Admission Document

Admission Document
Nominated Adviser and Broker
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document
or as to what action you should take, you are recommended immediately to seek your own financial advice from your stockbroker, bank manager,
solicitor or other independent adviser who specialises in advising on the acquisition of shares and other securities and is authorised under the
FSMA if you are resident in the UK, or, if you are not resident in the UK, from another authorised independent adviser. The whole of this document
should be read. Your attention is drawn in particular to the section entitled “Risk Factors” in Part II of this document that describes certain risks
associated with an investment in the Company.
The Company and its Directors accept collective and individual responsibility for the information contained in this document. To the best of the
knowledge and belief of the Company and the Directors (who have each taken all reasonable care to ensure that such is the case), the information
contained in this document is in accordance with the facts and does not omit anything likely to affect its import.
This document, which comprises an admission document drawn up in accordance with the AIM Rules for Companies, has been issued in connection
with the proposed Admission. This document does not contain an offer or constitute any part of an offer to the public within the meaning of sections
85 and 102B of FSMA or otherwise. This document is not an approved prospectus for the purposes of section 85 of FSMA and a copy of it has not
been, and will not be, delivered to the Financial Conduct Authority (“FCA”) in accordance with the Prospectus Rules or delivered to or approved by
any other authority which could be a competent authority for the purposes of the Prospectus Directive.
A copy of this document will be available, free of charge, during normal business hours on any weekday (except Saturdays, Sundays and public
holidays), at the offices of King & Spalding International LLP, 125 Old Broad Street, London EC2N 1AR, for a period of one month from the date of
Admission and is also available on the Company’s website at www.verseon.com.
Application will be made for the Enlarged Issued Share Capital to be admitted to trading on AIM. It is expected that Admission will take place and
that dealings in the Enlarged Issued Share Capital will commence on 7 May 2015. AIM is a market designed primarily for emerging or smaller
companies to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted
to the Official List of the UKLA. A prospective investor should be aware of the risks of investing in such companies and should make the decision
to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. In particular, it should be
remembered that the price of securities and the income from them can go down as well as up.
The AIM Rules are less demanding than those of the Official List. Each AIM company is required pursuant to the AIM Rules for Companies to have
a nominated adviser. The nominated adviser is required to make a declaration to the London Stock Exchange on Admission in the form set out in
Schedule Two to the AIM Rules for Nominated Advisers. It is emphasised that no application is being made for the Existing Common Shares and
Placing Shares to be admitted to the Official List or to any other recognised investment exchange. Further, neither the London Stock Exchange nor
the FCA has examined or approved the contents of this document.
VERSEON CORPORATION
(Incorporated and registered in the State of Delaware, US with registration number 3549267)
Placing of 32,569,047 new Common Shares at 202 pence per share and
Admission of the Enlarged Issued Share Capital to trading on AIM
Cenkos Securities Plc
Nominated Adviser and Broker
The Placing is conditional, inter alia, on Admission taking place on or before 7 May 2015 (or such later date as the Company and Cenkos Securities
plc (“Cenkos”) may agree, not being later than 21 May 2015). The Placing Shares will, on Admission, rank pari passu in all respects with the Existing
Common Shares including the right to receive all dividends or other distributions declared, paid or made after Admission.
Cenkos, which is authorised and regulated in the United Kingdom by the FCA and is advising the Company and no one else (whether or not a
recipient of this document) in connection with the Placing and Admission, and is acting exclusively for the Company as nominated adviser and joint
broker for the purpose of the AIM Rules for Companies. Cenkos will not be responsible to any person other than the Company for providing the
protections afforded to its customers, nor for providing advice in relation to the Placing and Admission or the contents of this document. In particular,
the information contained in this document has been prepared solely for the purposes of the Placing and Admission and is not intended to inform or
be relied upon by any subsequent purchasers of Common Shares (whether on or off exchange) and accordingly no duty of care is accepted in relation
to them. Without limiting the statutory rights of any person to whom this document is issued, no representation or warranty, express or implied, is
made by Cenkos as to the contents of this document.
No liability whatsoever is accepted by Cenkos for the accuracy of any information or opinions contained in this document, for which the Directors
are solely responsible, or for the omission of any information from this document for which it is not responsible.
This document does not constitute an offer to buy or to subscribe for, or the solicitation of an offer to buy or subscribe for, Common Shares to any
person to whom, or in any jurisdiction in which, such offer or solicitation is unlawful. The shares in the Common Shares have not been, and will not
be, registered in the United States of America under the US Securities Act of 1933 (as amended) (the “Securities Act”) or qualified for sale under the
laws of any state of the United States or under the applicable laws of any of Canada, Australia, the Republic of Ireland, the Republic of South Africa,
or Japan and, may not be offered or sold in the United States of America, Canada, Australia, the Republic of Ireland, the Republic of South Africa, or
Japan or to, or for the account or benefit of, US persons (as such term is defined in Regulation S under the Securities Act) or to any national, resident
or citizen of Canada, Australia, the Republic of Ireland, the Republic of South Africa, or Japan. Neither this document nor any copy of it may be sent
to or taken into the United States, Canada, Australia, the Republic of Ireland, the Republic of South Africa, or Japan, nor may it be distributed to any
US person (within the meaning of Regulation S under the Securities Act). In addition, the securities to which this document relates must not be
marketed into any jurisdiction where to do so would be unlawful.
The distribution of this document and the Placing in certain jurisdictions may be restricted by law. No action has been taken or will
be taken by the Company, the Directors or Cenkos to permit a public offer of Common Shares or to permit the possession or
distribution of this document in any jurisdiction where action for that purpose may be required. This document may not be distributed
in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into
whose possession this document comes are required by the Company, the Directors and Cenkos to inform themselves about and to
observe any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of the
relevant jurisdiction.
THE COMMON SHARES HAVE NOT BEEN REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “US
SECURITIES ACT”) OR ANY US STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT IF SUCH TRANSFER IS EFFECTED (1) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULES 901 THROUGH 905 (INCLUDING THE PRELIMINARY NOTES) OF REGULATION S UNDER THE US
SECURITIES ACT, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE US SECURITIES ACT, OR (3)
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT IN EACH
CASE IN ACCORDANCE WITH ALL APPLICABLE US FEDERAL AND STATE SECURITIES LAWS AND IN THE CASE OF (3), AN
OPINION OF COUNSEL SHALL BE DELIVERED TO THE COMPANY (AND UPON WHICH THE COMPANY MAY RELY)
REGARDING THE AVAILABILITY OF SUCH EXEMPTION. HEDGING TRANSACTIONS INVOLVING THE COMMON SHARES MAY
NOT BE CONDUCTED, DIRECTLY OR INDIRECTLY, UNLESS IN COMPLIANCE WITH THE US SECURITIES ACT.
IMPORTANT INFORMATION
SETTLEMENT AND CREST
The EU Regulation on Central Securities Depositories (the “CSDR”) was adopted on 23 July 2014. Article 3(2) of CSDR requires that
where transactions in transferable securities take place on a trading venue, such as the AIM market of the London Stock Exchange
(“AIM”), the relevant securities should be settled electronically and recorded in book entry form in a Central Securities Depository
(“CSD”), such as the CREST settlement system (“CREST”) operated by Euroclear UK and Ireland Limited (“EUI”), on or before the
intended settlement date (unless already so recorded). This requirement applies irrespective of whether the security is currently
eligible for electronic settlement or not and applies to all transactions executed under the Rules of the London Stock Exchange
irrespective of whether or not the securities are issued by an EU-incorporated issuer.
The London Stock Exchange has announced that it intends to amend its rules so that all London Stock Exchange transactions are able
to comply with the requirements of Article 3(2) of CSDR. On 18 September 2014, the London Stock Exchange published a market
notice indicating that it intended to amend its rules with effect from on 5 January 2015 in order to ensure that all securities traded
on the London Stock Exchange settle electronically in book entry form. On 27 November 2014, the London Stock Exchange
published a further market notice indicating that the commencement date for compliance with the requirement noted above for
transactions in “Regulation S, Category 3” securities, such as the Placing Shares to be issued in connection with the Placing, will be
deferred until 1 June 2015.
This rule change will require the Company (in common with all other companies whose securities are admitted to trading on AIM)
to ensure that the Common Shares are eligible for electronic settlement through CREST.
The Placing Shares offered in the Placing are subject to the conditions listed under Section 903(b)(3), or Category 3, of Regulation S.
Under Category 3, Offering Restrictions (as defined under Regulation S) must be in place in connection with the Placing and
additional restrictions are imposed on re-sales of the Placing Shares. Further details of these restrictions are set out in Part VII of this
document. All Placing Shares are subject to these restrictions until the expiry of one year after the later of (i) the time when the Placing
Shares are first offered to persons other than distributors in reliance upon Regulations S and (ii) the date of closing of the Placing, or
such longer period as may be required under applicable law (the “Compliance Period”).
Due to these restrictions, all Common Shares will be held in certificated form from Admission (with restrictive legends printed on the
face or back of such certificate). The London Stock Exchange and EUI intend to continue to work with issuers and other market
participants to provide a mechanism to facilitate compliance with the Transfer Restrictions in book entry form on or prior to the
revised 1 June 2015 deadline.
However, as of the date of this document, a mechanism has not yet been established, and there is a possibility that, if no mechanism
is implemented by 1 June 2015, AIM may require the Common Shares of the Company held in certificated form to be suspended
from trading. Following either the expiration of the Compliance Period or the implementation of an electronic settlement mechanism
of “Regulation S, Category 3 Securities”, the Common Shares held in certificated form will need to be dematerialised into the CREST
system prior to trading. This dematerialisation will be satisfied by a CREST Stock Deposit transaction together with a certification
instruction within the CREST system to issue depository interests which facilitate trading and electronic settlement of shares of nonUK companies in CREST. Depository interests are uncertificated “mirror image” securities constituted under English law representing
the underlying shares.
FORWARD-LOOKING STATEMENTS
This document contains forward looking statements relating to the Company’s future prospects, developments and strategies, which
have been made after due and careful enquiry and are based on the Directors’ current expectations and assumptions and involve
known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those
expressed or implied in such statements. Forward-looking statements are identified by their use of terms and phrases such as
“believe”, “could”, “envisage”, “estimate”, “intend”, “may”, “plan”, “will” or the negative of those, variations or comparable
expressions, including references to assumptions. These forward-looking statements are subject to, inter alia, the risk factors described
in Part II of this document. The Directors believe that the expectations reflected in these statements are reasonable, but may be
affected by a number of variables which could cause actual results or trends to differ materially. Each forward-looking statement
speaks only as of the date of the particular statement.
2
CONTENTS
PLACING STATISTICS
4
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
4
FOREIGN CURRENCY AMOUNT
4
DIRECTORS, SECRETARY AND ADVISERS
5
DEFINITIONS
6
PART I – INFORMATION ON THE COMPANY
9
PART II – RISK FACTORS
44
PART III – PATENT ATTORNEY’S REPORT
66
PART IV – HISTORICAL FINANCIAL INFORMATION ON THE GROUP
82
PART V – PRO FORMA FINANCIAL INFORMATION
110
PART VI – ADDITIONAL INFORMATION
111
PART VII – RESTRICTIONS ON TRANSFERS TO US PERSONS
143
GLOSSARY OF SCIENTIFIC AND TECHNICAL TERMS
147
3
KEY INFORMATION
PLACING STATISTICS
Placing Price
202 pence per share
Number of Existing Common Shares
111,509,706
Number of Placing Shares
32,569,047
Number of Common Shares in issue immediately following Admission*
149,739,909
Number of Placing Shares as a percentage of Enlarged Issued Share Capital
21.8%
Estimated gross proceeds of the Placing
£65.8 million
Estimated net proceeds of the Placing receivable by the Company
£60.7 million
Market capitalisation of the Company at the Placing Price
£302.5 million
TIDM
“VSN”
ISIN
USU9221J1098
SEDOL
BX7RSG6
* includes 635,418 Convertible Note Shares and 5,025,738 Nirog Conversion Shares.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Publication of this document
1 May 2015
Admission of Enlarged Issued Share Capital and dealings commence
on AIM
Despatch of definitive share certificates
8.00 a.m. on 7 May 2015
by 21 May 2015
References to time are to London time unless otherwise stated. Each of the dates in the above timetable is indicative only and is
subject to change without further notice.
FOREIGN CURRENCY AMOUNT
Where relevant in this document, unless otherwise stated, US Dollar amounts have been converted
into Sterling at USD1.52 : £1 (being the mid point exchange rate derived from FactSet at 7:08:42 p.m.
BST on 27 April 2015.
4
DIRECTORS, SECRETARY AND ADVISERS
Directors
Thomas Arnold Hecht
Adityo Prakash
Eniko Fodor
Company Secretary
Eniko Fodor
Registered Office of
the Company
Corporation Trust Center
1209 Orange Street, Wilmington,
Delaware 19801
United States of America
Principal place of
business of the
Company
48820 Kato Road
Suites 100 & 200B, Fremont,
California 94538
United States of America
Nominated Adviser
and Broker
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London EC2R 7AS
United Kingdom
Non-executive Chairman
Chief Executive Officer
Chief Operating Officer & Chief Financial
Officer
Grover Turnbow Wickersham Non-executive Director
Alastair Andrew Bertram Cade Non-executive Director
Auditors and Reporting Deloitte LLP
Accountants
Mountbatten House
1 Grosvenor Square
Southampton SO15 2BZ
United Kingdom
Legal Advisers to the
Company under
English Law and
US Law
King & Spalding International LLP
125 Old Broad Street
London EC2N 1AR
United Kingdom
King & Spalding LLP
601 South California Avenue
Palo Alto, CA 94304
United States of America
Legal Advisers to the
Nominated Adviser
and Broker under
English and US Law
K&L Gates LLP
One New Change
London EC4M 9AF
United Kingdom
K&L Gates LLP
1 Park Place, 12th Floor
Irvine, CA 92614
United States of America
Public Relations
Advisers
FTI Consultancy
200 Aldersgate
Aldersgate Street
London EC1A 4HD
United Kingdom
Registrars
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier JE1 1ES
Jersey
Company Secretarial
Adviser
CMS Advisory Group
201 Temple Chambers
3-7 Temple Avenue
London EC4Y 0DT
United Kingdom
5
DEFINITIONS
In this document, where the context permits, the expressions set out below shall bear the following
meanings:
“Act”
Delaware General Corporation Law
“Admission”
admission of the Enlarged Issued Share Capital to trading on
AIM and such admission becoming effective in accordance
with Rule 6 of the AIM Rules for Companies
“Affiliate”
an affiliate of an issuer is defined in Rule 144 under the US
Securities Act as a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or
is under common control with, such issuer
“AIM”
the market of that name operated by the London Stock
Exchange
“AIM Rules for Companies”
the AIM Rules for Companies published by the London
Stock Exchange from time to time
“AIM Rules for Nominated Advisers”
the AIM Rules for Nominated Advisers published by the
London Stock Exchange from time to time
“Bylaws”
the bylaws of the Company, as amended and restated from
time to time
“Cenkos”
Cenkos Securities plc, nominated adviser and broker to the
Company
“Certificate of Incorporation”
the certificate of incorporation of the Company, as amended
and restated from time to time
“Class A Preferred Shares”
shares of Class A preferred stock of the Company with a par
value per share of $0.001
“Class B Preferred Shares”
shares of Class B preferred stock of the Company with a par
value per share of $0.001
“Class C Preferred Shares”
shares of Class C preferred stock of the Company with a par
value per share of $0.001
“Class Y Common Shares”
shares of Class Y common stock of the Company with a par
value per share of $0.001
“Class Z Common Shares”
shares of Class Z common stock of the Company with a par
value per share of $0.001
“Common Shares”
shares of common stock of the Company with a par value
per share of $0.001
“Company” or “Verseon”
Verseon Corporation, a corporation organised under the
laws of the state of Delaware, USA
“Convertible Note Shares”
the 635,418 Common Shares to be issued upon Admission
pursuant to the conversion of the 6 per cent. convertible
promissory notes, as described in paragraph 3.2.8 of Part VI
“CREST”
the electronic systems for the holding and transfer of shares
in dematerialised form operated by Euroclear UK & Ireland
Limited
6
“Directors” or “Board”
the directors of the Company whose names appear on page
5 of this document and “Director” shall mean any one of
them
“Enlarged Issued Share Capital”
the issued share capital of the Company immediately
following Admission as enlarged by the issue of the Placing
Shares
“Executive Directors”
Adityo Prakash and Eniko Fodor, who are husband and wife
“Existing Common Shares”
the 111,509,706 Common Shares in issue immediately
prior to Admission
“FCA”
the Financial Conduct Authority of the United Kingdom
“Group”
the Company and its subsidiaries
“HMRC”
Her Majesty’s Revenue & Customs
“IRS”
US Internal Revenue Service
“London Stock Exchange”
London Stock Exchange plc
“Nirog”
Nirog Therapeutics LLC, a limited liability company
organised under the laws of the State of Delaware, USA
“Nirog Conversion Shares”
the 5,025,738 Common Shares to be issued by the
Company concurrent with Admission to certain Nirog
unitholders in exchange for Nirog units, as described in
paragraph 12.9 of Part VI
“Non-executive Directors”
the non-executive directors of the Company whose names
are set out on page 5 of this document and “Non-executive
Director” shall mean any one of them
“Placing”
the conditional placing of the Placing Shares at the Placing
Price by Cenkos as broker to the Company, pursuant to the
Placing Agreement
“Placing Agreement”
the conditional agreement dated the same date as this
document between Cenkos, the Company and the Directors
relating to the Placing of the Placing Shares, further details
of which are set out in paragraph 12 of Part VI of this
document
“Placing Price”
202 pence per Placing Share
“Placing Shares”
the 32,569,047 new Common Shares to be issued by the
Company pursuant to the Placing
“Preferred Shares”
shares of the preferred stock of the Company with a par
value per share of $0.001
“Regulation S”
Regulation S promulgated under the US Securities Act
“Relationship Agreement”
the agreement between the Company and the Executive
Directors, entered into on 29 April 2015, details of which
are set out in paragraph 5.2 of Part VI
“Rule 144”
Rule 144, as amended, promulgated under the US Securities
Act
“SEC”
the US Securities and Exchange Commission
“Shareholder”
a holder of Common Shares
7
“Subsidiaries”
those subsidiaries of the Company immediately prior to
Admission and listed in paragraph 11 of Part VI of this
document
“Takeover Code”
the UK City Code on Takeovers and Mergers (as published
by the Panel)
“UK”
the United Kingdom of Great Britain and Northern Ireland
“UKLA”
the United Kingdom Listing Authority, being the Financial
Conduct Authority acting in its capacity as the competent
authority for the purposes of the Financial Services and
Markets Act 2000
“US” “USA” or “United States”
the United States of America, its territories and possessions,
any State of the United States, and the District of Columbia
“US Exchange Act”
the United States Securities Exchange Act of 1934, as
amended
“US GAAP”
generally accepted accounting principles in the US
“US Person”
has the meaning ascribed to such phrase by Regulation S
“US Securities Act”
the United States Securities Act of 1933, as amended
“VIPL”
Verseon India Private Limited, a private company limited by
shares incorporated in Hyderabad, India and a wholly
owned subsidiary of the Company
“£” and “p”
United Kingdom pounds and pence sterling respectively
“$” and “c”
United States dollars and cents respectively
“2002 Plan”
Verseon LLC 2002 Unit Option Plan
“2007 Plan”
Verseon Corporation 2007 Option Plan
“2015 Plan”
Verseon Corporation 2015 Equity Incentive Plan
8
PART I
INFORMATION ON THE COMPANY
1.
Introduction
Verseon is a technology-based pharmaceutical company that employs its proprietary technology to
design novel therapeutics for today’s challenging diseases. The Directors believe the Company’s
proprietary drug discovery platform is the first systematic, computationally-driven solution to achieve
the molecular modelling accuracy necessary for rapid and cost-effective drug discovery. Verseon
generates multiple, chemically-diverse drug candidates for each discovery programme and, as such,
is not reliant on the success or failure of just a single drug candidate in the clinic. Verseon’s drug
discovery platform can be used to find drugs for a multitude of diseases that are now well-defined
following the advances made in the last two decades of genomics and proteomics research including
the mapping of the human genome. The platform can consistently design novel drugs that the
Directors believe are unlikely to be found using conventional methods. The Company is currently
advancing three drug discovery programmes that target medical conditions with very large markets.
Verseon initially intends to out-license drug candidates at early stages of clinical development to
pharmaceutical companies. As the business matures, it is expected that these out-licensing deals will
be struck at progressively later stages of clinical development and, therefore, more value will be
captured from the asset, although each potential licensing deal will be analysed on a case-by-case
basis.
The Directors believe the reduced time and cost for drug discovery combined with the platform’s
applicability to a wide range of therapeutic indications with strong market potential will enable
Verseon to rapidly develop a large, diverse pipeline of valuable therapeutics. The Directors believe
the Company’s drug candidates will be attractive to pharmaceutical licensees because the drug
candidates are designed to be both highly potent and selective towards target proteins and, crucially,
represent novel chemical matter that would not otherwise be accessible. The Directors also believe
that Verseon’s ability to produce multiple, chemically-diverse drug candidates for each discovery
programme will further increase the value proposition of out-licensing by increasing the likelihood of
at least one drug candidate successfully passing through downstream clinical development. Licensing
payments at preclinical or early stages of clinical development are typically in the form of upfront
fees, milestone payments and royalties.
The Directors believe the Company’s key strengths are:
•
a proprietary drug discovery platform that identifies novel potential therapeutics faster and
more inexpensively than existing methods;
•
a platform with the ability to generate novel, drug-like synthesisable compounds and design
multiple chemically-diverse drug candidates for use in drug discovery and development;
•
technology that is protected by intellectual property rights, patents and extensive know-how
which provides a significant barrier to entry;
•
exposure to a target market that is estimated to generate sales of $800 billion annually;
•
the potential, therefore, to earn significant revenue and profits from its pipeline; and
•
a highly qualified management team with expertise in physics, mathematics, medicinal and
synthetic chemistry, biology, computer science and drug discovery.
In the high-tech industry, Moore’s Law predicts a doubling of computing power per unit cost every
two years as new innovations drive progress forward and costs continue to decline. Conversely, the
9
pharmaceutical industry has seen an opposite relationship between R&D spending and drug
approvals. The number of new drugs approved each year per $1 billion spent on R&D has dropped
by half roughly every nine years since 1950 such that each new approved drug has seen the industry
spend more than $1 billion on R&D. The Directors believe this is due in large part to a significant
bottleneck in traditional drug discovery associated with the industry’s continued reliance for 15 or
more years on high-throughput screening (HTS) to test a comparatively small pool of drug-like
compounds against target proteins. An extrapolation of the observed, declining return-on-investment
is an unsustainable position for the global pharmaceutical industry, especially as many high revenue
drugs continue to lose patent protection. The Directors believe the Company’s platform has the
potential to change this negative outlook.
Verseon’s drug discovery and development process comprises the following steps:
•
Verseon designs virtual, novel, drug-like, synthesisable compounds, using a proprietary,
computer-based molecule creation engine, in numbers that are far in excess of the distinct,
synthesised compounds currently in the corporate collections of today’s pharmaceutical
companies.
•
These virtual compounds are then assessed in silico (i.e. computationally) against a diseasecausing target protein by leveraging Verseon’s proprietary breakthroughs in physics-based
molecular modelling of protein-drug interactions in water and sophisticated optimisation
algorithms that can be deployed in parallel across a large dedicated, private computing cloud.
•
Virtual compounds that are predicted by the platform to interact or bind strongly with the target
protein can then be synthesised in the laboratory and subjected to a battery of biochemical
assays for assessment of in vitro bioactivity and further biological characterisation.
•
Promising candidates (i.e. lead candidates) are further characterised via in vivo assessment of
pharmacokinetics (PK), efficacy and safety.
•
Further computational design facilitates lead optimisation for a discovery programme. This
process leads to new variants of compounds to be synthesised for downstream laboratory
assessment.
•
The expected end products for each discovery programme are multiple, novel, chemicallydiverse, drug candidates for entry into clinical development and potential out-licensing or
partnering.
The Company has used its platform to build its drug portfolio which comprises three different
programmes at various stages of discovery and preclinical development:
•
Anticoagulation
•
Diabetic retinopathy / diabetic macular oedema
•
Oncology (solid tumours)
These three therapeutic areas (and others already identified for future programmes) were selected
based on careful planning with input from the Company’s scientific advisory board, comprising
experts in both academia and industry, and pharmaceutical company contacts. The Directors believe
they represent therapeutic areas with substantial market potential that are poorly served by existing
drugs. The Directors also expect to create a balanced drug pipeline which would include rare disease
areas that should benefit from accelerated clinical development.
Anticoagulation
The Company’s most advanced programme is the development of novel anticoagulants (blood
thinning drugs) for the treatment of cardiovascular disorders such as stroke prevention for atrial
10
fibrillation patients, venous thromboembolism (VTE, which includes deep vein thrombosis and
pulmonary embolism) and acute coronary syndrome. As described in more detail in paragraph 4.1 of
this Part I and paragraph 11 of Part VI, Verseon on Admission expects to have a 70.89 per cent.
economic interest in the oral anticoagulant programme whilst retaining full operational control.
Warfarin has dominated the oral anticoagulant drug market for many decades but shortcomings
involving the need for constant monitoring and undesirable drug-drug and drug-food interactions
have led to the development of novel oral anticoagulants (NOACs) such as PradaxaTM, XareltoTM and
EliquisTM in recent years. The global market for NOACs in 2013 was $3.89 billion and is expected to
increase steadily with the total global anticoagulant market forecast to pass $24 billion by 2019.
However, existing NOACs suffer from serious side effects due in large part to associated risks of major
bleeding.
Diabetic retinopathy/diabetic macular oedema
The Company’s second programme is aimed at degenerative diseases of the eye and in particular the
development of novel therapeutics for the treatment of diabetic macular oedema (DME). The global
market for DME in 2009 was approximately $3 billion and is expected to grow to $6.9 billion by
2017. Conventional therapies for DME require injection directly into the eye on a regular basis.
Despite this, two therapeutic products, which are injected directly into the eye on a monthly (or once
every two months) basis, control the majority of the market. Unlike existing therapies which treat
downstream symptoms of DME via anti-angiogenesis (i.e. undesired blood vessel growth), the
Company has taken a different approach and is focusing on the development of plasma kallikrein
inhibitors that could potentially be delivered via topical eye drops for the local ocular disruption of
the kallikrein-kinin system, which is indicated in the DME disease pathway. Several other companies
are also pursuing plasma kallikrein inhibitors for DME treatment but, unlike Verseon’s candidates,
these currently still must be administered via injection into the eye.
Oncology (solid tumours)
The Company’s third programme is a solid tumour oncology programme in the discovery stage for the
development of novel angiogenesis inhibitors (AGIs). Currently, angiogenesis inhibitors are an
important part of oncology treatments for a variety of cancers with a significant share of the oncology
market. Conventional AGIs target vascular endothelial growth factor (VEGF) or other growth-related
kinases in order to restrict blood flow into a solid tumour and reduce its supply of nutrients. Often
these drugs are combined with other anti-cancer agents in a cancer treatment protocol. However,
conventional AGIs have serious side effects, are toxic and frequently fail to prevent cancer
progression once cancer cells develop resistance to such treatment. Verseon’s candidates represent a
new class of AGIs that do not inhibit VEGF or other growth-related kinases.
The Company has conditionally raised £60.7 million (net of expenses) in the Placing. The net
proceeds of the Placing will be used to fund its current portfolio of drug programmes and also to start
new drug programmes to establish a diversified pipeline of high-value therapeutics across multiple
disease areas. Other uses of the net proceeds will include expenditures for continued development
of the Company’s drug discovery platform, expansion of the Company’s intellectual property portfolio
and discovery infrastructure, business development, working capital and other general corporate
purposes.
2.
History and background
Verseon LLC was founded in 2002 as a US Delaware limited liability company by the three Founders,
Adityo Prakash, Eniko Fodor and David Kita. In 2007, the Company was reorganised as a US
Delaware C corporation, Verseon Corporation. The Founders were senior executives of Pulsent
Corporation, a video compression company founded by Adityo Prakash and Eniko Fodor which was
sold to Altera Corporation in 2003.
From the outset, the founders have adopted a different approach to drug discovery by focusing on the
development of proprietary breakthroughs in physics-based modelling of a protein and a drug
11
candidate in water and the construction of sophisticated computational optimisation algorithms.
Today the Company has expertise across a wide area of science and medicine and employs a range
of laboratory processes, computational methods and medicinal chemistry techniques.
During the first seven years of the Company’s history, the core science and technology behind its drug
discovery platform was initially created, with subsequent refinements and developments over the
remaining five years. Validation against industry benchmarks set by pharmaceutical industry and
academic experts was successfully completed by Verseon in 2004. The key milestones achieved by
the company are summarised below:
2002:
Verseon LLC founded; prototype development of Verseon Molecular Modelling Engine
(VMME) initiated
2004:
Prototype of VMME completed; “bake off” validation study vs competitors completed by
Verseon
2006:
Development of Verseon Molecule Creation Engine (VMCE) initiated
2007:
Verseon reorganised as US Delaware C corporation, Verseon Corporation
2008:
First release of VMCE completed
2009:
First release of VMME completed; formed Nirog, a Verseon subsidiary
2010:
Verseon anticoagulant programme initiated
2011:
Novel mechanism of action of Verseon anticoagulants confirmed by the Company
2013:
Verseon DME programme initiated
The Company currently employs a staff of 15 employees, the majority of whom have advanced
degrees and expertise in fields including mathematics, physics, bioinformatics, molecular modelling,
medicinal chemistry, molecular biology, biochemical assay development and the design and
implementation of complex mathematical and computational algorithms. The Company currently
outsources the majority of its synthetic chemistry to a synthesis partner in India, presently utilising six
chemistry full-time equivalents (FTEs). The Company operates from two sites: the Company’s
headquarters, which houses all non-laboratory activities, and a biology laboratory, which houses the
Company’s analytical and biology suites. The Company headquarters is located in Fremont,
California, in the heart of Silicon Valley and the laboratory in San Jose, California.
3.
Drug Discovery and the Verseon solution
3.1.1 Overview of traditional drug discovery
Introduction
The goal of traditional drug discovery is to produce and market a small molecule as a therapeutic
treatment of a disease. It is known that DNA is the recipe for creating the many different proteins in
the human body. Proteins are essential parts of all living organisms and participate in virtually every
biological process within the body. Each protein has a three-dimensional structure associated with
the performance of one or more biological tasks. Due in large part to the genomics revolution of the
1990s, virtually the entire set of protein-coding genes has been mapped and sequenced. Continued
work in recent years in the areas of bioinformatics and proteomics has furthered the understanding
of relationships between proteins and diseases and increased the number of validated target proteins
for the potential treatment of various therapeutic areas. Building on this revolution, modern drug
discovery aims to develop customised small molecule drugs that attach or bind strongly to a selected
validated disease-causing target protein, thereby changing that target protein’s function to produce a
health benefit. It is also generally desired that this small molecule drug binds selectively to the target
12
protein in order to prevent unwanted side effects due to potential binding to off-target proteins that
may cause disruption of the function of these proteins.
To find suitable small molecule drugs, traditional drug discovery routinely employs a trial-and-error
approach to find candidate molecules through a process called high-throughput screening (HTS).
Large-scale HTS requires large and costly infrastructure (laboratories, robotics, analytical equipment,
and both chemical and biological materials) and a large staff of chemists and biologists. HTS is
generally used to test a chosen target protein against a collection of already synthesised drug-like
compounds stored in a chemical library, typically a corporate collection, by detecting an
experimental signal that indicates if one or more of the tested small molecules will bind to the target
protein with acceptable potency. Those that produce a sufficiently strong signal are termed “hits” and,
after confirmation of bioactivity in the laboratory, are selected for additional in vitro biological
characterisation including functional and ex vivo assays. The subset of active compounds which show
promising results are termed “lead candidates” and are then subjected to a series of in vivo assays for
the assessment of pharmacokinetics (PK), efficacy and safety in preclinical studies. Lead candidates
are then optimised in order to improve these in vivo properties while maintaining potency against the
target protein.
Typically, the discovery stage (ranging from hit identification to lead optimisation) takes traditional
pharmaceutical companies around three years to complete with around a half of projects failing to
produce any viable drug candidates. Generally, most lead candidates are dropped from the
programme during this process, often resulting in only one (sometimes two) drug candidate(s)
entering another 12-18 months of preclinical studies. Historically, only 1 out of 3 drug discovery
programmes advance through the stages of drug discovery and preclinical studies and from those that
advance, typically only one drug candidate enters clinical trials. After another 6-7 years in clinical
trials and regulatory review, only one out of fifteen programmes entering the clinic results in a newly
approved drug with a typical total drug programme cost of over $1 billion spent. Despite these low
odds of success, high costs and long development timescales, HTS remains the standard method of
choice at the front end of the traditional drug discovery process as it has provided a number of
approved drugs over the past 15 or more years. As of 2011, the global pharmaceutical and biotech
market generated $1.1 trillion in sales (expected to grow to over $1.3 trillion by 2015) annually, of
which approximately $800 billion was generated by small molecules. The remaining approximately
$300 billion belonged to the biologics category. Whilst the market for biologics is growing more
rapidly than that for small molecules, biologics are large molecules and very expensive and difficult
to manufacture because they are based on modified proteins (including antibodies), genes and cells.
The role of biologics in modern medicine is discussed in more detail in paragraph 6.1 of this Part I.
Challenges
The pharmaceutical industry’s trillion dollar revenue stream is facing enormous challenges. The
industry has experienced a severe downward trend in the number of new drugs coming to market,
despite having increased new drug R&D spending to over $115 billion per year. Typically, the
industry commits over $4 billion to R&D to develop one successful new drug. High failure rates
plague the drug discovery process. The number of completely new drugs or “New Molecular Entities”
(NMEs) approved in a year by the FDA decreased from 56 in 1996 to 27 in 2013 and 41 in 2014 (of
which 11 are biologics). The number of NMEs for 2014 also includes many new drugs approved
under the FDA’s Breakthrough Therapy Designation, introduced in 2012 to accelerate the
development and approval process for drug candidates for rare diseases. Fewer small molecule drug
candidates are also passing into the clinic, despite an influx of new validated target proteins. In
addition, a record number of drugs will lose patent protection in the three year period spanning 2014,
2015 and 2016, thereby putting a significant proportion of the pharmaceutical industry’s annual
revenues at risk. Attempts to bolster drug pipelines by scaling existing processes (e.g. faster HTS,
expansion of chemical libraries) and analysis of the vast quantities of data from such programmes
have failed to reverse the diminishing returns seen by the pharmaceutical industry.
13
The application of HTS to traditional drug discovery is necessarily limited by the number of existing,
already synthesised drug-like compounds in the compound collections of pharmaceutical companies
and other institutions around the world. The corporate collections of pharmaceutical companies in
total represent approximately only 4-6 million distinct compounds. This number is insignificant in
comparison to the accessible drug-like chemical space of compounds that could potentially be
synthesised. Theoretical estimates vary wildly but one cited estimate is ~1060 synthesisable molecules
in the accessible drug-like chemical space. Whilst many of these “theoretical” virtual compounds will
not be viable as drugs since they will likely have poor PK properties and likely be biologically inactive
against any target protein, this still leaves an enormous disparity between what has been made (i.e.
current chemical libraries) and what is possible to make (i.e. vast accessible chemical space). To
exacerbate the problem, existing corporate collections are not very chemically diverse as they
contain many combinatorial chemistry variations of core chemical structures and closely related
analogues of existing drugs. Costs aside, there are simply not enough medicinal chemists alive to
make a significant impact on the accessible drug-like chemical space by making more compounds
in the laboratory.
The Directors believe that the pharmaceutical industry has run into a serious bottleneck and is now
seeing the diminishing returns of a process that has peaked. The Directors also believe that there is a
pressing need for a more reliable, effective and scalable drug discovery process—yielding more drug
candidates and increasing the rate of clinical trial success for drug programmes.
Current state of computational modelling in drug discovery
Experts agree that accurate computational modelling of protein-small molecule drug interactions is
the key to efficient drug discovery. The Directors believe that Verseon has successfully demonstrated
the capabilities of its proprietary drug discovery platform with its current portfolio of drug
programmes.
High resolution three-dimensional structures of target disease-causing proteins are readily available
(and are steadily increasing in number) whether sourced from experimental data (e.g. X-ray
crystallography or NMR) or built computationally by sequence similarity to other proteins.
Computational molecular modelling of the target protein and a small molecule compound would be
expected to determine the likelihood of binding of the small molecule to the target protein to assess
whether it is worth pursuing further in the drug discovery process. It has been postulated that in silico
design of small molecule drugs would avoid many of the constraints of traditional drug discovery by
exploring a much larger portion of the accessible drug-like chemical space and serving as an efficient
surrogate for HTS. To date, however, the Directors are not aware of any conventional computational
offering that has been able to model protein-drug interactions with enough accuracy to replace
primary HTS, thus leaving the promise of in silico drug discovery largely unfulfilled.
Whilst there has been an explosion of computing capacity over the last decade, no amount of
computing power exists that will solve protein-drug systems via brute force and thus more efficient
computational models are required. The challenge is how to accurately determine in silico which
small molecules in a virtual chemical collection bind with sufficient potency to a target protein to
warrant synthesis and further biological characterisation. While there are some modelling approaches
(e.g. molecular dynamics simulations, quantum mechanics / molecular mechanics hybrids and free
energy perturbation) that can model very specific molecular systems with some accuracy, none of
them is extensible to protein-drug systems, especially in the context of large-scale virtual library
screening (VLS). Current conventional modelling techniques, especially for use in VLS, magnify the
accuracy problem by typically making simple modelling approximations that do not represent well
the underlying physics. Partly this is due to speed considerations of VLS or simply because the
necessary modelling innovations were not made. Furthermore, VLS methods generally employ
heuristic or empirical models and many rely on training-set based techniques that can often fail when
applied to practical real-world protein-drug systems. Thus, as the Directors believe, conventional VLS
methods generally suffer from poor accuracy and yield little predictive power.
14
Accuracy is critical to the use of computational modelling of protein-drug interactions in drug
discovery. Without the requisite accuracy, false positives will overwhelm the drug discovery process
by promoting the synthesis and laboratory testing of far too many compounds that have little to no
biological activity against the target of interest. This is demonstrated with a simple hypothetical
example. Suppose a hypothetical conventional computational VLS method has 90 per cent. accuracy
in identifying ligands that bind with sufficient potency to a protein. If this same hypothetical
computational method were used to virtually screen and test a collection of one million compounds,
then 10 per cent. of the predictions would be expected to be wrong and around 100,000 false
positive compounds erroneously tagged as positive binders and requested for synthesis. This level of
accuracy would lead to an enormous waste in terms of time and money in trying to synthesise so
many inactive compounds, with only a very small percentage having any chance of leading to a
suitable drug candidate.
The Directors believe the primary reason that VLS has not been adopted as the standard method of
drug discovery, in spite of the inherent limitations of HTS and pre-synthesised chemical libraries, is
because conventional computational molecular modelling is simply not accurate enough to drive the
systematic design of novel drugs.
3.1.2 Overview of Verseon discovery platform
Verseon can choose to start a drug discovery project on a disease-causing target protein provided that
the protein has been validated for a particular therapeutic area and has available one or more suitable
three-dimensional structure(s) of the protein of interest. The selection of which particular therapeutic
areas to pursue is made based on careful planning with input from the Company’s scientific advisory
board, comprising experts in both academia and industry and pharmaceutical company contacts.
Verseon has developed a proprietary Molecule Creation Engine (VMCE) to generate large numbers of
virtual, novel, drug-like, and synthesisable compounds according to known medicinal chemistry
reactions (Verseon virtual compounds). The VMCE is a dynamic, computational chemistry-based,
molecule creation engine that generates Verseon virtual compounds for Verseon’s drug discovery
programmes. The VMCE also provides synthesis guidelines for each Verseon virtual compound in the
form of a synthetic recipe for manufacture that may be modified based on insights of the Company’s
medicinal chemists. This ensures that additional effort and resources are not wasted on compounds
that cannot be synthesised and can be of great aid to the Company’s medicinal chemists (whether inhouse or out-sourced) who are responsible for the real-world synthesis of Verseon virtual compounds
of interest to the drug programme. Verseon virtual compounds have so far demonstrated reliable
synthesisability, though sometimes alternate more efficient synthesis routes are employed by the
Company’s medicinal chemists.
For a typical disease programme, the Verseon drug discovery platform screens circa 108 Verseon
virtual compounds from the VMCE against a target protein through use of its core component, the
Verseon Molecular Modelling Engine (VMME). The VMME uses advanced proprietary physics-based
computational models to assess the likelihood of each input Verseon virtual compound to bind to the
target protein in water. The VMME typically devotes more than 1011 compute operations per tested
compound against the target protein. The Company has designed the VMME to work in a highly
parallel manner across a large dedicated, private computing cloud to handle this sizeable
computational load.
The output of the VMME is a collection of potential candidate compounds (Verseon hits) prioritised
by binding affinity. Before a Verseon hit is sent to the medicinal chemists for investigation and
potential synthesis, the VMCE can be used to generate a cluster of closely-related variants to prevent
the entry of “singletons” into the downstream drug discovery process. This is done to increase the
likelihood that a Verseon hit may progress into a viable lead candidate as the lead optimisation
process may require modification of the initial compound structure in order to satisfy various in vitro
and in vivo assay criteria. Thus for a typical programme, the usual practice is for medicinal chemists
15
to review many clusters featuring different chemotypes and comprising multiple potential candidate
compounds (Verseon hits), as opposed to standalone singletons. Additional Verseon hits can also be
generated based on proposed structural modifications from the Company’s medicinal chemists and
checked by the VMME. Additional aspects of the Verseon Molecular Modelling Engine (VMME) are
discussed below.
A subset of Verseon hits are then selected by the Company’s medicinal chemists and submitted for
synthesis. Once synthesised, the Verseon hits are subjected to a battery of focused biological testing
including in vitro, functional, and possibly ex vivo assays. Those with satisfactory results across the
set of assays are promoted to Verseon lead candidate status and subjected to additional testing
including in vivo assessment of PK and eventually preclinical studies of efficacy and safety. Other
Verseon hits may be sent back to the medicinal chemists for lead optimisation. Lead optimisation can
involve the use of the VMCE and the VMME to explore fine scale modifications of the chemical
structure that could better satisfy the panel of biological assays. The desired new chemical variants
are sent out for synthesis and then tested in the laboratory anew.
The decision-making process of which compounds to advance further is aided by having multiple
lead candidates of different chemotypes for a programme. In this way, if certain candidates
representing a particular chemotype are deemed unsuitable for further development, they can be
appropriately removed from the drug discovery programme instead of wasting time and resources on
trying to promote them. Working with multiple novel, potent, selective candidates spanning different
chemotypes is a position not typically enjoyed by a traditional drug discovery programme and in fact
the reverse scenario of having very few lead candidates (and potentially only one) is more likely to
occur. Finally, after all characterisation at the lead optimisation and preclinical stages is complete, the
final chosen drug candidates may be considered for advancement to the clinic.
Inherently, the Verseon solution is based on two key proprietary innovations: (1) the Molecule
Creation Engine (VMCE) and (2) the Verseon Molecular Modelling Engine (VMME). While the Verseon
computational platform is used in the Verseon drug discovery process, it is not intended to replace
the chemical and biological assays required for characterisation of drug candidates.
3.1.3 Verseon Molecule Creation Engine (VMCE)
The Directors believe that the VMCE is a unique and important piece of the Company’s intellectual
property. The VMCE is a proprietary computational system designed to dynamically generate large
virtual collections of novel, drug-like, synthesisable molecules (Verseon virtual compounds) that have
never before been synthesised. The purpose of these virtual collections is to serve as inputs to the
VMME for subsequent evaluation as potential binders to a target protein of interest. The generated
Verseon virtual compounds are each accompanied by a synthetic recipe that provides a guideline
based on starting materials and reagents typically available to biotechnology and pharmaceutical
companies.
The VMCE contains a computer-generated collection of circa 80,000 distinct building blocks that
were constructed by Verseon based on known synthetic chemistry reactions with a view towards
representing privileged medicinal chemistry structures. The VMCE assembles Verseon virtual
compounds by matching together building blocks with compatible, encoded chemistry reactions and
progressively combining them to form a final compound with the intent of preserving synthesisability.
Drug-likeness is enforced by examination of various properties of the generated compounds and
application of post-assembly drug-likeness criteria. If an assembled compound fails one or more of
these criteria it can be disregarded and the assembly engine can continue its process until the desired
number of compounds is satisfied. If by chance a duplicate Verseon virtual compound is made, it is
removed upon insertion into a VMCE database. The Company’s medicinal chemists can search against
publicly accessible compound databases, published patents and scientific literature using
conventional search tools, so as to check for novelty of each proposed Verseon hit with respect to
already synthesised compounds. The end product of the VMCE is a virtual compound collection of
16
novel, drug-like, synthesisable compounds (Verseon virtual compounds) each with an associated
VMCE-generated synthetic recipe.
The Directors believe that the VMCE is capable of making many more virtual novel, drug-like,
synthesisable compounds than there already exist as distinct, synthesised compounds in the
corporate collections of pharmaceutical companies today.
3.1.4 Verseon Molecule Modelling Engine (VMME)
Introduction to Molecular Modelling in Drug Discovery
Computational (in silico) molecular modelling generally attempts to simulate or make computerbased predictions about various molecular systems, including interactions between a small molecule
(i.e. ligand) and a target protein structure (i.e. receptor). Such modelling can include precise but
computationally-intensive quantum mechanical (QM) ab initio simulations of very small molecules
to molecular dynamics simulations of proteins to study short time scale protein folding and many
things in between. The goal of in silico molecular modelling in drug discovery is to predict accurately
the binding mode of the receptor-ligand system in its most thermodynamically favourable state and
to estimate the associated binding affinity. In virtual library screening (VLS), the objective is to screen
in silico a library of virtual compounds to predict which ligands bind favourably to the receptor. The
potentially favourable binders identified are then sent to the laboratory for confirmation as hits and
subsequent potential chemical and biological characterisation and development. In large-scale VLS,
the library of compounds to be screened may be quite large (i.e. millions or more).
The concept of receptor-ligand binding is illustrated in Figure 1A and 1B. Figure 1A shows a
schematic of a hypothetical small molecule ligand “a” and a hypothetical receptor “b” each in
isolation in an unbound state surrounded by water “c”. Figure 1B shows the same hypothetical ligand
and receptor now joined together in a bound state “d” again surrounded by water “c”. The final joint
configuration of the bound state of the ligand and receptor is the binding mode whereas the change
in free energy between the bound and unbound states is the binding affinity (consisting of both
enthalpic and entropic contributions). In order to predict the binding mode and estimate the binding
affinity with reasonable accuracy, it is generally necessary to model various factors which contribute
to the affinity between the ligand and the receptor which include, for example, electrostatics,
solvation, hydrogen bonding and Van der Waals’ forces. There is also a capacity for various covalent
bonds of the ligand and receptor to dynamically vibrate, bend, twist or otherwise distort as their
conformations often change upon binding. Thus it is also necessary to model the different ways that
the conformations of the ligand and receptor can change during binding, represented as “degrees of
freedom” (DOFs) of the system, including, for example, bond torsions, ring conformational changes,
bond lengths and bond angles; and the associated intramolecular strain. Each of these DOFs can vary
which inevitably makes the necessary calculations required to sample all the possible receptor-ligand
states so overwhelming that it is impossible to solve with brute force alone. Water also plays a key
role in multiple aspects of the binding due to its high dielectric constant, hydrogen bonding capacity,
solvent screening of charges and complex water-water interactions. Hence, while the underlying
physics of a receptor-ligand system is fundamentally governed by quantum mechanics and statistical
mechanics, such precise modelling of a system involving a large, complex molecule like a protein
cannot be modelled this way with anything close to today’s computational power – even for a single
system, let alone potentially millions or more such systems.
17
Figure 1: Schematic of the unbound (A) and bound (B) states of a hypothetical receptor ligand pair,
where (a) is the unbound ligand, (b) is the unbound protein, (c) is the water that both reside within,
and (d) is the ligand and receptor bound together.
Conventional computational molecular modelling methods used to predict the binding mode of
receptor-ligand systems are typically referred to as “docking” methods. It is also common for such
methods to employ one or more additional “scoring” functions to rank order the potential binding
modes for each ligand. Scoring functions are then also typically used to compare binding modes
across other ligands with the premise of ranking strong binders at the top of the list. As the number
of compounds to be screened increases the amount of computational work to be done grows as well.
In a large scale VLS, the collection of ligands may be quite large and therefore require a significant
number of calculations. Inaccuracies in the computational molecular modelling could lead to
misidentification of compounds as “hits” to be synthesised, when they are likely inactive once tested
in the laboratory for the target of interest and therefore a waste of resources.
Since brute force sampling is not an option, a more efficient approach is required. An optimisation
algorithm is generally employed to explore the search space and, if possible, find the best molecular
configurations for the system. Usually this involves minimisation of an objective function while
attempting to avoid the pitfalls presented by local minima in a multi-dimensional search space. The
objective function typically represents the energy of binding (or some approximation thereof). In
principle, the level of detail encapsulated in the objective function is limited by both the amount of
available computing power and the level of complexity that the optimisation algorithm can handle.
