sv4za
As filed with the Securities and Exchange Commission on
September 23, 2010
Registration
No. 333-169351
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 1
to
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
EMERGENT BIOSOLUTIONS
INC.
(Exact name of Registrant as
specified in its charter)
|
|
|
|
|
Delaware
(State or other jurisdiction
of
incorporation or organization)
|
|
2834
(Primary Standard
Industrial
Classification Code Number)
|
|
14-1902018
(I.R.S. Employer
Identification Number)
|
2273 Research Boulevard, Suite 400
Rockville, Maryland 20850
(301) 795-1800
(Address, including zip code,
and telephone number, including area code, of Registrants
principal executive offices)
Fuad El-Hibri
Chief Executive Officer
Emergent BioSolutions Inc.
2273 Research Boulevard, Suite 400
Rockville, Maryland 20850
(301) 795-1800
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
|
|
|
Carl A. Valenstein, Esq.
|
|
Alan C. Smith, Esq.
|
Laurie A. Cerveny, Esq.
|
|
James D. Evans, Esq.
|
Bingham McCutchen LLP
|
|
Fenwick & West LLP
|
2020 K Street, NW
|
|
1191 Second Avenue, 10th Floor
|
Washington, DC 20006
|
|
Seattle, Washington 98101
|
(202) 373-6000
|
|
(206) 389-4510
|
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effectiveness of this registration statement and the
satisfaction or waiver of all other conditions under the merger
agreement described herein.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
|
|
|
|
Large
accelerated
filer o
|
Accelerated
filer þ
|
Non-accelerated
filer o
|
Smaller reporting
company o
|
(Do not check if a smaller
reporting company)
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this proxy statement/prospectus is not complete
and may be changed. Emergent BioSolutions may not sell the
securities offered by this proxy statement/prospectus until the
registration statement filed with the Securities and Exchange
Commission is effective. This proxy statement/ prospectus is not
an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or
sale is not permitted.
|
SUBJECT TO COMPLETION, DATED
SEPTEMBER 23, 2010
PROXY STATEMENT/PROSPECTUS
MERGER
PROPOSAL
September 23,
2010
Dear Stockholder:
As previously announced, on August 12, 2010, Trubion
Pharmaceuticals, Inc., or Trubion, entered into a merger
agreement with Emergent BioSolutions Inc., or Emergent
BioSolutions, under which Emergent BioSolutions will acquire
Trubion. Following the merger, Trubion will become a direct
wholly owned subsidiary of Emergent BioSolutions. If the merger
is completed, Trubion stockholders (other than stockholders who
validly perfect appraisal rights under Delaware law) will be
entitled to receive, for each share of Trubion common stock that
they hold:
|
|
|
|
|
$1.365 in cash, without interest;
|
|
|
|
0.1641 of a share of Emergent BioSolutions common stock; and
|
|
|
|
one contingent value right, or CVR.
|
Each CVR will entitle its holder to receive additional cash
payments if certain milestones are met with respect to specified
clinical and preclinical assets currently partnered by Trubion
with Pfizer Inc. and Abbott Laboratories. The CVRs will not be
transferable, except in limited circumstances.
Emergent BioSolutions common stock is listed on The New
York Stock Exchange under the symbol EBS. On
September 22, 2010, the last trading day prior to the date
of this proxy statement/prospectus, the last reported sale price
per share of Emergent BioSolutions common stock on The New York
Stock Exchange was $17.98.
Trubion will hold a special meeting of stockholders to vote on
proposals to adopt the merger agreement and, if necessary, to
adjourn the special meeting. You will find the notice of
meeting, logistics of the proposed merger and details regarding
the merger agreement, the proposed merger and the other
transactions contemplated by the merger agreement in the
attached documents.
TRUBIONS BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT AND HAS UNANIMOUSLY
DETERMINED AND DECLARED THAT THE MERGER AGREEMENT, THE MERGER
AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT
ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, TRUBION
AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS OF TRUBION
RECOMMENDS THAT TRUBION STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE MERGER AGREEMENT AND FOR THE
APPROVAL OF THE PROPOSAL TO ADJOURN THE SPECIAL MEETING TO
A LATER DATE OR TIME, IF NECESSARY OR APPROPRIATE, IF A QUORUM
IS PRESENT, TO SOLICIT ADDITIONAL PROXIES IN THE EVENT THERE ARE
INSUFFICIENT VOTES AT THE TIME OF THE SPECIAL MEETING TO ADOPT
THE MERGER AGREEMENT.
Under Delaware law, the approval of holders of a majority of the
outstanding shares of Trubion common stock is required to adopt
the merger agreement. Concurrently with the execution of the
merger agreement, certain significant holders of Trubion common
stock holding, in the aggregate, approximately 41% of the
outstanding Trubion common stock, as of September 3, 2010,
entered into Support Agreements with Emergent BioSolutions
pursuant to which they have agreed to vote a portion of their
shares of Trubion common stock equal to approximately 35% in the
aggregate of the outstanding shares of Trubion common stock in
favor of adoption of the merger agreement and the transactions
contemplated thereby. These same significant stockholders have
also agreed to certain restrictions on the sale of their shares
of Emergent BioSolutions common stock following the merger, as
further described in this proxy statement/prospectus.
For a discussion of risk factors that you should consider in
evaluating the transaction, see the section entitled Risk
Factors beginning on page 21 of the attached proxy
statement/prospectus.
We urge you to read the proxy statement/prospectus carefully and
in its entirety.
Steven Gillis, Ph.D.
Executive Chairman and Acting
President
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER OR
OTHER TRANSACTIONS DESCRIBED IN THE ATTACHED PROXY
STATEMENT/PROSPECTUS OR THE SECURITIES TO BE ISSUED PURSUANT TO
THE MERGER UNDER THE ATTACHED PROXY STATEMENT/PROSPECTUS NOR
HAVE THEY DETERMINED IF THE ATTACHED PROXY STATEMENT/PROSPECTUS
IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The proxy statement/prospectus is dated September 23, 2010
and is first being mailed to Trubion stockholders on or about
September 27, 2010.
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To Be Held October 28,
2010
The special meeting of stockholders of Trubion Pharmaceuticals,
Inc., or Trubion, will be held on the first floor of
Trubions offices located at 2401 4th Avenue, Seattle,
Washington 98121, on October 28, 2010, at 10 a.m. local
time. The purposes of the special meeting are to vote on a
proposal to:
|
|
|
|
|
adopt the Agreement and Plan of Merger, dated as of
August 12, 2010, by and among Emergent BioSolutions Inc.,
35406 LLC and 30333 Inc., each of which are wholly owned
subsidiaries of Emergent, and Trubion Pharmaceuticals, Inc., as
it may be amended from time to time; and
|
|
|
|
approve the adjournment of the special meeting to a later date
or time, if necessary or appropriate, if a quorum is present, to
solicit additional proxies in the event there are insufficient
votes at the time of the special meeting to adopt the merger
agreement.
|
Trubions board of directors unanimously recommends that
you vote FOR the proposal to adopt the merger
agreement and FOR the proposal to adjourn the
special meeting to a later date or time, if necessary or
appropriate, if a quorum is present, to solicit additional
proxies in the event there are insufficient votes at the time of
the special meeting to adopt the merger agreement.
Only holders of record of Trubion common stock at the close of
business on September 21, 2010 will be entitled to vote at
the special meeting or any adjournments or postponements of the
special meeting. A list of stockholders entitled to vote at the
special meeting will be available in Trubions offices
located at 2401 4th Avenue, Seattle, Washington 98121,
during regular business hours for a period not less than
10 days before the special meeting, as well as at the place
of the special meeting during the special meeting.
Whether or not you plan to attend the special meeting, please
vote in advance by marking, signing, dating and returning the
proxy card in the enclosed postage-prepaid envelope.
By Order of the Board of Directors,
Secretary
Seattle, Washington
September 23, 2010
THIS
PROXY STATEMENT/PROSPECTUS INCORPORATES ADDITIONAL
INFORMATION
This proxy statement/prospectus incorporates by
reference important business and financial information
about Emergent BioSolutions Inc., or Emergent BioSolutions, from
documents that are not included in or delivered with this proxy
statement/prospectus. This information is available to you
without charge upon request. For a more detailed description of
the information incorporated by reference into this proxy
statement/prospectus and how you may obtain it, see the section
entitled Where You Can Find More Information
beginning on page 165 of this proxy statement/prospectus.
Emergent BioSolutions will provide you with copies of this
information (excluding all exhibits unless Emergent BioSolutions
has specifically incorporated by reference an exhibit in this
proxy statement/prospectus), without charge, upon written or
oral request to:
Emergent
BioSolutions Inc.
2273 Research Boulevard, Suite 400
Rockville, Maryland 20850
Attn: Investor Relations
(301) 795-1800
In order to receive timely delivery of the documents before
the special meeting, you must make your requests no later than
five business days prior to the date of the special meeting, or
no later than October 21, 2010.
ABOUT
THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus, which forms a part of a
registration statement on
Form S-4
filed with the Securities and Exchange Commission, or SEC, by
Emergent BioSolutions, constitutes a prospectus of Emergent
BioSolutions under Section 5 of the Securities Act of 1933,
as amended, or the Securities Act, with respect to the shares of
Emergent BioSolutions common stock to be issued to stockholders
of Trubion Pharmaceuticals, Inc., or Trubion, in connection with
the merger. This proxy statement/prospectus also constitutes a
proxy statement under Section 14(a) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and the
rules thereunder, and a notice of meeting with respect to the
special meeting of Trubion stockholders to vote upon the
proposals to adopt the merger agreement and, if necessary, to
adjourn the special meeting.
Except as otherwise provided herein, all descriptions of and
calculations with respect to the terms of the merger agreement
and the transactions contemplated by the merger agreement,
including the merger, assume that no Trubion stockholders
exercise their appraisal rights under Delaware law.
TABLE
OF CONTENTS
|
|
|
|
|
Page
|
|
|
|
iii
|
|
|
1
|
|
|
15
|
|
|
16
|
|
|
18
|
|
|
19
|
|
|
20
|
|
|
21
|
|
|
43
|
|
|
44
|
|
|
44
|
|
|
45
|
|
|
62
|
|
|
63
|
|
|
80
|
|
|
81
|
|
|
82
|
|
|
83
|
|
|
86
|
|
|
90
|
|
|
90
|
|
|
90
|
|
|
98
|
|
|
101
|
|
|
108
|
|
|
109
|
|
|
114
|
|
|
117
|
|
|
117
|
|
|
118
|
|
|
118
|
|
|
118
|
|
|
123
|
|
|
123
|
|
|
126
|
|
|
126
|
|
|
126
|
|
|
126
|
|
|
126
|
|
|
126
|
|
|
127
|
|
|
127
|
|
|
128
|
|
|
|
|
|
Page
|
|
|
|
128
|
|
|
130
|
|
|
132
|
|
|
132
|
|
|
133
|
|
|
133
|
|
|
133
|
|
|
134
|
|
|
135
|
|
|
136
|
|
|
138
|
|
|
138
|
|
|
139
|
|
|
140
|
|
|
141
|
|
|
143
|
|
|
143
|
|
|
143
|
|
|
144
|
|
|
144
|
|
|
144
|
|
|
144
|
|
|
144
|
|
|
145
|
|
|
146
|
|
|
147
|
|
|
151
|
|
|
156
|
|
|
164
|
|
|
164
|
|
|
164
|
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
|
|
164
|
|
|
165
|
|
|
165
|
|
|
|
ANNEXES:
|
|
|
|
|
A-1
|
|
|
B-1
|
|
|
C-1
|
|
|
D-1
|
|
|
E-1
|
|
|
F-1
|
|
|
G-1
|
|
|
H-1
|
ii
QUESTIONS
AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address
briefly some commonly asked questions regarding the Trubion
special meeting and the merger. These questions and answers may
not address all of the information that may be important to you.
Please refer to the more detailed information contained
elsewhere in this proxy statement/prospectus, the annexes to
this proxy statement/prospectus and in the documents referred to
or incorporated by reference in this proxy
statement/prospectus.
|
|
|
Q: |
|
Why am I receiving this proxy statement/prospectus? |
|
A: |
|
Emergent BioSolutions has agreed to acquire Trubion under the
terms of an Agreement and Plan of Merger, dated as of
August 12, 2010, or the merger agreement, that is described
in this proxy statement/prospectus. See the sections entitled
The Merger and The Merger Agreement
beginning on pages 90 and 126, respectively, of this proxy
statement/prospectus. A copy of the merger agreement is attached
to this proxy statement/prospectus as Annex A. |
|
|
|
In order to complete the transactions contemplated by the merger
agreement, including Emergent BioSolutions acquisition of
Trubion, Trubion stockholders must adopt the merger agreement by
the affirmative vote of the holders of at least a majority of
the shares of Trubion common stock outstanding on the record
date for the special meeting and all other conditions to the
merger must be satisfied or waived. |
|
|
|
|
|
You are receiving this proxy statement/prospectus because you
have been identified as a Trubion stockholder as of
September 21, 2010, the record date for the special
meeting, and thus you are entitled to vote at the special
meeting. |
|
|
|
|
|
This proxy statement/prospectus serves as both a proxy statement
of Trubion, used to solicit proxies for the special meeting, and
as a prospectus of Emergent BioSolutions used to offer shares of
Emergent BioSolutions common stock to be issued as partial
consideration for the surrender of shares of Trubion common
stock pursuant to the terms of the merger agreement. This proxy
statement/prospectus contains important information about the
merger and the special meeting, and you should read it carefully. |
|
Q: |
|
When and where is the special meeting of Trubion
stockholders? |
|
|
|
A: |
|
The special meeting of Trubion stockholders will be held on
October 28, 2010, starting at 10 a.m., local time, on
the first floor of Trubions offices located at 2401 4th
Avenue, Seattle, Washington 98121. |
|
|
|
Q: |
|
On what matters am I being asked to vote? |
|
A: |
|
Trubion stockholders are being asked to vote on a proposal to: |
|
|
|
adopt the merger agreement; and
|
|
|
|
adjourn the special meeting to a later date or time,
if necessary or appropriate, if a quorum is present, to solicit
additional proxies in the event there are insufficient votes at
the time of the special meeting to adopt the merger agreement.
|
|
Q: |
|
What constitutes a quorum at the special meeting? |
|
|
|
|
A: |
|
Stockholders who hold at least a majority of the issued and
outstanding shares of Trubion common stock entitled to vote at
the special meeting as of the close of business on the record
date must be present, either in person or represented by proxy
at the special meeting, in order to constitute a quorum to
conduct business at the special meeting. |
|
Q: |
|
How many votes do I have? |
|
|
|
|
|
|
A: |
|
You are entitled to one vote at the special meeting on all
matters properly presented at the meeting for each share of
Trubion common stock that you owned as of the record date. As of
the close of business on the record date, there were
20,425,554 outstanding shares of Trubion common stock. |
|
|
|
|
|
Concurrently with the execution of the merger agreement, certain
significant holders of Trubion common stock holding, in the
aggregate, approximately 41% of the outstanding Trubion common
stock, as of September 3, |
iii
|
|
|
|
|
2010, entered into Support Agreements with Emergent BioSolutions
pursuant to which they have agreed to vote a portion of their
shares of Trubion common stock amounting to approximately 35% in
the aggregate of the outstanding shares of Trubion common stock
in favor of adoption of the merger agreement and the
transactions contemplated by the merger agreement. |
|
Q: |
|
What are the terms of the merger? |
|
A: |
|
Under the terms of the merger agreement, subject to the
satisfaction or waiver of certain conditions, 30333 Inc., or
merger sub, will merge with and into Trubion, then promptly
thereafter, Trubion will merge with and into 35406 LLC, or the
surviving entity, and the surviving entity will become a direct
wholly owned subsidiary of Emergent BioSolutions. These
transactions are referred to collectively as the merger. Both
merger sub and the surviving entity are currently wholly owned
subsidiaries of Emergent BioSolutions. |
|
|
|
Upon completion of the merger, each outstanding share of Trubion
common stock will be converted into the right to receive the
merger consideration. For a more complete description of the
merger, see the section entitled The Merger
Agreement beginning on page 126 of this proxy
statement/prospectus. |
|
Q: |
|
As a Trubion stockholder, what will I receive in the
merger? |
|
A: |
|
If the merger agreement is adopted by Trubions
stockholders and the other conditions to the merger are
satisfied or waived, upon completion of the merger, Emergent
BioSolutions will pay, for each outstanding share of Trubion
common stock: |
|
|
|
$1.365 per share in cash, without interest, referred
to as the cash consideration;
|
|
|
|
0.1641 of a share of Emergent BioSolutions common
stock, referred to as the stock consideration; and
|
|
|
|
a CVR, which entitles its holder to receive
additional cash in certain circumstances.
|
|
|
|
The aggregate per share consideration payable in connection with
the merger is referred to as the merger consideration. |
|
|
|
|
|
Based on the average trading price of Emergent
BioSolutions common stock for the five consecutive trading
days ending August 11, 2010 of $19.41, the exchange ratio
set forth above implies an upfront purchase price of $4.55 per
share of Trubion common stock based on 20,421,294 shares of
Trubion common stock outstanding on August 11, 2010. As of
August 11, 2010, the total upfront value represents
approximately $96.8 million for Trubion stockholders and
optionholders. Based on the closing price of Emergent
BioSolutions common stock on September 22, 2010, the last
trading day prior to the date of this proxy
statement/prospectus, the exchange ratio set forth above implies
an upfront purchase price of $4.32 per share of Trubion common
stock based on 20,425,554 shares of Trubion common stock
outstanding on such date. As of September 22, 2010, the
total upfront value represents approximately $92.0 million
for Trubion stockholders and optionholders. |
|
|
|
|
|
These values exclude the potential for an aggregate of up to
$38.75 million of additional cash that may be payable to
holders of Trubion common stock and certain Trubion
optionholders related to the CVRs. The CVRs provide each holder
entitled to receive them the right to receive a pro rata share
of an aggregate of up to $38.75 million in cash based on
the achievement of predefined milestones over a
36-month
period following the effective time of the merger. For more
information, see the section entitled The CVR
Agreement beginning on page 143 of this proxy
statement/prospectus. |
|
Q: |
|
Will the value of the merger consideration I receive in the
merger increase or decrease if the market price of Emergent
BioSolutions common stock increases or decreases prior to the
closing of the merger? |
|
A: |
|
Yes. The precise value of the merger consideration you will
receive at the closing of the merger cannot be determined at the
present time because a portion of the merger consideration is
comprised of a fixed amount of 0.1641 of a share of Emergent
BioSolutions common stock for each share of Trubion common
stock. The price of Emergent BioSolutions common stock at the
closing of the merger may vary from its price on the date the
merger agreement was executed, on the date of this proxy
statement/prospectus and on the date of the special meeting of
Trubion stockholders. |
iv
|
|
|
Q: |
|
Will the value of the merger consideration I receive in the
merger increase or decrease if the market price of Trubion
common stock increases or decreases prior to the closing of the
merger? |
|
A: |
|
No. The merger consideration payable for each share of
Trubion common stock at closing is fixed at $1.365 in cash,
without interest; 0.1641 of a share of common stock of Emergent
BioSolutions; and one CVR. The payment received at closing will
not change regardless of the price of publicly traded common
stock of Trubion. |
|
Q: |
|
What will Trubion optionholders receive in the merger? |
|
|
|
A: |
|
All outstanding Trubion stock options will immediately vest and
will be canceled at the effective time of the merger. Stock
options with a per share exercise price of $4.55 or above will
be canceled. Holders of stock options with a per share exercise
price below $4.55 will receive, for each share of Trubion common
stock subject to such option, a cash payment equal to the
difference between $4.55 and the exercise price of the option
and one CVR. As of September 21, 2010, there were
1,679,952 outstanding Trubion stock options with a per
share exercise price below $4.55. See the section entitled
The Merger Agreement Treatment of Trubion
Stock Options beginning on page 126 of this proxy
statement/prospectus. |
|
|
|
Q: |
|
What is required to complete the merger? |
|
A: |
|
To complete the merger, Trubion stockholders must adopt the
merger agreement, which requires the affirmative vote of the
holders of at least a majority of the shares of Trubion common
stock outstanding on the record date and entitled to vote at the
special meeting. In addition to obtaining Trubion stockholder
approval, each of the other closing conditions set forth in the
merger agreement must be satisfied or waived. For a more
complete description of the closing conditions under the merger
agreement, see the section entitled The Merger
Agreement Conditions to Completion of the
Merger beginning on page 135 of this proxy
statement/prospectus. |
|
Q: |
|
How does Trubions board of directors recommend that I
vote? |
|
A: |
|
Trubions board of directors has unanimously approved the
merger agreement, the merger and the other transactions
contemplated by the merger agreement and has unanimously
determined and declared that the merger agreement, the merger
and the other transactions contemplated by the merger agreement
are advisable and fair to, and in the best interests of, Trubion
and its stockholders. The board of directors of Trubion
recommends that Trubion stockholders vote FOR
the adoption of the merger agreement and FOR
the approval of the proposal to adjourn the special meeting
to a later date or time, if necessary or appropriate, if a
quorum is present, to solicit additional proxies in the event
there are insufficient votes at the time of the special meeting
to adopt the merger agreement. See the section entitled
The Merger Trubions Reasons for the
Merger; Recommendation of Trubion Board of Directors
beginning on page 98 of this proxy statement/prospectus. |
|
Q: |
|
What risks should I consider in deciding whether to vote in
favor of the merger? |
|
A: |
|
You should carefully review the section entitled Risk
Factors beginning on page 21 of this proxy
statement/prospectus, which sets forth certain risks and
uncertainties related to the merger, risks and uncertainties to
which the combined business will be subject and risks and
uncertainties to which Trubion, as an independent company, is
subject. |
|
Q: |
|
When do the parties expect to complete the merger? |
|
A: |
|
The parties are working toward completing the merger as quickly
as possible. The merger is expected to close during the fourth
quarter of 2010 promptly following the special meeting date.
However, because completion of the merger is subject to various
conditions, including the adoption of the merger agreement by
Trubion stockholders at the special meeting, Emergent
BioSolutions and Trubion cannot predict the exact timing of the
completion of the merger or if the merger will be completed. |
|
Q: |
|
What happens if the merger is not completed? |
|
A: |
|
If the merger agreement is not adopted by Trubion stockholders
or if the merger is not completed for any other reason, you will
not receive any payment for your shares of Trubion common stock
in connection with the |
v
|
|
|
|
|
merger. Instead, Trubion will remain an independent public
company and its common stock will continue to be listed and
traded on the Nasdaq Global Market. If the merger agreement is
terminated under specified circumstances, Trubion may be
required to pay Emergent BioSolutions a fee of $3 million.
See the section entitled, The Merger Agreement
Expenses and Termination Fees beginning on page 139
of this proxy statement/prospectus. |
|
Q: |
|
Am I entitled to appraisal rights? |
|
|
|
A: |
|
Under Delaware law, Trubion stockholders who dissent from the
merger are entitled to appraisal rights in connection with the
merger pursuant to Section 262 of the Delaware General
Corporation Law. Failure to take any of the steps required under
Section 262 of the Delaware General Corporation Law on a
timely basis may result in a loss of those appraisal rights. The
provisions of the Delaware General Corporation Law that grant
appraisal rights and govern such procedures are attached as
Annex H to this proxy statement/prospectus. For a more
complete description of your appraisal rights, see the section
entitled The Merger Appraisal Rights of
Dissenting Trubion Stockholders beginning on page 123
of this proxy statement/prospectus. |
|
|
|
Q: |
|
Will my rights as a Trubion stockholder change as a result of
the merger? |
|
A: |
|
Yes. Assuming you do not elect to exercise your appraisal
rights, upon completion of the merger, your Trubion stock will
be converted into the right to receive the merger consideration.
You will no longer be a Trubion stockholder and your rights as
an Emergent BioSolutions stockholder will be governed by
Delaware law and Emergent BioSolutions restated
certificate of incorporation and amended and restated bylaws.
For further information regarding your rights as an Emergent
BioSolutions stockholder following the merger, see the section
entitled Comparative Rights of Emergent BioSolutions
Stockholders and Trubion Stockholders beginning on
page 156 of this proxy statement/prospectus. |
|
Q: |
|
As a Trubion stockholder, will I be able to trade the
Emergent BioSolutions common stock that I receive in connection
with the merger? |
|
A: |
|
Upon completion of the merger, the shares of Emergent
BioSolutions common stock issued in connection with the merger
will be freely tradable, unless you are deemed, pursuant to
applicable securities laws, to be an affiliate of
Emergent BioSolutions or you have entered into a
lock-up
agreement with Emergent BioSolutions, as further described on
page 146 of this proxy statement/prospectus. If you are
deemed to be an affiliate of Emergent BioSolutions you will be
required to comply with the applicable resale restrictions
pursuant to the securities laws in order to resell shares of
Emergent BioSolutions common stock you receive in connection
with the merger. If you are party to a
lock-up
agreement with Emergent BioSolutions, you may only sell your
shares in accordance with the terms of that agreement. See the
section entitled The
Lock-Up
Agreements beginning on page 146 of this proxy
statement/prospectus. |
|
Q: |
|
What are the United States federal income tax consequences of
the merger? |
|
A: |
|
The merger may qualify as a reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as
amended, or the code. There is no guarantee that at the
effective time of the merger, the amount of Emergent
BioSolutions stock transferred will be sufficient for the merger
to qualify as a reorganization. If the merger is treated as a
reorganization, a United States holder of Trubion common stock
may recognize gain (but not loss) with respect to each share of
Trubion common stock held in an amount equal to the lesser of
any gain or the value of the cash and the CVRs received with
respect to such share. However, the amount of gain or loss a
United States holder recognizes, and the timing of such gain or
loss, depends in part on the United States federal income tax
treatment of the CVRs, with respect to which there is
substantial uncertainty. For a description of a United States
holder as used in this proxy statement/prospectus, see the
section entitled The Merger Material United
States Federal Income Tax Consequences of the Merger
beginning on page 118 of this proxy statement/prospectus. |
|
|
|
Tax matters are very complicated, and the tax consequences of
the merger to a particular stockholder will depend in part on
such stockholders circumstances. You should read the
section entitled The Merger Material United
States Federal Income Tax Consequences of the Merger,
beginning on page 118 of this proxy statement/prospectus.
In addition, you should consult your own tax advisor for a full
|
vi
|
|
|
|
|
understanding of the tax consequences of the merger to you,
including the applicability and effect of federal, state, local
and foreign income and other tax laws. |
|
Q: |
|
What should I do now? |
|
A: |
|
You should carefully read this proxy statement/prospectus,
including its annexes and the documents incorporated by
reference, and consider how the merger will affect you. Emergent
BioSolutions and Trubion urge you to then respond by voting your
shares through one of the following means: |
|
|
|
by mail, by completing, signing, dating and
mailing a proxy card (if you are a registered stockholder,
meaning that you hold your stock in your name) or voting
instruction card (if your shares are held in street
name, meaning that your shares are held in the name of a
broker, bank or other nominee);
|
|
|
|
|
|
by telephone or internet, by following the
instructions given in the enclosed proxy/voting instruction
card; or
|
|
|
|
|
|
in person, by attending the special meeting
and submitting your vote in person.
|
|
|
|
Q: |
|
What happens if I do not return a proxy card or otherwise
vote? |
|
A: |
|
The failure to return your proxy card, vote using the telephone
or via the Internet or vote in person at the special meeting
will have the same effect as voting AGAINST
the adoption of the merger agreement and will have no effect
on the proposal to adjourn the special meeting to a later date
or time, if necessary or appropriate, if a quorum is present, to
solicit additional proxies in the event there are insufficient
votes at the time of the special meeting to adopt the merger
agreement. |
|
Q: |
|
What happens if I return a signed and dated proxy card but do
not indicate how to vote my proxy? |
|
A: |
|
If you do not include instructions on how to vote your properly
signed and dated proxy, your shares will be voted
FOR the adoption of the merger agreement and
FOR approval of the adjournment of the
special meeting to a later date or time, if necessary or
appropriate, if a quorum is present, to solicit additional
proxies in the event there are insufficient votes at the time of
the special meeting to adopt the merger agreement. |
|
Q: |
|
May I vote in person at the special meeting? |
|
A: |
|
If your shares of Trubion common stock are registered directly
in your name with Trubions transfer agent, you are
considered, with respect to those shares, the stockholder of
record and you may attend the special meeting and vote your
shares in person, rather than signing and returning your proxy
card. Even if you plan to attend the special meeting and vote
your shares in person, Trubion and Emergent BioSolutions
recommend that you sign and return your proxy card in advance of
the special meeting. |
|
|
|
If your shares of Trubion common stock are held in a brokerage
account or by a trustee or nominee, you are considered the
beneficial owner of shares held in street name, and
you may not vote these shares in person at the special meeting
unless you obtain a legal proxy from the broker,
trustee or nominee that holds your shares, giving you the right
to vote the shares at the special meeting. |
|
Q: |
|
May I change my vote after I have mailed my signed and dated
proxy card or otherwise voted? |
|
A: |
|
Yes. If you are a stockholder of record and have submitted a
proxy, you may change your vote at any time before your proxy is
voted at the special meeting. You can do this one of four ways.
You can: |
|
|
|
send a written, dated notice to the Corporate
Secretary of Trubion stating that you would like to revoke your
proxy;
|
|
|
|
complete, sign, date and submit a new later-dated
proxy card;
|
|
|
|
attend the special meeting if you are a stockholder
of record and vote in person, although your attendance at the
special meeting alone will not revoke your proxy; or
|
|
|
|
submit a new vote by telephone or via the Internet.
|
|
|
|
If you are not a stockholder of record and you have instructed a
broker, trustee or nominee to vote your shares, you must follow
the directions received from your broker, trustee or nominee to
change those instructions. |
vii
|
|
|
Q: |
|
If my shares are held in street name by my
broker, will my broker automatically vote my shares for me? |
|
|
|
A: |
|
No. Your broker will not be able to vote your shares
without instructions from you. Therefore, you should provide
your broker with instructions on how to vote your shares,
following the procedure provided on the enclosed voting
instruction form. The failure to provide such voting
instructions to your broker will have the same effect as voting
AGAINST adoption of the merger agreement and
will have no effect on the proposal to adjourn the special
meeting to a later date or time, if necessary or appropriate, if
a quorum is present, to solicit additional proxies in the event
there are insufficient votes at the time of the special meeting
to adopt the merger agreement. |
|
|
|
Q: |
|
Should I send in my Trubion stock certificates now? |
|
A: |
|
No. If you are a Trubion stockholder, after the merger is
completed, a letter of transmittal will be sent to you informing
you where to deliver your Trubion stock certificates in order to
receive the merger consideration. You should not send in your
Trubion common stock certificates prior to receiving the letter
of transmittal. |
|
Q: |
|
Who is soliciting this proxy? |
|
A: |
|
Trubion will bear all costs incurred in connection with the
solicitation of proxies from its stockholders on behalf of its
board of directors. In addition to solicitation by mail, the
directors, officers and regular employees of Trubion may solicit
proxies from stockholders in person or by telephone, telegram,
facsimile or other electronic methods without compensation other
than reimbursement for their actual expenses. Trubion has
retained Innisfree M&A Incorporated, a professional proxy
solicitation firm, to assist in the solicitation of proxies for
the special meeting for a fee of approximately $8,500, plus
reimbursement of
out-of-pocket
expenses. In addition, Trubion may reimburse brokers, banks and
other custodians, nominees and fiduciaries representing
beneficial owners of shares for their expenses in forwarding
soliciting materials to such beneficial owners. Trubions
directors, officers and employees may also solicit proxies by
personal interview, mail,
e-mail,
telephone, facsimile or other means of communication. These
persons will not be paid any additional remuneration for their
efforts. |
|
Q: |
|
Who can help answer my additional questions? |
|
A: |
|
Trubion stockholders who would like additional copies, without
charge, of this proxy statement/prospectus or have additional
questions about the merger, including the procedures for voting
their shares of Trubion common stock, should contact: |
Trubion
Pharmaceuticals, Inc.
2401 4th
Avenue, Suite 1050
Seattle, Washington 98121
Attn: Investor Relations
|
|
|
|
|
or Trubions solicitation agent: |
Innisfree
M&A Incorporated
501 Madison Avenue,
20th Floor
New York, NY 10022
Stockholders Call Toll-Free at:
(888) 750-5834
Banks and Brokers Call Collect at:
(212) 750-5833
viii
SUMMARY
This summary highlights selected information contained or
incorporated by reference in this proxy statement/prospectus.
You should read carefully this entire proxy statement/prospectus
and the documents referred to in this proxy statement/prospectus
for a more complete description of the terms of the merger and
related transactions. The merger agreement is attached as
Annex A, and the CVR agreement is attached as Annex B,
to this proxy statement/prospectus. Additional documents and
information, including important business and financial
information about Emergent BioSolutions, are incorporated by
reference into this proxy statement/prospectus. You are
encouraged to read the merger agreement as it is the legal
document that governs the merger, as well as the additional
documents attached as Annexes and incorporated by reference. In
this proxy statement/prospectus, unless the context otherwise
requires, Emergent BioSolutions refers to Emergent
BioSolutions Inc. and its subsidiaries, Trubion
refers to Trubion Pharmaceuticals, Inc., merger sub
refers to 30333 Inc., an indirect wholly owned subsidiary of
Emergent BioSolutions, and the surviving entity
refers to 35406 LLC, a direct wholly owned subsidiary of
Emergent BioSolutions.
The
Companies
Emergent
BioSolutions
Emergent BioSolutions (NYSE: EBS) is a company focused on the
development, manufacture and commercialization of vaccines and
antibody therapies that assist the bodys immune system to
prevent or treat disease. For financial reporting purposes,
Emergent BioSolutions operates in two principal business
segments: biodefense and commercial. Its biodefense segment
focuses on vaccines and antibody therapies for use against
biological agents that are potential weapons of bioterrorism and
biowarfare, while its commercial segment focuses on vaccines and
antibody therapies targeting infectious diseases that represent
significant unmet or underserved public health needs. Emergent
BioSolutions program pipeline currently includes programs
focused on anthrax, tuberculosis, typhoid, influenza and
chlamydia.
Emergent BioSolutions also seeks to advance development of
BioThrax and its product candidates through external funding
arrangements. BioThrax, also referred to as Anthrax Vaccine
Absorbed, is the only vaccine approved by the United States Food
and Drug Administration, or the FDA, for the prevention of
anthrax disease. Revenues from contracts and grants were
$17.6 million in 2009, $9.4 million in 2008 and
$13.1 million in 2007. Emergent BioSolutions continues to
actively pursue additional government-sponsored development
contracts and grants and to encourage both governmental and
non-governmental agencies and philanthropic organizations to
provide development funding or to conduct clinical studies of
its product candidates.
Emergent BioSolutions is a Delaware corporation with
headquarters at 2273 Research Boulevard, Suite 400,
Rockville, Maryland 20850, and its telephone number is
(301) 795-1800.
Trubion
Trubion (Nasdaq: TRBN) is a biopharmaceutical company creating a
pipeline of novel protein therapeutic product candidates to
treat autoimmune and inflammatory diseases and cancer. Its
mission is to develop a variety of
first-in-class
product candidates customized in an effort to optimize safety,
efficacy, and convenience that it believes may offer improved
patient experiences. Trubions current product development
efforts are focused on three proprietary technologies that
comprise the expanded foundation for Trubion product
development Small Modular Immunopharmaceutical, or
SMIPtm,
protein therapeutics,
SCORPIONtm
protein therapeutics, and
TRU-ADhanCetm
potency enhancing technology for immunopharmaceuticals. Its
current clinical-stage therapeutics target specific antigens on
B cells, CD20 and CD37, and are designed using its custom drug
assembly technology. In order to fund ongoing development
activities and commercialize its products, Trubion has, in some
cases, entered into collaboration agreements that include
licenses to its technology and arrangements to provide research
and development services for others.
Trubions lead product candidate, SBI-087, which it is
developing with its partner, Pfizer Inc., or Pfizer, is its next
generation CD20-directed product candidate. In June 2010,
Trubion announced Pfizers decision to discontinue
development of its first generation CD20-directed product
candidate, TRU-015, an investigational drug in
1
Phase II evaluation for the treatment of rheumatoid
arthritis, or RA, developed under Trubions CD20
collaboration with Pfizer. SBI-087 for RA builds on
Trubions and Pfizers clinical experience with
TRU-015 and is based on Trubions SMIP technology. Patient
dosing has commenced and recruitment is currently ongoing in a
Phase II trial of SBI-087 for RA evaluating safety and
efficacy of subcutaneous administration of SBI-087. In addition,
patient enrollment is complete in an additional Phase I trial of
SBI-087 for RA in Japan. Finally, Pfizer is conducting a Phase I
clinical trial of SBI-087 in systemic lupus erythematosus, or
SLE, in which patient dosing has commenced and recruitment is
ongoing.
Trubions other clinical product candidate, TRU-016, which
Trubion is developing with its partner Abbott Laboratories, or
Abbott, is a novel CD37-directed SMIP protein therapeutic. A
TRU-016 Phase I clinical trial for patients with chronic
lymphocytic leukemia, or CLL, is currently under way. TRU-016
uses a different mechanism of action than CD20-directed
therapies. As a result, Trubion believes its novel design may
provide patients with improved therapeutic options and enhance
efficacy when used alone or in combination with chemotherapy
and/or
CD20-directed therapeutics.
Trubion is a Delaware corporation with headquarters at
2401 4th Avenue, Suite 1050, Seattle, WA 98121,
and its telephone number is
(206) 838-0500.
Merger
Sub
Merger sub is a Delaware corporation and an indirect wholly
owned subsidiary of Emergent BioSolutions incorporated on
August 10, 2010. Merger sub does not engage in any
operations and exists solely to facilitate the merger. Its
principal executive offices have the same address and telephone
number as Emergent BioSolutions.
Surviving
Entity
The surviving entity is a Delaware limited liability company and
a direct wholly owned subsidiary of Emergent BioSolutions formed
on August 10, 2010. The surviving entity does not engage in
any operations and exists solely to facilitate the merger. Its
principal executive offices have the same address and telephone
number as Emergent BioSolutions.
Special
Meeting of Trubion Stockholders
Date, Time and Place. The special meeting of
Trubion stockholders will be held on October 28, 2010, at
10 a.m., local time, on the first floor of Trubions
offices located at 2401 4th Avenue, Seattle, Washington
98121. At the special meeting, Trubion stockholders will be
asked to vote on the proposals to adopt the merger agreement and
to adjourn the special meeting to a later date or time, if
necessary or appropriate, if a quorum is present, to solicit
additional proxies in the event there are insufficient votes at
the time of the special meeting to adopt the merger agreement.
No other business will be conducted at the special meeting.
Record Date. Only Trubion stockholders of
record at the close of business on September 21, 2010, will
be entitled to vote at the special meeting. Each share of
Trubion common stock is entitled to one vote on all matters
properly presented. As of the record date, there were
20,425,554 shares of Trubion common stock outstanding and
entitled to vote at the special meeting.
Vote Required for Approval. The holders of at
least a majority of the issued and outstanding shares of Trubion
common stock entitled to vote at the meeting as of the record
date must be represented in person or by proxy at the special
meeting to constitute a quorum to conduct business at the
special meeting. Abstentions will be counted for the purpose of
determining whether a quorum is present. Each share of Trubion
common stock entitles the holder to one vote at the special
meeting on all matters properly presented at the meeting.
