SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended March
31, 2008
OR
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from
|
to
|
Commission
file number 001-16043
SYNVISTA
THERAPEUTICS, INC.
|
(Exact
name of registrant as specified in its
charter)
|
Delaware
|
|
13-3304550
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer Identification No.)
|
221
West Grand Avenue, Suite 200, Montvale, New Jersey
07645
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(201)
934-5000
|
(Registrant's
telephone number, including area
code)
|
Not
Applicable
|
(Former
name, former address and former fiscal year,
|
if
changed since last report.)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes x
No
o
Indicate
by check mark whether the registrant is a
large
accelerated filer, an
accelerated filer,
a
non-accelerated filer, or a smaller reporting company. See definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
Large
accelerated filer o
Accelerated
filer o Non-accelerated filer o
(Do
not check if a smaller reporting
company) Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o
No
x
On
May 1,
2008, 2,586,326 shares of the registrant’s common stock were
outstanding.
Page
1 of
18 pages
The
Exhibit Index is on page 18
SYNVISTA
THERAPEUTICS, INC.
INDEX
|
|
Page
|
|
|
|
PART
I - FINANCIAL INFORMATION
|
|
|
|
|
Item
1.
|
Condensed
Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2008 and December 31,
2007
|
3
|
|
|
|
|
Condensed
Consolidated Statements of Operations for the three months ended
March 31,
2008 and 2007
|
4
|
|
|
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity for the three
months ended March 31, 2008
|
5
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the three months ended
March 31,
2008 and 2007
|
6
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
12
|
|
|
|
Item
3.
|
Qualitative
and Quantitative Disclosures about Market Risk
|
16
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
16
|
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
|
Item
6.
|
Exhibits
|
17
|
|
|
|
SIGNATURES
|
18
|
|
|
INDEX
TO EXHIBITS
|
19
|
PART
I - FINANCIAL INFORMATION
ITEM
l. Condensed
Consolidated Financial Statements (Unaudited).
SYNVISTA
THERAPEUTICS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
March
31,
|
|
December
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
12,527,474
|
|
$
|
15,646,225
|
|
Other
current assets
|
|
|
709,997
|
|
|
234,338
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
13,237,471
|
|
|
15,880,563
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
18,322
|
|
|
17,096
|
|
Other
assets
|
|
|
380,270
|
|
|
807,646
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
13,636,063
|
|
$
|
16,705,305
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
582,749
|
|
$
|
1,503,355
|
|
Accrued
expenses
|
|
|
561,551
|
|
|
458,731
|
|
Preferred
stock dividends payable
|
|
|
1,375,000
|
|
|
875,000
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
2,519,300
|
|
|
2,837,086
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; 15,000,000 shares authorized,
|
|
|
|
|
|
|
|
400,000
shares designated as Series A, none issued and
outstanding,
|
|
|
|
|
|
|
|
12,500,000
shares designated as Series B convertible preferred stock,
|
|
|
|
|
|
|
|
10,000,000
shares issued and outstanding
|
|
|
|
|
|
|
|
(aggregate
liquidation preference of $25,000,000) at March 31, 2008,
and
December 31, 2007
|
|
|
100,000
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
Common
stock, $.01 par value; 300,000,000 shares
|
|
|
|
|
|
|
|
authorized,
2,586,326 shares issued and outstanding
|
|
|
|
|
|
|
|
at
March 31, 2008, and 2,586,377 shares issued and
outstanding
|
|
|
|
|
|
|
|
at
December 31, 2007
|
|
|
25,863
|
|
|
25,864
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
278,764,900
|
|
|
276,834,875
|
|
|
|
|
|
|
|
|
|
Accumulated
deficit
|
|
|
(267,774,000
|
)
|
|
(263,092,520
|
)
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
11,116,763
|
|
|
13,868,219
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
13,636,063
|
|
$
|
16,705,305
|
|
The
accompanying notes are an integral part of these unaudited financial
statements.