The optimisation algorithm attempts to safely ignore many unfavourable binding states and thereby
lower the computational load dramatically. However, in a receptor-ligand system, optimisation is
further complicated by the many DOFs involved. This substantially increases the dimensionality of
the search space and thus the computational complexity of the modelling process, making it a very
difficult optimisation problem, especially when the receptor is allowed to flex as well.
Therefore, conventional computational efforts typically employ various modelling approximations or
heuristics which are often not physically very realistic and are in part introduced to speed-up
calculations under VLS constraints or reduce the complexity demands placed on the optimisation
algorithm. Unfortunately, such approximations can lead to inaccuracies in the predicted binding
modes and thus any subsequent scoring and ranking of ligands. Conventional efforts also tend to
make heavy use of empirical models to estimate various components of binding. Typically this
involves fitting a number of modelling parameters to “training sets” that are based on known systems
measured experimentally. However, the binding between a receptor and a ligand in water is
inherently a well-defined physics problem, albeit a fiendishly complicated one. Attempting to claim
that a model directly derived from empirical observations may be valid based solely on fitting to
training sets is generally contrary to the views of the scientific community. It is therefore not surprising
18
that training-set based methods tend to perform better for systems already in their training sets (or
where the receptor-ligand systems are highly similar to those in the training set) but perform worse
when applied to systems which fall outside the purview of the training sets. The accuracy problem of
training-set based methods is further compounded when considering large compound collections in
VLS and especially for novel targets.
Verseon’s Approach to Molecular Modelling in Drug Discovery
The VMME is focused on the computational molecular modelling of the interactions of a receptorligand system in water, particularly in the context of large-scale VLS. The Directors believe the
Verseon solution overcomes many of the challenges of accurate computational modelling of receptorligand systems via proprietary breakthroughs in physics-based modelling of a receptor and a ligand
in water. The Verseon platform combines proprietary molecular modelling with sophisticated
optimisation algorithms that can be deployed in parallel across a large, dedicated, private computing
cloud. The Directors believe the Verseon platform’s modelling of molecular interactions is superior to
the current state of the art in VLS applications. Furthermore, the VMME optimisation process uses an
objective function that attempts to calculate the binding enthalpy of the system in order to predict the
binding mode for each receptor-ligand pair. An estimation of the change in entropy of the system
upon binding is derived from the results of this optimisation process and used in combination with
the estimated binding enthalpy to estimate the binding affinity for the receptor-ligand system.
Verseon’s approach is very different from many conventional molecular modelling methods and
especially those based on heuristics, empirical models and training sets. For example, Verseon does
not rely on quantities empirically derived from experimentally measured receptor-ligand systems as
a basis to predict new systems. Instead, Verseon’s platform is physics-based and built on modelling
the molecular interactions involved in the binding of a receptor and a ligand in water. Verseon has
benchmarked the VMME across multiple experimentally measured drug-protein systems. The VMME,
when compared with various conventional docking software packages was shown to be more
accurate as well as more robust to increasing complexity (i.e. number of DOFs) in the tested systems.
The Company’s technology has also been validated under confidentiality agreements by a number of
experts in both the pharmaceutical industry and academia. Over time the Company has improved the
platform and the Directors believe that validation of the Company’s platform is best illustrated
through the Company’s drug programmes, which are described in more detail in paragraph 4 of this
Part I.
The binding of a ligand to a receptor is, as has been previously described in this document, very
difficult to model accurately due to the inherent complexity of the problem. Verseon’s approach to
modelling some of the more important factors involved in the binding of a receptor-ligand system are
described below in further detail.
Solvation
The presence of water greatly alters the electrostatics of a receptor-ligand system due to its high
dielectric constant and strong shielding of charges, an effect known as electrostatic desolvation or
simply solvation. Explicitly modelling many individual water molecules is too computationally
expensive for VLS. Implicitly modelling water as a bulk medium is an accepted way of simplifying the
problem. Such implicit solvation models include distance-dependence dielectrics, Generalised Born
approximations and the Poisson-Boltzmann equation (PBE) solvers or variants thereof, with the PBE
generally considered the best of the conventional implicit solvation methods. The PBE is typically
accurate in estimating the solvation of small molecules, but its application to proteins is complicated
by the complex surface geometry and size of the receptor. Moreover, the PBE cannot be used to assess
each of the many molecular configurations sampled by an optimisation algorithm in pursuit of
predicting binding mode and estimating the binding affinity of each receptor-ligand pair during largescale VLS because it is too computationally-intensive.
19
Verseon employs a novel, proprietary method of implicit solvation. The VMME solvation model (VSM)
accurately represents the local exposure of each solute atom to water using a proprietary, compact
and efficient representation of the receptor-ligand complex and the surrounding water medium.
Electrostatics and solvation are calculated together for each molecular configuration in the VSM. The
VSM is extensible from small molecules to proteins as it is very robust to the complex surface
geometry of a protein. The VSM typically calculates receptor-ligand solvation energies that correlate
highly with those predicted by PBE models. However, the VSM is several orders of magnitude faster
than standard PBE implementations and is therefore sufficiently fast to be used in binding mode
prediction and in VLS.
Hydrogen Bonds
Hydrogen bonds are important to receptor-ligand binding but can be challenging to model
accurately. Though hydrogen bonds are inherently quantum-mechanical in nature, accurate QM
simulations of hydrogen bonds are very computationally expensive and therefore not suitable for
computational docking and certainly not VLS. Hydrogen bonds are sensitive to both the separation
distance between the hydrogen bond donor and the hydrogen bond acceptor groups and their relative
orientation. Hydrogen bonds can be both intermolecular (i.e. between the ligand and the receptor)
and intramolecular (i.e. within the ligand itself or within the receptor). Hydrogen bonds are also very
non-linear in terms of their sensitivity to small radial or angular displacements.
Figure 2 shows an illustration of a hypothetical hydrogen bond formed between a hydrogen bond
donor in a hypothetical ligand and a hydrogen bond acceptor in a hypothetical receptor. The donor
atom is represented in Figure 2A as “d” and the acceptor atom as “a”. Also shown are the donor
hydrogen atom “h” and acceptor lone pairs “p”. Hydrogen bonds occur within a relatively narrow
range of separation distances between the donor and acceptor atoms. But hydrogen bonds are also
usually only likely to form when the relative angle between the line defined by the donor atom and
its donor hydrogen and the line defined by the acceptor atom and its closest lone pair is not too large.
To illustrate this Figure 2B shows the same pairing of a hydrogen bond donor on the ligand and
hydrogen bond acceptor on the receptor but at a different relative orientation. Now the hydrogen
bond depicted in Figure 2B is no longer favourable even though the separation distance is identical.
Figure 2: An illustration of hypothetical hydrogen bonds in (A) ideal and (B) non-ideal geometries.
Shown are (a) the acceptor atom, (d) the donor atom, (h) the donor hydrogen, and (p) the lone pairs.
Verseon has developed a proprietary method for accurately modelling hydrogen bonds based on a
semi-classical model of the phenomenon derived from QM simulations of hydrogen bonds and that
has been adapted for efficient use in modelling of receptor-ligand systems. The VMME hydrogen bond
model generally estimates hydrogen bond energies similar to the original QM simulation but does so
at a fraction of the computational cost. Thus the VMME hydrogen bond model can be used directly
during binding mode prediction and in VLS.
Bound Waters
Not all aspects of water involved in molecular binding can be modelled via an implicit solvation
model as described above and under certain circumstances the individual water molecules should be
20
modelled on a discrete basis. Waters that are bound near the surface of a receptor via primarily
electrostatic interactions and hydrogen bonds do not behave like bulk water. These bound waters can
mediate important interactions between the receptor and ligand and their displacement during
binding can directly impact the binding affinity of the system. Many conventional modelling
approaches do not attempt to dynamically model discrete water molecules and therefore often miss
the potentially important effects of bound waters on receptor-ligand binding.
Verseon employs a dynamic model of bound waters. The VMME takes the receptor in isolation and
pre-places individual water molecules on the surface of the protein by determining likely starting
points and optimising their locations. Then, when a ligand is modelled against the receptor, a number
of bound waters in the active site are modelled dynamically for each molecular configuration visited
by the VMME optimisation process. Verseon’s dynamic modelling of bound water is designed to be
compatible with the changing conformations of the receptor and ligand upon formation of a potential
molecular complex.
Conformational Degrees of Freedom
Typically both the ligand and receptor alter their conformations in order to bind to one another.
Figure 3 shows some of the conformational degrees of freedom that can occur in a molecule. Item
“a” shows an example of a proper torsion. Not all covalent bonds allow such a twist. Item “b”
shows an example of an improper torsion. Items “c” and “d” show examples of two different types
of conformational changes of rings. Item “e” shows an example of a change in the length of a bond.
Finally, item “f” shows an example of a change in a bond angle.
Figure 3: Some of the conformational degrees of freedom that can occur in a molecule.
Most conformational changes accessible to the receptor and ligand can be represented by a
combination of the conformational DOFs displayed in Figure 3. For larger ligands and for the active
sites of proteins, there are often a large number of conformational DOFs which characterise the
dynamics of a system. The more such conformational DOFs, the more complexity of the system to be
modelled and the heavier burden placed on an optimisation algorithm to find the best molecular
configurations.
Most conventional computational docking methods focus on modelling the proper torsions and
usually only those for rotatable bonds in the ligand. The VMME models not only ligand proper
torsions but also the other conformational DOFs depicted in Figure 3.
Receptor Flexibility
The residues in the active site of the receptor usually undergo conformational changes upon binding
with a ligand in order to form a receptor-ligand complex. The number of receptor conformational
DOFs can be somewhat larger when compared to those corresponding to the ligand and thus overall
degrees of freedom of the system tends to increase greatly when receptor flexibility is considered. If
21
an optimisation algorithm does not scale well with the number of DOFs of the system, then dynamic
modelling of receptor flexibility can cause errors in predictions. Conversely, ignoring the changes in
conformation of the receptor has its own negative ramifications for accuracy.
The VMME dynamically models conformational changes of residues in the active site of the receptor
upon binding with the ligand in water. This typically introduces a large number of conformational
DOFs to the modelling of the system. It should be noted that VMME is not intended nor designed to
determine protein structures ab initio from sequence data (i.e. protein folding). As will be discussed
in the next section, the VMME optimisation process is typically more robust to an increase in the
number of conformational DOFs than conventional computational docking methods.
Optimisation to Predict the Binding Mode and Estimate Binding Affinity
Optimisation algorithms are typically used to search for the global solution to a problem by
minimising an objective function. Depending on the complexity of the problem to be solved, there
may be many local minima that could potentially trick the optimisation algorithm into thinking it has
converged to the correct global solution, when in fact it has not. Figure 4 illustrates this point by
depicting a simple hypothetical one-dimensional objective function to be optimised with four
minima, which are specified as “a”, “b”, “c” and “d”. Only the global minimum “b” is the global
solution as it has the lowest value. Local minimum “d” is the second best but not as good as the
global minimum, though clearly local minima “a” and “c” are not good solutions. However, an
optimisation algorithm may falsely settle on any of the depicted local minima as a solution. The
challenge of finding the best solution only magnifies as the number of degrees of freedom of the
problem goes up and thus it is quite difficult in practice to find the global minimum of such an
objective function that is almost certain to have many local minima.
Figure 4: Depiction of a hypothetical simple one-dimensional objective function, as a target for
optimisation, with four minima (a), (b), (c) and (d).
For receptor-ligand systems, when predicting the binding mode, the objective function is usually the
binding energy (or some approximation thereof). The number of DOFs of the system can be quite
high, especially when the receptor is flexible. Also as is common with such systems, the local minima
are likely to be separated by energy barriers and thus it may be difficult to explore the search space
effectively. For an optimisation algorithm to be of practical use for receptor-ligand modelling in VLS,
it is has to cope well with a number of challenges, including the complexity of the receptor-ligand
system, the many local minima and be sufficiently fast.
The VMME employs a proprietary, adaptive, optimisation algorithm to efficiently search the joint
conformational search space of the receptor-ligand system in order to predict the binding mode. The
VMME applies the same optimisation process to the receptor and ligand when in the unbound state.
The VMME optimisation algorithm represents all relevant ligand and receptor DOFs as state variables
and iteratively manipulates them via specialised operators in pursuit of the best solution of an
22
objective function which is designed to represent the enthalpy of the system. The robustness of the
VMME optimisation algorithm to the complexity of the receptor-ligand systems allows the inclusion
of multiple DOFs associated with dynamic modelling of receptor flexibility.
Estimation of the binding affinity relates to the change in both enthalpy and entropy of the system
from the unbound to the bound state, i.e. the binding enthalpy and binding entropy, respectively.
Entropy is a thermodynamic quantity that is proportional to the logarithm of the number of possible
physical states with energies accessible to a system. The change in entropy for both the ligand and
receptor upon binding can be a significant portion of the binding affinity and often counters the
favourable enthalpy of a binding mode. There is translational and rotational entropy associated,
respectively, with movement and rotation of the ligand as it moves around in three-dimensional
space. There are also the conformational entropies of the ligand and the receptor associated with
DOFs such as those depicted in Figure 3. Typically it is reasonable to assume that most of the entropy
associated with the translation and rotation and much of the conformational entropy of the ligand is
lost when tightly bound to the receptor. However, due to the inherent complexity in modelling
entropy, many conventional docking methods typically estimate the change in entropy employing
one or more empirical relationships.
The VMME estimates the entropy of the bound state of the receptor-ligand system based on an
intricate analysis of the states visited by the VMME optimisation algorithm when predicting the
binding mode. Similar calculations are done for the optimised conformations of the ligand and
receptor in the unbound state. The VMME estimated binding entropy is then combined with the
estimated binding enthalpy to estimate the binding affinity of the receptor-ligand system.
4.
Drug discovery and development programmes
As discussed earlier the Company’s drug discovery platform is generally applicable to any diseasecausing target protein provided that the protein has been validated for a particular therapeutic area
and has available one or more suitable three-dimensional structure(s) of the protein of interest. The
Company has used its drug discovery platform to build its drug portfolio comprising three different
therapeutic areas, all with significant market opportunity and still unmet (or poorly met) medical
needs. The first three indications (and others already planned for the future for the Company’s drug
pipeline) were selected based on careful planning involving several criteria including market
opportunity, medical need, disease pathway validation and the expected value proposition to the
pharmaceutical industry for potential out-licensing. The decision-making process included input from
the Company’s scientific advisory board (SAB, described in paragraph 7.3 below) and pharmaceutical
company contacts. The three drug programmes described below are currently in various stages of
discovery and preclinical development.
4.1 Anticoagulant programme
The Company’s most advanced drug candidates are potential first-in-class oral anticoagulants
(specifically direct thrombin inhibitors) for various cardiovascular indications. The Company’s drug
candidates have demonstrated excellent potential in preclinical studies for both efficacy and safety
and several of them are in the process of late stage preclinical and investigational new drug
application (IND) enabling studies, a necessary precursor to first-in-man Phase I studies. These
anticoagulant candidates have been identified at a fraction of the cost typically incurred during for
traditional drug discovery programmes. Furthermore, Verseon’s anticoagulant candidates represent
novel chemical matter that cannot be found in existing chemical libraries.
4.1.1 Sector overview
The lead indications for anticoagulation therapies are related to cardiovascular conditions where
there is a heightened risk from developing blood clots. These indications include: stroke prevention
in atrial fibrillation patients, venous thrombosis (VTE, which includes deep vein thrombosis (DVT)
and pulmonary embolism) and acute coronary syndrome (ACS). Atrial fibrillation is estimated to have
afflicted over 33.5 million patients world-wide in 2010 with an incidence of around 5 million new
patients annually. Prevalence of atrial fibrillation in the US is expected to more than double to 12.1
million cases by 2030. The age-adjusted prevalence rate in North America is around 735 per
23
100,000. The atrial fibrillation market alone is estimated to reach over $16 billion per year in 2020
globally. Prevalence estimates for hospital-associated VTE for the 1.1 billion population in high
income countries are around 3.9 million (3.5 out of 1,000) and 6 million for the 5.5 billion
population of middle and lower income countries (1.1 per 1,000). Though VTE is generally acute, one
third will have recurrence within 10 years and 30 per cent. will have long term negative health
consequences from post-thrombotic syndrome. The prevalence of VTE is expected to double by 2050.
ACS is commonly linked with coronary artery disease and comprises unstable angina and various
forms of myocardial infarction (MI) and is estimated to be responsible for more than 1.4 million
hospital admissions per year in the US.
The annual world market for anticoagulants is predicted to reach $24 billion by 2019 having grown
from $6.5 billion in 2001. The treatment options for these indications were, until relatively recently,
heparin (both unfractionated and low molecular weight) and warfarin (Coumadin). Heparin is a
highly potent anticoagulant but it has major drawbacks in that its use must be monitored very
carefully, it must be administered by infusion and it must either be sourced from blood products or
produced synthetically. Warfarin (Coumadin) is a commonly prescribed oral generic medication,
which was originally developed as a rat poison and acts by depleting vitamin K in the body. Warfarin
requires careful monitoring and has a number of undesirable drug-drug and drug-food interactions,
bleeding risk and slow onset of action. Vitamin K injections are an emergency reversal to the
anticoagulation effects of warfarin in cases of uncontrolled bleeding. Despite this, warfarin is still a
commonly prescribed anticoagulant with more than 33 million prescriptions annually in the US
alone and a $125 million per year global market circa 2011. Other anticoagulants such as
unfractionated heparin, the low molecular weight heparins including enoxaparin (LovenoxTM from
Sanofi-Aventis) and others constitute a significant but rapidly declining portion of the US
anticoagulant market facing pressure from approved novel, oral anticoagulant drugs.
Over the years, it became clear there was a strong need for orally available anticoagulants with an
improved therapeutic window, predictable dose response and fewer drug-food and drug-drug
interactions. In recent years, a group of novel, oral anticoagulant drugs (NOACs) were developed
based on research of the coagulation cascade which involves the activation of more than a dozen
interconnected coagulation factors. NOACs include rivaroxaban (XareltoTM from Bayer), apixaban
(EliquisTM from Pfizer / BMS) and dabigatran (PradaxaTM from Boehringer Ingelheim). Rivoraxaban and
apixaban target Factor Xa and dabigatran targets thrombin, both of which are serine proteases that
are centrally located in the coagulation cascade and clinical research has verified that both are well
validated targets for anticoagulation. One of the primary benefits of the NOACs is that they do not
require as much regular monitoring for dose response like other existing anticoagulants. Whilst these
NOACs offer several benefits over the more established anticoagulants, their adoption has been
negatively impacted by the risk of major bleeding associated with such therapies. The NOACs also
have various serious side effects such as rebound stroke or heart attacks upon cessation of therapy,
high frequency of gastric bleeding forcing termination of use and poor kidney clearance, as well as
other side effects. Despite this, in 2013, NOACs generated over $3.5 billion in global sales
representing an estimated 62 per cent. of all new anticoagulant prescriptions in the US. Dabigatran,
rivaroxaban and apixaban have all been approved for stroke prevention in atrial fibrillation whilst
dabigatran and rivaroxaban have also been approved for DVT. NOACs are expected to predominantly
drive future growth of the total anticoagulant market and to reduce the market share of other
anticoagulants such as warfarin and various low molecular weight heparins such as enoxaparin,
among others. The Directors believe a new anticoagulant with reduced risk of major bleeding whilst
remaining a once-per-day (or twice-per-day) oral medication would be highly attractive to prescribing
physicians and pharmaceutical companies alike.
4.1.2 Verseon’s anticoagulation programme
The Company’s oral anticoagulant drug candidates are potent direct thrombin inhibitors (DTIs). They
operate via a novel mechanism of action to selectively inhibit thrombin generation during clotting
events. This has been verified in the Thrombin Generation Assay (TGA), a functional assay used in
clinical trials to assess clotting disorders. The Company has multiple oral anticoagulant candidates
that have demonstrated successful proof of concept in preclinical efficacy studies and also
24
substantially reduced risk of major bleeding relative to existing NOACs. The Directors believe the
Company’s anticoagulants are likely to have a potentially safer drug profile and substantially reduced
risk of major bleeding because of their unique chemical structures and the novel mechanism of action
for direct thrombin inhibition. Several candidates are in late stage preclinical and IND enabling
studies, a necessary precursor to first-in-man Phase I studies to assess clinical safety. The Directors
believe that the opportunity to advance several quality drug candidates into clinical trials will further
increase the value proposition of out-licensing of the anticoagulant programme by increasing the
likelihood of at least one drug candidate successfully passing through downstream clinical
development.
Verseon has designed a portfolio of anticoagulant drug candidates across different chemotypes
representing novel chemical matter. These candidates are very potent (i.e. nanomolar inhibition) and
selective (>1000-fold) inhibitors of thrombin as confirmed by in vitro assays. The candidates inhibit
thrombin through a novel mechanism of action via reversible, covalent inhibition. Verseon’s inhibitors
effectively consist of a warhead attached to a recognition carrier (Figure 5). The carrier is adapted to
bind to the thrombin active site and confers selectivity. When bound to thrombin, the carrier positions
the warhead at just the right location relative to the catalytic serine of thrombin (SER195), which is
critical to thrombin’s biochemical function of cleaving fibrinogen into fibrin monomers for blood clot
formation. After binding, the warhead is covalently bound to the catalytic serine through a chemical
process known as acylation and the carrier is then released from thrombin. The timescale for covalent
bond formation is typically ~1 second. While the warhead is attached, the catalytic action of
thrombin to cleave fibrinogen is suppressed and thrombin remains inactive. After about an hour or
more, the warhead is released and the thrombin protein regains activity.
Figure 5: Schematic of how a typical Verseon reversible covalent inhibitor (depicted as the union of a
and b) binds to and inhibits thrombin (c). A) The carrier (b) positions the warhead (a) over the serine
195 residue (d) of thrombin (c). B) The warhead is covalently attached (e) and the carrier is
subsequently cleaved and released (f) leaving the warhead connected to thrombin. Warhead-bound
thrombin is inactive. When the warhead eventually disassociates, thrombin returns to its active state.
Verseon’s drug candidates demonstrate excellent potency in a widely accepted modern functional
coagulation assay, the Thrombin Generation Assay (TGA). The TGA has excellent sensitivity and
represents the physiological conditions associated with coagulation because the assay is conducted
in human plasma. The standard physiological response after initiation of clotting is first a linear rise
in active thrombin followed by a nonlinear increase in thrombin generation. After a period of time, a
negative feedback mechanism in the clotting cascade stifles production of additional thrombin and a
peak is reached. At this point, the presence of physiological anti-thrombin in the plasma causes the
concentration of free thrombin to decrease until after around an hour or so, active thrombin has all
but disappeared. However, the behaviour observed in the TGA is expected to be very different when
an anticoagulant is involved.
25
Figure 6 shows a comparison of the TGA profiles for two Verseon inhibitors (top panels) compared
with two other conventional DTI drugs: melagatran (active agent of ExantaTM from AstraZeneca, now
withdrawn from market, bottom left) and dabigatran (NOAC currently on market, bottom right). For
both of these DTIs there is a substantial lag time introduced before the thrombin generation peaks at
typically around an hour. During this lag period, thrombin production is completely suppressed and
the body cannot mount a coagulation defence against vascular injury. This correlates with the
observed pharmacology of high risk of major bleeding and other bleeding liabilities seen with these
conventional DTIs. Similar lag periods have been observed for the other NOACs including
rivaroxaban (XareltoTM) and apixaban (EliquisTM). In stark contrast, the two Verseon candidates show
markedly different TGA profiles containing little to no lag period at all and the amplitude of the
thrombin generation is modulated in a dose-dependent fashion. Similar TGA profiles with little to no
observed lag period exist for virtually all Verseon candidates. The Directors believe the novel
mechanism of action for Verseon inhibitors is responsible for this behaviour seen in the TGA and also
for the observed novel pharmacology of the Verseon candidates relative to other NOACs (as discussed
below).
Figure 6: TGA results for two Verseon candidates showing dose dependent modulation of thrombin
without complete suppression.
Source: Verseon
In addition to being highly selective and very potent in both in vitro and functional assays, many of
these candidates have favourable PK / ADME-Tox properties. Many Verseon candidates have also
26
successfully demonstrated preclinical proof-of-concept in in vivo studies of efficacy with results that
compare favourably to existing anticoagulants including NOACs. Verseon candidates have also been
characterised in in vivo preclinical studies for evaluation of safety regarding risk of major bleeding.
In in vivo bleeding studies Verseon candidates typically show only approximately 2-4 times higher
bleeding than controls. Conversely, existing anticoagulants such as heparin, argatroban and apixaban
show excessive bleeding at approximately 20-40 times the controls. This is experimental evidence
that Verseon’s candidates have significantly reduced bleeding liabilities compared with the
conventional anticoagulants tested. The Directors believe the novel mechanism of action of Verseon
DTIs is responsible for their novel pharmacology and the improvement in in vivo preclinical safety
with significant implications for reduced risk of major bleeding relative to current NOACs when
Verseon candidates enter human clinical trials.
The Directors also believe that this was only made possible by using the Verseon platform to design
DTIs consisting of novel chemical matter that is able to moderate the coagulation cascade in a
potentially safer and more controlled manner than existing products in this space and as such are
potential first‐in‐class, novel oral, anticoagulants.
In addition to blood-clotting disorders, such as stroke prevention for atrial fibrillation, venous
thromboembolism (both DVT and pulmonary embolism) and acute coronary syndrome (ACS),
thrombin is also implicated in inflammatory disorders, cancer (including proliferation and metastasis)
and pulmonary fibrosis, all of which represent potential new opportunities for this new class of
thrombin inhibitor because of the likely reduced risk of major bleeding.
In order to fund the preclinical work required to obtain an IND, a likely stage at which the Directors
wish to potentially initiate licensing discussions, the anticoagulation programme was spun off into a
separate entity, Nirog, and third-party funding was introduced. Verseon retains complete operational
control of Nirog and is responsible for development of the anticoagulant programme. In addition,
Verseon expects to own 70.89 per cent. of Nirog on Admission and therefore has a 70.89 per cent.
economic interest in the revenues resulting from the out-licensing of the Company’s direct thrombin
inhibitors to large pharmaceutical companies in the future.
4.2
Diabetic Macular Oedema
The Company has developed multiple drug candidates that are selective and potent inhibitors of
plasma kallikrein (a target validated in degenerative eye disease pathways) that also exhibit strong
potency in a functional assay. Verseon is developing these candidates as eye drops to fill an important
medical need by offering a compelling alternative to existing therapies which all require recurring
monthly injections directly in the eye. By developing diabetic macular oedema drugs in the form of
eye drops, Verseon will also be able to take advantage of typically faster regulatory approval and
simplified IND enabling studies because of reduced concerns regarding systemic toxicity and low
anticipated systemic exposure.
Sector Overview
Common degenerative disorders of the eye that result in severe vision loss include diabetic
retinopathy / diabetic oedema and age-related macular degeneration (AMD, both the wet and dry
forms). These conditions can afflict diabetics and the elderly, respectively, and are growing problems
due to the lifestyles and demographics of today’s populations.
Diabetic retinopathy (DR) is a general term for certain affiliated eye disorders associated with diabetes
wherein an overabundance of glucose damages blood vessels of the retina ultimately leading to the
loss of vision. DR may manifest as diabetic macular oedema (DME) wherein damaged retinal blood
vessels leak fluid onto the macula, the portion of the retina responsible for seeing fine detail. This fluid
makes the macula swell and thicken, thereby causing central vision to blur. DME is a leading cause
of loss of vision for diabetes patients whether suffering from type I or type II diabetes. In total, DR and
DME threaten the sight of more than half of individuals who have suffered from chronic diabetes for
27
20 years or more. It is estimated that 21 million people around the world are afflicted by DME and
this number is expected to grow as diabetes continues to escalate globally. The size of the 2009 global
market for DME treatment was estimated at approximately $3 billion, growing to as much as $6.9
billion by 2017.
The wet form of age-related macular degeneration (wet AMD) is a degenerative eye disorder with
symptoms similar to DME as it also causes vascular leakage, retinal damage and leads to progressive
vision loss. Wet AMD is characterised by abnormal angiogenesis (blood vessel formation) within the
choroid, a vascular layer situated behind the retina, and eventual proliferation into the retina itself,
resulting in scarring and permanent loss of central vision. Though only 10 per cent. of AMD patients
have the wet form, it causes 90 per cent. of the severe vision loss in all AMD sufferers. By some
estimates, 30−50 million people around the world suffer from wet AMD. In the US alone, it is
estimated that almost 3 million people will suffer from wet AMD by the year 2020. Due to the
similarity between these two diseases, some of the current treatments for wet AMD are also approved
for use in DME. The size of the global market for wet AMD treatment was estimated at approximately
$4 billion in 2011, growing to as much as $8 billion by 2016 and ultimately higher as a result of the
aging populations.
The most widely employed current therapies for DME and wet AMD include intravitreal injections of
re-purposed anti-cancer agents. These include ranibizumab (LucentisTM from Roche, closely related
to AvastinTM, a biologic approved for colorectal and other cancers) and aflibercept (EyleaTM from Bayer
/ Regeneron, a recombinant fusion protein approved as ZaltrapTM for metastatic colorectal cancer).
Both LucentisTM and EyleaTM inhibit the same target protein, Vascular Endothelial Growth Factor
(VEGF), a key promoter of undesired blood vessel growth. Around 40 per cent. of DME patients and
35 per cent. of wet AMD patients on LucentisTM regain some degree of visual acuity, whilst the
majority of patients at least have progression of vision loss arrested. However, regular eye injections
are necessary for sustaining these benefits or halting progression at a high cost per eye injection (e.g.
approximately $2,000 for LucentisTM every month).
As of 2013, LucentisTM dominated the wet AMD market with a 94 per cent. market share and was
approved in 2012 for macular oedema secondary to retinal vein occlusion (RVO) and diabetic
retinopathy for patients with DME in 2015. EyleaTM is a more recent entrant into the field, but in a
recent head-to-head clinical study was shown to outperform LucentisTM for DME patients with equal
to or worse than 20/50 vision. EyleaTM (at $1,850 per eye injection every second month after an initial
set of three monthly doses) is expected to grow to 33 per cent. of the wet AMD market by 2016 at
the expense of LucentisTM and was also approved for treatment of macular oedema secondary to RVO
in the summer of 2014.
Verseon’s Diabetic Macular Oedema (DME) programme
The inhibition of VEGF and other growth factors is not the sole biological strategy for the treatment
of degenerative eye disorders, especially DME. Another promising and validated target is the serine
protease plasma kallikrein. In DME, the progression towards blindness is typically associated with
degeneration and dysfunction of the retinal vascular system. The plasma kallikrein-kinin system (KKS)
is activated during vascular injury, where it mediates inflammation, blood circulation and
coagulation. Over-activation of the KKS can lead to the over-production of bradykinin which is a
strong, pro‐inflammatory, vasodilator. When chronically over-produced in the eye due to diabetes,
this generally leads to an increase in eye inflammation and retinal vascular permeability and,
ultimately, loss of vision due to DME.
To date, the Directors are aware of the following drug programmes with compounds in development
as plasma kallikrein inhibitors for DME, none of which are administered as an eye drop. ASP‐440 is
a small molecule drug from ActiveSite Pharmaceuticals reported to reduce retinal vascular
permeability in in vivo models via systemic administration and is currently in early discovery for oral
delivery as a prodrug. KalVista Pharmaceuticals has an intravitreal‐injected small molecule drug
28
candidate that recently entered Phase I clinical trials along with an early stage discovery programme
to develop an oral variant. KalbitorTM from Dyax Pharmaceuticals is a polypeptide inhibitor of plasma
kallikrein that is administered by intravenous injection and was approved for the treatment of
hereditary angioedema in 2009. Phase I trials for DME via intravitreal injection of KalbitorTM were
started in 2011, but terminated thereafter. The goal of Verseon’s plasma kallikrein programme is the
development of an eye drop treatment for DME by locally interrupting the KKS.
The Company has used its proprietary drug discovery platform in the development of Verseon’s
portfolio of novel, potent, plasma kallikrein inhibitors which are generally selective against other
serine proteases and feature different chemotypes. To see if a drug will work in the blood vessels of
the human eye, it is customary to demonstrate the effectiveness of a compound in a functional assay
that more accurately simulates the working environment of the KKS. For this purpose, the Company
employs a highly sensitive functional assay called the kallikrein generation assay (KGA) and has
identified a number of Verseon DME candidates with strong functional inhibition of plasma kallikrein
generation. To be effective as a topical eye drop, it is also crucial to demonstrate transcorneal
permeability, otherwise the drug will not be able to pass into the eye and reach the retina.
Transcorneal permeability has been experimentally verified for a number of Verseon candidates in ex
vivo preclinical models. Verseon candidates also show other positive biochemical properties
including water solubility (again necessary for eye drops) and stability in human plasma.
In summary, Verseon’s DME candidates are potent in in vitro and functional assays, generally selective
against other serine proteases and possess sufficient transcorneal permeability and other chemical
properties that are required for administration as an eye drop. The Company intends to complete other
preclinical and IND-enabling studies before Phase I clinical trials commence. Typically, the mode of
delivery via an eye drop is expected to accelerate clinical development of an eye therapeutic because
of the reduced regulatory burden and simplified IND enabling studies as a result of the lower risk of
associated systemic toxicity. The Directors believe that Verseon’s plasma kallikrein inhibitors could be
delivered as eye drops and therefore fill a critical unmet market need for DME with the potential to be
an effective treatment of wet AMD.
4.3
Oncology (Anti-angiogenesis)
Verseon has a discovery programme focused on developing drugs to prevent unwanted angiogenesis
in solid tumour cancers. The Company has already developed several candidate compounds that
show strong potency in cell-based and ex vivo assessments of inhibition of angiogenesis and show no
significant cytotoxicity. The Company has confirmed that these compounds also do not inhibit the
VEGF receptors and other major kinases typically involved in angiogenesis. The Directors see
accelerated development of this programme as a priority.
4.3.1 Sector overview
The majority of all deaths associated with cancer are due to solid tumour cancers. In order to grow
and proliferate, solid tumours need to form new internal blood vessels to provide a constant supply
of key nutrients and oxygen. Whilst every solid tumour cancer is different and advances continue to
be made in personalised medicine and immune therapies, many cancer treatments utilise
angiogenesis inhibitors (AGIs) as part of the treatment regimen. The global cancer market size as of
2010 was $47.7 billion and expected to grow to over $100 billion by 2020. Whilst this includes solid
tumour and blood cancers, the majority of the cancer market is associated with solid tumours.
Eighteen oncology drugs constitute around 75 per cent. of the global oncology market and six of
those drugs are growing 30 per cent. per year. Anti-angiogenesis drugs have been approved for
treatment of many solid tumour cancers. The first angiogenesis inhibitor approved was bevacizumab
(AvastinTM from Roche) in 2004. It is a large antibody molecule which binds to and inhibits VEGF, a
key promoter of new blood vessel growth and a validated oncology target that has been the focus of
many drugs both approved and in clinical trials. Bevacizumab is currently approved for use in certain
types of advanced colorectal cancers, lung cancers, kidney cancers and glioblastoma multiforme.
29
Revenues for AvastinTM were approximately $6.1 billion and $6.5 billion in 2013 and 2014,
respectively. Despite its promise however, AvastinTM typically improves the median overall survival of
cancer patients by up to only a few months. Furthermore, AvastinTM’s approval for metastatic breast
cancer was revoked by the FDA in 2011 because of a lack of sufficient benefit for this indication.
AvastinTM is also associated with potentially dangerous side effects including gastrointestinal
perforations.
Other angiogenesis inhibitors are the small molecule drugs sorafenib (NexavarTM from Bayer / Onyx
Pharmaceuticals), sunitinib (SutentTM from Pfizer), pazopanib (VotrientTM from GlaxoSmithKline),
cabozantinib (CometriqTM from Exelixis), regorafenib (StivargaTM from Bayer / Onyx), axitinib (InlytaTM
from Pfizer), vandetanib (CaprelsaTM from AstraZeneca), everolimus (AfinitorTM from Novartis) and
temsirolimus (ToriselTM from Wyeth). All except everolimus and temsirolimus (which are general cell
growth inhibitors) block angiogenesis by binding to VEGFRs, the receptors that bind to VEGF. However,
these small molecule drugs also inhibit multiple additional tyrosine kinases that promote general cell
growth and other cellular functions. These drugs are toxic, meaning they do damage to normal, healthy
tissues and organs in addition to tumours. They also have many adverse side effects, some potentially
serious, including but not limited to haemorrhage and hypophosphataemia for sorafenib, hypertension
for sunitinib, liver damage for pazopanib, gastrointestinal perforations for cabozantinib and axitinib and
severe to sometimes fatal hepatotoxicity for regorafenib. However, these existing therapies frequently
fail to prevent cancer progression since cancer cells often develop resistance to these therapies. Thus,
new therapeutics that inhibit angiogenesis by other mechanisms are needed.
4.3.2 Verseon’s anti-angiogenesis programme
Angiogenesis within tumours is required for their continued growth. However, many current drugs
that inhibit angiogenesis frequently fail to prevent cancer progression due to development of
resistance to these therapies. Whilst anti-angiogenesis remains a highly desirable and validated
approach, there is an unmet (or poorly met) medical need to develop new cancer therapeutics that
prevent angiogenesis by other mechanisms in order to bypass resistance to existing therapies based
on targeting VEGF and other growth-related tyrosine kinases.
Verseon has designed and synthesised several angiogenesis inhibitors (AGIs) that block angiogenesis
in an endothelial tube formation (ETF) assay. The ETF assay is a functional assay that induces the
formation and growth of human blood vessels in vitro and emulates the same process of angiogenesis
in the human body. For this reason, the ETF assay is widely used in testing inhibition of angiogenesis.
In Figure 7 panel A, there are multiple healthy blood vessels present in the image. In panel B after
application of a Verseon AGI, blood vessel formation is completely disrupted. The efficacy of these
compounds has been further validated by testing in ex vivo branching angiogenesis assays. Branching
angiogenesis assays test for the ability of blood vessels to emanate from other major blood vessels in
experimental conditions, and are thus widely accepted as a way to test the efficacy of antiangiogenesis compounds.
A
B
Figure 7: Endothelial tube formation assay. Normal blood vessel growth (A) compared to disrupted
blood vessel growth in the presence of Verseon’s AGI (B).
Low cytotoxicity is important for minimising adverse side effects of cancer drugs. A cytotoxicity assay
has demonstrated that most of these compounds are not toxic at their effective doses. The Verseon
AGIs were tested against the six major receptor tyrosine kinases regulating angiogenesis including the
30
VEGF receptor. They were found to have little or no inhibitory activity against these receptors. These
compounds were further tested for inhibitory activity against additional representative protein kinases
involved in cellular signalling and were found to have no significant inhibitory activity against any of
them.
The Directors believe that the Verseon AGIs have the potential to be effective treatments of solid
tumour cancers by prevention of tumour growth and cancer progression. The Directors plan to
accelerate Verseon’s novel angiogenesis inhibitors and advance Verseon’s AGI candidates into the
stages of lead optimisation and preclinical testing for evaluation of in vivo efficacy and safety.
5.
Overview of Verseon’s intellectual property
Verseon’s intellectual property portfolio consists of a combination of patents and trade secrets. The
Company has 10 patent families with issued or pending patents and several more provisional patent
applications. These patents cover certain methods associated with the Company’s technology as well
as composition of matter patents covering the Company’s new chemical candidates for its current
drug programmes. Trade secrets form an important part of the Company’s strategy to enhance and
protect its technological advantage in the industry. Some critical features of the technology will
remain trade secrets so that the patent portfolio alone will be insufficient for any competitor to
reconstruct Verseon’s platform. Additionally, the Company does not plan to license its technology,
only the resulting drug molecules, which adds to the difficulties for competitors to copy or reverseengineer the technology. The Company has comprehensive patents filed and pending on Verseon’s
new chemical candidates for its current drug programmes. Further information on the Company’s
patent portfolio is set out in Part III of this document.
6.
Competition
The Directors recognise competition exists in a number of different forms. Competition in relation to
the anticoagulant and diabetic macular oedema programmes is described more fully in their
programme sections in paragraph 4 above. In general, drugs fall into one of two categories: small
molecule or biologic; paragraph 6.1 below discusses the role of biologics in modern medicine. The
Company’s proprietary drug discovery platform is in competition with several other drug discovery
techniques which are discussed below in paragraphs 6.2 and 6.3 below.
6.1 Biologics versus small molecule therapeutics
As fewer and fewer small molecules have been discovered using traditional drug discovery
techniques, the industry has embraced biological therapies (i.e. antibodies and therapeutic proteins
and is pursuing cell and gene therapies) and has seen a number of successes in specific medical
indications, including rheumatoid arthritis, plaque psoriasis, wet AMD and oncology. Biologics
account for a number of new drug applications at FDA as well as seven out of the top 10 highest
grossing drugs (a combined almost $300 billion out of the $1.1 trillion pharmaceutical market in
2011). The selectivity of biologics is responsible for the generally reduced side effects associated with
such therapies and there has been significant progress made, particularly in certain cancer
indications. However, they in general cannot target intracellular proteins limiting their application to
target proteins that are extracellular or have extracellular domains. In addition, they are often very
difficult and expensive to make.
The increasing burden placed on healthcare payor systems and budgets is compounded by the
increasing number of approvals of very high cost biologic therapies for rare diseases. This has led to
calls for pharmaceutical companies to reduce prices. Whilst advances are being made in the
manufacturing of biologics and reducing the associated cost of goods, there are limits to these
technologies. The Directors believe the Company’s technology will lead to renewed interest in small
molecule programmes by pharmaceutical companies as the benefits of the Verseon drug discovery
platform are realised by moving one or more of Verseon’s internal drug discovery programmes into
the clinic.
31
6.2 Rational drug design of small molecules
Rational drug design is the process of inventing small molecule drugs based on knowledge of the
biological target protein (and possibly one or more natural substrates or known inhibitors) and in
some cases may involve one or more computational techniques. Rational drug design takes many
forms, some of the more relevant of which are discussed below.
6.2.1 Ligand-based
Ligand-based drug design is based on the premise that the binding of a particular ligand to a receptor
can be faithfully predicted based on comparison to one or more known binders to a target protein.
The known binders may be natural substrates, peptides or small molecule compounds. In many cases
the binders themselves cannot be commercially developed as there may be IP blocking their use or
they may not be very suitable as drugs because of non-drug-like properties, toxicity liabilities, poor
PK properties or various other biochemical factors. In some cases, a similarity search is employed to
search out other compounds in a chemical library which are “similar” to the set of known binders.
Here the concept of similarity generally refers to one of the following (or any combination of them):
chemical similarity, similarity in the presence and/or location of chemical features or patterns (i.e.
molecular fingerprints), or similarity in terms of chemical properties (e.g. polar surface area, element
counts, molecular weight, number of hydrogen bond donors and acceptors, number of aromatic
subsystems, lipophilicity). In other cases, a pharmacophore model, which is a collection of molecular
features, possibly including chemical, steric, electronic and positional information, that attempts to
describe why a set of molecules binds to a given target protein, is used.
Figure 8 shows a 2-D representation of a ligand with several hypothetical pharmacophoric features
highlighted. More advanced ligand-based design methodologies may consider the use of 3-D
quantitative structural activity relationships (QSAR). Other methodologies may focus on the use of
3-D pharmacophore models that represent the electronic distributions, shape characteristics,
conformational ensembles, and other features of a binder, especially if the conformation of the binder
in the active site of the receptor is experimentally measured. When a similarity search is being
performed, typically a score is assigned such that higher scores represent ligands that are considered
more similar (based on the metrics used) to the known binders of a selected target protein. Some
ligand-based strategies use various machine learning methods (e.g. support vector machine) to assign
quantitative scores to ligands based on potentially complicated patterns of chemical substructures
and properties.
Figure 8: Schematic of a ligand drawn with a hypothetical pharmacophore model. The large circles
(drawn in various styles) represent specific types of features that are included as part of the
pharmacophore model.
There are several drawbacks of ligand-based drug design approaches. First, there must be one or more
known pre-existing binders for the target protein to serve as starting points for the process.
Unfortunately this not is the case for a number of target proteins of interest, particularly for many
recently elucidated targets. The success of the ligand-based design methods relies critically on the
quality of the input data associated with the known binders such as their binding affinities and 3-D
bound structures if available. In the absence of such data, it makes the entire process more difficult
due to lack of information. Known binders are in some cases peptides which are not drug-like. There
32
is also an implicit assumption that all compounds which are similar to a known binder will have
similar binding characteristics, and thus the target protein can be adequately described by the
properties and features of its known binders. The underlying physical principles that moderate the
molecular interactions between a ligand and receptor in water make this a questionable assumption.
Finally, since similarity searches across, or pharmacophore or QSAR models built using, known
binders are generally at the heart of ligand-based drug design, these techniques are often inherently
biased against identifying truly, distinct novel chemical matter.
The typical uses of ligand-based drug design include hit identification for HTS, scaffold hopping,
expansion around lead candidates during lead optimisation and re-purposing of existing drugs for
different target proteins.
Examples of ligand-based drug design software packages include, but are not limited to, Phase from
Schrodinger, Surflex from Certara (licensed to Tripos) and ROCS from OpenEye. A number of other
companies, including big pharma have likely employed ligand-based design methodologies at one
time or another for a variety of purposes. Examples of companies attempting to design drugs involving
the use of ligand-based drug design include Numerate (machine learning on bit-stream encoded
pharmacophore models) and C4X Discovery (ligand based design merging pharmacophore models
with proprietary NMR).
6.2.2 Structure-based
Structure-based drug design (SBDD) refers to methods that seek to identify potential ligand binders
based on a suitable three-dimensional structure of the target protein. Typically SBDD methods involve
computational molecular modelling of receptor-ligand systems. Common applications include VLS of
chemical libraries (virtual or synthesised), hit identification and lead optimisation support. The VMME
generally falls under the SBDD category with application to large-scale VLS. A more detailed
overview of structure-based drug design techniques and challenges is described in paragraph 3.1
above, the conclusion of which was that accuracy is critical to the use of computational modelling
of protein-drug interactions in drug discovery and hence the application of such computational
modelling to VLS and SBDD. An inaccurate modelling approach may yield too many false positive
identifications of (virtual) compounds to be reasonably tested (and synthesised) in the laboratory and
would result in additional cost and wasted resources.
Conventional computational molecular modelling of receptor-ligand systems, referred to commonly
as computational docking and scoring methods, generally make simple modelling approximations
that do not represent well the underlying physics, partly due to speed considerations, especially in a
VLS context, or simply because the necessary modelling innovations were not made. Furthermore,
such modelling methods are often heuristic in nature and rely on empirical models based on training
set-based methods (especially scoring functions) that generally fail when applied to practical realworld protein-drug systems. The limitations and aspects of empirical models of molecular interactions
and training set-driven approaches were discussed in paragraph 3.1.4 above.
The Directors believe the reason conventional SBDD and associated computational modelling
methods have not been fully adopted as the standard mode of systematic drug discovery is that they
are simply not accurate enough. To the Directors’ knowledge, conventional commercial
computational SBDD software packages are usually sold as software licences as they are not
generally used to drive internal drug programmes, and when used in a discovery setting by a licensee,
they are generally employed in a support role. Examples of SBDD software packages for commercial
or general purpose licence include GOLD from the CCDC, FlexX from BioSolveIT, AutoDock from
Scripps and Glide from Schrodinger.
The VMCE was designed to generate large numbers of virtual, novel, drug-like and synthesisable
compounds as needed for a new drug discovery programme and the Directors believe that the VMCE
is capable of designing many more such compounds than already exist as distinct, synthesised
compounds in the corporate collections of pharmaceutical companies today. The Directors are not
aware of such technology existing outside of Verseon and as such gives the Company access to an
33
abundance of novel chemical matter that is not available to conventional drug discovery platforms,
SBDD or otherwise.
Verseon’s approach to computational molecular modelling is very different from many conventional
computational docking methods and especially those based on heuristics, empirical models and training
sets. The VMME is physics-based and built on modelling the molecular interactions involved in the
binding of a receptor and ligand in water. Verseon’s VMME is generally more accurate and more robust
to increasing complexity when modelling receptor-ligand systems than conventional docking methods.
In contrast to conventional computational SBDD methods, Verseon does not partner with or sell its
technology platform to others. Instead, its technology platform is solely used to design novel drugs for
therapeutic areas targeted by Verseon as per its pharmaceutical business model.
The Directors are not aware of any computational SBDD technology with demonstrated performance
that matches the VMME and it is their view that the Verseon discovery platform represents a significant
advancement over conventional SBDD methods.
6.2.3 Fragment-based
Fragment-based drug design is an attempt at introducing additional experimental data into the
rational drug design process. In most fragment-based schemes, experimental binding data is obtained
for a library of very small, low molecular weight ligands, called fragments. The experimental data for
each fragment potentially includes low potency measured binding affinity and an observed binding
mode. Although the fragments would rarely be considered suitable as drug candidates by themselves,
the premise of fragment-based drug design is that these fragments are intended to be part of a larger
molecule that is built up over the course of a number of iterations of screening, synthesis and
experimental validation in order to arrive at a small molecule that has the desired biochemical
properties. An example of a hypothetical embodiment of fragment-based drug design is shown as
schematic in Figure 9. Computational modelling is sometimes employed to support the process but
typically experimental verification is used at each step. Another variation of fragment-based discovery
attempts to design compounds that incorporate more than one fragment, for example, a compound
that bridges the physical space between two chosen fragments.