The affirmative vote of the holders of at least a majority of
all outstanding shares of Trubion common stock on the record
date and entitled to vote at the special meeting is necessary to
adopt the merger agreement. Because the affirmative vote of the
holders of a majority of the outstanding shares of Trubion
common stock entitled to vote at the special meeting is needed
to approve the merger proposal, the failure to vote by proxy or
in person will have the same effect as a vote against the
approval of the merger proposal. Abstentions and broker
non-votes will also have the same effect as a vote against the
approval of the merger proposal.
2
Approval of the adjournment proposal requires the affirmative
vote of the holders of at least a majority of the shares of
Trubion common stock entitled to vote and present in person or
by proxy at the special meeting. Because approval of this
proposal requires the affirmative vote of at least a majority of
shares present in person or by proxy, abstentions will have the
same effect as a vote against this proposal. However, the
failure to vote, either by proxy or in person, and broker
non-votes, will have no effect on the adjournment proposal.
Share Ownership by Trubion Management. As of
the record date, the directors and executive officers of Trubion
and their affiliates owned in the aggregate 8,479,337
outstanding shares of Trubion common stock, representing
approximately 41.5% of the outstanding shares of Trubion common
stock entitled to vote at the special meeting.
See the section entitled, The Special Meeting of Trubion
Stockholders beginning on page 86 of this proxy
statement/prospectus.
Risk
Factors
You should carefully review the section entitled Risk
Factors beginning on page 21 of this proxy
statement/prospectus, which sets forth certain risks and
uncertainties related to the merger, risks and uncertainties to
which the combined business will be subject and risks and
uncertainties to which Trubion, as an independent company, is
subject. These risk factors should be considered along with any
additional risk factors in the reports of Emergent BioSolutions
or Trubion filed with the SEC and any other information included
in or incorporated by reference into this proxy
statement/prospectus.
Merger
Structure; Merger Consideration
If the merger is completed, merger sub will merge with and into
Trubion. Immediately thereafter, Trubion will merge with and
into the surviving entity, with the surviving entity continuing
as the surviving entity in the merger. Upon completion of the
merger, each outstanding share of Trubion common stock will be
converted into the right to receive, upon surrender of the
certificate representing such share in the manner provided in
the merger agreement, a combination of $1.365 in cash, without
interest; 0.1641 of a share of common stock of Emergent
BioSolutions; and a CVR that will provide the opportunity to
receive additional cash as described in this proxy
statement/prospectus. Emergent BioSolutions will pay cash in
lieu of issuing fractional shares of Emergent BioSolutions
common stock.
Based on the average trading price of Emergent
BioSolutions common stock for the five consecutive trading
days ending August 11, 2010 of $19.41 per share, the
exchange ratio set forth above implies an upfront purchase price
of $4.55 per common share of Trubion based on
20,421,294 shares of Trubion common stock outstanding on
August 11, 2010. As of August 11, 2010, the total
upfront value represents approximately $96.8 million to
Trubions stockholders and optionholders. Based on the
closing price of Emergent BioSolutions common stock on
September 22, 2010, the last trading day prior to the date
of this proxy statement/prospectus, the exchange ratio set forth
above implies an upfront purchase price of $4.32 per share of
Trubion common stock based on 20,425,554 shares of Trubion
common stock outstanding on such date. As of September 22,
2010, the total upfront value represents approximately
$92.0 million to Trubions stockholders and
optionholders.
These values exclude a potential for an aggregate of up to
$38.75 million of additional cash that may be payable to
holders of Trubion common stock and certain Trubion
optionholders related to the CVRs. The CVRs provide each holder
entitled to receive them the right to receive a pro rata share
of an aggregate of up to $38.75 million in cash based on
the achievement of certain predefined milestones over a
36-month
period following the effective time of the merger.
CVR
Agreement
Trubion, Emergent BioSolutions and Mellon Investor Services LLC,
as rights agent, entered into a Contingent Value Rights
Agreement, dated as of August 12, 2010, or the CVR
agreement, governing the terms of the CVRs. The CVRs are
generally not transferable or certificated and do not have any
voting or dividend rights. No interest
3
accrues on any amounts payable to any holders of CVRs and the
CVRs do not represent any equity or ownership interest in
Emergent BioSolutions or in any other parties.
Each CVR holder is entitled to receive a pro rata portion, based
on the number of CVRs then outstanding, of each of the following
CVR payment events, in each case if it occurs, which are either
milestone events under Trubions existing collaboration
agreements with Pfizer and Abbott pursuant to which payments
will be made by either Pfizer or Abbott to Emergent BioSolutions
or triggered by the manufacture of TRU-016 for use in clinical
studies pursuant to Trubions collaboration with Abbott:
|
|
|
|
|
CVR Payment Event
|
|
Applicable Payment
|
|
|
Milestone Events under the Pfizer Agreement
|
|
|
|
|
Initiation of dosing in the first Phase III clinical study
for the first major indication for CD20 candidate
|
|
$
|
6.25 million
|
|
Initiation of dosing in the first Phase III clinical study
for the second major indication for CD20 candidate
|
|
$
|
5.0 million
|
|
Initiation of dosing in the first Phase II clinical study
for a non-CD20 target
|
|
$
|
0.75 million
|
|
Pfizer subtotal
|
|
$
|
12.0 million
|
|
Milestone Events under the Abbott Agreement
|
|
|
|
|
Initiation of the first Phase II clinical study for TRU-016
|
|
$
|
1.75 million
|
|
Initiation of the first Phase III clinical study in
oncology indication for TRU-016
|
|
$
|
15.0 million
|
|
Achievement Event under the Abbott Agreement
|
|
|
|
|
Release TRU-016 manufactured for use in clinical studies
|
|
$
|
10.0 million
|
|
Abbott subtotal
|
|
$
|
26.75 million
|
|
Total
|
|
$
|
38.75 million
|
|
The total potential payment under the CVRs is approximately
$38.75 million over the
36-month
period following the effective time of the merger. Emergent
BioSolutions has agreed to use commercially reasonable efforts
to achieve all of the milestone events as soon as practicable.
For additional information about the CVRs and the milestones and
payments, see the section entitled The CVR Agreement
beginning on page 143 of this proxy statement/prospectus.
The full text of the CVR agreement is attached as Annex B
to this proxy statement/prospectus.
Treatment
of Stock Options
All outstanding Trubion stock options will immediately vest and
will be canceled at the effective time of the merger. Stock
options with a per share exercise price of $4.55 or above will
be canceled and extinguished. Holders of stock options with a
per share exercise price below $4.55 will receive, for each
share of Trubion common stock subject to such option, a cash
payment equal to the difference between $4.55 and the exercise
price of the option, less applicable taxes, and one CVR. As of
September 21, 2010, there were 1,679,952 outstanding
Trubion stock options with a per share exercise price below
$4.55. See the section entitled The Merger
Agreement Treatment of Trubion Stock Options
beginning on page 126 of this proxy statement/prospectus.
Support
Agreements and
Lock-up
Agreements
Concurrently with Trubions execution of the merger
agreement, affiliates of each of ARCH Venture Partners, Frazier
Healthcare, Venrock and Prospect Venture Partners who hold in
the aggregate, approximately 41% of the outstanding Trubion
common stock as of September 3, 2010, who we refer to as
the principal holders, entered into Support Agreements, dated as
of August 12, 2010, or support agreements, with Emergent
BioSolutions, pursuant to which they agreed, subject to the
terms of the support agreements, to vote a portion of their
shares of Trubion common stock equaling approximately 35% in the
aggregate of the outstanding shares of Trubion common stock in
favor of the adoption of the merger agreement and the
transactions contemplated by the merger agreement, and against,
among other things, a competing transaction. Each principal
holder also agreed to not solicit, initiate or intentionally
encourage a competing transaction. Finally, each principal
holder granted Emergent BioSolutions a limited irrevocable proxy
to vote the specified amount of shares subject to the support
agreements in accordance with the terms of the support
agreements. The support agreements limit the ability of the
principal holders to sell or otherwise transfer their shares of
Trubion common stock. The support agreements automatically
terminate if the
4
merger agreement terminates. Each of the principal holders is an
affiliate of a member of Trubions board of directors. The
full text of the form of support agreement is attached as
Annex C to this proxy statement/prospectus.
These same principal holders also entered into
lock-up
agreements with Emergent BioSolutions pursuant to which the
principal holders agreed to transfer restrictions, which limit
their ability to transfer the shares of Emergent BioSolutions
common stock they receive in connection with the merger. These
restrictions will lapse on a staggered basis at various times
for a period of one year after the end of the
lock-up
period, or 90 days after the effective time of the merger,
although they may lapse on an accelerated basis in specified
circumstances. The full text of the form of
lock-up
agreement is attached as Annex D to this proxy
statement/prospectus.
Ownership
of Emergent BioSolutions After the Merger
Emergent BioSolutions will issue approximately
3,351,833 shares of common stock to Trubion stockholders in
the merger. See the section entitled The Merger
Agreement Exchange of Trubion Stock Certificates for
Emergent BioSolutions Stock Certificates beginning on
page 127 of this proxy statement/prospectus. Trubion
stockholders will own approximately 9.7% of the outstanding
Emergent BioSolutions common stock after the merger. The above
calculations are based on the number of shares of Emergent
BioSolutions common stock and Trubion common stock outstanding
on the record date, and assume that no Trubion stock options and
no Emergent BioSolutions stock options will be exercised after
the record date.
Trubions
Reasons for the Merger
In reaching its decision to approve the merger, the merger
agreement and the other transactions contemplated by the merger
agreement and to recommend adoption of the merger agreement to
Trubion stockholders, Trubions board of directors
consulted with Trubions senior management team, as well as
its outside legal and financial advisors, and considered, among
other things, the process it had overseen to investigate
potential business combination transactions and other strategic
and financial alternatives and ultimately to negotiate and enter
into the merger agreement with Emergent BioSolutions including:
|
|
|
|
|
the possible alternatives to a sale of Trubion and the risks and
uncertainties related to not selling the company, including the
risks involved in Trubions product development pipeline,
and the fact that Trubion would need to raise significant
additional capital to support its business operations (which, if
available, would likely result in further significant dilution
to Trubions stockholders), cease preclinical activities
and complete a substantial reduction in force;
|
|
|
|
the risk that Trubion or its partners would be unable to
successfully commercialize Trubions partnered clinical
product candidates and that applicable milestones giving rise to
milestone payments to Trubion under the Pfizer and Abbott
collaboration agreements might not be achieved;
|
|
|
|
Trubions inability to complete additional strategic
collaboration transactions during the period from August 2009
through August 2010 despite Trubion managements attempts
to attract and complete such transactions;
|
|
|
|
the fact that Trubions common stock has traded at low
volumes on the Nasdaq Global Market for a significant period of
time, which has made it difficult for Trubion to raise capital
in the public or private markets or offer opportunities for
liquidity to its existing stockholders;
|
|
|
|
a sale process that presented the opportunity for a business
combination with Trubion to a substantial number of third
parties and generated several potentially interested parties but
ultimately culminated in only the Emergent BioSolutions offer;
|
|
|
|
|
|
the fact that the upfront merger consideration, based on the
average trading price of Emergent BioSolutions common stock for
the five consecutive trading days ending August 11, 2010,
the last full trading day before the announcement of the merger,
represents an approximately 57% premium over the closing price
($2.90) of Trubion common stock on the Nasdaq Global Market on
August 11, 2010, and represents, based on the closing price
of Emergent BioSolutions common stock on September 22,
2010, the last trading day prior to the date of this proxy
statement/prospectus, an approximately 49% premium over the
closing price ($2.90) of Trubion common stock on August 11,
2010;
|
5
|
|
|
|
|
the fact that the total potential merger consideration,
including the potential CVR payments, based on the average
trading price of Emergent BioSolutions common stock for the five
consecutive trading days ending August 11, 2010, the last
full trading day before the announcement of the merger,
represents an approximately 117% premium over the closing price
($2.90) of Trubion common stock on August 11, 2010, and
represents, based on the closing price of Emergent BioSolutions
common stock on September 22, 2010, the last trading day
prior to the date of this proxy statement/prospectus, an
approximately 109% premium over the closing price ($2.90) of
Trubion common stock on August 11, 2010;
|
|
|
|
|
|
the fact that a significant portion of the merger consideration
consists of shares of Emergent BioSolutions common stock, which
allows Trubion stockholders to benefit from any future growth of
the combined company, and the possibility that Trubions
business would benefit from the greater resources of Emergent
BioSolutions;
|
|
|
|
|
|
the fact that the CVRs represent further potential upside to the
upfront merger consideration that, if paid, would add
approximately $1.75 per share in cash value for Trubion
stockholders based on the number of shares of Trubion common
stock outstanding on August 11, 2010 and the number of
Trubion stock options outstanding as of such date with a per
share exercise price below $4.55;
|
|
|
|
|
|
the fact that the financial and other terms and conditions of
the merger agreement and the transactions contemplated by the
merger agreement were the product of extensive arms-length
negotiations between the parties;
|
|
|
|
the fact that under the terms of the merger agreement, the
completion of the merger is not conditioned on Emergent
BioSolutions ability to obtain financing or an affirmative
vote of its stockholders and there are very limited conditions
to closing, increasing the likelihood that the transaction will
be consummated;
|
|
|
|
the MTS Securities, LLC, or MTS, financial analysis of the
merger consideration and the opinion of MTS, delivered on
August 12, 2010, to the effect that, as of such date and
based upon and subject to the factors, procedures, assumptions,
qualifications and limitations set forth in the opinion, the
merger consideration to be received by the holders of shares of
Trubion common stock (other than Emergent BioSolutions, merger
sub, and their affiliates) pursuant to the merger agreement is
fair from a financial point of view to such holders, as
described elsewhere in this proxy statement/prospectus in the
section entitled The Merger Opinion of
Trubions Financial Advisor;
|
|
|
|
the terms of the merger agreement that, subject to compliance
with certain terms and conditions, permit the Trubion board of
directors:
|
|
|
|
|
|
in the exercise of its fiduciary duties, to furnish nonpublic
information in response to, and to negotiate with regard to,
unsolicited alternative proposals, if the board of directors
determines in good faith after consultation with outside counsel
that an unsolicited alternative offer could lead to a superior
offer; and
|
|
|
|
to change its recommendation with respect to the merger if the
board of directors determines in good faith, after it has
received a superior offer and after consultation with outside
counsel, that the failure to do so would reasonably be expected
to result in a breach of its fiduciary duties;
|
|
|
|
|
|
the belief that the termination fee amount under the merger
agreement, and the circumstances under which the termination fee
would be required to be paid, are reasonable compared to other
similar public company merger transactions, and would not
unreasonably deter another potential bidder from considering a
transaction with Trubion at a higher price;
|
|
|
|
the results of Trubions due diligence review of Emergent
BioSolutions products, business, finances, operations and
perceived prospects; and
|
|
|
|
the fact that a vote of Trubion stockholders on the merger is
required under Delaware law, and that stockholders who do not
vote in favor of the adoption of the merger agreement will have
the right to demand appraisal of the fair value of their shares
under Delaware law.
|
6
In addition to reviewing and considering the factors described
above, Trubions board of directors considered a number of
additional factors, including a variety of negative factors,
such as:
|
|
|
|
|
the fact that following the merger, Trubion will no longer exist
as an independent, stand-alone company and its stockholders will
not benefit from appreciation in value of the company other than
through the CVRs and their ownership of Emergent BioSolutions
common stock;
|
|
|
|
the risks and costs (both financial and otherwise) to Trubion if
the merger does not close, including the diversion of management
and employee attention, potential employee attrition and
potential impact on its business;
|
|
|
|
risks relating to the value of the Emergent BioSolutions common
stock that Trubion stockholders will receive in the merger;
|
|
|
|
the fact that a significant portion of the merger consideration,
which is represented by the CVRs, is contingent and is dependent
on Emergent BioSolutions ability to maintain and continue
to cultivate Trubions existing partnerships;
|
|
|
|
the restrictions on the conduct of Trubions business prior
to the consummation of the merger, which could delay or prevent
Trubion from undertaking business opportunities that may arise
during the term of the merger agreement, whether or not the
merger is consummated;
|
|
|
|
the fact that if the merger is not consummated for certain
reasons, and if Trubion consummates an acquisition transaction
or enters into an acquisition agreement within a specified time
period after the merger agreement is terminated, Trubion may be
required to pay the termination fee to Emergent BioSolutions or,
in certain circumstances, to reimburse Emergent BioSolutions for
reasonable, documented expenses;
|
|
|
|
the restrictions on Trubions ability to solicit or
participate in discussions or negotiations regarding alternative
business combination transactions, subject to specified
exceptions, which Trubions board of directors understood,
while potentially having the effect of discouraging third
parties from proposing a competing business combination
transaction, were conditions to Emergent BioSolutions
willingness to enter into the merger agreement and were
reasonable in light of, among other things, the benefits of the
merger to Trubions stockholders;
|
|
|
|
the fact that Trubion did not undertake a full public auction
prior to entering into the merger agreement, although the
Trubion board of directors was satisfied that the terms of the
merger agreement, including the ability of the board of
directors to exercise its fiduciary duties to consider
unsolicited potential alternative acquisition proposals and the
amount of the termination fee payable by Trubion upon acceptance
of an alternative acquisition proposal, would not unreasonably
deter another potential bidder from considering a transaction
with Trubion at a higher price;
|
|
|
|
the fact that the merger may not be completed in a timely manner
or at all due to a failure to receive necessary approvals or
clearances or due to the occurrence of an event causing a
material adverse effect for Trubion or for Emergent
BioSolutions; and
|
|
|
|
the fact that some of Trubions directors and executive
officers may have interests in the merger that are different
from, or in addition to, those of Trubions stockholders
generally, including as a result of employment and compensation
arrangements with Trubion and the manner in which they would be
affected by the merger (see the section entitled Interests
of Trubions Executive Officers and Directors in the
Merger).
|
For more information about the factors considered by
Trubions board of directors, see the section entitled
The Merger Trubions Reasons for the
Merger; Recommendation of Trubion Board of Directors
beginning on page 98 of this proxy statement/prospectus.
Recommendation
to Trubions Stockholders
Trubions board of directors has unanimously approved the
merger agreement, the merger and the other transactions
contemplated by the merger agreement and has unanimously
determined and declared that the merger
7
agreement, the merger and the other transactions contemplated by
the merger agreement are advisable and fair to, and in the best
interests of, Trubion and its stockholders. The board of
directors of Trubion recommends that Trubion stockholders vote
FOR the adoption of the merger agreement and
FOR the approval of the proposal to adjourn
the special meeting to a later date or time, if necessary or
appropriate, if a quorum is present, to solicit additional
proxies in the event there are insufficient votes at the time of
the special meeting to adopt the merger agreement. See the
section entitled The Merger Trubions
Reasons for the Merger; Recommendation of Trubion Board of
Directors beginning on page 98 of this proxy
statement/prospectus.
Opinion
of Trubions Financial Advisor
The Trubion board of directors retained MTS Health Partners,
L.P., or MTS Health Partners, to act as its financial advisor in
connection with a business combination transaction, and if
requested, to cause its affiliate, MTS, to render an opinion to
it as to the fairness from a financial point of view of any
consideration to be paid in any such transaction. On
August 12, 2010, MTS delivered to Trubions board of
directors an oral opinion, later confirmed in writing, to the
effect that, based upon and subject to the various assumptions
made, procedures followed, matters considered and limitations
described, as of August 12, 2010, the merger consideration
to be received by holders of shares of Trubion common stock
(other than Emergent BioSolutions, merger sub, and their
affiliates) pursuant to the merger agreement is fair, from a
financial point of view, to such holders. The full text of the
written opinion of MTS, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex E to this proxy statement/prospectus and is
incorporated in its entirety herein by reference. You are urged
to carefully read the opinion, together with the description
thereof elsewhere in this proxy statement/prospectus, in its
entirety. MTS provided its opinion for the information and
assistance of the Trubion board of directors in connection with
its consideration of the merger. The MTS opinion is not a
recommendation as to how any holder of Trubion common stock
should vote with respect to the merger or any other matter. For
more information regarding the MTS opinion, see the section
entitled The Merger Opinion of Trubions
Financial Advisor on page 101 of this proxy
statement/prospectus.
Emergent
BioSolutions Reasons for the Merger
Emergent BioSolutions board of directors decided to
acquire Trubion because of the significant benefits that this
acquisition will bring to Emergent BioSolutions. The addition of
Trubions proprietary
SMIPTM
and
SCORPIONTM
protein therapeutic technologies and its two clinical-stage
product candidates focused on the targeted disease areas of
autoimmunity and oncology will enhance Emergent
BioSolutions product development pipeline by diversifying
its product pipeline beyond infectious diseases into the two
high-growth areas of autoimmune diseases and cancer and
extending its therapeutic product capabilities beyond
conventional therapeutic approaches. In addition, Trubions
preclinical stage programs, as well as its leading edge science,
will significantly strengthen Emergent BioSolutions
ability to develop and commercialize novel,
first-in-class
therapeutic products. Furthermore, Emergent BioSolutions expects
that its acquisition of Trubion will further its position as a
leading, fully integrated biopharmaceutical company focused on
the manufacture, development and commercialization of vaccines
and protein-based therapeutics.
There can be no assurance that the benefits of the potential
growth, synergies or opportunities considered by Emergent
BioSolutions board of directors will be achieved through
completion of the merger. For more information regarding
Emergent BioSolutions reasons for the merger, see the
section entitled The Merger Emergent
BioSolutions Reasons for the Merger beginning on
page 108 of this proxy statement/prospectus. Achieving
Emergent BioSolutions objectives is subject to particular
risks that are discussed in the section entitled Risk
Factors beginning on page 21 of this proxy
statement/prospectus.
Opinion
of Emergent BioSolutions Financial Advisor
Emergent BioSolutions board of directors retained Wedbush
Securities Inc., or Wedbush, to act as its financial advisor
and, if requested, to render an opinion to it as to the
fairness, from a financial point of view, of the merger
consideration to be paid by Emergent BioSolutions in connection
with the merger. On August 11, 2010, Wedbush rendered its
oral opinion (subsequently confirmed in writing) to Emergent
BioSolutions board of directors to the effect that, as of
August 11, 2010, and based upon and subject to the factors,
assumptions made, matters considered,
8
procedures followed and limitations on the scope of the review
undertaken by Wedbush set forth in its written opinion, the
merger consideration specified in the merger agreement is fair,
from a financial point of view, to Emergent BioSolutions and its
stockholders. The full text of the Wedbush opinion, which sets
forth the factors, assumptions made, matters considered,
procedures followed and limitations on the scope of the review
undertaken by Wedbush in rendering its opinion, is included as
Annex F to this proxy statement/prospectus and is
incorporated in its entirety herein by reference. You are urged
to carefully read this opinion in its entirety for a description
of the factors, assumptions made, matters considered, procedures
followed and limitations on the scope of the review undertaken
by Wedbush in rendering its opinion. Wedbushs opinion was
provided to Emergent BioSolutions board of directors in
connection with its evaluation of the merger consideration, did
not address any other aspect of the merger, the merger
agreement, any related agreements or agreements ancillary
thereto, and did not constitute a recommendation to the Emergent
BioSolutions board of directors or to any stockholder as to how
to vote or act in connection with the merger. For more
information regarding the Wedbush opinion, see the section
entitled The Merger Opinion of Emergent
BioSolutions Financial Advisor on page 109 of
this proxy statement/prospectus.
Interests
of Trubions Executive Officers and Directors in the
Merger
Each of Trubions executive officers and directors who
holds shares of Trubion common stock will be entitled to receive
the same merger consideration as any Trubion stockholder for
their shares. However, in considering the recommendation of
Trubions board of directors that you vote to adopt the
merger agreement, you should be aware that some of
Trubions executive officers and directors may have
economic interests in the merger that are different from, or in
addition to, those of Trubions stockholders generally,
including, among other things, the fact that:
|
|
|
|
|
each Trubion executive officer and director holds options to
purchase Trubion common stock which, whether or not vested, will
immediately vest and be cancelled at the effective time of the
merger and any options with an exercise price of less than $4.55
will be exchanged for a cash payment and a CVR, as more fully
described in the section entitled The Merger
Agreement Treatment of Trubion Stock Options
beginning on page 126 of this proxy
statement/prospectus; and
|
|
|
|
Trubions executive officers, other than Steven
Gillis, Ph.D., Trubions executive chairman and acting
president, may receive cash severance and other benefits if they
are terminated without cause or resign for good reason after the
closing of the merger.
|
For more information regarding the interests of Trubions
executive officers and directors in the merger, see the section
entitled The Merger Interests of
Trubions Executive Officers and Directors in the
Merger beginning on page 114 of this proxy
statement/prospectus.
Trubions board of directors was aware of and considered
these interests, among other matters, in approving the merger
agreement and the transactions contemplated by the merger
agreement, including the merger, and in making its
recommendation that Trubions stockholders vote to adopt
the merger agreement. None of the members of Trubions
board of directors or Trubions named executive officers
will be members of the board of directors of Emergent
BioSolutions or executive officers of Emergent BioSolutions
following the effective time of the merger.
Conditions
to the Merger
The merger agreement provides that the obligations of the
parties to effect the merger and complete the other transactions
contemplated by the merger agreement are subject to the
satisfaction of each of the following conditions at or prior to
completion of the merger:
|
|
|
|
|
at least a majority of the holders of Trubions outstanding
common stock on the record date shall have voted to adopt the
merger agreement;
|
|
|
|
there shall not be any law or order that prevents or prohibits
consummation of the merger and there shall be no pending action,
proceeding or other application before any governmental entity
seeking such an order (other than a lawsuit commenced by a
stockholder plaintiff, the defense of which is covered by
applicable insurance and which would not be reasonably expected
to have a material adverse effect on Trubion);
|
9
|
|
|
|
|
all consents and approvals required to consummate the merger,
the failure of which to be obtained would be reasonably expected
to have a material adverse effect on Emergent BioSolutions or
Trubion, will be obtained;
|
|
|
|
the SEC shall have declared the registration statement, of which
this proxy statement/prospectus is a part, effective and no stop
order suspending such effectiveness shall have been issued and
no proceeding for that or a similar purpose shall have been
initiated or threatened in writing by the SEC;
|
|
|
|
the applicable waiting periods, together with any extensions
thereof, under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, or the HSR Act,
or any other applicable pre-clearance requirements of any
foreign competition law shall have expired or been
terminated; and
|
|
|
|
the shares of Emergent BioSolutions common stock to be issued as
partial consideration for the merger shall have been approved
and authorized for listing on the NYSE.
|
In addition, the merger agreement provides that the obligations
of Emergent BioSolutions, merger sub and the surviving entity to
effect the merger and complete the other transactions
contemplated by the merger agreement are subject to the
satisfaction of each of the following conditions at or prior to
the completion of the merger:
|
|
|
|
|
the representations and warranties of Trubion contained in the
merger agreement will be true and correct as of the date of the
merger agreement and as of the effective time of the merger as
if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such earlier
date), except where the failure to be so true and correct
(without giving effect to any limitation as to
materiality or material adverse effect)
would not reasonably be expected to have a material adverse
effect on Trubion, and Trubion will deliver to Emergent
BioSolutions a certificate signed by an executive officer of
Trubion to that effect;
|
|
|
|
Trubion will have performed or complied in all material respects
with all agreements and covenants required by the merger
agreement to be performed or complied with by it on or prior to
the effective time of the merger, and Trubion will deliver to
Emergent BioSolutions a certificate signed by an executive
officer of Trubion to that effect; and
|
|
|
|
since the date of the merger agreement, there shall not have
been a material adverse effect on Trubion, as defined in the
merger agreement, or any event, change or effect that would,
individually or in the aggregate, reasonably be expected to have
a material adverse effect, as defined in the merger agreement,
on Trubion.
|
In addition, the merger agreement provides that the obligations
of Trubion to effect the merger and complete the other
transactions contemplated by the merger agreement are subject to
the satisfaction of the following conditions at or prior to the
completion of the merger:
|
|
|
|
|
the representations and warranties of Emergent BioSolutions
contained in the merger agreement will be true and correct as of
the date of the merger agreement and as of the effective time of
the merger as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of
such earlier date), except where the failure to be so true and
correct (without giving effect to any limitation as to
materiality or material adverse effect)
would not reasonably be expected to have a material adverse
effect on Emergent BioSolutions, and Emergent BioSolutions will
deliver to Trubion a certificate signed by an executive officer
of Emergent BioSolutions to that effect;
|
|
|
|
Emergent BioSolutions will have performed or complied in all
material respects with all agreements and covenants required by
the merger agreement to be performed or complied with by it on
or prior to the effective time of the merger, and Emergent
BioSolutions will deliver to Trubion a certificate signed by an
executive officer of Emergent BioSolutions to that
effect; and
|
|
|
|
since the date of the merger agreement, there shall not have
been a material adverse effect on Emergent BioSolutions, as
defined in the merger agreement, or any event, change or effect
that would, individually or in the aggregate, reasonably be
expected to have a material adverse effect, as defined in the
merger agreement, on Emergent BioSolutions.
|
10
For more information regarding the conditions to completion of
the merger, see the section entitled, The Merger
Agreement Conditions to Completion of the
Merger beginning on page 135 of this proxy
statement/prospectus.
Either Emergent BioSolutions or Trubion may choose to waive any
or all of the conditions to its obligation to complete the
merger, provided that any such waiver is in compliance with
applicable law, subject to specified exceptions.
Termination
of the Merger Agreement
Each of Emergent BioSolutions and Trubion is entitled to
terminate the merger agreement under certain circumstances
including, among others:
|
|
|
|
|
by mutual written consent;
|
|
|
|
if the merger has not been consummated by December 31,
2010, except that this right to terminate shall not be available
to a party whose material breach of the merger agreement or
failure to fulfill any obligation under the merger agreement has
been the cause of, or results in, the failure of the merger to
occur on or before such date;
|
|
|
|
if a court or governmental or regulatory authority of competent
jurisdiction shall have issued any order, decree or ruling or
taken any other action (including the failure to have taken an
action), in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the merger or
any of the other transactions contemplated by the merger
agreement or any of the other transaction documents related to
the merger agreement, which order, decree, ruling or other
action is final and nonappealable, provided that this right of
termination is not available to any party whose failure to
fulfill any obligation under the merger agreement has been the
cause of, or results in, the issuance, promulgation, enforcement
or entry into such order, decree, ruling or action; or
|
|
|
|
if the approval of a majority of the stockholders of Trubion to
adopt the merger agreement is not obtained at a special meeting
of Trubion stockholders duly convened (including any
postponement or adjournment) to consider adoption of the merger
agreement, provided that this right of termination is not
available to Trubion if Trubion has materially breached any of
its obligations under certain non-solicitation and other
provisions of the merger agreement.
|
In addition, the merger agreement provides that Emergent
BioSolutions may terminate the merger agreement, at any time
prior to the effective time of the merger, if any of the
following events occurs:
|
|
|
|
|
if (i) the Trubion board of directors withdraws or
adversely modifies its approvals or recommendations of the
merger, the merger agreement or the transactions contemplated by
the merger agreement, (ii) the Trubion board of directors
fails to reaffirm its approvals and recommendations of the
merger or the merger agreement upon the request of Emergent
BioSolutions, (iii) the Trubion board of directors
(A) recommends to the Trubion stockholders that they
approve or accept a competing transaction or (B) determines
to accept a proposal or offer for a superior competing
transaction, (iv) Trubion materially breaches any of its
obligations under the merger agreement with respect to certain
non-solicitation obligations or convening the special meeting of
Trubion stockholders, or (v) any third party commences a
tender or exchange offer or other transaction constituting or
potentially constituting a competing transaction and Trubion
does not send to its security holders pursuant to
Rule 14e-2
of the Exchange Act a statement disclosing that Trubion
recommends rejection of such tender or exchange offer; or
|
|
|
|
(i) any representation or warranty of Trubion set forth in
the merger agreement shall have been breached or become untrue
or Trubion shall have breached any covenant or agreement,
(ii) such breach or misrepresentation is not cured or is
incapable of being cured by December 31, 2010, and
(iii) such breach or misrepresentation would, individually
or in the aggregate, cause the closing conditions relating to
accuracy of Trubions representations and warranties or
compliance with its covenants and agreements to be incapable of
being satisfied, provided that Emergent BioSolutions is not then
in breach of its respective warranties,
|
11
|
|
|
|
|
covenants or agreements such that the closing conditions
relating to accuracy of its representations and warranties or
compliance with covenants and agreements would not be satisfied.
|
Further, the merger agreement provides that Trubion may
terminate the merger agreement, at any time prior to the
effective time of the merger, if any of the following events
occurs:
|
|
|
|
|
(i) any representation or warranty of Emergent BioSolutions
set forth in the merger agreement shall have been breached or
become untrue or Emergent BioSolutions shall have breached any
covenant or agreement, (ii) such breach or
misrepresentation is not cured or is incapable of being cured by
December 31, 2010, and (iii) such breach or
misrepresentation would, individually or in the aggregate, cause
the closing conditions relating to accuracy of Emergent
BioSolutions representations and warranties or compliance
with its covenants and agreements to be incapable of being
satisfied, provided that Trubion is not then in breach of its
respective warranties, covenants or agreements such that the
closing conditions relating to accuracy of its representations
and warranties or compliance with covenants and agreements would
not be satisfied; or
|
|
|
|
in order to enter into an acquisition agreement for a superior
competing transaction.
|
For more information on termination of the merger agreement, see
the section entitled, The Merger Agreement
Termination of the Merger Agreement beginning on
page 138 of this proxy statement/prospectus.
Limitation
on Trubions Ability to Consider Competing
Transactions
Trubion has agreed that it will not, and that it will not
authorize or permit any of its affiliates or representatives to,
directly or indirectly,
|
|
|
|
|
solicit, initiate or intentionally encourage the submission of
any competing transaction; or
|
|
|
|
participate in any discussions or negotiations, or furnish to
any third party any information or data with respect to, or
provide access to the properties, offices, books, records,
officers, directors or employees of, or take any other action to
knowingly facilitate, induce or encourage the making of any
proposal that constitutes, or that may reasonably be expected to
lead to, a competing transaction.
|
Notwithstanding these restrictions, prior to obtaining the
approval of the holders of at least a majority of Trubions
issued and outstanding shares of common stock to adopt the
merger agreement, Trubion may, to the extent required by the
fiduciary obligations of Trubions board of directors (as
determined in good faith by a majority of the members of
Trubions board of directors and after consultation with
Trubions outside counsel) furnish information to a third
party that makes a competing transaction offer and participate
in related discussions and negotiations so long as:
|
|
|
|
|
Trubion is not in breach of its non-solicitation of competing
transactions covenant;
|
|
|
|
the third party is subject to a confidentiality agreement with
Trubion that is not less favorable than the confidentiality
agreement entered into between Trubion and Emergent BioSolutions;
|
|
|
|
Trubions board of directors reasonably determines in good
faith that such competing transaction constitutes or would
reasonably be expected to lead to a superior competing
transaction; and
|
|
|
|
Trubion provides written notice to Emergent BioSolutions of its
decision to furnish information to a third party that makes a
competing transaction offer and its compliance with the
non-solicitation of competing transactions covenant.
|
For more information on Trubions ability to consider
competing transactions, see the section entitled, The
Merger Agreement Limitation on the Solicitation,
Negotiation and Discussion by Trubion of Competing
Transactions beginning on page 136 of this proxy
statement/prospectus.
Fees and
Expenses
The merger agreement provides that, subject to limited
exceptions, all fees and expenses incurred in connection with
the merger agreement and the transactions contemplated by the
merger agreement shall be paid
12
by the party incurring such expenses. See the section entitled,
The Merger Agreement Expenses and Termination
Fees beginning on page 139 of this proxy
statement/prospectus.
Termination
Fee
Trubion must pay a termination fee of $3 million, or the
termination fee, to Emergent BioSolutions if the merger
agreement is terminated as follows:
|
|
|
|
|
by Trubion or Emergent BioSolutions if stockholder approval of
the adoption of the merger agreement is not obtained;
|
|
|
|
by Trubion or Emergent BioSolutions if the merger has not been
consummated by December 31, 2010, and
|
|
|
|
|
|
Trubion has publicly announced a competing transaction, or in
the alternative, a third party has made a proposal regarding a
competing transaction to Trubion or its board of directors,
whether or not publicly announced; and
|
|
|
|
an acquisition of Trubion is consummated within six months
following the termination of the merger agreement;
|
|
|
|
|
|
by Trubion in order to enter into an acquisition agreement for a
superior competing transaction;
|
|
|
|
by Emergent BioSolutions upon the occurrence of a triggering
event, which is described in more detail under The Merger
Agreement Termination of Merger Agreement
beginning on page 138 of this proxy statement/prospectus;
|
|
|
|
by Emergent BioSolutions as a result of Trubions breach or
misrepresentation of its representations and warranties set
forth in the merger agreement and such breach or
misrepresentation is not cured by December 31, 2010 and
prohibits Trubion from satisfying its closing covenants in the
merger agreement related to the accuracy of its representations
or warranties or compliance with its covenants and
agreements and
|
|
|
|
|
|
Trubion has publicly announced a competing transaction, or in
the alternative, a third party has made a proposal regarding a
competing transaction to Trubion or its board of directors,
whether or not publicly announced; and
|
|
|
|
an acquisition of Trubion is consummated within six months
following the termination of the merger agreement.
|
For more information on the termination fee, see the section
entitled The Merger Agreement Expenses and
Termination Fees beginning on page 139 of this proxy
statement/prospectus.
Material
United States Federal Income Tax Consequences of the
Merger
The merger may qualify as a reorganization under
Section 368(a) of the code. There is no guarantee that at
the effective time of the merger, the amount of Emergent
BioSolutions stock transferred will be sufficient for the merger
to qualify as a reorganization. If the merger is treated as a
reorganization, a United States holder of Trubion common stock
may recognize gain (but not loss) with respect to each share of
Trubion common stock held in an amount equal to the lesser of
any gain or the value of the cash and the CVRs received with
respect to such share. However, the amount of gain or loss a
United States holder recognizes, and the timing of such gain or
loss, depends in part on the United States federal income tax
treatment of the CVRs, with respect to which there is
substantial uncertainty. For a description of a United States
holder as used in this proxy statement/prospectus, see the
section entitled The Merger Material United
States Federal Income Tax Consequences of the Merger
beginning on page 118 of this proxy statement/prospectus.
Tax matters are very complicated, and the tax consequences of
the merger to a particular stockholder will depend in part on
such stockholders circumstances. You should read the
section entitled The Merger Material United
States Federal Income Tax Consequences of the Merger,
beginning on page 118 of this proxy statement/prospectus.
In addition, you should consult your own tax advisor for a full
13
understanding of the tax consequences of the merger to you,
including the applicability and effect of federal, state, local
and foreign income and other tax laws.
Anticipated
Accounting Treatment
Emergent BioSolutions will account for the merger under the
purchase method of accounting in accordance with Accounting
Standards Codification No. 805, Business
Combinations. See the section entitled The
Merger Anticipated Accounting Treatment
beginning on page 123 of this proxy statement/prospectus.
