, University of Miami, and formerly of Tulane University in New Orleans. This compound is a luteinising hormone releasing hormone (LHRH, also known as GnRH) antagonist that blocks the pituitary LHRH receptors resulting in a rapid decrease of sexual hormone levels. Moreover, Cetrorelix allows the LHRH receptors on the pituitary gland to be blocked gradually. Conversely, the side effects usually associated with the use of agonists and resulting from total hormone withdrawal can be avoided in conditions that do not require a castrating degree of hormone withdrawal. Therefore, in contrast to treatment with agonists, LHRH antagonists permit dose-dependent hormone suppression which is of critical importance for the tolerability of hormonal therapy.

 

Cetrorelix in vitro fertilization (COS/ART)

 

Cetrotide®

 

Cetrorelix is the first LHRH antagonist which was approved for therapeutic use as part of fertilization programs in Europe and was launched on the market under the trade name Cetrotide® (cetrorelix acetate) in 1999. In women who undergo controlled ovarian stimulation for recovery of ovocytes for subsequent fertilization, Cetrotide® helps prevent premature ovulation. LHRH is a naturally occurring hormone produced by the brain to control the secretion of LH and, therefore, final egg maturation and ovulation. Cetrotide® is designed to prevent LH production by the pituitary gland and to delay the hormonal event, known as the “LH surge” which could cause eggs to be released too early in the cycle, thereby reducing the opportunity to retrieve the eggs for the assisted reproductive techniques procedure.

 

In comparison with LHRH agonists that require a much longer pre-treatment, the use of our LHRH antagonist, Cetrotide®, permits the physician to interfere in the hormone regulation of the women undergoing treatment much more selectively and within a shorter time.

 

The effectiveness of Cetrotide® has been examined in five clinical trials (two Phase 2 and three Phase 3 trials). Two dose regimens were investigated in these trials: either a single dose per treatment cycle or multiple dosing. In the Phase 2 studies, a single dose of 3 mg was established as the minimal effective dose for the inhibition of premature LH surges with a protection period of at least four days. When Cetrotide® is administered in a multi-dose regimen, 0.25 mg was established as the minimal effective dose. The extent and duration of LH suppression was found to be dose-dependent. In the Phase 3 program, efficacy of the single 3 mg dose regimen and the multiple 0.25 mg dose regimen was established separately in two controlled studies utilizing active comparators. A third non-comparative study evaluated only the multiple 0.25 mg dose regimen of Cetrotide®. In the five Phase 2 and Phase 3 trials, 184 pregnancies were reported out of a total of 732 patients (including 21 pregnancies following the replacement of frozen-thawed embryos). In these studies, drug-related side effects were limited to a low incidence of injected site reactions; however, none of them was serious — such as an allergic type of reaction —  or required withdrawal from treatment. In addition, no drug-related allergic reactions were reported from these clinical studies.

 

Cetrotide® is the only LHRH antagonist that is available in two dosing regimens. With an immediate onset of action, Cetrotide® permits precise control — a single dose (3 mg), which controls the LH surge for up to four days, or a daily dose (0.25 mg) given over a short period of time (usually five to seven days). The treatment with Cetrotide® can be accomplished during a one-month cycle with a simplified, more convenient and shorter treatment requiring fewer injections than LHRH agonists.

 

Cetrotide® is marketed in a 3 mg and a 0.25 mg subcutaneous injection as Cetrorelix acetate by Merck Serono in the United States and Europe. Approval for Cetrotide® in Japan was gained in April 2006. In September 2006, we announced the launch of Cetrotide® in Japan for in vitro fertilization. Cetrotide® is marketed in Japan by our partner Shionogi. We receive revenue from the supply of Cetrotide® to our Japanese partners. The market competitor is ganirelix (Antagon™/Orgalutran®) from

 

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Schering-Plough (Organon) indicated for the inhibition of premature LH surges in women undergoing controlled ovarian hyperstimulation.