Figure 9: A schematic of an example of a hypothetical embodiment of fragment-based drug design. A)
A fragment (a) is found to bind satisfactorily to protein (b). The area (c) is a place where a separate
fragment could be attached. B) A new fragment has been added, creating a new compound (d) and
identifying a third place for addition (e). C) A full compound (f) has been designed. At each step in
the process, suitable chemistry must be identified to make the desired chemical extension possible.
There are several limitations of fragment-based drug discovery. One difficulty is that fragments, which
are essentially very small molecules, rarely have good binding affinity. Weak binding affinity is
difficult to measure experimentally (requires specialised assays and signal detection methods) and
does not necessarily represent a good starting point for larger drug compounds. Another challenge is
that the prediction of how a compound (or one of its intermediates) would bind based primarily on
34
experimental data associated with one or more starting fragments is very error prone based simply on
standard principles of statistical mechanics. It is typically necessary to take experimental snapshots
of the intermediates at each step and the final proposed compounds in terms of both in vitro activity
and determining a three-dimensional structure of the bound state. Computer modelling, structure
visualisation and medicinal chemist interaction are usually employed to help guide the process.
Perhaps the biggest challenge, however, is the ability to find connecting chemical groups (i.e.
“connectors”) that attempt to preserve the observed placement of fragments in the active site of the
receptor while granting improved activity for the entire compound. Sometimes such connectors
cannot be synthesised with the already identified fragment(s). There is often trial and error involved,
and even if a suitable connector can be synthesised with the experimentally characterised fragment(s)
in place, the insertion of connectors may often distort the overall binding so that the initial fragments
are shifted in the active site enough to disrupt the potency of the designed compound or intermediate.
Due to these limitations, and because of the heavy reliance on difficult to obtain experimental data,
drug discovery programmes based on fragment-based design still face multiple challenges. Examples
of companies that employ fragment-based drug design are Astex Pharmaceuticals (pioneers in
fragment-based screening), Plexxikon (bought by Daiichi Sankyo), Vitae Pharmaceuticals and
Sunesis.
6.3
Traditional drug discovery and high throughput screening (HTS)
Traditional drug discovery depends on HTS, a trial-and-error drug discovery process, which is often
not considered a rational drug design method. As already discussed in paragraph 3.1 above, HTS
automates the biochemical screening of already-synthesised chemical libraries against a target
protein of interest using robotics and automated laboratory assays embedded typically in a large and
costly infrastructure of personnel, materials and equipment.
Whilst there have been many technical advances in HTS over the years, a fundamental limitation
persists: only existing, already-synthesized compounds are available for screening. The corporate
collections (i.e. available chemical libraries) of pharmaceutical companies around the world in total
represent approximately only 4-6 million distinct compounds. As already discussed in paragraph
3.1.1 above, this represents a tiny fraction of the accessible drug-like chemical space of compounds
that could potentially be synthesised. However, the only manner in which HTS can produce new
chemical entities is for all such potential new chemical matter to be synthesised in advance. The
chance that a random, new chemical entity will show activity against a target protein is very small
and the cost of synthesis of any single compound is high, therefore there is little economic incentive
to adopt such a strategy. The use of approaches based on HTS does little to increase drug diversity
and the pursuit of new chemical entities.
As previously discussed in paragraph 3.1 above, traditional discovery is characterised by low odds of
success, high costs and long development timescales. Despite this, HTS remains the standard process
employed in drug discovery as it has provided a number of approved drugs over the past 15 or more
years. Most big pharmaceutical companies in the world are key players in traditional drug discovery
and HTS. Though they may want to find alternative methods of drug development and continue to
regularly in-license new drug candidates (valuing new chemical matter) from third parties, they
continue to have very significant investments in traditional drug discovery and HTS.
Therefore, the Directors believe that traditional drug discovery based on HTS of pre-synthesised
chemical libraries is the main competitor to Verseon’s approach to drug discovery, rather than the
three rational drug design options described above. At the same time, the Director’s believe that the
very same big pharmaceutical companies, while technically competitors, are also the mostly likely
potential in-licensees and partners for Verseon’s novel therapeutic products. In an industry that is
clamouring for novel chemical matter to sustain its revenue stream, the Directors believe this makes
for a strong value proposition for Verseon.
35
7.
Directors, senior management and employees
7.1
Directors
Details of the Directors and their roles and backgrounds are set out below. The Board is divided into
three classes, as nearly equal in number as possible, designated: Class I, Class II and Class III. Each
director initially appointed to Class I will serve for an initial term expiring on the Company’s first
annual meeting, each director initially appointed to Class II will serve for an initial term expiring on
the Company’s second annual meeting and each director initially appointed to Class III will serve for
an initial term expiring on the Company’s third annual meeting. The Class I directors are Thomas
Hecht and Grover Wickersham, the Class II directors is Alastair Cade and the Class III directors are
Adityo Prakash and Eniko Fodor.
7.1.1 Adityo Prakash, Chief Executive Officer, aged 48
Prior to founding Verseon, Mr. Prakash was founder and CEO of Pulsent Corporation. He grew the
company over five years and was instrumental in bringing Pulsent’s video compression and signal
processing technology to the marketplace. He is also an inventor on 35 patents.
Mr. Prakash received his B.S. in Mathematics and Physics from California Institute of Technology.
7.1.2 Eniko Fodor, Chief Operating Officer and Chief Financial Officer, aged 47
Prior to founding Verseon, Ms. Fodor co-founded Pulsent Corporation where she was the Chief
Operating Officer. She played a pivotal role in growing the company and developing highly effective
operating, marketing & intellectual property strategies. She is also an inventor on 17 patents.
Ms. Fodor received her B.S. in Physics from Universitatea Bolyai in Romania.
7.1.3 Thomas A. Hecht, Non-Executive Director, aged 68
Dr. Hecht has forty years of experience in business development, strategic planning, process
engineering, quality management and environmental policy. During his more than thirty years at
Chevron Corporation, he served in senior positions in the United States, Australia and South Korea.
His final positions were Executive Vice President of Strategy for NWS Australia LNG and Vice
President of LNG Procurement for GS Caltex in Korea.
Dr. Hecht received his Ph.D. from California Institute of Technology.
7.1.4 Grover Wickersham, Non-Executive Director, aged 66
Mr. Wickersham is the Vice Chairman of S&W Seed, a US publicly traded agricultural company he
founded in 2008. He is Chairman of the Board of Trustees of the mutual funds of Fisher Investments,
a US based firm which has $58 billion assets under management, and the general partner of
Glenbrook Capital, a partnership that invests in emerging growth companies. He served with the US
Securities & Exchange Commission as Staff Attorney in Washington, DC, and as an SEC Branch Chief
in Los Angeles. He holds an AB from the Univ. of California (Berkeley), an M.B.A. from Harvard and
a Jur.Dr. from the Univ. of California (Hastings) and is a practicing member of the California State Bar.
He has served on several boards, currently including the Board of Trustees of Hastings Law School.
7.1.5 Alastair Andrew Bertram Cade, Director, aged 42
Mr. Cade co-founded Daniel Stewart Securities plc, a London based corporate finance house and
broker and served as Managing Director. Subsequently, Mr. Cade set up a private investment vehicle
concentrating on agriculture and renewable energy. He co-founded Mytrah Energy (UK) Limited
where he served as Executive Director and as a director of Mytrah Energy India Limited.
Mr. Cade received his Masters degree in Economics from St. Andrews University.
36
It is the Board’s intention to split the roles of Chief Operating Officer and Chief Financial Officer
following Admission. The Company has commenced the process of identifying a Chief Financial
Officer and intends to appoint such person as soon as practicable following Admission.
7.2
Senior management
The Directors are supported by an experienced senior management team. The following individuals
are considered relevant to establishing that the Group has the appropriate expertise and experience
for the management of the business.
7.2.1 David Kita, PhD; VP R&D
Prior to founding Verseon, Dr. Kita was the Director of R&D at Pulsent Corporation, where he oversaw
the development of its core technology. David was also responsible for developing some of the
industry’s first bioinformatics software solutions for SBH genomics platforms as the Director of
Software & Algorithm Development – Bioinformatics at Hyseq Inc. He is also an inventor on 16
patents.
Dr. Kita received his B.S. in Applied Math, Physics and Electrical Engineering and his M.S. in Physics
and his PhD in Theoretical Astrophysics from University of Wisconsin-Madison.
7.2.2 David Williams, PhD; Director R&D
Dr. Williams is experienced in running successful computational physics and chemistry programs. He
previously led large research teams in high energy physics simulations at the Stanford Linear
Accelerator Center (SLAC).
Dr. Williams received his B.S. in Physics from Northeastern University and PhD in High Energy
Physics from MIT.
7.2.3 Kevin Short, PhD; Director of Discovery Planning
Dr. Short has many years of experience in drug discovery across both large pharmaceutical
companies and smaller biotechs. He previously headed discovery chemistry for GPCR targets at
Johnson & Johnson, prior to which he managed multiple drug discovery programmes at Ontogen
Corporation. He is also an inventor on 12 patents.
Dr. Short received his BSc from Imperial College, London and PhD in Organic Chemistry from Exeter
University, UK.
7.2.4 Anirban Datta, Ph.D, Director of Discovery Biology
Dr. Datta is experienced in cancer cell biology, biochemistry and novel bio-assay development. In
his previous position at UCSF he elucidated molecular signalling pathway in cancer metastasis. He
also co-founded and led the development of 3-D cell-culture assays at Pharmacomatrix Inc.
Dr. Datta received his B.A. in Physics and Biology from the University of Chicago and PhD in Cell
and Molecular Biology from the University of Pennsylvania.
7.3
Scientific advisory board (SAB)
The Company has appointed a SAB to provide management with guidance on target selection for
drug discovery programmes, licensing discussions with pharmaceutical companies and technology
development. The SAB is comprised of leading scientists and (former) pharmaceutical executives:
7.3.1 Steven Chu, PhD
Dr. Chu is the former US Secretary of Energy from 2009 to 2013. He was awarded the Nobel Prize
in Physics in 1997 for his work on laser cooling of atoms at Bell Labs. He has also served on the
37
faculty of University of California, Berkeley and served as director of the Lawrence Berkeley National
Laboratory from 2004 to 2009. He is currently Professor of Physics and Molecular and Cellular
Physiology at Stanford University.
7.3.2 Robert Karr, MD
Dr. Karr is the former Senior VP of R&D Strategy at Pfizer. Prior to its merger with Pfizer, he served as
Vice President, R&D for Warner-Lambert Company. He currently serves on the Board of Directors of
Idera Pharmaceuticals. He also served as a faculty member at both the University of Iowa College
and Washington University School of Medicine.
7.3.3 John Leonard, MD
Dr. Leonard is the former Senior VP, Chief Scientific Officer of AbbVie Inc. Prior to Abbvie, he was
the SVP Pharmaceutical R&D for Abbott, responsible for guiding Abbot’s research and development
efforts including HIV antiviral drugs and other therapies. He completed his internship and residency
at Stanford University School of Medicine, followed by a post-doctoral fellowship in molecular
virology at the National Institute of Allergy and Infectious Diseases.
7.3.4 Michael Berelowitz, MD
Dr. Berelowitz is the former SVP of Clinical Development at Pfizer. Prior to his time at Pfizer, he was
Professor of Medicine and Head, Division of Endocrinology and Metabolism at Stony Brook
University School of Medicine. He is currently Adjunct Clinical Professor of Medicine, Division of
Endocrinology at Mount Sinai School of Medicine.
7.3.5 Steven Deitcher, MD
Dr. Deitcher is the former President and CEO of Talon Therapeutics, responsible for Talon’s launch of
MarqiboTM approved in 2012 by the FDA for the treatment of leukemia. Prior to Talon, he was the VP
of Medical Affairs, Chief Medical Scientist for Nuvelo Inc. Before this, he was the Head, Section of
Hematology and Coagulation Medicine and Director, Vascular and Thrombosis Research at the
Cleveland Clinic.
7.4
Employees
As at the date of this document, the Company employs fifteen staff, all of whom are located in the
US at one of the Company’s two sites in Fremont, California or San Jose, California. The Company
outsources its synthetic chemistry in India, currently utilising six FTEs.
7.5
Relationship Agreement
Adityo Prakash and Eniko Fodor (the “Executive Directors”) are husband and wife. The Executive
Directors have entered into the Relationship Agreement with the Company and Cenkos to regulate
their and their connected persons’ dealings with the Group, details of which are set out in paragraph
5.2 of Part VI of this document.
38
8.
Summary financial information
The following summary financial information on the Group for the three years ended 31 December
2013 and the nine months ended 30 September 2014 and 30 September 2013 has been derived from
Section B of Part IV of this document, prepared in accordance with US GAAP, and should be read in
conjunction with the full text of this document. Investors should not rely solely on the summarised
information.
September 30,
2014
US $’000
Operating loss
Net loss
Total assets
Total liabilities
9.
(2,672)
(2,970)
336
4,198
2013
US $’000
(unaudited)
(1,328)
(1,918)
n/a
n/a
December 31,
2013
US $’000
(2,085)
(2,882)
115
9,691
2012
US $’000
(2,049)
(2,752)
36
8,740
2012
US $’000
(1,985)
(2,600)
122
7,000
Current trading and prospects
Since 1 October 2014, the Company has traded in line with the Directors’ expectations. Upon receipt
of the net proceeds of the Placing, the Company will have the resources to expand its computing and
laboratory infrastructure, advance current programmes into the clinic or license to a partner and start
additional drug programmes targeting new disease indications.
10.
Details of the Placing and use of proceeds
On Admission, the Company will have 149,739,909 Common Shares in issue and a market
capitalisation of approximately £302.5 million at the Placing Price. The Placing comprises the issue
of 32,569,047 Placing Shares which shall raise approximately £60.7 million, net of expenses, for the
Company. Pursuant to the Placing Agreement, Cenkos has agreed to use its reasonable endeavours to
place the Placing Shares at the Placing Price, with institutional and other investors.
The Placing is conditional, inter alia, upon:
•
the Placing Agreement not having been terminated in accordance with its terms prior to
Admission;
•
the Placing Shares having been unconditionally allotted and issued; and
•
Admission taking place on 7 May 2015, or such later date as Cenkos and the Company may
agree, being not later than 21 May 2015.
Further details of the Placing Agreement are set out in paragraph 12.4 of Part VI of this document. The
Placing has not been underwritten.
The Placing Shares to be issued pursuant to the Placing will represent approximately 21.8 per cent.
of the Enlarged Issued Share Capital of the Company immediately following Admission. The Placing
Shares will be issued credited as fully paid and will, on issue, rank pari passu with the Common
Shares in issue immediately prior to Admission, including the right to receive all dividends and other
distributions thereafter declared, made or paid. It is expected that certificates will be despatched
within 10 working days of the date of Admission. Immediately following Admission, approximately
69.0 per cent. of the Enlarged Issued Share Capital will not be in public hands.
None of the Placing Shares have been marketed to or will be made available in whole or in part to
the public in conjunction with the application for Admission. Application has been made to the
London Stock Exchange for the Common Shares to be admitted to trading on AIM. Admission is
expected to become effective and dealings in the Enlarged Issued Share Capital are expected to
commence on 7 May 2015.
39
The Company has conditionally raised £60.7 million (net of expenses) in the Placing. The net
proceeds of the Placing will be used:
•
to fund current programmes to the point where they can be out-licensed or progressed into the
clinic;
•
to initiate additional drug programmes and build the Company’s pipeline of assets;
•
to continue development of Verseon’s proprietory drug discovery platform;
•
to build a new supercomputing cluster and expand laboratory infrastructure; and
•
for general working capital purposes.
11.
Lock-in & orderly market arrangements
Pursuant to Rule 7 of the AIM Rules for Companies, the Company’s related parties and applicable
employees have agreed not to dispose of any interests in any of the Company’s Common Shares for
a period of at least 12 months from Admission.
The Directors, who will, in aggregate, have an interest in 62,791,320 Common Shares (representing
approximately 41.9 per cent. of the Enlarged Issued Share Capital) have undertaken to the Company
that they will not (without the prior written consent of the Company and Cenkos and subject, where
relevant, to compliance with Rule 7 of the AIM Rules for Companies) dispose of any interest in
Common Shares for a period of 18 months following Admission, except in certain limited
circumstances. In addition, other holders of the Existing Common Shares (including applicable
employees), who will, in aggregate, have an interest in 40,461,616 Common Shares (representing
approximately 27.0 per cent. of the Enlarged Issued Share Capital) have undertaken to the Company
that they will not (without the prior written consent of the Company and Cenkos and subject, where
relevant, to compliance with Rule 7 of the AIM Rules for Companies) dispose of any interest in
Common Shares for a period of 12 months following Admission, except in certain limited
circumstances. Accordingly, following Admission, holders of, in aggregate, 103,252,936 Common
Shares (representing approximately 69.0 per cent. of the Enlarged Issued Share Capital) will be
subject to a lock-in period of at least 12 months.
All such persons have also agreed that, for a further 12 months following the expiry of the initial 18
or 12 month period, they will only dispose of an interest in Common Shares through Cenkos and in
such manner as Cenkos may reasonably require with a view to the maintenance of an orderly market
in the Common Shares.
Further details of these lock in and orderly market agreements are set out in paragraph 12 of Part VI
of this document.
12.
Share option plans & warrants
Save as described in paragraph 13 of Part VI of this document, the Company does not currently have
any outstanding options or warrants to purchase its Common Shares. In order to attract a talented
workforce and support the Company’s growth, the Company adopted the 2015 Plan which provides
for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units,
performance shares, performance units, cash-based awards, stock-based awards and dividend
equivalents (together, the “Shares Awards”), which may be granted to employees, officers, Directors,
advisors, consultants and independent contractors of the Company and its Subsidiaries and affiliates.
Options over an aggregate of 15 million new Common Shares, which represents approximately
10 per cent. of the Enlarged Issued Share Capital, are available for delivery pursuant to awards under
the 2015 Plan. Under a provision of the 2015 Plan, the amount of new Common Shares under option
can be increased annually up to and including 2025 by a maximum of 2 per cent. of the prevailing
Enlarged Issued Share Capital. The Remuneration Committee has no current intention of exercising
this provision. Further details of the 2015 Plan are set out in paragraph 13 of Part VI of this document.
40
13.
Dividend policy
The Company is primarily seeking to achieve capital growth for its Shareholders. The Board’s
intention for the foreseeable is to retain future distributable profits from the business, to the extent any
are generated, and not declare any dividends.
14.
Corporate governance
The UK Corporate Governance Code published by the Financial Reporting Council does not apply to
AIM companies. However, the Directors recognise the importance of good corporate governance and
will comply with the provisions of the Corporate Governance Guidelines for Smaller Quoted
Companies, published from time to time by the Quoted Companies Alliance, to the extent that they
believe it is appropriate in light of the size, stage of development and resources of the Company.
The Company has adopted, and will operate a share dealing code for Directors and other applicable
employees under the equivalent terms to those provided by Rule 21 of the AIM Rules for Companies.
The Board has established an Audit Committee and a Remuneration Committee, with formally
delegated duties and responsibilities as described below.
14.1.1 Audit Committee
The Audit Committee will be responsible for ensuring the financial performance of the Company is
properly monitored and reported, reviewing significant financial reporting issues, reviewing the
effectiveness of the Company’s internal systems and controls and risk management. The Audit
Committee will also oversee the relationship with the external auditors.
The Audit Committee will comprise Grover Wickersham, who will act as Chairman, Thomas Hecht
and Alastair Cade. The Audit Committee will meet at least three times a year at appropriate times in
the financial reporting and audit cycle and otherwise as required and meet with the external auditors
as necessary. The Audit Committee will have discussions with the external auditors at least once a
year without any executive Directors being present.
14.1.2 Remuneration Committee
The Remuneration Committee will be responsible for monitoring and providing advice along with the
Board on the framework or broad policy for the compensation of executive management including
any pension arrangements and compensation payments, taking into account all factors it deems
necessary; determining the compensation of senior executives including pension arrangements and
compensation payments; reviewing the design of all share incentive plans for approval by the Board
and Shareholders; and ensuring that all provisions regarding disclosure of compensation is clear and
transparent.
The Remuneration Committee will comprise Alastair Cade, who will act as Chairman and Thomas
Hecht. The Remuneration Committee will meet as and when necessary.
15.
Admission, Settlement and dealings
Application has been made to the London Stock Exchange for all of the Existing Common Shares and
Placing Shares to be admitted to trading on AIM. It is expected that Admission will take place, and
that dealings on AIM will commence on 7 May 2015.
The EU Regulation on Central Securities Depositories (the “CSDR”) was adopted on 23 July 2014.
Article 3(2) of CSDR requires that where transactions in transferable securities take place on a trading
venue, such as AIM, the relevant securities should be recorded and settled electronically in book
entry form in a Central Securities Depository (“CSD”), such as CREST, on or before the intended
settlement date (unless already so recorded). This requirement applies irrespective of whether the
security is currently eligible for electronic settlement or not and applies to all transactions executed
41
under the Rules of the London Stock Exchange irrespective of whether or not the securities are issued
by an EU-incorporated issuer.
The London Stock Exchange has announced that it intends to amend its rules so that all London Stock
Exchange transactions are able to comply with the requirements of Article 3(2). On 18 September
2014, the London Stock Exchange published a market notice indicating that it intended to amend its
rules which would become effective on 5 January 2015 in order to ensure that all securities traded
on the London Stock Exchange settle electronically in book entry form. On 27 November 2014, the
London Stock Exchange published a further market notice indicating that the commencement date
for compliance with the requirement noted above for transactions in “Regulation S, Category 3”
securities, such as the Common Shares to be issued in connection with the Placing, will be deferred
until 1 June 2015.
This rule change will require the Company (in common with all other companies whose securities
are admitted to trading on AIM) to ensure that the Common Shares are eligible for electronic
settlement through CREST.
The Placing Shares offered in the Placing is subject to the conditions listed under section 903(b)(3),
or Category 3, of Regulation S. Under Category 3, Offering Restrictions (as defined under Regulation
S) must be in place in connection with the Placing and additional restrictions are imposed on re-sales
of the Placing Shares. Further details of these restrictions are set out below and in Part VII of this
document. All Placing Shares are subject to these restrictions until the expiry of one year after the
later of (i) the time when the Placing Shares are first offered to persons other than distributors in
reliance upon Regulations S and (ii) the date of closing of the Placing, or such longer period as may
be required under applicable law (the “Compliance Period”).
Due to these restrictions, all Common Shares will be held in certificated form from Admission. The
London Stock Exchange and EUI intends to continue to work with issuers and other market
participants to provide a mechanism to facilitate the application of such restrictive legends to
securities in book entry form on or prior to the revised 1 June 2015 deadline.
However, as of the date of this document, a mechanism has not yet been established, and there is a
possibility that, if no mechanism is implemented by 1 June 2015, AIM may require the Common
Shares of the Company held in certificated form (such as the Placing Shares) be suspended from
trading. Following either the expiration of the Compliance Period, the Common Shares held in
certificated form will need to be dematerialised into the CREST system prior to trading. The
dematerialisation will be satisfied by a CREST Stock Deposit transaction together with a certification
instruction within the CREST system to issue depository interests which facilitate trading and
electronic settlement of shares of non-UK companies in CREST. Depository interests are uncertificated
“mirror image” securities constituted under English law representing the underlying shares.
16.
Transfer restrictions
The Common Shares have not been, and will not be, registered under the US Securities Act or under
any securities laws of any state or other jurisdiction of the United States. The Placing Shares are being
offered only to non-US persons (as defined under Regulation S under the US Securities Act) outside
the United States in transactions exempt from the registration requirements of the US Securities Act
in reliance on Regulation S or pursuant to another available exemption from the US Securities Act.
Accordingly, the Placing Shares are “restricted securities” as defined in Rule 144 under the US
Securities Act. The Placing Shares may not be offered, sold or delivered, directly or indirectly, in or
into the United States or to, or for the account or benefit of, any US person, unless the transfer is
registered under the US Securities Act or an exemption from the registration requirements is available
under the US Securities Act such as under Regulation S, Rule 144 or otherwise.
One of the criteria for the exemptions from registration under Regulation S to apply is that, subject to
certain exemptions, US investors do not purchase the Placing Shares during a one year period after
42
Admission. As such, the share certificates issued in respect of the Placing Shares will be required to
bear a legend describing restrictions on transfer to US persons and prohibiting hedging transactions
in the Common Shares unless in compliance with the US Securities Act.
Further details of the transfer restrictions in respect of the Common Shares are set out in Part VII of
this document.
17.
Effects of US domicile
The Company is a US corporation organised under the laws of the State of Delaware. There are a
number of differences between the corporate structure of the Company and that of a public limited
company incorporated in the UK. While the Directors consider that it is appropriate to retain the
majority of the usual features of a US corporation, the Directors intend to take certain actions to
conform to UK standard practice. Paragraph 19 of Part VI of this document is a description of the
principal differences and, where appropriate, provisions contained in the Company’s constitutional
documents to incorporate English law principles in relation to pre-emption rights, notifiable interests
and takeovers.
18.
Taxation
Your attention is drawn to paragraph 18 of Part VI of this document. These details are intended only
as a general guide to the current tax position under UK and US tax law. Investors should consult their
own independent financial advisers concerning the tax effects of an investment in the Common
Shares.
19.
Applicability of the City Code
The Company is not subject to the City Code because its registered office and its place of central
management and control are outside the UK, the Channel Islands and the Isle of Man. As a result,
certain of the protections that are afforded to shareholders under the City Code, for example in
relation to a takeover of a company or certain stakebuilding activities by shareholders, do not apply
to the Company. Certain provisions have been inserted into the Certificate of Incorporation which
adopt similar procedures to the City Code in the event of any party (or parties acting in concert)
obtaining 30 per cent. or more of the voting rights attaching to the issued Common Shares, but there
is no assurance that the courts of the State of Delaware, USA, will uphold or allow the enforcement
of these provisions. Further details relating to these provisions are set out at paragraph 19.2 of Part VI
of this document.
20.
Further information and risk factors
Prospective investors should read the whole of this document which provides additional information
on the Company and the Placing and not rely on the summaries or individual parts only. In particular,
the attention of prospective investors is drawn to Part II which contains a summary of the risk factors
relating to an investment in the Company.
43
PART II
RISK FACTORS
AN INVESTMENT IN COMMON SHARES IS HIGHLY SPECULATIVE AND INVOLVES A HIGH
DEGREE OF RISK. THE ATTENTION OF PROSPECTIVE INVESTORS IS DRAWN TO THE FACT THAT
THE COMPANY IS SUBJECT TO A VARIETY OF RISKS WHICH, IF ANY WERE TO MATERIALISE,
COULD HAVE A SIGNIFICANT ADVERSE EFFECT ON THE COMPANY’S BUSINESS AND/OR
FINANCIAL CONDITION, RESULTS OR FUTURE OPERATIONS. IN SUCH CASE, THE MARKET
PRICE OF THE COMMON SHARES COULD DECLINE AND INVESTORS MIGHT LOSE SOME OR
ALL OF THEIR INVESTMENT.
In addition to the information set out in the rest of this document, the following risk factors in this
Part II should be considered carefully in evaluating whether to make an investment in the Company.
The following factors do not purport to be an exhaustive list or explanation of all the risk factors
involved in investing in the Company and they are not set out in any order of priority.
Additionally, there may be risks not mentioned in this document of which the Board is not aware or
believes to be immaterial but which may, in the future, adversely affect the Company’s business and
the market price of the Common Shares.
Before making a final investment decision, prospective investors should consider carefully whether
an investment in the Company is suitable for them and, if they are in any doubt, should consult with
an independent financial adviser authorised under FSMA which specialises in advising on the
acquisition of shares and other securities in the UK or another appropriate financial adviser in the
jurisdiction in which such investor is located.
Risks related to the Company’s financial condition and capital requirements
Incurrence of significant losses
The Company is a preclinical-stage biotechnology company, and it has not yet generated significant
revenues. The Company has incurred net losses in each year since its inception in 2002, including
net losses of $2.75 million and $2.88 million for the years ended 31 December 2012 and 2013,
respectively, and $2.97 million for the nine months ended 30 September 2014. As of 30 September
2014, the Company had an accumulated deficit of $28.42 million.
The Company has devoted most of its financial resources to research and development, including its
discovery and preclinical development activities. To date, the Company has financed its operations
primarily through the sale of equity securities and convertible debt. The amount of its future net losses
will depend, in part, on the rate of its future expenditures and its ability to obtain funding through
equity or debt financing, strategic collaborations or out-licensing of one or more of its product
candidates to potential partners. The Company has not completed clinical studies for any product
candidate and it will be several years, if ever, before it has a product candidate ready for
commercialisation. Even if the Company obtains regulatory approval to market a product candidate,
its future revenues will depend upon the size of any markets in which its product candidates have
received approval, and its ability to achieve sufficient market acceptance, reimbursement from
government and third-party payors and adequate market share for its product candidates in those
markets.
The Company expects to continue to incur significant expenses and increasing operating losses for
the foreseeable future. It anticipates that its expenses will increase substantially if and as it:
•
continues its research and preclinical and clinical development of its product candidates;
•
expands the scope of its current proposed clinical studies for its product candidates;
44
•
initiate additional preclinical, clinical or other studies for its product candidates;
•
changes or adds additional manufacturers or suppliers;
•
seeks regulatory and marketing approvals for its product candidates that successfully complete
clinical studies;
•
seeks to identify and validate additional product candidates;
•
acquires or in-licences other product candidates and technologies;
•
maintains, protects and expands its intellectual property portfolio;
•
attracts and retains skilled personnel;
•
creates additional infrastructure to support its operations as a public company and its product
development and planned future commercialisation efforts; and
•
experiences any delays or encounters issues with any of the above.
The net losses the Company incurs may fluctuate significantly from half-year to half-year and year to
year, such that a period-to-period comparison of its results of operations may not be a good indication
of its future performance. In any particular reporting period, its operating results could be below the
expectations of securities analysts or investors, which could cause its stock price to decline.
No revenue generation
The Company’s ability to generate revenue and achieve profitability depends on its ability, alone or
with strategic collaboration partners, to successfully complete the development of, and obtain the
regulatory approvals necessary to commercialise its product candidates. The Company’s ability to
generate future revenues from product sales depends heavily on its success in:
•
completing research and preclinical and clinical development of its product candidates;
•
seeking and obtaining regulatory and marketing approvals for product candidates for which the
Company completes clinical studies;
•
developing a sustainable, scalable, reproducible, and transferable manufacturing process for its
product candidates;
•
launching and commercialising product candidates for which it obtains regulatory and
marketing approval, either by collaborating with a partner or, if launched independently, by
establishing a sales force, marketing and distribution infrastructure;
•
obtaining market acceptance of its product candidates as a viable treatment option;
•
addressing any competing technological and market developments;
•
implementing additional internal systems and infrastructure, as needed;
•
identifying and validating new product candidates;
•
negotiating favourable terms in any collaboration, licensing or other arrangements into which
it may enter;
•
controlling the costs of clinical trials in the face of potential economical and operational
factors;
•
maintaining, protecting and expanding its portfolio of intellectual property rights, including
patents, trade secrets and know-how; and
•
attracting, hiring and retaining qualified personnel.
45
Even if one or more of the product candidates that it develops is approved for commercial sale, it
anticipates incurring significant costs associated with commercialising any approved product
candidate. Its expenses could increase beyond expectations if it is required by the US Food and Drug
Administration, or the FDA, the European Medicines Agency, or the EMA, or other regulatory
agencies, domestic or foreign, to perform clinical and other studies in addition to those that it
currently anticipates. Even if it is able to generate revenues from the sale of any approved products,
it may not become profitable and may need to obtain additional funding to continue operations.
Current or future discussions with potential business partners may fail to result in agreements
The Company cannot be certain that its current or future business development efforts will culminate
in agreements with potential business partners, including pharmaceutical companies, biotechnology
companies, or government agencies. Although in the long term the Company plans to commercialise
its own drugs after taking them through clinical trials, in the near term the success of the Company’s
business plan is dependent upon such agreements for licensing some of its drug candidates. The
Company’s business terms may be unacceptable to such third parties. Moreover, even if the Company
is successful in entering into licensing agreements with business partners, many aspects of the
performance of these partners will be beyond the Company’s control. Any failure by a partner to
adequately perform its contractual obligations with regard to clinical development and
commercialisation of drug candidates could have a material adverse effect on the Company’s
business and prospects.
The number of potential business partners for any drug programme is limited. Without sufficient
competition, the Company could be at a disadvantage in negotiations with potential partners. A
limited choice of potential partners may substantially increase the time needed to conclude any
negotiation and/or decrease the likelihood of a successful negotiation entirely, either of which could
have a material effect on its business.
Risks Related to the Company’s Strategy and Business
Reliance on sufficient and reliable computer resources
The Company’s drug discovery platform is dependent on the availability of substantial amounts of
computing resources. For practical reasons the Company may choose to house some of its own
computer installations in dedicated third party hosting facilities or employ preconfigured computer
hardware from third-party providers and will rely on those third parties to properly protect, power,
and cool the Company’s computer infrastructure. If a third party fails to protect the Company’s
computer infrastructure, whether due to business problems, damage due to fire or other accident, or
just from simple incompetence, research and development that relies on this computer infrastructure
would be negatively impacted. If the damage is permanent or widespread the Company may need to
invest in new computing resources at substantial expense.
The Company employs commercial hardware from reputable sources for its computer resources and
thoroughly test all aspects before deployment. Despite these precautions, there is a chance that the
hardware fails to operate as advertised or as tested, in which case the computing infrastructure may
not perform as expected. A lack of performance will negatively affect the Company’s research and
development and may require a significant investment in manpower and capital to remedy and may
cause delays in its research programmes.
Identification and discovery of additional product candidates
The success of the Company’s business depends primarily upon its ability to design, develop and
commercialise therapeutic products based on its drug discovery platform. The Company’s research
methodology may be unsuccessful in identifying potential product candidates or its potential product
candidates may not easily be synthesized in the laboratory or may be shown to have harmful side
46
effects or may have other characteristics that may make the product candidates unmarketable, unable
to be licenced to a partner or unlikely to receive marketing approval.
If any of these events occur, the Company may be forced to delay or even abandon its development
efforts for one or more programmes, which would have a material adverse effect on its business and
could potentially cause the Company to cease operations. Research programmes to research and
develop new product candidates require substantial technical, financial and human resources. The
Company may unknowingly focus its efforts and resources on one or more potential programmes or
product candidates that ultimately prove to be unsuccessful, thus resulting in waste of resources and
time and potential loss of opportunity.
Selection of research programmes
Because the Company has limited resources, it may forego or delay pursuit of opportunities with
certain programmes or product candidates or for indications that later prove to have greater
commercial potential. The Company’s resource allocation decisions may cause it to fail to capitalise
on viable commercial therapeutic products or profitable market opportunities. Its spending on current
and future research and development programmes for product candidates may not yield any
commercially viable products. If the Company does not accurately evaluate the commercial potential
or target market for a particular product candidate, it may relinquish valuable rights to that product
candidate through strategic collaboration, licensing or other royalty arrangements in cases in which
it would have been more advantageous for the Company to retain sole development and
commercialisation rights to such product candidate, or it may allocate internal resources to a product
candidate in a therapeutic area in which it would have been more advantageous to enter into a
partnering arrangement.
Reliance on third parties to produce preclinical and clinical supplies and to conduct clinical studies
The Company and its potential partners may rely in part on third parties to supply the materials and
components for, and manufacture, its discovery, preclinical and clinical trial supplies. There can be
no assurance that the supply of discovery, preclinical and clinical development drugs and other
materials will not be limited, interrupted, restricted in certain geographic regions or of satisfactory
quality or continue to be available at acceptable prices.
The manufacturing process for a product candidate is subject to FDA, EMA and other foreign
regulatory authority review. Suppliers and manufacturers must meet applicable manufacturing
requirements and undergo rigorous facility and process validation tests required by regulatory
authorities in order to comply with regulatory standards such as cGMP. In the event that any of the
suppliers or manufacturers fails to comply with such requirements or to perform its obligations to it
in relation to quality, timing or otherwise, or if its supply of components or other materials becomes
limited or interrupted for other reasons, the Company may be forced to manufacture the materials
itself, for which it currently does not have the capabilities or resources, or enter into an agreement
with another third party, which the Company may not be able to do on reasonable terms or in a
reasonable amount of time, if at all. In some cases, the technical skills or technology required to
manufacture its product candidates may be unique or proprietary to the original manufacturer and it
may have difficulty, or there may be contractual restrictions prohibiting the Company from,
transferring such skills or technology to another third party and a feasible alternative may not exist.
These factors would increase its reliance on such manufacturer or require the Company to obtain a
licence from such manufacturer in order to have another third party manufacture the Company’s
product candidates. If the Company is required to change manufacturers for any reason, it will be
required to verify that the new manufacturer maintains facilities and procedures that comply with
quality standards and with all applicable regulations and guidelines and that the new manufacturer
will be able to supply the appropriate quantity and quality of components or other materials. The
delays associated with the verification of a new manufacturer could negatively affect the Company’s
ability to develop product candidates in a timely manner or within budget.
47
The Company expects to rely on clinical research organisations (CROs) and clinical study sites to
ensure its clinical studies are conducted properly and on time. While the Company will have
agreements governing its activities, it will have limited influence over their actual performance. The
Company will control only certain aspects of its CROs’ activities. Nevertheless, the Company will be
responsible for ensuring that each of its clinical studies is conducted in accordance with the
applicable protocol, legal, regulatory and scientific standards, and its reliance on the CROs does not
relieve the Company of its regulatory responsibilities. The Company and its CROs are required to
comply with the FDA’s or other regulatory body’s GCPs for conducting, recording and reporting the
results of IND-enabling studies and clinical studies to assure that the data and reported results are
credible and accurate and that the rights, integrity and confidentiality of clinical study participants
are protected. The FDA and other regulatory bodies enforces these GCPs through periodic inspections
of study sponsors, principal investigators and clinical study sites. If the Company or its CROs fail to
comply with applicable GCPs, the clinical data generated in its future clinical studies may be deemed
unreliable and the FDA and other regulatory bodies may require it to perform additional clinical
studies before approving any marketing applications. Upon inspection, the FDA and other regulatory
bodies may determine that its clinical studies did not comply with GCPs. In addition, its future
clinical studies will require a sufficient number of test subjects to evaluate the safety and effectiveness
of its product candidates. Accordingly, if the CROs fail to comply with these regulations or fail to
recruit a sufficient number of patients, the Company may be required to repeat such clinical studies,
which would delay the regulatory approval process.
The members of the CROs are not the Company’s employees, and the Company is therefore unable
to directly monitor whether or not it devotes sufficient time and resources to its clinical and
nonclinical programmes. These CROs may also have relationships with other commercial entities,
including the Company’s competitors, for whom they may also be conducting clinical studies or other
drug development activities that could harm the Company’s competitive position. If the Company’s
CROs do not successfully carry out their contractual duties or obligations, fail to meet expected
deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the
failure to adhere to the Company’s clinical protocols or regulatory requirements, or for any other
reasons, the Company’s clinical studies may be extended, delayed or terminated, and the Company
may not be able to obtain regulatory approval for, or successfully commercialise its product
candidates. As a result, the Company’s financial results and the commercial prospects for its product
candidates would be harmed, its costs could increase, and its ability to generate revenues could be
delayed or adversely affected.
Company’s licensees’ failure to satisfy obligations
As part of any licence agreement the Company may enter into relating to its product candidates in
development, the Company will not have day-to-day control over the activities of its partners with
respect to any product candidate. If a licensee fails to fulfill its obligations under an agreement with
the Company, it may be unable to assume the development and/or commercialisation of the product
candidate covered by that agreement or to enter into alternative arrangements with another third
party. In addition, the Company may encounter delays in the commercialisation of the product
candidates that are the subject of a licence agreement. Accordingly, the Company’s ability to receive
any revenue from the product candidates covered by such agreements will be dependent on the
efforts and successful execution of its licensees. The Company could be involved in disputes with a
licensee, which could lead to delays in or termination of, the Company’s development and/or
commercialisation programmes and result in time consuming and expensive litigation or arbitration.
In addition, any such dispute could diminish a licensee’s commitment to the Company and reduce
the resources they devote to developing and/or commercialising its product candidates. If any
licensee terminates or breaches its agreement, or otherwise fails to complete its obligations in a
timely manner, the Company’s chances of successfully developing and/or commercialising its product
candidates would be materially adversely effected.
48
Sharing of trade secrets with third parties
Because the Company and its potential partners may rely on third parties to manufacture its product
candidates and conduct its clinical trials, the Company must, at times, share one or more trade secrets
with them. The Company seeks to protect its proprietary technology in part by entering into
confidentiality agreements and, if applicable, material transfer agreements, collaborative research
agreements, consulting agreements or other similar agreements with its collaborators, advisors,
employees and consultants prior to beginning research or disclosing proprietary information. These
agreements typically limit the rights of the third parties to use or disclose the Company’s confidential
information, such as trade secrets. Despite the contractual provisions employed when working with
third parties, the need to share one or more trade secrets and other confidential information increases
the risk that such trade secrets become known by the Company’s competitors, or are inadvertently
incorporated into the technology of others, or are disclosed or used in violation of these agreements.
Given that the Company’s proprietary position is based, in part, on its know-how and trade secrets,
a competitor’s discovery of one or more of its trade secrets or other unauthorised use or disclosure
would impair the Company’s competitive position and may have a material adverse effect on its
business.
Establishment of new licence agreements with pharmaceutical or biotechnology companies
The Company’s strategy for commercialisation of its product candidates contemplates the negotiation
of a strategic relationship with one or more major pharmaceutical or biotechnology companies. Such
strategic relationships may involve the out-licensing of one or more product candidates or
collaborative agreements for product candidate development or marketing. Negotiations with major
pharmaceutical or biotechnology companies are generally time-consuming and uncertain and there
can be no guarantee that any such agreement can be negotiated in a timely fashion, on favourable
terms, or at all. To the extent that the Company is unable to consummate an agreement for such a
strategic relationship or if excessive delay is encountered in consummating such a transaction, the
Company’s ability to begin to produce revenues will be adversely affected, especially in light of the
Company’s lack of internal manufacturing capabilities. In addition, if the Company is able to
consummate such an agreement, there can be no assurance that the strategic partner will adequately
perform.
Changing technological landscape
One of the Company’s key competitive advantages is provided by its proprietary drug discovery
platform. This advantage would be at risk if similar technology of sufficient capability were developed
outside the company. Many organisations, both public and private, including many academic
institutions, continue to perform research in molecular modelling. It is possible that one or more of
these groups will develop new computational technology that could rival one or more of the
capabilities of the Company’s drug discovery platform. Such new technology could become available
for general use.
If rival organisations were capable of replicating a portion of the capabilities of the Company’s drug
discovery platform, either by deploying improved versions of existing products, or by employing
newly developed technology, this would erode one of the Company’s competitive advantages which
would have a material effect on its business.
Risks Related to Development and Regulatory Approval of the Company’s Product Candidates
Clinical testing and regulatory approval
The Company’s business depends upon the successful development and commercialisation of
product candidates. These product candidates are in various stages of development and must satisfy
rigorous standards of safety and efficacy before they can be approved for sale by the FDA or
comparable foreign regulatory authorities. To satisfy these standards, the Company must allocate
resources among its various development programmes and must engage in expensive and lengthy
49
testing of its product candidates. Discovery and development efforts for new pharmaceutical products
are resource-intensive and may take 10 to 15 years or longer for each product candidate. Despite its
efforts, the Company’s product candidates may not:
•
offer therapeutic or other improvement over existing competitive drugs;
•
be proven safe and effective in clinical trials;
•
meet applicable regulatory standards;
•
be capable of being produced in commercial quantities at acceptable costs; or
•
be successfully marketed as pharmaceutical products.
Anticoagulant product candidates have not yet entered clinical trials
The Company’s anticoagulant product candidates while demonstrated as being efficacious in
preclinical studies, may be less effective in humans. Reduced efficacy in humans, if uncorrected, may
adversely affect the value of its anticoagulant product candidates, delay or otherwise hamper
regulatory approval for clinical trials, and/or reduce the chances of successful clinical trials.
The safety of the Company’s anticoagulant product candidates have only been demonstrated in
preclinical studies. If this safety profile fails to translate effectively in humans, its products may lose
their competitive advantage to comparable products already on the market. Reduced margins for
safety may also require a larger number of patients in clinical trials which will increase both the cost
and time required to organise and complete these trials. Even if safety is scientifically established, the
regulatory authorities may still insist on larger clinical trials and/or a different clinical study plan
either of which could substantially increase costs.
Reduced efficacy and/or safety may demand that the Company invest additional resources in further
drug development and/or institute additional clinical trials, both of which would require added
commitments in resources, delay commercialisation, and have an adverse material effect on its
business and operations.
Reduced efficacy and/or safety may adversely affect the perceived value of its product candidates,
making them less commercially attractive, and thus delaying or extending negotiations with potential
partners. Since the number of potential partners is ultimately limited, especially in the anticoagulant
market, reduced efficacy and/or safety may increase the possibility that no suitable agreement with a
partner can be negotiated at all, in which case the Company would have to bring the product
candidates to market themselves and accept all associated risks and costs.
Diabetic macular oedema product candidates have not yet entered clinical trials
The Company’s diabetic macular oedema product candidates treat the disease by controlled
disruption of the kallikrein kinin system. This method of treatment involving alteration of the kallikrein
kinin system, while successfully demonstrated in preclinical studies, has not been demonstrated in
clinical trials. If such a treatment strategy fails in clinical trials, this may require that additional
resources be committed for further development.
Even if this kallikrein kinin-based method of treatment for diabetic macular oedema is itself
successfully demonstrated in human clinical trials, one or more of the product candidates may still
fail to demonstrate efficacy in clinical trials even though they rely on this method of treatment. A
failure to demonstrate efficacy in clinical trials could prevent commercialisation and would likely
make the Company’s diabetic macular oedema product candidates unattractive to potential partners.
The performance of the Company’s diabetic macular oedema product candidates in both preclinical
studies and clinical trials is expected to rely on obtaining sufficient intraocular exposure for the
product candidates. Insufficient intraocular exposure in preclinical studies may require additional
50
development time to correct and could require additional resources and delay preclinical studies and
/or clinical trials. If intraocular exposure is limited and cannot be improved, the likelihood of a
successful preclinical study and/or clinical trial could be reduced.
Delays in clinical trials and regulatory approval
Clinical testing is expensive, difficult to design and implement, can take many years to complete, and
is uncertain as to the outcome. The Company may experience delays in clinical trials at any stage of
development and testing of its product candidates. The Company’s planned clinical trials may not
begin on time, have an effective design, enroll a sufficient number of subjects, or be completed on
schedule, if at all.
There are a variety of factors which may result in a delay or unsuccessful completion of clinical trials
for the Company’s anticoagulant and diabetic macular oedema product candidates, as well as those
associated with its other programmes, include:
•
inability to raise funding necessary to initiate or continue a trial;
•
delays in obtaining regulatory approval to commence a trial;
•
delays in reaching agreement with the FDA, EMA or other regulatory authorities on final trial
design;
•
imposition of a clinical hold following an inspection of clinical trial operations or trial sites by
the FDA, EMA or other regulatory authorities;
•
delays in reaching agreement on acceptable terms with prospective clinical research
organisations (CROs) and clinical trial sites;
•
delays in obtaining required institutional review board approval at each site;
•
delays in recruiting suitable patients to participate in a trial;
•
delays in having subjects complete participation in a trial or return for post-treatment followup;
•
delays caused by subjects dropping out of a trial due to side effects or otherwise;
•
clinical sites dropping out of a trial to the detriment of enrollment;
•
time required to add new clinical sites; and
•
delays by its contract manufacturers to produce and deliver sufficient supply of clinical trial
materials.
If initiation or completion of any of the clinical trials for the Company’s product candidates are
delayed for any of the above reasons, the Company’s development costs may increase, its approval
process could be delayed, any periods during which the Company may have the exclusive right to
commercialise its product candidates may be reduced and its competitors may have more time to
bring products to market before the Company does. A delay in clinical trial may also decrease the
duration of applicable patent coverage conferred by one or more patents in its intellectual property
portfolio. Any of these events could impair the Company’s ability to generate revenues from product
sales and impair its ability to generate regulatory and commercialisation milestones and royalties, all
of which could have a material adverse effect on its business.