Emergent
BioSolutions Will List the Shares of Emergent BioSolutions
Common Stock Issued in the Merger on the NYSE
If the merger is completed, Trubion stockholders will be able to
trade the shares of Emergent BioSolutions common stock they
receive in the merger on the NYSE, subject to restrictions on
parties to the
lock-up
agreements and on affiliates of Emergent BioSolutions upon
completion of the merger. See the section entitled The
Merger Sales of Shares of Emergent BioSolutions
Common Stock Received in the Merger beginning on
page 118 of this proxy statement/prospectus.
If Emergent BioSolutions and Trubion complete the merger,
Trubion stock will no longer be listed for trading on the Nasdaq
Global Market or any other market or exchange. See The
Merger Delisting and Deregistration of Trubion
Common Stock beginning on page 118 of this proxy
statement/prospectus.
Federal
or State Regulatory Filings Required in Connection with the
Merger
Under the HSR Act, and the rules and regulations promulgated
thereunder, mergers and acquisitions that meet certain
jurisdictional thresholds, such as the merger, may not be
completed until the expiration of a waiting period that follows
the filing of notification forms by both parties to the
transaction with the Department of Justice and the Federal Trade
Commission. The initial waiting period is 30 days, but this
period may be shortened if the reviewing agency grants
early termination of the waiting period, or it may
be lengthened if the reviewing agency determines that an
in-depth investigation is required and issues a formal request
for additional information and documentary material. Emergent
BioSolutions and Trubion filed pre-merger notifications with the
U.S. antitrust authorities pursuant to the HSR Act on
August 27, 2010 and, in accordance with the merger
agreement, requested early termination of the
waiting period. On September 3, 2010, the
U.S. Department of Justice and Federal Trade Commission
granted early termination of the waiting period.
Appraisal
Rights
Trubion stockholders who dissent from the merger are entitled to
appraisal rights under Delaware law. For more information on
appraisal rights, see the section entitled The
Merger Appraisal Rights of Dissenting Trubion
Stockholders beginning on page 123 of this proxy
statement/prospectus.
Material
Differences in Rights of Trubion Stockholders and Emergent
BioSolutions Stockholders
When the merger is completed, Trubion stockholders will
automatically become Emergent BioSolutions stockholders. The
rights of Emergent BioSolutions stockholders differ from the
rights of Trubion stockholders in certain important ways. For
more information on these differences, see the section entitled
Comparative Rights of Emergent BioSolutions Stockholders
and Trubion Stockholders beginning on page 156 of
this proxy statement/prospectus.
14
COMPARATIVE
PER SHARE MARKET PRICE AND DIVIDEND DATA
Emergent BioSolutions common stock is listed and traded on
the NYSE under the EBS symbol and Trubions
common stock is listed and traded on the Nasdaq Global Market
under the TRBN symbol. The table below sets forth,
for the respective periods of Emergent BioSolutions and Trubion
indicated, the high and low sale prices per share of Emergent
BioSolutions common stock and Trubion common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emergent BioSolutions
|
|
Trubion
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third quarter (through September 22, 2010)
|
|
$
|
19.98
|
|
|
$
|
14.86
|
|
|
$
|
4.95
|
|
|
$
|
2.29
|
|
Second quarter
|
|
$
|
17.30
|
|
|
$
|
14.11
|
|
|
$
|
4.59
|
|
|
$
|
3.09
|
|
First quarter
|
|
$
|
17.24
|
|
|
$
|
13.22
|
|
|
$
|
4.79
|
|
|
$
|
3.03
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter
|
|
$
|
18.25
|
|
|
$
|
12.36
|
|
|
$
|
5.11
|
|
|
$
|
3.65
|
|
Third quarter
|
|
$
|
19.95
|
|
|
$
|
12.09
|
|
|
$
|
6.25
|
|
|
$
|
2.36
|
|
Second quarter
|
|
$
|
15.31
|
|
|
$
|
9.15
|
|
|
$
|
2.97
|
|
|
$
|
1.30
|
|
First quarter
|
|
$
|
27.00
|
|
|
$
|
12.23
|
|
|
$
|
1.76
|
|
|
$
|
1.16
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter
|
|
$
|
26.40
|
|
|
$
|
11.22
|
|
|
$
|
3.67
|
|
|
$
|
1.01
|
|
Third quarter
|
|
$
|
15.17
|
|
|
$
|
9.62
|
|
|
$
|
5.40
|
|
|
$
|
3.32
|
|
Second quarter
|
|
$
|
11.14
|
|
|
$
|
8.22
|
|
|
$
|
8.80
|
|
|
$
|
4.39
|
|
First quarter
|
|
$
|
9.17
|
|
|
$
|
4.93
|
|
|
$
|
12.55
|
|
|
$
|
5.99
|
|
On August 11, 2010, the last trading day prior to the date
of the execution of the merger agreement, the closing sale price
per share of Trubions common stock was $2.90 and the
closing sale price per share of Emergent BioSolutions
common stock was $18.98. On September 22, 2010, the last
trading day prior to the date of this proxy
statement/prospectus, the last reported sale price per share of
Trubions common stock was $4.76 and the last reported sale
price per share of Emergent BioSolutions common stock was
$17.98. The market prices of shares of Trubion common stock and
Emergent BioSolutions common stock are subject to fluctuation.
As a result, Trubion and Emergent BioSolutions stockholders are
urged to obtain current market quotations.
As of September 21, 2010, there were approximately 40
holders of record of Trubion common stock. Brokers and other
institutions serve as the record holders on behalf of many
beneficial owners of Trubion common stock.
Dividend
Policy
Emergent BioSolutions has not declared or paid any cash
dividends on its common stock since becoming a publicly traded
company in November 2006. The merger agreement restricts the
ability of Emergent BioSolutions to declare or pay dividends
prior to the effective time of the merger. Emergent BioSolutions
currently intends to retain all of its future earnings to
finance the growth and development of its business. Emergent
BioSolutions does not intend to pay cash dividends to its
stockholders in the foreseeable future.
Trubion has not declared or paid any cash dividends on its
common stock since becoming a publicly traded company in October
2006. The merger agreement restricts the ability of Trubion to
declare or pay dividends prior to the effective time of the
merger.
15
EMERGENT
BIOSOLUTIONS INC.
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial data of
Emergent BioSolutions Inc. for the years ended December 31,
2009, 2008 and 2007 and as of December 31, 2009 and 2008,
have been derived from Emergent BioSolutions historical
audited consolidated financial statements contained in Emergent
BioSolutions annual report on
Form 10-K
for the year ended December 31, 2009, which is incorporated
by reference into this proxy statement/prospectus. The following
selected historical consolidated financial data for the years
ended December 31, 2006 and 2005 and as of
December 31, 2007, 2006 and 2005 have been derived from
Emergent BioSolutions historical audited consolidated
financial statements which are not required to be incorporated
by reference into this proxy statement/prospectus. The following
selected historical consolidated financial data for Emergent
BioSolutions as of and for the six months ended June 30,
2010 and 2009 have been derived from Emergent BioSolutions
unaudited interim consolidated financial statements contained in
Emergent BioSolutions quarterly report on
Form 10-Q
for the quarter ended June 30, 2010, which is incorporated
by reference into this proxy statement/prospectus. This
information is only a summary and you should read this selected
historical consolidated financial data together with Emergent
BioSolutions Managements Discussion and
Analysis of Financial Condition and Results of Operations,
and the unaudited and audited consolidated financial statements
and notes thereto incorporated by reference into this proxy
statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
94,725
|
|
|
$
|
131,008
|
|
|
$
|
217,172
|
|
|
$
|
169,124
|
|
|
$
|
169,799
|
|
|
$
|
147,995
|
|
|
$
|
127,271
|
|
Contracts and grants
|
|
|
14,213
|
|
|
|
6,702
|
|
|
|
17,614
|
|
|
|
9,430
|
|
|
|
13,116
|
|
|
|
4,737
|
|
|
|
3,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
108,938
|
|
|
|
137,710
|
|
|
|
234,786
|
|
|
|
178,554
|
|
|
|
182,915
|
|
|
|
152,732
|
|
|
|
130,688
|
|
Operating expenses (income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product sales
|
|
|
18,584
|
|
|
|
25,796
|
|
|
|
46,262
|
|
|
|
34,081
|
|
|
|
40,309
|
|
|
|
24,125
|
|
|
|
31,603
|
|
Research and development
|
|
|
38,524
|
|
|
|
36,590
|
|
|
|
74,588
|
|
|
|
59,470
|
|
|
|
53,958
|
|
|
|
45,501
|
|
|
|
18,381
|
|
Selling, general & administrative
|
|
|
33,841
|
|
|
|
35,348
|
|
|
|
73,786
|
|
|
|
55,076
|
|
|
|
55,555
|
|
|
|
44,601
|
|
|
|
42,793
|
|
Purchased in-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
477
|
|
|
|
26,575
|
|
Litigation settlement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
90,949
|
|
|
|
97,734
|
|
|
|
194,636
|
|
|
|
148,627
|
|
|
|
149,822
|
|
|
|
114,704
|
|
|
|
109,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
17,989
|
|
|
|
39,976
|
|
|
|
40,150
|
|
|
|
29,927
|
|
|
|
33,093
|
|
|
|
38,028
|
|
|
|
21,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
764
|
|
|
|
605
|
|
|
|
1,418
|
|
|
|
1,999
|
|
|
|
2,809
|
|
|
|
846
|
|
|
|
485
|
|
Interest expense
|
|
|
(7
|
)
|
|
|
(10
|
)
|
|
|
(7
|
)
|
|
|
(47
|
)
|
|
|
(71
|
)
|
|
|
(1,152
|
)
|
|
|
(767
|
)
|
Other income (expense), net
|
|
|
(2
|
)
|
|
|
(34
|
)
|
|
|
(50
|
)
|
|
|
134
|
|
|
|
156
|
|
|
|
293
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
755
|
|
|
|
561
|
|
|
|
1,361
|
|
|
|
2,086
|
|
|
|
2,894
|
|
|
|
(13
|
)
|
|
|
(227
|
)
|
Income before provision for income taxes
|
|
|
18,744
|
|
|
|
40,537
|
|
|
|
41,511
|
|
|
|
32,013
|
|
|
|
35,987
|
|
|
|
38,015
|
|
|
|
21,109
|
|
Provision for income taxes
|
|
|
7,392
|
|
|
|
17,114
|
|
|
|
14,966
|
|
|
|
12,055
|
|
|
|
13,051
|
|
|
|
15,222
|
|
|
|
5,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
11,352
|
|
|
|
23,423
|
|
|
|
26,545
|
|
|
|
19,958
|
|
|
|
22,936
|
|
|
|
22,793
|
|
|
|
15,784
|
|
Net loss attributable to noncontrolling interest
|
|
|
979
|
|
|
|
2,538
|
|
|
|
4,599
|
|
|
|
724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Emergent BioSolutions Inc.
|
|
$
|
12,331
|
|
|
$
|
25,961
|
|
|
$
|
31,144
|
|
|
$
|
20,682
|
|
|
$
|
22,936
|
|
|
$
|
22,793
|
|
|
$
|
15,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$
|
0.40
|
|
|
$
|
0.86
|
|
|
$
|
1.02
|
|
|
$
|
0.69
|
|
|
$
|
0.79
|
|
|
$
|
0.99
|
|
|
$
|
0.77
|
|
Earnings per share diluted
|
|
$
|
0.39
|
|
|
$
|
0.83
|
|
|
$
|
0.99
|
|
|
$
|
0.68
|
|
|
$
|
0.77
|
|
|
$
|
0.93
|
|
|
$
|
0.69
|
|
Weighted average number of shares basic
|
|
|
30,989
|
|
|
|
30,228
|
|
|
|
30,444
|
|
|
|
29,835
|
|
|
|
28,996
|
|
|
|
23,040
|
|
|
|
20,533
|
|
Weighted average number of shares diluted
|
|
|
31,667
|
|
|
|
31,202
|
|
|
|
31,375
|
|
|
|
30,458
|
|
|
|
29,663
|
|
|
|
24,567
|
|
|
|
22,752
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
As of December 31,
|
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
102,193
|
|
|
$
|
102,508
|
|
|
$
|
102,924
|
|
|
$
|
91,473
|
|
|
$
|
105,730
|
|
|
$
|
76,418
|
|
|
$
|
36,294
|
|
Working capital
|
|
|
149,002
|
|
|
|
130,812
|
|
|
|
139,113
|
|
|
|
98,866
|
|
|
|
88,649
|
|
|
|
82,990
|
|
|
|
29,023
|
|
Total assets
|
|
|
345,747
|
|
|
|
326,385
|
|
|
|
344,689
|
|
|
|
290,788
|
|
|
|
273,508
|
|
|
|
238,255
|
|
|
|
100,332
|
|
Total long-term liabilities
|
|
|
38,260
|
|
|
|
23,073
|
|
|
|
46,173
|
|
|
|
37,418
|
|
|
|
46,688
|
|
|
|
35,436
|
|
|
|
10,502
|
|
Total stockholders equity
|
|
|
262,043
|
|
|
|
230,402
|
|
|
|
243,815
|
|
|
|
199,349
|
|
|
|
171,159
|
|
|
|
138,472
|
|
|
|
59,737
|
|
17
TRUBION
PHARMACEUTICALS, INC.
SELECTED
HISTORICAL FINANCIAL INFORMATION
The following tables set forth selected historical financial
data of Trubion. The information presented below was derived
from Trubions audited financial statements as of
December 31, 2009, 2008, 2007, 2006 and 2005 and for the
fiscal years then ended and Trubions unaudited financial
statements as of June 30, 2010 and for the six months ended
June 30, 2010 and 2009. This information is only a summary.
You should read it together with Trubions historical
financial statements and accompanying notes thereto attached as
Annex G to this proxy statement/prospectus and the section
entitled Managements Discussion and Analysis of
Financial Condition and Results of Operations of Trubion
beginning on page 63 of this proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
(in thousands, except per share data)
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collaboration revenue
|
|
$
|
11,209
|
|
|
$
|
8,331
|
|
|
$
|
18,003
|
|
|
$
|
16,467
|
|
|
$
|
20,148
|
|
|
$
|
36,530
|
|
|
$
|
222
|
|
Grant revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
11,209
|
|
|
|
8,331
|
|
|
|
18,003
|
|
|
|
16,467
|
|
|
|
20,148
|
|
|
|
36,530
|
|
|
|
349
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
18,047
|
|
|
|
20,177
|
|
|
|
34,396
|
|
|
|
31,608
|
|
|
|
36,466
|
|
|
|
33,309
|
|
|
|
15,212
|
|
General and administrative
|
|
|
4,767
|
|
|
|
5,731
|
|
|
|
12,429
|
|
|
|
11,374
|
|
|
|
10,833
|
|
|
|
9,473
|
|
|
|
4,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
22,814
|
|
|
|
25,908
|
|
|
|
46,825
|
|
|
|
42,982
|
|
|
|
47,299
|
|
|
|
42,782
|
|
|
|
19,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(11,605
|
)
|
|
|
(17,577
|
)
|
|
|
(28,822
|
)
|
|
|
(26,515
|
)
|
|
|
(27,151
|
)
|
|
|
(6,252
|
)
|
|
|
(19,009
|
)
|
Net interest income (expense)
|
|
|
(217
|
)
|
|
|
(124
|
)
|
|
|
(361
|
)
|
|
|
956
|
|
|
|
3,837
|
|
|
|
2,222
|
|
|
|
278
|
|
Other income (expense)
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
|
|
(134
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect of change in accounting principle
|
|
|
(11,792
|
)
|
|
|
(17,701
|
)
|
|
|
(29,183
|
)
|
|
|
(25,559
|
)
|
|
|
(23,314
|
)
|
|
|
(3,929
|
)
|
|
|
(18,865
|
)
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,792
|
)
|
|
$
|
(17,701
|
)
|
|
$
|
(29,183
|
)
|
|
$
|
(25,559
|
)
|
|
$
|
(23,314
|
)
|
|
$
|
(3,929
|
)
|
|
$
|
(18,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.58
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(1.55
|
)
|
|
$
|
(1.43
|
)
|
|
$
|
(1.32
|
)
|
|
$
|
(0.83
|
)
|
|
$
|
(23.30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic and diluted net loss per
share
|
|
|
20,403
|
|
|
|
17,961
|
|
|
|
18,797
|
|
|
|
17,856
|
|
|
|
17,688
|
|
|
|
4,744
|
|
|
|
812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30,
|
|
At December 31,
|
(in thousands)
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and investments
|
|
$
|
42,121
|
|
|
$
|
54,846
|
|
|
$
|
52,897
|
|
|
$
|
78,515
|
|
|
$
|
105,801
|
|
|
$
|
9,792
|
|
Receivable from collaborations
|
|
|
3,900
|
|
|
|
3,428
|
|
|
|
3,084
|
|
|
|
4,237
|
|
|
|
4,354
|
|
|
|
40,000
|
|
Working capital
|
|
|
30,628
|
|
|
|
40,530
|
|
|
|
45,287
|
|
|
|
69,132
|
|
|
|
93,188
|
|
|
|
37,881
|
|
Total assets
|
|
|
51,986
|
|
|
|
65,380
|
|
|
|
67,290
|
|
|
|
95,174
|
|
|
|
121,394
|
|
|
|
54,009
|
|
Deferred revenue
|
|
|
31,679
|
|
|
|
35,262
|
|
|
|
19,493
|
|
|
|
24,854
|
|
|
|
31,778
|
|
|
|
39,778
|
|
Non-current portion of notes payable
|
|
|
6,303
|
|
|
|
6,975
|
|
|
|
8,261
|
|
|
|
7,567
|
|
|
|
6,708
|
|
|
|
1,276
|
|
Preferred stock warrant liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282
|
|
Convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,753
|
|
Total stockholders equity (deficit)
|
|
|
4,542
|
|
|
|
15,094
|
|
|
|
31,468
|
|
|
|
53,313
|
|
|
|
72,654
|
|
|
|
(37,902
|
)
|
18
SELECTED
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The following selected unaudited pro forma condensed combined
financial data gives effect to the proposed merger as if it had
occurred on January 1, 2009, for statement of operations
purposes, and on June 30, 2010, for balance sheet purposes.
The selected unaudited pro forma condensed combined financial
data presented below is based on, and should be read together
with, the historical financial statements of Emergent
BioSolutions and Trubion that are contained in their respective
filings with the SEC and included in or incorporated by
reference into this proxy statement/prospectus and the unaudited
pro forma condensed consolidated financial statements that
appear elsewhere in this proxy statement/prospectus. See the
sections entitled Where You Can Find More
Information and Unaudited Pro Forma Condensed
Combined Financial Information beginning on pages 165 and
147, respectively, of this proxy statement/prospectus.
The unaudited pro forma condensed combined financial data is
presented for illustrative purposes only and is not necessarily
indicative of the actual or future financial position or results
of operations that would have been realized if the proposed
merger had been completed as of the dates indicated or will be
realized upon the completion of the proposed merger.
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
Ended
|
|
Year Ended
|
|
|
June 30,
|
|
December 31,
|
(in thousands, except per share data)
|
|
2010
|
|
2009
|
|
Statements of operations data:
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
120,147
|
|
|
$
|
252,789
|
|
Cost and expenses
|
|
|
113,763
|
|
|
|
241,461
|
|
Income from operations
|
|
|
6,384
|
|
|
|
11,328
|
|
Other income
|
|
|
805
|
|
|
|
1,534
|
|
Income before provision for income taxes
|
|
|
7,189
|
|
|
|
12,862
|
|
Provision for income taxes
|
|
|
3,348
|
|
|
|
4,939
|
|
Net income
|
|
|
3,841
|
|
|
|
7,923
|
|
Net loss attributable to noncontrolling interest
|
|
|
979
|
|
|
|
4,599
|
|
Net income attributable to Emergent BioSolutions Inc.
|
|
|
4,820
|
|
|
|
12,522
|
|
Earnings per share basic
|
|
|
0.14
|
|
|
|
0.37
|
|
Earnings per share diluted
|
|
|
0.14
|
|
|
|
0.36
|
|
|
|
|
|
|
|
|
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
463,630
|
|
|
|
|
|
Total liabilities
|
|
|
140,845
|
|
|
|
|
|
Stockholders equity
|
|
|
322,785
|
|
|
|
|
|
19
UNAUDITED
COMPARATIVE PER SHARE DATA
The following table sets forth for Emergent BioSolutions common
stock and Trubion common stock certain historical and unaudited
pro forma combined and pro forma-equivalent per share financial
information. The unaudited pro forma consolidated and pro
forma-equivalent per share information gives effect to the
proposed merger as if it had occurred on January 1, 2009.
The information in the table is based on, and should be read
together with, the historical financial information that
Emergent BioSolutions and Trubion have presented in their
respective filings with the SEC and the pro forma financial
information that appears elsewhere in this proxy
prospectus/statement. See the sections entitled Where You
Can Find More Information and Unaudited Pro Forma
Condensed Combined Financial Information beginning on
pages 165 and 147, respectively, of this proxy
statement/prospectus.
The unaudited pro forma combined and pro forma-equivalent data
is presented for illustrative purposes only and is not
necessarily indicative of actual or future financial position or
results of operations that would have been realized if the
proposed merger had been completed as of the dates indicated or
will be realized upon the completion of the proposed merger.
Neither Emergent BioSolutions nor Trubion declared or paid any
dividends during the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emergent
|
|
|
|
|
|
|
|
|
BioSolutions
|
|
Trubion
|
|
|
|
|
|
|
Unaudited Pro
|
|
Unaudited Pro
|
|
|
Emergent
|
|
|
|
Forma Consolidated
|
|
Forma-Equivalent
|
|
|
BioSolutions
|
|
Trubion
|
|
per Share of
|
|
per Share of
|
|
|
Historical
|
|
Historical
|
|
Common Stock
|
|
Common Stock
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months Ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.40
|
|
|
$
|
(0.58
|
)
|
|
$
|
0.14
|
|
|
$
|
0.02
|
|
Diluted
|
|
$
|
0.39
|
|
|
$
|
(0.58
|
)
|
|
$
|
0.14
|
|
|
$
|
0.02
|
|
Book value per share
|
|
$
|
8.34
|
|
|
$
|
0.22
|
|
|
$
|
9.29
|
|
|
$
|
1.52
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.02
|
|
|
$
|
(1.55
|
)
|
|
$
|
0.37
|
|
|
$
|
0.06
|
|
Diluted
|
|
$
|
0.99
|
|
|
$
|
(1.55
|
)
|
|
$
|
0.36
|
|
|
$
|
0.06
|
|
Book value per share
|
|
$
|
7.82
|
|
|
$
|
0.74
|
|
|
|
N/A
|
|
|
|
N/A
|
|
20
RISK
FACTORS
If the merger is completed, Emergent BioSolutions and Trubion
will operate as a combined company in a market environment that
is difficult to predict and that involves significant risks,
many of which will be beyond the combined companys
control. In addition to information regarding Emergent
BioSolutions and Trubion contained in, or incorporated by
reference into, this proxy statement/prospectus, you should
carefully consider the risks described below before voting your
shares. Additional risks and uncertainties not presently known
to Emergent BioSolutions and Trubion or that they do not
currently believe are important to an investor, if they
materialize, also may adversely affect the merger, Emergent
BioSolutions, Trubion
and/or the
combined company. A discussion of additional risks and
uncertainties regarding Emergent BioSolutions can be found in
the information that is incorporated by reference in this proxy
statement/prospectus and referred to in the section entitled
Where You Can Find More Information beginning on
page 165 of this proxy statement/prospectus. If any of the
events, contingencies, circumstances or conditions described in
the following risks actually occur, Emergent BioSolutions
and Trubions respective businesses, financial condition or
results of operations (both separately and as a combined
company) could be seriously harmed. If that happens, the trading
price of Emergent BioSolutions common stock or Trubion common
stock could decline and you may lose part or all of the value of
any Emergent BioSolutions shares or Trubion shares that you
hold.
Risks
Related to the Merger and the Combined Company
The
value of Emergent BioSolutions common stock that Trubion
stockholders will receive in connection with the merger will
fluctuate.
The precise value of the merger consideration to be received by
Trubion stockholders at the effective time of the merger cannot
be determined at the present time. Under the terms of the merger
agreement, holders of Trubion common stock will receive, for
each share of Trubion common stock that they hold immediately
prior to the effective time of the merger, a payment of $1.365
in cash, without interest; 0.1641 of a share of Emergent
BioSolutions common stock; and a CVR that will provide the
possibility of receiving additional cash in the future.
The price of Emergent BioSolutions common stock at the closing
of the merger may vary from its price on the date the merger
agreement was executed, on the date of this proxy
statement/prospectus and on the date of the special meeting of
Trubion stockholders. Stock price changes may result from a
variety of factors beyond Emergent BioSolutions control,
including general economic and market conditions. In addition,
there will be a period of time between completion of the merger
and the time at which former Trubion stockholders actually
receive stock certificates evidencing Emergent BioSolutions
common stock. Until stock certificates are received, former
Trubion stockholders may not be able to sell their Emergent
BioSolutions shares in the open market and, therefore, may not
be able to avoid losses from any decrease in the trading price
of Emergent BioSolutions common stock during that period.
A
portion of the consideration payable in the merger is in the
form of non-transferable CVRs, some or all of which may never be
paid.
Approximately $38.75 million in cash of the total potential
aggregate merger consideration payable in connection with the
merger is payable to the holders of the CVRs only upon the
achievement of certain predetermined milestones during the
36-month
period following the effective time of the merger. If the
combined company fails to achieve some or all of the milestones,
some or all of this amount will never be paid to the holders of
the CVRs. Trubions stockholders should be aware that they
may not receive any consideration other than the $1.365 in cash,
without interest, and 0.1641 of a share of Emergent BioSolutions
common stock in consideration for each share of Trubion common
stock.
Furthermore, the CVRs are not transferable and do not have any
voting or dividend rights. As a result, a holder of a CVR will
only realize value, if any, from these rights in the event that
some or all of the underlying milestones are achieved. For more
information about the CVRs and the milestones and associated
payments, see the section entitled The CVR Agreement
beginning on page 143 of this proxy statement/prospectus.
21
If
Emergent BioSolutions is not successful in integrating Trubion
into its business, the benefits of the merger will not be fully
realized and the market price of Emergent BioSolutions common
stock may be negatively affected.
Emergent BioSolutions and Trubion entered into the merger
agreement with the expectation that the merger will result in
benefits arising out of the combination of the companies.
Emergent BioSolutions may not successfully integrate Trubion in
a timely manner, if at all, and Emergent BioSolutions may not
realize the benefits and synergies of the merger to the extent,
or in the timeframe, anticipated.
It is possible that the integration process could result in the
loss of key employees, diversion of each companys
managements attention, the disruption or interruption of,
or the loss of momentum in, each companys on-going
business or inconsistencies in standards, controls, procedures
and policies, any of which could adversely affect either
companys ability to maintain relationships with licensors,
collaborators, partners, suppliers and employees or Emergent
BioSolutions ability to achieve the anticipated benefits
of the merger, or could reduce Emergent BioSolutions
earnings or otherwise adversely affect the business and
financial results of the combined company and, as a result,
adversely affect the market price of Emergent BioSolutions
common stock.
Emergent
BioSolutions has limited acquisition experience and this is
Emergent BioSolutions first acquisition of a public
company. As a result, Emergent BioSolutions may not be able to
realize the potential benefits of its acquisition of
Trubion.
Emergent BioSolutions has limited experience in acquiring
businesses and has never acquired a public company. Acquisitions
such as this one involve a number of particular risks,
including, but not limited to:
|
|
|
|
|
diversion of managements attention from current operations;
|
|
|
|
disruption of a companys ongoing business and difficulties
in integrating and retaining all or part of the acquired
business, its partners and its personnel;
|
|
|
|
difficulties in the assimilation of different cultures and
practices, as well as in the assimilation of geographically
dispersed personnel and operations;
|
|
|
|
assumption of disclosed and undisclosed liabilities; and
|
|
|
|
difficulties in the integration of departments, systems,
including accounting systems, technologies, books and records,
and procedures, as well as in maintaining uniform standards,
controls, including internal control over financial reporting
required by the Sarbanes-Oxley Act of 2002, and related
procedures and policies.
|
The individual or combined effect of these risks could have a
material adverse effect on the combined companys business.
The acquisition may turn out to be overvalued due to unforeseen
circumstances and could result in the accounting effect of the
acquisition being different than what Emergent BioSolutions had
anticipated. Emergent BioSolutions may also have to adjust
certain aspects of the accounting for acquisitions, such as
goodwill, in-process research and development of other
intangible assets and contingent consideration over time as
events or circumstances occur, which could have a material
adverse effect on the combined companys results of
operations.
Uncertainty
regarding the merger and the effects of the merger could cause
each companys licensors, collaborators, suppliers or other
strategic partners to delay or defer decisions, which could
increase costs of the on-going business for Emergent
BioSolutions and/or Trubion.
Emergent BioSolutions and Trubions strategy for
developing and commercializing many of their respective
potential products includes entering into agreements with
licensors, collaborators, suppliers and other strategic
partners. These partners, in response to the announcement of the
merger, may delay or defer decisions regarding their business
relationships with each company, which could increase costs for
the business of the applicable company and delay, interrupt or
terminate the collaborative research, development and
commercialization of certain potential products, regardless of
whether the merger is ultimately completed. Under specified
circumstances, these partners may also terminate their
agreements with each company. Any such delay, interruption or
22
termination of the combined companys relationship with any
of these partners could materially harm the combined
companys business and financial condition, and frustrate
any commercialization efforts for its product candidates.
The
merger is subject to closing conditions that could result in the
completion of the merger being delayed or not consummated, which
could negatively affect Emergent BioSolutions and/or
Trubions stock price, future business and operations and
financial condition.
Completion of the merger is conditioned on Emergent BioSolutions
and Trubion satisfying closing conditions, including adoption of
the merger agreement by Trubions stockholders, all as set
forth in the merger agreement. See the section entitled
The Merger Agreement Conditions to Completion
of the Merger beginning on page 135 of this proxy
statement/prospectus for a discussion of the conditions to the
completion of the merger. The required conditions to closing may
not be satisfied in a timely manner, if at all, or, if
permissible, waived, and the merger may not be consummated.
Failure to consummate the merger would negatively affect
Emergent BioSolutions
and/or
Trubions stock price, future business and operations, and
financial condition. If the merger is not completed, Trubion
will likely need to complete a substantial reduction in force
and implement other significant changes in the scope of its
operations and raise additional capital in order to continue
operating as a separate company. Any delay in the consummation
of the merger, including delays resulting from litigation
regarding the merger, or any uncertainty about the consummation
of the merger may adversely affect the future business, growth,
revenue and results of operations of either or both of the
companies.
Failure
to complete the merger could negatively affect the market price
of Emergent BioSolutions common stock and/or Trubion common
stock and the future business and financial results of Emergent
BioSolutions and/or Trubion, and the merger agreement limits
Trubions ability to pursue alternatives to the
merger.
If the merger is not completed for any reason, the on-going
business of Emergent BioSolutions and Trubion may be adversely
affected and will be subject to a number of risks, including:
|
|
|
|
|
the risk that Trubion may be required, under some circumstances,
to pay Emergent BioSolutions a termination fee of
$3 million. See the section entitled The Merger
Agreement Expenses and Termination Fee
beginning on page 139 of this proxy statement/prospectus;
|
|
|
|
the risk that the restrictions on capital spending, the
suspension of planned hiring and other affirmative and negative
covenants in the merger agreement restricting the
companies businesses may differ from or reduce efforts the
applicable company would have made if Emergent BioSolutions and
Trubion had not executed the merger agreement and prevent or
delay progress the applicable company would otherwise have made;
|
|
|
|
the risk that failure to pursue other beneficial opportunities
as a result of the focus of management of each of the companies
on the merger, without realizing any of the anticipated benefits
of the merger may prevent or delay progress the applicable
company would otherwise have made;
|
|
|
|
the risk that the market price of Emergent BioSolutions common
stock or Trubion common stock may decline to the extent that the
current market price reflects a market assumption that the
merger will be completed;
|
|
|
|
the risk that Emergent BioSolutions and Trubion may experience
negative reactions to the termination of the merger from
licensors, collaborators, suppliers, or other strategic
partners, which could harm their respective businesses; and
|
|
|
|
the risk that, because Emergent BioSolutions and
Trubions costs incurred related to the merger, such as
legal, other advisor and accounting fees, must be paid even if
the merger is not completed, Emergent BioSolutions and Trubion
may have to delay incurring other expenses that would have
benefited their businesses.
|
If the merger agreement is terminated and Trubions board
of directors seeks another merger or business combination, it is
unlikely that Trubion would be able to find a party willing to
pay a price equivalent to or more attractive than the price
Emergent BioSolutions has agreed to pay in the merger.
23
In addition, the merger agreement contains no shop
provisions that, subject to limited exceptions, preclude Trubion
from soliciting competing transactions, or participating in any
discussions or negotiations, or furnishing information or data
with respect to, or taking any action to knowingly encourage the
making of any proposal that constitutes, or that may reasonably
be expected to lead to, competing transactions that may result
in a superior transaction for Trubions stockholders.
The
pro forma financial statements are presented for illustrative
purposes only and may not be an indication of the combined
companys financial condition or results of operations
following the merger.
The pro forma financial statements contained in this proxy
statement/prospectus are presented for illustrative purposes
only and may not be an indication of the combined companys
financial condition or results of operations following the
merger for several reasons. For example, the pro forma financial
statements have been derived from the historical financial
statements of Emergent BioSolutions and Trubion and certain
adjustments and assumptions have been made regarding the
combined company after giving effect to the merger. The
information upon which these adjustments and assumptions have
been made is preliminary, and these kinds of adjustments and
assumptions are difficult to make with complete accuracy.
Moreover, the pro forma financial statements do not reflect all
costs that are expected to be incurred by the parties in
connection with the merger. For example, the affect of any
incremental costs that may be incurred in integrating the
companies is not reflected in the pro forma financial
statements. As a result, the actual financial condition and
results of operations of the combined company following the
merger may not be consistent with, or illustrated by, these pro
forma financial statements.
In addition, the assumptions used in preparing the pro forma
financial information may not prove to be accurate, and other
factors may affect the combined companys financial
condition or results of operations following the merger. Any
potential decline in the combined companys financial
condition or results of operations may cause significant
variations in the stock price of the combined company. See the
section entitled Unaudited Pro Forma Condensed Combined
Financial Information beginning on page 147 of this
proxy statement/prospectus.
If
Emergent BioSolutions is unable to retain Trubion employees
after the merger is completed, the business of the combined
company may suffer.
The success of the merger will depend in part on Emergent
BioSolutions ability to retain Trubion employees after the
merger. It is not currently expected that Dr. Gillis will
remain with Emergent BioSolutions after the merger and it is
possible that other employees also might decide not to remain.
There can be no assurance that Emergent BioSolutions will be
able to retain key employees of Trubion. If key employees
terminate their employment, or if insufficient numbers of
employees are retained to maintain effective operations,
Emergent BioSolutions development activities may be
adversely affected, managements attention might be
diverted from successfully integrating Trubions operations
to focus instead on hiring suitable replacements, and the
business of the combined company may suffer. In addition,
Emergent BioSolutions may not be able to locate suitable
replacements for any key employees that leave, and Emergent
BioSolutions may not be able to offer employment to potential
replacements on reasonable or competitive terms.
In the
event the merger is completed, Emergent BioSolutions will incur
additional expenses in connection with the integration of
Trubion.
In the event the merger is completed, Emergent BioSolutions
expects to incur additional expenses in connection with the
integration of Trubion, including integrating personnel,
information technology systems, accounting systems, vendors and
strategic partners of each company and implementing consistent
standards, policies, and procedures, and Emergent BioSolutions
may be subject to write downs in assets and charges to earnings.
Trubions
executive officers and directors may have interests that are
different from, or in addition to, those of Trubion stockholders
generally.
In considering the recommendation of the Trubion board of
directors to adopt the merger agreement, Trubions
stockholders should recognize that Trubions executive
officers and directors have interests that differ from those of
Trubions stockholders generally that may have influenced
the Trubion board of directors in making its
24
recommendation that Trubion stockholders vote in favor of the
adoption of the merger agreement. The reasons for these
different interests are described in the section entitled
The Merger Interests of Trubions
Executive Officers and Directors in the Merger beginning
on page 114 of this proxy statement/prospectus.
If
Trubions stockholders sell the Emergent BioSolutions
common stock received in connection with the merger, the market
price of Emergent BioSolutions common stock could
decline.
Emergent BioSolutions issuance of common stock in
connection with the merger will be registered with the SEC. As a
result, those shares will be immediately available for resale in
the public markets, except for shares of Emergent BioSolutions
common stock that are subject to transfer restrictions. If
former Trubion stockholders, or other holders of Emergent
BioSolutions common stock, sell significant amounts of Emergent
BioSolutions common stock after the merger is completed, the
market price of Emergent BioSolutions common stock could
decline. Such a decline in its stock price may make it more
difficult for Emergent BioSolutions to sell equity securities in
the future at a time and at a price that Emergent BioSolutions
deems appropriate to raise funds through future offerings of
common stock.
The
market price of Emergent BioSolutions common stock may decline
as a result of the merger or for other reasons.
In addition to any decline resulting from the sale of shares of
Emergent BioSolutions common stock by former Trubion
stockholders or other holders of Emergent BioSolutions common
stock, the market price of Emergent BioSolutions common stock
may decline as a result of the merger for a number of other
reasons, including if:
|
|
|
|
|
Emergent BioSolutions does not achieve the perceived benefits of
the merger as rapidly or to the extent anticipated by financial
or industry analysts or Emergent BioSolutions investors;
|
|
|
|
the effect of the merger on Emergent BioSolutions business
and prospects is not consistent with the expectations of
financial or biopharmaceutical industry analysts or Emergent
BioSolutions investors; or
|
|
|
|
the outcome of any litigation related to the merger that is not
resolved prior to the consummation of the merger is adverse to
Emergent BioSolutions.
|
Furthermore, the market price of Emergent BioSolutions
common stock could be subject to significant fluctuations
following the merger that are not directly related to the
merger. Market prices for securities of pharmaceutical,
biotechnology and other life sciences companies have
historically been particularly volatile. Some of the factors
that may cause the market price of Emergent BioSolutions
common stock to fluctuate include:
|
|
|
|
|
the ability of Emergent BioSolutions to obtain regulatory
approvals for any of its product candidates, and delays or
failures to obtain such approvals;
|
|
|
|
the failure of any of Emergent BioSolutions product
candidates, if approved, to achieve commercial success;
|
|
|
|
issues in manufacturing Emergent BioSolutions approved
products, if any, or product candidates;
|
|
|
|
the results of Emergent BioSolutions current and any
future clinical trials of its product candidates;
|
|
|
|
the entry into, or termination of, key agreements, including key
commercial partner agreements;
|
|
|
|
the initiation of, material developments in, or conclusion of,
litigation to enforce or defend any of the combined
companys intellectual property rights or defend against
the intellectual property rights of others;
|
|
|
|
developments concerning current or future strategic
collaborations;
|
|
|
|
announcements by commercial partners or competitors of new
commercial products, clinical progress or the lack thereof,
significant contracts, commercial relationships or capital
commitments;
|
|
|
|
the introduction of technological innovations or new therapies
that compete with potential products of Emergent BioSolutions;
|
|
|
|
additions or departures of key employees;
|
25
|
|
|
|
|
third-party coverage and reimbursement policies;
|
|
|
|
changes in estimates or recommendations by securities analysts,
if any, who cover Emergent BioSolutions common stock;
|
|
|
|
future sales of Emergent BioSolutions common stock;
|
|
|
|
general and industry-specific economic conditions that may
affect Emergent BioSolutions research and development
expenditures; and
|
|
|
|
period-to-period
fluctuations in Emergent BioSolutions financial results.
|
Moreover, the stock markets in general have experienced
substantial volatility that has often been unrelated to the
operating performance of individual companies. These broad
market fluctuations may also adversely affect the trading price
of Emergent BioSolutions common stock.