 

Partners for Cetrotide®

 

In August 2000, we entered into a commercialization agreement with Merck Serono for Cetrotide®. Under the terms of this agreement, we granted an exclusive license to Merck Serono to commercialize Cetrotide® for IVF/COS/ART worldwide ex-Japan and we are entitled to receive fixed and sales royalties from Merck Serono. The Japanese rights for this indication are held by Shionogi whereby, according to a commercialization agreement, we received transfer pricing from Shionogi.

 

In December 2008, we sold our rights to royalties on future sales of Cetrotide® covered by our license agreement with Merck Serono for $52.5 million to Cowen Healthcare Royalty Partners (“CHRP”) less transaction costs of $1.0 million, resulting in initial net proceeds to us of $51.5 million. In addition, contingent on 2010 net sales of Cetrotide® reaching a specified level, we may receive an additional payment of $2.5 million from CHRP. Under the terms of the agreement, we agreed to make a one-time cash payment to CHRP in an amount ranging from $5 million up to a maximum of $15 million in the event Cetrorelix is approved for sale by the European regulatory authorities in an indication other than in vitro fertilization. The amount which would be due to CHRP will be higher the earlier the product receives European regulatory approval.

 

Clinical development overview of Cetrorelix in benign prostatic hyperplasia (“BPH”), endometriosis and uterine myoma

 

Cetrorelix in BPH

 

BPH is a hormone-driven enlargement of the male prostate gland. The prostate is located directly at the vesicle outlet in the male surrounding the first part of the urethra. The enlargement puts pressure on the urethra, causing difficulty in urinating. BPH is classified into three stages according to symptoms: 1) the irritant phase, where the patient suffers dysuria (pain when urinating) and nocturia (the urge to urinate during the night); 2) residual urine occurring in the bladder thus increasing problems during urinating; and 3) overflow of the bladder. These can result in formation of bladder stones, congestion of urine and engorged kidneys which can in turn lead to life-threatening kidney damage.

 

BPH clinical trials

 

On August 17, 2009, we reported Phase 3 results for our North American efficacy trial Z-033 (including certain sites in Europe) and safety trial Z-041 in BPH, with cetrorelix. The study Z-033 failed to achieve its primary endpoint, being an improvement in International Prostate Symptom Score (“IPSS”) as compared to placebo, and it demonstrated no clear differences in overall efficacy with all 3 groups showing an improvement in IPSS of approximately 4 points that was maintained throughout the 52 weeks. There was a slight advantage in favor of the main active treatment arm (Arm A) up to Week 46 of the follow-up, which was no longer demonstrated at Week 52. These differences did not achieve statistical significance. Furthermore, a statistically significant effect on the IPSS, as compared to placebo, was seen in a sub-group of patients with large prostate glands (greater than 50 cm3) on entry to the study. Tolerability of cetrorelix in study Z-033 was very good, as evidenced by the absence of major differences to placebo with regard to both clinical adverse events and changes in laboratory parameters.

 

On December 7, 2009, we reported the Phase 3 results for cetrorelix from the European efficacy trial Z-036, involving 420 patients. Study Z-036 did not reach its primary endpoint. There were no clear differences in overall efficacy, with all 3 groups (including placebo) showing an improvement in IPSS of approximately 6 points that was maintained throughout the 52 weeks. There was observation of an improvement in uroflow, both maximum and mean, and in residual volume in all treatment groups. These favorable changes are reflected in an overall improvement in Quality of Life measures. Furthermore, a favorable trend on the IPSS, as compared to placebo, was seen in a sub-group of patients with large prostate glands (greater than 50 cm3) on entry to the study. Cetrorelix was well tolerated, there were no relevant differences to placebo with regard to both clinical adverse events or changes in laboratory parameters with the exception of the anticipated hormonal changes.

 

On December 18, 2009, following the unsuccessful results of our Phase 3 program in BPH with cetrorelix, we announced the termination of our agreement with sanofi dated March 5, 2009, for the development, commercialization and licensing of cetrorelix in BPH for the U.S. market. Termination of the agreement took effect as of January 9, 2010.

 

Cetrorelix in endometriosis and uterine myoma

 

There is no active program ongoing at present.