Consequence of adverse effects
Adverse events (AEs) caused by the Company’s product candidates could cause the Company,
potential partners, other reviewing entities, clinical study sites or regulatory authorities to interrupt,
51
delay or halt clinical studies and could result in the denial of regulatory
anticoagulants are sometimes associated with bleeding liabilities that can
conditions such as stroke. If an unacceptable frequency and/or severity of
Company’s clinical trials for its product candidates, its ability to obtain
product candidates will likely be negatively impacted.
approval. For example,
lead to life threatening
AEs are reported in the
regulatory approval for
Furthermore, if any of the Company’s approved therapeutic products cause serious or unexpected
side effects after receiving market approval, a number of potentially significant negative
consequences could result, including:
•
regulatory authorities may withdraw their approval of the therapeutic product or impose
restrictions on its distribution in a form of a modified risk evaluation and mitigation strategy
(REMS);
•
regulatory authorities may require the addition of labeling statements, such as warnings or
contraindications;
•
the Company may be required to change the way the therapeutic product is administered or to
conduct additional clinical studies;
•
the Company could be sued and held liable for harm caused to patients; and
•
the Company’s reputation may suffer.
Any of these events could prevent the Company from achieving or maintaining market acceptance of
the affected therapeutic product and could substantially increase the costs of commercialising its
product candidates.
Regulatory approval to commercialise anticoagulant and diabetic macular oedema product
candidates
The Company cannot commercialise its product candidates until the appropriate regulatory
authorities, such as the FDA or EMA, have reviewed and approved the product candidate. The
regulatory agencies may not complete their review processes in a timely manner, or the Company
may not be able to obtain regulatory approval for its drug programmes. Additional delays may result
if any of its product candidates is brought before an FDA advisory committee or similar regulatory
body, which could recommend restrictions on approval or recommend non-approval of the product
candidate. In addition, the Company may experience delays or rejections based upon additional
government regulation from future legislation or administrative action, or changes in regulatory
agency policy during the period of product development, clinical studies and the review process. As
a result, the Company cannot predict when, if at all, the Company will receive any future revenue
from commercialisation of any of its product candidates.
Extensive regulatory requirements
Even if the Company obtains regulatory approval in a given regulatory jurisdiction, that regulatory
authority, for example the FDA in the United States or EMA in Europe, may still impose significant
restrictions on the indicated uses or marketing of its therapeutic products, or impose ongoing
requirements for potentially costly post-approval studies or post-market surveillance. For example,
the labelling ultimately approved for its therapeutic products will likely include one or more
restrictions on use due to the specific patient population and manner of use in which the drug was
evaluated and the quality and quantity of clinical trial data obtained in those evaluations.
In addition, manufacturers of therapeutic products and their facilities are subject to payment of user
fees and continual review and periodic inspections by the FDA, EMA and other regulatory authorities
for compliance with current good manufacturing practices (cGMP), and adherence to commitments
made in the New Drug Application (NDA). If the Company, or a regulatory agency, discover
52
previously unknown problems with a therapeutic product, such as quality issues or AEs of
unanticipated severity or frequency, or problems with the facility where the therapeutic product is
manufactured, a regulatory agency may impose restrictions relative to that product or the
manufacturing facility, including requiring recall or withdrawal of the therapeutic product from the
market or suspension of manufacturing.
If the Company or a potential partner fail to comply with applicable regulatory requirements
following approval of its therapeutic product, a regulatory agency may:
•
issue an untitled or warning letter asserting that it is in violation of the law;
•
seek an injunction or impose civil or criminal penalties or monetary fines;
•
suspend or withdraw regulatory approval;
•
suspend any ongoing clinical trials;
•
refuse to approve a pending NDA or supplements to an NDA submitted by the Company;
•
recall and/or seize the therapeutic product; or
•
refuse to allow the Company to enter into supply contracts, including government contracts.
Any government investigation of alleged violations of law could require the Company to expend
significant time and resources in response and could generate negative publicity. The occurrence of
any event or penalty described above may inhibit the Company’s ability to commercialise product
candidates and inhibit its ability to generate revenues.
Commercialisation in different jurisdictions
In order to market any therapeutic products across jurisdictions, the Company must establish and
comply with numerous and varying regulatory requirements on a country-by-country basis regarding
safety and efficacy. Approval by the FDA or EMA does not ensure approval by regulatory authorities
in other countries or jurisdictions. In addition, clinical trials conducted in one country may not be
accepted by regulatory authorities in other countries, and regulatory approval in one country does
not guarantee regulatory approval in any other country. Approval processes vary among countries and
can involve additional therapeutic product testing and validation and additional administrative
review periods. Seeking foreign regulatory approval could result in difficulties and costs for the
Company and require additional preclinical studies or clinical trials which could be costly and time
consuming. Regulatory requirements can vary widely from country to country and could delay or
prevent the introduction of the Company’s therapeutic products in those countries. The Company
currently does not have any product candidates approved for sale in any jurisdiction, including
international markets, and it does not have experience in obtaining regulatory approval in
international markets. If the Company fails to comply with regulatory requirements in international
markets or to obtain and maintain required approvals, or if regulatory approvals in international
markets are delayed, its target market will be reduced and its ability to realise the full market potential
of its therapeutic products will be unrealised.
Risks Related to Commercialisation of the Company’s Product Candidates
Acceptance of products by the medical community
If any of the Company’s product candidates receive marketing approval, they may nonetheless not
gain sufficient market acceptance by physicians, patients, healthcare payors and others in the medical
community. If these therapeutic products do not achieve an adequate level of acceptance, the
Company may not generate significant therapeutic product revenues and it may not become
profitable. The degree of market acceptance of any of the Company’s therapeutic product candidates
will depend on a number of factors, including:
53
•
demonstration of clinical safety and efficacy in clinical trials;
•
relative convenience, ease of administration and acceptance by physicians, patients and health
care payors;
•
prevalence and severity of any AEs;
•
limitations or warnings contained in the FDA, EMA or other foreign regulatory approved label
for the relevant product candidate;
•
availability of alternative treatments;
•
pricing and cost-effectiveness;
•
effectiveness of the Company’s or any future collaborators’ sales and marketing strategies;
•
ability to obtain hospital formulary approval; and
•
ability to obtain and maintain sufficient third-party coverage or reimbursement, which may
vary from country to country.
If any of the Company’s product candidates is approved but does not achieve an adequate level of
acceptance by physicians, patients and health care payors, the Company may not generate sufficient
revenue and may not become or remain profitable.
Ability to establish sales and marketing capabilities
The Company currently does not have an organisation for the sales, marketing and distribution of
pharmaceutical products and the cost of establishing and maintaining such an organisation may
exceed the cost-effectiveness of doing so. In order to market any therapeutic products that may be
approved, the Company must build its sales, marketing, managerial and other non-technical
capabilities or make arrangements with partners to perform these services.
If the Company obtains approval to commercialise any therapeutic products internationally, a variety
of risks associated with international operations could materially adversely affect the Company’s
business. If the Company’s product candidates are approved for commercialisation, the Company
expects that it will be subject to additional risks related to entering into international business
relationships, including:
•
different regulatory requirements for drug approvals in foreign countries;
•
reduced protection for intellectual property rights;
•
unexpected changes in tariffs, trade barriers and regulatory requirements;
•
economic weakness, including inflation, or political instability in particular foreign economies
and markets;
•
compliance with tax, employment, immigration and labour laws for employees living or
traveling abroad;
•
foreign taxes, including withholding of payroll taxes;
•
foreign currency fluctuations, which could result in increased operating expenses and reduced
revenues, and other obligations incident to doing business in another country;
•
workforce uncertainty in countries where labour unrest is more common than in the United
States;
54
•
production shortages resulting from any events affecting raw material supply or manufacturing
capabilities abroad; and
•
business interruptions resulting from geopolitical actions, including war and terrorism, natural
disasters including earthquakes, typhoons, hurricanes, tornados, floods and fires, or man-made
disasters including civil unrest, actions of animal rights activists, social turmoil, power
blackouts, and arson.
The Company has little or no prior experience in these areas. In addition, there are complex
regulatory, tax, labour and other legal requirements imposed by both the European Union and many
of the individual countries in Europe with which the Company will need to comply.
Significant competition from other biotechnology and pharmaceutical companies
The biotechnology and pharmaceutical industries are intensely competitive. The Company has
competitors both in the United States and internationally, including major multinational
pharmaceutical companies, biotechnology companies and universities and other research
institutions. Many of its competitors have substantially greater financial, technical, commercial and
other resources, such as larger research and development staff, larger intellectual property portfolios
and experienced marketing and manufacturing organisations. Additional mergers and acquisitions in
the biotechnology and pharmaceutical industries may result in even more resources being
concentrated in competitors.
Competition may increase further as a result of advances in the commercial applicability of
technologies and greater availability of capital for investment in these industries. The Company’s
competitors may succeed in developing, acquiring or licensing, on an exclusive basis, therapeutic
products that are more effective or less costly than the product candidates that the Company is
currently developing or that it may develop.
The Company will face competition from other therapeutic products currently approved or that will
be approved in the future for the same indications. Therefore, the Company’s ability to compete
successfully will depend largely on its ability to:
•
discover and successfully develop therapeutic products that are superior to other therapeutic
products in the market;
•
demonstrate through clinical trials that the Company’s product candidates are well
differentiated from existing and future therapies;
•
attract qualified scientific, therapeutic product development and commercial personnel;
•
obtain patent and/or other intellectual property protection for its product candidates and
technologies;
•
obtain required regulatory approvals;
•
successfully collaborate with pharmaceutical companies in the development and
commercialisation of new therapeutic products; and
•
negotiate competitive pricing and reimbursement with third-party payors.
The availability of competitors’ products could limit the demand and/or the price the Company is able
to charge for any product candidate or therapeutic products it develops. The Company will not
achieve its business plan if the acceptance of its therapeutic products is inhibited by price
competition or the reluctance of physicians to switch from existing therapeutic products, or if
physicians switch to other new therapeutic products or choose to reserve the Company’s therapeutic
products for use in limited circumstances. The inability to compete with existing or subsequently
introduced therapeutic products would have a material adverse impact on the Company’s business,
financial condition and prospects.
55
Changes in health care systems
The United States federal government and other governments are pursuing various changes in the
health care system. Any government-adopted measures could adversely affect the pricing of health
care products, including that of any of the Company’s current or future therapeutic products that may
be approved for sale in the future. The continuing efforts of governments, insurance companies,
managed care organisations and other payors for health care products, to contain or reduce health
care costs may adversely affect the Company’s ability to set prices it believes are fair for its therapeutic
products or any product candidates it may develop and commercialise.
New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and
decisions, relating to health care availability, methods of delivery or payment for drugs, or sales,
marketing or pricing, may limit the Company’s potential revenues, and the Company may need to
revise its research and development or commercialisation programmes. The pricing and
reimbursement environment may change in the future and become more challenging for any of
several reasons, including policies advanced by the US government or foreign governments, new
health care legislation or fiscal challenges faced by government health administration authorities.
Specifically, in the United States and some foreign jurisdictions, there have been a number of
legislative and regulatory proposals and initiatives to change the health care system in ways that
could affect the Company’s ability to sell therapeutic products. Some of these proposed and
implemented reforms have resulted, or could result, in reduced reimbursement rates for its future
therapeutic products, which would adversely affect its business, operations and financial results. The
Affordable Care Act (ACA) has far-reaching consequences for biopharmaceutical companies like the
Company. As a result of this legislation, substantial changes are being made to the current system for
paying for health care in the United States, including changes made in order to extend medical
benefits to those who would otherwise lack health insurance coverage. If reimbursement for the
Company’s therapeutic products is substantially less than the Company expects in the future, or
rebate obligations associated with them are substantially increased, the Company’s business could be
materially and adversely affected. Further federal and state proposals and health care reforms in and
outside of the United States could limit the prices that can be charged for the Company’s products
and may further limit the Company’s commercial opportunities. The Company’s results of operations
could be materially adversely affected by the ACA, by any Medicare prescription drug coverage
legislation, by the possible effect of such current or future legislation on amounts that private insurers
will pay and by other health care reforms that may be enacted or adopted in the future.
Risks Related to Intellectual Property
Protection and enforcement of the Company’s patents
Competitors may infringe the Company’s patents. To counter infringement or unauthorised use, the
Company may be required to file infringement claims, which can be expensive and time-consuming.
In addition, in a patent infringement proceeding, a court may decide that a patent of the Company is
not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using
the technology at issue on the grounds that the Company’s patents do not cover the technology in
question. An adverse result in any litigation or defense proceedings could put one or more of the
Company’s patents at risk of being invalidated or interpreted narrowly and could put any other of the
Company’s patent applications at risk of not issuing.
Interference proceedings provoked by third parties or brought by the Company may be necessary to
determine the priority of inventions with respect to its patents. An unfavourable outcome could
require the Company to cease using the related technology or to attempt to licence rights to it from
the prevailing party. The Company’s business could be harmed if the prevailing party does not offer
the Company a licence on commercially reasonable terms. The Company’s defense of litigation or
interference proceedings may fail and, even if successful, may result in substantial costs and distract
the Company’s management and other employees. The Company may not be able to prevent
56
misappropriation of its intellectual property rights, particularly in countries where the laws may not
protect those rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of the Company’s confidential information or one or more
of the Company’s trade secrets could be compromised by disclosure during this type of litigation.
There could also be public announcements of the results of hearings, motions or other interim
proceedings or developments. If securities analysts or investors perceive these results to be negative,
it could have a material adverse effect on the price of the Company’s Common Shares.
Claims against employees, consultants or independent contractors
The Company employs individuals who were previously employed at universities or other companies,
including biotechnology or pharmaceutical companies that may or may not be the Company’s
competitors or potential competitors. Although the Company tries to ensure that its employees,
consultants and independent contractors do not use the proprietary information or know-how of
others in their work for the Company, it may be subject to claims that it or its employees, consultants
or independent contractors have inadvertently or otherwise used or disclosed intellectual property,
including trade secrets or other proprietary information, of any of its employees’ former employers or
other third parties. Litigation may be necessary to defend against these claims. If the Company fails
in defending any such claims, in addition to paying monetary damages, it may lose valuable
intellectual property rights or personnel, which could adversely impact its business. Even if the
Company is successful in defending against such claims, litigation could result in substantial costs
and be a distraction to management and other employees.
Challenges to the inventorship or ownership of patents and other intellectual property
The Company may also be subject to claims that former employees, collaborators or other third
parties have an ownership interest in its patents or other intellectual property. It may have ownership
disputes arising, for example, from conflicting obligations of consultants or others who are involved
in developing the Company’s product candidates. Litigation may be necessary to defend against these
and other claims challenging inventorship or ownership. If the Company fails in defending any such
claims, in addition to paying monetary damages, it may lose valuable intellectual property rights,
such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could
have a material adverse effect on the Company’s business. Even if the Company is successful in
defending against such claims, litigation could result in substantial costs and be a distraction to
management and other employees.
Claims of infringement by third parties
While the Company believes that its current therapeutic candidates, additional therapeutic
candidates in development, and proprietary processes for generating those candidate compounds do
not infringe the intellectual property rights of any third parties, it is impossible to be aware of all third
party intellectual property. The Company’s research has included searching and reviewing certain
publicly available resources relating to molecular modeling (including docking and scoring methods),
virtual library screening, virtual library generation, computational chemistry, and other computational
molecular modeling software packages. These documents are routinely collected by members of the
Company’s research and development team and examined by senior levels of management in order
to keep abreast of developments in the field. Based on a review of the references it has identified, the
Company is not aware of any patent or other publication that it believes poses any infringement risk.
The Company’s also performs patent and literature searches on all of its new chemical candidates.
Other than performing these types of searches and having a general knowledge of the other
companies or institutions developing or selling computational molecular modeling software, it is very
difficult to ascertain precisely what other entities have in the way of such technology. Like the
Company, many of these other entities choose to keep certain details of their research and
57
development efforts confidential. In those cases where details of their technology appear in scientific
publications, the Company has collected and examined a number of those materials. However, there
can be no assurance that the Company’s drug discovery platform and new chemical candidates do
not infringe the intellectual property rights of any third parties.
Risk of non-compliance with requirements imposed by governmental patent agencies
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents
and/or applications will be due to be paid to the USPTO and various governmental patent agencies
outside of the United States in several stages over the lifetime of the patents and/or applications. The
Company has systems in place to remind it to pay these fees, and it employs an outside law firm and
relies on its outside counsel to file these fees on its behalf with non-US patent agencies.
The US PTO and various non-US governmental patent agencies require compliance with a number
of procedural, documentary, fee payment and other similar provisions during the patent application
process. The Company employs a reputable law firm and other professionals to help it comply, and
in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in
accordance with the applicable rules. However, there are situations in which non-compliance can
result in abandonment or lapse of the patent or patent application, resulting in partial or complete
loss of patent rights in the relevant jurisdiction. In such an event, the Company’s competitors might
be able to enter the market with a therapeutic product that is a copy of or highly similar to one or
more of the affected product candidates and such a circumstance would have a material adverse
effect on its business.
Patents could be found invalid or unenforceable if challenged in court
If the Company and/or one of the Company’s licensing partners initiated legal proceedings against a
third party to enforce a patent covering one of its product candidates, the defendant could
counterclaim that the patent covering its product candidate is invalid and/or unenforceable. In patent
litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are
commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several
statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an
unenforceability assertion could be an allegation that someone connected with prosecution of the
patent withheld relevant information from the USPTO, or made a misleading statement, during
prosecution. Third parties may also raise similar claims before administrative bodies in the United
States or abroad, even outside the context of litigation. Such mechanisms include reexamination, post
grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such
proceedings could result in revocation or amendment to the Company’s patents in such a way that
they no longer cover the Company’s product candidates. The outcome following legal assertions of
invalidity and unenforceability is unpredictable. With respect to the validity question, for example,
the Company cannot be certain that there is no invalidating prior art, of which the Company and the
patent examiner were unaware during examination. If a defendant were to prevail on a legal assertion
of invalidity and/or unenforceability, the Company would lose at least part, and perhaps all, of the
patent protection on its product candidates. Such a loss of patent protection would have a material
adverse impact on its business
Adequate prevention of disclosure of trade secrets and other proprietary information
The Company relies on trade secrets to protect the Company’s proprietary technologies, especially
where it does not believe patent protection is appropriate or obtainable. However, trade secrets are
difficult to protect. The Company relies in part on confidentiality agreements with its employees,
consultants, outside scientific collaborators, sponsored researchers, contract manufacturers, vendors
and other advisors to protect the Company’s trade secrets and other proprietary information. These
agreements may not effectively prevent disclosure of confidential information and may not provide
an adequate remedy in the event of unauthorised disclosure of confidential information.
58
Any party with whom the Company has executed such an agreement may breach that agreement and
disclose its proprietary information, including its trade secrets, and the Company may not be able to
obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is
unpredictable. In addition, some courts inside and outside the United States are less willing or
unwilling to protect trade secrets. If any of the Company’s trade secrets were to be independently
developed by a competitor, the Company would have no right to prevent them, or those to whom
they disclose such trade secrets, from using that technology or information to compete with the
Company. If any of the Company’s trade secrets were to be unlawfully disclosed to or independently
developed by a competitor or other third-party, its competitive position would be harmed.
Protection of intellectual property rights throughout the world
Filing, prosecuting and defending patents on product candidates in all countries throughout the world
would be prohibitively expensive, and its intellectual property rights in some countries outside the
United States can be less extensive than those in the United States. In addition, the laws of some
foreign countries do not protect intellectual property rights to the same extent as federal and state
laws in the United States. Consequently, the Company may not be able to prevent third parties from
practicing its inventions in all countries outside the United States, or from selling or importing
therapeutic products made using its inventions in and into the United States or other jurisdictions.
Competitors may use its technologies in jurisdictions where it has not obtained patent protection to
develop its own therapeutic products and further, may export otherwise infringing therapeutic
products to territories where it has patent protection, but enforcement is not as strong as that in the
United States. These therapeutic products may compete with the Company’s therapeutic products and
its patents or other intellectual property rights may not be effective or sufficient to prevent them from
competing with the Company.
Many companies have encountered significant problems in protecting and defending intellectual
property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain
developing countries, do not favour the enforcement of patents, trade secrets and other intellectual
property protection, particularly those relating to biotechnology and/or pharmaceutical products,
which could make it difficult for the Company to stop the infringement of its patents or marketing of
competing products in violation of its proprietary rights generally. Proceedings to enforce the
Company’s patent rights in foreign jurisdictions could result in substantial costs and divert its efforts
and attention from other aspects of its business, could put its patents at risk of being invalidated or
interpreted narrowly and its patent applications at risk of not issuing and could provoke third parties
to assert claims against the Company. The Company may not prevail in any lawsuits that it initiates
and the damages or other remedies awarded, if any, may not be commercially meaningful or
represent acceptable compensation. Accordingly, the Company’s efforts to enforce its intellectual
property rights around the world may be inadequate to obtain a significant commercial advantage
from the intellectual property that it develops or licences to strategic partners.
Information technology systems and infrastructure face certain risks, including cybersecurity and
data storage risks
In the ordinary course of business, the Company collects, stores and transmits confidential
information, and it is critical that it does so in a secure manner in order to maintain the integrity of
such confidential information. The Company’s information technology systems are potentially
vulnerable to security breaches from inadvertent actions by the Company’s employees, partners,
vendors, or from attacks by malicious third parties. Maintaining the secrecy of the Company’s trade
secrets is important to its competitive business position. While the Company has taken appropriate
steps to protect such information, there can be no assurance that its efforts will prevent service
interruptions or security breaches in its systems or the unauthorised or inadvertent wrongful access
or disclosure of confidential information that could adversely affect the Company’s business
operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach
59
of its security measures or the accidental loss, inadvertent disclosure, unapproved dissemination or
misappropriation or misuse of trade secrets, proprietary information, or other confidential
information, whether as a result of theft, hacking, or other forms of deception, or for any other cause,
could enable others to produce competing products, use the Company’s proprietary technology
and/or adversely affect its business position. Further, any such interruption, security breach, loss or
disclosure of confidential information could result in financial, legal, business, and reputational harm
to the Company and could have a material effect on its business, financial position, results of
operations and/or cash flow.
Computing resources may reside outside of its direct physical control and contain confidential
information
For practical reasons the Company may choose to house some of its own computer installations in
dedicated third party hosting facilities or employ preconfigured computer hardware from third-party
providers. These computing resources by their nature will contain electronic records containing
confidential information including trade secrets associated with the Company’s drug discovery
platform, designs of potential product candidates, and other operational information. Although all
such information is stored in encrypted form, an accidental disclosure of an encryption key or
passphrase could lead to potential exposure of this information to third parties. Furthermore, an
unknown software issue or other unexpected technical problem could potentially weaken the
encryption to a sufficient extent for a third-party with sufficient technical know-how and computing
resources to break the encryption. Exposure of the electronic information contained in the Company’s
computing resources could enable others to produce competing therapeutic products, use the
Company’s proprietary technology and/or adversely affect its business position.
Risks Related to the Company’s Operations
Key employees, consultants and advisers
The Company is highly dependent on principal members of its executive team and key employees
listed under “Directors, senior management and employees” located elsewhere in this document, the
loss of whose services may adversely impact the achievement of the Company’s objectives. While the
Company has entered into employment agreements with each of its executive officers, any of them
could leave the Company’s employment at any time. Recruiting and retaining other qualified
employees, consultants and advisers for the Company’s business, including scientific and technical
personnel, will also be critical to the Company’s success. There is currently a shortage of skilled
executives in the Company’s industry, which is likely to continue. As a result, competition for skilled
personnel is intense and the turnover rate can be high. The Company may not be able to attract and
retain personnel on acceptable terms given the competition among numerous pharmaceutical,
biotechnology, and other technology companies for individuals with similar skill sets. In addition,
failure to succeed in preclinical or clinical studies may make it more challenging to recruit and retain
qualified personnel. The inability to recruit or loss of the services of any executive, key employee,
consultant or adviser may impede the progress of the Company’s research, development and
commercialisation objectives.
Organisational expansion
As of 31 March 2015, the Company had fifteen full-time employees. As the Company matures and
expands its organisation, it expects to expand its full-time employee base and to hire more
consultants and contractors. The Company also expects to combine its two locations into a new single
site that will include the preparation and/or construction of new laboratory facilities. The Company’s
management may need to divert a disproportionate amount of its attention away from its day-to-day
activities and devote a substantial amount of time to managing these growth activities including
recruitment and hiring. It may not be able to effectively manage the expansion of its operations and
infrastructure, which may result in weaknesses in its infrastructure, operational mistakes, loss of
business opportunities, loss of employees and reduced productivity among remaining employees. The
60
Company’s expected growth could require significant capital expenditures or result in significant
delays thereby impacting other projects, such as the development of additional product candidates.
If the Company’s management is unable to effectively manage the Company’s growth, its expenses
may increase more than expected, its ability to generate and/or grow revenues could be reduced, and
the Company may not be able to implement its business strategy in a timely fashion. The Company’s
future financial performance and its ability to commercialise product candidates and compete
effectively will depend, in part, on its ability to effectively manage any future growth.
Misconduct or other improper activities
The Company is exposed to the risk of fraud or other misconduct by its employees, principal
investigators, consultants and commercial partners. Misconduct by these parties could include
intentional failures to:
•
comply with the regulations of the FDA, EMA and non-US regulators;
•
provide accurate information to the FDA, EMA and non-US regulators;
•
comply with healthcare fraud and abuse laws and regulations in the United States and abroad;
•
report financial information or data accurately; or
•
disclose unauthorised activities to us.
In particular, sales, marketing and business arrangements in the healthcare industry are subject to
extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and
other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer incentive programmes and other
business arrangements. Such misconduct could also involve the improper use of information
obtained in the course of clinical studies, which could result in regulatory sanctions and cause serious
harm to the Company’s reputation. The Company has adopted a code of conduct applicable to all of
its employees, but it is not always possible to identify and deter employee misconduct, and the
precautions the Company takes to detect and prevent this activity may not be effective in controlling
unknown or unmanaged risks or losses or in protecting the Company from governmental
investigations or other actions or lawsuits stemming from a failure to comply with these laws or
regulations. If any such actions are instituted against the Company, and the Company is not successful
in defending itself or asserting its rights, those actions could have a significant impact on its business,
including the imposition of significant fines or other sanctions.
Compliance with environmental, health and safety laws and regulations
The Company is subject to numerous environmental, health and safety laws and regulations,
including those governing laboratory procedures and the handling, use, storage, treatment and
disposal of hazardous materials and wastes. The Company’s operations involve the use of hazardous
and flammable materials, including chemicals and biological materials. Its operations also produce
hazardous waste products. The Company generally contracts with third parties for the disposal of
these materials and wastes. The Company cannot eliminate the risk of contamination or injury from
these materials. In the event of contamination or injury resulting from its use of hazardous materials,
the Company could be held liable for any resulting damages, and any liability could exceed the
Company’s resources. It also could incur significant costs associated with civil or criminal fines and
penalties.
Although the Company maintains workers’ compensation insurance to cover it for costs and expenses
that may incur due to injuries to its employees resulting from the use of hazardous materials or other
work-related injuries, this insurance may not provide adequate coverage against potential liabilities.
In addition, the Company may incur substantial costs in order to comply with current or future
environmental, health and safety laws and regulations. These current or future laws and regulations
61
may impair the Company’s research, development or production efforts. Failure to comply with these
laws and regulations also may result in substantial fines, penalties or other sanctions.
As the Company grows it is likely that additional permits, consents and regulations will apply to the
expanded activities of the Company which may include, inter alia, broader preclinical testing
capabilities. The Company may not immediately qualify for such permits or consents and may never
do so, thus potentially curtailing the Company’s potential for growth. The Company may discover the
need for a relevant permit or consent for an activity it is performing which may then be costly or timeconsuming to obtain or the Company may fail to maintain the necessary standards to renew a
particular permit or consent, either of which may materially affect its business.
Transition to publicly quoted company
The consequence of the Company becoming a publicly quoted company whose shares are admitted
to trading on AIM is that it will require some changes in operations or controls, increased awareness
of the requirements of being a publicly quoted company and a requirement to ensure that staff satisfy
a number of new requirements, including the AIM Rules, disclosure and financial reporting
requirements and enhanced corporate governance. While the current Board will make every effort to
successfully manage the transition, there can be no assurance that the Company will be able to
successfully manage the transition, and its failure to do so could have a material adverse effect on the
Company’s business, financial condition and/or operating or financial results.
Unfavourable global economic conditions
The Company’s results of operations could be adversely affected by general conditions in the global
economy and in the global financial markets. The recent global financial crisis caused extreme
volatility and disruptions in the capital and credit markets. A severe or prolonged economic
downturn, such as the recent global financial crisis, could result in a variety of risks to the Company’s
business, including, weakened demand for the Company’s product candidates and the Company’s
ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining
economy could also strain the Company’s third party suppliers, possibly resulting in supply
disruption, or disrupt the work of third-party CROs. Any of the foregoing could harm the Company’s
business and the Company cannot anticipate all of the ways in which the current economic climate
and financial market conditions could materially and adversely impact the Company’s business.
Natural disasters and other catastrophic events
Earthquakes or other natural disasters could severely disrupt the Company’s operations, and have a
material adverse effect on its business, results of operations, financial condition and prospects. If a
natural disaster, power outage or other detrimental event, whether man-made or natural in origin,
occurred that prevented the Company from using all or a significant portion of its headquarters and/or
laboratory facilities, that damaged critical infrastructure, such as the manufacturing facilities of thirdparty suppliers manufacturers, or partners, or that otherwise disrupted operations, it may be difficult
or, in certain cases, impossible for the Company to continue the Company’s business for a substantial
period of time which could materially and adversely impact its business.
Risks Relating to the Company’s Securities
Electronic settlement requirements
Due to the requirements for restrictive legends to be placed on the Common Shares under Category
3 of Regulation S, all Common Shares will be held in certificated form from Admission. The London
Stock Exchange is in the process of implementing Article 3(2) of CSDR requiring where transactions
in transferable securities take place on a trading venue, such as AIM, the relevant securities should
be recorded in book entry form. However, as of the date of this document, a mechanism has not yet
been established, and there is a possibility that, if no mechanism is implemented by 1 June 2015, AIM
may require the Common Shares of the Company to be suspended from trading. Following the
62
expiration of the Compliance Period or the implementation of an electronic settlement mechanism of
“Regulation S, Category 3 Securities”, the Common Shares held in certificated form should, at each
holder’s option, and subject to such holder providing the Company’s registrars with certain
certifications and documentation, be eligible to be settled in CREST in the form of Depository
Interests (“DIs”) which facilitate trading and settlement of shares of non-UK companies in CREST. DIs
are uncertificated “mirror image” securities constituted under English law representing the underlying
shares.
Investor influence over the Company
The Company’s founders and executive officers, Adityo Prakash, Eniko Fodor and David Kita will
beneficially own 80,687,803 Common Shares, or approximately 53.9 per cent. of the Company
following Admission. They will have the power to exert considerable influence over the Company’s
actions and matters which require Shareholder approval, which will limit the ability of other
Shareholders to influence the Company’s actions.
Currency fluctuations
The Common Shares will be settled in pounds sterling. All amounts received from the Placing will be
in pounds sterling and, net of fees and expenses, are intended to be converted into US dollars by
Cenkos before transmission to the Company. The Company’s functional currency is US dollars. As a
result, the total net proceeds (after conversion) received by the Company may differ from the amount
anticipated in this document.
The Company’s assets are denominated in US dollars and the Company’s financial information is
presented in US dollars. Returns of capital and, if paid, dividends will be denominated in sterling. The
Company does not currently engage in any currency hedging. The Company may in the future hedge
some of its exposure to non-US dollar currencies through forward foreign exchange contracts or
through other financial products, thought it currently has no plans to do so. While hedging may
reduce currency risk, it is not possible to hedge fully or perfectly against currency fluctuations and
the Company may also elect to forego hedging to save the attendant expense.
Taxation change
Any change in the Company’s tax status or in taxation legislation could affect the Company’s ability
to provide returns to Shareholders. Statements in this document concerning the taxation of investors
in Common Shares are based on current tax law and practice which are subject to change. The
taxation of an investment in the Company depends on the individual circumstances of investors.
Volatility of share price
The subsequent market price of the shares in the Common Shares may be subject to wide fluctuations
in response to many factors, including those referred to in this Part II, as well as stock market
fluctuations and general economic conditions or changes in political sentiment that may substantially
affect the market price of the shares in the Common Shares irrespective of the Company’s actual
financial, trading or operational performance. These factors could include the performance of the
Company, large purchases or sales of the shares in the Common Shares (or the perception that such
sales may occur, as, for example in the period leading up to the expiration of the various lock-in
agreements to which certain Shareholders are subject), legislative changes and market, economic,
political or regulatory conditions.
Liquidity of Common Shares
Prior to Admission, there has been no public market for the Common Shares. Admission to AIM
should not be taken as implying that a liquid market for the Common Shares will either develop or
be sustained following Admission. The liquidity of a securities market is often a function of the
volume of the underlying shares that are publicly held by unrelated parties. If a liquid trading market
63
for the Common Shares does not develop, the price of the Common Shares may become more
volatile and it may be more difficult to complete a buy or sell order for Common Shares.
The Common Shares will not be admitted to the Official List
Common Shares will be traded on AIM and will not be admitted to the Official List or admitted to
trading on the London Stock Exchange’s main market for listed securities. The rules of AIM are less
demanding than those of the Official List and an investment in Common Shares traded on AIM may
carry a higher risk than an investment in shares admitted to the Official List. In addition, the market
in Common Shares on AIM may have limited liquidity, making it more difficult for an investor to
realise its investment than might be the case in respect of an investment in shares which are quoted
on the London Stock Exchange’s main market for listed securities. Investors should therefore be aware
that the market price of the Common Shares may be more volatile than the market prices of shares
quoted on the London Stock Exchange’s main market for listed securities and may not reflect the
underlying value of the net assets of the Company. For these and other reasons, investors may not be
able to sell at a price which permits them to recover their original investment.
Risk Relating to US Incorporated Companies
Application of US Law
The Company is incorporated under the laws of the State of Delaware, United States. Accordingly, a
significant amount of the legislation in England and Wales regulating the operation of companies
does not apply to the Company. In addition, the laws of the State of Delaware will apply in respect
to the Company and these laws may provide for mechanisms and procedures that would not
otherwise apply to companies incorporated in England and Wales. The rights of Shareholders are
governed by Delaware law and by the Company’s Certificate of Incorporation and Bylaws, which may
differ from the typical rights of shareholders in the UK and other jurisdictions.
The City Code
The City Code does not currently apply to the Company and therefore a takeover of the Company
would be unregulated by the UK takeover authority. The Certificate of Incorporation of the Company
contains certain takeover protections designed to ensure that any person who, together with other
persons acting in concert with such person, acquires 30 per cent. or more of all the securities of the
Company or, if they already hold 30 per cent. or more but not more than 50 per cent. of such
securities, acquires any additional securities, will be required to purchase the shares of all other
shareholders who so request unless the Board otherwise determines. These provisions will not,
however, provide the full protections afforded by the City Code. The relevant provisions of the
Certificate of Incorporation are summarised in paragraph 4 of Part VI of this document. The
protections afforded in relation to potential takeovers are contained in the Company’s Certificate of
Incorporation and are therefore subject to amendment by the Shareholders.
Enforcement of judgments
The Company is incorporated under the laws of the State of Delaware and its assets are primarily
located in the US. There is no convention or treaty between the US and the UK governing the
recognition and enforcement of judgments. A US judgment cannot be automatically enforced in the
UK or a UK judgment in the US. The only way to enforce a US judgment in the UK is to treat the US
judgment as a debt and make a claim in court. A UK judgment may be enforced against a US
company in the UK, provided the US company has assets in the UK.
Restrictions on transfer under the US Securities Act
The Common Shares have not been, and will not be, registered under the US Securities Act. The
Common Shares are being offered only to non-US persons (as defined under Regulation S
promulgated under the US Securities Act) outside the United States in transactions exempt from the
64
registration requirements of the US Securities Act in reliance on Regulation S. Accordingly, the
Common Shares are a “restricted security” as defined in Rule 144 under the US Securities Act. The
Common Shares may not be offered, sold or delivered in the United States or to, or for the account
or benefit of, any US Person, unless the transfer is registered under the US Securities Act or an
exemption from the registration requirements is available, including a transaction specified by
Regulation S. Only the Company is entitled to register the Common Shares under the US Securities
Act, and the Company has no obligation to do so. The Company can give no assurances that an
exemption from registration will be available to any subscribers for or purchasers of Common Shares.
The share certificates issued in respect of the Common Shares will bear a legend describing
restrictions on transfer to US Persons and prohibiting hedging transactions in the Common Shares
unless in compliance with the US Securities Act. Each subscriber for Common Shares, by subscribing
for such Common Shares, agrees to reoffer or resell the Common Shares only pursuant to registration
under the US Securities Act or in accordance with the provisions of Regulation S or pursuant to
another available exemption from registration, and agrees not to engage in hedging transactions with
regard to such securities unless in compliance with the US Securities Act. The above restrictions
severely restrict purchasers of Common Shares from reselling the Common Shares in the US or to a
US Person. The Common Shares will not be admitted for trading on any US securities exchange in
connection with the Placing. For further information regarding the significant restrictions on transfer
applicable to the Common Shares, please see Part VII of this document.
65
PART III
PATENT ATTORNEY’S REPORT
King & Spalding LLP
1700 Pennsylvania Ave, NW
Suite 200
Washington, D.C. 20006-4707
Tel: +1 202 737 0500
Fax: +1 202 626 3737
www.kslaw.com
The Directors
Verseon Corporation
48820-100B Kato Road
Fremont, CA 94538
The Directors
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London
EC2R 7AS
1 May 2015
Dear Sirs,
Re: Report on Verseon’s IP Assets
We have prepared this report for the directors of Verseon Corporation (“Verseon”) and for Verseon’s
nominated adviser, Cenkos Securities plc, for inclusion in the admission document issued by Verseon
in connection with the admission of Verseon’s entire issued and to be issued ordinary share capital to
trading on AIM, a market operated by the London Stock Exchange. Throughout this report, reference
to the “Verseon” includes Verseon Corporation and its subsidiaries.
1
Executive Summary
Verseon is a pharmaceutical company specializing in the development of novel small molecule
drugs. Verseon’s intellectual property is divided into two categories: 1) a computational-based drug
discovery platform (“DDP”) that allows, for a given therapeutic target, the design and testing of new
chemical candidates (“NCC”s) entirely in simulation, without the need for chemical synthesis, and
(2) the new chemical candidates identified by the drug discovery platform. Verseon’s strategy for
protection of its DDP is to seek patent protection for novel computational techniques that have broad
application while keeping strategic details of its technology as trade secrets. Verseon places a high
value on the protection of its NCCs and employs a broad drug patent strategy for this purpose.
Verseon has several published patents and pending patent applications and two federal trademarks
applications pending in the United States as well as several trademarks in other countries. Verseon is
also the owner of common law rights in the Verseon trademark, trade name, and logo. At present,
Verseon has not licensed any of its IP to a third party.
We are not aware of any challenge by any third party to any of Verseon’s patents, trademarks, or
copyrights, nor are we aware of any assertion against Verseon of infringement of a third-party’s IP.
Similarly, Verseon is not aware of any infringement of any of Verseon’s patents, nor any challenge by
any third party to any of Verseon’s patents or patent applications. Verseon is not aware of any patent
or other publication that it believes currently poses any infringement risk.
66
2
Introduction
2.1
King & Spalding
King & Spalding is an international law firm that represents a broad array of clients, including
half of the Fortune Global 100, with over 850 lawyers in 17 offices in the United States, Europe,
the Middle East, and Asia. The firm’s Intellectual Property Practice Group consists of more than
70 IP professionals, including first chair trial lawyers, business litigators, and scientific
specialists, who have worked in the field as engineers and scientists, as in-house counsel, and
as examiners in the US Patent and Trademark Office. More than 80 per cent. of King &
Spalding’s intellectual property (“IP”) professionals have technical degrees, including a dozen
PhDs in electrical, computer, mechanical, biotech, and chemical engineering. King & Spalding
IP attorneys counsel clients on all aspects of intellectual property protection and enforcement.
Jennifer Burdman, who has been involved in the preparation of this report, is a partner in the
firm’s Washington, D.C. office, where she practices in the Intellectual Property Group. Ms.
Burdman regularly counsel clients on a broad range of matters relating to the acquisition,
protection, licensing, and enforcement of intellectual property rights. Ms. Burdman graduated
from Dartmouth College with an A.B. in biochemistry and molecular biology and received her
J.D. from Fordham University School of Law. She is admitted to the New York and District of
Columbia bars, as well as the US Court of Appeals for the Federal Circuit and the District Courts
for the Southern and Eastern Districts of New York and the Eastern District of Michigan. Ms.
Burdman is registered to practice before the US Patent and Trademark Office.
William Sauers, who has also been involved in the preparation of this report, is a partner in the
firm’s Washington, D.C. office, where he practices in the Intellectual Property Group. Mr.
Sauers has extensive trial experience including numerous litigations in patent infringement,
trade secret misappropriation, copyright infringement, trademarks, and contractual matters
involving intellectual property rights. Mr. Sauers received his undergraduate degree in
international business at King’s College and his J.D. from Villanova University School of Law.
Prior to entering private practice, Mr. Sauers was an attorney with the US Patent and Trademark
Office.
2.2
IP Report
For the purpose of paragraph (a) of Schedule Two of the AIM Rules for Companies, we declare
that we are responsible for this report, which forms part of the Admission Document, and that
we have taken all reasonable care to ensure that the information contained in this report is, to
the best of our knowledge and belief, in accordance with the facts and contains no omission
likely to affect its import. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone for any purpose other than that stated above, for our work, for this
report, or for any opinions which we have formed.
This report gives factual details of IP assets which are owned by Verseon and which Verseon
believes are relevant to its core technology and preclinical programs. In addition to IP assets
reported here, Verseon owns additional IP assets but these are either not yet published and
therefore remain confidential and cannot be reported here, or they are not considered by
Verseon to be material to Verseon’s technology.
3
Verseon’s Patent and Trademark Policy
3.1
Drug Discovery Platform (DDP) IP Strategy
Verseon’s strategy, as we understand it, is to patent those technological advancements that have
broad application. Certain other aspects of Verseon’s DDP are protected as trade secrets.
Verseon’s policy is to have all active research on technology associated with the DDP regularly
reviewed by an IP committee comprising members of the executive management team and
67
scientists representing the technical disciplines connected to the DDP. Verseon consults
regularly with its IP advisors, including the law firm of Davis Wright Tremaine LLP, to
determine, in accordance with Verseon’s IP strategy, which new inventions are to be patented
and which are to be protected as trade secrets.
In accordance with its policy, Verseon has not sought patent protection for certain aspects of
its DDP on the basis that the required public disclosure of the underlying operating principles
and algorithms of the software would be counterproductive.
3.2
New Chemical Candidates (NCC) IP Strategy
Verseon employs its DDP to invent NCCs for drug development programs. As part of these
programs, Verseon invents, synthesizes, and then tests and optimizes compound designs to
establish the appropriate properties for human use using standard laboratory methods
augmented by Verseon’s computational platform. Patent protection for novel drug molecules is
typically sought after value is observed in the laboratory.
Verseon conducts regular reviews of known chemical entities and applies chemical structure
searches to identify possible infringements of its patent portfolio. Any potential infringement
that is identified is forwarded to Verseon’s IP advisors for further evaluation. To date, no such
potential infringement has been identified by the Company.
3.3
Trademarks and Copyrights Strategy
Verseon’s overall strategy is to project a unique global brand that includes trademarks, trade
names, and copyrights. Marks and copyrights are registered and internet domain names are
reserved as deemed appropriate by Verseon.
4
Intellectual Property Assets
What follows is a list of the Intellectual Property rights solely or jointly owned by Verseon, which are
deemed material by Verseon to Verseon’s core technology and to Verseon’s drug programs. The
patents and patent applications are grouped as patent families (i.e., cases claiming priority from
common priority filings). It should be noted that any one family may include patent applications
which claim more than one invention, which means that the individual patent application may need
to be divided (without loss of priority) during prosecution in order to properly protect the different
inventions. Thus, one application may lead to two or more patents in the same family.
The published patents and pending patent applications identified below are currently prosecuted and
maintained by the law firm of Davis Wright Tremaine LLP. The bibliographic details of Verseon’s assets
in this Report have been obtained from Davis Wright Tremaine LLP’s database as well as from publicly
available information. Verseon is not aware of any infringement of any of Verseon’s patents, nor any
challenge by any third party to any of Verseon’s patents or patent applications.
This Report is not intended as a substitute for reviewing the publicly available prosecution files that,
in the case of the US Patent & Trademark Office (“USPTO”) and European Patent Office (“EPO”), are
available online. Reports from the Patent Cooperation Treaty (“PCT”) procedure are also available
online from the World Intellectual Property Organization (“WIPO”). The patent filing numbers and
dates have been checked for correctness against these publically available databases. The status of
granted patents and pending applications have been checked against the online registers of the
appropriate countries to ensure that any necessary maintenance fees have been paid. For all US
patents and patent applications, it has been confirmed by reference to the online database
maintained by the USPTO that assignments to Verseon have been recorded at the USPTO. Additional
information on each of the IP Assets listed below, including more detailed information on
prosecution, can be obtained in the publically available files available online.
68
This Report should not be relied upon as being a comprehensive or formal legal opinion in relation
to any matter referred to in it. It has been prepared as a general review by King & Spalding of the
Reviewed Information and should not be treated as a substitute for specific legal advice concerning
specific situations or concerns. Other than as expressly indicated herein as related to facts contained
in certain public databases, we have not independently verified the accuracy or completeness of facts
or the basis of opinions supplied to us. We have assumed that all opinions, beliefs, and views
expressed by and in relation to Verseon are honestly held by them and when made were and continue
to be based on reasonable assumptions. Where facts and opinions were supplied orally we have in
some cases relied on this without documentary verification for the purposes of this Report. We have
assumed that the persons to whom we directed or of whom we made enquiries were competent to
answer our queries and that there were no other persons to whom we should have directed or of
whom we should have made enquiries in relation to those issues. We can accept no responsibility for
omissions or inaccuracies in this Report caused by the fact that this information and these documents
were not made available to us. A number of public registries and third party agencies who provide
information filed with these registries exclude liability in many circumstances for any incorrect or
incomplete information which they supply. We accept no responsibility for omissions or inaccuracies
from any searches obtained by us from such registries or agencies and we will not bear the
consequences of any such exclusions of liability.
4.1
Background of the Patent System
Below is a brief outline of the procedures and requirements whereby patents are filed in the
United States and are then subsequently prosecuted on an international basis.
A patent is the grant of a property right to the patentee for a specific duration of time. During
the term of the patent, the patentee is generally given the right to prevent others from making,
using, selling, or offering for sale the claimed invention. A patent however, does not give the
patentee an automatic right to practice the claimed invention, as doing so may still infringe the
patent rights of a third party. In return for the rights of a granted patent, the inventor(s) must
provide a full description of the invention in the patent application, which is ultimately
published and disclosed to the public. This description must be sufficiently detailed for a skilled
person to be able to carry out the invention. In addition to this description, a patent contains
one or more claims. The claims define the scope of invention and in turn, the scope of the
property grant.
A patent is a national right, enforceable only in the country for which it has been granted.
Patent applications are searched and examined by Patent Offices, and the process of patent
examination is known as “prosecution.” In addition to individual country patent offices, there
are a series of international conventions regulate patents internationally. The Patent
Cooperation Treaty (“PCT”) allows applicants to obtain patents in a number of countries
following the filing of a single patent application in one country. A number of European
countries are also signatories to the European Patent Convention (“EPC”), and protection can
be obtained via a centrally operated examination carried out by the European Patent Office
(“EPO”). On grant, the EPC application is transformed into a bundle of national patents in each
of the designated countries, provided certain formalities are complied with, this procedure
being referred to as “validating” the European patent. A European patent can only be enforced
in those EPC states where the validation procedure has been carried out.
Published PCT applications can be viewed on-line at the web-site of WIPO. For PCT
applications, a search is carried out in the international phase by the international searching
authority. In order to continue the application in a specified country, the applicant must take
certain steps at the national or regional patent offices. Those steps, which take the PCT
application into what is referred to as the national phase must be carried out at the latest 30 or
31 months (depending on the country) from the first priority date. The separate national and
69
regional patent applications are then typically searched and examined further by the national
and regional patent offices.
Grant of a patent follows after the applicant for the patent has successfully dealt with all the
objections raised by the examining authority, either by argument, by amendment of claims, or
both. Once a patent is granted it will remain in force for a specified period, subject to payment
of the appropriate renewal fees. Typically, a patent has a term of 20 years from its priority date.
Just because a patent has been granted does not necessarily mean that it is valid and will be
enforced by the court. Details vary from country to country, but in most countries the validity
of the granted patent may be challenged by a third party throughout the life of the patent, on
the grounds for example that it is not new or that it is not inventive.
Ownership of patents is governed by national law. In the US and the UK, the right to apply for
a patent and to have a patent granted belongs in the first instance to the inventor, but by law
or agreement ownership can be transferred either before or after the invention is made.
4.2
Background of the Trademark System
A trademark is a word, name, symbol, or device that is used in trade with goods to indicate the
source of the goods and to distinguish them from the goods of others. A service mark is the
same as a trademark except that it identifies and distinguishes the source of a service rather
than a product. The terms “trademark” and “mark” are commonly used to refer to both
trademarks and service marks.