In the past, following periods of volatility in the market price
of a companys securities, stockholders have often
instituted class action securities litigation against those
companies. Such litigation, if instituted, could result in
substantial costs and diversion of managements attention
and resources, which could significantly harm Emergent
BioSolutions profitability and reputation.
During
the pendency of the merger, Trubion may not be able to enter
into certain business arrangements with other parties because of
restrictions in the merger agreement.
Provisions in the merger agreement place significant constraints
on the manner in which Trubion must conduct its business pending
completion of the merger. There are a significant number of
actions that require the written consent of Emergent
BioSolutions before they can be taken or completed. As a result,
if the merger is not completed, Trubion may be at a disadvantage
to its competitors or its business may otherwise suffer because
it was prevented or delayed from making progress in its business
that it might otherwise have made. See the section entitled
The Merger Agreement Other Agreements of
Trubion beginning on page 130 of this proxy
statement/prospectus.
Risks
Related to Trubion
In addition to the other information in this proxy
statement/prospectus, you should consider carefully the
following factors in evaluating Trubion and its business. Unless
otherwise indicated, the discussions in this section relate to
Trubion as a stand-alone entity and do not reflect the effect of
the proposed merger with Emergent BioSolutions.
Risks
Related to Trubions Business
Trubions
business and results of operations are likely to be affected by
its proposed merger with Emergent BioSolutions.
The announcement of the merger could have an adverse effect on
Trubions business in the near term if current or potential
collaborative partners curtail their relationships with it
pending consummation of the proposed merger. Activities relating
to the proposed merger and related uncertainties could divert
its managements and its employees attention from
Trubions
day-to-day
business, cause disruptions among its relationships with
potential and current business partners, and cause employees to
seek alternative employment, all of which could harm its
business. In addition, Trubion may be disadvantaged in its
attempts to attract and retain personnel by its announcement of
the proposed merger. The success of Trubions business
depends on its continued ability to attract and retain highly
qualified management, scientific and manufacturing personnel.
There is significant competition for personnel among companies
in the biotechnology and pharmaceutical industries.
If the
conditions to the proposed merger with Emergent BioSolutions set
forth in the merger agreement are not met, the merger with
Emergent BioSolutions may not occur.
Several conditions must be satisfied to complete the proposed
merger with Emergent BioSolutions. These conditions are set
forth in detail in the merger agreement. Trubion cannot assure
you that each of the conditions will
26
be satisfied. If the conditions are not satisfied or waived, the
proposed merger will not occur or will be delayed, and Trubion
may lose some or all of the benefits of the proposed merger. For
example, if either Trubions or Emergent BioSolutions
representations and warranties are not true and correct and,
with some exceptions, the failure to be true and correct has a
material adverse effect at the closing, the other party will not
be required to close.
Failure
to complete the proposed merger with Emergent BioSolutions could
negatively affect Trubions future business and
operations.
If the proposed merger with Emergent BioSolutions is not
completed, Trubion could suffer a number of consequences that
may adversely affect its business, results of operations and
stock price, including the following:
|
|
|
|
|
activities relating to the proposed merger and related
uncertainties may lead to a loss of progress with existing and
potential corporate partners that Trubion may not be able to
regain if the proposed merger does not occur;
|
|
|
|
the market price of Trubion common stock could significantly
decline following an announcement that the proposed merger has
been abandoned;
|
|
|
|
Trubion would remain liable for its costs related to the
proposed merger;
|
|
|
|
Trubion may be liable for the $3 million termination fee
for various reasons, including if it does not obtain the vote of
its stockholders in favor of the transaction, if it enters into
an acquisition agreement for a superior transaction or if
Emergent BioSolutions terminates the merger agreement for a
material uncured breach of its representations and warranties
and, in the latter case, it enters into another merger agreement
within six months of the termination;
|
|
|
|
Trubions board of directors may not be able to find
another partner willing to pay an equivalent or more attractive
price for another merger or business combination than that which
would have been paid in the merger with Emergent BioSolutions;
|
|
|
|
if Trubions board of directors is unable to find another
partner willing to pay an equivalent or more attractive price
for another merger or business combination, Trubion will not be
able to continue its present level of operations and therefore
would have to scale back its present level of business and
implement additional reductions in force; and
|
|
|
|
Trubion may not be able to take advantage of alternative
business opportunities or effectively respond to competitive
pressures.
|
Trubions
success depends on the success of its partnered clinical product
candidates, and it cannot be certain that its partners will
continue development or that its partnered clinical product
candidates will be safe or effective, complete clinical trials,
receive regulatory approval or be successfully
commercialized.
In June 2010, Trubion announced Pfizers decision to
discontinue development of TRU-015, an investigational drug in
Phase II evaluation for the treatment of rheumatoid
arthritis, or RA, developed under its CD20 collaboration with
Pfizer. Due to Pfizers discontinued development of
TRU-015, Trubions lead product candidate is now
SBI-087.
TRU-015 had completed two Phase II clinical trials for RA.
SBI-087 is earlier in development than
TRU-015 and
is currently the subject of an ongoing Phase II trial.
Patient dosing in the Phase II SBI-087 RA trial commenced
in December 2009, and final data is not anticipated until the
end of 2011. Because SBI-087 is at an earlier stage in clinical
development than TRU-015 the decision by Pfizer to develop
SBI-087 instead of TRU-015 is likely to delay the potential
commercialization of any product under Trubions
collaboration with Pfizer, which could adversely affect its
business and cause the price of Trubion common stock to decline.
Trubions Abbott collaboration clinical candidate, TRU-016,
and its Pfizer collaboration clinical candidate, SBI-087,
commenced initial clinical testing in 2008 and even if Trubion
and Abbott, in the case of TRU-016, or Pfizer, in the case of
SBI-087, determine to proceed with further clinical testing, a
number of additional clinical trials will be required before a
Biologics License Application, or BLA, can be submitted to the
FDA for product approval.
27
The regulatory approval process can take many years and require
the expenditure of substantial resources. Pursuant to
Trubions collaboration agreement with Pfizer, Pfizer is
responsible for regulatory approval of, and any subsequent
commercialization of SBI-087. Ultimate decision-making authority
as to most matters within the collaboration, including
development plans and timeline, is vested with Pfizer. Pfizer
may not advance the development and commercialization of SBI-087
as quickly as Trubion would like, if at all.
Pursuant to Trubions collaboration agreement with Abbott,
Trubion and Abbott must jointly agree to all development and
commercialization plans and timelines for TRU-016. Acting
jointly, Trubion and Abbott may be unable to advance the
development and commercialization of TRU-016 as quickly as
Trubion would if it were acting alone.
Clinical trials required for FDA approval of SBI-087 for RA or
systemic lupus erythematosus, or SLE, or
TRU-016 for
chronic lymphocytic leukemia, or CLL, and non-Hodgkins lymphoma,
or NHL, may not be successfully completed. If required clinical
trials are not completed or their results do not meet safety and
efficacy thresholds required by the FDA, Trubions product
candidates will likely not receive regulatory approval. Even if
any of these product candidates receives regulatory approval,
the approved product candidate may never be successfully
commercialized. If Trubions product candidates do not
receive regulatory approval or are not successfully
commercialized, it may not be able to generate revenue, or
become profitable, which would negatively affect its ability to
continue operations.
If
Trubion fails to obtain the capital necessary to fund its
operations, it may be unable to develop its product candidates
and it could be forced to share its rights to these product
candidates with third parties on terms that may not be favorable
to it.
Trubion needs large amounts of capital to support its research
and development efforts. It may seek to raise funds through
additional strategic partnerships, by selling additional equity
or debt securities, or both, or by incurring other indebtedness.
If Trubion is unable to raise additional capital in sufficient
amounts or on terms acceptable to it, Trubion will be prevented
from pursuing research and development efforts or it may instead
elect to enter into collaborations that could require it to
share rights to its product candidates to a greater extent than
it currently intends, which could harm its business prospects
and financial condition. The sale of additional equity or
equity-linked securities could result in the issuance of
additional shares of Trubion capital stock and could result in
dilution to Trubion stockholders. The incurrence of indebtedness
would result in increased fixed payment obligations and could
also result in certain restrictive covenants, such as
limitations on Trubions ability to incur additional debt,
limitations on its ability to acquire or license intellectual
property rights, and other operating restrictions that could
adversely affect its ability to conduct its business.
Trubion
has incurred operating losses in each year since its inception
and expects to continue to incur substantial and increasing
losses for the foreseeable future.
Trubion has been engaged in designing and developing compounds
and product candidates since 1999 and has not generated any
product revenue to date. Its net losses were $11.8 million
and $17.7 million in the six months ended June 30,
2010 and 2009, respectively. As of June 30, 2010, it had an
accumulated deficit of $133.4 million. Trubion expects its
research and development expenses to increase in the future due
to increased manufacturing and clinical development costs
primarily related to TRU-016, Trubions Abbott
collaboration clinical candidate, as well as the advancement of
its preclinical programs, and to product candidate manufacturing
costs. As a result, Trubion expects to continue to incur
substantial and increasing losses for the foreseeable future.
Trubion is uncertain when or if it will be able to achieve or
sustain profitability. Failure to become and remain profitable
would adversely affect the price of Trubions common stock
and its ability to raise capital and continue operations.
Continued operating losses and depletion of its cash balance may
also result in non-compliance with its existing debt covenants
and may require it to dedicate a substantial portion of its cash
to repay its debt. As of June 30, 2010, Trubions
outstanding indebtedness under agreements with financial debt
covenants that could be affected by continued operating losses
or its cash position totaled $7.7 million. In addition,
Trubions net operating loss carry forwards and credits
were substantially exhausted as a result of the payments it
received from Wyeth in January 2006 pursuant to its Pfizer
collaboration agreement, and additional operating loss carry
forwards it had accumulated since that time were further reduced
by the upfront fee it received from Facet Biotech Corporation,
or Facet (now owned by Abbott
28
Labs), in September 2009. Any remaining net operating loss carry
forwards and credits may be subject to an annual limitation due
to the change in ownership provisions of the
Internal Revenue Code of 1986, as amended, and similar state law
provisions, which would have an adverse effect on Trubions
ability to reduce future tax expenses.
Trubion
depends on its collaborative relationship with Pfizer to
develop, manufacture, and commercialize SBI-087 and other
selected product candidates.
In October 2009, Pfizer completed its acquisition of Wyeth, and
Pfizer is now Trubions collaboration partner for SBI-087.
In June 2010, Trubion announced Pfizers decision to
discontinue development of TRU-015, an investigational drug in
Phase II evaluation for the treatment of RA developed under
Trubions CD20 collaboration with Pfizer. Trubion cannot
predict how or whether Pfizer will proceed with the
collaboration or the development of any of the remaining
collaboration product candidates. In addition to Trubions
collaboration with Pfizer for the development and worldwide
commercialization of SBI-087 and other therapeutics directed to
CD20, it is also collaborating with Pfizer on the development
and worldwide commercialization of certain other product
candidates directed to a small number of targets other than CD20
that have been established pursuant to the agreement. In
anticipation of the completion of the research program in
December 2010, Pfizer has retained a subset of these non- CD20
targets licensed from Trubion and released the remaining targets
to Trubion. Trubions ability to receive any significant
revenue from its product candidates covered by the collaboration
agreement depends on the efforts of Pfizer and on Trubions
ability to collaborate effectively. Any future payments,
including royalties to Trubion, will depend on the extent to
which Trubion and Pfizer advance product candidates through
development and commercialization. Pfizer may terminate the
collaboration relationship, in whole or in part, without cause,
by giving 90 days written notice to Trubion. Pfizer
also has the right to terminate the agreement, on a
target-by-target
basis, upon 60 days written notice, if any safety or
regulatory issue arises that would have a material adverse
effect on Pfizers ability to develop, manufacture, or
commercialize one or more product candidates.
With respect to control over decisions and responsibilities, the
collaboration agreement provides for a research committee and a
CD20-directed therapy development committee consisting of
representatives of Pfizer and Trubion. Ultimate decision-making
authority as to most matters within the collaboration, including
development plans and timelines, however, is vested in Pfizer.
For example, as discussed above, Pfizer has recently determined
to discontinue clinical development of TRU-015 and is proceeding
with clinical development of only one product candidate against
CD20, SBI-087.
Pfizer may not develop and commercialize Trubions
remaining product candidates as quickly as Trubion would like,
if at all. If Pfizer terminates the agreement or fails to
fulfill its obligations under the agreement, Trubion would need
to obtain the capital necessary to fund the development and
commercialization of its product candidates or enter into
alternative arrangements with a third party. Trubion could also
become involved in disputes with Pfizer, which could lead to
delays in or termination of Trubions development and
commercialization programs and time-consuming and expensive
litigation or arbitration. If Pfizer terminates or breaches its
agreement with Trubion, or otherwise fails to complete its
obligations in a timely manner, Trubions collaboration
product development programs would be substantially delayed and
the chances of successfully developing or commercializing
Trubions collaboration product candidates would be
materially and adversely affected.
Trubion
depends on its collaborative relationship with Abbott to
develop, manufacture and commercialize TRU-016 and other
CD37-directed protein therapeutics.
In August 2009, Trubion entered into a collaboration agreement
with Facet for the joint worldwide development and
commercialization of TRU-016, Trubions product candidate
in Phase I clinical development for CLL and other CD37-directed
protein therapeutics. On April 21, 2010, Abbott closed its
acquisition of all of Facets outstanding stock, and Facet
became a wholly owned subsidiary of Abbott. Trubion has no prior
relationship with Abbott and, as a result, it cannot predict how
or whether Abbotts acquisition of Facet will impact the
collaboration. Under the terms of the collaboration agreement,
neither Trubion nor Abbott has the right to develop or
commercialize protein therapeutics directed to CD37 outside of
the collaboration.
Trubions ability to receive funding for TRU-016 under the
collaboration depends on its ability to collaborate effectively
with Abbott. Any future payments, including milestones payable
to Trubion, will depend on the extent to
29
which Trubion and Abbott advance TRU-016 through development and
commercialization. Abbott may terminate the collaboration
agreement without cause and would not be obligated to pay
Trubion a termination fee if such a termination was more than
18 months after the beginning of the collaboration. Abbott
also has the right upon 90 days written notice to
terminate the agreement for any uncured material breach by
Trubion.
With respect to control over decisions and responsibilities, the
collaboration agreement provides for a joint steering committee,
or JSC, that must make decisions by consensus. The failure of
the JSC to reach consensus on material aspects of the
development or commercialization of TRU-016 would lead to
dispute resolution by each companys respective designated
officers, and potentially arbitration, any of which may delay
the development of TRU-016, which may harm Trubions
business.
Under certain circumstances, the parties have the right to
opt-out of the collaboration or may be deemed to have opted-out
of the collaboration. If Abbott opts-out of the collaboration
with respect to a product, then Trubion would become responsible
for all development and commercialization costs for that product
and be obligated to pay Abbott certain royalty payments upon the
sale of that product. If Abbott has an anti-CD37 program that
competes with the program under the collaboration agreement with
Facet, then Abbott must either divest itself of the competing
program or opt-out of the collaboration in which case Trubion
would become responsible for all development and
commercialization costs for all collaboration products and be
obligated to pay Abbott certain royalty payments upon the sale
of these products. Trubion is currently the lead manufacturing
party for TRU-016 and if it opts-out of the collaboration as a
result of Facets change of control or any other reason
allowed under the collaboration agreement, and are the lead
TRU-016 manufacturing party at that time, Trubion would be
obligated to continue to supply TRU-016 to Abbott for up to
18 months.
If Abbott opts-out of or terminates the agreement or fails to
fulfill its obligations under the agreement, Trubion would need
to obtain the capital necessary to fully fund the development
and commercialization of TRU-016 or enter into alternative
arrangements with a third party. Trubion could also become
involved in disputes with Abbott, which could lead to delays in
or termination of its development and commercialization programs
and time-consuming and expensive litigation or arbitration. If
Abbott terminates or breaches its agreement with Trubion, or
otherwise fails to complete its obligations in a timely manner,
Trubions collaboration product development programs would
be substantially delayed and the chances of successfully
developing or commercializing its collaboration product
candidates would be materially and adversely affected.
Trubion
currently relies on third-party manufacturers to supply its
product candidates for clinical trials and will rely on
third-party manufacturers to manufacture its product candidates
in commercial quantities, which could delay, prevent or increase
the costs associated with the clinical development and future
commercialization of its product candidates.
Trubion currently depends on Pfizer for the supply of SBI-087.
It also currently depends on contract manufacturers for certain
biopharmaceutical development and manufacturing services for
TRU-016, Trubions Abbott collaboration clinical candidate.
In addition, Trubion is planning to have Abbott perform certain
manufacturing services for TRU-016 in 2011. Any disruption in
production, inability of these manufacturers to produce adequate
quantities to meet Trubions needs, or other impediments
with respect to development, manufacturing or shipping could
adversely affect Trubions ability to successfully complete
clinical trials, delay submissions of its regulatory
applications, increase its costs or otherwise adversely affect
its ability to commercialize its product candidates in a timely
manner, if at all. For example, Trubions commitments with
Lonza Biologics, or Lonza, for manufacturing TRU-016 expired in
the second quarter of 2010 and although Trubion is planning to
have Abbott perform certain manufacturing services in 2011 for
TRU-016, it currently does not have any other future
manufacturing agreements at this time. Trubion plans on
negotiating for additional manufacturing capacity, however it
may be unable to do so in a timely manner or on terms that are
consistent with its existing agreements. If Trubion is unable to
negotiate for additional manufacturing capacity, it will need to
contract with other third-party manufacturers, which may result
in additional costs and may cause delays in the future supply of
TRU-016 and the clinical development of TRU-016.
Trubions product candidates have not yet been manufactured
for commercial use. If any of its product candidates becomes a
product approved for commercial sale, in order to supply Trubion
or its collaborators
30
commercial requirements for such an approved product, the
third-party manufacturer may need to increase its manufacturing
capacity, which may require the manufacturer to fund capital
improvements to support the
scale-up of
manufacturing and related activities. The third-party
manufacturer may not be able to successfully increase its
manufacturing capacity for such an approved product in a timely
or economic manner, if at all. If any manufacturer is unable to
provide commercial quantities of such an approved product,
Trubion will have to successfully transfer manufacturing
technology to a new manufacturer. Engaging a new manufacturer
for such an approved product could require Trubion to conduct
comparative studies or utilize other means to determine
bioequivalence of the new and prior manufacturers
products, which could delay or prevent its ability to
commercialize such an approved product. If any of these
manufacturers is unable or unwilling to increase its
manufacturing capacity or if Trubion is unable to establish
alternative arrangements on a timely basis or on acceptable
terms, the development and commercialization of such an approved
product may be delayed or there may be a shortage in supply. Any
inability to manufacture Trubions products in sufficient
quantities when needed would seriously harm its business.
Any manufacturer of Trubions product candidates and
approved products, if any, must comply with current good
manufacturing practices, or cGMP, requirements enforced by the
FDA through its facilities inspection program. These
requirements include quality control, quality assurance, and the
maintenance of records and documentation. Manufacturers of
Trubions product candidates and approved products, if any,
may be unable to comply with these cGMP requirements and with
other FDA, state, and foreign regulatory requirements. Trubion
has little control over its manufacturers compliance with
these regulations and standards. A failure to comply with these
requirements may result in fines and civil penalties, suspension
of production, suspension or delay in product approval, product
seizure or recall, or withdrawal of product approval. If the
safety of any quantities supplied is compromised due to its
manufacturers failure to adhere to applicable laws or for
other reasons, Trubion may not be able to obtain regulatory
approval for or successfully commercialize its products, which
would seriously harm its business.
Trubion
relies on third parties to conduct its clinical trials. If these
third parties do not perform as contractually required or
otherwise expected, Trubion may not be able to obtain regulatory
approval for or commercialize its product
candidates.
Trubion does not currently have the ability to conduct clinical
trials and it must rely on third parties, such as contract
research organizations, medical institutions, clinical
investigators, and contract laboratories, to conduct
Trubions clinical trials. Trubion has, in the ordinary
course of business, entered into agreements with these third
parties. Nonetheless, Trubion is responsible for confirming that
each of its clinical trials is conducted in accordance with its
general investigational plan and protocol. Moreover, the FDA
requires Trubion to comply with regulations and standards,
commonly referred to as good clinical practices, for conducting,
recording, and reporting the results of clinical trials to
ensure that data and reported results are credible and accurate
and that the trial participants are adequately protected.
Trubions reliance on third parties does not relieve it of
these responsibilities and requirements. If these third parties
do not successfully carry out their contractual duties or
regulatory obligations or meet expected deadlines, if the third
parties need to be replaced or if the quality or accuracy of the
data they obtain is compromised due to the failure to adhere to
Trubions clinical protocols or regulatory requirements or
for other reasons, Trubions clinical trials may be
extended, delayed, suspended, or terminated, and Trubion may not
be able to obtain regulatory approval for its product candidates.
Any
failure or delay in commencing or completing clinical trials for
product candidates could severely harm Trubions
business.
Each of Trubions product candidates must undergo extensive
preclinical studies and clinical trials as a condition to
regulatory approval. Preclinical studies and clinical trials are
expensive and take many years to complete. To date Trubion has
not initiated any Phase III clinical trials of any product
candidate. The commencement and completion of clinical trials
for its product candidates may be delayed by many factors,
including:
|
|
|
|
|
having the capital resources available to fund additional
clinical trials;
|
|
|
|
Trubions or its collaborators ability to obtain
regulatory approval to commence a clinical trial;
|
|
|
|
Trubions or its collaborators ability to manufacture
or obtain from third parties materials sufficient for use in
preclinical studies and clinical trials;
|
31
|
|
|
|
|
delays in patient enrollment and variability in the number and
types of patients available for clinical trials;
|
|
|
|
poor effectiveness of product candidates during clinical trials;
|
|
|
|
unforeseen safety issues or side effects;
|
|
|
|
governmental or regulatory delays related to clinical trials,
including trial design, results, and materials supply;
|
|
|
|
changes in regulatory requirements, policy, and
guidelines; and
|
|
|
|
varying interpretation of data by Trubion, any or all of its
collaborators, the FDA, and similar foreign regulatory agencies.
|
It is possible that none of Trubions product candidates
will complete the required clinical trials in any of the markets
in which Trubion or its collaborators intend to commercialize
those product candidates. Accordingly, Trubion or its
collaborators may not seek or receive the regulatory approvals
necessary to market Trubions product candidates. Any
failure or delay in commencing or completing clinical trials or
obtaining regulatory approvals for product candidates would
prevent or delay their commercialization and severely harm
Trubions business and financial condition.
Trubions
success depends on the proper management of its current and
future business operations, and the expenses associated with
them.
Trubions business strategy requires it to manage its
operations to provide for the continued development and
potential commercialization of its product candidates and to
manage its expenses generated by these activities. Trubion
believes that strict cost containment in the near term is
essential if its current funds are to be sufficient to allow it
to continue its currently planned operations.
If Trubion is unable to effectively manage its current
operations, it may not be able to implement its business
strategy and its financial condition and operating results may
be adversely affected. If Trubion is unable to effectively
manage its expenses, it may find it necessary to reduce its
expenses through another reduction in its workforce, which could
adversely affect its operations.
Trubion
relies on highly skilled personnel, and if it is unable to
retain or motivate key personnel or hire qualified personnel, it
may not be able to maintain its operations.
Trubions operations and its ability to execute its
business strategy are highly dependent on the efforts of its
executive management team. In November 2009, Trubions
chief executive officer, and chairman of the board resigned
after serving since February 2003. Following his departure,
Trubions Board of Directors appointed its prior lead
director to serve as executive chairman and acting president
until a qualified replacement is found. Trubion cannot assure
you that it will be able to attract and retain a suitable chief
executive officer. An extended period of time without a
permanent chief executive officer could materially and adversely
affect Trubions business, financial condition or operating
results. Furthermore, in recruiting a new chief executive
officer, Trubion will incur expenses related to recruiting,
relocation and training and possibly experience operational
inefficiencies. In the event Trubion is unable to effect a
smooth transition from its executive chairman and acting
president to a new chief executive officer, or if a new chief
executive officer should unexpectedly prove to be unsuitable,
the resulting disruption could negatively affect Trubions
operations and impede its ability to execute its strategic plan.
In addition, although the members of Trubions senior
management team have employment agreements with Trubion, these
agreements may not provide sufficient incentives for these
officers to continue employment with Trubion. The loss of one or
more of the members of Trubions senior management team
could adversely affect its operations.
Trubion
cannot assure you any of its product candidates will be safe or
effective, or receive regulatory approval.
The clinical trials and the manufacturing of Trubions
product candidates are, and marketing of its products will be,
subject to extensive and rigorous review and regulation by
numerous government authorities in the
32
United States and in other countries where Trubion intends
to test and market its product candidates. Before obtaining
regulatory approvals for the commercial sale of any product
candidate, Trubion must demonstrate through preclinical testing
and clinical trials that the product candidate is safe and
effective for use in each target indication. This process can
take many years and require the expenditure of substantial
resources, and may include post-marketing studies and
surveillance. To date, Trubion has not successfully demonstrated
in clinical trials safety or efficacy sufficient for regulatory
approval. Trubions Abbott collaboration clinical
candidate, TRU-016, and its Pfizer collaboration clinical
candidate, SBI-087, commenced initial clinical testing in 2008
and as a result Trubion only has limited clinical trial results
regarding the safety or efficacy of either of these product
candidates. Even if, based on the results of the initial
clinical trials for TRU-016 and SBI-087, Trubion and Abbott, in
the case of
TRU-016, or
Pfizer, in the case of SBI-087, determine to proceed with
further clinical testing, a number of additional clinical trials
will be required before a BLA can be submitted to the FDA for
product approval. The results from preclinical testing and
clinical trials that Trubion has completed may not be predictive
of results in future preclinical tests and clinical trials, and
Trubion cannot assure you it will demonstrate sufficient safety
and efficacy to seek or obtain the requisite regulatory
approvals. A number of companies in the biotechnology and
pharmaceutical industries have suffered significant setbacks in
advanced clinical trials, even after promising results in
earlier trials. All of Trubions other product candidates
remain in the discovery and pre-clinical testing stages. Trubion
may also encounter delays or rejections due to additional
government regulation from future legislation, administrative
action, or changes in FDA policy. Trubion cannot assure you that
regulatory approval will be obtained for any of its product
candidates, and even if the FDA approves a product, the approval
will be limited to those indications covered in the approval. If
Trubions current product candidates are not shown to be
safe and effective in clinical trials, the resulting delays in
developing other product candidates and conducting related
preclinical testing and clinical trials, as well as the
potential need for additional financing, would have a material
adverse effect on its business, financial condition, and
operating results. If Trubion is unable to discover or
successfully develop drugs that are effective and safe in humans
and receive regulatory approval, Trubion will not have a viable
business. Trubion does not expect any of its current product
candidates to be commercially available in major markets before
2014, if at all.
If
Trubion enters into additional strategic partnerships it may be
required to relinquish important rights to and control over the
development of its product candidates or otherwise be subject to
terms unfavorable to it.
If Trubion enters into any strategic partnerships, it will be
subject to a number of risks, including:
|
|
|
|
|
Trubion may not be able to control the amount and timing of
resources that its strategic partners devote to the development
or commercialization of product candidates;
|
|
|
|
strategic partners may delay clinical trials, design clinical
trials in a manner with which Trubion does not agree, provide
insufficient funding, terminate a clinical trial or abandon a
product candidate, repeat or conduct new clinical trials, or
require a new version of a product candidate for clinical
testing;
|
|
|
|
strategic partners may not pursue further development and
commercialization of products resulting from the strategic
partnering arrangement or may elect to discontinue research and
development programs;
|
|
|
|
strategic partners may not commit adequate resources to the
marketing and distribution of any future products, limiting
Trubions potential revenues from these products;
|
|
|
|
disputes may arise between Trubion and its strategic partners
that result in the delay or termination of the research,
development, or commercialization of Trubions product
candidates or that result in costly litigation or arbitration
that diverts managements attention and consumes resources;
|
|
|
|
strategic partners may experience financial difficulties;
|
|
|
|
strategic partners may not properly maintain or defend
Trubions intellectual property rights or may use its
proprietary information in a manner that could jeopardize or
invalidate its proprietary information or expose Trubion to
potential litigation;
|
33
|
|
|
|
|
business combinations or significant changes in a strategic
partners business strategy may also adversely affect a
strategic partners willingness or ability to complete its
obligations under any arrangement;
|
|
|
|
strategic partners could independently move forward with a
competing product candidate developed either independently or in
collaboration with others, including Trubions
competitors; and
|
|
|
|
strategic partners could terminate the arrangement or allow it
to expire, which would delay the development and may increase
the cost of developing Trubions product candidates.
|
The occurrence of any of these risks could negatively affect the
development of Trubions product candidates which would
have an adverse effect on its business prospects.
If
Trubions technology or its product candidates conflict
with the rights of others it may not be able to manufacture or
market its product candidates, which could have a material
adverse effect on it.
Trubions commercial success will depend in part on not
infringing the patents or violating the proprietary rights of
third parties. Issued patents held by others may limit its
ability to develop commercial products. All issued
U.S. patents are entitled to a presumption of validity
under U.S. law. If Trubion needs licenses to such patents
to permit it to manufacture, develop, or market its product
candidates it may be required to pay significant fees or
royalties, and Trubion cannot be certain that it would be able
to obtain such licenses. Competitors or third parties may obtain
patents that may cover subject matter Trubion uses in developing
the technology required to bring its products to market,
producing its products, or treating patients with its products.
Trubion knows that others have filed patent applications in
various jurisdictions that relate to several areas in which it
is developing products. Some of these patent applications have
already resulted in patents and some are still pending. Trubion
may be required to alter its processes or product candidates,
pay licensing fees, or cease activities. If use of technology
incorporated into or used to produce Trubions product
candidates is challenged, or if its processes or product
candidates conflict with patent rights of others, third parties
could bring legal actions against Trubion in Europe, the United
States, and elsewhere claiming damages and seeking to enjoin
manufacturing and marketing of the affected products.
Additionally, it is not possible to predict with certainty what
patent claims may issue from pending applications. In the United
States, for example, patent prosecution can proceed in secret
prior to issuance of a patent. As a result, third parties may be
able to obtain patents with claims relating to Trubions
product candidates that they could attempt to assert against
Trubion. Further, as Trubion develops its products, third
parties may assert that Trubion infringes the patents currently
held or licensed by them and Trubion cannot predict the outcome
of any such action.
If
Trubion is unable to obtain, maintain and enforce its
proprietary rights, it may not be able to compete effectively or
operate profitably.
Trubions success depends in part on obtaining,
maintaining, and enforcing its patents and other proprietary
rights, and will depend in large part on its ability to:
|
|
|
|
|
obtain and maintain patent and other proprietary protection for
Trubions technology, processes, and product candidates;
|
|
|
|
enforce patents and defend those patents if their enforceability
is challenged;
|
|
|
|
preserve trade secrets; and
|
|
|
|
operate without infringing the patents and proprietary rights of
third parties.
|
The degree of future protection for Trubions proprietary
rights is uncertain. For example:
|
|
|
|
|
Trubion might not have been the first to make the inventions
claimed in its patents or disclosed in its pending patent
applications;
|
|
|
|
Trubion might not have been the first to file patent
applications for these inventions;
|
|
|
|
others may independently develop similar or alternative
technologies or duplicate any of Trubions technologies;
|
34
|
|
|
|
|
it is possible that Trubions pending patent applications
will not result in issued patents or, if issued, such patents
may not be sufficient to protect its technology or commercially
viable products, and may not provide Trubion with any
competitive advantages;
|
|
|
|
if Trubions pending applications issue as patents, they
may be challenged by third parties as infringed, invalid, or
unenforceable under U.S. or foreign laws;
|
|
|
|
the patents under which Trubion holds rights may be invalid or
not enforceable; or
|
|
|
|
Trubion may develop additional proprietary technologies that are
not patentable and that may not be adequately protected through
trade secrets, if, for example, a competitor were to
independently develop duplicative, similar, or alternative
technologies.
|
The patent position of biotechnology and pharmaceutical firms is
highly uncertain and involves many complex legal and technical
issues. There is no clear policy involving the breadth of claims
allowed in patents or the degree of protection afforded under
patents. Although Trubion believes its potential rights under
patent applications provide a competitive advantage, Trubion
cannot assure you that patent applications owned by or licensed
to Trubion will result in patents being issued or that, the
patents will give Trubion an advantage over competitors with
similar technology, nor can Trubion assure you that it can
obtain, maintain, and enforce all ownership and other
proprietary rights necessary to develop and commercialize its
product candidates.
Even if Trubions patent applications issue as patents,
others may challenge the validity, inventorship, ownership,
enforceability, or scope of its patents or other technology used
in or otherwise necessary for the development and
commercialization of its product candidates. Further, Trubion
cannot assure you that any such challenge would not be
successful. Moreover, the cost of litigation to uphold the
validity of patents to prevent infringement or to otherwise
protect Trubions proprietary rights can be substantial. If
the outcome of litigation is adverse to Trubion, third parties
may be able to use the challenged technologies without payment
to Trubion. Trubion cannot assure you that its patents will not
be infringed or successfully avoided through design innovation.
Intellectual property lawsuits are expensive and would consume
time and other resources, even if the outcome were successful.
In addition, there is a risk that a court would decide that
Trubions patents are not valid and that Trubion does not
have the right to stop the other party from using the
inventions. There is also the risk that, even if the validity of
a patent were upheld, a court would refuse to stop the other
party from using the invention(s), including on the grounds that
its activities do not infringe that patent. If any of these
events were to occur, Trubions business, financial
condition, and operating results would be materially adversely
affected.
Trubion also will rely on current and future trademarks to
establish and maintain recognized brands. If Trubion fails to
acquire and protect such trademarks, its ability to market and
sell its products, and therefore its business, financial
condition and operating results, would be materially adversely
affected. For example, in November 2005, Merck KGaA filed a
proceeding with the Office for Harmonisation for the Internal
Market opposing Trubions European registration of the
trademark TRUBION and seeking to place certain restrictions on
the identification of goods, services, and channels of trade
description in Trubions European trademark registration.
Merck claims rights resulting from its prior trademark
registration of TRIBION HARMONIS. Trubions action with the
Court of First Instance of the European Community to annul the
Board decision has been denied. Merck also filed a similar
opposition in Brazil in February 2009. While this opposition is
to the use of TRUBION for the identification of goods, Trubion
has successfully registered this mark for services. Trubion has
re-filed its trademark application in Europe with respect to
goods, and Merck has again sought to oppose Trubions
registration for goods on July 15, 2010. Trubion intends to
vigorously pursue registration of the mark TRUBION for products
in the European Union and Brazil and to challenge Mercks
claimed rights as necessary to obtain such registration;
however, if Trubion is unable to effectively defend against the
opposition, Trubion may be prohibited from using the TRUBION
trademark in certain European Union jurisdictions and Brazil,
which could have an adverse effect on its ability to promote the
Trubion brand in those jurisdictions.
In addition to the intellectual property and other rights
described above, Trubion also relies on unpatented technology,
trade secrets, and confidential information, particularly when
it does not believe that patent or trademark protection is
appropriate or available. Trade secrets are difficult to protect
and Trubion cannot assure you that others will not independently
develop substantially equivalent information and techniques or
otherwise gain
35
access to or disclose Trubions unpatented technology,
trade secrets, and confidential information. In addition,
Trubion cannot assure you that the steps it takes with
employees, consultants, and advisors will provide effective
protection of Trubions confidential information or, in the
event of unauthorized use of Trubions intellectual
property or the intellectual property of third parties, provide
adequate or effective remedies or protection.
Trubion
may incur substantial costs as a result of litigation or other
proceedings relating to patent and other intellectual property
rights.
There has been significant litigation in the biotechnology
industry over patents and other proprietary rights, and if
Trubion becomes involved in any litigation it could consume a
substantial portion of its resources, regardless of the outcome
of the litigation. Some of Trubions competitors may be
better able to sustain the costs of complex patent litigation
because they may have substantially greater resources. If these
legal actions are successful, in addition to any potential
liability for damages, Trubion could be required to obtain a
license, grant cross-licenses, and pay substantial royalties in
order to continue to manufacture or market the affected
products. Trubion cannot assure you it would prevail in any
legal action or that any license required under a third-party
patent would be made available on acceptable terms, if at all.
In addition, uncertainties resulting from the initiation and
continuation of any litigation could have a material adverse
effect on Trubions ability to continue its operations.
Ultimately Trubion could be prevented from commercializing a
product or be forced to cease some aspect of its business
operations as a result of claims of patent infringement or
violation of other intellectual property rights, which could
have a material adverse effect on its business, financial
condition, and operating results. Should third parties file
patent applications or obtain patents claiming technology also
claimed by Trubion in pending applications, Trubion may be
required to participate in interference proceedings in the
United States Patent and Trademark Office to determine priority
of invention, which could result in substantial costs to Trubion
and an adverse decision as to the priority of its inventions. An
unfavorable outcome in an interference proceeding could require
Trubion to cease using the technology or to license rights from
prevailing third parties. Trubion cannot assure you that any
prevailing party would offer Trubion a license or that Trubion
could acquire any license made available to it on commercially
acceptable terms.
Trubion
faces substantial competition, which may result in others
discovering, developing, or commercializing products before, or
more successfully than, it does.
Trubions future success depends on its ability to
demonstrate and maintain a competitive advantage with respect to
the design, development, and commercialization of its product
candidates. Trubion expects any product candidate that it
commercializes with its collaborative partners, or on its own,
will compete with other products.
Product Candidates for Autoimmune and Inflammatory
Diseases. If approved for the treatment of RA,
Trubion anticipates that its product candidates would compete
with other marketed protein therapeutics for the treatment of
RA, including:
Enbrel®
(Amgen, Pfizer and Takeda),
Remicade®
(Centocor Ortho Biotech, Merck and Mitsubishi Tanabe),
Humira®
(Abbott and Eisai),
Orencia®
(BMS),
Cimzia®
(UCB and Otsuka),
Simponi®
(Centocor Ortho Biotech and Merck),
Actemra®
(Roche and Chugai) and
Rituxan®
(Genentech, Roche and Biogen Idec). If approved for the
treatment of SLE, Trubions product candidates will compete
with other therapies.