SYNVISTA
THERAPEUTICS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
License
and other revenue
|
|
$
|
2,233
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
1,720,342
|
|
|
467,180
|
|
General
and administrative
|
|
|
894,912
|
|
|
1,229,544
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
2,615,254
|
|
|
1,696,724
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(2,613,021
|
)
|
|
(1,696,724
|
)
|
|
|
|
|
|
|
|
|
Investment
income
|
|
|
134,763
|
|
|
36,360
|
|
Interest
expense
|
|
|
(1,144
|
)
|
|
(2,005,582
|
)
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(2,479,402
|
)
|
|
(3,665,946
|
)
|
|
|
|
|
|
|
|
|
Preferred
stock dividends - Series B
|
|
|
500,000
|
|
|
-
|
|
Deemed
dividends to Series B preferred stockholders on beneficial conversion
feature
|
|
|
1,702,078
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
loss applicable to common shares
|
|
$
|
(4,681,480
|
)
|
$
|
(3,665,946
|
)
|
|
|
|
|
|
|
|
|
Net
loss per common share:
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(1.81
|
)
|
$
|
(1.42
|
)
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding:
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
2,586,326
|
|
|
2,586,377
|
|
The
accompanying notes are an integral part of these unaudited financial
statements.
SYNVISTA
THERAPEUTICS, INC.
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
Total
|
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Paid-in
|
|
Accumulated
|
|
Stockholders'
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
December 31, 2007
|
|
|
10,000,000
|
|
$
|
100,000
|
|
|
2,586,377
|
|
$
|
25,864
|
|
$
|
276,834,875
|
|
$
|
(263,092,520
|
)
|
$
|
13,868,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,479,402
|
)
|
|
(2,479,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fractional
shares
|
|
|
-
|
|
|
-
|
|
|
(51
|
)
|
|
(1
|
)
|
|
1
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed
dividends to Series B preferred stockholders on beneficial
conversion feature
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,702,078
|
|
|
(1,702,078
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
B preferred stock dividend payable
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(500,000
|
)
|
|
(500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
222,580
|
|
|
-
|
|
|
222,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
issued for consulting services
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,698
|
|
|
-
|
|
|
2,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
costs related to restricted stock
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,668
|
|
|
-
|
|
|
2,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
March 31, 2008
|
|
|
10,000,000
|
|
$
|
100,000
|
|
|
2,586,326
|
|
$
|
25,863
|
|
$
|
278,764,900
|
|
$
|
(267,774,000
|
)
|
$
|
11,116,763
|
|
The
accompanying notes are an integral part of these unaudited financial
statements.
SYNVISTA
THERAPEUTICS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three
Months Ended March 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Operating Activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(2,479,402
|
)
|
$
|
(3,665,946
|
)
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to cash
|
|
|
|
|
|
|
|
used
in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
222,580
|
|
|
41,036 |
|
Options
issued for consulting services
|
|
|
2,698
|
|
|
2,732 |
|
Compensation
costs related to restricted stock
|
|
|
2,668
|
|
|
22,268 |
|
Amortization
of debt discount
|
|
|
-
|
|
|
1,692,857
|
|
Depreciation
and amortization
|
|
|
3,063
|
|
|
260,549
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Other
current assets
|
|
|
(475,659
|
)
|
|
74,018 |
|
Other
assets
|
|
|
427,376
|
|
|
12,115 |
|
Accounts
payable and accrued expenses
|
|
|
(817,786
|
)
|
|
(368,887
|
)
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(3,114,462
|
)
|
|
(1,929,258
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(4,289
|
)
|
|
(10,207
|
)
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(4,289
|
)
|
|
(10,207
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
Proceeds
from debt financing
|
|
|
-
|
|
|
3,000,000
|
|
Deferred
debt financing costs
|
|
|
-
|
|
|
(514,639
|
)
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
2,485,361
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
|
|
(3,118,751
|
)
|
|
545,896
|
|
Cash
and cash equivalents, beginning of period
|
|
|
15,646,225
|
|
|
1,478,780
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$
|
12,527,474
|
|
$
|
2,024,676
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
Deemed
dividends to Series B preferred stockholders on beneficial
conversion
|
|
$
|
1,702,078
|
|
$ |
- |
|
Series
B stock dividends payable
|
|
$
|
500,000
|
|
$
|
-
|
|
Accrual
of deferred financing costs
|
|
$
|
-
|
|
$
|
149,285
|
|
Warrants
issued and embedded conversion feature associated
|
|
|
|
|
|
|
|
with
debt financing
|
|
$
|
-
|
|
$
|
3,000,000
|
|
The
accompanying notes are an integral part of these unaudited financial
statements.