 

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Partners for Cetrorelix

 

We previously licensed Cetrorelix to Solvay worldwide (ex-Japan) for all indications with the exception of IVF/COS/ART, which rights belong to Merck Serono and Japanese rights are held by Shionogi. In the BPH indication, for which we regained exclusive worldwide (ex-Japan) rights, Japanese rights are held by Shionogi. On May 8, 2007, we and Solvay announced the termination of the license and cooperation agreement for Cetrorelix for all remaining indications, including endometriosis, effective on that date, as a result of which we regained exclusive worldwide (ex-Japan) rights for Cetrorelix in all indications without any financial compensation payable to Solvay.

 

On March 22, 2007, we announced that Nippon Kayaku had terminated its development agreement pertaining to Cetrorelix pamoate to focus solely in oncology.

 

We signed a license and cooperation agreement for the commercialization of Cetrorelix (BPH indication) with Handok for the Korean market during the third quarter of 2008.

 

On March 5, 2009, we entered into a development, commercialization and license agreement with sanofi-aventis for the development, registration and marketing of Cetrorelix in BPH for the US market. Under the terms of the agreement, sanofi-aventis made an initial upfront payment to us of $30.0 million. Following the announcement of the negative results for the efficacy trial in North America (study Z-033) and in Europe (study Z-036), we announced the termination of our agreement with sanofi-aventis dated March 5, 2009 for the development, commercialization and licensing of Cetrorelix in BPH for the U.S. market. Termination of the agreement was effective January 9, 2010.

 

Following the negative Phase 3 results for cetrorelix in BPH, our Japanese partner, Shionogi, also agreed with the Company to cease the development of cetrorelix in this indication.

 

Ozarelix

 

Ozarelix is a modified LHRH antagonist which is a linear decapeptide sequence. Ozarelix is a fourth-generation LHRH antagonist aiming at extended suppression of testosterone levels that does not require a sophisticated depot formulation for long-lasting activity.

 

On August 12, 2004, we entered into a licensing and collaboration agreement with Spectrum for Ozarelix and its potential to treat hormone-dependent cancers as well as benign proliferative disorders, such as BPH and endometriosis. Under the terms of the agreement, we granted an exclusive license to Spectrum to develop and commercialize Ozarelix for all potential indications in North America (including Canada and Mexico) and India while keeping the rights for the rest of the world. In addition, Spectrum is entitled to receive 50% of upfront and milestone payments and royalties received from our Japanese partner, Nippon Kayaku, that are generated in the Japanese market for oncological indications. During the third quarter of 2008, we entered into a commercialization agreement with Handok for Ozarelix (BPH indication) for the Korean market.

 

BPH clinical trials

 

In October 2006, we announced positive and highly statistically significant Phase 2 results for Ozarelix in BPH. The primary efficacy endpoint of improving clinical symptoms of BPH at week 12, as measured by significant changes in IPSS, was achieved at all dosage regimens. Secondary efficacy parameters such as uroflow, residual urinary volume, quality of life and circulating testosterone levels were also measured and showed good results. The outcome of the trial demonstrated an excellent safety profile with Ozarelix as patients had no serious side effects. The erectile function was also not affected at any dose regimens.

 

On May 23, 2007 and September 5, 2007, Spectrum disclosed detailed Phase 2 results for Ozarelix in BPH at two medical conferences. Results indicate that Ozarelix was well tolerated and demonstrated statistically significant as well as clinically meaningful efficacy in the treatment of LUTS secondary to BPH.

 

On January 3, 2007, Spectrum announced the FDA’s acceptance of an IND for Ozarelix in BPH. Spectrum initiated a Phase 2b study in January 2007. On April 22, 2008, our partner Spectrum released the nine-month Phase 2b results for ozarelix. Spectrum indicated that ozarelix demonstrated sufficient clinical activity to justify its continued development in BPH. Based on these results, Spectrum initiated in September 2008 the recruitment of 860 patients for a new BPH study, as mentioned on the www.clinicaltrials.gov website. In January 2010, Spectrum Pharmaceuticals announced the discontinuation of Ozarelix development in BPH, stating that the mixed results of their Phase 2b study and the recently announced negative results of our Phase 3 registrational trial of Cetrorelix in BPH does not support continued development of Ozarelix in this indication.