Product Candidates for B-cell Malignancies. If
approved for the treatment of CLL, NHL, or other B-cell
malignancies, Trubion anticipates that its product candidates
would compete with other B-cell depleting therapies. While
Trubion is not aware of any CD37-directed therapeutics in
development or on the market, other biologic therapies are
marketed for the treatment of NHL or CLL or both, such as
Rituxan/Mabthera®
(Genentech, Roche and Biogen Idec),
Zevalin®
(Spectrum Pharmaceuticals, Inc. and Bayer Schering AG),
Bexxar®
(GSK),
Campath®
(Genzyme and Bayer Schering AG),
Treanda®
(Cephalon Oncology) and
Arzerra®
(GSK and Genmab).
Many of Trubions potential competitors have substantially
greater financial, technical, manufacturing, marketing and
personnel resources than Trubion has. In addition, many of these
competitors have significantly greater commercial
infrastructures than Trubion has. Trubions ability to
compete successfully will depend largely on its ability to:
|
|
|
|
|
design and develop products that are superior to other products
in the market;
|
36
|
|
|
|
|
attract and retain qualified scientific, medical, product
development, commercial, and sales and marketing personnel;
|
|
|
|
obtain patent
and/or other
proprietary protection for Trubions processes, product
candidates, and technologies;
|
|
|
|
operate without infringing the patents and proprietary rights of
third parties;
|
|
|
|
obtain required regulatory approvals; and
|
|
|
|
successfully collaborate with others in the design, development,
and commercialization of new products.
|
Established competitors may invest heavily to quickly discover
and develop novel compounds that could make Trubions
product candidates obsolete. In addition, any new product that
competes with a generic market-leading product must demonstrate
compelling advantages in efficacy, convenience, tolerability,
and safety in order to overcome severe price competition and to
be commercially successful. If Trubion is not able to compete
effectively against its current and future competitors, its
business will not grow, and its financial condition and
operating results will suffer.
Trubion
may fail to select or capitalize on the most scientifically,
clinically, or commercially promising or profitable product
candidates.
Trubion has limited technical, managerial, and financial
resources to determine which of its product candidates should
proceed to initial clinical trials, later-stage clinical
development, and potential commercialization and, further,
Trubion may make incorrect determinations as a result of its
limited resources or information available to it at the time of
its determination. Trubions decisions to allocate its
research and development, management, and financial resources
toward particular product candidates or therapeutic areas may
not lead to the development of viable commercial products and
may divert resources from better opportunities. Similarly,
Trubions decisions to delay or terminate drug development
programs may also be incorrect and could cause it to miss
valuable opportunities.
Even
if Trubions product candidates receive regulatory
approval, they could be subject to restrictions or withdrawal
from the market and Trubion may be subject to penalties if it
fails to comply with regulatory requirements or if it
experiences unanticipated problems with its
products.
Any product candidate for which Trubion receives regulatory
approval, together with the manufacturing processes,
post-approval clinical data, and advertising and promotional
activities for such product, will be subject to continued review
and regulation by the FDA and other regulatory agencies. Even if
regulatory approval of a product candidate is granted, the
approval may be subject to limitations on the indicated uses for
which the product candidate may be marketed or on the conditions
of approval, or contain requirements for costly post-marketing
testing and surveillance to monitor the safety or efficacy of
the product candidate. Later discovery of previously unknown
problems with Trubions products or their manufacture, or
failure to comply with regulatory requirements, may result in,
among other things:
|
|
|
|
|
restrictions on the products or manufacturing processes;
|
|
|
|
withdrawal of the products from the market;
|
|
|
|
voluntary or mandatory recalls;
|
|
|
|
fines;
|
|
|
|
suspension of regulatory approvals;
|
|
|
|
product seizures; or
|
|
|
|
injunctions or the imposition of civil or criminal penalties.
|
If Trubion is slow or otherwise unable to adapt to changes in
existing regulatory requirements, it may lose marketing approval
for any products that may be approved in the future.
37
Failure
to obtain regulatory approval in foreign jurisdictions would
prevent Trubion from marketing its products
internationally.
Trubion intends to have its product candidates marketed outside
the United States. In order to market its products in the
European Union and many other
non-U.S. jurisdictions,
Trubion must obtain separate regulatory approvals and comply
with numerous and varying regulatory requirements. To date,
Trubion has not filed for marketing approval of any of its
product candidates and may not receive the approvals necessary
to commercialize its product candidates in any market. The
approval procedure varies among countries and can involve
additional testing and data review. The time required to obtain
foreign regulatory approval may differ from that required to
obtain FDA approval. The foreign regulatory approval process may
include all of the risks associated with obtaining FDA approval,
or may include different or additional risks. Trubion may not
obtain foreign regulatory approvals on a timely basis, if at
all. Approval by the FDA does not ensure approval by regulatory
agencies in other countries, and approval by one foreign
regulatory authority does not ensure approval by regulatory
agencies in other foreign countries or by the FDA. A failure or
delay in obtaining regulatory approval in one jurisdiction may
have a negative effect on the regulatory approval process in
other jurisdictions, including approval by the FDA. The failure
to obtain regulatory approval in foreign jurisdictions could
seriously harm Trubions business.
Trubions
product candidates may never achieve market acceptance even if
it obtains regulatory approvals.
Even if Trubion obtains regulatory approvals for the commercial
sale of its product candidates, the commercial success of these
product candidates will depend on, among other things, their
acceptance by physicians, patients, third-party payors, and
other members of the medical community as a therapeutic and
cost-effective alternative to competing products and treatments.
If Trubions product candidates fail to gain market
acceptance, Trubion may be unable to earn sufficient revenue to
continue its business. Market acceptance of, and demand for, any
product that Trubion may develop and commercialize will depend
on many factors, including:
|
|
|
|
|
its ability to provide acceptable evidence of safety and
efficacy;
|
|
|
|
the prevalence and severity of adverse side effects;
|
|
|
|
availability, relative cost, and relative efficacy of
alternative and competing treatments;
|
|
|
|
the effectiveness of Trubions marketing and distribution
strategy;
|
|
|
|
publicity concerning Trubions products or competing
products and treatments; and
|
|
|
|
its ability to obtain sufficient third-party insurance coverage
or reimbursement.
|
If Trubions product candidates do not become widely
accepted by physicians, patients, third-party payors, and other
members of the medical community, its business, financial
condition, and operating results would be materially adversely
affected.
If
Trubion is unable to establish a sales and marketing
infrastructure or enter into collaborations with partners to
perform these functions, it will not be able to commercialize
its product candidates.
Trubion currently does not have any internal sales, marketing,
or distribution capabilities. In order to commercialize any of
its product candidates that are approved for commercial sale,
Trubion must either acquire or internally develop a sales,
marketing, and distribution infrastructure or enter into
collaborations with partners able to perform these services for
it. In December 2005, Trubion entered into a collaboration
agreement with Wyeth, now Pfizer, to develop and commercialize
therapeutics directed to TRU-015 and other therapeutics directed
to the CD20 protein and other targets. In August 2009, it
entered into a collaboration agreement with Facet, now owned by
Abbott, to develop and commercialize TRU-016. If Trubion does
not enter into collaborations with respect to product candidates
not covered by the Pfizer or Abbott collaborations, or if any of
its product candidates are the subject of collaborations with
partners that are not able to commercialize such product
candidates, Trubion will need to acquire or internally develop a
sales, marketing, and distribution infrastructure. Factors that
may inhibit
38
Trubions efforts to commercialize its product candidates
without partners that are able to commercialize the product
candidates include:
|
|
|
|
|
its inability to recruit and retain adequate numbers of
effective sales and marketing personnel;
|
|
|
|
the inability of sales personnel to obtain access to or persuade
adequate numbers of physicians to prescribe Trubions
products;
|
|
|
|
the lack of complementary products to be offered by sales
personnel, which may put Trubion at a competitive disadvantage
relative to companies with more extensive product lines; and
|
|
|
|
unforeseen costs and expenses associated with creating a sales
and marketing organization.
|
If Trubion is not able to partner with a third party able to
commercialize its product candidates, or is not successful in
recruiting sales and marketing personnel or in building a sales,
marketing, and distribution infrastructure, it will have
difficulty commercializing its product candidates, which would
adversely affect its business and financial condition.
If any
products Trubion develops become subject to unfavorable pricing
regulations, third-party reimbursement practices or healthcare
reform initiatives, its business could be harmed.
Trubions ability to commercialize any product candidate
profitably will depend in part on the extent to which
reimbursement for such product candidate and related treatments
will be available from government health administration
authorities, private health insurers or private payors, and
other organizations in the United States and internationally.
The U.S. government and other governments have shown
interest in pursuing healthcare reform, as evidenced by the
recent passing of the Patient Protection and Affordable
Healthcare Act. Such government-adopted reform measures may
adversely impact the pricing of healthcare products and services
in the U.S. or internationally and the amount of
reimbursement available from governmental agencies or other
third party payors. At this time, Trubion cannot predict which,
if any, additional healthcare reform proposals will be adopted,
when they may be adopted or what the impact they, or the
recently approved federal legislation, may have on
Trubions business and operations, and any such impact may
be adverse on its operating results and financial condition.
Even if Trubion succeeds in bringing one or more product
candidates to market, these products may not be considered
cost-effective, and the amount reimbursed for any product may be
insufficient to allow Trubion to sell it profitably. Because
Trubions product candidates are in the early stages of
development, Trubion is unable at this time to determine their
cost-effectiveness and the level or method of reimbursement.
There may be significant delays in obtaining coverage for newly
approved products, and coverage may be more limited than the
purposes for which the product candidate is approved by the FDA
or foreign regulatory agencies. Moreover, eligibility for
coverage does not mean that any product will be reimbursed in
all cases or at a rate that covers Trubions costs,
including research, development, manufacture, sale, and
distribution. Increasingly, the third-party payors who reimburse
patients, such as government and private payors, are requiring
that companies provide them with predetermined discounts from
list prices and are challenging the prices charged for medical
products. If the reimbursement Trubion is able to obtain for any
product it develops is inadequate in light of its development
and other costs, Trubions business could be harmed.
Trubion
faces potential product liability exposure, and if successful
claims are brought against it, it may incur substantial
liability for a product candidate and may have to limit its
commercialization.
The use of Trubions product candidates in clinical trials
and the sale of any products for which it obtains marketing
approval expose it to the risk of product liability claims.
Product liability claims might be brought against Trubion by
consumers, health-care providers, pharmaceutical companies, or
others selling its products. If Trubion cannot successfully
defend itself against these claims, it will incur substantial
liabilities. Regardless of merit or eventual outcome, product
liability claims may result in:
|
|
|
|
|
decreased demand for Trubions product candidates;
|
|
|
|
impairment of Trubions business reputation;
|
|
|
|
withdrawal of clinical trial participants;
|
39
|
|
|
|
|
costs of related litigation;
|
|
|
|
substantial monetary awards to patients or other claimants;
|
|
|
|
loss of revenues; and
|
|
|
|
the inability to commercialize Trubions product candidates.
|
Although Trubion currently has product liability insurance
coverage for its clinical trials for expenses or losses,
Trubions insurance coverage may not reimburse it or may
not be sufficient to reimburse it for any or all expenses or
losses it may suffer. Moreover, insurance coverage is becoming
increasingly expensive and, in the future, Trubion may not be
able to maintain insurance coverage at a reasonable cost or in
sufficient amounts to protect it against losses due to
liability. Trubion intends to expand its insurance coverage to
include the sale of commercial products if it obtains marketing
approval for its product candidates in development, but Trubion
may be unable to obtain commercially reasonable product
liability insurance for any products approved for marketing. On
occasion, large judgments have been awarded in class action
lawsuits based on products that had unanticipated side effects.
A successful product liability claim or series of claims brought
against Trubion could cause its stock price to fall and, if
judgments exceed Trubions insurance coverage, could
decrease its cash and adversely affect its business.
If
Trubion uses biological and hazardous materials in a manner that
causes contamination or injury or violates laws, it may be
liable for damages.
Trubions research and development activities involve the
use of potentially harmful biological materials, as well as
hazardous materials, chemicals, and various radioactive
compounds. Trubion cannot completely eliminate the risk of
accidental contamination or injury from the use, storage,
handling or disposal of these materials. In the event of
contamination or injury, Trubion could be held liable for
damages that result, and any liability could exceed its
resources. Trubion does not maintain liability insurance
coverage for its handling of biological or hazardous materials.
Trubion, the third parties that conduct clinical trials on its
behalf, and the third parties that manufacture its product
candidates are subject to federal, state, and local laws and
regulations governing the use, storage, handling, and disposal
of these materials and waste products. The cost of compliance
with these laws and regulations could be significant. The
failure to comply with any of these laws and regulations could
result in significant fines and work stoppages and may harm
Trubions business.
Risks
Related to Trubions Common Stock
Prior
to the completion of Trubions proposed merger with
Emergent BioSolutions, the trading price of Trubion common stock
may fluctuate based on the trading price of Emergent
BioSolutions common stock.
Under the terms of Trubions merger agreement with Emergent
BioSolutions, holders of Trubion common stock will receive a
payment of $1.365 in cash, without interest; 0.1641 of a share
of Emergent BioSolutions common stock; and a CVR for each share
of Trubion common stock that they hold immediately prior to the
effective time of the merger. As a result, Trubions stock
price may fluctuate based on the trading price of Emergent
BioSolutions common stock and market assumptions regarding the
probability that the transaction will be completed. The trading
price of Emergent BioSolutions common stock may be influenced by
a variety of factors beyond its control, including general
economic and market conditions.
The
trading price of Trubion common stock may be subject to
significant fluctuations and volatility, and Trubion
stockholders may be unable to resell their shares at a
profit.
The trading prices of many smaller publicly traded companies are
highly volatile, particularly companies such as Trubion that
have limited operating histories. Accordingly, the trading price
of Trubion common stock has been subject to significant
fluctuations and may continue to fluctuate or decline. Since
Trubions initial public offering, which was completed in
October 2006, the price of Trubion common stock has ranged from
an intra-day
low of
40
$1.00 to an
intra-day
high of $22.50. Factors that could cause fluctuations in the
trading price of Trubion common stock include the following:
|
|
|
|
|
the effect of the announcement or pendency of Trubions
proposed merger with Emergent BioSolutions on Trubions
relationships with its collaborators, operating results and
business generally;
|
|
|
|
the occurrence of any event, change or circumstance that could
give rise to the ability on the part of Emergent BioSolutions to
terminate the merger agreement;
|
|
|
|
the possibility that Trubions proposed merger with
Emergent BioSolutions will not be completed;
|
|
|
|
low trading volumes;
|
|
|
|
Trubions ability to develop and market new and enhanced
product candidates on a timely basis;
|
|
|
|
announcements by Trubion or its collaborators or competitors of
new commercial products, clinical progress or the lack thereof,
changes in or terminations of relationships, significant
contracts, commercial relationships, or capital commitments;
|
|
|
|
commencement of, or Trubions involvement in, litigation;
|
|
|
|
changes in earnings estimates or recommendations by securities
analysts;
|
|
|
|
changes in governmental regulations or in the status of
Trubions regulatory approvals;
|
|
|
|
any major change in Trubions board of directors or
management;
|
|
|
|
quarterly variations in Trubions operating results or
those of its collaborators or competitors;
|
|
|
|
general economic conditions and slow or negative growth of
Trubions markets; and
|
|
|
|
political instability, natural disasters, war,
and/or
events of terrorism.
|
In addition, the U.S. stock market in the last
24 months has experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate
to the operating performance of trading companies. Broad market
and industry factors may seriously affect the market price of
companies stock, including Trubions, regardless of
actual operating performance. In addition, in the past,
following periods of volatility in the overall market and the
market price of a particular companys securities,
securities class action litigation has often been instituted
against these companies. This litigation, if instituted against
Trubion, could result in substantial costs and a diversion of
its managements attention and resources.
The
concentration of Trubion capital stock ownership with insiders
will likely limit a holders ability to influence corporate
matters.
As of September 3, 2010, Trubions executive officers,
directors, current five percent or greater stockholders, and
affiliated entities together beneficially owned approximately
80.3% of Trubions outstanding common stock. As a result,
these stockholders, acting together, have control over most
matters that require approval by Trubion stockholders, including
the election of directors and approval of significant corporate
transactions. Corporate action might be taken even if other
stockholders oppose such action. This concentration of ownership
might also have the effect of delaying or preventing a change of
control of Trubion that other stockholders may view as
beneficial.
If
securities analysts do not publish research or reports about
Trubions business, or if they downgrade Trubion stock, the
price of Trubion common stock could decline.
The trading market for Trubion common stock will rely in part on
the availability of research and reports that third-party
industry or financial analysts publish about Trubion. There are
many large, publicly traded companies active in the
biopharmaceutical industry, which may mean it will be less
likely that Trubion receives widespread analyst coverage.
Furthermore, if one or more of the analysts who do cover Trubion
downgrade Trubion stock, its stock price would likely decline.
If one or more of these analysts cease coverage of Trubion,
Trubion could lose visibility in the market, which in turn could
cause Trubions stock price to decline.
41
Anti-takeover
provisions in Trubions charter documents and under
Delaware law could make an acquisition of Trubion, which may be
beneficial to Trubion stockholders, more difficult and may
prevent attempts by Trubion stockholders to replace or remove
Trubions current management.
Provisions in Trubions certificate of incorporation and
bylaws may delay or prevent an acquisition of Trubion or a
change in its management. These provisions include a classified
board of directors, a prohibition on actions by written consent
of its stockholders and the ability of its board of directors to
issue preferred stock without stockholder approval. In addition,
because Trubion is incorporated in Delaware, it is governed by
the provisions of Section 203 of the Delaware General
Corporation Law, which prohibits stockholders owning in excess
of 15% of Trubions outstanding voting stock from merging
or combining with it. Although Trubion believes these provisions
collectively provide for an opportunity to receive higher bids
by requiring potential acquirers to negotiate with its board of
directors, they would apply even if the offer may be considered
beneficial by some stockholders. In addition, these provisions
may frustrate or prevent any attempts by Trubion stockholders to
replace or remove Trubions current management by making it
more difficult for stockholders to replace members of
Trubions board of directors, which is responsible for
appointing the members of its management.
Trubion
is exposed to potential risks from legislation requiring
companies to evaluate controls under
Section 404 of the Sarbanes-Oxley Act.
The Sarbanes-Oxley Act requires that Trubion maintain effective
internal controls over financial reporting and disclosure
controls and procedures. Among other things, Trubion must
perform system and process evaluation and testing of its
internal controls over financial reporting to allow management
to report on its internal controls over financial reporting, as
required by Section 404 of the Sarbanes-Oxley Act.
Compliance with Section 404 requires substantial accounting
expense and significant management efforts. Trubions
testing may reveal deficiencies in its internal controls that
would require it to remediate in a timely manner so as to be
able to comply with the requirements of Section 404 each
year. If Trubion is not able to comply with the requirements of
Section 404 in a timely manner each year, it could be
subject to sanctions or investigations by the SEC, the Nasdaq
Global Market or other regulatory authorities that would require
additional financial and management resources and could
adversely affect the market price of Trubion common stock.
42
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents incorporated
by reference into this proxy statement/prospectus contain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 that involve risks and
uncertainties, as well as assumptions, that, if they never
materialize or prove incorrect, could cause the results of
Emergent BioSolutions, Trubion or the combined company to differ
materially from those expressed or implied by such
forward-looking statements. Forward-looking statements generally
are identified by the words may, will,
project, might, expects,
anticipates, believes,
intends, estimates, should,
could, would, strategy,
plan, continue, pursue, or
the negative of these words or other words or expressions of
similar meaning. All statements other than statements of
historical fact are statements that could be deemed
forward-looking statements. For example, forward-looking
statements include statements about Emergent BioSolutions
and Trubions future financial and operating results,
plans, expectations for research and development revenue and
profits as a combined company, costs and expenses, taxes,
interest rates, outcome of contingencies, financial condition,
liquidity, business strategies and cost savings; any statements
of the plans, strategies and objectives of management for future
operations, including the execution of integration plans and the
anticipated timing of filings and approvals related to the
merger; the timing for closing the merger; any statements
concerning Emergent BioSolutions and Trubions
product candidates and product development; any statements
regarding future economic conditions or performance; statements
of belief and any statement of assumptions underlying any of the
foregoing. The risks, uncertainties and assumptions referred to
above include the risk that the merger may not close, including
the risk that any required stockholder approval for the merger
and related transactions may not be obtained; the possibility
that expected synergies and cost savings will not be obtained or
that litigation may delay the merger; the difficulty of
integrating the business, operations and employees of the two
companies; as well as the reliance on collaborative partners for
milestone and royalty payments, regulatory hurdles facing
product candidates, uncertain product development costs,
disputes regarding ownership of intellectual property, and the
commercial success of any approved products; and other risks and
uncertainties described in the section entitled Risk
Factors and in the documents that are incorporated by
reference into this proxy statement/prospectus. You should note
that the discussion of Trubions board of directors
reasons for the merger and the description of its and Emergent
BioSolutions respective financial advisors opinion
contain forward-looking statements that describe beliefs,
assumptions and estimates as of the indicated dates and those
forward-looking expectations may have changed as of the date of
this proxy statement/prospectus.
If any of these risks or uncertainties materializes or any of
these assumptions proves incorrect, the results of Emergent
BioSolutions, Trubion or the combined company could differ
materially from the expectations in these statements. The
forward-looking statements included in this proxy
statement/prospectus are made only as of the date of this proxy
statement/prospectus, and neither Emergent BioSolutions nor
Trubion is under any obligation to update their respective
forward-looking statements and neither party intends to do
so.
43
THE
COMPANIES
Emergent
BioSolutions
Emergent BioSolutions is a company focused on the development,
manufacture and commercialization of vaccines and antibody
therapies that assist the bodys immune system to prevent
or treat disease. For financial reporting purposes, Emergent
BioSolutions operates in two principal business segments:
biodefense and commercial. Its biodefense segment focuses on
vaccines and antibody therapies for use against biological
agents that are potential weapons of bioterrorism and
biowarfare, while its commercial segment focuses on vaccines and
antibody therapies targeting infectious diseases that represent
significant unmet or underserved public health needs.
Emergent BioSolutions program pipeline currently includes
programs focused on anthrax, tuberculosis, typhoid, influenza
and chlamydia. Set forth below is a list of each of its products
or product candidates that are designed to address these disease
areas.
Anthrax
BioThrax also referred to as Anthrax Vaccine
Adsorbed, is the only vaccine approved by the FDA for the
prevention of anthrax disease. BioThrax is approved for
pre-exposure prevention of anthrax disease by all routes of
exposure, including inhalation.
BioThrax related programs initiatives
designed to further improve BioThrax as a medical
countermeasure, and include seeking approval for use as a
post-exposure prophylaxis against anthrax disease in combination
with antibiotic treatment, extending expiry dating from four
years to five years and reducing the number of required doses
from five to three. Emergent BioSolutions is also developing a
third generation anthrax vaccine product candidate based on
BioThrax that is designed to provide rapid immunity, in part
with funding from the National Institute of Allergy and
Infectious Diseases, or NIAID, and the Biomedical Advanced
Research and Development Authority, or BARDA.
rPA vaccine an anthrax vaccine product
candidate that is composed of a purified recombinant protective
antigen, or rPA, protein with an aluminum hydroxide adjuvant.
Double-mutant rPA vaccine an anthrax vaccine
product candidate based on a double-mutant form of rPA combined
with adjuvant CpG 7909 and an aluminum hydroxide adjuvant, which
Emergent BioSolutions is developing in part with funding from
NIAID and BARDA.
Anthrax immune globulin therapeutic a
therapeutic antibody product candidate for the treatment of
symptomatic anthrax disease, which Emergent BioSolutions is
developing in part and for which it initiated a Phase I/II
clinical trial and pilot animal studies in 2009 with funding
from NIAID.
Anthrax monoclonal antibody therapeutic a
human monoclonal antibody product candidate for treatment of
patients who present symptoms of anthrax disease, which Emergent
BioSolutions is developing in part with funding from NIAID and
BARDA.
Tuberculosis
Tuberculosis vaccine a single-dose,
injectable vaccine product candidate for use in persons who have
been vaccinated with Bacille Calmette-Guerin, or BCG, the
vaccine currently available against tuberculosis, for which
Emergent BioSolutions has commenced a Phase IIb efficacy
clinical trial in South Africa that is expected to conclude in
2012, and which it is developing as part of its joint venture
with the University of Oxford with funding and services from the
Wellcome Trust and the Aeras Global Tuberculosis Vaccine
Foundation.
Typhoid
Typhellatm
(typhoid vaccine live oral ZH9) a
single-dose, drinkable vaccine product candidate that Emergent
BioSolutions is developing with funding from the Wellcome Trust,
for which it has completed Phase I clinical trials in the United
States, the United Kingdom and Vietnam, and Phase II
clinical trials in Vietnam and the United States.
44
Influenza
Influenza vaccine a multivalent,
cross-protective human vaccine product candidate to protect
against influenza caused by a broad range of circulating H5
influenza strains, which Emergent BioSolutions is developing as
part of a joint venture with Temasek Life Science Ventures Pte
Ltd.
Chlamydia
Chlamydia vaccine a vaccine product candidate
designed to prevent disease caused by clinically relevant
strains of Chlamydia trachomatis.
Emergent BioSolutions has derived substantially all of its
product revenues from sales of BioThrax to the
U.S. Department of Defense, or DoD, and the
U.S. Department of Health and Human Services, or HHS, and
expects for the foreseeable future to continue to derive
substantially all product revenues from the sale of BioThrax to
U.S. government customers. Product revenues were
$217.2 million in 2009, $169.1 million in 2008 and
$169.8 million in 2007. Emergent BioSolutions is focused on
increasing sales of BioThrax to U.S. government customers,
expanding the market for BioThrax to other international and
domestic customers and pursuing label expansions and
improvements for BioThrax.
Emergent BioSolutions also seeks to advance development of its
product candidates through external funding arrangements.
Revenues from contracts and grants were $17.6 million in
2009, $9.4 million in 2008 and $13.1 million in 2007.
Emergent BioSolutions continues to actively pursue additional
government-sponsored development contracts and grants and to
encourage both governmental and non-governmental agencies and
philanthropic organizations to provide development funding or to
conduct clinical studies of its product candidates.
Emergent BioSolutions is a Delaware corporation with
headquarters at 2273 Research Boulevard, Suite 400,
Rockville, Maryland 20850, and its telephone number is
(301) 795-1800.
30333
Inc.
Merger sub is a Delaware corporation and an indirect wholly
owned subsidiary of Emergent BioSolutions incorporated on
August 10, 2010. Merger sub does not engage in any
operations and exists solely to facilitate the merger. Its
principal executive offices have the same address and telephone
number as Emergent BioSolutions.
35406
LLC
The surviving entity is a Delaware limited liability company and
a direct wholly owned subsidiary of Emergent BioSolutions formed
on August 10, 2010. The surviving entity does not engage in
any operations and exists solely to facilitate the merger. Its
principal executive offices have the same address and telephone
number as Emergent BioSolutions.
Trubion
Overview
Trubion is a biopharmaceutical company creating a pipeline of
novel protein therapeutic product candidates to treat autoimmune
and inflammatory diseases and cancer. Trubions mission is
to develop a variety of
first-in-class
product candidates customized in an effort to optimize safety,
efficacy, and convenience that Trubion believes may offer
improved patient experiences. Trubions current product
development efforts are focused on three proprietary
technologies that comprise the expanded foundation for Trubion
product development Small Modular
Immunopharmaceutical, or
SMIPtm
protein therapeutics,
SCORPIONtm
protein therapeutics, and
TRU-ADhanCetm
potency enhancing technology for immunopharmaceuticals.
Trubions current clinical-stage therapeutics target
specific antigens on B cells, CD20 and CD37, and are designed
using Trubions custom drug assembly technology.
Trubions lead product candidate, SBI-087, which Trubion is
developing with its partner, Pfizer Inc., or Pfizer, is,
Trubions next generation CD20-directed product candidate.
In June 2010, Trubion announced Pfizers decision to
discontinue development of Trubions first generation
CD20-directed product candidate, TRU-015, an investigational
drug in Phase II evaluation for the treatment of rheumatoid
arthritis, or RA, developed under Trubions
45
CD20 collaboration with Pfizer. SBI-087 for RA builds on
Trubions and Pfizers clinical experience with
TRU-015 and is based on Trubions SMIP technology. Patient
dosing has commenced and recruitment is currently ongoing in a
Phase II trial of SBI-087 for RA evaluating safety and
efficacy of subcutaneous administration of SBI-087. In addition,
patient enrollment is complete in an additional Phase I trial of
SBI-087 for RA in Japan. Finally, Pfizer is conducting a Phase I
clinical trial of SBI-087 in systemic lupus erythematosus, or
SLE, in which patient dosing has commenced and recruitment is
ongoing.
Trubions other clinical product candidate, TRU-016, which
Trubion is developing with its partner Abbott Laboratories, or
Abbott, is a novel CD37-directed SMIP protein therapeutic. A
TRU-016 Phase I clinical trial for patients with chronic
lymphocytic leukemia, or CLL, is currently under way. TRU-016
uses a different mechanism of action than CD20-directed
therapies. As a result, Trubion believes its novel design may
provide patients with improved therapeutic options and enhance
efficacy when used alone or in combination with chemotherapy
and/or
CD20-directed therapeutics.
In June and December 2009, Trubion announced positive results
following each of two preliminary analyses from the Phase I
clinical trial of TRU-016 for the treatment of CLL. The
objectives of the Phase I TRU-016 CLL study are to define safety
and tolerability, identify a maximum tolerated dose, or MTD,
evaluate pharmacology and pharmacodynamics, and assess
preliminary clinical activity. As of August 2010, Trubion has
not reached an MTD. Trubion has amended its IND to include
treatment of patients with non-Hodgkins lymphoma, or NHL, and
patient dosing has commenced and recruitment is ongoing.
Trubions product candidates are as follows:
|
|
|
|
|
SBI-087 for the Treatment of Rheumatoid
Arthritis. Trubions partner, Pfizer, in
collaboration with Trubion, has commenced two clinical studies
of SBI-087 for the treatment of RA. The first is a Phase II
randomized, placebo-controlled, double-blind, parallel-group,
outpatient dose regimen-finding study in which patient dosing
commenced in December 2009, with interim data review anticipated
to occur late 2010 or early 2011 and final data anticipated by
the end of 2011. The second is a Phase I dose escalation
clinical trial designed to evaluate the safety, tolerability,
pharmacokinetics, or PK, and pharmacodynamics, or PD, of a
single dose of SBI-087 in patients with RA, in which patient
enrollment is complete. In addition, patient enrollment is
complete in an additional Phase I study of SBI-087 for RA in
Japan.
|
|
|
|
SBI-087 for the Treatment of Systemic Lupus
Erythematosus. According to Datamonitor, SLE is
estimated to affect approximately 434,000 people in the
United States, Japan, and the five major European markets. The
prevalence of SLE varies significantly on a
country-by-country
basis and could be up to five times greater with expanding
disease definitions and increasing diagnosis. No new
pharmaceutical or biologic treatments have been approved for SLE
in over 40 years. Trubions partner Pfizer is
conducting a Phase I clinical trial of SBI-087 in SLE in which
patient dosing has commenced and recruitment is ongoing.
Currently, no protein therapeutics have been approved
specifically for the treatment of SLE.
|
|
|
|
TRU-016 for the Treatment of B-cell
Malignancies. According to the National Cancer
Institute, CLL is estimated to affect approximately
70,000 people in the United States. Approximately 12,000
new cases of CLL are diagnosed in the United States each year
according to Datamonitor. In addition, NHL, another
B-cell
malignancy, is one of the most common types of cancer accounting
for approximately 4% of all cancers. About 66,000 people
were expected to be diagnosed with NHL in 2009 in the United
States according to the American Cancer Society. Total reported
worldwide sales of one of the most commonly used biologics in
NHL,
Rituxan®,
surpassed $3 billion in 2009. Trubions TRU-016
product candidate targets CD37 for the treatment of B-cell
malignancies such as CLL and NHL. TRU-016 uses a different
mechanism of action than CD20-directed therapies. As a result,
Trubion believes that its novel design may provide patients with
improved therapeutic options and enhance efficacy when used
alone or in combination with chemotherapy
and/or other
CD20-directed therapeutics. Trubion is currently conducting a
Phase I clinical trial of TRU-016 in CLL and has filed an
amendment to include treatment of patients with NHL.
|
In addition to Trubions current product candidates,
Trubion is also developing additional alliance and proprietary
product candidates that build on Trubions existing product
experience. To date, none of Trubions
46
product candidates has been approved for marketing and sale to
patients nor has Trubion received any product revenue.
In August 2009, Trubion entered into a collaboration agreement
with Facet Biotech Corporation, now a wholly owned subsidiary of
Abbott, for the joint worldwide development and
commercialization of TRU-016, a product candidate in Phase I
clinical development for CLL. TRU-016 is a CD37-directed SMIP
protein therapeutic. The collaboration agreement includes
TRU-016 in all indications and all other CD37-directed protein
therapeutics. Under the terms of the collaboration agreement,
the parties will not develop or commercialize protein
therapeutics directed to CD37 outside of the collaboration
agreement.
In December 2005, Trubion entered into a collaboration agreement
with Wyeth, now a wholly owned subsidiary of Pfizer, for the
development and worldwide commercialization of TRU-015 and other
therapeutics directed to CD20, an antigen that is a validated
clinical target present on B cells. Pursuant to the agreement,
Trubion is also collaborating with Pfizer on the development and
worldwide commercialization of certain other product candidates
directed to a small number of targets other than CD20. During
the period in which Trubion will be providing research services
for Pfizer, Pfizer has the right, subject to Trubions
reasonable consent, to replace a limited number of these
targets. In addition, Trubion also has the option to co-promote
with Pfizer, on customary terms to be agreed, CD20-directed
therapies in the United States for niche indications. Trubion
retains the right to develop and commercialize, on its own or
with others, product candidates directed to all targets not
included within the agreement, including CD37. Unless it is
terminated earlier, Trubions agreement with Pfizer will
remain in effect on a
product-by-product
basis and on a
country-by-country
basis until the later of the date that any such product shall no
longer be covered by a valid claim of a United States or foreign
patent or application and, generally, ten years after the first
commercial sale of any product licensed under the agreement.
Product
Technologies
Trubions current product development efforts are focused
on three proprietary technologies that comprise the expanded
foundation for Trubion product development
SMIPtm
protein therapeutics,
SCORPIONtm
protein therapeutics, and
TRU-ADhanCetm
potency enhancing technology for immunopharmaceuticals. Trubion
believes that its product candidates offer the potential for
safer and more effective therapies than existing or other
potential products. Additionally, Trubion believes that these
technologies will provide the basis for the long-term
development of additional
first-in-class
product candidates.
SMIPtm
Protein Therapeutics vs. mAbs
Trubions custom SMIP drug assembly technology was designed
to specifically address the limitations of monoclonal
antibodies, or mAbs. SMIP therapeutics are single chain
polypeptides comprising a binding domain, a hinge domain and an
effector domain designed in an effort to meet predetermined
therapeutic criteria for specific diseases. SMIP proteins are
mono-specific therapeutics a drug that recognizes
and attaches to a single antigen target and initiates biological
activity. SMIP therapeutics have engineered structural design
characteristics and are significantly smaller than whole
antibodies, which Trubion believes allows for better in vivo
penetration.
47
SMIP technology enables Trubion to design and develop
differentiated product candidates for a range of targets and
biological activities that have the following advantages:
|
|
|
|
|
|
|
Engineered Structural Characteristics: When
engaging cell surface targets, SMIP proteins are capable of
bringing together cell surface molecules in ways not always
possible with mAbs. The binding domains of SMIP product
candidates have a different geometry than the binding domains of
mAbs that is, the binding domains are closer
together. The structural format of SMIP proteins permits
engineering a range of distances between the binding domains.
SMIP proteins are also capable of binding and neutralizing
soluble molecules.
|
|
|
|
|
|
|
|
Differentiated Product Candidates: SMIP
product candidates can be engineered to deliver desired cellular
signaling responses. These properties can be used to generate
biological responses not observed with mAbs. In addition, SMIP
proteins can be engineered to balance target signal induction,
complement-dependent cytotoxicity, or CDC and antibody-dependent
cellular cytotoxicity, or ADCC, mediated activity. The ability
to customize this balance of biological activities could result
in safer and more effective immunopharmaceuticals.
|
|
|
|
|
Improved Biodistribution: SMIP product
candidates have a particle size that is approximately one-half
the size of mAbs. Smaller molecules have been demonstrated to
penetrate tissues more readily, a feature Trubion believes will
provide increased therapeutic benefits.
|
|
|
Reliable Manufacturing: SMIP product
candidates can be produced at large scale in mammalian cell
expression systems from readily available materials.
|
|
|
Broad Therapeutic Application: SMIP product
candidates have potential application in diabetes, solid organ
transplant, oncology, and other high unmet need areas.
|
SCORPIONtm
Multispecific Protein Therapeutics
SCORPION therapeutics are a novel platform for the development
of multi-specific protein therapeutics. SCORPION therapeutics
are single chain proteins comprised of one binding domain, an
effector domain, and another binding domain. This proprietary
molecular class leverages Trubions
SMIPtm
product format by combining single-chain binding and effector
domain libraries, and adding additional binding domains. Trubion
utilizes human protein sequences selected for stability,
manufacturability, geometry of the binding domains, and low
immunogenicity.
SCORPION therapeutics offer several potential advantages:
|
|
|
|
|
Dual Targeting: SCORPION constructs enable
simultaneous multi-valent engagement of two or more different
soluble or cell-surface targets, providing the capability for
differentiated signaling events.
|
|
|
|
Desirable Pharmacodynamic Properties: SCORPION
constructs retain immunoglobulin effector functions such as long
in vivo half-life and Fc-dependent cellular cytotoxicity
(FcDCC) activity, if desired.
|
48
|
|
|
|
|
Development of Multiple Product
Candidates: SCORPION technology provides for a
multitude of product candidates by utilizing binding domains in
a variety of target combinations.
|
|
|
|
Reliable Manufacturing: SCORPION constructs
can be produced as stable, homogeneous products with a standard
manufacturing profile.
|
|
|
|
Broad Therapeutic Application: SCORPION
therapeutics have applications in autoimmune and inflammatory
diseases, or AIID, transplant, oncology, and other high unmet
need areas.
|
TRU-ADhanCetm
Technology: Greater ADCC Potency
Trubions
TRU-ADhanCetm
technology enhances the antibody-dependent cellular
cytotoxicity, or ADCC, potency of immunopharmaceutical product
candidates. In contrast to existing approaches that impose
challenges on product development, Trubion has created a
proprietary manufacturing methodology with the following
advantages:
|
|
|
|
|
TRU-ADhanCe requires no change to the amino acid sequence of a
product;
|
|
|
|
TRU-ADhanCe requires no change to a manufacturing cell
line; and
|
|
|
|
TRU-ADhanCe can be applied late in product development.
|
Trubions TRU-ADhanCe technology is capable of yielding a
well defined glycovariant product with ADCC via the addition of
the glycosidase inhibitor castanospermine during the
cell-culture stage of production. Although many other ADCC
technologies require genetic modifications to the producing cell
line, TRU-ADhanCe technology instead interferes with
carbohydrate maturation in production cell lines, yielding
products with enhanced ADCC.