SYNVISTA
THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1 – Basis of Presentation
On
July
20, 2007, the stockholders of Alteon Inc. approved changing the name of the
company from Alteon Inc. to Synvista Therapeutics, Inc. (the “Company” or
“Synvista”). The name change became effective on July 25,
2007.
On
July
20, 2007, the Company’s stockholders approved an amendment to its certificate of
incorporation to, among other things, effect a reverse stock split of the
Company’s common stock. On July 25, 2007, a 1:50 reverse stock split of the
Company’s common stock became effective. Accordingly, all share, warrant, option
and per share information for all periods presented reflect the reverse stock
split.
The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 2008 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2008.
For
further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2007, as filed with the Securities and Exchange Commission. The accompanying
condensed consolidated balance sheet as of December 31, 2007 has been derived
from the audited balance as of that date included in the Form 10-K.
Principles
of Consolidation
The
accompanying condensed consolidated financial statements include the accounts
of
Synvista Therapeutics, Inc. and its wholly owned subsidiary, HaptoGuard, Inc.
All inter-company accounts and transactions have been eliminated in
consolidation.
Reclassifications
Certain
prior period balances have been reclassified to conform to the current
presentation.
Note
2 – Liquidity
The
Company has devoted substantially all of its resources to research, drug
discovery and development programs. To date, it has not generated any revenues
from the sale of products and does not expect to generate any such revenues
for
a number of years, if at all. As a result, Synvista has incurred net losses
since inception, has an accumulated deficit of $267,774,000 as of March 31,
2008, and expects to incur net losses, potentially greater than losses in prior
years, for a number of years.
The
Company has financed its operations through proceeds from the sales of common
and preferred equity securities, debt securities, revenue from former
collaborative relationships, reimbursement of certain of its research and
development expenses by collaborative partners, investment income earned on
cash
and cash equivalent balances and short-term investments and the sale of a
portion of the Company’s New Jersey state net operating loss carryforwards and
research and development tax credit carryforwards.
As
of
March 31, 2008, the Company had working capital of $10,718,171, including
$12,527,474 of cash and cash equivalents. The Company’s net cash used in
operating activities for the three months ended March 31, 2008 was $3,114,462.
Synvista
expects to continue to utilize cash and cash equivalents to fund its operating
activities, including continued development of SYI-2074, alagebrium and its
diagnostic test. The amount and timing of the Company’s future capital
requirements will depend on numerous factors, including the progress
of
its
research
and development programs, the number and characteristics of product candidates
that the Company pursues, the conduct of preclinical tests and clinical studies,
the status and timelines of regulatory submissions, the costs associated
with
protecting patents and other proprietary rights, the ability to complete
strategic collaborations and the availability of third-party funding, if
any.
The Company expects to have sufficient cash and cash equivalents to satisfy
its
working capital requirements into the first quarter of 2009.
The
Company anticipates that it will require substantial new funding in 2009 to
pursue development and commercialization of alagebrium and its other product
candidates and to continue its operations. Synvista believes that satisfying
these capital requirements over the long term will require successful
commercialization of its product candidates. However, it is uncertain whether
any products will be approved or will be commercially successful.