Trademark rights may be used to prevent others from using a confusingly similar mark, but not
to prevent others from making the same goods or from selling the same goods or services under
a dissimilar mark. In general, a registered trademark carries a presumption of validity,
ownership, and in some countries, use of the mark. Once a mark is registered, the owner can
seek to prevent the use in that nation or territory, without its consent, of identical or similar
marks for identical or similar goods and/or services in circumstances where there would be a
likelihood of confusion. In certain “common law” counties including the UK and the US,
enforceable rights in a mark can also be acquired through use without registration.
Trademark protection is generally obtained by filing applications on a country-by-country
basis, although there are some applications that can provide production in multiple countries.
For example, it is possible to seek registration by way of a European Community trademark
(“CTM”) which confers unitary protection on a trademark throughout the 28 member states of
the European Union. In addition, an international treaty commonly referred to as the Madrid
Protocol permits the owners of trademark applications and/or registrations in the owner’s
‘home’ jurisdiction to seek protection of the same mark for the same goods and/or services in
other member countries without the need to file separate applications directly in each country.
Each extension of protection filed pursuant to the Madrid Protocol, however, is examined as an
application by the individual country pursuant to its law.
Trademark applications typically are examined by national or territorial offices on the basis of
numerous grounds for registration, such as whether the mark is distinctive for the relevant
goods and services and that it is not descriptive (for example, international non-proprietary
names for pharmaceutical compounds), and some countries may require correction of
informalities.
In the majority of European Community member states, national offices will not refuse
registration on the basis of earlier marks, it being left to the owners of earlier rights to lodge
opposition if they wish to prevent registration. The position in many countries outside Europe
(including the US), by contrast, is that the national office will, ex officio, refuse registration of
a mark contained in a later-filed application if it feels that it is in conflict with an earlier-filed
70
application or registration. The applicant can attempt to overcome or obviate the refusal. In
some countries such as the US and Canada, it is necessary to provide evidence of use before
a mark can be registered, although there are exceptions to this requirement for applications
based on foreign application or registrations where the applicant has a bona fide intent to use
the mark in the country.
In most instances, including for UK and CTM Registrations, trademarks are registered for 10
years from filing and may be renewed indefinitely upon payment of a fee, usually for 10-year
terms. In some countries such as the US, the renewal date is calculated from the date of
registration. The US also requires a declaration after six years from registration and each
subsequent 10-year renewal period showing that the mark is in use in US commerce in
connection with each of the goods/services listed in the registration.
Subject to the laws of particular countries, registered trademarks in may be challenged by a
third party before the national trademark offices or courts on numerous bases, including nonuse of the mark, earlier rights, or that the registered mark has become generic or misleading.
5
Summary of Patent Families
5.1
Drug Discovery Platform (DDP) Patent Families
5.1.1 Method and Apparatus for Analysis of Molecular Configurations and Combinations
Applicant/Assignee: Verseon Corporation
Inventors: Eniko Fodor, David Kita, Adityo Prakash
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO.
Patent Family Details:
US Patent No.
8,036,867
PCT No.
PCT/US2004/033816
Europe Application No.
04795035.7
Europe Divisional Appl. No.
11158741.6
India Patent No.
239163
China Patent No.
200480035190.5
Hong Kong Application No.:
06112019.6
Canada Patent No.
2,542,446
Korea Patent No.
10-1129126
Japan Patent No.
4934428
Summary:
This patent family claims priority from a US provisional application (60/511,387) filed
October 14, 2003. A PCT application was filed on October 14, 2004 and published as
WO2005/038429. A continuation application of US Patent No. 8,036,867 was filed on
October 4, 2011 and published as US 2012/0116742 on May 10, 2012. This application
was abandoned on February 8, 2013.
The original US assignment was recorded with the USPTO on January 31, 2005 from
Eniko Fodor, David Kita, and Adityo Prakash to Verseon, LLC. On February 9, 2015 a
Change of Name from Verseon, LLC to Verseon Corporation was recorded with the
USPTO.
The invention disclosed relates to a method and apparatus for determining whether a
biomolecule is a potential lead candidate by using a computational system to compute
71
an affinity function or reaction profile between two or more molecular subsets of a
molecular configuration of the biomolecule or target or both defined by a configuration
dataset.
5.1.2 Lead Molecule Cross-Reaction Prediction and Optimization System
Applicant/Assignee: Verseon Corporation
Inventors: Eniko Fodor, David Kita, Adityo Prakash
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO.
Patent Family Details:
US Patent No.
7,751,988
PCT No.
PCT/US2004/034122
Europe Application No.
04795308.8
India Application No.
1665/CHENP/2006
Hong Kong Application No.
6112020.3
Canada Application No.
2,542,456
Korea Patent No.
10-1229206
Japan Application No.
2011-289786
Japan Divisional Appl. No.
2014-211968
Summary:
This patent family claims priority from a US provisional application (60/511,474) filed
October 14, 2003. A PCT application was filed on October 14, 2004 and published as
WO2005/038618. Previously published Japanese patent application 2006-535357 has
been abandoned.
The original US assignment was recorded with the USPTO on April 7, 2005 from Eniko
Fodor, David Kita, and Adityo Prakash to Verseon. On February 9, 2015, a Change of
Name from Verseon, LLC to Verseon Corporation was recorded with the USPTO.
The invention disclosed relates to methods for predicting and modeling potential crossreactions between a lead candidate biomolecule, known to react with one or more
desired target biomolecules, and a plurality of potential reactant biomolecules.
Disclosed are potential uses for such methods include the characterization of the safety
and efficacy of a potential drug candidates. Also disclosed in this patent family is an
apparatus to perform the methods described.
72
5.1.3 Method and Device for Partitioning a Molecule
Applicant/Assignee: Verseon Corporation
Inventors: Sachin Ahuja, Eniko Fodor, David Kita, Adityo Prakash
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO.
Patent Family Details:
US Application No.
PCT No.
Europe Application No.
India Patent No.
Hong Kong Application No.
Canada Application No.
Korea Patent No.
Japan Patent No.
10/966,041
PCT/US2004/034151
04795331.0
241494
6112018.7
2,542,343
10-1239466
5032120
Summary:
This patent family claims priority from a US provisional application (60/511,189) filed
October 14, 2003. A PCT application was filed on October 14, 2004 and published as
WO2005/038431. India patent application IN3131CHENP2010 filed May 26, 2010 has
been abandoned.
The original US assignment was recorded with the USPTO on June 20, 2005 from Sachin
Ahuja, Eniko Fodor, David Kita, and Adityo Prakash to Verseon. On February 9, 2015, a
Change of Name from Verseon, LLC to Verseon Corporation was recorded with the
USPTO.
The invention disclosed relates to methods for partitioning a molecule into smaller parts
to facilitate faster and more efficient storage, transmission, and processing. The disclosed
methods take into account the nature of processing, as well as constraints due to devices
which store, transmit, and process the molecule.
5.1.4 Method and Apparatus for Analysis of Molecular Combination Based on Computations of
Shape Complementarity Using Basis Expansions
Applicant/Assignee: Verseon Corporation
Inventors: David Kita, Somalee Datta, Adityo Prakash, Eniko Fodor
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO.
Patent Family Details:
US Patent No.
PCT No.
Europe Patent No.
India Patent No.
Hong Kong Application No.
Canada Application No.
France Patent No.
Great Britain Patent No.
Germany Patent No.
Switzerland Patent No.
7,890,313
PCT/US2004/034058
1673626
239161
0.6112015.0
2,542,447
1673626
1673626
1673626
1673626
73
Summary:
This patent family claims priority from a US provisional application (60/511,477) filed
October 14, 2003. A PCT application was filed on October 14, 2004 and published as
WO2005/038452. India divisional patent application IN7098CHENP2009 filed
December 2, 2009 has been abandoned.
The original US assignment was recorded with the USPTO on January 31, 2005 from
David Kita, Somalee Datta, Adityo Prakash, and Eniko Fodor to Verseon, LLC. On
February 9, 2015, a Change of Name from Verseon, LLC to Verseon Corporation was
recorded with the USPTO.
The invention disclosed relates to a computational method to analyze molecular
combinations based on computations of shape complementarity utilizing a basis
expansion representing molecular shapes. The disclosed invention includes a method
and apparatus for determining whether a first molecular subset is a lead candidate for a
target biomolecule.
5.1.5 Method and Apparatus for Analysis of Molecular Combination Based on Computational
Estimation of Electrostatic Affinity Using Basis Expansions
Applicant/Assignee: Verseon Corporation
Inventors: David Kita, Somalee Datta, Adityo Prakash, Eniko Fodor
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO.
Patent Family Details:
US Patent No.
6,970,790
PCT No.
PCT/US2004/033817
Europe Patent No.
1673466
India Patent No.
238886
Hong Kong Application No.
06112016.9
Canada Application No.
2,542,595
France Patent No.
1673466
Great Britain Patent No.
1673466
Germany Patent No.
1673466
Switzerland Patent No.
1673466
Summary:
This patent family claims priority from a US provisional application (60/511,277) filed
October 14, 2003. A PCT application was filed on October 14, 2004 and published as
WO2005/038596. India divisional patent application IN7097CHENP2009 filed
December 2, 2009 has been abandoned.
The original US assignment was recorded with the USPTO on January 31, 2005 from
David Kita, Somalee Datta, Adityo Prakash, and Eniko Fodor to Verseon, LLC. On
February 9, 2015, a Change of Name from Verseon, LLC to Verseon Corporation was
recorded with the USPTO.
The invention disclosed relates to a method and apparatus used to analyze molecular
combinations based on computation of electrostatic affinity using basis expansions
representing charge density and electrostatic potential functions as well as an apparatus
for performing said method.
74
5.2
New Chemical Candidates (NCC) Patent Families
5.2.1 Multisubstituted Aromatic Compounds as Inhibitors of Thrombin
Applicant/Assignee: Verseon Corporation
Inventors: Somalee Datta, Son Minh Pham, Kevin Michael Short, David Charles Williams
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO.
Patent Family Details:
US Application No.
13/630,201
PCT No.
PCT/US2011/030585
Europe Application No.
11766507.5
Hong Kong Application No.
13109348.5
China Patent Pub No.
CN102918034A
Canada Application No.
CA 2829790
Israel Application No.
222019
Russian Federation Appn No.
2012146194
Japan Application No.
2013502815
Brazil Application No.
BR112012024678-0
Australia Application No.
2011238616
New Zealand Patent No.
603156
New Zealand Divisional App No.
700332
India Application No.
9232/DELNP/2012
Mexico Application No.
MX2012/011380
Singapore Application No.
2012/07089-2
South Africa Application No.
2012/08057
South Korea Application No.
10-2012-7028509
Summary:
This patent family claims priority from a US provisional application (61/319,175) filed
March 30, 2010. A PCT application was filed on March 30, 2011 and published as
WO2011/126903.
The original US assignment was recorded with the USPTO on April 9, 2013 from
Somalee Datta, Son Minh Pham, Kevin Michael Short, and David Charles Williams to
Verseon Corporation.
The invention disclosed relates to a class of multisubstituted aromatic compounds
including substituted pyrazolyl-containing and substituted triazolyl-containing
compounds, that are inhibitors of thrombin. In addition to anti-coagulation applications,
other potential treatment applications disclosed include cancer, neuropathic pain, and
fibrosis.
75
5.2.2 Dual Inhibitor Compounds and Methods of Use Thereof
Applicant/Assignee: Verseon Corporation
Inventors: Kevin Michael Short, Son Minh Pham, David Charles Williams
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO.
Patent Family Details:
PCT No.
PCT/US2012/57951
Summary:
This patent family claims priority from a US provisional application (61/540,653) filed
September 29, 2011. A PCT application was filed on September 28, 2012 and published
as WO2013/049591.
The invention disclosed includes substituted triazolyl-containing compounds that inhibit
both thrombin and Factor Xa. Also disclosed are potential therapeutic uses for such
compounds.
5.2.3 Halogenopyrazoles as Inhibitors of Thrombin
Applicant/Assignee: Verseon Corporation
Inventors: Kevin Michael Short, Son Minh Pham, David Charles Williams
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO.
Patent Family Details:
PCT No.
PCT/US2014/000058
PCT No.
PCT/US2014/030937
Summary:
This patent family claims priority from two US provisional applications (61/789,358 and
61/899,588) filed March 15, 2013 and November 4, 2013, respectively. A PCT
application was filed on March 17, 2014 and published as WO2014/149139. A second
copy of the PCT application was filed on March 18, 2014 and published as
WO2014/146059. Due to inclement weather on the date of filing, a second copy of the
PCT application was filed in order to ensure timely receipt of the application by the PCT
receiving office. Verseon intends to pursue protection based on WO2014/149139.
The invention disclosed includes substituted halogenopyrazolyl-containing compounds
that are inhibitors of thrombin with therapeutic potential. Also disclosed are potential
therapeutic uses for such compounds.
76
5.2.4 Multisubstituted Aromatic Compounds as Serine Protease Inhibitors
Applicant/Assignee: Verseon, Inc.
Inventors: Kevin Michael Short, Son Minh Pham, David Charles Williams, David Ben
Kita
Right of ownership: By employment or other contract of the inventors. A confirmatory
assignment has been recorded with the USPTO from Kevin Michael Short, Son Minh
Pham and David Charles Williams to Verseon, Inc. On March 5, 2015, a Change of
Applicant’s Information was submitted to the International Bureau of WIPO, changing
the name from Verseon, LLC to Verseon Corporation. On March 11, 2015, the
International Bureau of WIPO issued a corresponding Notification of the Recording of a
Change. On March 30, 2015 an additional assignment was recorded with the USPTO
from Kevin Michael Short, Son Minh Pham, David Charles Williams, and David Ben Kita
to Verseon Corporation.
Patent Family Details:
PCT No.
PCT/US2014/030853
Summary:
This patent family claims priority from a US provisional application (61/789,358) filed
March 15, 2013. A PCT application was filed on March 17, 2014 and published as
WO2014/145986.
The invention disclosed relates to novel substituted pyridone-pyrazolyl-containing
compounds that are inhibitors of thrombin with therapeutic potential for anticoagulation
and the potential treatment of other disorders. The invention disclosed also relates to
multiple compounds comprising different chemotypes shown to be inhibitors of
kallikreins, a family of serine proteases with potential therapeutic application to
degenerative ocular disorders such as diabetic macular oedema.
5.2.5 Additional Patent Applications
Verseon continues to discover, develop, and protect compounds identified through its
DDP. Verseon has additional patent applications filed in the United States and not yet
published, including provisional patent applications.
6
Summary of Trademarks
Mark
Summary
Verseon
Registered in the European Community (5305982), Canada
(TMA934425), China (5560475), India (1481118), and Japan
(5016361).
Registration is pending in the United States (application 86/145951,
filed December 17, 2013).
Registered in the European Community (5306551), Canada
(TMA834430), China (5560474) , and Japan (5016362).
Registration is pending in India (application 1481117, filed August
23, 2006) and in the United States (application 86/145954, filed
December 17, 2013).
Verseon is also the owner of common law rights in the Verseon trademark and trade name and the
above logo.
77
7
Protection of Know-How & Trade Secrets
Verseon’s policy is to protect certain details of its DDP, such as the computational and molecular
modeling algorithms and the computer code for implementing the DDP, as confidential know-how
or trade secrets. Verseon has indicated that it takes reasonable measures to secure and protect its
confidential know-how and trade secrets. For example: all methodology, software code, and research
data is kept strictly confidential; all Verseon employees, consultants, and representatives are required
to sign confidentiality agreements and are regularly instructed on Verseon’s policies regarding
confidentiality and security; access to Verseon’s trade secrets is provided solely on a need-to-know
basis, protected with multiple levels of security; all DDP computer source code is stored on secure
servers owned and operated by Verseon; publication of any DDP code outside the company is
prohibited; and audits of the DDP source code are regularly employed to ensure compliance to these
policies.
There can be no assurance that Verseon can absolutely protect its right to unpatented proprietary
know-how and trade secrets or that others will not independently develop substantially equivalent or
superior technology. Although Verseon has entered into confidentiality agreements with its
consultants, representatives, and employees, there can be no assurance that the confidentiality of
proprietary know-how and trade secrets will be preserved.
8
Competitive Landscape
Discovering a new drug to treat or cure some biological condition is a lengthy and expensive process.
A goal of a drug discovery process is to identify and characterize a chemical compound or ligand
biomolecule, i.e., binder that affects the function of one or more other biomolecules (a drug “target”).
The target molecule is typically what is known as a disease-related target protein or nucleic acid for
which it is desired to affect a change in function, structure, and/or chemical activity in order to aid
in the treatment of a patient disease or other disorder.
The drug discovery process itself typically includes four different subprocesses: (1) target validation;
(2) lead generation/optimization; (3) preclinical testing; and (4) clinical trials and approval. Rational
drug design generally uses structural information about drug targets (structure-based) and/or their
natural ligands (ligand-based) as a basis for the design of effective lead candidate generation and
optimization. It is desirable in the drug discovery process to identify quickly and efficiently the
optimal states or configurations, i.e., binding modes and binding energy, of two molecules or parts of
molecules. Efficiency is especially relevant in the lead generation and lead optimization stages for a
drug discovery pipeline, where it may be desirable to accurately predict the binding mode and
binding affinity for possibly millions of potential target-ligand molecular combinations, before
submitting promising candidates to further analysis.
Many companies or institutions are engaged in the sale or development of computational molecular
modeling software / tools for potential use in drug discovery efforts. For example, Verseon is aware of
the following companies/institutions and their software packages: Accelrys (LigandFit), Tripos /
Certara (Surflex), BioSolveIT (Flexx), MolSoft (ICM), Schrodinger (Glide), the Cambridge
Crystallographic Data Centre (GOLD), and the Scripps Institute (AutoDock). Verseon believes that
most of these companies / institutions commercially license their molecular modeling software
packages and to Verseon’s knowledge do not use them to drive their own drug discovery programs.
AutoDock from the Scripps Institute is issued under a general purpose license for non-commercial
use.
Verseon believes that its current therapeutic candidates, additional therapeutic candidates in
development, and proprietary processes for generating those candidate compounds do not infringe
the intellectual property rights of any third parties, including those identified above. However, it is
impossible to be aware of all third party intellectual property. No assurance can be given that third
parties will not in the future claim rights in or ownership of the patents and other proprietary rights
from time to time held by Verseon. As discussed in more detail below, based on a review of the
78
relevant references it has identified, including those references cited during prosecution of the
company’s patent applications, Verseon is not aware of any patent or other publication that it believes
poses any infringement risk.
The intellectual property on which the Verseon’s business is based is a combination of granted
patents, pending patent applications, and proprietary know-how. The ability of Verseon’s products
and services to compete effectively with those developed by other companies depends, amongst
other things, on the Company’s ability to obtain, maintain and enforce valid patents and other
intellectual property rights. No assurance can be given that any patent application will proceed to
grant or that any granted patent will be enforceable. Even if enforceable, such patents may not be
sufficiently broad in their scope to provide commercially valuable protection for Verseon’s products
and services.
Verseon also relies on trade secrets, know-how and technology, which are not protected by patents,
to maintain its competitive position. Verseon’s policy is to protect certain details of its DDP, such as
the computational and molecular modeling algorithms and the computer code for implementing the
DDP, as confidential know-how or trade secrets. Verseon has indicated that it takes reasonable
measures to secure and protect its confidential know-how and trade secrets. For example: all
methodology, software code, and research data is kept strictly confidential; all employees,
consultants, and representatives are required to sign confidentiality agreements and are regularly
instructed on Verseon’s policies regarding confidentiality and security; access to Verseon’s trade
secrets is provided solely on a need-to-know basis, protected with multiple levels of security; all DDP
computer source code is stored on secure servers owned and operated by Verseon; publication of any
DDP code outside the company is prohibited; and audits of the DDP source code are regularly
employed to ensure compliance to these policies.
There can be no assurance that Verseon can absolutely protect its right to unpatented proprietary
know-how and trade secrets or that others will not independently develop substantially equivalent or
superior technology. Although Verseon has entered into confidentiality agreements with its
consultants, representatives, and employees, there can be no assurance that the confidentiality of
proprietary know-how and trade secrets will be preserved.
8.1
Drug Discovery Platform (DDP)
Verseon’s DDP is intended to be an efficient and accurate determination or characterization of
molecular interactions via computational methods. In the DDP the determination or
characterization of molecular interactions (of which computational docking and scoring
methods are only a subset) may involve the prediction of likelihood of formation of a potential
molecular complex, the estimation of the binding affinity or binding energy of two (or more)
molecules, the prediction of the binding mode (or even additional alternative modes) for the
target-ligand pair, or the rank prioritization of a set of ligands based on predicted bioactivity
with the target protein.
Verseon protects its DDP through a combination of patents and trade secrets. Verseon has
indicated that since the conception and development of the DDP, Verseon has searched and
reviewed certain publicly available resources relating to molecular modeling (including
docking and scoring methods), virtual library screening, virtual library generation,
computational chemistry, and other computational molecular modeling software packages.
These documents are routinely collected by members of Verseon’s R&D team and examined by
senior levels of management in order to keep abreast of developments in the field.
In addition, a number of references are identified and described in Verseon’s patents. For
example, US Patent No. 8,036,867, entitled “Method and Apparatus for Analysis of Molecular
Configurations and Combinations,” includes an identification and description of 70 references
that the Company has reviewed and analyzed (see ‘867 patent at col. 6, line 4 – col. 13, line
18). US Patent No. 7,751,988, entitled “Lead Molecule Cross-Reaction Prediction and
79
Optimization System,” includes an identification of at least 76 references that the Company has
reviewed and analyzed (see ‘988 Patent at col. 7, line 11 – col. 16, line 27). US Patent No.
6,970,790, entitled “Method and Apparatus for Analysis of Molecular Combination Based on
Computational Estimation of Electrostatic Affinity Using Basis Expansions,” includes an
identification of at least 58 references that the Company has reviewed and analyzed (see ‘790
Patent at col. 4, line 65 – col. 16, line 28). US Patent No. 7,890,313, entitled “Method and
Apparatus for Analysis of Molecular Combination Based on Computations of Shape
Complementarity Using Basis Expansions,” includes an identification of at least 34 references
that the Company has reviewed and analyzed (see ‘313 Patent at col. 8, line 44 – col. 12, line
29). Similarly, US Patent Application No. 10/966,041, entitled “Method and device for
Partitioning a Molecule,” includes an identification of at least 59 references that the Company
has reviewed and analyzed (see ‘041 application at paragraph 0073 – paragraph 0152).
Based on a review of the references it has identified, including those referenced above, Verseon
is not aware of any patent or other publication that it believes reduces the validity of any of
Verseon’s patents, nor is it aware of any patent or other publication that it believes poses any
infringement risk.
Other than performing these types of searches and having a general knowledge of the other
companies or institutions developing or selling computational molecular modeling software, it
is very difficult to ascertain precisely what other entities have in the way of such technology.
Like Verseon, many of these other entities choose to keep certain details of their research and
development efforts confidential. In those cases where details of their technology appear in
scientific publications, Verseon has collected and examined a number of those materials. There
can be no assurance that others have not developed or will not develop similar technology,
duplicate any components of the Company’s DDP, or attempt to design around any of Verseon’s
DDP patents. In addition, no assurance can be given that others will not independently develop
or otherwise acquire substantially equivalent techniques or otherwise gain access to Verseon’s
unpatented proprietary technology or independently disclose such technology or that Verseon
can ultimately protect meaningful rights to such unpatented technology.
8.2
New Chemical Candidates (NCC)
When potential NCCs are identified by the DDP, Verseon typically performs SciFinder searches
as part of its evaluation of whether to synthesize the compound for further biological
characterization. SciFinder is a CAS (Chemical Abstract Services) database of chemical and
bibliographic information. More information regarding SciFinder can be found on the CAS
website at http://www.cas.org/products/scifinder. SciFinder can be searched for both chemical
structures and reactions, as well as patent and literature references. Compound structures can
be drawn in the tool and searched by similarity, or exact structure or substructure. For example,
when Verseon submits its identified compounds as an encrypted query for similarity searching,
SciFinder generates a list of compounds indexed in the SciFinder databases (literature and
patent sources) that may be considered potentially ‘similar’ to the query compound. SciFinder
compares all substances in its databases with the query structure by using a Tanimoto measure
that reflects similarity based on a molecular fingerprint analysis, and then uses this measure to
determine which are the most likely to be potentially similar. Similarity searching is both
complementary to and broader than structure-based searches because it returns many answers
that are neither exact nor feature identical substructures. Chemical similarity is represented by
a Tanimoto measure that ranges from 0.0 to 1.0 where 1.0 represents a duplicate of the query
compound. The results of SciFinder’s chemical similarity search gives a number of compounds
‘similar’ to the query compound of interest binned into various ranges based on the Tanimoto
measure with the highest possible value being 100 per cent. similarity.
Based on its SciFinder searches, Verseon only moves forward with compounds that do not have
significant structural or chemical similarity to known compounds. Verseon is not aware of any
80
compound in the literature, as searched by SciFinder, of any compounds that have any material
overlap with Verseon’s NCCs. Verseon has indicated that none of the structures identified in its
SciFinder searches have significant structural or chemical similarity to the Company’s candidate
compounds, nor do the Markush drawings that comprise the descriptions of or the claims
described in Verseon’s NCC patents and patent applications cover these ‘dissimilar’
compounds found by SciFinder.
Based on a review of any potentially relevant references identified in Verseon’s searches,
including those identified above and those cited during prosecution of Verseon’s applications,
Verseon is not aware of any patent or other publication that it believes poses any infringement
risk.
Yours faithfully
King & Spalding LLP
81
PART IV
HISTORICAL FINANCIAL INFORMATION ON THE GROUP
SECTION A:
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION ON THE GROUP
Deloitte LLP
Mountbatten House
Grosvenor Square
Southampton
SO15 2BZ
The Board of Directors
on behalf of Verseon Corporation
48820 Kato Road
Fremont
CA
94538
United States
Cenkos Securities PLC
6.7.8 Tokenhouse Yard
London
EC2R 7AS
United Kingdom
1 May 2015
Dear Sirs
Verseon Corporation (the “Company”)
We report on the financial information of Verseon Corporation (the “Company” and, together with its
subsidiaries, the “Group”) for the three years ended 31 December 2013 and nine months ended
30 September 2014 set out in Section B of Part IV of the AIM admission document dated 1 May 2015
of Verseon Corporation (the “Admission Document”). This financial information has been prepared
for inclusion in the Admission Document on the basis of the accounting policies set out in set out in
note D to the financial information. This report is required by Annex I item 20.1 of Commission
Regulation (EC) No 809/2004 (the “Prospectus Directive Regulation”) as applied by Paragraph (a) of
Schedule Two to the AIM Rules for Companies and is given for the purpose of complying with that
requirement and for no other purpose.
We have not audited or reviewed the financial information for the nine months ended 30 September
2013 which has been included for comparative purposes only, and accordingly do not express an
opinion thereon.
Responsibilities
The Directors of the Company are responsible for preparing the financial information in accordance
with US GAAP.
It is our responsibility to form an opinion on the financial information and to report our opinion to
you.
82
Save for any responsibility arising under paragraph (a) of Schedule Two to the AIM Rules for
Companies to any person as and to the extent there provided, to the fullest extent permitted by law
we do not assume any responsibility and will not accept any liability to any other person for any loss
suffered by any such other person as a result of, arising out of, or in connection with this report or
our statement, required by and given solely for the purposes of complying with Annex I item 23.1 of
the Prospectus Directive Regulation as applied by Paragraph (a) of Schedule Two to the AIM Rules for
Companies, consenting to its inclusion in the Admission Document.
Basis of opinion
We conducted our work in accordance with Standards for Investment Reporting issued by the
Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence
relevant to the amounts and disclosures in the financial information. It also included an assessment
of significant estimates and judgments made by those responsible for the preparation of the financial
information and whether the accounting policies are appropriate to the entity’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that
the financial information is free from material misstatement whether caused by fraud or other
irregularity or error.
Our work has not been carried out in accordance with auditing or other standards and practices
generally accepted in jurisdictions outside the United Kingdom, including the United States of
America, and accordingly should not be relied upon as if it had been carried out in accordance with
those standards and practices.
Opinion on financial information
In our opinion, the financial information gives, for the purposes of the Admission Document, a true
and fair view of the state of affairs of the Group as at 31 December 2011, 2012 and 2013 and 30
September 2014 and of its comprehensive losses, cash flows and changes in shareholders’ equity for
the three years ended 31 December 2013 and the nine months ended 30 September 2014 in
accordance with US GAAP.
Declaration
For the purposes of Paragraph (a) of Schedule Two of the AIM Rules for Companies, we are responsible
for this report as part of the Admission Document and declare that we have taken all reasonable care
to ensure that the information contained in this report is, to the best of our knowledge, in accordance
with the facts and contains no omission likely to affect its import. This declaration is included in the
Admission Document in compliance with Schedule Two to the AIM Rules for Companies.
Yours faithfully
Deloitte LLP
Chartered Accountants
Deloitte LLP is a limited liability partnership registered in England and Wales with registered number
OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a
UK private company limited by guarantee, whose member firms are legally separate and independent
entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL
and its member firms.
83
HISTORICAL FINANCIAL INFORMATION ON THE GROUP
SECTION B:
HISTORICAL FINANCIAL INFORMATION ON THE GROUP
VERSEON CORPORATION
For the nine months ended September 30, 2014 and 2013 and the years ended December 31, 2013,
2012 and 2011.
TABLE OF CONTENTS
Page
Consolidated Balance Sheets
85–86
Consolidated Statements of Operations
87
Consolidated Statements of Cash Flows
88–89
Consolidated Statements of Changes in Shareholders’ Deficit
Notes to Consolidated Financial Information
90
91–109
84
Consolidated Balance Sheets
September 30, December 31, December 31, December 31,
2014
2013
2012
2011
US $’000
US $’000
US $’000
US $’000
ASSETS
Current Assets:
Cash and cash equivalents
Prepaid expenses and other current assets (Note 1)
213
34
13
16
17
10
19
91
Total Current Assets
247
29
27
110
89
86
9
12
336
115
36
122
LIABILITIES AND SHAREHOLDER’S DEFICIT
Current Liabilities:
Accounts payable
Accrued liabilities (Note 4)
Current portion of long-term debt (Note 5)
437
1,679
99
510
4,147
—
642
3,261
—
730
2,344
—
Total Current Liabilities
2,215
4,657
3,903
3,074
Long-term debt (Note 5)
1,983
5,034
4,837
3,926
TOTAL LIABILITIES
4,198
9,691
8,740
7,000
Property and equipment, net (Note 2)
TOTAL ASSETS
See accompanying notes to consolidated financial statements.
85
Consolidated Balance Sheets
September 30, December 31, December 31, December 31,
2014
2013
2012
2011
US $’000
US $’000
US $’000
US $’000
COMMITMENTS AND CONTINGENCIES
(NOTE 11)
SHAREHOLDERS’ DEFICIT
Preferred Shares Series A, par value of $0.001,
10,000,000 shares authorized, 6,809,050
shares issued and outstanding as of
September 30, 2014 and December 31,
2013, 2012 and 2011.
Preferred Shares Series B, par value of $0.001,
12,000,000 shares authorized, 2,143,011,
45,274, 45,274 and 45,274 shares issued and
outstanding as of September 30, 2014 and
December 31, 2013, 2012 and 2011, respectively
Common Shares Class Y, par value of $0.001,
15,000,000 shares authorized, 15,000,000
shares issued and outstanding as of
September 30, 2014 and December 31,
2013, 2012 and 2011.
Common Shares Class Z, par value of $0.001,
35,000,000 shares authorized, 2,417,643,
2,417,643, 2,361,143 and 2,358,143 shares
issued and outstanding as of September 30.
2014 and December 31, 2013, 2012 and 2011,
respectively
Share subscription money (Note 12)
Additional paid-in-capital
Loan receivable from shareholders (Note 10)
Accumulated deficit
6,457
6,457
6,457
6,457
5,716
115
115
115
—
—
—
—
265
3,073
902
(62)
(28,422)
265
3,073
744
(62)
(25,470)
256
3,073
599
(52)
(22,668)
255
3,073
468
(52)
(19,929)
(12,071)
(14,878)
(12,220)
(9,613)
NON-CONTROLLING INTEREST IN
SUBSIDIARIES (Note 3)
8,209
5,302
3,516
2,735
TOTAL DEFICIT
(3,862)
(9,576)
(8,704)
(6,878)
336
115
36
122
Total Shareholders’ Deficit
TOTAL LIABILITIES AND
SHAREHOLDERS’ DEFICIT
See accompanying notes to consolidated financial statements.
86
Consolidated Statement of Operations
For the nine months ended September 30, 2014 and 2013 (unaudited) and the years ended
December 31, 2013, 2012 and 2011.
September 30,
2014
2013
US $’000
US $’000
(unaudited)
REVENUES
Revenue
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
—
157
158
—
—
OPERATING EXPENSES
Research & Development
General and Administrative Expenses
1,494
1,178
843
642
1,305
938
1,333
716
1,440
545
Total Operating Expenses
2,672
1,485
2,243
2,049
1,985
OPERATING LOSS
(2,672)
(1,328)
(2,085)
(2,049)
(1,985)
298
590
797
703
615
Interest Expense, net
Loss from continuing operations,
before income taxes
(2,970)
Income tax provision (Note 6)
—
Net Loss
(2,970)
Net loss attributable to non-controlling
interests in subsidiaries
Net loss attributable to Verseon
Corporation
18
(1,918)
—
(1,918)
18
(2,882)
—
(2,882)
80
(2,752)
—
(2,752)
13
(2,600)
—
(2,600)
24
(2,952)
(1,900)
(2,802)
(2,739)
(2,576)
Net loss per share (Note 7)
Basic
(0.11)
(0.08)
(0.12)
(0.11)
(0.11)
Diluted
(0.11)
(0.08)
(0.12)
(0.11)
(0.11)
Weighted average number of
shares outstanding
Basic
Diluted
26,369,704 24,271,467 24,271,967 24,215,467 24,212,467
26,369,704 24,271,467 24,271,967 24,215,467 24,212,467
See accompanying notes to consolidated financial statements.
87
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2014 and 2013 (unaudited) and the years ended
December 31, 2013, 2012 and 2011.
For 9 months Ended
September 30,
2014
2013
US $’000
US $’000
(unaudited)
Cash flows from Operating Activities:
Net Loss
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation
Share-Based Compensation Expense
Changes in Asset / Liabilities
(Increase)/Decrease in Prepaid &
Other Current Assets
Increase/(Decrease) in Accounts
Payable
Increase/(Decrease) in Accrued
Liabilities
Net Cash used in Operating Activities
For the Years Ended
December 31,
2013
2012
US $’000
US $’000
2011
US $’000
(2,970)
(1,918)
(2,882)
(2,752)
(2,600)
18
158
8
59
13
145
3
131
11
57
(18)
—
(6)
81
20
(73)
(109)
(132)
(88)
134
181
735
886
917
600
(2,704)
(1,225)
(1,976)
(1,708)
(1,778)
Cash flows from Investing Activities:
Purchase of property and equipment
(21)
(89)
(91)
—
—
Net Cash used in Investing Activities
(21)
(89)
(91)
—
—
Cash flows from Financing Activities:
Proceeds from Sale of Common Shares
Proceeds from Sale of Preferred Shares
Proceeds from Sale of Equity in Nirog
Proceeds from Issuance of Debt
—
—
2,925
—
9
—
1,335
(18)
9
—
1,866
188
1
—
794
911
41
25
1,503
217
Net Cash provided by Financing
Activities
2,925
1,326
2,063
1,706
1,786
200
12
(4)
(2)
8
Cash and cash equivalents at the
beginning of the period
13
17
17
19
11
Cash and Cash Equivalents at the
end of the period
213
29
13
17
19
Change in cash and cash equivalents
during the period
See accompanying notes to consolidated financial statements.
88
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2014 and 2013 (unaudited) and the years ended
December 31, 2013, 2012 and 2011.
For 9 months Ended
September 30,
2014
2013
US $’000
US $’000
(unaudited)
Supplemental Disclosure of Non-Cash
Investing and Financing Activity: (Note 5)
Accrued Interest converted to Preferred
Shares Series B
(2,649)
Conversion of convertible notes to
Preferred Shares Series B
5,601
Issuance of Preferred Shares Series B
for long-term convertible note – 1
(1,000)
Issuance of Preferred Shares Series B
for long-term convertible notes – 2
(1,952)
2011
US $’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
See accompanying notes to consolidated financial statements.
89
For the Years Ended
December 31,
2013
2012
US $’000
US $’000
90
6,809,050
6,809,050
6,809,050
6,457
6,457
6,457
2,143,011
2,097,737
45,274
45,274
45,274
35,432
9,842
5,716 15,000,000
5,601
115 15,000,000
115 15,000,000
115 15,000,000
0
0
0
0
0
Class Y
Common Shares
Shares US$’000
90 15,000,000
25
Class B
Preferred Shares
Shares US$’000
See accompanying notes to consolidated financial statements.
September 30, 2014
Preferred Shares Series B
issuance for conversion
of debt
Share-Based
Compensation Expense
Investment in Nirog
Net loss
Other comprehensive
income attributable
to NCI
December 31, 2013
Issuance of shares
Issuance of Loans to
Shareholder(s)
Share-Based
Compensation Expense
Investment in Nirog
Net loss
Other comprehensive
income attributable
to NCI
December 31, 2012
Issuance of shares
Share-Based
Compensation Expense
Investment in Nirog
Net loss
Other comprehensive
income attributable
to NCI
6,457
December 31, 2011
6,809,050
6,457
January 1, 2011
6,809,050
Issuance of shares
Issuance of Loans to
Shareholder(s)
Share-Based
Compensation Expense
Investment in Nirog
Net loss
Other comprehensive
income attributable
to NCI
Class A
Preferred Shares
Shares US$’000
2,417,643
2,417,643
56,500
2,361,143
3,000
2,358,143
2,152,143
206,000
265
265
9
256
1
255
214
41
Class Z
Common Shares
Shares US$’000
8,209
(18)
2,925
5,302
(80)
1,866
3,516
(13)
794
2,735
(24)
1,503
1,256
Noncontrolling
Interest
US$’000
3,073
3,073
3,073
3,073
3,073
Share
Subscription
Money
US$’000
902
158
744
145
599
131
468
57
411
(62)
(62)
(10)
(52)
(52)
(42)
(10)
(28,422)
18
(2,970)
(25,470)
80
(2,882)
(22,668)
13
(2,752)
(19,929)
24
(2,600)
(17,353)
Total Shares
Outstanding
—
—
—
—
—
—
—
30,000
—
—
—
—
56,500
—
—
—
2,097,737
(3,862) 26,369,704
—
158
2,925
(2,970)
5,601
(9,576) 24,271,967
—
145
1,866
(2,882)
(10)
9
(8,704) 24,215,467
—
131
794
(2,752)
1
(6,878) 24,212,467
—
57
1,503
(2,600)
(42)
(5,862) 23,996,625
66
215,842
Additional
Receivable
Total
Paid-in
From Accumulated Shareholders’
Capital Shareholder(s)
deficit
Deficit
US$’000
US$’000
US$’000
US$’000
For the nine months ended September 30, 2014 and the years ended December 31, 2013, 2012 and 2011
Consolidated Statement of Changes in Shareholders’ Deficit
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
A.
Basis of presentation
The financial information included herein, is presented in accordance with generally accepted
accounting principles in the United States of America and stated in US dollars, and has been prepared
by Verseon Corporation (the “Company” or “Verseon”).
B.
History and organization of the Company
The Company was incorporated as Verseon LLC on July 18, 2002, in the state of Delaware. In August
2007 the Company reincorporated as a general corporation in the state of Delaware. The Company
is headquartered in Fremont, California.
The Company has formed Verseon India Private Limited (“VIPL”) together with a Mauritius based
private equity investor. VIPL was incorporated in Andra Pradesh, India in March 2006 to manage and
maintain the Company’s supercomputing cluster. The Company has since closed this operation in
2009 and is in the process of dissolving the legal entity.
The Company incorporated its majority owned Indian subsidiary, Verseon Laboratories Private
Limited (“VLPL”), in November 2006. VLPL was incorporated with the intent to conduct synthetic
chemistry operations for the Company. The Company has since closed VLPL and discontinued the
legal entity. All debts and liabilities were fulfilled prior to closure of the operation.
Nirog Therapeutics LLC (“Nirog”) was formed on September 23, 2009 as a Delaware Limited Liability
Company. Nirog was established as a vehicle to fund the research & development of the Company’s
anti-coagulation program.
This consolidated financial information has been prepared on a going concern basis, which assumes
the realization of assets and settlement of liabilities in the normal course of business. The Company
is financed substantially through equity and debt funding and is dependent upon the continuing
ability to obtain equity (for example through an IPO or private funding round), debt or related party
financing to fund its operations until positive cash flow is generated from ongoing business
operations. There is no assurance that continued related or third party financing will be available
when needed on terms acceptable to the Company, or at all, which casts substantial doubt on the
Company’s ability to continue as a going concern. The Company’s management believes it will
continue to be able to secure the additional financing it requires.
This consolidated financial information does not include any adjustments to the carrying value or
classification of recorded asset amounts and carrying value or classification of liabilities that might
be necessary, should the Company be unable to continue as a going concern.
C.
Description of business
Verseon is an emerging pharmaceutical company that uses a proprietary platform to design and
develop new drug candidates. Verseon has created a proprietary computational platform that can
model molecular interactions with sufficient accuracy to drive the drug-discovery process. For any
disease program, the platform first generates vast numbers of novel drug-like, synthesizable
compounds which are then computationally tested against a disease-causing protein to identify the
best binders, i.e. drug candidates that could potentially treat the disease. These computationally
designed candidates are synthesized and sent through a series of disease specific in vitro and in vivo
tests to identify the best candidates for clinical testing in humans. The Verseon process is disease
agnostic and can systematically yield drug candidates that cannot be found with other current
methods.
91
D. Summary of significant accounting policies
a)
Basis of preparation and principles of consideration: The consolidated historical financial
information of the Company is prepared in accordance with accounting principles generally
accepted in the United States of America (“US GAAP”). The financial information is presented
in United States Dollars (US$). All intercompany amounts have been eliminated.
b)
Use of estimates: The preparation of the financial information in conformity with US GAAP
requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities as on the date of the financial
information and the reported amount of revenues and expenses during the reported period.
Examples of such estimates include: project completion dates, time and cost required to
complete projects for purposes of revenue recognition and future revenue, expense and cash
flow estimates for purposes of impairment analysis and loss contract evaluation, and useful
lives of premises and equipment (fixed assets). Actual results could differ materially from those
estimates.
c)
Principles of Consolidation: The accompanying consolidated financial information includes
the accounts of the Company, consolidated with the accounts of all of its subsidiaries and
affiliates in which the Company holds a controlling financial interest as of the financial
information date. Normally, a controlling financial interest reflects ownership of a majority of
the voting interests. Other factors considered in determining whether a controlling financial
interest is held include whether the Company has the power to direct the activities that are
most significant to the entity’s performance and whether the Company has an obligation to
absorb losses or the right to receive benefits that could potentially be significant to the entity.
Intercompany accounts and transactions have been eliminated.
d)
Revenue Recognition: The Company has not earned revenue from the sale of its new drug
candidates. During 2013, the Company earned revenue from drug testing for an unrelated
biotech company. Related to this testing, revenue was recognized when persuasive evidence of
an agreement existed, delivery of service had occurred, the sales price was fixed or
determinable and collectability was reasonably assured.
e)
Research and development expenses: Verseon’s research and development expenses include
wages, benefits, facilities, supplies, external services and other expenses that are directly
related to our research and development operations. We expense research and development
costs as we incur them. When we make payments for research and development services prior
to the services being rendered, we record those amounts as prepaid assets on our consolidated
balance sheet and we expense them as the services are provided. For the period ended
September 30, 2014 and 2013 and the years ended December 31, 2013, 2012 and 2011,
research and development expenses were $1.5 million, $0.8 million, $1.3 million, $1.3
million, and $1.4 million, respectively.
f)
Cash and cash equivalents: the Company considers investments in highly liquid instruments th
at are purchased with original maturities, of three months or less to be cash equivalents.
g)
Property and equipment, net: Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the estimated
useful lives. The estimated useful lives of assets are as follows:
92
Estimated Useful Life
Computer & Peripherals
Communication Equipment
Lab Equipment
Office Equipment
Motor Vehicle
Test Equipment
Furniture and Fittings
2
2
5
5
5
5
5
Leasehold improvements
h)
years
years
years
years
years
years
years
Shorter of Lease period or estimated useful life
Income taxes: Income taxes are accounted for under the asset and liability method.
(i)
Current income taxes: The Company assesses its current income tax expense based upon
the taxes due in each operating tax jurisdictions, which is comprised of the US and India.
The Company has its Indian subsidiary, VIPL, which is dormant and not incurring any
taxes. The United States is where the Company’s main operational unit is located with all
of the Company’s revenue and operating expenses occurring within this tax jurisdiction.
Payments of advance taxes and income taxes payable in the same tax jurisdictions are offset.
(ii)
Deferred income taxes: Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial information carrying
amounts of assets and liabilities and their respective tax basis, operating loss carry
forwards and tax credits. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Valuation allowances are recorded
to reduce deferred tax assets when it is more likely than not that a tax benefit will not be
realized. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the Statements of Operations in the period of change.
Uncertain tax positions are recognized using the more likely-than-not threshold determined
solely based on technical merits that the tax positions will be sustained upon examination by
a taxing authority that has full knowledge of all relevant information. Tax positions that meet
the recognition threshold are measured as the largest amount of benefit that is greater than fifty
percent likely of being realized upon settlement.
i)
Net Loss per share: In accordance with the provisions of Accounting Standards Codification
(“ASC”) Topic 260, “Earnings per Share”, basic loss per share are computed by dividing net loss
attributable to shareholders of the Company by the weighted average number of shares
outstanding during the period. Diluted earnings per share are computed on the basis of the
weighted average number of common and dilutive common equivalent shares outstanding
during the period. Potentially dilutive shares are excluded when the effect would be to increase
diluted earnings per share or reduce diluted losses per share.
j)
Share-Based Employee Compensation: The Company accounts the cost of employee services
rendered in exchange for share-based compensation based upon the grant date fair value. The
cost is recognized over the employee’s requisite service period (generally relating to the vesting
period of the equity grant and the lifetime of the option).
k)
Recently Issued Accounting Standards: In August 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, “Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern”. The standard will
explicitly require management to assess an entity’s ability to continue as a going concern, and
to provide related disclosures in certain circumstances. The new standard incorporates and
expands upon certain principles that are currently in the auditing standards. Specifically, the
93
new standard defines substantial doubt, requires assessments each annual and interim period,
provides an assessment period of one year from the issuance date, and requires disclosures
both when substantial doubt is alleviated by management’s plans and when substantial doubt
remains unalleviated. ASU 2014-15 will be effective for annual periods ending after December
15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.
The Company is currently in the process of evaluating the impact of adoption of this ASU on
the Company’s combined financial statements.
In June 2014, the FASB issued ASU 2014-10, “Development Stage Entities (Topic 915):
Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable
Interest Entities Guidance in Topic 810, Consolidation”, which eliminates development stage
entities from certain parts of US generally accepted accounting principles. This guidance
permits a company to eliminate the following requirements for development stage companies:
(1)
present inception-to-date information on the statement of operations and members’
equity and cash flows;
(2)
label the financial statements as those of a development stage entity;
(3)
disclose a description of the development stage activities in which the entity is engaged;
and
(4)
disclose the first year in which the entity is no longer in the development stage.
ASU 2014-10 is effective for years beginning after December 15, 2014, with early adoption
permitted. The Company has early adopted ASU 2014-10, and as such, no longer is required
to present the items noted above.
In February 2015, the FASB issued ASU 2015-02 “Consolidation (Topic 810): Amendments to
the Consolidation Analysis” to improve targeted areas of consolidation guidance for legal
entities such as limited partnerships, limited liability corporations, and securitization structures.
The ASU focuses on the consolidation evaluation for reporting organizations that are required
to evaluate whether they should consolidate certain legal entities. The new standard simplifies
and improves current GAAP by:
(1)
placing more emphasis on risk of loss when determining a controlling financial interest;
(2)
reducing the frequency of the application of related-party guidance when determining a
controlling financial interest in a VIE; and
(3)
changing consolidation conclusions for companies in several industries that typically
make use of limited partnerships or VIEs.
The ASU will be effective for periods beginning after December 15, 2015. The Company is still
evaluating the potential impact on the Company’s consolidated financial statements.
94
E.
Notes to Financial Information
1.
Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of:
September 30,
2014
US $’000
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
Prepaid expenses and other current assets:
Operating lease(s) related deposits
Other
Deposit for lab equipment
30
4
—
13
3
—
9
1
—
9
2
80
Prepaid expenses and other current assets
34
16
10
91
2.
Property and equipment, net
September 30,
2014
US $’000
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
Lab Equipment
Office Equipment
Furniture and Fittings
127
4
126
106
4
126
16
4
126
16
4
126
Total
Less: Accumulated Depreciation
257
(168)
236
(150)
146
(137)
146
(134)
89
86
9
12
Property and equipment, net
Depreciation expense included within General and Administrative expenses aggregated to $18
thousand and $8 thousand for the nine months ended September 30, 2014 and 2013, and $13
thousand, $3 thousand and $11 thousand for the years ended December 31, 2013, 2012 and 2011
respectively.