Trubions
Product Candidates
Trubions current clinical product candidates target B
cells. B cells are important to the basic functioning of the
bodys immune system. In addition to producing antibodies
that attack and kill bacteria and viruses circulating within the
body, they also help recruit and coordinate other types of
immune system cells to perform specialized functions in the
bodys fight against disease and infection. When B cells
fail to appropriately distinguish the bodys own cells,
tissues or organs from foreign pathogens or proteins, the
mistaken identification can result in the B cells initiating an
immune response against healthy cells, which results in an
autoimmune disease that can lead to progressive disability.
Autoimmune diseases include RA, SLE, multiple sclerosis, type 1
diabetes, and Graves disease. As a group, autoimmune
diseases are among the most prevalent illnesses in the United
States, affecting up to 5-8% of the population, or up to
24 million people. In addition, when B cells become
malignant or otherwise multiply uncontrollably, they can result
in cancers known as lymphomas, leukemias and myelomas.
The following table sets forth the development stages of
Trubions product candidates:
49
SBI-087
SBI-087 is Trubions next generation, humanized,
CD20-directed product candidate for the treatment of RA, SLE,
and other autoimmune and inflammatory diseases. Pfizer is
evaluating both intravenous and subcutaneous formulations of
SBI-087 in multiple clinical studies. Preclinical studies
conducted by Pfizer evaluated the PK and PD of SBI-087 following
a single intravenous dose. Administration of SBI-087 in
preclinical studies resulted in dose-dependent B-lymphocyte
depletion in peripheral blood and lymphoid tissues that was more
profound and sustained in SBI-087-treated groups compared with
rituximab. Trubions partner, Pfizer, in collaboration with
Trubion, has commenced two clinical studies of SBI-087 for the
treatment of RA including a Phase II randomized,
placebo-controlled, double-blind, parallel-group, outpatient
dose regimen-finding study in which patient dosing commenced in
December 2009, with interim data review anticipated to occur in
late 2010/early 2011.
Rheumatoid
Arthritis
Background. RA is an autoimmune disease
characterized by inflammation of the joint lining, called the
synovium. In RA, a persons immune system attacks the
synovium, resulting in the thickening of the normally thin
membrane and degradation of the cartilage and bone at the joint.
Though the primary symptoms of RA are pain, stiffness and
swelling of joints, additional symptoms may include fatigue,
weakness, muscle pain, and lumps of tissue under the skin.
Tissue damage from the inflammation ultimately results in
deformity and disability.
Potential Market. According to Datamonitor, RA
is estimated to affect approximately 5.2 million people in
the United States, Japan and the five major European markets. In
2009 total reported worldwide sales of therapeutics used for the
treatment of RA were greater than $10 billion.
Notwithstanding the administration of currently available
treatments, approximately two-thirds of the RA patient
population experiences pain, stiffness and fatigue on a daily
basis. As a result, Trubion believes that there is a large unmet
medical need in the RA patient population for an effective drug
therapy.
Current Treatments. Initially, a patient
presenting symptoms of RA is typically prescribed non-steroidal
anti-inflammatory drugs, or NSAIDS. As the disease progresses,
the RA patient may be prescribed a regimen of disease modifying
anti-rheumatic drugs, or DMARDS, an anti-tumor necrosis factor,
or anti-TNF, or other biologics. It is estimated that 20% of the
RA patient population takes a combination of therapies that
include biologics. Most biologics currently on the market for RA
attempt to block the activity of immune system cytokines, which
are chemical messengers thought to be associated with the
autoimmune reactions, joint inflammation and bone damage
characteristic of RA. These biologics include anti-TNF drugs
such as
Remicade®,
Enbrel®,
Humira,®
and
Cimzia®.
Biologics are typically administered to patients with moderate
to severe RA who need therapy in addition to NSAIDS or DMARDS.
In addition to biologics that target immune system cytokines
such as
Kineret®,
Orencia®,
a drug that targets co-receptors on T cells,
Actemra®,
which targets IL-6 receptors and
Rituxan®
that, like SBI-087, is targeted to the CD20 antigen, have been
approved for RA.
SBI-087 for RA Ongoing Clinical
Development. Trubions partner Pfizer has
completed a Phase I study of SBI-087 for RA and a Phase II
study of SBI-087 for RA has commenced and is ongoing. In
addition, patient enrollment is complete in an additional Phase
I study of SBI-087 for RA in Japan.
Systemic
Lupus Erythematosus
Background. SLE is a debilitating, chronic,
inflammatory autoimmune disease characterized by the presence of
auto-reactive antibodies. It can cause disease in the skin,
internal organs, and the nervous system. Some of the most common
symptoms include extreme fatigue, painful or swollen joints,
fever, skin rashes, and kidney problems.
SLE is a chronic condition with episodic periods of disease
activity, known as flares, and periods of remission. Currently,
there is no cure for SLE, and symptomatic treatment is used in
an effort to prevent flares or treat them when they occur.
Trubion believes that B-cell depletion therapy is a promising
approach toward a targeted therapy in SLE.
Potential Market. According to Datamonitor,
SLE is estimated to affect 236,000 people in the United
States. The prevalence of SLE varies significantly on a
country-by-country
basis and could be up to five times greater with expanding
disease definitions and increasing diagnosis. No new
pharmaceutical or biologic treatments have been
50
approved for SLE in over 40 years. Trubion believes that
there is a large, unmet medical need in the SLE patient
population as SLE patients have a death rate three times higher
than that of the general population despite the fact that most
patients are young and middle-aged individuals.
Current Treatment. No protein therapeutics
have been approved specifically for use in the treatment of SLE.
Current drug therapies are predominantly palliative in nature
and are targeted to the patients specific symptoms.
Different medications are used to treat specific manifestations
of SLE. Treatments include acetaminophen
and/or
NSAIDs, immunosuppressants such as methotrexate and
cylcophosphamide, corticosteroids such as methylprednisolone,
and antimalarials such as hydroxychloroquine.
SBI-087 for SLE Ongoing Clinical
Development. Trubions partner, Pfizer, is
conducting a Phase I clinical trial of SBI-087 in SLE in which
patient dosing has commenced and recruitment is ongoing.
Commercialization
Rights
Trubions collaboration agreement with Pfizer includes a
worldwide licensing and commercialization agreement for the
development of SBI-087 and other therapies. Trubion retains an
option to co-promote with Pfizer, on customary terms to be
agreed, CD20-directed therapies in the United States for niche
indications.
TRU-016
Trubions TRU-016 program, in collaboration with Abbott, is
focused on the development of a novel
CD37-directed
therapy for B-cell malignancies, such as CLL and NHL. CD37 is a
clinically validated target for the treatment of B-cell
malignancies and Trubions TRU-016 product candidate has
been designed for a desired therapeutic label surrounding B-cell
depletion in these B-cell malignancies. CD37 is found at high
levels on B cells and at lower levels on a subpopulation of T
cells and myeloid cells. Experiments suggest that CD37 plays an
important role in B-cell regulation. In addition, CD37 is known
to be overexpressed in patients with CLL. TRU-016 uses a
different mechanism of action than CD20-directed therapies. As a
result, Trubion believes its novel design may provide patients
with improved therapeutic options and enhance efficacy when used
alone or in combination with chemotherapy
and/or other
CD20-directed therapeutics. Trubion is currently conducting a
Phase I clinical trial of TRU-016 in CLL. Trubion has amended
its IND to include treatment of patients with NHL and patient
dosing has commenced and recruitment is ongoing. Expansion of
the development program to other indications in oncology and
AIID is planned.
B-cell
Malignancies: Chronic Lymphocytic Leukemia and
Non-Hodgkins Lymphoma
Background. B cells and T cells are the two
major types of lymphocytes responsible for defending the body
against infection. Lymphocytic malignancies arise when these
cells multiply uncontrollably. CLL is a type of cancer affecting
the blood and bone marrow. It is a slowly progressing disease
and in most patients the abnormal proliferating lymphocytes are
clonal B cells arrested in the differentiation pathway between
pre B cells and mature B cells. NHL is a diverse group of
lymphocytic malignancies, approximately 85% of which are B-cell
malignancies.
Preclinical data has demonstrated that TRU-016 induces potent
ADCC against primary B-CLL cells, demonstrates significant in
vivo therapeutic efficacy, and induces potent apoptosis in
primary CLL cells. In addition, combination therapy with a
CD37-directed
SMIPtm
product candidate and CD20-directed therapy with
Rituxan®
has shown greater preclinical efficacy than either therapy alone.
Potential Market. According to the National
Cancer Institute, CLL is estimated to affect approximately
70,000 people in the United States. Approximately 12,000
new cases of CLL are diagnosed each year in the
United States according to Datamonitor. In addition, NHL,
another B-cell malignancy, is one of the most common types of
cancer accounting for about 4% of all cancers. About
66,000 people in the United States were expected to be
diagnosed with NHL in 2009 according to the American Cancer
Society. Total reported worldwide sales of one of the most
common used biologics in NHL,
Rituxan®
surpassed $3 billion in 2009.
Current Treatments. While available CLL and
NHL therapies include chemotherapy, radiation therapy, surgery
and bone and stem cell transplantation, biologics have become
the standard of care to treat these cancers. Biologic therapies
for NHL include interferon and mAbs such as
Rituxan®/Mabthera,
Bexxar®,
Zevalin®
and
51
Arzerra®.
These mAbs all target CD20 on B cells, and Bexxar and Zevalin
are radiolabeled. In addition,
Campath®
is a CD52-targeted mAb indicated for CLL, and
Treanda®,
a cytotoxic, is also indicated for CLL. FCR, a combination of
fludaraline, cyclophosphamide and rituximab is currently the
most effective combination for the treatment of CLL.
TRU-016 for CLL Ongoing Clinical
Development. A TRU-016 Phase I clinical trial for
patients with CLL is currently under way. The open label
clinical trial is composed of two parts- a dose escalation study
designed to evaluate the safety, tolerability and
pharmacokinetics of TRU-016; and an expansion cohort designed to
further evaluate safety and to estimate clinical activity of
TRU-016 in patients with previously treated CLL or small
lymphocytic leukemia. In addition, Trubion has amended its IND
to include treatment of patients with NHL and patient dosing has
commenced and recruitment is ongoing.
TRU-016 for CLL Clinical Trial Results. In
December 2009, Trubion announced positive data from a Phase I
study of TRU-016 in patients with relapsed and refractory CLL.
Evidence of TRU-016 biological activity was seen beginning with
patients dosed at the 0.3 mg/kg dose level, including in
high-risk patients. Partial response was observed in five
patients, including one patient with the 17p deletion
cytogenetic abnormality. Partial response was determined
following investigator assessment and the
two-month
confirmation of these responses is pending. Two patients with
leukemia cutis experienced clearing, one complete and one
partial. At the 10 mg/kg dose, four of five patients with
elevated peripheral lymphocyte counts were reduced to normal
levels. A total of 16 serious adverse events have been reported.
The maximum tolerated dose has not yet been reached.
TRU-016
Phase I Clinical Results: Dose Response in Evaluable
Patients Reduction in Peripheral
Lymphocytes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normalized
|
|
Median
|
|
|
Dose Cohort
|
|
N
|
|
Lymph Count
|
|
Reduction
|
|
Best Response
|
1 mg/kg
|
|
|
3
|
|
|
|
0/3 (0%
|
)
|
|
|
67%
|
|
|
|
0
|
|
3 mg/kg
|
|
|
4
|
|
|
|
0/4 (0%
|
)
|
|
|
78%
|
|
|
|
0
|
|
6 mg/kg
|
|
|
4
|
|
|
|
1/4 (25%
|
)
|
|
|
85%
|
|
|
|
1 PR
|
|
10 mg/kg
|
|
|
5
|
|
|
|
4/5 (80%
|
)
|
|
|
95%
|
|
|
|
2 PR
|
|
3 mg/kg TIW
|
|
|
4
|
|
|
|
1/4 (25%
|
)
|
|
|
49%
|
|
|
|
1 PR
|
|
6 mg/kg TIW
|
|
|
4
|
|
|
|
1/1 (100%
|
)
|
|
|
77%
|
|
|
|
1 PR
|
|
Strategic
Collaborations
Abbott
In August 2009, Trubion entered into a collaboration agreement
with Facet, now a wholly owned subsidiary of Abbott, for the
joint worldwide development and commercialization of TRU-016, a
product candidate in Phase I clinical development for CLL.
TRU-016 is a CD37-directed SMIP protein therapeutic. The
collaboration agreement includes TRU-016 in all indications and
all other CD37-directed protein therapeutics. Under the terms of
the collaboration agreement, the parties will not develop or
commercialize protein therapeutics directed to CD37 outside of
the collaboration agreement.
Trubion received an upfront payment of $20 million in cash
in September 2009 and may receive up to $176.5 million in
additional contingent payments upon the achievement of specified
development, regulatory and sales milestones. Trubion and Abbott
share equally the costs of all development, commercialization
and promotional activities and all global operating profits. In
connection with the execution of the collaboration agreement,
Trubion and Facet also entered into a stock purchase agreement,
pursuant to which Facet purchased 2,243,649 shares of
Trubions common stock for an aggregate purchase price of
$10 million, or $4.46 per share. The per share price of
$4.46 represents a 35% equity premium over the
sixty-day
trading average of Trubions common stock on the Nasdaq
Global Market for the trading period ending immediately prior to
the execution of the stock purchase agreement.
With respect to control over decisions and responsibilities, the
collaboration agreement provides for a joint steering committee,
or JSC, consisting of representatives of Trubion and Abbott,
which makes decisions by
52
consensus. If the JSC is unable to reach a consensus, then the
matter will be referred to designated officers at Trubion and
Abbott for resolution. If these officers are unable to resolve
the matter, then it will be resolved by arbitration. Both
Trubion and Abbott, at their sole discretion, may discontinue
participation on the JSC with 90 days written notice to the
other party.
At predefined times, the parties have the right to opt-out of
the collaboration entirely or on a
product-by-product
basis. Upon a change of control of a party, the other party will
have the right to opt-out of the collaboration entirely and if
the successor party is conducting a program that competes with
the programs under the collaboration agreement, then the
successor party must either (i) opt-out of the
collaboration entirely or (ii) divest the competing program
to a third party. If a party exercises its opt-out right with
respect to a product, then the parties will no longer share
development and commercialization costs for such product and
such opting-out party will receive certain royalty payments upon
the sale of such product, rather than half of the profits
derived from such product. Even if Abbott exercises its opt-out
right, its obligation to make milestone payments to Trubion
continues. In addition, if the party that opts-out is the lead
manufacturing party for the opt-out product, then such party
must continue to supply the product to the continuing party for
up to eighteen months following the opt-out.
Abbott can terminate the collaboration agreement at any time, in
which event all rights to TRU-016 and other CD37-directed
protein therapeutics under the collaboration agreement would
revert to Trubion. If Abbott terminates the collaboration
agreement in the first 18 months, then Abbott must pay
Trubion a $10 million termination fee.
If there is a material breach of the collaboration agreement,
then the non-breaching party may either terminate the
collaboration agreement or continue the collaboration agreement
and force the breaching party to opt-out and accept royalties at
a reduced rate.
Either party may assign its interest in the collaboration
agreement to a third party, provided that the non-assigning
party maintains a right of first negotiation over any proposed
assignment. In addition, either Trubion or Abbott can freely
assign the collaboration agreement without the consent of the
other party in connection with certain specified change of
control transactions, such as an acquisition.
Pfizer
In December 2005 Trubion entered into a collaboration agreement
with Wyeth, now a wholly owned subsidiary of Pfizer, for the
development and worldwide commercialization of TRU-015 and other
CD20-directed therapeutics. Pursuant to the agreement, Trubion
is also collaborating with Pfizer on the development and
worldwide commercialization of certain other product candidates
directed to a small number of targets other than CD20. During
the period in which Trubion will be providing research services
for Pfizer, Pfizer has the right, subject to Trubions
reasonable consent, to replace a limited number of these
targets. In addition, Trubion has the option to co-promote with
Pfizer, on customary terms to be agreed, CD20-directed therapies
in the United States for niche indications. Trubion retains the
right to develop and commercialize, by itself or with others,
product candidates directed to all targets not included within
the agreement. In June 2010, Trubion announced Pfizers
decision to discontinue development of TRU-015, an
investigational drug in Phase II evaluation for the
treatment of RA developed under Trubions CD20
collaboration with Pfizer. Pfizer confirmed that it will
continue to develop SBI-087, Trubions next-generation,
humanized, subcutaneous CD20 RA product candidate also in
Phase II clinical evaluation. Unless it is terminated
earlier, Trubions agreement with Pfizer will remain in
effect on a
product-by-product
basis and on a
country-by-country
basis until the later of the date that any such product shall no
longer be covered by a valid claim of a U.S. or foreign
patent or application and, generally, ten years after the first
commercial sale of any product licensed under the agreement.
In connection with the agreement, Wyeth paid Trubion a
$40 million non-refundable, non-creditable, upfront fee in
January 2006 and purchased directly from Trubion in a private
placement, concurrent with Trubions initial public
offering, 800,000 shares of Trubions common stock at
the initial public offering price of $13.00 per share, resulting
in net proceeds to Trubion of $10.4 million. Under the
agreement, Trubion provided research services for an initial
three-year period ended December 22, 2008 with the option
for Wyeth to extend the service period for two additional
one-year periods. Wyeths financial obligations during the
initial research service term included collaborative research
funding commitments of $9.0 million in exchange for such
committed research services.
53
This $9.0 million was subject to an increase if the service
period was extended beyond three years as well as annual
increases pursuant to percentage changes in the CPI. In June
2008, Wyeth exercised the first option under the terms of the
agreement to extend the research period for an additional
one-year period through December 22, 2009. In June 2009,
Wyeth exercised the second option under the terms of the
agreement to extend the research period for an additional
one-year period through December 22, 2010. Due to the
research period extension in 2009, the collaboration research
funding commitments to Trubion initially from Wyeth and now from
Pfizer, increased to approximately $3.3 million per year in
exchange for committed research services from Trubion through
December 2010. In anticipation of the completion of the research
program in December 2010, Pfizer has retained a subset of the
non-CD20 targets licensed from Trubion and released the
remaining targets to Trubion.
Pfizers financial obligations include additional amounts
for reimbursement of
agreed-upon
external research and development costs and patent costs.
Pursuant to the agreement, Pfizer is also obligated to make
payments to Trubion of up to $250 million based on the
achievement of specified regulatory and sales milestones for
CD20-directed
therapies and payments to Trubion of up to $200 million
based on the specified achievement of regulatory and sales
milestones for therapies directed to the small number of
retained non-CD20 targets. In addition, Trubion will receive
royalty payments in the event of future licensed product sales.
In October 2009, Pfizer completed its acquisition of Wyeth.
Trubions collaboration agreement remains in effect with
Pfizer and, in response to Trubions request, Pfizer has
provided further written assurances reaffirming its commitment
to comply with the terms and conditions of the agreement.
If during the 12 month period following Pfizers
acquisition of Wyeth, Pfizer is required or voluntarily decides
to divest itself of one or more of the products under the
collaboration agreement, then subject to any governmental
limitations, Pfizer must offer Trubion an exclusive opportunity
to negotiate the acquisition or license of all of Pfizers
rights to that product on commercially reasonable terms. If
Trubion does not conclude an agreement with Pfizer covering the
product, Pfizer can divest itself of the product but the terms
of that divestiture cannot be more favorable than those that
were last offered to Trubion unless Trubion is given the
opportunity to accept those more favorable terms.
Upon a change of control of Trubion, the agreement would remain
in effect, subject to the right of Pfizer to terminate specified
provisions of the agreement.
Assuming product candidates under the collaboration with Pfizer
continue to progress in development, expenses for future
clinical trials may be higher than those incurred in prior
clinical trials. These expenses will, however, be incurred by
Pfizer. In addition, Pfizer is responsible for a substantial
portion of costs related to patent prosecution and patent
litigation for products directed to targets selected by Pfizer
pursuant to the collaboration agreement.
Competition
The pharmaceutical and biotechnology industries are intensely
competitive, and any product candidate developed by Trubion
would likely compete with other drugs and therapies. There are
many pharmaceutical companies, biotechnology companies, public
and private universities, government agencies, and research
organizations actively engaged in research and development of
products targeting the same markets as Trubions product
candidates. Many of these organizations have substantially
greater financial, technical, manufacturing, marketing and
personnel resources than Trubion has. Several of them have
developed or are developing therapies that could be used for
treatment of the same diseases that Trubion is targeting. In
addition, many of these competitors have significantly greater
commercial infrastructures than Trubion has. Trubions
ability to compete successfully will depend largely on its
ability to:
|
|
|
|
|
design and develop products that are superior to other products
in the market;
|
|
|
|
successfully collaborate with others in the design, development
and commercialization of new products;
|
|
|
|
attract and retain qualified scientific, medical, product
development, commercial and sales and marketing personnel;
|
54
|
|
|
|
|
obtain patent
and/or other
proprietary protection for Trubions processes, product
candidates and technologies;
|
|
|
|
operate without infringing the patents and proprietary rights of
third parties; and
|
|
|
|
obtain required regulatory approvals.
|
Trubion expects to compete on, among other things, product
efficacy, safety, convenience, time to market and price. In
order to compete successfully Trubion will need to identify,
secure the rights to and develop products and exploit these
products commercially before others are able to develop
competitive products. In addition, Trubions ability to
compete may be affected if insurers and other third-party payors
seek to encourage the use of generic products, making branded
products less attractive to buyers from a cost perspective.
Trubion believes its product development programs will be
subject to significant competition from companies utilizing
alternative technologies. In addition, as the principles of
Trubions
SMIPtm
product candidates become more widely known and appreciated
based on patent and scientific publications and regulatory
filings, Trubion expects the field to become highly competitive.
Pharmaceutical companies, biotechnology companies, and academic
and research institutions may succeed in developing products
based upon the principles underlying Trubions proprietary
technologies earlier than Trubion, obtaining approvals for such
products from the FDA more rapidly than Trubion or developing
products that are safer, more effective,
and/or more
cost effective than those under development or proposed to be
developed by Trubion.
Product Candidates for Autoimmune and Inflammatory
Diseases. If approved for the treatment of RA,
Trubion anticipates that its product candidates would compete
with other marketed protein therapeutics for the treatment of RA
in this $10 billion market including:
Rituxan®
(Genentech, Roche and Biogen Idec),
Enbrel®
(Amgen and Pfizer),
Remicade®
(JNJ and Schering-Plough),
Humira®
(Abbott),
Orencia®
(BMS),
Cimzia®
(UCB),
Simponi®
(JNJ and Schering-Plough) and
Actemra®
(Roche and Chugai).
If approved for the treatment of SLE, Trubion anticipates that
its product candidates would have to compete with other B-cell
depleting therapies, including CD20-directed therapeutics.
Product Candidates for B-cell Malignancies. If
approved for the treatment of CLL, NHL, or other B-cell
malignancies, Trubion anticipates that its product candidates
would compete with other B-cell depleting therapies in these
billion dollar markets. Although Trubion is not aware of any
CD37-directed therapeutics in development or on the market, for
the treatment of CLL, NHL, or other B-cell malignancies, other
biologic therapies are marketed for the treatment of NHL or CLL
or both, such as
Rituxan®
(Genentech),
Zevalin®
(Spectrum Pharmaceuticals, Inc. and Bayer Schering AG),
Bexxar®
(GSK),
Campath®
(Genzyme and Bayer Schering AG) and
Arzerra®
(GSK and Genmab).
Intellectual
Property
Because of the length of time and expense associated with
bringing new products through development and the governmental
approval process, pharmaceutical and biotechnology companies
have traditionally placed considerable importance on obtaining
and maintaining patent protection for significant new
technologies, products and processes.
Trubion intends to seek patent protection for appropriate
proprietary technologies by filing patent applications when
possible in the United States and selected other jurisdictions.
Trubions policy is to seek patent protection for the
inventions that Trubion considers important to the development
of its business. Trubion intends to continue using its
scientific expertise to pursue and file patent applications on
new developments with respect to uses, methods, and compositions
to enhance Trubions intellectual property position in the
areas that are important to the development of its business.
Trubion has applied, and is applying for, patents directed to
its
SMIPtm
technology and product candidates, its
SCORPIONtm
technology and product candidates and its
TRU-ADhanCetm
technology as well as other aspects of its technology both in
the United States and, when appropriate, in other jurisdictions.
Even if Trubion is granted patents by government authorities or
obtain the right to utilize them through licensing,
Trubions patents may not provide significant protection,
competitive advantage or commercial benefit. The validity and
enforceability of patents issued to pharmaceutical and
biotechnology companies has proven highly
55
uncertain. For example, legal considerations surrounding the
validity of patents in the fields of pharmaceuticals and
biotechnology are in transition, and Trubion cannot assure you
that the historical legal standards surrounding questions of
validity will continue to be applied or that current defenses
relating to issued patents in these fields will be sufficient in
the future. In addition, Trubion cannot assure you as to the
degree and range of protections any of its patents, if issued,
may afford Trubion or whether patents will be issued. For
example, patents that may issue to Trubion may be subjected to
further governmental review that may ultimately result in the
reduction of their scope of protection, and pending patent
applications may have their requested breadth of protection
significantly limited before being issued, if issued at all.
Further, since publication of discoveries in scientific or
patent literature often lags behind actual discoveries, Trubion
cannot assure you that it was the first creator of inventions
covered by its pending patent applications, or that it was the
first to file patent applications for these inventions.
Many pharmaceutical and biotechnology companies and university
and research institutions have filed patent applications or have
received patents in Trubions areas of product development.
Many of these entities applications, patents and other
intellectual property rights could prevent Trubion from
obtaining patents or could call into question the validity of
any of Trubions patents, if issued, or could otherwise
adversely affect the ability to develop, manufacture or
commercialize product candidates. If use of technology
incorporated into or used to produce Trubions product
candidates is challenged, or if a conflicting patent issued to
others is upheld in the courts or if a conflicting patent
application filed by others is issued as a patent and is upheld,
Trubion may be unable to market one or more of its product
candidates, or Trubion may be required to obtain a license to
market those product candidates. To contend with these
possibilities, Trubion may have to enter into license agreements
in the future with third parties for technologies that may be
useful or necessary for the manufacture or commercialization of
some of its product candidates. In addition, Trubion is
routinely in discussions with academic and commercial entities
that hold patents on technology or processes that Trubion may
find necessary in order to engage in some of its activities.
Trubion cannot, however, assure you that these licenses, or any
others that Trubion may be required to obtain to market its
product candidates, will be available on commercially reasonable
terms, if at all, or that Trubion will be able to develop
alternative technologies if Trubion cannot obtain required
licenses.
To protect Trubions rights to any of its patents, if
issued, and proprietary information, Trubion may need to
litigate against infringing third parties, or otherwise avail
itself of the courts or participate in administrative
proceedings to determine the scope and validity of those patents
or other proprietary rights. These types of proceedings are
often costly and could be very time-consuming to Trubion, and
Trubion cannot assure you that the deciding authorities will
rule in its favor. An unfavorable decision could allow third
parties to use Trubions technology without being required
to pay Trubion licensing fees or may compel Trubion to license
needed technologies to avoid infringing third-party patent and
proprietary rights. Although Trubion believes that it would have
valid defenses to allegations that its current product
candidates, production methods and other activities infringe the
valid and enforceable intellectual property rights of any third
parties, Trubion cannot be certain that a third party will not
challenge its position in the future. Even if some of these
activities were found to infringe a third partys patent
rights, Trubion may be found to be exempt from infringement
under 35 U.S.C. § 271(e) to the extent that these
are found to be pre-commercialization activities related to
Trubions seeking regulatory approval for a product
candidate. The scope of protection under 35 U.S.C.
§ 271(e), however, is uncertain and Trubion cannot
assure you that any defense under 35 U.S.C.
§ 271(e) would be successful. Further, the defense
under 35 U.S.C. § 271(e) is only available for
pre-commercialization activities, and could not be used as a
defense for sale and marketing of any of Trubions product
candidates. There has been, and Trubion believes that there will
continue to be, significant litigation in the biopharmaceutical
and pharmaceutical industries regarding patent and other
intellectual property rights.
Third parties could bring legal actions against Trubion claiming
Trubion infringes their patents or proprietary rights, and seek
monetary damages
and/or
enjoin clinical testing, manufacturing and marketing of the
affected product or products. If Trubion becomes involved in any
litigation, it could consume a substantial portion of its
resources, and cause a significant diversion of effort by
Trubions technical and management personnel regardless of
the outcome of the litigation. If any of these actions were
successful, in addition to any potential liability for damages,
Trubion could be required to obtain a license to continue to
manufacture or market the affected product, in which case
Trubion may be required to pay substantial royalties or grant
cross-licenses to its patents. Trubion cannot, however, assure
you that any such license will be available on acceptable terms,
if at all. Ultimately, Trubion
56
could be prevented from commercializing a product, or forced to
cease some aspect of its business operations as a result of
claims of patent infringement or violation of other intellectual
property rights, which could have a material and adverse effect
on Trubions business, financial condition, and results of
operations. Further, the outcome of intellectual property
litigation is subject to uncertainties that cannot be adequately
quantified in advance, including the demeanor and credibility of
witnesses and the identity of the adverse party. This is
especially true in intellectual property cases that may turn on
the testimony of experts as to technical facts upon which
experts may reasonably disagree.
While Trubion pursues patent protection and enforcement of its
product candidates and aspects of its technologies when
appropriate, Trubion also relies on trade secrets, know-how and
continuing technological advancement to develop and maintain its
competitive position. To protect this competitive position,
Trubion regularly enters into confidentiality and proprietary
information agreements with third parties, including employees,
suppliers and collaborators. Trubions employment policy
requires each new employee to enter into an agreement that
contains provisions generally prohibiting the disclosure of
confidential information to anyone outside of Trubion and
providing that any invention conceived by an employee within the
scope of his or her employment duties is Trubions
exclusive property. Furthermore, Trubions know-how that is
accessed by third parties through collaborations and research
and development contracts and through its relationships with
scientific consultants is generally protected through
confidentiality agreements with the appropriate parties. Trubion
cannot, however, assure you these protective arrangements will
be honored by third parties, including employees, suppliers, and
collaborators, or that these arrangements will effectively
protect Trubions rights relating to unpatented proprietary
information, trade secrets and know-how. In addition, Trubion
cannot assure you that other parties will not independently
develop substantially equivalent proprietary information and
techniques or otherwise gain access to Trubions
proprietary information and technologies.
Manufacturing
Trubion does not currently own or operate manufacturing
facilities for the production of clinical or commercial
quantities of its product candidates. Trubion currently relies
on a small number of third-party manufacturers to produce its
compounds and expect to continue to do so to meet the clinical
requirements of its product candidates and for all of its
commercial needs. Trubions product candidates are
currently manufactured in mammalian cell expression systems from
readily available starting materials. To the extent that SBI-087
and TRU-016 advance through clinical trials, and to the extent
Trubion brings its future product candidates into clinical
trials and partner the development and commercialization of any
of the product candidates, Trubion and its existing and
prospective partners will be required to assess the
manufacturing needs of the product candidates for clinical
requirements as well as for commercial production. Trubion may
need to obtain one or more licenses to intellectual property
rights held by third parties in order to manufacture each of its
product candidates. While such licenses may be available, they
may not be available on terms that are commercially acceptable
to Trubion or its existing or prospective partners. Should such
licenses prove unavailable, Trubion or its existing or
prospective partners may choose to modify Trubions
manufacturing processes to use alternative manufacturing
methods. Such modifications may result in greater expenditures
of capital by Trubion or its partners, delay commercialization,
or prevent Trubion or its partners from successfully
commercializing Trubions product candidates.
Trubion has multiple potential sources for manufacturing its
product candidates. Pfizer manufactures SBI-087 and has
significant process development capabilities and extensive
commercial-scale production capabilities at numerous facilities
worldwide. Pfizers manufacturing commitment is contingent
upon the effectiveness of the collaboration agreement which they
may terminate without cause at any time upon 90 days
prior written notice. However, in the event Trubion or Pfizer
terminates the collaboration agreement for certain reasons
specified in the collaboration agreement, Pfizer would have
limited manufacturing obligations to Trubion. In addition,
Trubion is planning to have Abbott perform certain manufacturing
services for TRU-016 in 2011.
Trubion relies and expects to continue to rely on a number of
contract manufacturers to produce sufficient quantities of its
product candidates in accordance with current good manufacturing
practices, or cGMP, for use in clinical trials. Trubion will
ultimately depend on contract manufacturers for the manufacture
of its products for commercial sale. Contract manufacturers are
subject to extensive government regulation.
57
Government
Regulation
Government authorities in the United States at the federal,
state and local level, and other countries, extensively
regulate, among other things, the research, development,
testing, manufacture, labeling, promotion, advertising,
distribution, marketing, and export and import of
immunopharmaceutical products such as those Trubion is
developing.
United
States Government Regulation
In the United States the information that must be submitted to
the FDA in order to obtain approval to market a new drug varies
depending on whether the drug is a new product whose safety and
effectiveness has not previously been demonstrated in humans or
a drug whose active ingredient(s) and certain other properties
are the same as those of a previously approved drug. A new
biologic will follow the Biologics License Application, or BLA,
route for approval, a new drug will follow the New Drug
Application, or NDA, route for approval, and a drug that claims
to be the same as an already approved drug may be able to follow
the Abbreviated New Drug Application route for approval.
BLA and
NDA Approval Process
In the United States, the FDA regulates drugs and biologics
under the Federal Food, Drug and Cosmetic Act, and, in the case
of biologics, also under the Public Health Service Act, and the
FDAs implementing regulations. If Trubion fails to comply
with the applicable U.S. requirements at any time during
the product development process, approval process or after
approval, Trubion may become subject to administrative or
judicial sanctions. These sanctions could include the FDAs
refusal to approve pending applications, license suspension or
revocation, withdrawal of an approval, a clinical hold, warning
letters, product recalls, product seizures, total or partial
suspension of production or distribution, injunctions, fines,
civil penalties or criminal prosecution. Any agency or judicial
enforcement action could have a material adverse effect on
Trubion.
The major steps required before a biologic drug may be marketed
in the United States include:
|
|
|
|
|
completion of laboratory tests and animal studies under the
FDAs good laboratory practices regulations;
|
|
|
|
submission to the FDA of an IND for human clinical testing,
which must become effective before human clinical trials may
begin;
|
|
|
|
performance of adequate and well-controlled clinical trials to
establish the safety and efficacy of the product for each
indication;
|
|
|
|
submission to the FDA of a BLA or NDA, which includes the
results of all required preclinical animal studies, laboratory
tests, clinical trials, and data relating to the products
pharmacology, chemistry, manufacture, and control;
|
|
|
|
satisfactory completion of an FDA inspection of the
manufacturing facility or facilities at which the product is
produced to assess compliance with cGMP; and
|
|
|
|
FDA review and approval of the BLA or NDA.
|
Preclinical tests include laboratory evaluations of product
chemistry, toxicity and formulation, as well as animal studies.
An IND sponsor must submit the results of the preclinical tests,
together with manufacturing information and analytical data, to
the FDA as part of the IND. Long term preclinical tests, such as
animal tests for reproductive toxicity and carcinogenicity, may
continue after the IND is submitted. The IND must become
effective before human clinical trials may begin. An IND will
automatically become effective 30 days after receipt by the
FDA, unless before that time the FDA raises concerns or
questions about issues such as the conduct of the trials as
outlined in the IND. In that case, the IND sponsor and the FDA
must resolve any outstanding FDA concerns or questions before
clinical trials can proceed. Submission of an IND does not
guarantee that the FDA will allow clinical trials to commence.
The FDA may order the temporary or permanent discontinuation of
a clinical trial at any time or impose other sanctions if it
believes that the clinical trial is not being conducted in
accordance with FDA requirements or presents an unacceptable
risk to the study subjects.
58
Clinical trials involve the administration of the
investigational product to human subjects under the supervision
of qualified investigators. Clinical trials must be conducted in
compliance with federal regulations, good clinical practices, or
GCPs, and under protocols detailing, among other things, the
objectives of the study, the parameters to be used in monitoring
safety, and the effectiveness criteria to be evaluated. Each
clinical protocol must be submitted to the FDA as part of the
IND.
Clinical trials typically are conducted in three sequential
phases, but the phases may overlap or be combined. Each trial
must be reviewed and approved by an independent institutional
review board, or IRB, before it can begin at that site. An IRB
may require the clinical trial be halted, either temporarily or
permanently, for failure to comply with the IRBs
requirements, or may impose other conditions.
Phase I clinical trials usually involve the initial introduction
of the investigational drug into humans to evaluate the
products safety, dosage tolerance and pharmacodynamics
and, if possible, to gain an early indication of its efficacy.
Phase II clinical trials usually involve controlled trials
in a limited patient population to:
|
|
|
|
|
evaluate dosage tolerance and appropriate dosage;
|
|
|
|
identify possible adverse effects and safety risks; and
|
|
|
|
evaluate preliminarily the efficacy of the drug for specific
indications.
|
Phase III clinical trials usually further evaluate clinical
efficacy and further test for safety in an expanded patient
population. Phase I, Phase II and Phase III
trials may not be completed successfully within any specified
period, if at all. The FDA or Trubion, or its partners may
suspend or terminate clinical trials at any time on various
grounds, including a finding that the subjects or patients are
being exposed to an unacceptable health risk. Prior to
conducting Phase III trials, an applicant may seek a
special protocol assessment which is an agreement between an
applicant and the FDA on the design and size of clinical
trial(s) that is/are intended to form the basis of a BLA or NDA.
Assuming successful completion of the required clinical trials,
the results of the preclinical studies and of the clinical
studies, together with other detailed information, including
information on the chemistry, manufacture, and control criteria
of the product, are submitted to the FDA in the form of a BLA or
NDA requesting approval to market the product for one or more
indications. The FDA reviews a BLA or NDA to determine, among
other things, whether the product is safe, pure, and potent and
whether the facility in which it is manufactured, processed,
packed, or held meets standards designed to assure the
products continued safety, purity and potency. The FDA
also reviews a BLA or NDA to determine whether a product is safe
and effective for its intended use.
Before approving an application, the FDA will inspect the
facility or the facilities at which the product is manufactured.
The FDA will not approve the product unless cGMP compliance is
satisfactory. If the FDA determines the application,
manufacturing process, or manufacturing facilities are not
acceptable, it will outline the deficiencies in the submission
and often will request additional testing or information.
Notwithstanding the submission of any requested additional
information, the FDA ultimately may decide that the application
does not satisfy the regulatory criteria for approval. Before
approving a BLA or NDA, the FDA will also typically inspect one
or more clinical sites to assure compliance with GCP.
The testing and approval process requires substantial time,
effort and financial resources, and each may take several years
to complete. The FDA may not grant approval on a timely basis,
if at all. Trubion may encounter difficulties or unanticipated
costs in its efforts to secure necessary governmental approvals,
which could delay or preclude Trubion from marketing its product
candidates. The FDA may limit the indications for use or place
other conditions on any approvals that could restrict the
commercial application of its product candidates. After
approval, some types of changes to the approved product, such as
adding new indications, manufacturing changes and additional
labeling claims, are subject to further FDA review and approval.