Selling
securities to satisfy its capital requirements may have the effect of materially
diluting the current holders of the Company’s outstanding stock. The Company may
also seek additional funding through corporate collaborations and other
financing vehicles. There can be no assurances that such funding will be
available at all or on terms acceptable to the Company. If funds are obtained
through arrangements with collaborative partners or others, the Company may
be
required to relinquish rights to its technologies or product candidates and
alter its plans for the development of its product candidates. If the Company
is
unable to obtain the necessary funding, it will likely be forced to cease
operations.
Note
3 – Stock-Based Compensation
The
Company has stockholder-approved stock incentive plans for employees, directors,
officers and consultants.
The
Company follows SFAS No. 123(R), “Share-Based Payment,” (“SFAS 123(R)”) for
employee options and used the modified prospective transition method.
The
following table shows the weighted average assumptions the Company used to
develop the fair value estimates for determination of the compensation
charges:
|
|
Three
months ended
March
31,
|
|
|
|
2008
|
|
2007
|
|
Expected
volatility
|
|
|
115
|
%
|
|
144
|
%
|
Dividend
yield
|
|
|
—
|
|
|
—
|
|
Expected
term (in years)
|
|
|
8.29
|
|
|
6.0
|
|
Risk-free
interest rate
|
|
|
3.50
|
%
|
|
4.50
|
%
|
Options
granted to consultants and other non-employees are accounted for in accordance
with EITF No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other
than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." Accordingly, such options are recorded at fair value at the
date of grant and subsequently adjusted to fair value at the end of each
reporting period until such options vest, and the fair value of the
options, as adjusted, is charged to consulting expense over the related
vesting period. For the three months ended March 31, 2008, the Company
recognized research and development consulting expenses of $2,698.
For
the
three-month period ended March 31, 2008, the Company recognized stock-based
employee compensation cost of $222,580 in accordance with SFAS 123(R), which
was
recorded as general and administrative expense. This expense related to the
granting of stock options to employees, directors and officers on or after
January 1, 2006. None of this expense resulted from the grants of stock options
prior to January 1, 2006. The Company recognized compensation expense related
to
these stock options, taking into consideration a forfeiture rate of
approximately 1.20% based on historical experience, on a straight-line basis
over the vesting period. The Company did not capitalize any stock-based
compensation cost.
As
of
March 31, 2008, the total compensation cost related to non-vested option awards
not yet recognized is $1,459,144. The weighted average period over which it
is
expected to be recognized is approximately 2.50 years.
A
summary
of the status of the Company’s stock options outstanding as of March 31, 2008
and changes during the three months then ended is presented below:
|
|
Shares
|
|
Weighted
average
exercise
price
|
|
Weighted
Average
Remaining
Contractual
Term
(years)
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding
at December 31, 2007
|
|
|
876,706
|
|
$
|
16.00
|
|
|
|
|
|
|
|
Granted/assumed
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(4,000
|
)
|
|
|
|
|
|
|
|
|
|
Outstanding
at March 31, 2008
|
|
|
872,706
|
|
$
|
15.82
|
|
|
8.32
|
|
$
|
-
|
|
Options
exerciseable at March 31, 2008
|
|
|
259,423
|
|
$
|
46.04
|
|
|
5.62
|
|
$
|
-
|
|
Restricted
Stock
The
Company periodically grants awards of restricted stock to its Board of Directors
as compensation for service on the Board of Directors. The awards vest during
various periods ranging from one to three years. There were no shares of
restricted stock granted during the period ended March 31, 2008. There were
19,200 shares of restricted stock granted during the year ended December 31,
2006, of which 6,400 were forfeited in prior periods. Of the 8,520 shares of
restricted stock that vested, the vesting of 4,280 shares had been accelerated
by the Board of Directors. The Company recognized compensation cost of $2,668,
which was recorded as general and administrative expense, for the period ended
March 31, 2008.