 

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Prostate cancer clinical trials

 

In August 2006, we announced positive Phase 2 results for Ozarelix in hormone-dependent inoperable prostate cancer. This open-label, randomized-controlled dose-finding trial enrolled 64 patients receiving different IM dosage regimens of Ozarelix to assess its safety and efficacy. The study achieved its primary endpoint of defining a tolerable dosage regimen of Ozarelix that would ensure continuous suppression of testosterone at castration level for a three-month test period. A secondary efficacy endpoint aimed at assessing tumor response as determined by a 50% or greater reduction of serum PSA level, compared to baseline, was also achieved. The best results regarding the primary endpoint of continuous suppression were obtained with a dose of 130 mg per cycle where all patients remained suppressed to castration until at least day 85. In patients with continuous testosterone suppression below castration level, tumor response as measured by PSA levels was 97%. Following these results, we, in collaboration with Spectrum, initiated an additional Phase 2 study in European centers to verify and optimize the findings derived from the cohort of patients having received 130 mg of Ozarelix per cycle.

 

On August 3, 2006, we announced a licensing and collaboration agreement with Nippon Kayaku for Ozarelix. Under the terms of the agreement, we granted Nippon Kayaku an exclusive license to develop and market Ozarelix for all potential oncological indications in Japan. In return, we received an upfront payment upon signature and are eligible to receive payments upon achievement of certain development and regulatory milestones, in addition to low double-digit royalties on potential net sales. Spectrum is entitled to receive 50% of the upfront, milestone payments and royalties received from Nippon Kayaku.

 

Non-peptide LHRH antagonists

 

As outlined above, the LHRH receptor plays an important role in a number of benign and malignant tumors. Our drug discovery unit searches for small, non-peptide molecules which have the same effect on the receptor. Their advantage lies in the potential for oral administration.

 

AEZS-115 is a new orally bioavailable LHRH antagonist with LHRH-receptor binding affinity in the nanomolar range which is developed for hormone therapy of endocrinological disorder and of benign and malignant tumors. The compound demonstrates excellent selectivity to LHRH-receptor and has advanced to a preclinical stage where the in vivo activity has been confirmed. Major advantages are the dose-dependent reduction of sexual hormones without flare-up effect whereas no decrease down to castration level is necessary and therefore side effects are reduced.

 

In January 2006, we regained the exclusive worldwide rights to develop and commercialize AEZS-115 from Solvay. Attractive in vivo activity of this orally available peptidomimetic LHRH-antagonist was demonstrated with a single, oral administration (20mg/kg) in rats which led to efficient and revocable suppression of plasma testosterone levels for up to 12 hours. Furthermore, a repeat of the dosing of AEZS-115 increased the suppression time without accumulation in the plasma.

 

In 2007, an oral formulation was selected and pharmacokinetic data were obtained.

 

First preclinical results were presented at the 2008 San Antonio Breast Cancer Symposium on December 12, 2008 and showed substantial anti-tumor activity of AEZS-115 in human ovarian and breast cancer cell lines, as evidenced by exposure of human cell lines SKOV3, Ovcar 3 (human ovarian cancer cell lines) and MDA-MB 468 (human breast cancer cell line) to increasing concentrations of AEZS-115, peptidic GnRH-antagonist Cetrorelix and GnRH-agonist Triptorelin (1, 10, and 100 µM) for 48 days. The number of viable cells was determined by crystal violet staining as well as by ATP-dependent luminometric assays. Results showed that both GnRH-antagonists dose-dependently inhibited growth of all three cell lines, while GnRH-agonist Triptorelin showed marginal growth inhibition. Cell growth was inhibited by 40-60% following exposure to a concentration of 10 µM of AEZS-115 and by 60-80% when cells were exposed to 100 µM. Inhibition with Cetrorelix at 100 µM ranged from 20-40%, while only minor effects on cell growth were seen at 10µM.  Optimization is ongoing.