Priority
Review
The FDA has established priority and standard review
classifications for original BLAs and NDAs and efficacy
supplements. The classification of an application indicates the
anticipated time frame for FDA review of completed
59
marketing applications. The classification system, which does
not preclude the FDA from doing work on other projects, provides
a way of prioritizing certain BLAs and NDAs upon receipt and
throughout the FDA application review process.
Under FDA policies, a biologic or drug candidate is eligible for
priority review, or review within a six-month time frame from
the time a complete BLA or NDA, as applicable, is accepted for
filing, if the drug candidate provides a significant improvement
compared to marketed drugs in the treatment, diagnosis or
prevention of a disease. Even if a BLA or NDA is initially
classified as a priority application, this status can change
during the FDA review process, such as in the situation where
another product is approved for the same disease for which
previously there was no available therapy. In addition, priority
review does not guarantee that a product candidate will receive
regulatory approval.
Post-Approval
Requirements
After regulatory approval of a product is obtained, Trubion
would be required to comply with a number of post-approval
requirements. For example, as a condition of approval of a BLA
or NDA, the FDA may require post-marketing clinical studies and
surveillance to monitor the products safety or efficacy.
In addition, holders of an approved BLA or NDA are required to
report certain adverse reactions and production problems to the
FDA, to provide updated safety and efficacy information and to
comply with requirements concerning advertising and promotional
labeling for their products. Drugs may be marketed only for the
approved indications and in accordance with the provisions of
the approved labeling. Changes to some of the conditions
established in an approved application, including changes in
indications, labeling, or manufacturing processes or facilities,
require submission and FDA approval of a new BLA/NDA or BLA/NDA
supplement before the change can be implemented. A BLA/NDA
supplement for a new indication typically requires clinical data
similar to that in the original application, and the FDA uses
the same procedures and actions in reviewing
BLA/NDA
supplements as it does in reviewing BLAs/NDAs.
Also, quality control and manufacturing procedures must continue
to conform to cGMP after approval. The FDA periodically inspects
manufacturing facilities to assess compliance with cGMP, which
imposes certain procedural, substantive and recordkeeping
requirements. Accordingly, biologics and drug companies and
their manufacturers must continue to expend time, money, and
effort in the area of production and quality control to maintain
compliance with cGMP and other aspects of regulatory compliance.
Foreign
Regulation
In addition to regulations in the United States, Trubion will be
subject to a variety of foreign regulations governing clinical
trials and commercial sales and distribution of its product
candidates. Whether or not Trubion obtains FDA approval for a
product candidate, Trubion must obtain approval by the
comparable regulatory authorities of foreign countries before
Trubion can commence clinical trials or marketing of the product
candidate in those countries. The approval process varies from
country to country, and the time may be longer or shorter than
that required for FDA approval. The requirements governing the
conduct of clinical trials, product licensing, pricing and
reimbursement vary greatly from country to country.
Under European Union regulatory systems, a marketing
authorization for a medical product derived from biotechnology
processes must be submitted under a centralized procedure. The
centralized procedure provides for the grant of a single
marketing authorization that is valid for all European Union
member states.
Reimbursement
Sales of biopharmaceutical products depend in significant part
on the availability of third-party reimbursement. Each
third-party payor may have its own policy regarding what
products it will cover, the conditions under which it will cover
such products, and how much it will pay for such products. It
will be time consuming and expensive for Trubion to seek
reimbursement from third-party payors. Reimbursement may not be
available or sufficient to allow Trubion to sell its products on
a competitive and profitable basis.
60
The passage of the Medicare Prescription Drug and Modernization
Act of 2003, or the MMA, sets forth the requirements for the
distribution and pricing of prescription drugs for Medicare
beneficiaries, which may affect the marketing of Trubions
products. The MMA also introduced a new reimbursement
methodology. Moreover, while the MMA applies only to drug
benefits for Medicare beneficiaries, private payors often follow
Medicare coverage policy and payment limitations in setting
their own payment rates. Any reduction in payment that results
from the MMA may result in a similar reduction in payments from
non-governmental payors.
In addition, in some foreign countries, the proposed pricing for
a drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing vary widely from country to
country. For example, the European Union provides options for
its member states to restrict the range of medicinal products
for which their national health insurance systems provide
reimbursement and to control the prices of medicinal products
for human use. A member state may approve a specific price for
the medicinal product or it may instead adopt a system of direct
or indirect controls on the profitability of the company placing
the medicinal product on the market.
Trubion expects that there will continue to be a number of
federal and state proposals to implement governmental pricing
controls. While Trubion cannot predict whether such legislative
or regulatory proposals will be adopted, the adoption of such
proposals could have a material adverse effect on its business,
financial condition, and profitability.
Employees
As of September 1, 2010, Trubion had 71 full-time
employees, 18 of whom held Ph.D. or M.D. degrees and 55 of
whom were engaged in full-time research and development
activities. None of Trubions employees is represented by a
labor union and Trubion considers its employee relations to be
good.
Available
Information
Trubions corporate website address is www.trubion.com.
Trubion makes available free of charge on its website its
annual, quarterly and current reports as soon as reasonably
practicable after Trubion electronically files such material
with, or furnish it to, the SEC. These SEC reports can be
accessed through the Investors section of
Trubions website. Trubion also makes available on its
website its corporate governance guidelines, the charters for
its audit committee, compensation committee, and nominating and
corporate governance committee, its whistleblower and corporate
communications policies and its code of business conduct and
ethics, and such information is available in print to any
stockholder of Trubion who requests it. In addition, Trubion
intends to disclose on its website any amendments to, or waivers
from, its code of business conduct and ethics that are required
to be publicly disclosed pursuant to rules of the SEC and the
Nasdaq Global Market. The information found on Trubions
corporate website is not, however, part of this or any other
report.
Trubion was founded as a limited liability company in the state
of Washington in March 1999, and operated as a development-stage
company. Trubion converted into a corporation and redomiciled in
the state of Delaware in October 2002.
61
LITIGATION
On August 17, 2010, two class action lawsuits were filed in
the Superior Court of Washington, King County, against Trubion,
its board of directors, and Emergent BioSolutions. Those
actions, captioned Rajat Sharma v. Trubion
Pharmaceuticals, Inc., et al. (Case Number:
10-2-29637-9-SEA),
and Shirley Harris v. Trubion Pharmaceuticals, Inc., et al.
(Case Number:
10-2-29680-8
SEA) allege in summary that, in connection with the proposed
merger with Emergent BioSolutions, the members of the Trubion
board of directors breached their fiduciary duties by conducting
an unfair sale process and agreeing to an unfair price. Both
complaints also claim that Trubion and Emergent BioSolutions
aided and abetted the Trubion board of directors in its
breach of fiduciary duties. On September 9, 2010, the
actions were consolidated into the action entitled In re Trubion
Pharmaceuticals, Inc. Shareholder Litigation, Lead Case No.
10-2-29637-9. The plaintiffs seek the following relief: a
declaration that the complaints can be maintained as a class
action; a declaration that the merger agreement was entered into
in breach of the Trubion board of directors fiduciary
duties; an injunction against the proposed merger unless and
until Trubion adopts a fair sales procedure that does not
advantage any particular bidder to maximize stockholder value,
including majority of the minority vote requirement to provide
Trubions minority stockholders with the ability to vote
down the proposed merger; rescission of the proposed merger; and
the award of costs and disbursements of the action, including
reasonable attorneys and experts fees. Trubion, its
board of directors and Emergent BioSolutions believe that the
claims are without merit and intend to vigorously defend against
them. However, there can be no assurances as to the outcome of
the litigation.
62
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
TRUBION
The following discussion should be read in conjunction with
Trubions financial statements and accompanying notes,
which appear elsewhere in this proxy statement/prospectus.
Unless otherwise indicated, the discussions in this section
relate to Trubion as a stand-alone entity and do not reflect the
impact of the proposed merger with Emergent BioSolutions.
Overview
Trubion is a biopharmaceutical company creating a pipeline of
novel protein therapeutic product candidates to treat autoimmune
and inflammatory diseases and cancer. Its mission is to develop
a variety of
first-in-class
product candidates customized in an effort to optimize safety,
efficacy, and convenience that Trubion believes may offer
improved patient experiences. Trubions current product
development efforts are focused on three proprietary
technologies that comprise the expanded foundation for Trubion
product development
SMIPtm
protein therapeutics,
SCORPIONtm
protein therapeutics, and
TRU-ADhanCetm
potency enhancing technology for immunopharmaceuticals.
Trubions current clinical-stage therapeutics target
specific antigens on B cells, CD20 and CD37, and are designed
using its custom drug assembly technology.
On August 12, 2010, Trubion signed a definitive merger
agreement with Emergent BioSolutions in which Emergent
BioSolutions has agreed to acquire Trubion. Under the terms of
the agreement, each share of Trubion common stock will be
converted into the right to receive an upfront payment of $1.365
in cash, without interest, and 0.1641 of a share of Emergent
BioSolutions common stock. The upfront payment represents a
value of $4.55 per share, or approximately $96.8 million,
based on Trubions total shares of common stock outstanding
on August 11, 2010, the net value of dilutive stock
options, and the trading average of Emergent BioSolutions common
stock for the five days prior to the signing of the merger
agreement. Trubion stockholders will also receive one CVR per
share, which will entitle the holder to potentially receive cash
payments based upon achievement of predefined milestones. The
total potential aggregate value of the CVRs is
$38.75 million over the
36-month
period after the closing of the merger.
The merger has been approved by the boards of directors of both
companies and is subject to customary closing conditions,
including the approval of the merger agreement by stockholders
of Trubion. The acquisition is expected to close in the fourth
quarter of 2010.
Trubion was founded as a limited liability company in the state
of Washington in March 1999. It converted into a corporation and
redomiciled in the state of Delaware in October 2002. To date,
Trubion has funded its operations primarily through the sale of
equity securities, strategic alliances, equipment financings and
interest earned on investments.
Product
Candidates and Recent Developments
In June 2010, Trubion announced Pfizers decision to
discontinue development of TRU-015, an investigational drug in
Phase II evaluation for the treatment of rheumatoid
arthritis, or RA developed under Trubions CD20
collaboration with Pfizer. Pfizer also confirmed that it will
continue to develop SBI-087, Trubions next-generation,
humanized, subcutaneous anti-CD20 RA product candidate also in
Phase II clinical evaluation.
Pfizers decision was based on preliminary results from the
Phase IIb (2203) randomized, parallel, double-blind,
placebo-controlled study designed to evaluate the efficacy and
safety of two dosing regimens (a single dose of 800mg TRU-015
compared with an induction dose of 800mg TRU-015 followed by an
additional dose of 800mg TRU-015 at week 12) in combination
with methotrexate in patients with active RA. Although the
American College of Rheumatology, or ACR
20/50/70
results in the Phase II (2203) study were consistent
with previous studies and similar to other B-cell-depleting
therapies, the results did not meet the internally predefined
primary endpoint, a 20% difference in ACR50 response compared
with placebo at week 24 (p value = 0.06 for the single-dose
group ACR 50 compared with placebo and p= 0.12 for the
induction-dose group ACR 50 compared with placebo). A previously
conducted interim analysis of the trial data on approximately
50% of the total enrolled patient population
63
revealed that the primary endpoint had been met at that point in
time. No significant safety issues were reported, and they were
not a factor in Pfizers decision to discontinue
development.
TRU-015 demonstrated biologic activity including peripheral
B-cell depletion and a statistically significant decrease in
C-reactive protein in both dose groups compared with placebo.
Specifically, ACR 20 was 67.1% for the induction-dose group,
61.3% for the single-dose group and 43.2% for the placebo group.
ACR 50 was 27.4% for the induction dose, 29.3% for the single
dose and 16.2% for placebo. ACR 70 was 9.6% for the induction
dose, 9.3% for the single dose and 2.7% for placebo. TRU-015 was
generally well-tolerated, and serious adverse events and
medically important infection rates in both dose groups were
similar to placebo.
In collaboration with Trubion, Pfizer is also developing
SBI-087, Trubions next generation CD20-directed product
candidate. SBI-087 for RA builds on Trubions and
Pfizers clinical experience with TRU-015 and is based on
Trubions SMIP technology. Patient dosing has commenced and
recruitment is currently ongoing in a Phase II trial of
SBI-087 for RA evaluating safety and efficacy of subcutaneous
administration of 200mg of SBI-087. In addition, patient
enrollment is complete in an additional Phase I trial of SBI-087
for RA in Japan. Finally, Pfizer is conducting a Phase I
clinical trial of SBI-087 in systemic lupus erythematosus, or
SLE, in which patient dosing has commenced and recruitment is
ongoing.
In June 2010 two Phase I data presentations on SBI-087 were
presented at the 2010 annual congress of the European League
Against Rheumatism, or EULAR, including data from a Phase I
study of SBI-087 for the treatment of RA and a Phase I study of
SBI-087 for the treatment of SLE.
The SBI-087 Phase I RA trial was designed to evaluate the
safety, tolerability, PK and PD of ascending single doses of
SBI-087 in patients with controlled RA. At the time of the
abstract submission, 60 patients enrolled in the open-label
Phase I trial had received intravenous doses of SBI-087 ranging
from 0.15 to 2 mg/kg or subcutaneous doses of 50, 100, 200
and 300 mg. All of the patients studied had well-controlled
RA. Data demonstrate that
SBI-087,
given as a single subcutaneous dose with a
day-of-treatment
oral steroid regimen, is generally well-tolerated and induces
potent B-cell depletion. The most frequently reported adverse
events were upper respiratory infection, headache, diarrhea,
chills, fever, fatigue and bruising at the injection site.
SBI-087 administered at subcutaneous doses of at least
100 mg depleted peripheral blood B-cell levels to less than
5 cells/uL for at least 12 weeks.
SBI-087 Phase I SLE data was also presented at EULAR in June
2010. At the time of abstract submission, data was available for
18 patients enrolled in an open-label Phase I study of
SBI-087 for SLE. Patients received intravenous doses of
0.5 mg/kg or subcutaneous doses of 25 mg or 75 mg
of SBI-087. All patients had well-controlled SLE. Preliminary
data demonstrate that SBI-087 was generally well-tolerated by
patients with well-controlled lupus when administered as a
single subcutaneous dose with a
day-of-treatment
oral steroid regimen. Adverse events included chills, extreme
fatigue, upper respiratory tract infection and muscle spasms.
Subcutaneous doses of 75 mg of SBI-087 depleted peripheral
blood B-cell levels in all subjects to below 20 cells/uL. Five
of six subjects in this cohort had B-cell levels below 5
cells/uL by week two. By week 10, B-cell levels increased to
above 20 cells/uL in four of six subjects. The Phase I trial is
ongoing and is designed to evaluate the safety, tolerability,
PK and PD of ascending single doses of SBI-087 in patients
with controlled SLE.
TRU-016, which Trubion is developing with its partner Abbott, is
a novel CD37-directed SMIP protein therapeutic. A TRU-016 Phase
I clinical trial for patients with chronic lymphocytic leukemia,
or CLL, is currently under way. TRU-016 uses a different
mechanism of action than CD20-directed therapies. As a result,
Trubion believes its novel design may provide patients with
improved therapeutic options and enhanced efficacy when used
alone or in combination with chemotherapy
and/or
CD20-directed therapeutics.
In June and December 2009, Trubion announced positive results
following each of two preliminary analyses from the Phase I
clinical trial of TRU-016 for the treatment of CLL. The
objectives of the Phase I TRU-016 CLL trial were to define
safety and tolerability, identify a maximum tolerated dose,
evaluate pharmacology and PD, and assess preliminary clinical
activity. As of August 2010, Trubion has not reached a maximum
tolerated dose. In addition, Trubion has amended its IND to
include treatment of patients with non-Hodgkins lymphoma, or
NHL, and patient dosing has commenced and recruitment is ongoing.
64
Collaborations
Abbott
Laboratories
In August 2009, Trubion entered into a collaboration agreement
with Facet, now a wholly owned subsidiary of Abbott, for the
joint worldwide development and commercialization of TRU-016, a
product candidate in Phase I clinical development for CLL.
TRU-016 is a CD37-directed SMIP protein therapeutic. The
collaboration agreement includes TRU-016 in all indications and
all other CD37-directed protein therapeutics. Under the terms of
the collaboration agreement, the parties will not develop or
commercialize protein therapeutics directed to CD37 outside
of the collaboration agreement.
Trubion received an upfront payment of $20 million in cash
in September 2009 and may receive up to $176.5 million in
additional contingent payments upon the achievement of specified
development, regulatory and sales milestones. Trubion and Abbott
share equally the costs of all development, commercialization
and promotional activities and all global operating profits. In
connection with the collaboration agreement, Trubion and Facet
also entered into a stock purchase agreement, pursuant to which
Facet purchased 2,243,649 shares of Trubions common
stock for an aggregate purchase price of $10 million, or
$4.46 per share. The per share price of $4.46 represents a 35%
equity premium over the
60-day
trading average of Trubions common stock on the Nasdaq
Global Market for the trading period ending immediately prior to
the execution of the stock purchase agreement.
With respect to control over decisions and responsibilities, the
collaboration agreement provides for a joint steering committee,
or JSC, consisting of representatives of Trubion and Abbott,
which makes decisions by consensus. If the JSC is unable to
reach a consensus, then the matter will be referred to
designated officers at Trubion and Abbott for resolution. If
these officers are unable to resolve the matter, then it will be
resolved by arbitration. Both Trubion and Abbott, at their sole
discretion, may discontinue participation on the JSC with
90 days written notice to the other party.
At predefined times, the parties have the right to opt-out of
the collaboration entirely or on a
product-by-product
basis. Upon a change of control of a party, the other party will
have the right to opt-out of the collaboration entirely and if
the successor party is conducting a program that competes with
the programs under the collaboration agreement, then the
successor party must either (i) opt-out of the
collaboration entirely or (ii) divest the competing program
to a third party. If a party exercises its opt-out right with
respect to a product, then the parties will no longer share
development and commercialization costs for such product and
such opting-out party will receive certain royalty payments upon
the sale of such product, rather than half of the profits
derived from such product. Even if Abbott exercises its opt-out
right, its obligation to make milestone payments to Trubion
continues. In addition, if the party that opts-out is the lead
manufacturing party for the opt-out product, then such party
must continue to supply the product to the continuing party for
up to 18 months following the opt-out.
Abbott can terminate the collaboration agreement at any time, in
which event all rights to TRU-016 and other CD37-directed
protein therapeutics under the collaboration agreement would
revert to Trubion. If Abbott terminates the collaboration
agreement in the first 18 months, then Abbott must pay
Trubion a $10 million termination fee.
If there is a material breach of the collaboration agreement,
then the non-breaching party may either terminate the
collaboration agreement or continue the collaboration agreement
and force the breaching party to opt-out and accept royalties at
a reduced rate.
Either party may assign its interest in the collaboration
agreement to a third party, provided that the non-assigning
party maintains a right of first negotiation over any proposed
assignment. In addition, either Trubion or Abbott can freely
assign the collaboration agreement without the consent of the
other party in connection with certain specified change of
control transactions, such as an acquisition.
Pfizer
Inc.
In December 2005, Trubion entered into a collaboration agreement
with Wyeth, now a wholly owned subsidiary of Pfizer, for the
development and worldwide commercialization of TRU-015 and other
CD20-directed therapeutics. Pursuant to the agreement, Trubion
is also collaborating with Pfizer on the development and
65
worldwide commercialization of certain other product candidates
directed to a small number of non-CD20 targets. During the
period in which Trubion will provide research services for
Pfizer, Pfizer has the right, subject to Trubions
reasonable consent, to replace a limited number of these
non-CD20 targets. In addition, Trubion has the option to
co-promote with Pfizer, on customary terms to be agreed,
CD20-directed therapies in the United States for niche
indications. Trubion retains the right to develop and
commercialize, on its own or with others, product candidates
directed to all targets not included within the agreement. In
June 2010, Trubion announced Pfizers decision to
discontinue development of TRU-015, an investigational drug in
Phase II evaluation for the treatment of rheumatoid
arthritis, or RA developed under Trubions CD20
collaboration with Pfizer. Pfizer confirmed that it will
continue to develop SBI-087, Trubions next-generation,
humanized, subcutaneous CD20 RA product candidate also in
Phase II clinical evaluation. Unless it is terminated
earlier, Trubions agreement with Pfizer will remain in
effect on a
product-by-product
basis and on a
country-by-country
basis until the later of the date that any such product shall no
longer be covered by a valid claim of a U.S. or foreign
patent or application and, generally, ten years after the first
commercial sale of any product licensed under the agreement.
Pfizer may terminate the agreement without cause at any time
upon 90 days prior written notice.
In connection with the agreement, Wyeth paid Trubion a
$40 million non-refundable, non-creditable, upfront fee in
January 2006 and purchased directly from Trubion in a private
placement, concurrent with Trubions initial public
offering, 800,000 shares of Trubions common stock at
the initial public offering price of $13.00 per share, resulting
in net proceeds to Trubion of $10.4 million. Under the
agreement, Trubion provided research services for an initial
three-year period ended December 22, 2008 with the option
for Wyeth to extend the service period for two additional
one-year periods. Wyeths financial obligations during the
initial research service term included collaborative research
funding commitments of $9.0 million in exchange for such
committed research services. This $9.0 million was subject
to an increase if the service period was extended beyond three
years as well as annual increases pursuant to percentage changes
in the CPI. In June 2008, Wyeth exercised the first option under
the terms of the agreement to extend the research period for an
additional one-year period through December 22, 2009. In
June 2009, Wyeth exercised the second option under the terms of
the agreement to extend the research period for an additional
one-year period through December 22, 2010. Due to the
research period extension in 2009, the collaboration research
funding commitments to Trubion initially from Wyeth and now from
Pfizer, increased to approximately $3.3 million per year in
exchange for committed research services from Trubion through
December 2010. In anticipation of the completion of the research
program in December 2010, Pfizer has retained a subset of the
non-CD20 targets licensed from Trubion and released the
remaining targets to Trubion.
Pfizers financial obligations include additional amounts
for reimbursement of
agreed-upon
external research and development costs and patent costs.
Pursuant to the agreement, Pfizer is also obligated to make
payments to Trubion of up to $250 million based on the
achievement of specified regulatory and sales milestones for
CD20-directed
therapies and payments to Trubion of up to $200 million
based on the specified achievement of regulatory and sales
milestones for therapies directed to the small number of
retained non-CD20 targets. In addition, Trubion will receive
royalty payments in the event of future licensed product sales.
If Pfizer has ongoing development
and/or
commercialization activities that would violate the mutual
exclusivity provisions of the collaboration agreement related to
CD20, Trubion has the right to require Pfizer to engage in good
faith discussions regarding the terms and conditions on which
Pfizer would pay reasonable financial consideration to Trubion
with respect to those development and commercialization
activities. If Trubion and Pfizer do not agree to terms, Trubion
has the right to require Pfizer to enter into an agreement to
divest such development and commercialization activities, or to
divest the relevant collaboration agreement products to a third
party. If Pfizer does not divest such development and
commercialization activities or such collaboration agreement
products, Trubion has the right to terminate all licenses
related to CD20.
In October 2009, Pfizer completed its acquisition of Wyeth.
Trubions collaboration agreement remains in effect with
Pfizer and in response to Trubions request, Pfizer has
provided further written assurances reaffirming its commitment
to comply with the terms and conditions of the agreement.
If during the 12 month period following Pfizers
acquisition of Wyeth, Pfizer is required or voluntarily decides
to divest itself of one or more of the products under the
collaboration agreement, then subject to any governmental
limitations, Pfizer must offer Trubion an exclusive opportunity
to negotiate the acquisition or license of all of
66
Pfizers rights to that product on commercially reasonable
terms. If Trubion does not conclude an agreement with Pfizer
covering the product, Pfizer can divest itself of the product
but the terms of that divestiture cannot be more favorable than
those that were last offered to Trubion unless Trubion is given
the opportunity to accept those more favorable terms.
Upon a change of control of Trubion, the agreement would remain
in effect, subject to the right of Pfizer to terminate specified
provisions of the agreement.
Assuming product candidates under the collaboration with Pfizer
continue to progress in development, expenses for future
clinical trials may be higher than those incurred in prior
clinical trials. These expenses will, however, be incurred by
Pfizer. In addition, Pfizer is responsible for a substantial
portion of costs related to patent prosecution and patent
litigation for products directed to targets selected by Pfizer
pursuant to the collaboration agreement.
Outlook
The continued research and development of Trubions product
candidates will require significant additional expenditures,
including preclinical studies, clinical trials, manufacturing
costs, and the expenses of seeking regulatory approval. Trubion
relies on third parties to conduct a portion of its preclinical
studies, all of its clinical trials and all of the manufacturing
of current Good Manufacturing Process, or cGMP material. Trubion
expects expenditures associated with these activities to
increase in future years as it continues developing its product
candidates. Expenses associated with Trubions product
candidates included in the Pfizer collaboration are offset by
reimbursement revenue from Pfizer. Expenses associated with
Trubions product candidates included in the Abbott
collaboration are shared equally.
Trubion has incurred significant losses since its inception. As
of June 30, 2010, Trubions accumulated deficit was
$133.4 million and total stockholders equity was
$4.5 million. During the six months ended June 30,
2010 and 2009, Trubion recognized net losses of
$11.8 million and $17.7 million, respectively. Trubion
expects its net losses to increase in the future as it continues
its existing and anticipated preclinical studies, manufacturing
and clinical trials. Trubion expects revenue to decline in the
future as a result of Pfizers decision to discontinue
development of TRU-015, the anticipated completion of the
research program in December 2010 under its collaboration
agreement with Pfizer, and the anticipated increase in research
and development expenses incurred by Trubion under its
collaboration agreement with Abbott. Trubions revenues and
research and development expenses under the Abbott collaboration
may fluctuate depending on which party in the collaboration is
incurring the majority of the development costs in any
particular period.
Critical
Accounting Policies and Significant Judgments and
Estimates
Trubions managements discussion and analysis of
Trubions financial condition and operating results are
based on Trubions unaudited financial statements, which
have been prepared in accordance with GAAP. The preparation of
these financial statements requires Trubion to make estimates
and judgments that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as
reported revenues and expenses during the reporting periods.
Trubion bases its estimates on historical experience and on
various other factors that Trubion believes are reasonable under
the circumstances. An accounting policy is considered to be
critical if it is important to a companys financial
condition and operating results, and if it requires the exercise
of significant judgment and the use of estimates on the part of
management in its application. Trubion has discussed the
selection and development of the critical accounting policies
with the audit committee of its board of directors, and the
audit committee has reviewed Trubions related disclosures
in this proxy statement/prospectus. Although Trubion believes
its judgments and estimates are appropriate, actual results may
differ from those estimates.
Trubions significant accounting policies are described in
Note 1 to its audited financial statements for the year
ended December 31, 2009 attached as Annex G to this proxy
statement/prospectus. Of Trubions significant accounting
policies, Trubion believes that the following accounting
policies relating to revenue recognition, preclinical study,
clinical trial and manufacturing accruals, stock-based
compensation and valuation of investments are the most critical
to understanding and evaluating Trubions reported
financial results.
67
Revenue
Recognition
Trubion recognizes revenue from its collaboration agreements
with Pfizer and Abbott, which consists of non-refundable,
non-creditable upfront fees and license fees, collaborative
research funding, regulatory and sales milestones future product
royalties and future product sales. Revenue related to
Trubions collaboration agreements is recognized as follows:
Upfront Fees and License Fee. Non-refundable,
non-creditable upfront fees and license fees received in
connection with collaborative research and development
agreements are deferred and recognized on a straight-line basis
over the estimated term of the research and development service
period. The estimated term of the research and development
service period is reviewed and adjusted based on the status of
the project against the estimated timeline as additional
information becomes available. Trubion also considers the time
frame of its substantive contractual obligations related to
research and development agreements when estimating the term of
the research and development period. For each collaboration
agreement, Trubion reviews its ongoing performance obligations
on a regular basis and makes adjustments to the estimated term
as additional information becomes available. During the third
quarter of 2008, the estimated term of the research and
development service period related to the Pfizer agreement was
adjusted from six years and three months to seven years, or
through December 2012, due to an extension of the estimated
service period of Trubions obligations to conduct clinical
activities under Trubions agreement with Pfizer. The
adjustment during the third quarter of 2008 was the second
adjustment to the estimated research and development service
period since the inception of the collaboration agreement with
Pfizer. Trubion has evaluated its ongoing substantive
contractual obligations in connection with Pfizers
decision to discontinue development of TRU-015 in June 2010 and
believes that its estimated research and development service
period, through December 2012, is still appropriate. Adjustments
to the research and development service period are made
prospectively. Trubion has made adjustments to the research and
development service periods in the past and Trubion expects to
revise its estimate of the development term in future periods
due to the inherently uncertain nature of development terms. As
a result, revenue may fluctuate materially in the future due to
adjustments to the estimated term of the research and
development service periods and Trubions substantive
contractual obligations under its collaborations.
Collaborative Research Funding. Certain
internal and external research and development costs and patent
costs are reimbursed in connection with Trubions
collaboration agreements. Reimbursed costs under the Pfizer
collaboration are recognized as revenue in the same period the
costs are incurred. With respect to the reimbursement of
development costs under the Abbott collaboration, Trubion and
Abbott reconcile each quarter what each party has incurred for
development costs, and Trubion records either a net receivable
or a net payable in Trubions financial statements. For
each quarterly period, if Trubion has a net receivable from
Abbott, Trubion recognizes revenues by such amount, and if
Trubion has a net payable to Abbott, Trubion recognizes
additional research and development expenses by such amount. As
a result, Trubions revenues and research and development
expenses may fluctuate depending on which party in the
collaboration is incurring the majority of the development costs
in any particular quarterly period. Reimbursed costs are subject
to the estimation processes described in the preclinical study,
clinical trial and manufacturing accruals processes described
below and are subject to change in future periods when actual
activity is known. To date Trubion has not made any material
adjustments to these estimates.
Milestones. Payments for milestones that are
based on the achievement of substantive and at-risk performance
criteria will be recognized in full at such time as the
specified milestone has been achieved according to the terms of
the agreement. When payments are not for substantive or at-risk
milestones, revenue will be recognized on a straight-line basis
over the remaining estimated term of the research and
development service period. The estimated term of the research
and development service period is reviewed and adjusted based on
the status of the project against the estimated timeline as
additional information becomes available.
Preclinical
Study, Clinical Trial and Manufacturing Accruals
Trubion estimates its preclinical study, clinical trial and
manufacturing accrued expenses based on its estimates of the
services received pursuant to contracts with multiple research
organizations and contract
68
manufacturers that conduct, manage, and provide materials for
preclinical studies and clinical trials on Trubions
behalf. The financial terms of these agreements vary from
contract to contract and may result in uneven payment flows.
Research and development costs are expensed as the related goods
are delivered or the related services are performed.
Trubions preclinical study, clinical trial and
manufacturing expenses include fees paid to the following:
|
|
|
|
|
contract research organizations in connection with preclinical
studies;
|
|
|
|
clinical research organizations and other clinical sites in
connection with clinical trials; and
|
|
|
|
contract manufacturers in connection with the production of
components and drug materials for preclinical studies and
clinical trials.
|
Trubion records accruals for these preclinical studies, clinical
trial and manufacturing expenses based on the estimated amount
of work completed. All such costs are included in research and
development expenses based on these estimates. Costs of setting
up a preclinical study or clinical trial are expensed as the
related services are performed. Costs related to patient
enrollment in clinical trials are accrued as patients are
enrolled in the trial. Trubion monitors patient enrollment
levels and related activities to the extent possible through
internal reviews, correspondence and discussions with research
organizations. If Trubion has incomplete or inaccurate
information, Trubion may, however, underestimate or overestimate
activity levels associated with various preclinical studies and
clinical trials at a given point in time. In the event Trubion
underestimates, Trubion could record significant research and
development expenses in future periods when the actual activity
level becomes known. To the extent any of these expenses are
reimbursable under Trubions collaboration agreements with
Pfizer or Abbott, Trubion could also record significant
adjustments to revenue when the actual activity becomes known.
To date, Trubion has not made any material adjustments to its
estimates of preclinical study, clinical trial and manufacturing
expenses. Trubion makes good-faith estimates that Trubion
believes to be accurate, but the actual costs and timing of
preclinical studies, clinical trials and manufacturing runs are
highly uncertain, subject to risks, and may change depending on
a number of factors, including Trubions clinical
development plan. If any of Trubions product candidates
enter Phase III clinical trials, the process of estimating
clinical trial costs will become more difficult because the
trials will involve larger numbers of patients and clinical
sites.
Stock-Based
Compensation
Trubion accounts for stock-based compensation for employees and
directors based on estimated fair values. Employee stock-based
compensation expense recognized in the six months ended
June 30, 2010 and June 30, 2009 was calculated based
on awards ultimately expected to vest, and has been reduced for
estimated forfeitures. Forfeitures are estimated at the time of
grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. The forfeiture estimate
is based on historical employee turnover rates and could differ
from actual forfeitures. Compensation costs for employee stock
options granted prior to January 1, 2006 were accounted for
using the options intrinsic value or the difference, if
any, between the fair market value of Trubions common
stock and the exercise price of the option.
The fair value of each employee option grant in the six months
ended June 30, 2010 and 2009, respectively, was estimated
on the date of grant using the Black-Scholes option pricing
model with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
Risk-free interest rate
|
|
|
2.44%-2.77%
|
|
|
|
2.13%-2.64%
|
|
Weighted-average expected life (in years)
|
|
|
5.99
|
|
|
|
5.98
|
|
Expected dividend yield
|
|
|
0%
|
|
|
|
0%
|
|
Expected volatility rate
|
|
|
100%-102%
|
|
|
|
88%-91%
|
|
Weighted-average estimated fair value of employee options
|
|
$
|
3.06
|
|
|
$
|
1.04
|
|
For stock options granted to non-employees, the fair value of
the stock options is estimated using the Black-Scholes valuation
model. The Black-Scholes model utilizes the estimated fair value
of common stock and requires that, at the date of grant, Trubion
makes assumptions with respect to the expected life of the
option, the volatility of the fair value of the underlying
common stock, risk-free interest rates and expected dividend
yields of Trubions
69
common stock. Trubion has assumed that non-employee stock
options have an expected life of one to ten years and assumed
common stock volatility between 65% and 105%.
Stock-based compensation expense is recognized over the period
of expected service by the non-employee. As the service is
performed, Trubion is required to update its valuation
assumptions, remeasure unvested options and record the
stock-based compensation using the valuation as of the vesting
date. These adjustments may result in higher or lower
stock-based compensation expense in the statement of operations
than originally estimated. Changes in the market price of
Trubions stock could materially change the value of an
option and the resulting stock-based compensation expense.
Trubion expects stock-based compensation expense associated with
non-employee options to fluctuate in the future based on the
volatility of Trubions future stock price.
Valuation
of Investments
Trubion classifies its investment portfolio as
available-for-sale.
The cost of securities sold is based on the specific
identification method. Trubion carries its investments in debt
securities at fair value, estimated as the amount at which an
asset or liability could be bought or sold in a current
transaction between willing parties. In accordance with its
investment policy, Trubion diversifies its credit risk and
invest in debt securities with high credit quality. The majority
of Trubions investments held as of June 30, 2010 are
in active markets and Trubions estimate of fair value is
based upon quoted market prices. Fair value of investment not
based on quoted market prices are valued using observable
inputs. Trubion regularly evaluates the performance of its
investments individually for impairment, taking into
consideration the investment, volatility and current returns. If
a determination is made that a decline in fair value is
other-than-temporary,
the related investment is written down to its estimated fair
value. To date, the carrying values of Trubions
investments have not been written down due to declines in value
because such declines are judged to be temporary. Declines in
the fair value of Trubions investments judged to be other
than temporary could adversely affect Trubions future
operating results. Trubion continues to monitor its credit risks
and evaluate the potential need for impairment charges related
to credit risks in future periods.
Recent
Accounting Pronouncements
In October 2009, the FASB issued new guidance for
multiple-deliverable revenue arrangements. The new guidance
addresses the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. This
guidance establishes a selling price hierarchy for determining
the selling price of a deliverable, which is based on:
(a) vendor-specific objective evidence;
(b) third-party evidence; or (c) estimates. This
guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the
relative selling price method. In addition, this guidance
significantly expands required disclosures related to a
vendors multiple-deliverable revenue arrangements. Trubion
expects to adopt this guidance on January 1, 2011 and it
will be applied prospectively for revenue arrangements entered
into or materially modified after the date of adoption. Trubion
is evaluating the affect this guidance will have on
Trubions financial position, operating results, cash flows
and disclosures.
In March 2010, the FASB issued new guidance for recognizing
revenue under the milestone method. This new guidance allows an
entity to make a policy election to recognize a substantive
milestone in its entirety in the period in which the milestone
is achieved. The new guidance also requires an entity that makes
this policy election to disclose the following: (a) a
description of the overall arrangement, (b) a description
of each milestone and related contingent consideration,
(c) a determination of whether each milestone is considered
substantive, (d) the factors considered in determining
whether the milestone is substantive and (e) the amount of
consideration recognized during the period for milestones. This
guidance did not have a material impact on Trubions
financial position and results of operations, however this
guidance will require additional disclosure in the period
milestones are met.
70
Results
of Operations for the Three Months and Six Months Ended
June 30, 2010 and 2009
Revenue
Revenue recognized under Trubions collaboration agreements
for the three months and six months ended June 30, 2010 and
2009 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Pfizer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upfront fee
|
|
$
|
1,218
|
|
|
$
|
1,218
|
|
|
$
|
2,437
|
|
|
$
|
2,437
|
|
Collaborative research funding
|
|
|
2,360
|
|
|
|
2,901
|
|
|
|
4,915
|
|
|
|
5,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pfizer revenue
|
|
|
3,578
|
|
|
|
4,119
|
|
|
|
7,352
|
|
|
|
8,331
|
|
Abbott
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upfront fee
|
|
|
574
|
|
|
|
|
|
|
|
1,147
|
|
|
|
|
|
Collaborative research funding
|
|
|
1,545
|
|
|
|
|
|
|
|
2,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Abbott revenue
|
|
|
2,119
|
|
|
|
|
|
|
|
3,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
5,697
|
|
|
$
|
4,119
|
|
|
$
|
11,209
|
|
|
$
|
8,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue increased to $5.7 million in the three months ended
June 30, 2010 from $4.1 million in the three months
ended June 30, 2009. Revenue increased to
$11.2 million in the six months ended June 30, 2010
from $8.3 million in the six months ended June 30,
2009. The increase in the three and six months ended
June 30, 2010 compared to the three and six months ended
June 30, 2009 was due to revenue recognized from
Trubions Abbott collaboration of $2.1 million and
$3.9 million, respectively. The increase in revenue related
to Trubions Abbott collaboration was partially offset by
lower reimbursement revenue recognized from Trubions
Pfizer collaboration due to lower costs related to the Phase IIb
clinical trial for TRU-015 in the treatment of RA and a decrease
in the amount of reimbursable legal fees. Revenue from
Trubions Pfizer collaboration for the three and six months
ended June 30, 2010 was $3.6 million and
$7.3 million, respectively.