3.
Variable Interest Entity
The Company owns 31.6 per cent. of Nirog, as of September 30, 2014. Nirog is controlled at the
board and management levels by the Company, which results in the Company being the primary
beneficiary due to its ownership interest and power to direct the activities that most significantly
impact Nirog’s economic performance. The Company has consolidated Nirog into the Company’s
financial information since Nirog’s incorporation under the Variable Interest Entity (“VIE”) model
within ASC Topic 810, “Consolidation”.
The Company determined it was the primary beneficiary of Nirog and has consolidated Nirog into
the Company’s financial information since its inception on September 23, 2009. As of September 23,
2009, Nirog’s assets were of $180 thousand due to initial investments by the founding members.
Verseon’s portion of that initial investment was $112 thousand.
95
The following table shows the assets and liabilities of the VIE that are not associated with the
Company:
September 30,
2014
US $’000
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
VIE Assets
Cash
200
—
—
—
Total Assets
200
—
—
—
VIE Liabilities
Accounts Payable
Long-Term Loan
80
517
43
517
15
419
—
140
Total Liabilities
597
560
434
140
4.
Accrued Liabilities
September 30,
2014
US $’000
Interest Payable
Deferred Compensation
Legal Services
Vacation Accrual
Professional Services – Chemistry
Various Operating Accruals
Total Accrued Liabilities
5.
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
471
465
249
163
105
226
2,871
457
182
141
247
249
2,159
417
65
123
231
266
1,535
387
24
94
135
169
1,679
4,147
3,261
2,344
Long-Term Debt:
In September 2007, the Company completed the issuance of a $1.0 million in unsecured convertible
note to Godrej Industries, a shareholder of the Company (referred to as “Long-Term Convertible Note
– 1”), which carried a 13 per cent. interest rate. The original due date of the convertible note was
September 14, 2012, which was mutually extended by both parties to September 14, 2015 for both
the payment of the principal amount and any accrued interest. Prepayments were allowed under the
terms of the convertible note and interest would accrue on a monthly basis for both the payment of
the principal amount and any accrued interest. As part of the convertible note agreement, Godrej was
issued 85,587 preferred class B warrants at a strike price of fair market value at the date of exercise
(estimated at $2.54 on the date of grant) and an expiration date of March 31, 2016. The total amount
of the convertible note (principal and interest) was converted on March 31, 2014 into 715,668
preferred Class B shares in the Company at a share price of $2.92.
In 2008, the Company established a 12% unsecured convertible note with several lenders. By the end
of 2008, the Company had borrowed the principal amount of $1,019 thousand under the unsecured
convertible note (referred to as “Long-Term Convertible Notes – 2”). The original due date of the
unsecured convertible note was one year from the issuance date. The Company continued to receive
funds under similar terms and conditions over the ensuing years.
The due date on the convertible debt has since its inception been mutually extended a few times and
its most recent due date was established as of September 30, 2015. Prepayments were allowed under
the terms of the note and interest accrues and is compounded annually. The conversion option allows
a holder to convert the principal and interest into preferred class B shares at the rate of 100 per cent.
of the Company’s most recent sale of preferred class B shares. As part of the convertible note
agreement, the various holders were issued a total of 332,761 preferred class B warrants at a strike
96
price of $2.54 and were issued 48,030 common class Z warrants at a strike price of $0.15 with an
expiration date of March 31, 2016. The total amount of the convertible note (principal and interest)
was converted on March 31, 2014 into 1,382,069 preferred Class B shares in the Corporation at a
share price of $2.54.
In December 2008, the Company issued promissory notes to certain individuals. The promissory
notes carry an 8 per cent. interest rate and do not have a conversion option and are listed on in the
table below as “Long-Term Loans – 3”. The promissory notes are due upon completion of the sale of
the Company, an initial public offering or private equity funding of at least $8.0 million.
In 2011, a Board member with Nirog, Mr. Sabeer Bhatia, agreed to provide funds to Nirog in the form
of unsecured convertible notes (referred to as “Long-Term Convertible Notes – 4”), which carried a 6
per cent. interest rate. Mr Sabeer Bhatia subsequently made additional investments to the Company
on the same terms as the original note. Prepayments were allowed under the terms of the convertible
note and interest accrued on a monthly basis, compounding annually. The convertible note is still
outstanding as of September 30, 2014 for an amount of $517 thousand, of which $99 thousand is
repayable on September 30, 2015 and has been classified as current or short-term debt as of
September 30, 2014.
The following table summarizes the principal and interest information pertaining to the Company’s
convertible notes:
September 30,
2014
US $’000
Principal amount
Note – 1
Principal amount
Notes – 2
Principal amount
Principal amount
Notes – 4
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
of Long-Term Convertible
—
1,000
1,000
1,000
—
1,565
1,952
1,565
2,006
1,412
1,889
898
418
517
419
139
Total Principal amount of Long-Term Debt
Current portion of long-term convertible
Notes – 4
1,983
5,034
4,837
3,926
99
—
—
—
Total Long-Term Debt
Interest amount outstanding
2,082
638
5,034
2,983
4,837
2,204
3,926
1,548
Total principal and interest outstanding
2,720
8,017
7,041
5,474
6.
of Long-Term Convertible
of Long-Term Loans – 3
of Long-Term Convertible
Income taxes
The Company did not record a federal or state income tax provision or benefit for the period ended
September 30, 2014 or years ended December 31, 2013, 2012 and 2011 due to the losses incurred
in the corresponding periods, as well as the Company’s continued maintenance of full valuation
allowance against its net deferred tax assets. The Company’s income tax provision of $nil in all
periods represents an effective tax rate of 0%. This differs from income taxes computed at the federal
statutory income tax rate of 35% principally due to the effect of losses incurred by the Company and
the full valuation allowance taken against deferred tax assets.
The Company has chosen to record a full valuation allowance against its net deferred tax assets;
accordingly, the Company does not show any deferred tax assets or deferred tax liabilities in its
financial statements.
97
The components of the deferred tax assets are as follows:
September 30,
2014
US $’000
Deferred Tax Assets:
Accumulated Net Operating Loss
Accumulated R&D Tax Credits
Share Option Compensation
Depreciation and Other Costs
Net Deferred Tax Assets
Valuation Allowance
Total
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
7,436
492
68
—
7,436
492
77
11
7,479
357
85
8
7,224
325
45
10
7,996
(7,996)
8,016
(8,016)
7,929
(7,929)
7,604
(7,604)
—
—
—
—
Management of the Company has evaluated the positive and negative evidence bearing upon the
realizability of its net deferred tax assets and determined that it is more likely than not that the
Company will not realize the benefits of the deferred tax assets. As a result, the Company has a full
valuation allowance at September 30, 2014, December 31, 2013, 2012 and 2011. The valuation
allowance remained nearly flat from 2012 to 2013 increasing by $87 thousand, however, from 2011
to 2012 the valuation allowance increased by $325 thousand primarily due to the increase in the
Company’s accumulated net operating loss.
Realization of the deferred tax asset in the future is dependent on many factors, including the
Company’s ability to generate taxable income within the net operating loss carry-forward period.
Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s
ownership, including sale of the Company or significant changes in ownership due to the sale of
equity, may have limited, or may limit in the future, the amount of net operating loss carry-forwards,
which could be used annually to offset future taxable income.
As of September 30, 2014, the Company has a significant Net Operating Loss (“NOL”) being carriedforward. As of September 30, 2014, the Company’s NOL being carried forward was approximately
$7,436 thousand for US Federal and state taxes. The Company recorded a full valuation allowance
against this NOL in 2014 and 2013 due to ongoing losses. The Company’s future NOL can have large
variations depending the amount of the losses from operations and/or timing of a revenue stream. Of
the Company’s NOL carry-forward $1,191 thousand, $3,020 thousand, $1,775 thousand, $670
thousand, $526 thousand and $254 thousand will expire in the tax years 2027, 2028, 2029, 2030,
2031 and 2032 respectively.
The Company files income tax returns in the United States and the state of California. The tax years
2007 through 2013 remain open to examination by these jurisdictions, as carry-forward attributes
generated in the years may be adjusted in a future period. The Company has not recorded any interest
or penalties and does not have any unrecognised tax benefits since its inception.
ASC 740-30-30-2 foreign investments (due to subsidiary investment in VIPL) income tax has not been
recognised on the excess of the amount for financial reporting over the tax basis of investments in
foreign subsidiaries that is indefinitely reinvested. This amount becomes taxable upon a repatriation
of assets from the subsidiary or on a sale or liquidation of the subsidiary. Determination of the amount
of any unrecognised deferred income tax liability on this temporary difference is not predictable.
98
7.
Net Loss per share
Basic net loss per share is computed by dividing net loss by the average number of share outstanding
each period. The Company calculates the dilutive effects of both the warrants and share options
utilising the treasury share method. All warrants and options were anti-dilutive in all the periods
presented. The weighted average shares for basic earnings per share consists of the following:
September 30,
2014
2013
US $’000
US $’000
Weighted average shares – basic
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
26,369,704 24,271,467 24,271,967 24,215,467 24,212,467
The components of basic and diluted earnings per share were as follows:
September 30,
2014
2013
US $’000
US $’000
Net loss attributable to shareholders
Average outstanding shares
Basic
Diluted *
Net loss per share
Basic
Diluted *
(2,970)
(1,918)
2013
US $’000
(2,882)
December 31,
2012
US $’000
(2,752)
2011
US $’000
(2,600)
26,369,704 24,271,467 24,271,967 24,215,467 24,212,467
26,369,704 24,271,467 24,271,967 24,215,467 24,212,467
(0.11)
(0.11)
(0.08)
(0.08)
(0.12)
(0.12)
(0.11)
(0.11)
(0.11)
(0.11)
* Diluted earnings per share is the same as basic earnings per share since the impact of the dilutive instruments on earnings per share
is antidilutive.
8.
Segment reporting
ASC Topic 280 “Segment reporting” establishes standards for the way that public business enterprises
report information about business segments and related disclosures about products and services,
geographical areas and major customers.
The Chief Executive Officer (“CEO”) of the Company has been identified as the Chief Operating
Decision Maker as defined by ASC Topic 280. The CEO of the Company allocates resources based
upon information related to its one operating segment, pharmaceutical research. Accordingly, the
Company has concluded they have one reportable segment.
All revenues are attributable to the United States of America.
9.
Concentration of Credit Risk
Financial instruments that potentially subject the Group to concentrations of credit risk principally
consist of cash and cash equivalents.
The Group does not have a customer concentration risk, as the Group has only incurred revenue in
the fiscal year 2013 and that was from one customer and was a one-time event. By the end of 2013,
the customer had paid all invoices to the Group.
All cash and cash equivalents are held in the United States as of September 30, 2014. The cash
balances in non-interest bearing accounts held at financial institutions are fully insured by the Federal
Deposit Insurance Corporation of America. At times, cash balances may exceed federally insured
amounts and potentially subject the Company to a concentration of credit risk. Management believes
that no significant concentration of credit risk exists with respect to these cash balances because of
its assessment of the credit worthiness and financial viability of the respective financial institutions.
99
10.
Related Party Transactions (see Note 5)
The Company had certain related party transactions which are explained below:
The Company has a convertible note agreement (described in Note 5 as Long-Term Convertible
Note – 1) with Godrej Industries, a shareholder in the Company, in the principal amount of
$1,000,000. The loan was converted into Class B preferred shares on March 31, 2014.
One of the Nirog Board members, Mr. Sabeer Bhatia, has provided funds to the Company in the form
of convertible notes, through a Trust. The table below reports the financial changes in the notes from
the Sabeer Bhatia Trust. The convertible notes were part of Long Term Convertible
Notes – 2 (described in Note 5) and converted into Class B preferred shares on March 31, 2014. The
second set of convertible notes are the loans described in Note 5 as Long-Term Convertible
Notes – 4 and remain outstanding with the Group.
The three founders and officers of the Company, Adityo Prakash, Eniko Fodor and David Kita, have
provided funds to the Company in the form of convertible notes to help support its operations. These
convertible notes were part of Long Term Convertible Notes – 2 (described in Note 5) and converted
into Class B preferred shares on March 31, 2014.
The line item “Loan receivable from shareholders(s)” in the Shareholders’ Equity section of the
Balance Sheet refers to employees and consultants of the Company who purchased their shares
through the issuance of promissory notes with the Company.
The table below reports the financial changes due to the related party transactions described above:
September 30,
2014
US $’000
Godrej Industries
Sabeer Bhatia Trust
Founders
Loan Receivable from Shareholder(s)
—
517
—
(62)
2013
US $’000
1,000
1,213
222
(62)
December 31,
2012
US $’000
1,000
1,066
222
(52)
2011
US $’000
1,000
774
222
(52)
There are warrants associated with the aforementioned financial transactions. The following table
provides the number of warrants associated with each of the related parties:
September 30,
2014
US $’000
Godrej Industries
Sabeer Bhatia Trust
Founders
11.
85,587
212,130
50,191
2013
US $’000
85,587
202,060
50,191
December 31,
2012
US $’000
85,587
192,612
50,191
2011
US $’000
85,587
189,562
50,191
Contingencies and commitments
Operating leases
Rental expense for operating leases amounted to $97 thousand and $82 thousand for the nine months
ended September 30, 2014 and 2013 respectively, and $116 thousand, $111 thousand and $108
thousand for the years ended December 31, 2013, 2012 and 2011 respectively. All operating leases
during the year ended 2013 are in the case of the laboratory lease cancellable with a 1 month prior
notice before vacating and the Headquarter lease is cancellable at the end of the renewal period (July
31). The Headquarters lease renews annually and runs from August 1 through July 31. In 2014 the
Company moved its laboratory facilities and the lease is cancellable with a 3 months prior notice.
100
The table sets out the Company’s uncancellable operating lease commitments at each of the balance
sheet dates stated:
September 30,
2014
US $’000
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
Office lease for Headquarters
Office lease for the Lab
45
17
26
0
25
3
25
3
Total obligation
62
26
28
28
Legal Proceedings
The Company has no ongoing legal proceedings nor is it aware of any potential legal proceedings.
12.
Shareholder’s Equity
Common Shares
The authorized common shares of the Company consist of 50,000,000 authorized shares of common
shares. The common shares are divided into two classes: Class Y common with 15,000,000
authorized shares and Class Z common with 35,000,000 authorized shares. Both Class Y common
and Class Z common have a par value of $0.001 per share. As of September 30, 2014, December 31,
2013, December 31, 2012, and December 31, 2011 the Company had 15,000,000 of Class Y
common outstanding and 2,417,643, 2,417,643, 2,361,143, and 2,358,143 of Class Z common
outstanding, respectively.
Class Y common shares value: The Company founders contributed intellectual property in exchange
for the Class Y common shares. For purposes of establishing capital accounts for tax filings, such
contributions were valued at $750 thousand. These assets have been recorded in the accompanying
consolidated financial information at their historical basis of zero for financial reporting purposes.
Preferred Shares
The authorized preferred shares of the Company consist of 22,000,000 authorized shares of preferred
shares. The preferred shares are divided in two classes: Class A preferred with 10,000,000 authorized
shares and Class B preferred with 12,000,000 authorized shares. Both Class A preferred and Class B
preferred have a par value of $0.001 per share. As of September 30, 2014, December 31, 2013,
December 31, 2012, and December 31, 2011 the Company had 6,809,050 of Class A preferred
outstanding and 2,143,011, 45,274, 45,274, and 45,274 of Class B preferred outstanding,
respectively.
Share Subscription Money
In 2006, VIPL issued 1,578,947 shares to investors (“VIPL Investors”) who purchased non-cumulative
convertible Preference Shares in the subsidiary. VIPL Investors had an Exchange agreement with the
Company to swap VIPL shares for Company shares; the Exchange agreement has since expired. VIPL
has been dormant since 2009 and the cash paid by VIPL Investors is recorded as a share subscription
in this financial information.
13.
Warrants
Verseon
During the nine months ended September 30, 2014, the Company did not issue common Z warrants
nor preferred A warrants to purchase either Common Class Z shares or Preferred Class A shares of the
Company. The Company issued preferred B warrants to purchase 170,174 shares of the Company’s
preferred B shares for $432 thousand. The preferred B warrants have a weighted average exercise
price of $2.54 and the majority expire during the calendar year 2019.
101
The fair value of the each share under the Preferred B warrants was $2.54 at the date of the grants.
An amount of $130 thousand was recorded as of September 30, 2014 as share based compensation
expense that was determined using the Black-Scholes option pricing model with an expected life of
5 years, a risk free interest rate of 1.7 per cent., a dividend yield of 0 per cent. and expected volatility
of 75 per cent..
For details of the variables used by the Company in the Black-Scholes warrant pricing model for the
period ending September 30, 2014 and the years December 31, 2013, 2012 and 2011, see the
following table:
September 30,
2014
US $’000
Expected Volatility (%)
Expected Dividend Yields (%)
Expected Risk Free Interest Rate (%)
Expected Life of Warrants (Years)
75%
0%
1.7%
5
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
75%
0%
1.75%
5
75%
0%
0.75%
5
75%
0%
0.85%
5
The following is a summary of the status of all of the Company’s shares warrants issued related to
long-term debt (Note 5) and third party contractors as of September 30, 2014, December 31, 2013,
December 31, 2012, and December 31, 2011 and changes that occurred during each time period:
Number
of Common
Z Warrants
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
at December 31, 2011
at December 31, 2012
at December 31, 2013
at September 30, 2014
Exercisable at September 30, 2014
102
WeightedAverage
Exercise
Price ($)
WeightedAverage
Remaining
Life (Years)
1,862,606
13,219
—
—
1,875,825
3,226
—
—
1,879,051
—
—
—
1,879,051
0.08
0.20
—
—
0.08
0.23
—
—
0.08
—
—
—
0.08
8.23
4.72
—
—
7.21
4.68
—
—
6.21
—
—
—
5.51
1,879,051
0.08
5.51
Number
of Common
A Warrants
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
at December 31, 2011
at December 31, 2012
at December 31, 2013
at September 30, 2014
Exercisable at September 30, 2014
at December 31, 2011
at December 31, 2012
at December 31, 2013
at September 30, 2014
Exercisable at September 30, 2014
WeightedAverage
Remaining
Life (Years)
42,104
—
—
—
42,104
—
—
—
42,104
—
—
—
42,104
0.95
—
—
—
0.95
—
—
—
0.95
—
—
—
0.95
10.10
—
—
—
9.10
—
—
—
8.10
—
—
—
7.35
42,104
0.95
7.35
Number
of Common
B Warrants
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
WeightedAverage
Exercise
Price ($)
WeightedAverage
Exercise
Price ($)
WeightedAverage
Remaining
Life (Years)
429,882
13,638
—
2,460
441,060
36,068
—
—
477,128
170,174
—
—
647,302
2.54
2.54
—
2.54
2.54
2.54
—
—
2.54
2.54
—
—
2.54
2.27
4.40
—
3.60
1.12
4.60
—
—
0.46
4.53
—
—
3.54
647,302
0.95
3.54
Nirog
During the nine months ended September 30, 2014, Nirog did not issue common Z warrants nor
preferred A warrants, preferred B1 warrants or preferred B2 warrants to purchase either Common
Class Z, Preferred Class A, Preferred Class B1, or Preferred Class B2 units of Nirog respectively. Nirog
issued preferred C1 warrants to purchase 81,664 units of Nirog’s preferred Class C1 unit for $73
thousand and issued preferred C2 warrants to purchase 5,250 units of Nirog’s preferred Class C2 unit
for $5 thousand. The preferred C1 warrants have a weighted average exercise price of $0.90 and the
majority expire during the calendar year 2019. The preferred C2 warrants have a weighted average
exercise price of $1.00 and expire during the calendar year 2019.
The fair value of each share under the Preferred C1 warrants was $0.90 at the date of the grants and
the fair value of each share under the Preferred C2 warrants was $1.00 at the date of the grants. An
amount of $25 thousand was recorded as of September 30, 2014 as shares based compensation
expense that was determined using the Black-Scholes option pricing model with an expected life of
5 years, a risk free interest rate of 1.7 per cent., a dividend yield of 0 per cent. and expected volatility
of 75 per cent.
103
For details of the variables used by Nirog in the Black-Scholes warrant pricing model for the period
ending September 30, 2014 and the years December 31, 2013, 2012 and 2011, see the following
table:
September 30,
2014
US $’000
Expected Volatility (%)
Expected Dividend Yields (%)
Expected Risk Free Interest Rate (%)
Expected Life of Warrants (Years)
75%
0%
1.7%
5
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
75%
0%
1.75%
5
75%
0%
0.75%
5
75%
0%
0.85%
5
The following is a summary of the status of all of Nirog’s unit warrants issued related to long-term
debt (Note 5) and third party contractors as of September 30, 2014, December 31, 2013,
December 31, 2012, and December 31, 2011 and changes that occurred during each time period:
Number
of Common
A Warrants
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
at December 31, 2011
at December 31, 2012
at December 31, 2013
at September 30, 2014
Exercisable at September 30, 2014
at December 31, 2011
at December 31, 2012
at December 31, 2013
at September 30, 2014
Exercisable at September 30, 2014
104
WeightedAverage
Remaining
Life (Years)
105,104
—
—
—
105,104
—
37,837
22,223
45,044
—
—
—
45,044
0.33
—
—
—
0.33
—
0.33
0.33
0.33
—
—
—
0.33
3.83
—
—
—
2.83
—
—
—
1.58
—
—
—
0.83
45,044
0.33
0.83
Number
of Common
B1 Warrants
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
WeightedAverage
Exercise
Price ($)
WeightedAverage
Exercise
Price ($)
WeightedAverage
Remaining
Life (Years)
72,000
55,500
25,000
5,000
97,500
—
—
—
97,500
—
—
—
97,500
0.50
0.50
0.50
0.50
0.50
—
—
—
0.50
—
—
—
0.50
3.07
4.40
—
—
4.24
—
—
—
3.24
—
—
—
2.49
97,500
0.50
2.49
Number
of Common
B2 Warrants
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
at December 31, 2011
at December 31, 2012
at December 31, 2013
at September 30, 2014
Exercisable at September 30, 2014
at December 31, 2011
at December 31, 2012
at December 31, 2013
at September 30, 2014
Exercisable at September 30, 2014
105
WeightedAverage
Remaining
Life (Years)
—
35,967
—
—
35,967
55,572
—
—
91,539
—
—
6,250
85,289
—
0.80
—
—
0.80
0.80
—
—
0.80
—
—
0.80
0.80
—
3.26
—
—
3.26
4.34
—
—
3.52
—
—
—
3.01
85,289
0.80
3.01
Number
of Common
C1 Warrants
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
WeightedAverage
Exercise
Price ($)
WeightedAverage
Exercise
Price ($)
WeightedAverage
Remaining
Life (Years)
—
—
—
—
—
27,713
—
—
27,713
81,664
—
—
109,377
—
—
—
—
—
0.90
—
—
0.90
0.90
—
—
0.90
—
—
—
—
—
4.90
—
—
4.90
4.41
—
—
4.35
109,377
0.90
4.35
Number
of Common
C2 Warrants
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
Granted
Exercised
Cancelled
Outstanding
at December 31, 2011
at December 31, 2012
at December 31, 2013
at September 30, 2014
Exercisable at September 30, 2014
14.
WeightedAverage
Exercise
Price ($)
WeightedAverage
Remaining
Life (Years)
—
—
—
—
—
—
—
—
—
5,250
—
—
5,250
—
—
—
—
—
—
—
—
—
1.00
—
—
1.00
—
—
—
—
—
—
—
—
—
4.60
—
—
4.60
5,250
1.00
4.60
Share Options
Verseon
The Company’s Share Option Plan, as of September 30, 2014, provides for the grant of up to
5,960,250 (net of options previously exercised) Class Z shares to its employees, directors and
consultants. Currently, there are 2,564,387 share options available for grant. The Share Option Plan
provides for incentive share options, non-qualified share options, share bonuses and restricted share
grants. Share option grants generally vest over a four-year period from either the employee’s hire date
for new employees or the unit option grant date. The activity in the Company’s share option plan
during the years 2011, 2012, 2013, and the nine months ending September 30, 2014 are set out in
the table below.
Number
of Options
WeightedAverage
Exercise
Price ($)
WeightedAverage
Remaining
Life (Years)
Outstanding at January 1, 2011
Granted
Exercised
Cancelled
3,461,124
91,713
206,000
20,834
0.16
0.20
0.20
0.20
6.51
9.20
—
—
Outstanding at December 31, 2011
Granted
Exercised
Cancelled
3,326,003
108,910
3,000
153,000
0.15
0.20
0.20
0.20
6.40
9.24
—
—
Outstanding at December 31, 2012
Granted
Exercised
Cancelled
3,278,913
124,300
56,500
36,400
0.15
0.25
0.23
0.25
7.28
9.46
—
—
Outstanding at December 31, 2013
Granted
Exercised
Cancelled
3,310,313
121,550
—
36,000
0.15
0.25
—
—
6.52
9.66
—
—
Outstanding at September 30, 2014
3,395,863
0.16
5.62
Exercisable at September 30, 2014
3,246,863
0.16
5.33
106
In the nine months ended September 30, 2014, the Company granted 121,550 options to employees
of the Company that will vest over a four year period and to contractors that vested immediately with
a weighted average exercise price of $0.25 per share with terms of ten years. The grant price of each
options was $0.25 at the date of the grants. An amount of $3 thousand was recorded as of September
30, 2014 as stock based compensation expense that was determined using the Black-Scholes option
pricing model with an expected life of 6 years for employees and 5 years for consultants, a risk free
interest rate of 2.0 per cent. for employees and 1.7 per cent. for consultants, a dividend yield of 0 per
cent. and expected volatility of 75 per cent. for both employees and consultants.
For details of the variables used by the Company in the Black-Scholes option pricing model for the
period ending September 30, 2014 and the years December 31, 2013, 2012 and 2011, see the
following table:
September 30,
2014
US $’000
Expected Volatility (%)
Expected Dividend Yields (%)
Expected Risk Free Interest Rate for Employees (%)
Expected Life of Options for Employees (Years)
Expected Risk Free Interest Rate for Consultants (%)
Expected Life of Options for Consultants (Years)
75%
0%
2.0%
6
1.7%
5
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
75%
0%
2.1%
6
1.75%
5
75%
0%
0.95%
6
0.75%
5
75%
0%
1.1%
6
0.85%
5
Nirog
The Nirog Unit Option Plan, as of September 30, 2014, provides for the grant of up to 3,400,000
Class Z units to its employees, consultants and directors of which 2,944,333 have been granted and
exercised. Currently, there are 355,667 unit options available for grant. The Nirog Unit Option Plan
provides for both incentive and non-qualified unit options. Unit option grants generally vest over a
two-year period from the unit option grant date. The activity in Nirog’s unit option plan during the years
2011, 2012, 2013, and the nine months ending September 30, 2014 are set out in the table below.
Number
of Options
Outstanding at January 1, 2011
Granted
Exercised
Cancelled
WeightedAverage
Exercise
Price ($)
WeightedAverage
Remaining
Life (Years)
660,000
4,000
120,000
30,000
0.03
0.07
0.05
0.05
9.21
9.20
—
—
Outstanding at December 31, 2011
Granted
Exercised
Cancelled
514,000
1,436,000
1,830,000
—
0.05
0.07
0.07
—
8.22
9.97
—
—
Outstanding at December 31, 2012
Granted
Exercised
Cancelled
Outstanding at December 31, 2013
Granted
Exercised
Cancelled
120,000
145,000
20,000
—
245,000
800,000
945,000
—
0.07
0.09
0.08
—
0.08
0.10
0.10
—
8.99
9.46
—
—
9.22
9.66
—
—
Outstanding at September 30, 2014
100,000
0.07
7.39
Exercisable at September 30, 2014
100,000
0.07
7.39
107
In the nine months ended September 30, 2014, Nirog granted 800,000 options to Directors of the
Nirog that were 50 per cent. vested and the rest of the units vest monthly over a one year period with
a weighted average exercise price of $0.10 per share with term of ten years. The grant price of each
unit was $0.10 at the date of the grants. An amount of $nil was recorded as of September 30, 2014
as a unit based compensation expense that was determined using the Black-Scholes option pricing
model with an expected life of 6 years for employees and 5 years for consultants, a risk free interest
rate of 2.0 per cent. for employees and 1.7 per cent. for consultants, a dividend yield of 0 per cent.
and expected volatility of 75 per cent. for both employees and consultants.
For details of the variables used by Nirog in the Black-Scholes option pricing model for the period
ending September 30, 2014 and the years December 31, 2013, 2012 and 2011, see the following
table:
September 30,
2014
US $’000
Expected Volatility (%)
Expected Dividend Yields (%)
Expected Risk Free Interest Rate for Employees (%)
Expected Life of Options for Employees (Years)
Expected Risk Free Interest Rate for Consultants (%)
Expected Life of Options for Consultants (Years)
15.
75%
0%
2.0%
6
1.7%
5
2013
US $’000
December 31,
2012
US $’000
2011
US $’000
75%
0%
2.1%
6
1.75%
5
75%
0%
0.95%
6
0.75%
5
75%
0%
1.1%
6
0.85%
5
Subsequent Events
The Company has evaluated subsequent events and transactions for potential recognition or
disclosure in the financial information through to the date of this document. Except as described
below, no other events have occurred that require adjustment to or disclosure in the financial
information.
(a)
Certain changes have been made to the number of the Company’s authorized shares, as well
as amendments to the rate of conversion of several classes of shares. The following is a list of
the key modifications to the Company’s authorized shares:
•
The number of total Common Shares increased from 50,000,000 shares to 156,000,000
shares. The increase in the authorized shares specifically increased the number of
authorized Class Z Common Shares from 35,000,000 to 141,000,000 shares.
•
The total number of Preferred Shares increased from 22,000,000 to 22,810,000. The
increase was used to restructure the share allocation and to form a new class of Preferred
Shares, Class C. The re-allocation of the authorized preferred shares are as follows:
•
(b)
•
Class A Preferred Shares increased to 10,010,000 shares from 10,000,000 shares.
•
Class B Preferred Shares reduced to 2,800,000 shares from 12,000,000 shares.
•
Class C Preferred Shares was formed with 10,000,000 shares.
The conversion rights of Classes A, B and C Preferred Shares and Class Y Common Shares
were adjusted such that each share of these classes converts to two shares of Class Z
Common Shares or its equivalent.
The following list of changes has occurred to the Company’s issued equity, warrants and
options:
•
An increase in the shares available for issuance under the Shares Option Plan, including
any granted but unexercised options, to 20,652,573 shares.
108
(c)
•
The Company granted 15,168,062 options to employees of the Company that will vest
over a four year period and to contractors that vested immediately with a weighted
average exercise price of $0.25 per share with terms of ten years. Of the options granted,
14,670,000 were approved by the Board of Directors for early exercise during December
2014.
•
In December 2014 and January 2015, the Company issued 57,439,096 Class Z Common
Shares, of which 41,324,921 related to the purchase of shares and 16,114,175 related to
the exercise of previously granted options. The Company accepted promissory notes in
an aggregate principal amount of $14,037 thousand from certain of its employees,
officers, directors and consultants in exchange for a loan, each of which was full
recourse and secured by a pledge of shares of Class Z Common Shares purchased by the
promissory note issuer with the proceeds of the loan under a pledge and security
agreement. Each promissory note was issued in the same form, the principal sum of
which is payable by the issuer at a rate of 2.1 per cent. per annum, compounded
annually, on the unpaid balance of the principal sum. Principal and interest are due on
the earlier of the (i) nine year anniversary of the date of issuance and (ii) the sale, transfer
or assignment of the pledged collateral.
•
In December 2014, a share grant was made for 400,000 Class Z Common Shares to an
outside contractor for services rendered.
•
In addition to the above, a further 57,323 Class Z Common Shares have been issued
since 30 September 2014 for an aggregate cash consideration of $10 thousand,
comprising both the purchase of shares and the exercise of previously granted options.
•
In December 2014, 45,762 Class B Preferred Share warrants were exercised via
promissory notes in the amount of $115 thousand and cash consideration of $1
thousand. In addition, 21,052 Class A Preferred Share warrants were exercised via
promissory notes in the amount of $20 thousand.
•
The Company has agreed, under share exchange agreements entered into during March
and April 2015 with certain unitholders of Nirog, to issue Common Shares to Nirog
unitholders in exchange for 12,859,188 Nirog units held by such Nirog unitholders. As
a result of the transactions under the share exchange agreements, the Company will
obtain ownership 70.89 per cent. of the outstanding equity of Nirog. Closing of the
transaction will be concurrent with Admission.
•
On 24 April 2015, the Company and a VIPL investor, Peepul Capital Fund II LLC, entered
into an agreement pursuant to which the Company issued 3,157,894 shares of Class Z
Common Shares to the investor in exchange for the termination of certain past
obligations of the Company and the waiver of certain rights held by such investor.
The following list of changes has occurred to the Company’s debt:
•
The principal amount of $517 thousand of the Long Term Convertible Note 5, together
with accrued interest thereon, has been converted into Nirog equity.
•
The Company has issued 6 per cent. convertible promissory notes in the aggregate
amount of $1,951 thousand. Such 6 per cent. convertible promissory notes are
convertible into new Common Shares upon Admission at a price per share equal to the
Placing Price. The notes have warrants attached which are exercisable at $0.25 per
warrant share. For $1,000 thousand of the notes there is a fixed number of 30,000 new
Common Shares. For $500 thousand of the notes, the number of new Common Shares
is calculated by dividing 10 per cent. of the principal amount by the Placing Price. For
the residual $451 thousand of the notes, the number of new Common Shares is
calculated by dividing 20 per cent. of the principal amount by the Placing Price.
109
PART V
PROFORMA FINANCIAL INFORMATION
The following unaudited pro forma statement of net (liabilities)/assets of the Group has been prepared
to illustrate the effect of the Placing on the Group’s net (liabilities)/assets as if the Placing had taken
place on 30 September 2014. The pro forma financial information has been prepared on the basis set
out in the notes below, in accordance with Annex II to the Prospective Directive Regulation and in a
manner consistent with the accounting polices applied in preparing the historical financial
information as set out in Section B of Part IV (Historical Financial Information on the Group). This
unaudited pro forma statement of net (liabilities)/assets has been prepared for illustrative purposes
only, and because of its nature, addresses a hypothetical situation and, therefore does not represent
the Group’s actual financial position or results. It may not, therefore, give a true picture of the Group’s
financial position or results nor is it indicative of the results that may, or may not, be expected to be
achieved in the future.
Adjustments
Group balance
Proceeds
sheet at
of the
30 September Placing net of
expenses(2)
2014(1)
US $’000
US $’000
ASSETS
Current assets
Cash and cash equivalents
Prepaid expenses and other
current assets
Unaudited
Pro Forma(3,4)
US $’000
213
92,248
92,461
34
—
34
247
92,248
92,495
89
—
89
336
92,248
92,584
(437)
(1,679)
(99)
—
—
—
(437)
(1,679)
(99)
(2,215)
—
(2,215)
Long-term debt
(1,983)
—
(1,983)
Total liabilities
(4,198)
—
(4,198)
Net (liabilities)/assets
(3,862)
92,248
Property, plant and equipment
Total assets
LIABILITIES
Current liabilities
Accounts payable
Accrued liabilities
Current portion of long-term debt
(1)
(2)
(3)
(4)
88,386
The Group balance sheet has been extracted without material adjustment from the historical financial information of the Group
for the 9 month period ended 30 September 2014 contained in Section B of Part IV (Historical Financial Information on the
Company).
The proceeds of the Placing net of expenses reflects an estimate of the proceeds of the Placing of $100.0 million, after deduction
of estimated fees and expenses of $7.8 million.
The unaudited pro forma statement of net assets does not constitute financial statements within the meaning of section 434 of
the Companies Act.
The unaudited pro forma statement of net assets does not reflect any trading results or other transactions undertaken by the
Group since 30 September 2014. Transactions not reflected include the issuance of new long term convertible debt of
$1,951,000 and the conversion of Long Term Convertible Note 5 in the amount of $517,000 plus accrued interest into Nirog
equity.
110
PART VI
ADDITIONAL INFORMATION
1.
Responsibility Statement
The Directors, whose names and functions are set out on page 5 of this document, and the Company
accept responsibility, individually and collectively in accordance with the AIM Rules for companies,
for information contained in this document. To the best of the knowledge of the Directors and the
Company (who have taken all reasonable care to ensure that such is the case) the information
contained in this document is in accordance with the facts and does not omit anything likely to affect
the import of such information.
2.
Incorporation and registration
2.1
The Company was formed in the United States as a Delaware limited liability company,
Verseon LLC, on 18 July 2002. The Company converted from a limited liability company to a
corporation under Delaware General Corporation Law on 6 August 2007 and was renamed
Verseon Corporation. The Company’s registration number is 3549267.
2.2
The governing documents of the Company (which correspond in general terms to the articles
of association of a company incorporated in England and Wales) are its Certificate of
Incorporation and Bylaws. The Company’s registered office is located at Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware 19801. The Company’s principal place of
business is located at 48820 Kato Road, Suites 100 & 200B, Fremont, California 94538
(telephone number +1 510 225 9000).
2.3
Due to failure to file a complete annual report, the Company lost good standing with the State
of Delaware and its Certificate of Incorporation was deemed forfeited and voided by the State
of Delaware. Upon notice of such action, the Company filed a Certificate of Renewal and
Revival of Charter on 4 October 2010 and has been a validly existing corporation since the
filing of such Certificate of Renewal and Revival of Charter and is in good standing with the
State.
2.4
The Company’s legal name at the date of this document is Verseon Corporation. The Company
is domiciled in the State of Delaware, USA. The primary legislation under which the Company
operates is the Act and the Common Shares has been created by the Company pursuant to the
Act.
2.5
The liability of the Shareholders is limited.
2.6
The Company’s accounting reference date is 31 December.
2.7
Deloitte LLP, members of the Institute of Chartered Accountants in England and Wales, are the
Company’s auditors.
111
3.
Share Capital
3.1
The authorised and issued share capital of the Company as at the date of this document and
Admission is as set out below. All the issued share capital of the Company has been fully paid
up.
At the date of this document
Issued and
fully paid
Authorised
10,010,000
2,800,000
10,000,000
15,000,000
141,000,000
Subject to
Options/
Warrants
Class A Preferred Shares, par value $0.001 per share 6,830,102
21,052
Class B Preferred Shares, par value $0.001 per share 2,188,773
601,540
Class C Preferred Shares, par value $0.001 per share
—
—
Class Y Common Shares, par value $0.001 per share 15,000,000
—
Class Z Common Shares, par value $0.001 per share 63,471,956 1,657,217
At Admission
Issued and
fully paid
Authorised
300,000,000
30,000,000
3.2
Common Shares, par value $0.001 per share
Preferred Shares, par value $0.001 per share
Subject to
Options/
Warrants
149,739,909 4,020,265
—
—
The following is a summary of the changes in the Company’s authorised and issued share
capital during the three years preceding the date of this document:
3.2.1
During the three years preceding the date of this document, the Company granted an
aggregate of 588,312 options to purchase Class Z Common Shares which have not
been cancelled or exercised as detailed in 3.2.3 below.
3.2.2
During the three years preceding the date of this document, the Company granted
warrants to purchase an aggregate of 268,916 Class Z Common Shares which have not
been cancelled or exercised as described in 3.2.3 below.
3.2.3
During the three years preceding the date of this document, the Company issued an
aggregate of 57,955,919 Class Z Common Shares to holders of options and/or
warrants to purchase Class Z Common Shares upon such holders’ exercise of such
options and/or warrants.
3.2.4
On 10 December 2014, the Company issued 21,052 Class A Preferred Shares to
holders of warrants to purchase Class A Preferred Shares upon such holders’ exercise
of such warrants.
3.2.5
During the three years preceding the date of this document, the Company granted an
aggregate of 209,980 warrants to purchase Class B Preferred Shares which have not
been cancelled or exercised as described in 3.2.6 below.
3.2.6
During the three years preceding the date of this document, the Company issued an
aggregate of 2,143,499 Class B Preferred Shares to holders of convertible promissory
notes convertible into, and/or warrants to purchase, Class B Preferred Shares upon
such holders’ conversion of such notes and/or exercise of such warrants.
3.2.7
On 30 October 2014, the Company’s requisite shareholders approved the amendment
and restatement of the Company’s Certificate of Incorporation to, among other things,
authorize 10,010,000 Class A Preferred Shares, 2,800,000 Class B Preferred Shares,
10,000,000 Class C Preferred Shares, 15,000,000 Class Y Common Shares and
141,000,000 Class Z Common Shares, par value $0.001 per share in each case.
112
3.2.8
From 10 November 2014 to 2 February 2015, the Company granted 6 per cent.
convertible promissory notes to certain investors in exchange for loans in an aggregate
amount of $1,951,000. Such 6 per cent. convertible promissory notes are convertible
without discount or valuation cap into Common Shares upon Admission at a price per
share equal to the Placing Price. The 6 per cent. convertible promissory notes have
warrants attached for an aggregate of 75,654 Common Shares at a $0.25 per share
exercise price.
3.2.9
On 31 December 2014, the Company granted 400,000 Class Z Common Shares to
The Lowell Corporation for services rendered to the Company.
3.2.10 On 6 April 2015, Company’s Board of Directors and requisite shareholders approved
the Company’s filing in the State of Delaware a Certificate of Validation with respect
to its issuance of 57,883,596 Class Z Common Shares to holders of options to
purchase Class Z Common Shares as a result of the exercise of such options, thereby
validating an issuance of the Company’s Class Z Common Shares that was not
authorized under its Certificate of Incorporation.
3.2.11 On 24 April 2015, the Company granted a right to receive an aggregate number of
3,157,894 shares of the Company’s Class Z Common Shares to Peepul Capital Fund II
LLC, a previous investor in the Company’s subsidiary, Verseon India Private Limited.
3.2.12 The Company has entered into a series of stock exchange agreements with certain
investors pursuant to which the Company will issue to such investors an aggregate
amount of $15,431,025.60 in shares of the Company’s Common Shares, as further
described in paragraph 12.9 below.
3.2.13 Effective prior to Admission, the holders of the Company’s Class Y Common Shares,
Class A Preferred Shares and Class B Preferred stock elected to convert each share of
such class and series of the Company’s capital stock into two shares of the Company’s
Class Z Common Shares pursuant to a right of conversion under the Company’s
amended and restated Certificate of Incorporation as in effect prior to Admission.
3.2.14 The Company’s board of directors and requisite shareholders approved the
amendment and restatement of the Company’s amended and restated Certificate of
Incorporation, which includes the conversion of each of the issued and outstanding
shares of the Company’s Class Z Common Shares into Common Shares.
3.2.15 The Placing Shares the subject of the Placing are expected to be issued (conditional
upon Admission) pursuant to a resolution passed at a meeting of the Board held on
29 April 2015.
3.2.16 The holders of Existing Common Shares will be diluted by the issue of the Placing
Shares and other Common Shares upon Admission. The effect of the issue of Placing
Shares, the Convertible Note Shares and Nirog Conversion Shares will be that the
holders of Existing Common Shares at the date of this document will own 74.5 per
cent. of the Enlarged Issued Share Capital.
3.2.17 The Common Shares will be issued in United Kingdom pence sterling at 202 pence
per Common Share. The ISIN of the Common Shares is USU9221J1098. The SEDOL
of the Common Shares is BX7RSG6
4.
Certificate of Incorporation and Bylaws
The following is a summary of certain provisions of the Company’s Certificate of Incorporation,
Bylaws and provisions of the Act that apply to the Company with effect from Admission.
113
4.1
Objects
The Company may, and is authorised by its Certificate of Incorporation to, engage in any lawful
act or activity for which corporations may be engaged in under the Act.
4.2
Authorised Shares
The Certificate of Incorporation authorises the Company to issue one class of share to be
designated Common Shares and one class of share to be designated Preferred Shares.
4.3
Common Shares
(a)
Voting rights
Each holder of the Company’s Common Shares is entitled to one vote for each Common Share
held by such holder. The Bylaws provide that the holders of one-third of all shares entitled to
vote on a matter, represented by Shareholders of record in person or by proxy, shall constitute
a quorum, unless otherwise required by law, the Company’s Certificate of Incorporation or the
Bylaws. If a quorum is present at a meeting of the Shareholders, then, other than for the
election of directors, the affirmative vote of a majority of the shares represented and voting shall
be the act of the Shareholders, unless the vote of a greater number of shareholders of voting
classes is required by law, the Company’s Certificate of Incorporation or the Bylaws. Unless
otherwise required by law or the Certificate of Incorporation, the Bylaws provide that the
election of directors shall be decided by a plurality of the votes cast at a meeting of
shareholders by the holders of stock entitled to vote in the election.
(b)
Issue of Shares
The Company may issue shares of its capital stock from time to time for such consideration as
may be fixed by the Board; provided, however, that the consideration to be received for any
shares of capital stock subject thereto shall not be less than the par value thereof. Shares so
issued for which the consideration shall have been paid or delivered to the Company shall be
deemed fully paid stock and shall not be liable to any further call or assessment thereon, and
the holders of such shares shall not be liable for any further payments in respect of such shares.
(c)
Dividends
Subject to the prior rights and preferences (if any) applicable to Preferred Shares, holders of
Common Shares are entitled to receive dividends, when, as and if declared by the Board out
of funds legally available for such purposes. Dividends may be paid in cash, in property or in
shares of the Company’s capital stock, unless otherwise provided by applicable law or the
Certificate of Incorporation.
(d)
Rights upon liquidation, dissolution or winding-up
In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the
Company, after payment or provision for preferential or other rights (if any) of the holders of
Preferred Shares in respect thereof, the holders of Common Shares shall be entitled to receive
all the remaining assets of the Company available for distribution to its shareholders, ratably in
proportion to the number of shares of the Common Shares held by them.
(e)
Other rights
The Certificate of Incorporation provides that unless otherwise determined in a general meeting
by Shareholders holding at least two thirds of the voting rights of the Common Shares
represented at such meeting, each Shareholder shall have a pre-emption right to subscribe for
its pro rata share of Common Shares (with certain exceptions) that the Company may, from time
to time, propose to allot and issue wholly for cash, but subject to such exclusions or other
114
arrangements as the Board may deem necessary or expedient in their exclusive discretion to
deal with fractional entitlements or legal or practical problems under the laws of any country,
territory or political subdivision thereof, or the requirements of any regulatory authority or stock
exchange in any jurisdiction. The Company may, at any time and from time to time upon
approval by the Board, disapply the pre-emption provisions, provided that such disapplication
is limited to (i) the allotment for cash of Common Shares where the nominal amount of such
Common Shares during any twelve month period does not exceed in the aggregate, ten per
cent. (10 per cent.) of the Common Shares in issue from time to time, or (ii) the allotment is in
connection with a rights issue or (iii) the grant of options or other rights to subscribe for
Common Shares (and the subsequent issue of Common Shares upon the exercise or vesting of
such options or rights) pursuant to a plan approved by Shareholders for the incentivisation of
employees and consultants of the Group. These pre-emption rights will cease to apply if the
Company becomes a reporting company under the Exchange Act of 1934 (the “Exchange Act”).
4.4
Method of transfer of Shares
The Bylaws provide the Company’s shares shall be represented by certificates unless the Board
resolves that that some or all of any class or series shall be uncertificated shares that may be
evidenced by a book-entry system maintained by the registrar of such stock. Shares are
transferable in the manner prescribed by law and in the Bylaws. Transfers of shares shall be
made on the books of the Company only by the holder of record thereof, by such person’s
attorney lawfully constituted in writing and, in the case of certificated shares, upon the
surrender of the certificate thereof, which shall be cancelled before a new certificate or
uncertificated shares shall be issued. No transfer of stock shall be valid as against the Company
for any purpose until it has been entered in the stock records of the Company by an entry
showing from and to whom transferred. To the extent designated by the chief executive officer,
the chief financial officer, any vice president or the treasurer of the Company, the Company
may recognize the transfer of fractional uncertificated shares, but shall not otherwise be
required to recognize the transfer of fractional shares. The Board may appoint, or authorize any
officer or officers to appoint, one or more transfer agents and one or more registrars.
4.5
Meetings of Shareholders
The Bylaws provide for an annual or special meeting of Shareholders called in accordance with
the Bylaws. No action shall be taken by the Shareholders by written consent.
The Bylaws provide for an annual meeting of the Shareholders for the election of directors and
for the transaction of such other business as may properly come before the meeting. A special
meeting of the Shareholders for any purpose or purposes may be called at any time by the
Board, the chief executive officer or pursuant to a resolution approved by the Board and may
not be called by any other person or persons.
To determine the Shareholders entitled to vote in a Shareholder meeting, the Board may fix, in
advance, a record date, which is not more than 60 days nor less than 10 days before the date
of any such meeting. If the Board does not fix a record date, then the record date will be the
day notice is given of the meeting to the Shareholders.
4.6
Method of appointing proxy
Shareholders of record may vote at any meeting by proxy executed in writing. No such proxy
shall be voted or acted upon after three years from its date, unless the proxy provides for a
longer period.