 

RAW MATERIALS

 

Raw materials and supplies are generally available in quantities adequate to meet the needs of our business. We are dependent on third-party manufacturers for the pharmaceutical products that we market. An interruption in the availability of certain raw materials or ingredients, or significant increases in the prices paid by us for them, could have a material adverse effect on our business, financial condition, liquidity and operating results.

 

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DISTRIBUTION

 

We currently have a lean sales and marketing staff. In order to commercialize our product candidates successfully, we need to make arrangements with third parties to perform some or all of these services in certain territories.

 

We contract with third parties for the sales and marketing of our products.  We are currently dependent on strategic partners and may enter into future collaborations for the research, development and commercialization of our product candidates. Our arrangements with these strategic partners may not provide us with the benefits we expect and may expose us to a number of risks.

 

REGULATORY COMPLIANCE

 

Governmental authorities in Canada, the United States, Europe and other countries extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage, record keeping, advertising, promotion, export, marketing and distribution, among other things, of our product candidates. In Canada, the Canadian Therapeutic Products Directorate is the Canadian federal authority that regulates pharmaceutical drugs and medical devices for human use.  Prior to being given market authorization, a manufacturer must present substantive scientific evidence of a product’s safety, efficacy and quality as required by the Food and Drugs Act and other regulations. In the United States, the FDA under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal statutes and regulations, subject pharmaceutical products to rigorous review.  For more information about the regulatory risks associated with the Company’s business operations, see “Item 3—Key Information—Risk Factors”.

 

DRUG DISCOVERY

 

There is an increasing demand on the world market for active substances. Our internal drug discovery unit provides an important prerequisite for the provision of new patented active substances, which can then be developed further or licensed to third parties.

 

Our drug discovery unit concentrates on the search for active substances for innovative targets which open the door to the introduction of new therapeutic approaches. Further, this unit searches for new active substances having improved properties for clinically validated targets for which drugs are already being used in humans and which produce inadequate effects, cause severe side effects, are not economical or are not available in a patient-friendly form.

 

To this end, we possess an original substance library for the discovery of active compounds with a comprehensive range of promising natural substances which can serve as models for the construction of synthetic molecules. The initial tests involve 120,000 samples from our internal substance library in the form of high-throughput screening. The hits, i.e. the first active compounds found in the library, are tested further and built up specifically into potential lead structures. Based on two to three lead structures, they are then optimized in a further step to potential development candidates.

 

INTELLECTUAL PROPERTY — PATENTS

 

We believe that we have a solid intellectual property portfolio that covers compounds, manufacturing processes, compositions and methods of medical use for our lead drugs and drug candidates. Our patent portfolio consists of about 55 owned and in licensed patent families (issued, granted or pending in the United States, Europe and other jurisdictions). Independent from the original patent expiry date additional exclusivity is possible in the United States, Europe and several other countries by data protection for new chemical entities, by orphan drug designation, or by patent term extension respective supplementary protection certificate.

 

Of the issued or granted patents, the protective rights described below form the core of our patent portfolio with regard to our lead drugs and drug candidates.

 

Perifosine:

 

·                  U.S. patent 6,172,050 provides protection in the United States for the compound perifosine and other related alkyl phospholipid derivatives, pharmaceutical compositions comprising the compounds as well as their medical use for the treatment of tumors. This U.S. patent expires in July 2013. A patent term extension of up to five years may be possible and will be requested upon receiving marketing approval of perifosine.

 

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·                  European patent 0 579 939 provides protection in European countries for the compound perifosine and other related alkyl phospholipid derivatives, pharmaceutical compositions comprising the compounds as well as their medical use for the treatment of tumors. This European patent expires in June 2013. A patent term extension of up to five years by SPC may be possible and will be requested upon receiving marketing approval of perifosine.