The Pfizer and Abbott upfront fees are being deferred and
recognized on a straight-line basis over the estimated term of
the research and development service periods. The Pfizer
estimated service period is through 2012 and the Abbott
estimated service period is through 2018. Reimbursement revenue
is expected to fluctuate in the future due to the timing of
reimbursed development and legal costs, and the recognition of
the associated collaborative research revenue under
Trubions collaboration agreements. Trubion expects revenue
to decline in the future as a result of Pfizers decision
to discontinue development of TRU-015, the anticipated
completion of the research program in December 2010 under
Trubions collaboration agreement with Pfizer, and the
anticipated increase in research and development expenses
incurred by Abbott under Trubions collaboration agreement
with Abbott. Trubions revenues and research and
development expenses under the Abbott collaboration may
fluctuate depending on which party in the collaboration is
incurring the majority of the development costs in any
particular quarterly period. Trubions actual revenue,
however, could differ materially from anticipated revenue.
Research
and Development Expenses
Research and development expenses increased to $9.0 million
in the three months ended June 30, 2010 from
$8.1 million in the three months ended June 30, 2009.
Research and development expenses decreased to
$18.0 million in the six months ended June 30, 2010
from $20.2 million in the six months ended June 30,
2009. The increase in the three months ended June 30, 2010
compared to the three months ended June 30, 2009 was due to
increased clinical development costs related to the initiation
of the Phase I/II clinical trial of TRU-016 (16201) and
TRU-016 manufacturing costs. The decrease in the six months
ended June 30, 2010 was primarily due to lower outside
manufacturing costs related to Trubions TRU-016 product
candidate and lower personnel and non-cash stock-based
compensation costs due to the restructuring in February 2009.
These decreases were partially offset by increased clinical
trial costs for the Phase I/II clinical trial of TRU-016
(16201) and increased contract license fees. Trubion
expects research and development expenses to increase in the
future due to the expansion of
71
Trubions clinical activities related to TRU-016 and
increases in preclinical research. Trubion expects these
increases to be partially offset by decreases in TRU-016
manufacturing expenses as future manufacturing runs are
anticipated to take place with Trubions partner Abbott.
These costs may fluctuate depending on which party in the Abbott
collaboration is incurring the majority of the development costs
in any particular period. Trubions actual research and
development expenses could differ materially from those
anticipated.
At any time, Trubion has many ongoing research projects.
Trubions internal resources, employees, and infrastructure
are not directly tied to any individual research project and are
typically deployed across multiple projects. Through its
clinical development programs, Trubion is developing each of its
product candidates in parallel for multiple disease indications,
and through its basic research activities, Trubion is seeking to
design potential drug candidates for multiple new disease
indications. Due to the number of ongoing projects and
Trubions ability to utilize resources across several
projects, Trubion does not record or maintain information
regarding the costs incurred for its research and development
programs on a program-specific basis. In addition, Trubion
believes that allocating costs on the basis of time incurred by
its employees does not accurately reflect the actual costs of a
project.
Trubions research and development activities can be
divided into research and preclinical programs and clinical
development programs. The costs associated with research and
preclinical programs and clinical development programs
approximate the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Research and preclinical programs
|
|
$
|
4,358
|
|
|
$
|
4,147
|
|
|
$
|
9,468
|
|
|
$
|
9,923
|
|
Clinical development programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRU-015
|
|
|
1,465
|
|
|
|
2,004
|
|
|
|
3,124
|
|
|
|
3,826
|
|
TRU-016
|
|
|
2,817
|
|
|
|
1,709
|
|
|
|
4,671
|
|
|
|
5,752
|
|
Indirect
|
|
|
391
|
|
|
|
238
|
|
|
|
784
|
|
|
|
676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total clinical development programs
|
|
|
4,673
|
|
|
|
3,951
|
|
|
|
8,579
|
|
|
|
10,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development
|
|
$
|
9,031
|
|
|
$
|
8,098
|
|
|
$
|
18,047
|
|
|
$
|
20,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and preclinical program costs consist of costs
associated with Trubions product development efforts,
conducting preclinical studies, personnel costs, lab expenses
and indirect costs such as rent, utilities and depreciation.
Research and preclinical program costs decreased in the six
months ended June 30, 2010 compared to the six months ended
June 30, 2009 due to decreased personnel and non-cash
stock-based compensation costs as a result of the restructuring
in February 2009. These decreases were partially offset by
increased contract license fees.
Clinical development costs consist of direct expenses such as
clinical manufacturing costs, clinical trial site and
investigator fees. Indirect costs include items such as
personnel costs, rent, utilities and depreciation. Costs for
TRU-015 decreased in the three months and six months ended
June 30, 2010 compared to the three months and six months
ended June 30, 2009 due to lower costs related to the Phase
IIb clinical trial for TRU-015 in the treatment of RA. Costs for
TRU-016 increased in the three months ended June 30, 2010
compared to the three months ended June 30, 2009 due to
increased clinical development and manufacturing costs. Costs
for TRU-016 decreased in the six months ended June 30, 2010
compared to the six months ended June 30, 2009 due to
decreased outside manufacturing costs and costs incurred by
Abbott that would have otherwise been incurred by Trubion. Costs
for SBI-087 are incurred by Trubions partner, Pfizer, and
as such are not included in the table above.
The majority of Trubions research and development programs
are at an early stage and may not result in any approved
products. Product candidates that may appear promising at early
stages of development may not reach the market for a variety of
reasons. Product candidates may be found to be ineffective or to
cause harmful side effects during clinical trials, may take
longer to pass through clinical trials than had been
anticipated, may fail to receive necessary regulatory approvals
and may prove impractical to manufacture in commercial
quantities at reasonable cost and with acceptable quality. As
part of its business strategy, Trubion may enter into
collaborative arrangements with third parties to complete the
development and commercialization of Trubions product
candidates and it is
72
uncertain which of Trubions product candidates may be
subject to future collaborative arrangements. The participation
of a collaborative partner may accelerate the time to completion
and reduce the cost to Trubion of a product candidate or it may
delay the time to completion and increase the cost to Trubion
due to the alteration of its existing strategy.
As a result of the uncertainties discussed above, the
uncertainty associated with clinical trial enrollments, and the
risks inherent in the development process, Trubion is unable to
determine the duration and completion costs of the current or
future clinical stages of Trubions product candidates or
when, or to what extent, Trubion will generate revenue from the
commercialization and sale of any of its product candidates.
Development timelines, probability of success and development
costs vary widely. Under the collaboration with Pfizer, Trubion
is responsible for winding down the Phase IIa and IIb clinical
retreatment trials of TRU-015 for RA. Under the collaboration
agreement with Abbott, Trubion is the lead party responsible for
the ongoing clinical trial for patients with CLL, manufacturing
activities, and regulatory activities. While Trubion is
currently focused on developing SBI-087 and other non-CD20
product candidates with Pfizer and Trubions TRU-016
product candidate with Abbott, together with other product
candidates that are outside of Trubions collaborations,
Trubion will make determinations as to which programs to pursue
and how much funding to direct to each program on an ongoing
basis in response to the scientific and clinical success of each
product candidate, as well as an ongoing assessment as to the
product candidates commercial potential and value to
potential partners. In addition, due to the limited availability
of capital, Trubion may not be able to fund programs adequately,
if at all. Trubion anticipates developing additional product
candidates, which will also increase its research and
development expenses in future periods. Trubion does not expect
any of its current product candidates to be commercially
available in major markets before 2014, if at all.
General
and Administrative Expenses
General and administrative expenses decreased to
$2.2 million in the three months ended June 30, 2010
compared to $2.6 million in the three months ended
June 30, 2009. General and administrative expenses
decreased to $4.8 million in the six months ended
June 30, 2010 compared to $5.7 million in the six
months ended June 30, 2009. The decrease was primarily due
to the resignation of Trubions chief executive officer in
November 2009, resulting in lower personnel and non-cash
stock-based compensation expense. Trubion expects its general
and administrative expenses to increase in the future.
Trubions actual general and administrative expenses could
differ materially from those anticipated.
Net
Interest Income (Expense)
Net interest income (expense) increased to an expense of
$103,000 in the three months ended June 30, 2010 from an
expense of $102,000 in the three months ended June 30,
2009. Net interest income (expense) increased to an expense of
$207,000 in the six months ended June 30, 2010 from an
expense of $124,000 in the six months ended June 30, 2009.
The increase was the result of continued low interest rates and
a decrease in Trubions average cash and investment
balance. Trubion expects net interest expense to increase in the
near future as a result of lower interest income from a
declining cash balance and low interest rates that are not great
enough to exceed interest expense on its debt.
Other
Income
Other income was $20,000 in the three and six months ended
June 30, 2010 resulting from a gain on the sale of
investments.
73
Results
of Operations for the Years Ended December 31, 2009, 2008
and 2007
Revenue
Revenue recognized under Trubions collaboration agreements
for the years ended December 31, 2009, 2008 and 2007 was as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Pfizer
|
|
$
|
15,855
|
|
|
$
|
16,467
|
|
|
$
|
20,148
|
|
Facet
|
|
|
2,148
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
18,003
|
|
|
$
|
16,467
|
|
|
$
|
20,148
|
|
Revenue increased to $18.0 million in 2009 from
$16.5 million in 2008. Revenue was $20.1 million in
2007. The increase in 2009 compared to 2008 was due to revenue
recognized from Trubions Abbott collaboration of
$2.1 million. The $2.1 million is comprised of
$0.8 million for recognition of the $20 million
upfront fee and $1.4 million equity premium and
$1.3 million for collaborative research funding. The
increase in revenue related to the Abbott collaboration was
partially offset by lower revenue recognized from the Pfizer
collaboration due to an extension of the recognition period of
the upfront fee and lower reimbursement revenue due to lower
costs related to the Phase IIb clinical trial for TRU-015 in the
treatment of RA. Revenue from the Pfizer collaboration for the
year ended December 31, 2009 was comprised of
$11.0 million for collaborative research funding and
$4.9 million for recognition of the $40 million
upfront fee.
The decrease in 2008 compared to 2007 was due to a decrease in
reimbursement revenue from the Pfizer collaboration related to
the Phase IIb clinical trial for TRU-015 in the treatment of RA,
an extension of the recognition of the upfront fee and a decline
in reimbursable legal costs. Revenue for the year ended
December 31, 2008 was comprised of $11.1 million for
Pfizer collaborative research funding and $5.4 million for
recognition of the $40 million Pfizer upfront fee.
Research
and Development Expenses
Research and development expenses increased to
$34.4 million from $31.6 million in 2008. Research and
development expenses were $36.5 million in 2007. The
increase in 2009 compared to 2008 was primarily due to higher
outside manufacturing and clinical development costs related to
the TRU-016 product candidate, partially offset by decreased lab
expense and personnel costs. In connection with the
restructuring in February 2009, Trubion incurred a
$0.8 million charge in the first quarter of 2009 related to
employee severance, benefits and outplacement services,
$0.6 million of which was classified as research and
development expense.
The decrease in 2008 compared to 2007 was primarily due to
decreased outside manufacturing costs related to the TRU-016
product candidate, decreased clinical costs related to the Phase
IIb clinical trial for TRU-015 and decreased costs for lab
expenses for TRU-016.
At any time, Trubion has many ongoing research projects.
Trubions internal resources, employees and infrastructure
are not directly tied to any individual research project and are
typically deployed across multiple projects. Through its
clinical development programs, Trubion is developing each of its
product candidates in parallel for multiple disease indications,
and through its basic research activities, Trubion is seeking to
design potential drug candidates for multiple new disease
indications. Due to the number of ongoing projects and
Trubions ability to utilize resources across several
projects, Trubion does not record or maintain information
regarding the costs incurred for Trubions research and
development programs on a program-specific basis. In addition,
Trubion believes that allocating costs on the basis of time
incurred by its employees does not accurately reflect the actual
costs of a project.
74
Trubions research and development activities can be
divided into research and preclinical programs and clinical
development programs. The costs associated with research and
preclinical programs and clinical development programs
approximate the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Research and preclinical programs
|
|
$
|
17,954
|
|
|
$
|
20,257
|
|
|
$
|
21,344
|
|
Clinical development programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
TRU-015
|
|
|
7,168
|
|
|
|
7,423
|
|
|
|
9,296
|
|
TRU-016
|
|
|
7,659
|
|
|
|
2,009
|
|
|
|
4,587
|
|
Indirect
|
|
|
1,615
|
|
|
|
1,919
|
|
|
|
1,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total clinical development programs
|
|
|
16,442
|
|
|
|
11,351
|
|
|
|
15,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development
|
|
$
|
34,396
|
|
|
$
|
31,608
|
|
|
$
|
36,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and preclinical program costs consist of costs
associated with Trubions product development efforts,
conducting preclinical studies, personnel costs, lab expenses
and indirect costs such as rent, utilities and depreciation.
Research and preclinical program costs decreased in 2009
compared to 2008 due to decreased lab expense and personnel
costs as a result of the restructuring in February 2009.
Research and preclinical program costs decreased in 2008
compared to 2007 due to decreased lab expenses for TRU-016 as
this program moved from a preclinical program to a clinical
program.
Clinical development costs consist of direct expenses such as
clinical manufacturing costs, clinical trial site and
investigator fees. Indirect costs include items such as
personnel costs, rent, utilities and depreciation. Costs for
TRU-015 decreased in 2009 compared to 2008 and 2007 due to lower
costs related to the Phase IIb clinical trial for TRU-015 in the
treatment of RA. Costs for TRU-016 increased in 2009 compared to
2008 due to increased manufacturing costs and clinical
development costs. Costs for TRU-016 decreased in 2008 compared
to 2007 due to decreased outside manufacturing costs and
decreased lab supplies. Costs for SBI-087 are incurred by
Trubions partner, Pfizer, and as such are not included in
the table above.
The majority of Trubions research and development programs
are at an early stage and may not result in any approved
products. Product candidates that may appear promising at early
stages of development may not reach the market for a variety of
reasons. Product candidates may be found to be ineffective or to
cause harmful side effects during clinical trials, may take
longer to pass through clinical trials than had been
anticipated, may fail to receive necessary regulatory approvals
and may prove impracticable to manufacture in commercial
quantities at reasonable cost and with acceptable quality. As
part of its business strategy, Trubion may enter into
collaborative arrangements with third parties to complete the
development and commercialization of its product candidates and
it is uncertain which of its product candidates may be subject
to future collaborative arrangements. The participation of a
collaborative partner may accelerate the time to completion and
reduce the cost to Trubion of a product candidate or it may
delay the time to completion and increase the cost to Trubion
due to the alteration of Trubions existing strategy.
As a result of the uncertainties discussed above, the
uncertainty associated with clinical trial enrollments, and the
risks inherent in the development process, Trubion is unable to
determine the duration and completion costs of the current or
future clinical stages of its product candidates or when, or to
what extent, Trubion will generate revenue from the
commercialization and sale of any of its product candidates.
Development timelines, probability of success and development
costs vary widely. Under the collaboration with Pfizer, Trubion
is responsible for winding down the Phase IIa and IIb clinical
retreatment trials of TRU-015 for RA. In addition, Trubion is
responsible for conducting clinical studies for TRU-015 niche
indications. Under the collaboration agreement with Abbott,
Trubion is the lead party responsible for the ongoing clinical
trial for patients with CLL, manufacturing activities, and
regulatory activities. While Trubion is currently focused on
developing SBI-087 and other non-CD20 product candidates with
Pfizer and the TRU-016 product candidate with Abbott, together
with other SMIP product candidates that are outside of the
collaborations, Trubion will make determinations as to which
programs to pursue and how much funding to direct to each
program on an ongoing basis in response to the scientific and
clinical success of each product candidate, as well as an
ongoing assessment as to the product candidates commercial
75
potential and value to potential partners. In addition, due to
the limited availability of capital Trubion may not be able to
fund programs adequately, or at all. Trubion anticipates
developing additional product candidates, which will also
increase its research and development expenses in future
periods. Trubion does not expect any of its current product
candidates to be commercially available in major markets before
2014, if at all.
General
and Administrative Expenses
General and administrative expenses increased to
$12.4 million in 2009 from $11.4 million in 2008.
General and administrative expenses were $10.8 million in
2007. The increase in 2009 compared to 2008 was primarily due to
charges associated with the resignation of Trubions former
CEO, partially offset by lower personnel-related costs as a
result of the restructuring in February 2009. In connection with
the restructuring in February 2009, Trubion incurred a
$0.8 million charge in the first quarter of 2009 related to
employee severance, benefits and outplacement services,
$0.2 million of which was classified as general and
administrative expense. The increase in 2008 compared to 2007
was primarily due to increased consulting and outside service
fees and increased non-cash stock-based compensation expense
partially offset by decreased fees related to filings for the
protection of Trubions intellectual property.
Net
Interest Income (Expense)
Net interest income (expense) decreased to an expense of
$0.4 million in 2009 from a gain of $1.0 million in
2008 and a gain of $3.8 million in 2007. The decreases were
the result of a decline in interest rates and a decrease in
Trubions average cash and investment balance. Trubion
expects net interest expense to increase in the near future as a
result of lower interest income from a declining cash balance
and low interest rates that are not great enough to exceed
interest expense on Trubions debt.
Income
Taxes
Since inception, Trubion has incurred operating losses and,
accordingly, has not recorded a provision for income taxes for
any of the periods presented. As of December 31, 2009,
Trubion had net operating loss carry forwards for federal income
tax purposes of $64.2 million. Trubion also had federal
research and development tax credit carry forwards of
$2.7 million. If not utilized, the net operating loss and
tax credit carry forwards will expire between 2021 and 2029.
Liquidity
and Capital Resources for the Six Months Ended June 30,
2010 and 2009
As of June 30, 2010, Trubion had $42.1 million in
cash, cash equivalents and investments. Trubion has received the
majority of its funding from the issuance of common stock,
proceeds from its collaboration agreements, asset-based lease
financings and interest earned on investments. Trubions
cash and investment balances are held in a variety of interest
bearing instruments, including obligations of United States
government agencies, high credit rating corporate borrowers, and
money market accounts. Trubion does not hold auction rate
securities within its investment portfolio and, as of
June 30, 2010, Trubion did not hold any corporate
securities. Cash in excess of immediate requirements is invested
with regard to liquidity and capital preservation.
Operating Activities. Net cash used in
operating activities decreased to $12.1 million in the six
months ended June 30, 2010 from $14.7 million in the
six months ended June 30, 2009.
Investing Activities. Net cash provided by
investing activities decreased to $6.1 million in the six
months ended June 30, 2010 from $17.2 million in the
six months ended June 30, 2009. Investing activities
consist primarily of purchases, sales and maturities of
marketable securities and capital purchases.
Financing Activities. Net cash used in
financing activities was $0.6 million in the six months
ended June 30, 2010 and 2009. In the six months ended
June 30, 2010 and 2009, financing activities consisted
primarily of payments on an equipment financing arrangement of
$0.6 million.
Based on its current operating plans, Trubion believes that its
existing capital resources, together with interest thereon, will
be sufficient to meet its financial obligations for at least the
next 12 months. The key assumption
76
underlying this estimate is that collaboration revenue and
expenditures related to continued preclinical, manufacturing,
and clinical development of its product candidates during this
period will be within budgeted levels.
Trubions forecast of the period of time that its financial
resources will be adequate to support operations is a
forward-looking statement and involves risks and uncertainties,
and actual results could vary as a result of a number of
factors, including the risk factors discussed elsewhere in this
proxy statement/prospectus. In light of the numerous risks and
uncertainties associated with the development and
commercialization of its product candidates and the extent to
which Trubion enters into collaborations with third parties to
participate in their development and commercialization, Trubion
is unable to estimate the amounts of increased capital outlays
and operating expenditures associated with product development.
Trubions future funding requirements will depend on many
factors, including:
|
|
|
|
|
the ability to raise capital through strategic partnerships or
in the debt/equity markets;
|
|
|
|
the terms and timing of any additional collaborative or
licensing agreements that Trubion may establish;
|
|
|
|
milestone payments projected to be received under the Pfizer and
Abbott collaboration agreements;
|
|
|
|
the determination by any of Trubions current collaboration
partners to cease developing any product candidate that is the
subject of that collaboration;
|
|
|
|
the scope, rate of progress, results and costs of Trubions
preclinical testing, clinical trials, and other research and
development activities;
|
|
|
|
the number of programs Trubion pursues;
|
|
|
|
the cost of establishing clinical and commercial supplies of
Trubions product candidates;
|
|
|
|
the cost of preparing, filing, prosecuting, defending, and
enforcing any patent claims and other intellectual property
rights;
|
|
|
|
the cost, timing, and outcomes of regulatory approvals; and
|
|
|
|
the extent to which Trubion acquires or invests in businesses,
products, or technologies.
|
Trubion will need to raise additional funds to support its
operations, and such funding may not be available to Trubion on
acceptable terms, if at all. If Trubion is unable to raise
additional funds when needed, Trubion may not be able to
continue development of its product candidates or Trubion could
be required to delay, scale back, or eliminate some or all of
its development programs and other operations. Trubion may seek
to raise additional funds through public or private financing,
strategic partnerships, or other arrangements. Any additional
equity financing may be dilutive to stockholders and debt
financing, if available, may involve restrictive covenants. If
Trubion raises funds through collaborative or licensing
arrangements, Trubion may be required to relinquish, on terms
that are not favorable to Trubion, rights to some of
Trubions technologies or product candidates that Trubion
would otherwise seek to develop or commercialize itself.
Trubions failure to raise capital when needed may harm its
business and operating results.
Liquidity
and Capital Resources for the Years Ended December 31,
2009, 2008 and 2007
As of December 31, 2009, Trubion had $54.8 million in
cash, cash equivalents and investments. Trubion has received the
majority of its funding from the issuance of common stock,
proceeds from collaboration agreements, asset-based lease
financings and interest earned on investments. Trubions
cash and investment balances are held in a variety of interest
bearing instruments, including obligations of United States
government agencies, high credit rating corporate borrowers, and
money market accounts. Trubion does not hold auction rate
securities within its investment portfolio and as of
December 31, 2009 Trubion did not hold any corporate
securities. Cash in excess of immediate requirements is invested
with regard to liquidity and capital preservation.
Operating Activities. Net cash used in
operating activities was $5.1 million, $23.9 million
and $26.4 million for the years ended December 31,
2009, 2008 and 2007, respectively. Net cash used in operations
during 2009 was due to personnel-related costs, clinical trial
costs, manufacturing costs, legal and professional fees,
facilities costs, lab supplies to support Trubions
research activities and administrative costs, partially offset
by upfront fees
77
received under the Abbott collaboration. Net cash used in
operations during 2008 was primarily used for personnel-related
costs, clinical trial costs, legal and professional fees, lab
supplies to support research activities, facilities costs and
administrative costs.
Investing Activities. Net cash used in
investing activities was $9.9 million in the year ended
December 31, 2009. Net cash provided by investing
activities was $12.4 million and $9.1 million for the
years ended December 31, 2008 and 2007. Investing
activities consist primarily of purchases, sales and maturities
of marketable securities and capital purchases. Trubions
purchases of securities increased during 2009 as a result of the
$30.0 million in cash provided to Trubion as part of the
collaboration agreement with Abbott. Additionally, Trubion had
lower maturities in 2009 as a result of a lower average cash and
investment balance. Purchases of property and equipment were
$85,000, $1.3 million and $3.8 million in the years
ended December 31, 2009, 2008 and 2007, respectively.
Financing Activities. Net cash provided by
financing activities was $7.4 million in the year ended
December 31, 2009 compared to net cash used in financing
activities of $373,000 in the year ended December 31, 2008.
Net cash provided by financing activities was $2.7 million
in the year ended December 31, 2007. In 2009 financing
activities consisted primarily of a private placement of common
stock to Abbott of $8.6 million and payments on an
equipment financing arrangement of $1.3 million. In 2008,
financing activities consisted primarily of $10.0 million
in proceeds under a new debt facility, offset by
$9.5 million in payments against pre-existing equipment
financing arrangements and $900,000 in other debt payments. In
2007, financing activities consisted primarily of net proceeds
from an equipment financing arrangement of $2.2 million.
Trubion entered into a loan and security agreement with Silicon
Valley Bank, or SVB, effective July 25, 2008, the terms of
which provide for a $10.0 million debt facility secured by
a security interest in Trubions assets, other than
intellectual property, and used $8.5 million of the
proceeds from this debt facility to fully extinguish
Trubions obligations with Comerica Bank, or Comerica,
under its existing debt facility. In conjunction with
extinguishing its obligations under the Comerica debt facility,
Trubion also terminated the Comerica loan and security agreement
and related interest rate swap agreement. Trubion incurred a fee
of $165,000 in connection with the termination of the interest
rate swap agreement, which is included in interest expense in
the statements of operations for the year ended
December 31, 2008. The full $10.0 million available
under the SVB facility was drawn at closing and is payable in
fixed equal payments of principal plus accrued interest at a
fixed rate of 5.75% based on an
84-month
amortization schedule with all principal and interest due
July 25, 2013. As of December 31, 2009,
$8.3 million was outstanding under the SVB loan and
security agreement.
The loan and security agreement with SVB contains
representations and warranties and affirmative and negative
covenants that are customary for credit facilities of this type.
The debt covenants in place by the loan and security agreement
with SVB require Trubion to maintain a liquidity coverage of at
least 1.5:1 and remaining months liquidity of at least 3:1.
Trubion was in compliance with all covenants under the loan and
security agreement as of December 31, 2009. The loan and
security agreement could restrict Trubions ability to,
among other things, sell certain assets, engage in a merger or
change in control transaction, incur debt, pay cash dividends,
and make investments. The loan and security agreement also
contains events of default that are customary for credit
facilities of this type, including payment defaults, covenant
defaults, insolvency type defaults, and events of default
relating to liens, judgments, material misrepresentations, and
the occurrence of certain material adverse events. In addition,
the loan and security agreement with SVB contains a material
adverse change clause which may accelerate the maturity of the
loan upon the occurrence of certain events. Trubion has no
indication that Trubion is in default of the material adverse
change clause and no scheduled loan payments have accelerated as
a result of this provision.
Based on its current operating plans, Trubion believes that its
existing capital resources, together with interest thereon, will
be sufficient to meet its financial obligations for at least the
next 12 months. The key assumption underlying this estimate
is that expenditures related to continued preclinical,
manufacturing, and clinical development of its product
candidates during this period will be within budgeted levels.
Trubions forecast of the period of time that its financial
resources will be adequate to support operations is a
forward-looking statement and involves risks and uncertainties,
and actual results could vary as a result of a number of
factors, including the risk factors discussed elsewhere in this
proxy statement/prospectus. In light of the numerous risks and
uncertainties associated with the development and
commercialization of its product candidates and the extent to
which Trubion enters into collaborations with third parties to
participate in their development and
78
commercialization, Trubion is unable to estimate the amounts of
increased capital outlays and operating expenditures associated
with product development. Trubions future funding
requirements will depend on many factors, including:
|
|
|
|
|
the ability to raise capital through strategic partnerships or
in the debt/equity markets;
|
|
|
|
the terms and timing of any additional collaborative or
licensing agreements that Trubion may establish;
|
|
|
|
milestone payments projected to be received under the Pfizer and
Abbott collaboration agreements;
|
|
|
|
the determination by any of the current collaboration partners
to cease developing any product candidate that is the subject of
that collaboration;
|
|
|
|
the scope, rate of progress, results and costs of Trubions
preclinical testing, clinical trials, and other research and
development activities;
|
|
|
|
the number of programs Trubion pursues;
|
|
|
|
the cost of establishing clinical and commercial supplies of
Trubions product candidates;
|
|
|
|
the cost of preparing, filing, prosecuting, defending, and
enforcing any patent claims and other intellectual property
rights;
|
|
|
|
the cost, timing, and outcomes of regulatory approvals; and
|
|
|
|
the extent to which Trubion acquires or invests in businesses,
products, or technologies.
|
Trubion will need to raise additional funds to support its
operations, and such funding may not be available to Trubion on
acceptable terms, if at all. The capital markets have been
experiencing extreme volatility and disruption. The scope and
extent of this disruption in the capital markets could make it
difficult or impossible to raise additional capital in public or
private capital markets until conditions stabilize. If Trubion
is unable to raise additional funds when needed, Trubion may not
be able to continue development of its product candidates or
Trubion could be required to delay, scale back, or eliminate
some or all of its development programs and other operations.
Trubion may seek to raise additional funds through public or
private financing, strategic partnerships, or other
arrangements. Any additional equity financing may be dilutive to
stockholders and debt financing, if available, may involve
restrictive covenants. If Trubion raises funds through
collaborative or licensing arrangements Trubion may be required
to relinquish, on terms that are not favorable to Trubion,
rights to some of Trubions technologies or product
candidates that Trubion would otherwise seek to develop or
commercialize itself. Trubions failure to raise capital
when needed may harm its business and operating results.
Trubions future contractual obligations as of
December 31, 2009 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
Total
|
|
|
1 Year
|
|
|
2-3 Years
|
|
|
4-5 Years
|
|
|
Thereafter
|
|
|
Notes payable (including interest)
|
|
$
|
9,531
|
|
|
$
|
1,744
|
|
|
$
|
3,486
|
|
|
$
|
4,301
|
|
|
$
|
|
|
Manufacturing commitment
|
|
|
2,100
|
|
|
|
2,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
|
4,934
|
|
|
|
1,490
|
|
|
|
2,952
|
|
|
|
492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,565
|
|
|
$
|
5,334
|
|
|
$
|
6,438
|
|
|
$
|
4,793
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Balance
Sheet Arrangements
Since inception, Trubion has not engaged in any off-balance
sheet arrangements, including the use of structured finance,
special purpose entities or variable interest entities.
79
QUANTITATIVE
AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK OF TRUBION
Trubions exposure to market risk is primarily confined to
its investment securities. The primary objective of its
investment activities is to preserve its capital to fund
operations. Trubion also seeks to maximize income from its
investments without assuming significant risk. To achieve its
objectives, Trubion maintains a portfolio of investments in a
variety of securities of high credit quality. As of
June 30, 2010, Trubions portfolio of investments
consisted of money market accounts and U.S. treasury
securities. Trubion has no exposure to auction rate securities
within its investment portfolio. The securities in its
investment portfolio are not leveraged, are classified as
available for sale and, due to their short-term nature, are
subject to minimal interest rate risk. Trubion currently does
not hedge interest rate exposure on its investment securities.
Trubion actively monitors changes in interest rates.
Trubion is also exposed to potential loss due to changes in
interest rates. Its principal interest rate exposure is to
changes in U.S. interest rates related to its investment
securities. To estimate the potential loss due to changes in
interest rates, Trubion performed a sensitivity analysis using
the instantaneous adverse change in interest rates of
100 basis points across the yield curve. On this basis,
Trubion estimates the potential loss in fair value that would
result from a hypothetical 1% (100 basis points) increase
in interest rates to be $62,000 and $5,000 as of June 30,
2010 and 2009, respectively.
80
SUPPLEMENTARY
FINANCIAL INFORMATION OF TRUBION
Selected
Quarterly Results of Operations
The following selected quarterly data should be read in
conjunction with the Consolidated Financial Statements and Notes
of Trubion and Managements Discussion and Analysis
of Financial Condition and Results of Operations of
Trubion in this in this proxy statement/prospectus. This
information has been derived from unaudited consolidated
financial statements of Trubion that, in Trubions opinion,
reflect all recurring adjustments necessary to fairly present
Trubions financial information when read in conjunction
with the Consolidated Financial Statements and Notes. The
results of operations for any quarter are not necessarily
indicative of the results to be expected for any future period.
Quarterly
Consolidated Statements of Operations for 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Year
|
|
|
|
(in thousands, except per share data)
|
|
|
Collaboration revenue
|
|
$
|
4,212
|
|
|
$
|
4,119
|
|
|
$
|
4,452
|
|
|
$
|
5,220
|
|
|
$
|
18,003
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
12,079
|
(1)
|
|
|
8,098
|
|
|
|
7,410
|
|
|
|
6,809
|
|
|
|
34,396
|
|
General and administrative
|
|
|
3,110
|
|
|
|
2,621
|
|
|
|
3,146
|
|
|
|
3,552
|
|
|
|
12,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
15,189
|
|
|
|
10,719
|
|
|
|
10,556
|
|
|
|
10,361
|
|
|
|
46,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(10,977
|
)
|
|
|
(6,600
|
)
|
|
|
(6,104
|
)
|
|
|
(5,141
|
)
|
|
|
(28,822
|
)
|
Net interest income (expense)
|
|
|
(22
|
)
|
|
|
(102
|
)
|
|
|
(123
|
)
|
|
|
(114
|
)
|
|
|
(361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(10,999
|
)
|
|
$
|
(6,702
|
)
|
|
$
|
(6,227
|
)
|
|
$
|
(5,255
|
)
|
|
$
|
(29,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.61
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(1.55
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic and diluted net loss per
share
|
|
|
17,899
|
|
|
|
18,023
|
|
|
|
18,868
|
|
|
|
18,110
|
|
|
|
18,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The quarterly period ending March 31, 2009 included $3.6
million for outside manufacturing costs for
TRU-016. |
Quarterly
Consolidated Statements of Operations for 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Year
|
|
|
|
(in thousands, except per share data)
|
|
|
Collaboration revenue
|
|
$
|
3,963
|
|
|
$
|
4,468
|
|
|
$
|
3,766
|
|
|
$
|
4,270
|
|
|
$
|
16,467
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
7,515
|
|
|
|
8,390
|
|
|
|
7,397
|
|
|
|
8,306
|
|
|
|
31,608
|
|
General and administrative
|
|
|
2,973
|
|
|
|
3,025
|
|
|
|
2,987
|
|
|
|
2,389
|
|
|
|
11,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
10,488
|
|
|
|
11,415
|
|
|
|
10,384
|
|
|
|
10,695
|
|
|
|
42,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(6,525
|
)
|
|
|
(6,947
|
)
|
|
|
(6,618
|
)
|
|
|
(6,425
|
)
|
|
|
(26,515
|
)
|
Net interest income
|
|
|
557
|
|
|
|
315
|
|
|
|
36
|
|
|
|
48
|
|
|
|
956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,968
|
)
|
|
$
|
(6,632
|
)
|
|
$
|
(6,582
|
)
|
|
$
|
(6,377
|
)
|
|
$
|
(25,559
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.33
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(1.43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic and diluted net loss per
share
|
|
|
17,831
|
|
|
|
17,851
|
|
|
|
17,859
|
|
|
|
17,882
|
|
|
|
17,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
SECURITY
OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND MANAGEMENT OF TRUBION
The following table sets forth the beneficial ownership of
Trubions common stock as of September 3, 2010 by:
|
|
|
|
|
all persons known to Trubion, based on statements filed by such
persons pursuant to Section 13(d) or 13(g) of the Exchange
Act, to be the beneficial owners of more than 5% of its common
stock and based on the records of BNY Mellon Shareowner Services
LLC, its transfer agent;
|
|
|
|
each director of Trubion;
|
|
|
|
each of the executive officers named in the 2009 Summary
Compensation Table set forth in the proxy statement
Trubion delivered to its stockholders in connection with its
2010 Annual Meeting of Stockholders; and
|
|
|
|
all current directors and executive officers as a group.
|
Except as otherwise noted, and subject to applicable community
property laws, the persons named in this table have, to
Trubions knowledge, sole voting and investing power for
all of the shares of common stock held by them.
This table lists applicable percentage ownership based on
20,425,554 shares of common stock outstanding as of
September 3, 2010. Options to purchase shares of Trubion
common stock that are exercisable within 60 days of
September 3, 2010 are deemed to be beneficially owned by
the persons holding these options for the purpose of computing
the number of shares owned by, and percentage ownership of, that
person, but are not treated as outstanding for the purpose of
computing any other persons number of shares owned or
ownership percentage.
Unless otherwise indicated, the address for each stockholder on
this table is
c/o Trubion
Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050,
Seattle, WA, 98121.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
|
|
Exercisable
|
|
Number of Shares
|
|
|
|
|
Stock
|
|
Beneficially
|
|
Percent of
|
Name of Beneficial Owner
|
|
Options(1)
|
|
Owned(2)
|
|
Class
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Emergent BioSolutions Inc., 2273 Research Boulevard,
Suite 400, Rockville, MD 20850(3)
|
|
|
|
|
|
|
7,146,815
|
|
|
|
34.9
|
%
|
Entities affiliated with ARCH Venture Partners(4)
|
|
|
|
|
|
|
2,357,046
|
|
|
|
11.5
|
%
|
Entities affiliated with Frazier Healthcare Ventures(5)
|
|
|
|
|
|
|
2,237,940
|
|
|
|
11.0
|
%
|
Entities affiliated with OBP Management IV L.P.(6)
|
|
|
|
|
|
|
2,197,300
|
|
|
|
10.8
|
%
|
Entities affiliated with Venrock(7)
|
|
|
|
|
|
|
1,857,632
|
|
|
|
9.1
|
%
|
Entities affiliated with Prospect Venture Partners(8)
|
|
|
|
|
|
|
1,857,631
|
|
|
|
9.1
|
%
|
Entities affiliated with FMR LLC(9)
|
|
|
|
|
|
|
1,076,300
|
|
|
|
5.3
|
%
|
Entities affiliated with First Eagle Investment Management,
LLC(10)
|
|
|
|
|
|
|
1,385,479
|
|
|
|
6.8
|
%
|
Entities affiliated with Facet Biotech Corporation(11)
|
|
|
|
|
|
|
2,243,649
|
|
|
|
11.0
|
%
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned
|
|
|
Exercisable
|
|
Number of Shares
|
|
|
|
|
Stock
|
|
Beneficially
|
|
Percent of
|
Name of Beneficial Owner
|
|
Options(1)
|
|
Owned(2)
|
|
Class
|
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter A. Thompson
|
|
|
453,534
|
|
|
|
839,953
|
|
|
|
4.0
|
%
|
Steven Gillis, Ph.D.(12)
|
|
|
61,635
|
|
|
|
2,418,681
|
|
|
|
11.8
|
%
|
Michelle G. Burris
|
|
|
159,549
|
|
|
|
159,549
|
|
|
|
*
|
|
Kathleen M. Deeley
|
|
|
111,742
|
|
|
|
111,742
|
|
|
|
*
|
|
Kendall M. Mohler, Ph.D.
|
|
|
248,021
|
|
|
|
388,227
|
|
|
|
1.9
|
%
|
Scott C. Stromatt, M.D.
|
|
|
62,985
|
|
|
|
62,985
|
|
|
|
*
|
|
John A. Bencich
|
|
|
29,093
|
|
|
|
29,093
|
|
|
|
*
|
|
Lee T. Brettman, M.D., FACP
|
|
|
27,757
|
|
|
|
43,704
|
|
|
|
*
|
|
Patrick J. Heron(13)
|
|
|
27,500
|
|
|
|
2,265,440
|
|
|
|
11.1
|
%
|
Anders D. Hove, M.D.(14)
|
|
|
27,500
|
|
|
|
1,885,132
|
|
|
|
9.2
|
%
|
David A. Mann
|
|
|
34,135
|
|
|
|
47,070
|
|
|
|
*
|
|
Samuel R. Saks, M.D.
|
|
|
34,135
|
|
|
|
34,135
|
|
|
|
*
|
|
David Schnell, M.D.(15)
|
|
|
27,500
|
|
|
|
1,885,131
|
|
|
|
9.2
|
%
|
All directors and executive officers as a group (12) persons
|
|
|
1,305,086
|
|
|