A
summary
of the status of the Company’s non-vested shares as of March 31, 2008 and
changes during the three months ended March 31, 2008, is presented
below:
Nonvested
Shares
|
|
Shares
|
|
Weighted
average
grant
date
fair value
|
|
Nonvested
at
|
|
|
|
|
|
|
|
January
1, 2008
|
|
|
4,280
|
|
$
|
7.50
|
|
Granted
|
|
|
-
|
|
|
-
|
|
Vested
|
|
|
-
|
|
|
-
|
|
Nonvested
at Forfeited
|
|
|
-
|
|
|
-
|
|
March
31, 2008
|
|
|
4,280
|
|
$
|
7.50
|
|
As
of
March 31, 2008, there was $13,954 of total unrecognized compensation cost
related to non-vested share-based compensation arrangements granted. That cost
is expected to be recognized over a weighted-average period of 1.3 years.
Note
4 – Net Loss Per Share Applicable to Common
Stockholders
Basic
net
loss per share is computed by dividing net loss applicable to common
stockholders by the weighted average number of shares outstanding during the
period. Diluted net loss per share is the same as basic net loss per share
applicable to common stockholders, since the assumed exercise of stock options
and warrants and the conversion of preferred stock would be antidilutive. The
amount of potentially dilutive shares excluded from the calculation as of March
31, 2008 and 2007 was 14,416,222 and 1,171,730 shares,
respectively.
Note
5 – Collaborative Research and Development Agreement
On
January 20, 2008, Synvista entered into a License Agreement (the “Agreement”)
with Novel Therapeutic Technology Inc. (“NTT”). The Agreement states that NTT
will develop a formulation of the Company’s product candidate SYI-2074. The
Agreement also states that NTT will grant the Company an exclusive worldwide
license to the product formulation developed as well as to the intellectual
property rights resulting under the Agreement. An insignificant upfront payment
was made in January 2008. The Company will also make specified payments to
NTT
upon the occurrence of certain milestone events in the clinical development
of
the product formulated under the Agreement. In addition, the Company would
also
have to pay NTT royalties on any sales of the developed product and a separate
fee if any of the rights granted under the Agreement are sublicensed by the
Company.
The
license granted under the Agreement will be terminated upon the earlier to
occur
of (i) the date the Company notifies NTT that it does not intend to proceed
further with development of formulation of SYI-2074 subject to the Agreement,
(ii) the date the Company notifies NTT that it does not intend to continue
to
commercialize the products developed pursuant to the Agreement, and (iii) the
later of (a) the expiration of the last valid patent covering the formulation
of
the Company’s intellectual property pursuant to the Agreement, which, absent the
Agreement, would infringe an existing patent, or (b) 15 years from the date
of
the first commercial sale of a product pursuant to the Agreement.
Note
6 – Series B Preferred Stock and Warrant Purchase
Agreement
On
July
20, 2007, at the Company’s annual meeting of stockholders, stockholders of the
Company approved the
issuance of securities pursuant to the Series B Preferred Stock and Warrant
Purchase Agreement dated as of January 11, 2007, as amended. At the closing
of
the financing on July 25, 2007, the Company issued 10,000,000 shares of its
Series B Preferred Stock and warrants to purchase 2,500,000 shares of Series
B
Preferred Stock to the Buyers. The Series B Preferred Stock accrues dividends
at
a rate of 8.0% per year on the original issue price of $2.50 per share for
a
period of five years from the date on which the shares of Series B Preferred
Stock were issued. The warrants are exercisable for a period of five years
commencing on July 25, 2007 at an exercise price of $2.50 per share.
On
the
date of issuance, the Company adjusted its balance sheet to reduce the value
of
the Series B Convertible Preferred Stock by $9,445,299 and the warrants by
$4,171,326. The Company used the Black Scholes model to value the Series B
warrants. For purposes of calculating the fair value of the warrants the Company
used a risk free rate of return of 4.88% and a volatility percentage of 114%.