115
4.7
Directors
(a)
Powers of Directors
Subject to the provisions of the Certificate of Incorporation, the Bylaws and applicable law, the
business and property of the Company shall be managed by the Board.
(b)
Number of Directors
The Certificate of Incorporation provides that the number of Directors constituting the Board
will be not less than three nor more than seven Directors, with the then-authorized number of
directors fixed from time to time by the Board. Pursuant to the Bylaws, the Board shall initially
consist of five directors. The Board is divided into three classes, as nearly equal in number as
possible, designated: Class I, Class II and Class III.
(c)
Resignation and Removal
A Director may resign at any time by giving notice to the Company. A Director may be removed
before the expiration of such Director’s term of office (i) for cause or without cause by the
affirmative vote of two-thirds of the voting power thereof and (ii) for cause, by the affirmative
vote or consent of at least two-thirds of the other members of the Board.
(d)
Vacancies
In the case of any vacancy on the Board, including a vacancy resulting from an increase in the
number of Directors authorised to serve on the Board, such vacancy may be filled by the
remaining Directors (whether constituting a quorum or not).
(e)
Appointment
Each director serves for a term ending on the date of the third annual meeting following the
annual meeting at which such director was elected, with the initial directors serving as follows:
each director initially appointed to Class I will serve for an initial term expiring on the
Company’s first annual meeting following the effectiveness of the provision, each director
initially appointed to Class II will serve for an initial term expiring on the Company’s second
annual meeting following the effectiveness of the provision and each director initially
appointed to Class III will serve for an initial term expiring on the Company’s third annual
meeting following the effectiveness of the provision.
(f)
Action without a Meeting
The Bylaws provide that, unless otherwise restricted by the Certificate of Incorporation or the
Bylaws, any action required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting by the consent in writing or by electronic
transmission of all the directors or members of the committee as the case may be (such written
consents or electronic transmissions to be filed with the minutes of proceedings of the Board).
(g)
Meetings of Directors
The Bylaws provide that regular meetings of the Board may be held at any place or time that
the Board or its chairman determine by a vote and may be held without notice upon such vote.
Special meetings of the Board may be called by the Chair of the Board or the Chief Executive
Officer or by any two or more Directors with at least 48 hours’ notice to each director or on at
least three days’ notice if given by mail. A majority of the Directors shall constitute a quorum
for the transaction of business. Every act or decision done or made by a majority of the
Directors at a meeting of the Board where a quorum is present is regarded as an act of the
Board unless a greater number is required by the Bylaws, law or the Certificate of
Incorporation.
116
4.8
Officers
The officers of the Company are appointed by the Board, or except in the case of the
appointment of the Chief Executive Officer, by the Chief Executive Officer and may include a
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, treasurer and
secretary and one or more vice presidents, assistant treasurers, assistant secretaries and other
officers, and any two or more offices may be held by the same person.
4.9
Exculpation and Indemnification of officers, Directors, employees and other agents
The Certificate of Incorporation provides that a Director will not be personally liable to the
Company or its Shareholders for monetary damages for breach of fiduciary duty as a director
except to the extent required by law.
The Certificate of Incorporation provides that the Company, to the fullest extent permitted by
the Act, will indemnify any person made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or investigative to which the
indemnified individual was made a party because such individual is the legal representative, is
or was a director or officer of the Company or, while a director or officer of the Company, is or
was serving at the request of the Company as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss suffered and
expenses (including attorneys’ fees) reasonably incurred by such indemnified individual.
Notwithstanding the preceding sentence, except for claims for indemnification (following the
final disposition of such proceeding) or advancement of expenses not paid in full, the Company
will be required to indemnify an indemnified individual in connection with a proceeding (or
part thereof) commenced by such indemnified individual only if the commencement of such
proceeding (or part thereof) by the indemnified individual as authorized in the specific case by
the Board.
4.10 Notices
The Bylaws provide for notice to Shareholders to be in writing and delivered personally or
mailed to the Shareholders at their address appearing on the books of the Company, unless
otherwise provided in the Bylaws or permitted by law. Without limiting the manner by which
notice otherwise may be given effectively to shareholders, notice of meetings may be given to
Shareholders by means of electronic transmission in accordance with applicable law. Notice
of any meeting need not be given to any Shareholders who shall, either before or after the
meeting, submit a waiver of notice or who shall attend such meeting, except when the
Shareholders attends for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or convened. Any
Shareholders so waiving notice of the meeting shall be bound by the proceedings of the
meeting in all respects as if due notice thereof had been given.
4.11 Disclosure of significant shareholdings
The Certificate of Incorporation provides that a person must notify the Company, subject to the
Act, the Exchange Act (if the Company has any equity securities under the Exchange Act) and
any applicable SEC regulations or other law, where the person acquires an aggregate nominal
value of the Company’s securities in which such person’s interest is equal to or more than three
per cent. of the securities and of any subsequent relevant change to their holdings (being one
per cent. (1 per cent.) increment increase or decrease while that holdings are above the three
per cent. (3 per cent.) threshold) so that these disclosures can be properly notified to AIM by
the Company.
In addition, the Board may serve a disclosure notice (“Disclosure Notice”) in writing on any
person whom the Board, or has reasonable cause to believe, to be interested in the Company’s
117
securities, requiring such person to indicate whether or not it is the case and, where such
person holds any interest in any such securities, to give such further information as may be
required by the Board. If a Disclosure Notice has been served on a person and the Company
has not received the information required in respect of the specified securities in writing within
a period of fourteen (14) days after the service of the Disclosure Notice, then the Board may
apply certain restrictions on the specified securities.
4.12 Amendments to Certificate of Incorporation and Bylaws
The Certificate of Incorporation may be amended in a manner permitted by applicable law. For
certain provisions of the Certificate of Incorporation, a vote of at least two-thirds of voting
power of all then outstanding capital stock is required for amendment. The Bylaws provide that
the Bylaws may be amended, altered, changed, adopted and repealed or new bylaws adopted
by the Board. The Shareholders, by the affirmative vote of the holders of at least two-thirds,
voting together as a single class, may make additional bylaws and may alter and repeal any
bylaws whether such bylaws were originally adopted by them or otherwise.
4.13 Takeovers
The Certificate of Incorporation provides that if a person (i) acquires shares which (taken
together with securities held or acquired by persons acting in concert with such person)
represent 30 per cent. or more of the voting rights attaching to the issued Common Shares, or
(ii) (together with persons acting in concert with such person) holds not less than 30 per cent.
but not more than 50 per cent. of the voting rights attaching to the issued Common Shares and
such person, or any person acting in concert with such person, acquires additional securities,
which will increase such person’s percentage holding of such voting rights, then any such
person (and any persons acting in concert with such person) must make a written cash offer to
the holders of all of the Common Shares to acquire the outstanding Common Shares. These
takeover provisions will cease to apply if the Common Shares ceases to be admitted to trading
on AIM or the Company becomes a reporting company under the Exchange Act.
4.14 Squeeze-out rules
Section 267 of the Act outlines the procedures by which a controlling shareholder or parent
corporation that has obtained 90 per cent. or more of the Company’s shares may consummate
a short-form merger to squeeze out the remaining Shareholders. Generally, Section 267 allows
for a short-form merger between a parent and a subsidiary, whereby a parent corporation that
owns at least 90 per cent. of the outstanding shares of each class of a subsidiary corporation’s
stock may merge the subsidiary corporation into itself, or, alternatively, may merge both itself
and the subsidiary corporation into a third corporation. A short-form merger is effected
unilaterally by a board resolution of the parent company. A shareholder would be entitled to
certain appraisal rights under Section 262 of the Act (as discussed below) in connection with
the squeeze-out merger if the merger consideration was considered by such shareholder to be
below “fair value”. However, no resolution of the Board or the Shareholders would be required
to effect the squeeze-out merger.
Under Section 262 of the Act, a holder of shares of a company that is the target of a merger,
sale or consolidation who does not wish to accept the consideration being offered may elect
to have the company pay in cash to him or her the “fair value” of his or her shares, plus accrued
interest (excluding any appreciation or depreciation in anticipation of the corporate action
unless exclusion would be inequitable), provided that the shareholder comply with the
conditions set forth in Section 262 of the Act. If there is a dispute between the shareholder and
the company as to the fair value of the shares, Section 262 of the Act provides that the fair value
may be judicially determined.
118
5.
Directors’ Interests in the Company
5.1
The interests of the Directors, their immediate families and the persons connected with them,
all of which unless otherwise disclosed are beneficial, in the Issued Share Capital or the
Enlarged Issued Share Capital of the Company.
Current
number of
Common
Shares(1)
Director
Adityo Prakash
Eniko Fodor
Thomas Arnold Hecht
Grover Turnbow Wickersham
Alastair Andrew Bertram Cade*
31,528,281
31,002,486
—
—
—
Following
Admission
number of
Common
Shares
Following
Admission
% of
Enlarged
Issued
Share
Capital
28.3% 31,528,281
27.8% 31,002,486
—
—
—
—
—
260,553
21.1%
20.7%
—
—
0.2%
Current %
of Issued
Share
Capital
(1)
Assuming that all classes of Common Shares and Preferred Shares have been converted into Common Shares, such
conversions are due to become effective on Admission.
* Mr Cade holds a 6 per cent. convertible promissory note in the amount of $500,000, $300,000 in his name and $200,000
in the name of Chaka Investments (UK) Limited, of which Mr. Cade is sole director and shareholder. Upon Admission, the
note will convert into Common Shares at the Placing Price. There is attached a warrant for $50,000 of Common Shares
at a $0.25 per share exercise price.
Save as disclosed in this paragraph 5 and paragraph 12.10 of this Part VI, none of the Directors,
nor any member of their respective immediate families, nor any person connected with them,
is or, immediately following Admission, will be interested in any share capital of the Company.
Save as disclosed in this document, no Director has any interest, whether direct or indirect, in
any transaction which is or was unusual in its nature or conditions or significant to the business
of the Company taken as a whole and which was effected by the Company during the current
or immediately preceding financial year, or during any earlier financial year and which remains
in any respect outstanding or unperformed.
5.2
Adityo Prakash and Eniko Fodor (the “Executive Directors” are husband and wife. On
Admission they, will together hold 41.8 per cent. of the Enlarged Issued Share Capital. The
Company and the Executive Directors entered into a relationship agreement on 29 April 2015
(the “Relationship Agreement”) to regulate aspects of the continuing relationship between the
Company and the Executive Directors, to ensure that the Company is capable at all times of
carrying on its business independently of the Executive Directors and that any future
transactions between the Company and the Executive Directors are on arm’s length terms and
on a normal commercial basis.
119
6.
Major Shareholders
6.1
Save as disclosed in this paragraph 6, the Directors are not aware of any person (other than the
Directors, as set out in paragraph 5 above) who, directly or indirectly, jointly or severally at the
date of this document and at Admission is or will be interested in three per cent. or more of the
Issued Share Capital or the Enlarged Issued Share Capital of the Company. None of the persons
interested, directly or indirectly, in 3 per cent. or more of the Company’s issued share capital
or voting rights has voting rights which are different from other Shareholders.
Current
number of
Common
Shares(1)
Current %
of Issued
Share
Capital
Following
Admission
number of
Common
Shares
Following
Admission
% of
Enlarged
Issued
Share
Capital
18,157,036
—
6,694,492
—
3,490,000
16.3%
—
6.0%
—
3.1%
18,157,036
15,712,930
6,694,492
4,564,434
3,490,000
12.1%
10.5%
4.5%
3.0%
2.3%
Shareholder
David Kita
Woodford Investment Management LLP
Godrej Industries(2)
Standard Life Investments Limited
David Williams
(1)
(2)
Assuming that all classes of Common Shares and Preferred Shares have been converted into Common Shares, such
conversions are due to become effective on Admission.
On 30 April 2015, the Company received a notice of exercise of warrants in respect of 85,587 shares of Class B Preferred
Stock from Godrej Industries. As soon as practicable following Admission, the Company shall issue 171,174 new
Common Shares to Godrej Industries in satisfaction of the notice of exercise and receipt of exercise monies. Application
will be made for admission to AIM of these shares upon such issue.
7.
Directors’ Terms
7.1
Executive Directors
7.1.1
Adityo Prakash
Adityo Prakash entered into an employment agreement with the Company on 29 April 2015
setting out the terms of his employment as chief executive officer. The agreement provides for
the payment by the Company to Mr. Prakash of a salary of $325,000 (£213,816) per annum
and, at the discretion of the Board, a performance bonus. Under the agreement, Mr. Prakash is
also entitled to standard Company benefits to the extent they are available to other employees
or officers, including medical insurance, retirement plan, vacation, sick leave and holidays. The
Company will provide long term disability insurance on terms and conditions that are no less
favourable than the disability insurance provided by the Company for its other officers. The
agreement provides for housing assistance in the event of relocation of the executive offices to
a location more than 30 miles from the location of the executive offices prior to relocation. Mr.
Prakash’s employment is “at will,” meaning that both Mr. Prakash and the Company have the
right to terminate his employment at any time for any reason. The agreement contains
provisions setting forth severance benefits upon termination depending on whether
employment is terminated with or without cause, with or without good reason or upon death
or disability. The agreement includes a proprietary information and inventions agreement
relating to confidentiality of the Company’s proprietary information and the assignment of
inventions and intellectual property.
7.1.2
Eniko Fodor
Eniko Fodor entered into an employment agreement with the Company on 29 April 2015
setting out the terms of her employment as chief operating officer. The agreement provides for
the payment by the Company to Ms. Fodor of a salary of $325,000 (£213,816) per annum and,
at the discretion of the Board, a performance bonus. Under the agreement, Ms. Fodor is also
entitled to standard Company benefits to the extent they are available to other employees or
officers, including medical insurance, retirement plan, vacation, sick leave and holidays. The
Company will provide long term disability insurance on terms and conditions that are no less
120
favourable than the disability insurance provided by the Company for its other officers. The
agreement provides for housing assistance in the event of relocation of the executive offices to
a location more than 30 miles from the location of the executive offices prior to relocation. Ms.
Fodor’s employment is “at will,” meaning that both Ms. Fodor and the Company have the right
to terminate her employment at any time for any reason. The agreement contains provisions
setting forth severance benefits upon termination depending on whether employment is
terminated with or without cause, with or without good reason or upon death or disability. The
agreement includes a proprietary information and inventions agreement relating to
confidentiality of the Company’s proprietary information and the assignment of inventions and
intellectual property.
7.2
Non-Executive Directors
Each Non-executive Director has entered into a letter of appointment dated 29 April 2015 at
an annual fee of $60,000 (£39,474). The appointment is terminable by either party giving one
months’ notice in writing. The agreement imposes certain restrictions on Non-executive
Directors as regards the use of intellectual property.
Thomas Hecht and Grover Wickersham have been appointed as Class I directors for an initial
term of one year, and Alastair Cade has been appointed as a Class II director for an initial term
of two years.
8.
Additional Information on the Board
8.1
Aside from directorships held within the Group, the Directors hold or have held the following
directorships or been a partner in the following partnerships within the five years prior to the
date of this document:
8.2
Name of Director
Current Directorships
Past Directorships
Adityo Prakash
Wellsa Corporation
—
Eniko Fodor
Wellsa Corporation
—
Thomas Arnold Hecht
—
—
Grover Turnbow Wickersham
Purisima Funds
S&W Seed Company
Triangle T Partners, LLC
Alastair Andrew Bertram Cade
Chaka Investments
UK Limited
Sila Energy Inc.
32|0 Capital Inc.
Sierra Leone Agriculture SA
Namibia Agriculture and
Renewables SA
Namibia Agriculture and
Renewables Namibia
Venus Capital Resources Ltd
Mytrah Energy
(UK) Limited
Mytrah Energy
India Limited
Save as disclosed in this document, none of the Directors has:
(a)
any unspent convictions in relation to indictable offences;
(b)
had any bankruptcy order made against him or entered into any voluntary
arrangements;
(c)
been a director of a company which has been placed in receivership, compulsory
liquidation, creditors’ voluntary liquidation, administration, been subject to a
121
voluntary arrangement or any composition or arrangement with its creditors generally
or any class of its creditors whilst it was a director of that company or within 12
months after he ceased to be a director of that company;
8.3
(d)
been a partner in any partnership which has been placed in compulsory liquidation,
administration or been the subject of a partnership voluntary arrangement whilst he
was a partner in that partnership or within the 12 months after he ceased to be a
partner in that partnership;
(e)
been the owner of assets or a partner in a partnership which has been placed in
receivership whilst he was a partner in that partnership or within 12 months after he
ceased to be a partner in that partnership;
(f)
been publicly criticised by any statutory or regulatory authority (including designated
professional bodies);
(g)
been disqualified by a court from acting as a director of any company or from acting
in the management or conduct of the affairs of a Company; or
(h)
had a name other than his/her existing name.
Alastair Cade was appointed as a director of Ellen Trustees Ltd on 18 October 1999 and
resigned on 31 August 2001. Ellen Trustees Ltd was subsequently dissolved.
In June 2000, the Securities and Futures Authority Limited (“SFA”) brought disciplinary
proceedings against Daniel Stewart & Company plc, which were concluded by settlement. The
proceedings were raised because Daniel Stewart & Company plc permitted its then employee,
Alastair Cade, to carry out the duties of an SFA-Registered Representative from January 1996 to
March 1998 when he was not in fact registered. Daniel Stewart & Company plc was
reprimanded and fined £12,500 and required to pay costs of £8,000, and the SFA issued a
Board Notice dated 24 October 2000.
9.
Employees
9.1
The number of employees of the Company at the end of each of the last three financial years,
the last of which ended on 31 December 2014, is as follows:
Total Employees
31 December
2014
31 December
2013
31 December
2012
14
11
10
All of the Company’s offices are located in the US at one of the Company’s two sites in Fremont,
California or San Jose, California. The Company outsources its synthetic chemistry in India,
currently utilising six Fully-Allocated Chemists or “FTEs”.
10.
Advisory and Consultant Agreements
10.1 Advisory Agreement
10.1.1 On 24 November 2014 the Company entered into an advisory agreement expiring on
31 March 2015 with the Westgate Group, Inc. to serve as an adviser to interact with
Nirog investors in relation to the ongoing anti-coagulant programme and to solicit
their input and advise the Company as to strategy and actions required to maintain a
good working relationship between Nirog investors and the Company. Pursuant to the
agreement the Company granted to Westgate Group, Inc. a warrant to purchase 8,500
Common Shares, exercisable at any time for three years from issuance at a price per
share equal to the effective price paid by independent investors immediately
preceding issuance and agreed to pay $20,000 at the end of three months of service.
122
10.2 Consultant Agreements
10.2.1 On 3 October 2014, the Company entered into a six month consultant agreement
commencing 2 October 2014 with The Lowell Corporation to serve as a consultant in
relation to legal and consulting services relating to VIPL. Pursuant to the agreement,
The Lowell Corporation will receive payments of $30,000, $30,000, $30,000 and
$10,000 at the completion of four specified steps. The agreement was extended for an
additional six months on 4 April 2015.
10.2.2 The Company has agreed to pay a consultancy fee of 0.5 per cent. of the funds raised
in the Placing to Chaka Investments UK Limited for services in connection with the
Placing. Company Director Alastair Cade is a director of Chaka Investments UK
Limited and its sole shareholder. Alastair Cade has elected to utilise approximately
$300,000 of this fee to subscribe for 97,708 Placing Shares at the Placing Price (and
which will be registered in his name).
10.2.3 The Company has agreed to pay a consultancy fee of 0.5 per cent. of the funds raised
in the Placing to RKP Capital Inc. for services in connection with the Placing.
11.
Details of Subsidiaries
11.1 As at the date of this document, the Company has the following directly owned subsidiaries:
Name
Country of
Incorporation
Proportion of Ownership
Principal Activity
Nirog Therapeutics LLC
United States
33.57%
Operating Company
Verseon India Private Limited
India
0.6% of total shares;
96.0% of voting
shares
Dormant Company
11.2 Save for the subsidiaries disclosed in paragraph 11.1 above, the Company does not hold capital
in any other undertakings that have a significant effect on the assessment of the Company’s
assets and liabilities, financial position or profits and losses.
12.
Material Contracts
The following material contracts are those contracts which have been entered into by the Company,
other than in the ordinary course of business: (a) in the two years immediately preceding the date of
this document and (b) which contain any provision under which the Company has any obligation or
entitlement which is material to the Company as at the date of this document.
12.1 Nirog Agreement
On 1 October 2009, the Company and Nirog entered into an agreement, as amended on
7 March 2014, to pursue a thrombo-embolism venture pursuant to which the Company agreed
to design, test and optimise molecules that are inhibitors of thrombin and/or Factor Xa and
possess such physiochemical properties as makes them developable further as drug candidates.
The Company also agreed to act as Nirog’s agent to attempt to outlicense or sell the lead drug
candidates to a buyer. Nirog agreed to defray any and all costs incurred by the Company for
performing its obligations as part of the TEV. Nirog further agreed to pay the Company a
minimum sum of $165,000 per month pre-animal studies and $225,000 per month postanimal studies during the term of the agreement. If Nirog is unable to defray costs in cash, it
may pay the Company in Nirog shares, subject to the approval of both boards. The agreement
states that Nirog potentially gets a license of up to three (3) compounds that are inhibitors of
thrombin and/or Factor Xa and desirable as drug candidates if the Company is unable to
outlicense one or more such molecules to a buyer during the term of the agreement. Such a
license would only be for use of those compounds in the indications (the prevention and/or
123
treatment of arterial thrombosis, venous thrombosis, and stroke due to arterial fibrillation). All
rights to other potential indications and the ownership of all intellectual property related to the
agreement are reserved to the Company.
The agreement took effect from 1 October 2009 and shall remain in effect until 30 September
2017 (per the terms of the amendment), unless terminated at an earlier date or extended to a
later date in accordance with the terms of the agreement.
The agreement contains typical representations and warranties and is governed by the laws of
the State of California.
12.2 Piramal Contract Research Agreement
On 5 November 2012, the Company and Oxygen Healthcare Ltd (now Piramal Enterprises
Limited, “Provider”) entered into a contract research agreement pursuant to which the
Company retained Provider to provide medicinal chemistry, project management and
customized chemistry services to support the Company’s discovery chemistry efforts. Provider
agreed to provide a team of initially two FTEs or “Fully Allocated Chemists” exclusively
dedicated to chemical synthesis work for the Company who produce and deliver to the
Company specific compounds and/or libraries as requested by the Company and described in
the research plans. The timeline for the project is three months and may be extended at
Company’s option by up to 24 additional months. The Company agreed to pay $5,000 per
month for each FTE for the first three months and $5,417 per month for each FTE for any
subsequent months.
The agreement contains confidentiality provisions and project ownership provisions pursuant
to which all of the Company’s “Confidential Information,” materials, documents, information,
programs, syntheses and suggestions of any kind and description including reports and
updates, supplied to Provider by the Company as well as any materials, documents,
information, programs, synthesis or suggestions generated by Provider as a result of the services
performed shall be, in each case, the sole and exclusive property of the Company. In addition,
Provider assigns and agrees to assign or cause to be assigned all right, title and interest to
specified intellectual property arising out of services performed for the Company to the
Company. Provider does not retain title to any technology or intellectual property that is
material to the Company’s business pursuant to this agreement. The contract research
agreement is effective from 5 November 2012 and terminates five years from that date, unless
extended by the parties in writing or earlier terminated pursuant to termination provisions.
The contract research agreement is governed by California law, except that any dispute relating
to the scope and/or validity of any patent shall be governed by the law of the jurisdiction to
which the disputed patent pertains.
12.3 Employment Agreement with David Kita
David Kita entered into an employment agreement with the Company on 29 April 2015 setting
out the terms of his employment as vice president, research and development. The agreement
provides for the payment by the Company to Mr. Kita of a salary of $305,000 (£200,658) per
annum and, at the discretion of the Board, a performance bonus. Under the agreement, Mr.
Kita is also entitled to standard Company benefits to the extent they are available to other
employees or officers, including medical insurance, retirement plan, vacation, sick leave and
holidays. The Company will provide long term disability insurance on terms and conditions
that are no less favourable than the disability insurance provided by the Company for its other
officers. The agreement provides for housing assistance in the event of relocation of the
executive offices to a location more than 30 miles from the location of the executive offices
prior to relocation. Mr. Kita’s employment is “at will,” meaning that both Mr. Kita and the
Company have the right to terminate his employment at any time for any reason. The agreement
124
contains provisions setting forth severance benefits upon termination depending on whether
employment is terminated with or without cause, with or without good reason or upon death
or disability. The agreement includes a proprietary information and inventions agreement
relating to confidentiality of the Company’s proprietary information and the assignment of
inventions and intellectual property.
12.4 Placing Agreement
The Placing Agreement dated 1 May 2015 between the Company, the Directors and Cenkos,
pursuant to which, subject to certain conditions, Cenkos has agreed to use reasonable
endeavours to procure subscribers for the Placing Shares at the Placing Price.
The Placing Agreement may be terminated by Cenkos in certain customary circumstances prior
to Admission. The Company has appointed Cenkos as Nominated Adviser and Broker to the
Company in connection with the Placing.
The obligation of the Company to issue the Placing Shares and the obligation of Cenkos to use
its reasonable endeavours to procure subscribers for such Placing Shares are conditional upon
certain conditions that are typical for an agreement of this nature. These conditions include,
among others: (i) Admission occurring and becoming effective by 8.00 a.m. on or prior to
7 May 2015 (or such later time and/or date, not being later than 21 May 2015, as the Company
and Cenkos may agree); (ii) the Placing Agreement not having been terminated in accordance
with its terms.
In consideration for its services in relation to the Placing and conditional upon completion of
the Placing, Cenkos will be paid a corporate finance fee of £500,000, a commission of four per
cent. of the aggregate value of the Placing Shares at the Placing Price (the “Gross Placing
Value”) plus warrants over Common Shares, exercisable for 5 years from Admission at an
exercise price of 130 per cent. of the Placing Price and equating to 1.6 per cent. of the Gross
Placing Value.
The Company and the Directors have given warranties to Cenkos concerning, inter alia, the
accuracy of the information contained in this document. The Company has also given
indemnities to Cenkos. The warranties and indemnities given by the Company and the
Directors are standard for an agreement of this nature.
The Placing Agreement is governed by the laws of England and Wales.
12.5 Nominated Adviser and Broker Agreement
A nominated adviser and broker agreement dated 29 April 2015 between Cenkos and the
Company pursuant to which the Company has appointed Cenkos to act as nominated adviser
and broker to the Company for the purposes of the AIM Rules for Companies. The Company
has agreed to pay Cenkos a fee of £60,000 plus VAT per annum for its services as nominated
adviser and broker under the agreement.
The agreement contains certain undertakings, warranties and indemnities given by the
Company to Cenkos. The agreement is for a fixed term of twelve months from the date of
Admission and thereafter is terminable upon not less than 3 months’ prior written notice by
either the Company or Cenkos.
The nominated adviser and broker agreement is governed by the laws of England and Wales.
12.6 Lock-in and Orderly Market Agreements
Pursuant to Rule 7 of the AIM Rules for Companies, the Company’s related parties and
applicable employees have agreed not to dispose of any interests in any of the Company’s
Common Shares for a period of at least 12 months from Admission.
125
Accordingly each of the Directors has entered into a lock-in and orderly market agreement
dated 29 April 2015, pursuant to which they have agreed with the Company and with Cenkos,
subject to certain limited exceptions:
•
not to dispose of any Common Shares owned by him whether before or after Admission
for a period of 18 months from Admission; and
•
only to dispose of such Common Shares through Cenkos for a further 12 month period
in order so as to ensure an orderly market for the issued share capital of the Company.
Shareholders who hold 1 per cent. or more of the Existing Common Shares and certain other
shareholders (some of whom are employees), have each entered into a lock-in and orderly
market agreement dated 29 April 2015, pursuant to which they have agreed with the Company
and with Cenkos, subject to certain limited exceptions:
•
not to dispose of any Common Shares owned by him whether before or after Admission
for a period of 12 months from Admission; and
•
only to dispose of such Common Shares through Cenkos for a further 12 month period
in order so as to ensure an orderly market for the issued share capital of the Company.
12.7 Registrar Agreement
On 29 April 2015, the Company entered into a registrar agreement under which the Registrar
will, subject to the consent of the Jersey Financial Service Commission, provide services
connected with the maintenance of the Company’s register. The registrar agreement shall last
for a period of 12 months from the commencement date. The registrar agreement contains
certain indemnities given by the Company to the Registrar which are customary for an
agreement of this nature.
12.8 VIPL Agreement
On 24 April 2015, the Company and a VIPL investor, Peepul Capital Fund II LLC, entered into
an agreement pursuant to which the Company issued 3,157,894 shares of Class Z Common
Shares to the investor in exchange for the termination of certain past obligations of the
Company and the waiver of certain rights held by such investor.
12.9 Nirog Share Exchange Agreement
The Company has agreed, under share exchange agreements entered into during March and
April 2015 with certain unitholders of Nirog, to issue Common Shares to Nirog unitholders in
exchange for 12,859,188 Nirog units held by such Nirog unitholders. As a result of the
transactions under the share exchange agreements, the Company will obtain ownership 70.89
per cent. of the outstanding equity of Nirog. Closing of the transaction will be concurrent with
Admission. Closing is conditional on the validity of representations and warranties at the time
of closing; all authorisations, approvals or permits, if any, of any US governmental authority or
state being obtained; unitholders having performed and complied in all material respects with
all covenants, agreements, obligations and conditions contained in the share exchange
agreements; shareholder approval being obtained and the Company obtaining majority
ownership in Nirog. The share exchange agreements may be terminated at any time prior to
closing by mutual consent, by either party if it notifies the other party of the other party’s
material breach and the other party fails to cure such breach within 30 days of notice, or if
Admission does not occur by the 23rd month anniversary of the share exchange agreements.
126
12.10 Common Warrant Instrument
On 29 April 2015, the Company executed a common warrant instrument deed to create and
issue warrants to subscribe for up to 1,042,210 shares in the capital of the Company. The
warrants issued pursuant to the warrant instrument confer the right but not the obligation on
the warrantholders to subscribe in cash for warrant shares at the subscription price of £2.63 per
warrant share on the terms and conditions of the warrant instrument. On 29 April 2015, the
Company issued to each of the initial warrantholders, Alastair Cade, and Cenkos, 521,105
warrants under the common warrant instrument equal in value to 1.6 per cent. of funds raised
in the Placing.
12.11 Lease Agreement for Head Offices
On 12 January 2009, the Company entered into a lease for its head offices at 48820 Kato Road,
Suites 100 & 200B, Fremont, California. The current term of the lease ends on 31 July 2015.
Under the lease, the Company must pay monthly rent of $4,507.55.
12.12 Licence for Laboratory Facilities
On 13 January 2014, the Company entered into a non-exclusive, revocable licence for its
laboratory facilities at 5941 Optical Court, San Jose, California. The licence was amended on
13 January 2014, 21 April 2014, 1 November 2014 and 9 March 2015. The licence is
revocable by the Company by giving ninety (90) days written notice. The Company must pay a
monthly licence fee of $14,712.50.
12.13 Promissory Notes
On 19 May 2011, Eniko Fodor entered into a $40,000 promissory note with the Company. The
principal sum of the promissory note is payable by Ms. Fodor with interest from the date
entered into at a rate of 5.25 per cent. per annum, compounded semi-annually, on the unpaid
balance of the principal sum. Principal and interest are due in full on 19 May 2016. The
promissory note is full recourse and is secured by a pledge of certain Common Shares and is
subject to the terms of the pledge and security agreement between the undersigned and the
Company.
In December 2014 and January 2015, the Company accepted promissory notes in an aggregate
principal amount of $14,037,135.65 from certain of its employees, officers, directors and
consultants in exchange for a loan, each of which was full recourse and secured by a pledge
of Class Z Common Shares purchased by the promissory note issuer with the proceeds of the
loan under a pledge and security agreement. Each promissory note was issued in the same
form, the principal sum of which is payable by the issuer at a rate of 2.06 per cent. per annum
or 2.10 per cent. per annum, compounded annually, on the unpaid balance of the principal
sum. Principal and interest are due on the earlier of the (i) nine year anniversary of the date of
issuance and (ii) the sale, transfer or assignment of the pledged collateral. The issuers and the
amount of the notes are as follows:
Principal Amount of
Promissory Note
Issuer
Adityo Prakash
Adityo Prakash
Adityo Prakash
Eniko Fodor
Eniko Fodor
Eniko Fodor
David Kita
$3,750,000
$656,250
$50,238.15
$3,750,000
$656,250
$49,500
$2,500,000
127
Principal Amount of
Promissory Note
Issuer
David Kita
Amy Thai
Amy Thai
Anirban Datta
Anirban Datta
Anirban Datta
David Williams
David Williams
David Williams
David Williams
Douglas Pahel
Douglas Pahel
Douglas Pahel
Douglas Pahel
Kevin Short
Kevin Short
Kevin Short
Ki C Wong
Lev Igoudin
Lev Igoudin
Lev Igoudin
Sabeer Bhatia
Subhadra Dash
Subhadra Dash
Subhadra Dash
Sunder Velamuri
13.
$437,500
$62,500
$18,750
$400,000
$120,000
$15,000
$625,000
$187,500
$40,000
$6,000
$187,500
$56,250
$12,000
$6,000
$162,500
$48,750
$13,500
$13,437.50
$12,500
$4,400
$3,750
$140,000
$25,000
$7,500
$3,560
$16,000
Employee Option Plans
13.1 Introduction
The Company has adopted the following employee option plans:
(a)
Verseon, LLC 2002 Unit Option Plan adopted on 15 August 2002 (the “2002 Plan”); and
(b)
Verseon Corporation 2007 Option Plan adopted on 6 August 2007 (the “2007 Plan”);
and
(c)
Verseon Corporation 2015 Equity Incentive Plan adopted on 29 April 2015 (the “2015
Plan”).
13.2 The 2002 Plan
13.2.1 General
The 2002 Plan provides a means by which eligible individuals may acquire an ownership
interest in the Company, pursuant to the grant of options. While the 2002 Plan expired by its
terms on 15 August 2012, outstanding options granted under the 2002 Plan remain exercisable
according to the terms of such option grants. In 2007, when the Company was converted from
an LLC to a C corporation, all options granted under the 2002 Plan were converted into options
to acquire the Company’s Class Z Common Shares.
13.2.2 Administration
The 2002 Plan is administered by a committee designated by the Board. The committee has the
power and authority to make all determinations with respect to the grant of options under the
128
2002 Plan, including, but not limited to, determining the grantee, number of shares subject to
the option, term of the option, exercise price, vesting and vesting acceleration, applicable
performance requirements, waiver or forfeiture conditions, and means of settlement. The
committee has the sole discretionary authority to interpret the 2002 Plan, to adopt rules and
policies, and to make all factual determinations, that it deems necessary or advisable to
administer the 2002 Plan. The committee may delegate ministerial duties, and employ
professional advisors, as it deems advisable.
13.2.3 Option Terms and Conditions
The committee determines the terms, conditions and restrictions upon which options are
granted, all of which shall be set forth in an award agreement. All options granted under the
2002 Plan are nonqualified options within the meaning of the Internal Revenue Code. The
2002 Plan provides for the following general terms:
•
The term of an option shall be set forth in the award agreement, but cannot be longer
than 10 years from the date of grant.
•
The per share exercise price of the option may be set either above or below “fair market
value” of a share of stock; provided, however, all options granted after 2005 provide for
an exercise price at least equal to fair market value.
•
Unless the committee determines otherwise, 25 per cent. of the options will vest on the
first anniversary of the grant date, and the remainder will vest in equal monthly
installments over the following 36 months.
•
Subject to approval by the committee, the option holder can exercise his/her options
before they become vested, subject to the Company’s right to repurchase the option
holder’s shares at the original exercise price and any other restrictions imposed by the
committee.
•
The option holder can pay the exercise price in cash, or in the sole discretion of the
committee, by promissory note, by tendering shares owned by the option holder, by
surrender of shares received in connection with exercise of the option, or through a
broker-assisted cashless exercise.
13.2.4 Effect of Termination of Employment
Upon an option holder’s termination of employment or service with the Company, his/her
options granted under the 2002 Plan will be treated as follows:
•
If employment or service is terminated for by the Company for “Cause”, the unexercised
portion of the option (whether or not vested) shall immediately expire.
•
If employment or service is terminated by reason of death or disability, the option may
be exercised, to the extent then vested, during the 12 month period following the option
holder’s death or disability, but in no event later than the expiration date set forth in such
option.
•
If employment or service is terminated by the Company for any reason other than
“Cause”, death or disability, the option may be exercised, to the extent then vested,
during the 3 month period following the option holder’s termination, but in no event
later than the expiration date set forth in such option.
Except as otherwise set forth in the option holder’s award agreement, an option that is not
vested as of the date the option holder terminates employment or service shall immediately
terminate and shall be forfeited.
129
13.2.5 Transferability of Options
Unless otherwise permitted by the committee, options are not subject to execution, attachment
or similar process, and may not be assigned, hypothecated or otherwise disposed of by the
option holder. Options may be exercised only by the option holder during his/her lifetime, and
following death, may be transferred only pursuant to the laws of descent and distribution.
13.2.6 Corporate Events
In the event of an initial public offering of the Company’s shares, option holders will take all
actions requested by the Board in connection with the consummation of such offering,
including the execution of customary lock-up, underwriting and other agreements. In
connection with a merger, consolidation or other corporate event, the committee is authorized
to proportionately adjust the aggregate number of shares of stock available for grant under the
2002 Plan, and the number of shares of stock subject to outstanding options, so that the value
of each share remains unchanged. In the event of a merger of the Company with or into another
corporation, or a sale of substantially all of the Company’s assets, the Company may cancel
outstanding options in exchange for a cash payment based on the fair market value of the stock
at the time of the transaction. To the extent the Company does not cancel the options, the
Company shall require the successor to assume each option in accordance with the terms of
such options.
13.2.7 Amendment and Termination
The Board may, at any time, amend, suspend or terminate the 2002 Plan; provided, that no
amendment, suspension or termination of the 2002 Plan shall materially and adversely alter or
impair any option previously granted without consent of the option holder.
13.2.8 Forfeiture Conditions
Options granted under the 2002 Plan are subject to certain restrictive covenants, including
confidentiality, non-compete and non-solicitation provisions. In the event the option holder
violates the restrictive covenants, he/she shall immediately forfeit any vested or unvested
options.
13.2.9 Employment and Shareholder Rights
Neither participation in the 2002 Plan, nor the grant of options thereunder, confers upon any
individual the right to continue in the employ or service of the Company, nor limits the
Company’s right to terminate such individual’s employment or service at any time. An option
holder shall have no rights as a shareholder of the Company with respect to shares issuable
upon exercise of an option until certificates representing such shares have been issued to the
option holder. Shares of common shares acquired pursuant to the exercise of an option are
subject to all restrictions and limitations on sales, transfers and other rights set forth in the
Company’s Certificate of Incorporation.
13.3 The 2007 Plan
13.3.1 General
The 2007 Plan provides a means by which eligible individuals may acquire an ownership
interest in the Company, pursuant to the grant of options. The 2007 Plan provides that a
committee designated by the Board may, in its discretion, grant options to employees,
consultants, officers and directors of the Company. The 2007 Plan will terminate on 6 August
2017 unless earlier terminated by the Board. In no event may options be granted under the plan
after such termination date. A maximum of 5,000,000 Class Z Common Shares, subject to
adjustment to reflect corporate events, may be issued pursuant to options under the 2007 Plan.
Any option that expires or is forfeited, surrendered, canceled or otherwise terminated without
130
being exercised in whole or in part will again be available for subsequent grants under the
2007 Plan. By resolution, the Board may increase the number of shares available for issuance
under the 2007 Plan by up to 5 per cent. each year.
13.3.2 Administration
The 2007 Plan is administered by the committee. The committee has the power and authority
to make all determinations with respect to the grant of options under the 2007 Plan, including,
but not limited to, determining the grantee, number of shares subject to the option, term of the
option, exercise price, vesting and vesting acceleration, applicable performance requirements,
waiver or forfeiture conditions, and means of settlement. The committee has the sole
discretionary authority to interpret the 2007 Plan, to adopt rules and policies, and to make all
factual determinations, that it deems necessary or advisable to administer the 2007 Plan. The
committee may delegate ministerial duties, and employ professional advisors, as it deems
advisable.
13.3.3 Option Terms and Conditions
The committee determines the terms, conditions and restrictions upon which options are
granted, all of which shall be set forth in an award agreement. All Options granted under the
2007 Plan are nonqualified options within the meaning of the Internal Revenue Code. The
2007 Plan provides for the following general terms:
•
The term of an option shall be set forth in the award agreement, but cannot be longer
than 10 years from the date of grant.
•
The per share exercise price of the option may be set either above or below “fair market
value” of a share; provided, however, all options granted provide for an exercise price at
or above fair market value.
•
Unless the committee determines otherwise, 25 per cent. of the options will vest on the
first anniversary of the grant date, and the remainder will vest in equal monthly
installments over the following 36 months.
•
Subject to approval by the committee, the option holder can exercise his/her options
before they become vested, subject to the Company’s right to repurchase the option
holder’s shares at the original exercise price and any other restrictions imposed by the
Committee.
•
The option holder can pay the exercise price in cash, or in the sole discretion of the
committee, by promissory note, by tendering shares owned by the option holder, by
surrender of shares received in connection with exercise of the option, or through a
broker-assisted cashless exercise.
13.3.4 Effect of Termination of Employment
Upon an option holder’s termination of employment or service with the Company unless
otherwise determined by the committee, his/her options granted under the 2007 Plan will be
treated as follows:
•
If employment or service is terminated by the Company for “Cause”, the unexercised
portion of the option (whether or not vested) shall immediately expire.
•
If employment or service is terminated by reason of death or disability, the option may
be exercised, to the extent then vested, during the 12 month period following the option
holder’s death or disability, but in no event later than the expiration date set forth in such
option.
131
•
If employment or service is terminated by the Company for any reason other than
“Cause”, death or disability, the option may be exercised, to the extent then vested,
during the 3 month period following the option holder’s termination, but in no event
later than the expiration date set forth in such option.
Except as otherwise set forth in the option holder’s award agreement, an option that is not
vested as of the date the option holder terminates employment or service shall immediately
terminate and shall be forfeited.
13.3.5 Transferability of Options
Unless otherwise permitted by the committee, options are not subject to execution, attachment
or similar process, and may not be assigned, hypothecated or otherwise disposed of by the
option holder. Options may be exercised only by the option holder during his/her lifetime, and
following death, may be transferred only pursuant to the laws of descent and distribution.
13.3.6 Corporate Events
In the event of an initial public offering of the Company’s shares, option holders will take all
actions requested by the Board in connection with the consummation of such offering,
including the execution of customary lock-up, underwriting and other agreements. In
connection with a merger, consolidation or other corporate event, the Committee is authorized
to proportionately adjust the aggregate number of shares of stock available for grant under the
2007 Plan, and the number of shares of stock subject to outstanding options, so that the value
of each share remains unchanged. In the event of a merger of the Company with or into another
corporation, or a sale of substantially all of the Company’s assets, the Company may cancel
outstanding options in exchange for a cash payment based on the fair market value of the stock
at the time of the transaction. To the extent the Company does not cancel the options, the
Company shall require the successor to assume each option in accordance with the terms of
such options.
13.3.7 Amendment and Termination
The Board may, at any time, amend, suspend or terminate the 2007 Plan; provided, that no
amendment, suspension or termination of the 2007 Plan shall materially and adversely alter or
impair any option previously granted without consent of the option holder.
13.3.8 Forfeiture Conditions
Options granted under the 2007 Plan are subject to certain restrictive covenants, including
confidentiality, non-compete and non-solicitation provisions. In the event the option holder
violates the restrictive covenants, he/she shall immediately forfeit any vested or unvested
options.
13.3.9 Employment and Shareholder Rights
Neither participation in the 2007 Plan, nor the grant of options thereunder, confers upon any
individual the right to continue in the employ or service of the Company, nor limits the
Company’s right to terminate such individual’s employment or service at any time. An option
holder shall have no rights as a shareholder of the Company with respect to shares issuable
upon exercise of an option until certificates representing such shares have been issued to the
option holder. Shares of common shares acquired pursuant to the exercise of an option are
subject to all restrictions and limitations on sales, transfers and other rights set forth in the
Company’s Certificate of Incorporation.
132
13.4 The 2015 Plan
13.4.1 General
The 2015 Plan provides for the grant of stock options, stock appreciation rights, restricted stock,
restricted stock units, performance units, performance shares, cash-based awards and other
stock- based awards to non-employee directors, officers, employees, advisors, consultants and
independent contractors. Once the 2015 Plan is effective, no further grants will be made under
the 2007 Plan. No awards have yet been made under the 2015 Plan.
13.4.2 Administration
The Remuneration Committee of the Board will have discretionary authority to administer the
2015 Plan in accordance with its terms and applicable laws, and will determine the nonemployee directors, employees, advisors, consultants and independent contractors who will be
granted awards under the 2015 Plan, the size and types of awards, the terms and conditions of
awards and the form and content of the award agreements representing awards; provided that
‘‘incentive stock options’’ may be granted only to employees of the Company and its
subsidiaries. To the extent permitted by applicable law, the Remuneration Committee may
delegate all or any part of its responsibilities and powers, and the Board will be permitted to
exercise all of the Remuneration Committee’s powers under the 2015 Plan.
13.4.3 Shares Subject to the 2015 Plan
An aggregate of 15,000,000 Common Shares is available for delivery pursuant to awards under
the 2015 Plan. The 2015 Plan contains a provision that provides annual increases in the
number of Common Shares available for delivery pursuant to awards on each 1 January
beginning 1 January 2016, and ending on (and including) 1 January 2025. Such annual
increase will equal 2 per cent. of the total shares of Common Shares outstanding on 31
December of the preceding calendar year; provided, that the Board can decide prior to the first
day of any calendar year that there will be no increase, or a lesser increase, for such calendar
year.
The shares awarded under the 2015 Plan will be either authorized and unissued shares or
previously issued shares that have been reacquired and held as treasury stock. Any shares
subject to an award that is forfeited, terminated, cancelled or otherwise expires, or is settled for
cash, will be available for future awards under the 2015 Plan. If the Company acquires or
combines with another company, any awards that may be granted under the 2015 Plan in
substitution or exchange for outstanding share options or other awards of that other company
will not reduce the shares available for issuance under the 2015 Plan. All of the authorized
shares may be granted as awards of ‘‘incentive stock options.” No awards can be made on or
after the tenth anniversary of the effective date of the 2015 Plan.
In the event of a change in the Company’s capital structure, such as a dividend, share split or
recapitalisation, or a corporate transaction, such as a merger, consolidation, reorganisation or
spin-off, the Remuneration Committee will appropriately adjust the number of shares available
for awards under the 2015 Plan and the number and exercise price of shares covered by any
outstanding award.
13.4.4 Share Options
Share options granted under the 2015 Plan will be either ‘‘incentive stock options,’’ which may
be eligible for special tax treatment under the Internal Revenue Code, or ‘‘nonqualified stock
options.” The type of option, number of shares covered by each option, and the terms
applicable to each such option, will be determined by the Remuneration Committee. The
exercise price of each option will be set by the Remuneration Committee but cannot be less
than 100 per cent. of the fair market value of the Common Shares at the time of grant (or
133
110 per cent. of such fair market value, in the case of an ‘‘incentive stock option’’ granted to a
10 per cent. or more Shareholder). Fair market value generally means the closing price of the
Common Shares on AIM on the option grant date. The exercise price of any share options will
be paid by check, or, with the Committee’s approval, Common Shares already owned by the
option holder, a cashless broker-assisted exercise, or withholding of shares otherwise
deliverable upon exercise of the option. Options will expire at the times and on the terms
established by the Remuneration Committee, not later than the tenth anniversary of the grant
date (or the fifth anniversary of the grant date in the case of an “incentive stock option” to a 10
per cent. or more Shareholder). Options generally terminate when the holder’s employment or
service terminates, but in specified circumstances may be exercised for up to one year
following the holder’s termination of employment or services.
13.4.5 Stock Appreciation Rights
Stock appreciation rights, or SARs, give the holder a right to receive an amount equal to the
excess of the (a) fair market value of a Common Share on the exercise date, over (b) the grant
price per share, multiplied by the number of SARs exercised. The grant price per share of a SAR
generally cannot be less than 100 per cent. of the fair market value of the Common Share on
the grant date. SARs expire at the times and on the terms established by the Remuneration
Committee, not later than the tenth anniversary of the grant date, and may be settled in cash,
shares or a combination.
13.4.6 Restricted Stock and Restricted Stock Units
Restricted stock awards are Common Shares that are subject to forfeiture until the applicable
restrictions established by the Remuneration Committee lapse. Restricted stock units are
denominated in units of Common Shares, and upon vesting will be settled in shares, a cash
payment based on the value of shares or a combination. A recipient of restricted stock will
generally have the rights and privileges of a Shareholder during the restriction period, including
the right to receive any dividends, which may be subject to the same restrictions as the
restricted stock. A recipient of restricted stock units will have none of the rights of a Shareholder
until shares are actually delivered.