 

·                  Japanese patent 3 311 431 provides protection in Japan for the compound perifosine and other related alkyl phospholipid derivatives. This Japanese patent expires in July 2013. A patent term extension of up to five years may be possible and will be requested upon receiving marketing approval of perifosine

 

AEZS-108:

 

·                  U.S. patent 5,843,903 provides protection in the United States for the compound AN-152 and other related targeted cytotoxic anthracycline analogs, pharmaceutical compositions comprising the compounds as well as their medical use for the treatment of tumors. This U.S. patent expires in November 2015.  A patent term extension of up to five years may be possible and will be requested upon receiving marketing approval of AEZS-108.

 

AEZS-130:

 

·                  U.S. patent 6,861,409 protects the compound AEZS-130 and U.S. patent 7,297,681 protects other related growth hormone secretagogue compounds, pharmaceutical compositions comprising the compounds as well as their medical use for elevating the plasma level of growth hormone. This U.S. patent 6,861,409 expires in August 2022.  A patent term extension of up to five years may be possible and will be requested upon receiving marketing approval of AEZS-130.

 

·                  European patent 1 289 951 protects the compound AEZS-130 and European patent 1 344 773 protects other related growth hormone secretagogue compounds, pharmaceutical compositions comprising the compounds as well as their medical use for elevating the plasma level of growth hormone. This European patent 1 289 951 expires in June 2021.  A patent term extension of up to five years by supplementary protection certificates (“SPC”) may be possible and will be requested upon receiving marketing approval of AEZS-130.

 

·                  Japanese patent 3 522 265 protects the compound AEZS-130 and pharmaceutical compositions comprising the compounds as well as their medical use for elevating the plasma level of growth hormone. This Japanese patent expires in June 2021.  A patent term extension of up to five years may be possible and will be requested upon receiving marketing approval of AEZS-130.

 

Cetrorelix:

 

·                  U.S. patent 5,198,533 provides protection in the United States for the compound cetrorelix and other LHRH antagonists. This U.S. patent will expire in October 2010 pursuant to a granted request for patent term extension.

 

·                  European patent 0 299 402 provides protection in European countries for the compound cetroelix and other LHRH antagonists. This patent will expire in July 2013 pursuant to granted requests for SPC.

 

·                  U.S. patent 6,828,415 protects a method for preparing sterile lyophilizate formulations of cetrorelix. It specifically protects the lyophilization process used to manufacture Cetrotide. This U.S. patent will expire in December 2021.

 

·                  European patent 0 611 572 protects a method for preparing sterile lyophilizate formulations of cetrorelix. It specifically protects the lyophilization process used to manufacture Cetrotide. This patent will expire in February 2014.

 

·                  U.S. patent 7,005,418 is a method-of-use patent covering the therapeutic management of extrauterine proliferation of endometrial tissue (endometriosis), chronic pelvic pain and/or fallopian tube obstruction by administering an LHRH antagonist in the form of a short-term induction treatment for a period of about 4 to 12 weeks. The U.S. patent will expire in August 2022.

 

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AEZS-112:

 

·                  U.S. patent 7,365,081 provides protection in the United States for the compound AEZS-112 and other related indole derivatives, and medicaments comprising them. This U.S. patent will expire in July 2021. A patent term extension of up to five years may be possible and will be requested upon receiving marketing approval of AEZS-112.

 

Ozarelix:

 

·                  U.S. patent 6,627,609 provides protection in the United States for the compound ozarelix and related third-generation LHRH antagonists and pharmaceutical compositions comprising them. This U.S. patent will expire in March 2020. A patent term extension of up to five years may be possible and will be requested upon marketing approval of ozarelix.

 

The table below lists some of our issued or granted patents in the United States and Europe:

 

Patent No.

 

Title

 

Country

 

Expiry Date*

 

 

 

 

 

 

 

Perifosine

 

 

 

 

 

 

U.S. 6,172,050

 

Phospholipid derivatives

 

United States

 

2013-07-07*

 

 

 

 

 

 

 

AEZS-108

 

 

 

 

 

 

U.S. 5,843,903

 

Targeted cytotoxic anthracycline analogs