In
accordance with EITF 98-5 and EITF 00-27 the intrinsic value of the beneficial
conversion feature is considered a deemed dividend to the preferred shareholders
and is amortized over the period of the security’s earliest conversion date.
Pursuant to Amendment No.1 to the Registration Rights Agreement, the Company
will register the securities at various times over a two year period for resale
by the investors, which is when the preferred stock will be convertible. To
amortize the beneficial conversion feature the Company charged the accumulated
deficit account and increased additional paid-in capital for the amount of
the
deemed dividend.
Series
B
Preferred Stock dividends are payable annually in cash or in shares of preferred
stock at a rate of 8% of the Series B Original Issue Price of $2.50 for each
share of Series B Preferred Stock for five years from the Original Issue Date
of
July 25, 2007. Each holder of the Series B Preferred Stock is entitled to vote
one-half the number of whole shares of common stock into which the shares of
Series B Preferred Stock held by the holder are convertible as of the record
date for any meeting of the Company’s stockholders.
ITEM 2. |
Management's
Discussion and Analysis of Financial Condition and
Results of Operations.
|
Overview
We
are a
product-based biotechnology company engaged in the development of diagnostic
tests and drugs to identify and treat diabetic patients at high risk for the
development of cardiovascular disease. We have identified several promising
product candidates that we believe represent novel approaches for diagnosis
and
treatment in some of the largest pharmaceutical markets. Currently we are
advancing the development and commercialization of a diagnostic product and
two
of our drug candidates are in Phase 2 clinical trials.
We
are
developing a diagnostic kit to identify the subset of patients with diabetes
who
are at increased risk for cardiovascular disease. The technology underlying
this
kit relates to a serum protein called haptoglobin, or Hp. A common variant
of
this protein, known as Hp2-2, which is found in 40% of the population, is
associated with increased cardiovascular risk in diabetic patients. Further,
it
has been shown that this protein variant may identify those diabetic patients
for whom daily use of vitamin E could potentially reduce the rate of heart
attack by 50% annually. We are developing a kit to identify this high risk
variant of haptoglobin. Any successful commercialization of such a kit could
generate revenues for us in future years and could help focus the development
of
one of our therapeutic product candidates, SYI-2074, described
below.
We
are
also managing a discovery and development program aiming to produce small
molecule drugs that mimic, the enzyme glutathione peroxidase, or GPx. We believe
that GPx is one of the only enzymes in the human body that reduces oxidized
lipids. By recreating the activity of this enzyme in a small molecule we may
be
able to treat diseases in which oxidized lipids are thought to play a
significant role.
One
of
our GPx mimetics, SYI-2074, is in Phase 2 clinical trials. Our intention is
to
focus this product candidate on the treatment of diabetic patients with Hp2-2.
These patients have a markedly elevated rate of heart failure and death
following a heart attack, which may relate to elevated levels of oxidized lipids
and consequent atherosclerosis. Our goal for SYI-2074 is to develop it for
use
in the treatment of acute coronary syndrome (“ACS”) and explore its
anti-atherosclerotic activity in Hp2-2, diabetic patients.
Our
two
ongoing Phase 2 studies of SYI-2074 are designed to prepare for a pivotal study.
Our first study uses SYI-2074 in Hp2-2, diabetic patients. The drug or placebo
is being administered orally in ascending doses for 28 days as we track
inflammatory biomarkers and functional improvement in cholesterol efflux.
Results from this study are anticipated in the second quarter of 2008. In
addition, we are conducting a Phase 2 clinical trial in diabetic patients
undergoing angioplasty to see whether SYI-2074 can protect heart muscle that
is
not receiving adequate blood supply. We expect to complete this study in the
second quarter of 2008 as well.