13.4.7 Performance Units, Performance Shares and Cash-based Awards
Performance units, performance shares and cash-based awards are amounts credited to a
bookkeeping account established for the participant. A performance unit is a fixed or variable
dollar denominated unit with a value determined by the Remuneration Committee and stated
in the award agreement. The value of a performance share is based on the value of Common
Shares. A cash-based award has a value that is established by the Remuneration Committee at
the time of its grant. Whether a performance unit, performance share or cash-based award
actually results in a payment depends upon the extent to which performance goals or other
conditions established by the Remuneration Committee are satisfied. Payment can be made in
cash, Common Shares or a combination thereof.
13.4.8 Other Share-Based Awards and Dividend Equivalents
The Remuneration Committee is authorized to grant to participants other types of share-based
awards under the 2015 Plan, which will be valued in whole or in part by reference to Common
Shares, on such terms and conditions as the Remuneration Committee determines. The
Remuneration Committee is also authorised to grant dividend equivalents with respect to
shares that have not actually been issued under an award, such as restricted stock units.
Dividend equivalents may not be paid until and to the extent the underlying award vests or is
exercised.
134
13.4.9 Performance-Based Awards
Awards may, in the Remuneration Committee’s discretion, be conditioned on the achievement
of objectively determinable performance goals based on one or more specified performance
measures, determined in relation to the Company or its subsidiaries or affiliates, or any of their
business units, divisions, services or products, or in comparison to a designated group of other
companies or index. The Remuneration Committee will determine whether the performance
goals applicable to a particular performance-based award have been met, but retains the
discretion to adjust performance-based awards.
13.4.10 Transferability of Awards
Options, SARs, unvested restricted stock and other awards under the 2015 Plan generally may
not be sold or otherwise transferred except in the event of a participant’s death to his or her
designated beneficiary or by will or the laws of descent and distribution.
13.4.11 Change in Control
In the event of a change in control, all outstanding awards under the 2015 Plan may be
honored, assumed or replaced with new rights by the surviving or acquiring entity. If the
surviving or acquiring entity elects not to honor, assume or replace such awards with new
rights, then such awards will fully vest and become nonforfeitable and exercisable immediately
prior to the change in control. To the extent not exercised prior the change in control, such
awards will be cancelled in exchange for an amount equal to the fair market value of the
Common Shares on the change in control date, less any applicable exercise price.
13.4.12 Amendment and Termination
The Board has the authority to amend, alter, suspend or terminate the 2015 Plan in whole or
in part, in its sole discretion, except that Shareholder approval is required for any amendment
that would: (a) increase the maximum number of shares available under the 2015 Plan; (b)
decrease the minimum option exercise price or SAR grant price; (c) change the class of persons
eligible to receive awards; (d) extend the duration of the 2015 Plan; (e) change the performance
measures; or (f) otherwise require Shareholder approval to comply with applicable laws,
regulations or rules. In general, the Remuneration Committee cannot amend outstanding
awards in a manner that would materially impair the participant’s rights without his or her the
consent. The 2015 Plan prohibits the Company from reducing the exercise price of an
outstanding share option or SAR, or replacing an outstanding share option or SAR with a new
option or SAR that has a lower exercise price, or with any other type of new award, except in
connection with a corporate transaction, without first obtaining Shareholder approval.
13.5 Issuances under the 2002 Plan and the 2007 Plan
The Company also has issued, and there remain outstanding, options to purchase 869,312
shares of Class Z Common Shares.
14.
Warrants
The Company has issued, and there remain outstanding, warrants to purchase 789,030 shares of Class
Z Common Shares, 21,052 shares of Class A Preferred Shares and 601,540 shares of Class B Preferred
Shares.(1)
15.
Related Party Transactions
Save as disclosed in paragraph 12 above, and as disclosed in Note 10 to the Historical Financial
Information on the Group set out in Section B of Part IV of this document, there are no related party
(1)
To calculate the number of Common Shares under warrant, 10 per cent. of the principal amounting to $500,000 (converted into
Sterling) is divided by the Placing Price, 20 per cent. of the principal amounting to $451,000 (converted into Sterling) is divided
by the Placing Price and the remainder of the principal is to be satisfied by the issue of 30,000 new Common Shares.
135
transactions required to be disclosed under the accounting standards applicable to the Company to
which the Company was a party during the 3 years preceding the date of this document.
16.
Working Capital
The Directors are of the opinion that, having made due and careful enquiry, after taking into account
the net proceeds it receives from the Placing, the working capital available to the Company and the
Group will be sufficient for their present requirements, that is, for at least the next 12 months from
the date of Admission.
17.
Litigation
There are no governmental, legal or arbitration proceedings (including any such proceedings which
are pending or threatened against it of which the Company is aware) during the period of 12 months
prior to the date of this document which may have or have had in the recent past a significant effect
on the Company’s and/or the Group’s financial position or profitability.
18.
Taxation
18.1 UK Taxation
The following statements are intended only as a general guide to current UK tax legislation and
to the current practice of HM Revenue & Customs (“HMRC”) and may not apply to certain
classes of Shareholders, such as dealers in securities, insurance companies, pension funds,
trustees, employees and collective investment schemes. They relate only to persons who are the
absolute beneficial owners of Common Shares, are resident in the UK for tax purposes (except
where stated otherwise) and who hold Common Shares as investments. The tax position of any
UK resident tax exempt entity, or an individual who is not UK domiciled, is not dealt with
below and specific advice should be sought.
This summary relates only to certain limited aspects of the taxation treatment of owners of
Common Shares and should not be relied upon as constituting legal or tax advice. Any person
who is in any doubt as to his tax position, or who is subject to tax in any jurisdiction other than
the UK, should consult his professional advisers immediately. In addition, the tax position of
any shareholder who together with connected persons holds at least 10 per cent. of the
Common Shares of the Company is not dealt with below and specific advice should be sought.
18.1.1 Tax on chargeable gains
A disposal of Common Shares by any shareholder who is (at any time in the relevant UK tax
year) resident in the UK may give rise to a chargeable gain or allowable loss for the purposes
of UK taxation of chargeable gains (subject to any available exemptions or reliefs). Special rules
may apply to tax gains on disposals made by individuals at a time when they are temporarily
resident outside the UK.
Any chargeable gain (or allowable loss) will be calculated by reference to the consideration
received for the disposal of the Common Shares less the allowable cost to the shareholder of
acquiring such Common Shares. For a shareholder within the charge to UK corporation tax, an
indexation allowance (calculated by reference to the UK retail prices index) in respect of the
acquisition cost of the Common Shares should be available to reduce the amount of any
chargeable gain realised on a subsequent disposal.
18.1.2 Dividends
Dividends received on the Common Shares by a shareholder subject to UK corporation tax will
generally be exempt from UK corporation tax, subject to certain specific anti-avoidance rules.
136
Dividends received on the Common Shares by an individual shareholder who is resident in the
UK carry an associated tax credit of one-ninth of the cash dividend (as grossed up for United
States withholding tax, if any). Such individuals will be liable to UK income tax on the
aggregate of the dividend (as grossed up for United States withholding tax, if any) and the
associated tax credit at either the ordinary rate of 10 per cent., the higher rate of 32.5 per cent.
or the additional rate of 37.5 per cent. Effectively those liable to tax at the basic rate will have
no further liability to income tax in respect of the dividend. Those who are liable to tax at the
higher or additional rates will have an additional tax liability (after taking into account the tax
credit) currently of 25 per cent. and 30.55 per cent. respectively. It should be noted that the
one ninth tax credit described above does not give rise to any repayment rights in respect of
same.
If any dividend has been subject to United States withholding tax (“Withholding Tax”), the
amount received plus the Withholding Tax will be included in the assessable income of UK
resident individual shareholders. In these circumstances, such shareholders may be entitled to
a further credit for the foreign tax paid. UK resident corporate shareholders who are exempt
from corporation tax on such dividends will not be able to utilise a credit for Withholding Tax.
18.1.3 Stamp duty and stamp duty reserve tax (“SDRT”)
The statements below are intended as a general guide to the current position. They may not
apply to certain intermediaries who are not liable to stamp duty or SDRT, or (except where
stated otherwise) to persons connected with depositary arrangements or clearance services
who may be liable at a higher rate.
18.1.4 Common Shares held in certificated form
No stamp duty or SDRT should be payable on the issue of Placing Shares.
No charge to stamp duty will arise in relation to the transfer of Common Shares held in
certificated form provided that all instruments relating to the transfer are executed and retained
outside the UK and do not relate to matters or actions performed or to be performed in the UK
(subject to the exemption for AIM-listed shares discussed below in paragraph 18.1.5). However
any instrument effecting or evidencing a transfer of Common Shares held in certificated form
whether executed in the UK or offshore may not (except in criminal proceedings) be given in
evidence or be available for any purpose whatsoever in the UK unless duly stamped or certified
as exempt. The rate of stamp duty is 0.5 per cent. on the amount or value of the consideration
for the relevant transfer, rounded up to the next multiple of £5. Interest on the stamp duty will
accrue from 30 days after the date the instrument was executed.
No charge to SDRT will arise in respect of an agreement to transfer Common Shares held in
certificated form, provided such shares are not registered in any register kept or maintained in
the UK by or on behalf of the Company.
18.1.5 Common Shares held in uncertificated form
It is not currently envisaged that Common Shares of the Company will be held in uncertificated
form as depository interests although, the Company intends, when appropriate, to apply for
depository interests, representing the Common Shares, to be held in CREST in uncertificated
form. Therefore the discussion below has been included for information purposes.
Due to the restrictions of the CREST system, shares of companies incorporated outside the UK,
such as the Company, may not be settled directly in the CREST system. Accordingly, should
Common Shares be held within the CREST system in uncertificated form, they will be held in
the form of depositary interests issued by the depositary.
137
Subject to the exemption discussed below, agreements to transfer depositary interests in shares
of companies listed on AIM are liable to SDRT at the rate of 0.5 per cent. of the value of the
consideration for the transfer. Interest on the SDRT will accrue from 14 days after the trade date
in respect of transfers secured in CREST.
The Finance Act 2014 abolished stamp duty and SDRT on shares which are admitted to trading
on AIM so long as such shares are not listed on a recognised stock exchange. In order to claim
the exemption the Company must complete a self certification.
18.2 US Federal Income Taxation
The following is a summary of certain material federal income tax consequences of the
ownership and disposition of Common Shares by a Non-US Holder. You are a Non-US Holder
if you are, for federal income tax purposes, the beneficial owner of the Company’s Common
Shares and are:
(i)
a nonresident alien individual;
(ii)
a foreign corporation;
(iii)
an estate whose income is not subject to federal income tax regardless of its source; or
(iv)
a foreign trust.
This discussion does not consider the specific facts and circumstances that may be relevant to
a particular Non-US Holder and does not address the treatment of a Non-US Holder under the
laws of any state, local or foreign taxing jurisdiction.
This summary does not address holders of equity interests in a Non-US Holder. If a partnership
(or any other entity treated as fiscally transparent for US federal income tax purposes) holds
Common Shares, the tax treatment of a partner in such partnership generally will depend upon
the status of the partner and the activities of the partnership. Any such partner or partnership
should consult their tax advisers as to the US federal income tax consequences to them of the
ownership and disposition of the Company’s Common Shares.
This summary is based on the tax laws of the United States including the Internal Revenue
Code of 1986 (the “Code”), its legislative history, existing and proposed regulations
promulgated thereunder, published rulings and court decisions, all as currently in effect and all
of which are subject to change at any time, possibly with retroactive effect.
INVESTORS SHOULD CONSULT THEIR TAX ADVISERS TO DETERMINE THE TAX
CONSEQUENCES TO THEM OF OWNING AND DISPOSING OF COMMON SHARES,
INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATION OF THE US FEDERAL
INCOME TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE APPLICATION OF
THE ALTERNATIVE MINIMUM TAX AND STATE, LOCAL, NON-US OR OTHER TAX LAWS.
18.2.1 Dividends
Except as described below, any dividend paid to you will be subject to federal withholding tax
at a rate of 30 per cent. of the gross amount of the distribution or at a lower rate if you are
eligible for the benefits of an income tax treaty that provides for a lower rate. Even if you are
eligible for a lower treaty rate, the Company and other payors will generally be required to
withhold at a 30 per cent. rate (rather than the lower treaty rate) on dividend payments to you,
unless you have furnished to the Company or another payor:
(i)
a valid Internal Revenue Service (“IRS”) Form W–8 or an acceptable substitute form upon
which you certify, under penalties of perjury, your status as a Non-US person (as defined
by the Code) and your entitlement to the lower treaty rate with respect to such payments;
or
138
(ii)
in the case of payments made outside the United States to an offshore account (generally,
an account maintained by you at an office or branch of a bank or other financial
institution at any location outside the United States), other documentary evidence
establishing your entitlement to the lower treaty rate in accordance with US Treasury
regulations.
A Non-US Holder eligible for a reduced rate of federal withholding tax pursuant to an income
tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim
for refund with the IRS.
If dividends paid to you are “effectively connected” with your conduct of a trade or business
within the United States, and, if required by a tax treaty, the dividends are attributable to a
permanent establishment that you maintain in the United States, the Company and other
payors generally are not required to withhold tax from the dividends, provided that you have
furnished to the Company or another payor a valid IRS Form W–8ECI or an acceptable
substitute form upon which you represent, under penalties of perjury, that you are a Non-US
person and the dividends are effectively connected with your conduct of a trade or business
within the United States and are includible in your gross income.
“Effectively connected” dividends are taxed at rates applicable to US citizens, resident aliens
and domestic US corporations. If you are a corporate Non-US Holder, “effectively connected”
dividends that you receive may, under certain circumstances, be subject to an additional
“branch profits tax” at a 30 per cent. rate or at a lower rate if you are eligible for the benefits
of an income tax treaty that provides for a lower rate.
18.2.2 Gain on Disposition of Common Shares
If you are a Non-US Holder, you generally will not be subject to federal income tax on gain
that you recognize on a disposition of Common Shares unless:
(i)
the gain is “effectively connected” with your conduct of a trade or business in the United
States, and the gain is attributable to a permanent establishment that you maintain in the
United States, if that is required by an applicable income tax treaty as a condition for
subjecting you to US taxation on a net income basis;
(ii)
you are an individual, you hold Common Shares as a capital asset, you are present in the
United States for 183 or more days in the taxable year of the sale and certain other
conditions exist; or
(iii)
we are or have been a US real property holding corporation for federal income tax
purposes and certain exemptions are inapplicable.
If you are a corporate Non-US Holder, “effectively connected” gains that you recognize may
also, under certain circumstances, be subject to an additional “branch profits tax” at a 30 per
cent. rate or at a lower rate if you are eligible for the benefits of an income tax treaty that
provides for a lower rate.
The Company does not believe that it has been or is a US real property holding corporation for
federal income tax purposes. The Company does not anticipate becoming a US real property
holding corporation for federal income tax purposes.
18.2.3 Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (“FATCA”) imposes a 30 per cent. withholding tax on
certain types of payments to non-US financial institutions (an “FFI”) that fail to comply with
information reporting requirements or certification requirements in respect of their direct and
indirect United States shareholders and/or United States accountholders. This could include
139
non-US Holders holding Common Shares through an account with an FFI and receiving the
Company’s dividends.
Many governments have entered into intergovernmental agreements with the United States that
implement FATCA. Under this approach, an FFI that satisfies the conditions imposed under a
bilateral agreement and any applicable implementing legislation generally will report FATCA
information to its local governmental authorities rather than the IRS and in turn will be treated
as FATCA compliant. The local governmental authorities will then report such information to
the IRS in compliance with the bilateral agreement. Additional information and/or certifications
may be requested by such an FFI as a result of FATCA directly or the bilateral agreement.
Prospective investors should consult their tax advisers on how these rules may apply to owning
or disposing of Common Shares.
18.2.4 Information Reporting and Backup Withholding
You generally will be required to comply with certain certification procedures to establish that
you are not a US person in order to avoid backup withholding with respect to dividends or the
proceeds of a disposition of Common Shares. In addition, the Company is required to annually
report to the IRS and you the amount of any distributions paid to you, regardless of whether the
Company actually withheld any tax.
Copies of the information returns reporting such distributions and the amount withheld, if any,
may also be made available to the tax authorities in the country in which you reside under the
provisions of an applicable income tax treaty.
Backup withholding is not an additional tax. The amount of any backup withholding from a
payment to a Non-US Holder may entitle the Non-US Holder to a refund, provided that the
required information is timely furnished to the IRS in the manner required.
19.
Effects of US Domicile
The Company is a US corporation organised under the laws of the State of Delaware. There are a
number of differences between the corporate structure of the Company and that of a public limited
company incorporated in England under the Companies Act 2006. While the Directors consider that
it is appropriate to retain the majority of the usual features of a US corporation, the Directors intend
to take certain actions to conform to UK standard practice adopted by companies under English law
and admitted to AIM. Set out below is a description of the principal differences and, where
appropriate, the actions the Board intends to take.
19.1 Pre-emption rights
Shareholders do not have pre-emption rights under the Act over further issues of common
shares of the Company and the Company shall have no obligation to provide any pre-emptive
rights to its shareholders.
However, the Certificate of Incorporation provides that unless otherwise determined in a
general meeting by Shareholders holding at least two thirds of the voting rights of the Common
Shares represented at such meeting, each Shareholder shall have a pre-emption right to
subscribe for its pro rata share of Common Shares (with certain exceptions) that the Company
may, from time to time, propose to allot and issue wholly for cash, but subject to such
exclusions or other arrangements as the Board may deem necessary or expedient in their
exclusive discretion to deal with fractional entitlements or legal or practical problems under
the laws of any country, territory or political subdivision thereof, or the requirements of any
regulatory authority or stock exchange in any jurisdiction. The Company may, at any time and
from time to time upon approval by the Board, disapply the pre-emption provisions, provided
that such disapplication is limited to (i) the allotment for cash of Common Shares where the
nominal amount of such Common Shares during any twelve month period does not exceed in
140
aggregate, ten per cent. (10 per cent.) of the Common Shares in issue from time to time, or (ii)
the allotment is in connection with a rights issue or (iii) the grant of options or other rights to
subscribe for Common Shares (and the subsequent issue of Common Shares upon the exercise
or vesting of such options or rights) pursuant to a plan approved by Shareholders for the
incentivisation of employees and consultants of the Company. These pre-emption rights will
cease to apply if the Company becomes a reporting company under the US Exchange Act.
19.2 Inapplicability of the Takeover Code and anti-takeover effects of the Certificate of Incorporation
and Bylaws and other relevant law
The Company is not subject to the Takeover Code because its registered office and its place of
central management are outside the UK, the Channel Islands and the Isle of Man. As a result,
certain of the protections which are afforded to Shareholders under the Takeover Code, for
example in relation to a takeover of a company or certain shareholding activities by
shareholders, do not apply to the Company. However, the Certificate of Incorporation contains
similar procedures to the Takeover Code in the event of any party (or parties acting in concert)
obtaining 30 per cent. or more of the voting rights attaching to the issued Common Shares. See
paragraph 4 of this Part VI above for more details.
19.3 Disclosure of interests in Common Shares
The Company’s Certificate of Incorporation provide that where a Shareholder either (i) to his
knowledge acquires an aggregate nominal value of a class, or series, of shares in which his
interest is equal to or more than three per cent of the aggregate outstanding shares of that class
of shares (a “Notifiable Interest”); (ii) ceases to have a Notifiable Interest; or (iii) becomes aware
that he has acquired a Notifiable Interest, or that he has ceased to have a Notifiable Interest in
which he was previously interested, he shall notify the Company of his interest. This obligation
also arises where there is an increase or decrease in the level of a Shareholder’s Notifiable
Interest through any single percentage. It should be noted that the provisions regarding
notification of interests in shares contained in the Disclosure and Transparency Rules of the
FCA do not apply to the Company, therefore, the Company is not able to rely on such rules for
the purpose of satisfying its obligations to publish notifications of relevant changes to its
significant shareholders in accordance with Rule 17 of the AIM Rules. In addition, compliance
with any disclosure requirement under Delaware General Corporation Law or other applicable
laws and regulations from time to time may not always ensure compliance with the
requirements set out in the Certificate of Incorporation which may vary in a number of respects.
20.
Consents
20.1 Deloitte LLP have given and not withdrawn their written consent to the inclusion herein of their
report set out in Section A of Part IV (“Historical Financial Information on the Group”) of this
document in the form and context in which it is included and have accepted responsibility for
such report.
20.2 King & Spalding LLP, as patent attorneys, have given and not withdrawn their written consent
to the inclusion of their report in Part III of this document in the form and context in which it
is included and have accepted responsibility for such report.
20.3 Cenkos has given and not withdrawn its written consent to the issue of this document with
inclusion herein of references to its name in the form and context in which they are included.
21.
No significant change
Save as disclosed in note 15 of Section B of Part IV of this document, there has been no significant
change in the trading or financial position of the Group since 30 September 2014 (being the date to
which the Historical Financial Information on the Group set out in Section B of Part IV of this
document was prepared).
141
22.
Other information
22.1 The total costs, charges and expenses payable by the Company in connection with the
Admission and the Placing are estimated to be £5.1 million (exclusive of VAT).
22.2 No person (excluding professional advisers otherwise disclosed in this document and trade
suppliers) has received, directly or indirectly, from the Company within 12 months preceding
Admission, or entered into contractual arrangements (not otherwise disclosed in this
document) to receive on or after Admission, directly or indirectly from the Company any of the
following:
(a)
fee totalling £10,000 or more;
(b)
securities in the Company with a value of £10,000 or more, calculated by reference
to the issue price of the Common Shares; or
(c)
any other benefit with a value of £10,000 or more.
22.3 Where information contained in this document has been sourced from a third party, the
Company confirms that such information has been accurately produced and, so far as the
Company is aware and is able to ascertain from the information published by the third party,
no facts have been omitted which would render the reproduced information inaccurate or
misleading.
22.4 Save as disclosed in this document, there are no known trends, uncertainties, demands,
commitments or events that are reasonably likely to have a material adverse effect on the
Company’s prospects for at least the current financial year.
22.5 Save as disclosed in this document, the Company has no principal investments for the period
covered by the Historic Financial Information contained in this document and has no principal
investments in progress and no principal future investments in relation to which it has made a
firm financial commitment.
22.6 The Directors are unaware of any environmental issues that may affect the Company’s
utilisation of its tangible fixed assets.
23.
Copies of this Document
Copies of this document will be available, free of charge, at the offices of King & Spalding
International LLP, 125 Old Broad Street, London EC2N 1AR from the date of this document during
normal business hours on any weekday (Saturdays, Sundays and public holidays excepted) for at least
one month from the date of Admission.
142
PART VII
RESTRICTIONS ON TRANSFERS TO US PERSONS
Terms used in the following description that are defined in Regulation S of the US Securities Act are
used as defined therein.
The Common Shares have not been, and will not currently be, registered under the US Securities Act
or under any securities laws of any state or other jurisdiction of the US and are “restricted securities”
as defined in Rule 144 promulgated under the US Securities Act. A purchaser of Placing Shares may
not offer, sell, pledge or otherwise transfer Placing Shares, directly or indirectly, in or into the United
States or to, or for the account or benefit of, any US person, except pursuant to a transaction meeting
the requirements of Rules 901 to 905 (including the Preliminary Notes) of Regulation S, pursuant to
an effective registration statement under the US Securities Act or pursuant to an exemption from the
registration requirements of the US Securities Act. Hedging transactions in the Common Shares may
not be conducted, directly or indirectly, unless in compliance with the US Securities Act. The
certificates evidencing the Placing Shares will bear a legend to the following effect, unless the
Company determines otherwise in compliance with applicable law.
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “US SECURITIES ACT”) OR ANY
US STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT IF SUCH TRANSFER IS EFFECTED (1) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULES 901 THROUGH 905 (INCLUDING THE
PRELIMINARY NOTES) OF REGULATION S UNDER THE US SECURITIES ACT, (2) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE US SECURITIES ACT, OR (3) PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE US
SECURITIES ACT IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE US FEDERAL AND
STATE SECURITIES LAWS AND IN THE CASE OF (3), AN OPINION OF COUNSEL SHALL BE
DELIVERED TO THE COMPANY (AND UPON WHICH THE COMPANY MAY RELY) REGARDING
THE AVAILABILITY OF SUCH EXEMPTION. HEDGING TRANSACTIONS INVOLVING THE
COMMON SHARES MAY NOT BE CONDUCTED, DIRECTLY OR INDIRECTLY, UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT.
Prior to one year after the later of (1) the time when the Placing Shares are first offered to persons
other than distributors in reliance upon Regulation S and (2) Admission:
(a)
every purchaser of Placing Shares (other than a distributor) will be required to certify that it is
not a US person and is not acquiring the securities for the account or benefit of any US person,
or that it is a US person who purchased securities in a transaction that did not require
registration under the US Securities Act;
(b)
every purchaser of the Placing Shares will be required to agree to resell such Placing Shares
only in accordance with the provisions of Rules 901 to 905 (including the Preliminary Notes)
of Regulation S, pursuant to an effective registration statement under the US Securities Act or
pursuant to an exemption from such registration requirements and will be required to agree not
to engage in hedging transactions, directly or indirectly, with regard to the Placing Shares
unless in compliance with the US Securities Act;
(c)
the certificates evidencing the Placing Shares will contain a legend to the effect that transfer is
prohibited except in accordance with the provisions of Rules 901 to 905 (including the
Preliminary Notes) of Regulation S, pursuant to an effective registration statement under the US
Securities Act or pursuant to an exemption from such registration requirements;
143
(d)
the Company is required to refuse to register any transfer of the Placing Shares not made in
accordance with the provisions of Rules 901 to 905 (including the Preliminary Notes) of
Regulation S, pursuant to an effective registration statement under the US Securities Act, or
pursuant to an available exemption from such registration; and
(e)
each distributor selling securities to a distributor, a dealer (as defined in Section 2(a)(12) of the
US Exchange Act), or a person receiving a selling concession, fee or other remuneration will
be required to send a confirmation or other notice to the purchaser stating that the purchaser
is subject to the same restrictions on offers and sales that apply to a distributor.
Each purchaser of Placing Shares acquired in reliance on Regulation S will be required, prior to any
transfer of such Placing Shares, to represent and agree as follows, that:
(a)
the purchaser is not a US person and is not acting for the account or benefit of a US person
and is not located in the United States at the time the investment decision is made with respect
to the Placing Shares;
(b)
the purchaser understands that the Placing Shares have not been registered under the US
Securities Act and may not be offered, sold, pledged or otherwise transferred by such purchaser
except: (i) in an offshore transaction to non-US persons and otherwise meeting the
requirements of Rule 901 through Rule 905 (including Preliminary Notes) of Regulation S; (ii)
pursuant to an effective registration statement under the US Securities Act; or (iii) pursuant to
an exemption from the registration requirements of the US Securities Act, and in each case, in
accordance with all applicable securities laws of the states of the United States and any other
applicable jurisdictions;
(c)
the purchaser understands and agrees that, if in the future it decides to resell, pledge or
otherwise transfer any Placing Shares or any beneficial interests in any Placing Shares prior to
the date which is one year after the later of: (i) the date when the Placing Shares are first offered
to persons (other than distributors) pursuant to Regulation S; and (ii) Admission, it will do so
only outside the United States in an offshore transaction to non-US persons and otherwise in
compliance with Rule 901 to Rule 905 (including the Preliminary Notes) under the US
Securities Act, pursuant to an effective registration statement under the US Securities Act or
pursuant to an exemption from the registration requirements of the US Securities Act and in
each of such cases in accordance with any applicable securities law of any state of the United
States;
(d)
hedging transactions involving the Common Shares of the Company may not be conducted,
directly or indirectly, unless in compliance with the US Securities Act;
(e)
the purchaser agrees to, and each subsequent holder is required to, notify any purchaser of the
Placing Shares from it of the resale restrictions referred to above, if then applicable;
(f)
the purchaser acknowledges that, prior to any proposed transfer of Placing Shares other than
pursuant to an effective registration statement, the transferee of Placing Shares will be required
to provide certifications and other documentation relating to the non-US person status of such
transferee and that such transferee was not located in the United States at the time the
investment decision was made with respect to the Placing Shares;
(g)
the purchaser acknowledges that the Company, Cenkos and others will rely upon the truth and
accuracy of the foregoing acknowledgements, representations and warranties and agrees that
if any such acknowledgement, representation or warranty deemed to have been made by virtue
of its purchase of Placing Shares is no longer accurate, it shall promptly notify the Company
and Cenkos; and
144
(h)
the purchaser acknowledges that the Placing Shares will bear a restrictive legend to the
following effect, unless the Company determines otherwise in compliance with applicable law:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “US
SECURITIES ACT”) AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED, DIRECTLY OR INDIRECTLY, EXCEPT IF SUCH TRANSFER IS EFFECTED (1) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULES 901 THROUGH 905
(INCLUDING THE PRELIMINARY NOTES) OF REGULATION S UNDER THE US SECURITIES
ACT, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE US
SECURITIES ACT, OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE US SECURITIES LAWS AND IN THE CASE OF (3) AN
OPINION OF COUNSEL SHALL BE DELIVERED TO THE COMPANY (AND UPON WHICH
THE COMPANY MAY RELY) REGARDING THE AVAILABILITY OF SUCH EXEMPTION.
HEDGING TRANSACTIONS INVOLVING THE COMMON SHARES MAY NOT BE
CONDUCTED, DIRECTLY OR INDIRECTLY, UNLESS IN COMPLIANCE WITH THE US
SECURITIES ACT.
Shares issued pursuant to Regulation S are deemed to be restricted securities under the US
Securities Act. Therefore, purchasers of Placing Shares will need to comply with Rule 144
promulgated under the US Securities Act with respect to any resales to US persons on the
market or otherwise following the expiration of the one-year Regulation S distribution
compliance period.
Subject to various conditions including, among others, the availability of current information
regarding the Company, applicable holding periods and volume and manner of sale
restrictions, Rule 144 may be available for US resales of Placing Shares by affiliates of the
Company on the market or otherwise. A liquid trading market for the Common Shares does not
currently exist in the US, and the Company does not expect such a market to develop soon.
Rule 144 may be available for resales of Placing Shares on the market or otherwise after the
first anniversary of the Purchase of Placing Shares.
PRIOR TO PURCHASING ANY PLACING SHARES OR CONDUCTING ANY TRANSACTIONS
IN ANY PLACING SHARES, INVESTORS ARE ADVISED TO CONSULT PROFESSIONAL
ADVISERS REGARDING THE ABOVE RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS REFERRED TO IN THIS DOCUMENT.
In this document, a “US person” has the meaning set forth in Regulation S and includes:
(i)
any natural person resident in the United States;
(ii)
any partnership or corporation organised or incorporated under the laws of the United
States;
(iii)
any estate of which any executor or administrator is a US person;
(iv)
any trust of which any trustee is a US person;
(v)
any agency or branch of a foreign entity located in the United States;
(vi)
any non-discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary for the benefit or account of a US person;
145
(vii)
any discretionary account or similar account (other than an estate or trust) held by a
dealer or other fiduciary organised, incorporated or (if an individual) resident in the
United States; and
(viii) any partnership or corporation if:
A.
organised or incorporated under the laws of any foreign jurisdiction; and
B.
formed by a US person principally for the purpose of investing in securities not
registered under the US Securities Act, unless it is organised or incorporated and
owned, by accredited investors (as defined in Rule 501(a) under the US Securities
Act) who are not natural persons, estates or trusts.
146
GLOSSARY OF SCIENTIFIC AND TECHNICAL TERMS
“ab initio”
a calculation that relies on established laws of nature without
additional assumptions
“active site”
the set of residues of a protein that are most closely associated
with the primary biological purpose of a protein, often in close
proximity, and not necessarily on the surface
“acute coronary syndrome” or
“ACS”
a life threatening medical condition in which blood flow to all
or part of the heart is impaired
“ADME”
“Absorption, Distribution, Metabolism and Excretion,” the
characteristics that determine how easily a drug compound
reaches its target in a human or animal body after
administration
“ADMET”
“ADME and toxicity,” the characteristics that encompass both
ADME and how toxic a drug compound is after administration
“age-related macular generation”
or “AMD”
“Age-related macular degeneration,” a deterioration of the
macular of the eye, the portion responsible for central vision,
often affecting older adults
“angiogenesis”
the physiological process through which new blood vessels are
created from existing blood vessels, associated, for example,
with wound healing and malignant cancers
“antibody”
a specialised type of protein that recognises specific biological
objects and either disables them or marks them for destruction
by other parts of the immune system
“anticoagulant”
a drug that can lessen and/or delay the effect of blood clotting
“anti-thrombin”
a protein whose primary purpose is to disable other proteins
involved in coagulation, specifically thrombin
“aromatic”
a planar ring of atoms stabilised by a characteristic
arrangement of bonds around the ring, or a compound that
contains one or more such rings
“atrial fibrillation”
the most common type of abnormal heart rhythm, sometimes
asymptomatic, that can result in risk of stroke from clots
“binding affinity”
the relative ability of a compound to bind reversibly to a
protein receptor
“binding mode”
one of possibly many geometric configurations a compound
takes when bound to a protein receptor
“biochemical assay”
a laboratory test that measures the effectiveness of a therapy
using just chemical molecules such as drug compounds and
proteins without relying on biological systems such as cells
“biologic”
typically a large molecule derived from animal products or
other biological sources used to treat a disease
147
“Breakthrough Therapy
Designation”
a classification of a drug programme by the United States
Federal Drug Agency that permits rapid approval and is a
recognition of the drug’s potential importance
“bulk medium”
the type of material that encompasses the largest portion of a
system and which can be approximated as uniform in nature
“bulk water”
water molecules associated with bulk medium
“cardiac arrhythmia”
an irregular heartbeat that may take many forms and in extreme
cases can lead to death
“cardiologist”
a doctor who specialises in treating and preventing diseases of
the heart and blood vessels
“cardiovascular”
relating to the heart and/or blood vessels
“cell therapy”
a therapy that involves administrating cellular material to a
patient
“chemotype”
a chemically distinct molecule, with the exception of minor
variations outside the core of the molecule
“chemical library”
a physical collection of synthesised compounds that is
organised in a fashion that permits systematic laboratory testing
“chemically diverse”
a description of a set of chemical formulas that bare little
similarity to each other
“clinical trials” or
“clinical development”
a part of drug development that involves testing on a pool of
human volunteers
“coagulation factor”
one of the various proteins involved in the coagulation cascade
“colorectal”
related to or affecting the the final section of the large intestine
“combinatorial chemistry”
a type of chemical synthesis that involves, often in parallel, the
application of similar chemical reactions to produce multiple
close variants of a compound
“complex”
the combination of a protein and a bound compound
“conformation”
a specific state of a compound differentiated by the relative
positions of its atoms, irrespective of overall displacement or
rotation
“corporate collection”
a chemical library as owned by a given corporation, typically
including at least some proprietary designs
“covalent bond”
a connection between two atoms that is considered permanent
under ordinary conditions and is usually associated with a
characteristic distance
“cytotoxicity”
the level at which a compound kills or interrupts the growth of
cells
“deep vein thrombosis” or “DVT”
the formation of abnormal clots within a deep vein,
predominantly in the legs
148
“degree of freedom” or “DOF”
the set of independent quantities needed to fully describe the
state of a given system
“diabetes”
a disease that is characterised by abnormally high blood
glucose levels
“diabetic macular oedema” or
“DME”
a form of damage to the eye associated with diabetes that can
ultimately lead to blindness
“diabetic retinopathy” or “DR”
a type of damage to the blood vessels in the retina that can be
induced by diabetes and may result in vision loss
“dielectric constant”
the relative ability of a material, such as water, to shield or
absorb electric charges from each other
“direct thrombin inhibitor” or
”DTI”
a compound that is capable of inhibiting thrombin by directly
binding to it
“disease pathway”
the sequence of molecular signals created and passed within a
living organism that is associated with a disease
“docking”
the process of determining one or more bound states of a given
compound on a given protein, often using computer algorithms
“dose response”
the manner in which efficacy changes as the dose of a
medicine is altered
“energy barrier”
a restriction between two different states that occurs if the path
between those states requires large amounts of energy
“enthalpy”
the preferred energy of a given system, typically corresponding
to the energy minima
“entropy”
a thermodynamic quantity proportional to the logarithm of the
number of states available to a system under specific conditions
and which increases as the number of states increases
“ex vivo”
“out of the living”, a type of laboratory assay designed to mimic
the processes in a living organism without using a live animal
“factor Xa”
a protein involved in the coagulation cascade whose inhibition
prevents clotting, specifically the protein responsible for
activating thrombin
“fingerprint”
a numeric identifier that captures important and distinguishing
characteristics of a compound design that can be used to judge
how similar one compound is to other designs
“free energy”
a thermodynamic quantity associated with the amount of
energy available for work for a given state and which can be
used to calculate the relative likelihood that the state would be
observed
“functional assay”
a laboratory assay that is designed to mimic a complex process
in a living organism without relying on live animals or cells
“fusion protein”
an artificial protein created by combining the genetic
instructions of two or more naturally-occuring proteins
149
“gastric bleeding”
bleeding that occurs somewhere in the digestive track, which
could include the throat, stomach and/or intestines
“gastric perforation”
a hole that forms somewhere along the digestive track, which
could include the throat, stomach and/or intestines
“genome”
the complete set of genetic information belonging to an
individual organism
“genomics”
the science of mapping and interpreting genetic information
“glioblastoma multiforme”
an aggressive type of brain cancer
“global minimum”
the lowest value available among all possible states
“global solution”
the state associated with the global minima
“hereditary angioedema”
a rare and potentially life-threatening genetic condition that
can involve episodes of swelling in various parts of the body
“heuristic”
a solution or type of model obtained by trial and error or
experiment rather than through first principles, usually less
than optimal, and the opposite of physics-based
“high-throughput screening” or
“HTS”
a process that it used for hit identification that involves running
all or part of a chemical library through a laboratory assay using
robotics or some other form of automation
“hit”
a compound that observes some level of activity and could be
developed with some effort into a drug candidate
“hydrogen bond”
an interaction between a hydrogen atom and a highly
electronegative atom, such as nitrogen or oxygen, whose
strength depends not only on distance, but orientation
“hypertension”
high blood pressure
“hypophophataemia”
an unusually low concentration of phosphate in the blood that
can cause various symptoms including muscle dysfunction and
weakness
“immune therapy”
a treatment for a disease that uses the body’s own immune
system
“incidence”
the number of new cases of a particular disease appearing in a
given population over a given time interval
“inhibitor”
a substance that slows down or prevents a chemical reaction or
process, the latter of which may be associated with some
protein function
“in silico”
performed by computer modelling or simulation
“intermolecular”
a type of interaction between two molecules
“intramolecular”
a type of interaction that occurs between the atoms of the same
molecule
“intravitreal”
a route of administration of a drug via injection into the
vitreous humour of the eye
150
“investigational new drug” or
“IND”
the official designation of a compound that is undergoing FDA
approval for testing in humans, a process that is required in the
United States if the compound or indication is new
“in vitro”
a laboratory assay that does not involve a living animal but may
involve tissues, cells, or just chemicals
“in vivo”
a laboratory assay that involves observations of a living animal
“IND enabling”
a process that contributes to the filing of an investigational new
drug application, typically a type of assay
“kallikrein”
the name given to a specific class of serine proteases some of
which are associated with inflammation
“kinase”
a class of proteins whose purpose is to attach phosphate groups
to specific indigenous proteins, lipids or carbohydrates and are
involved with many cellular functions such as metabolism and
cell division
“lead” or “lead candidate”
one of a select number of specific compounds in a drug
discovery programme that is closest to a final candidate for a
drug
“lead optimisation”
the process in a drug discovery programme that focuses efforts
on improving the best compound candidates
“ligand”
a compound that binds to a protein
“lipophilicity”
the ability of a compound to dissolve into oils or other nonpolar solvents
“lone pair”
electrons of particular importance to a hydrogen bond
“local minimum”
the lowest energy available near a given state, typically located
by a search from that state
“low molecular weight heparin”
an anticoagulant medicine composed of a portion of heparin,
a naturally occurring molecule
“machine learning”
a set of algorithms that allow a computer programme to
automatically establish correlations between disparate sources
of raw data
“macula”
the portion of the retina associated with the central field of
vision
“macular degeneration”
a chronic eye disease that results in vision loss in the central
field of vision
“mechanism of action”
the type of chemical reaction or effect that allows a particular
class of drug compound to influence its target protein
“medicinal chemistry”
a discipline of chemistry concerned with the design, synthesis
and development of pharmaceutical drugs
“metastasis”
the spread of cancer growths in tissue distant from the original
cancer tumour
“metastatic”
a type of cancer that has reached metastasis
151
“micromolar” or “µM”
a concentration of a compound or protein that corresponds to
on average, one millionth of a mole per litre of fluid
“millimolar” or “mM”
a concentration of a compound or protein that corresponds to
one thousandth of a mole per litre of fluid
“molecular dynamics”
a computer simulation of one or more compounds or proteins
in which the movements of all atoms are individually
calculated at fixed intervals of time, typically on the order of a
femtosecond
“nanomolar” or “nM”
a concentration of a compound or protein that corresponds to,
one billionth of a mole per litre of fluid
“molecular mechanics” or “MM”
the use of classical physics, in contrast to quantum mechanics,
to model molecular systems
“novel oral anticoagulant” or
“NOAC”
the class of anticoagulant drugs that have come to market since
2008 and are taken orally, namely, dabigatran (Pradaxa),
rivaroxaban (Xarelto), apixaban (Eliquis) and edoxaban
(Lixiana)
“nuclear magnetic resonance” or
“NMR”
an imaging technique that takes advantage of the response of
specific atom types to an oscillating magnetic field of a set
frequency
“objective function”
a theoretical quantity that is given as a target of optimisation,
i.e. a function of parameters where the goal is to find the
specific value of parameters that produces the most favorable
result
“personalised medicine”
a treatment tailored to a specific individual, typically using
genetic information
“pharmacokinetics” or “PK”
the ADME properties of a drug
“pharmacology”
the branch of medicine that specialises in the use and effects of
drugs
“physics-based”
a solution or type of model based on fundamental physical
principles rather than empirical experimental observation; the
opposite of heuristic
“plasma kallikrein”
a serine protease that is an important part of the kallikrein-kinin
system and whose inhibition can disrupt this system
“polypeptide”
a molecule that consists of a chain of amino acids, sometimes
with additional atomic bonds that provide structural stability
and a major element of all proteins
“prevalence”
the number of cases of a specific disease present in a given
population
“privileged medical chemistry
structure”
a chemical structure with sufficient distinctive characteristics to
distinguish it from common chemical matter.
“prodrug”
a drug that is converted by the body into its most active form
only after administration
152
“proteome”
the total set of different proteins that can be expressed by a
single organism
“pulmonary embolism”
a serious and sometimes fatal medical condition caused by a
sudden blockage in an artery in the lung by a clot formed
elsewhere in the body
“pulmonary fibrosis”
a disease marked by scarring in the lung, often leading to
serious breathing problems
“pulmonologist”
a doctor who specialises in treating and preventing diseases of
the respiratory tract, especially the lungs
“proteomics”
the study of proteomes and their function
“protein-drug system”
a receptor-ligand system in which the ligand is a potential drug
“quantum mechanics” or “QM”
the scientific principles that underlies all matter and are based
on a concept of discrete states
“rational drug design”
a drug design practice that targets a specific protein in order to
select which compounds to synthesise and test, often times
using information from computer simulations
“rebound stroke”
a stroke caused by discontinuing anticoagulant medication,
presumably caused by a resulting blood clot
“receptor”
a protein that is capable of accepting a ligand
“receptor flexibility”
the degree to which a receptor must change state in order to
accept one or more ligands
“receptor-ligand system”
the total set of available states, whether bound or unbound, of
a receptor and ligand
“residue”
one specific amino acid component of a protein, usually one of
hundreds or thousands
“retina”
the back portion of the eyeball which contains the cells
sensitive to light without which sight would be impossible
“retinal vein occlusion”
a blockage of one of the main veins in the retina
“rheumatoid arthritis”
a chronic inflammatory disorder that primarily effects joints
which can lead to pain and loss of function
“scoring”
a prediction of the binding affinity of a compound using as
input the results of molecular modelling and properties of the
compound
“screen”
a process in which many compounds are systematically tested
“semi-classical”
a model that has the features of classical physics but is intended
to approximate predictions generated by quantum mechanics
“selectivity”
the relative rate at which a compound affects proteins other
than the target protein, where the value increases as this rate is
reduced, such that a compound with high selectivity affects
very little besides the target protein
153
“sequence”
the process of identifying the genetic instructions in one or
more genes
“serine protease”
a class of proteins that use a specific type of catalyst (a serine
residue) to cleave a class of biological compounds called
peptides
“singleton”
a member of a set that is dissimilar to all other members, that
is, if all similar objects were grouped together, the singleton
would be left by itself
“small molecule”
a small compound, used to describe a class of compounds that,
because of their molecule weight, are relatively simple to
synthesise and dose
“solid tumors”
an abnormal mass of tissue that does not contain fluid or cysts,
as sometimes produced by cancer
“solvation”
the process by which water surrounds and interacts with
compounds in solution
“solvent screening”
the effect that solvent, such as water, has on an electric field
“statistical mechanics”
a mathematic formalism that describes the relative likelihood of
states of a system and the influence of these states on the
characteristics of the system
“structural diversity”
the level of uniqueness of the structure of a molecule
“synthesisable”
a compound that can be created in a laboratory setting using
conventional methods
“synthesis”
the act of creating a physical compound out of raw materials
from a specific design
“synthetic chemistry”
a discipline of chemistry concerned with the synthesis of
compounds
“systemic”
relating to or concerning the entire animal Human body
“tanimoto coefficient”
a numerical measure of the difference between two sets of
numerical markers, used, for example, to compare the features
of two molecules
“therapeutic”
a treatment for a medical disorder, such as with a drug or
device
“therapeutic area”
a class of health problems and/or diseases that have a common
origin and thus are amenable to the same class of therapeutic
drugs
“therapeutic window”
the range of doses of a medicine that is still effective but not
toxic, that is, if too little medicine is taken, the desired effect is
lost, but if too much medicine is taken, it can be toxic
“thermodynamically favorable”
those states of a molecule system which are relatively likely to
occur
154
“thrombin”
a protein centrally involved in coagulation that, if inhibited,
would reduce the level of clotting normally observed in an
animal
“thrombin generation assay” or
“TGA”
a functional assay used to measure the efficacy of an
anticoagulant under conditions similar to that found in a living
animal
“thromboembolism”
the formation of a blood clot that breaks loose and is carried
away in the blood stream, often causing harm
“training-set”
experimental data organised by effect that can be used to
statistically extract the parameters of a model or algorithm
“transcorneal permeability”
the ability of a compound to penetrate into the eye from
outside
“type I diabetes”
a form of diabetes caused by the complete inability of the body
to produce insulin, almost always requiring constant treatment
“type II diabetes”
a form of diabetes caused by the inability of the body to
produce sufficient insulin or respond properly to normal levels
of insulin, a condition that generally does not cause immediate
harm if left untreated
“unfractionated heparin”
an anticoagulant medicine composed of the entire heparin
molecule, in its naturally occurring form
“tyrosine kinase”
a class of proteins often involved in activating or deactivating
cellular functions, sometimes a target of certain cancer
treatments
“Verseon hit”
a Verseon virtual compound that meets established criteria as
determined by the Verseon molecule modelling engine
“Verseon Molecule Creation
Engine” or “VMCE”
the Verseon technology that can create a virtually unlimited
number of drug-like, synthesizable compound designs
“Verseon Molecule Modelling
Engine” or “VMME”
the Verseon technology that can determine if a given virtual
compound would be effective against a given target protein
“Verseon virtual compound”
a compound design generated by the Verseon molecule
creation engine and optionally including improvements from a
medicinal chemist
“VMME solvation model” or “VSM” the Verseon technology that allows for fast and accurate
calculation of the effects of solvation
“validated target”
a target protein that has been established as useful in a drug
therapy
“vascular endothelial growth
factor” or “VEGF”
a protein associated with the biological pathway that signals
vessel growth (angiogenesis) that when inhibited, prevents
vessel growth
“vascular injury”
damage to a blood vessel
155
“vascular permeability”
a property of small blood vessels that allows certain specific
molecules to pass through the vessel walls
“vasodilator”
a drug or device that tends to widen blood vessels
“VEGF receptor”
a protein that produces a signal for a certain biological
functions, typically associated with blood vessel growth, when
in contact with vascular endothelial growth factor
“venous thromboembolism”
a blockage in a blood vessel from a clot that originally formed
somewhere else in a vein
“venous thrombosis” or “VTE”
a blood clot that forms within a vein
“virtual chemical library”
a set of compound designs that only need to exist in theory,
each member of which may or may not exist in physical form
“virtual compound”
a compound design that only need exist in theory and which
may or may not exist in physical form
“virtual library screening” or “VLS” the process of deciding which members of a virtual chemical
library will bind to a given target protein, usually performed in
an automated fashion on a computer
“warhead”
for some of Verseon’s compounds, the portion of the compound
that forms a covalent bond to the protein, preventing function
“X-ray crystallography”
an experimental procedure that can be used to measure the
detailed structure of a protein with some uncertainty, and often
requiring special conditions
156
Printed by Rubicon Corporate Print — 25020-01