We
are
developing a second compound, alagebrium chloride or alagebrium (formerly
ALT-711). Alagebrium is an Advanced Glycation End-product Crosslink Breaker
being developed for diastolic heart failure and diabetic nephropathy. Alagebrium
has demonstrated potential efficacy in two clinical trials in heart failure,
as
well as in animal models of heart failure, nephropathy, hypertension and
erectile dysfunction. These diseases represent rapidly growing markets of unmet
medical needs, particularly common among diabetic patients. The compound has
been tested in approximately 1,000 patients, which represents a sizeable human
safety database, in a number of Phase 2 clinical studies.
Future
Development Plans
We
are
proceeding with several studies involving SYI-2074 and alagebrium. With
respect to SYI-2074, in addition to the myocardial protection study (Trial
203),
and the Phase II biomarker study (Trial 201) designed to correlate the dose
and
schedule of SYI-2074 with an effect on inflammatory biomarker levels and various
components of cholesterol, we are considering other clinical development
activities.
In
January 2008, we announced the signing of an agreement with privately-held
Novel
Therapeutic Technologies, Inc. to provide us with formulation work for a topical
cream formulation of SYI-2074, for the treatment of psoriasis. This work will
be
performed at a major clinical institution in Israel. SYI-2074 may have potential
in the treatment of plaque psoriasis because SYI-2074
can
block TNF-α
activated
expression of cell adhesion molecules, I-CAM and V-CAM, which may be essential
for cellular migration. TNF-α is an established target for drug development in
psoriasis and other autoimmune diseases. We have identified sites in Israel
to
perform
a
planned Phase 2 clinical trial beginning in mid-2008, pending approval from
the
Ministry of Health in Israel.
With
respect to alagebrium, we plan, among other things, to initiate a second Phase
2
study to examine the impact of alagebrium on heart function. As previously
reported, we also expect that alagebrium will be studied in a clinical trial
of
patients with Type I diabetes and microalbuminuria (protein in the urine),
funded by the Juvenile Diabetes Research Foundation.
We
continue to evaluate potential pre-clinical and clinical studies in other
therapeutic indications in which alagebrium and SYI-2074 may address significant
unmet needs. For alagebrium, in addition to our anticipated clinical studies
in
heart failure, we have conducted preclinical studies focusing on
atherosclerosis; Alzheimer's disease; photoaging of the skin; eye diseases,
including age-related macular degeneration, and glaucoma; and other diabetic
complications, including renal diseases.
Since
our
inception in October 1986, we have devoted a substantial portion of our
resources to research, drug discovery and development programs. To date, we
have
not generated any revenues from the sale of products and may not generate any
such revenues for a number of years, if at all. We have incurred an accumulated
deficit of $267,774,000 as of March 31, 2008, and expect to incur net losses,
potentially greater than losses in prior years, for a number of
years.
We
have
financed our operations through proceeds from public offerings of common stock,
private placements of common and preferred equity and debt securities, revenue
from former collaborative relationships, reimbursement of certain of our
research and development expenses by our collaborative partners, investment
income earned on cash and cash equivalent balances and short-term investments
and the sale of a portion of our New Jersey State net operating loss
carryforwards and research and development tax credit
carryforwards.
Our
business is subject to significant risks including, but not limited to, (1)
our
ability to obtain and maintain sufficient financial resources to conduct and
continue enrollment in our clinical studies of SYI-2074 and alagebrium, (2)
risks associated with our development of a diagnostic kit, (3) the risks
inherent in our research and development efforts, including clinical trials
and
the length, expense and uncertainty of the process of seeking regulatory
approvals for our product candidates, (4) uncertainties associated with
obtaining and enforcing our patents and with the patent rights of others, (5)
uncertainties regarding government healthcare reforms and product pricing and
reimbursement levels, (6) technological change and competition, (7)
manufacturing uncertainties, and (8) dependence on collaborative partners and
other third parties. Even if our product candidates appear promising at an
early
stage of development, they may not reach the market for numerous reasons. These
reasons include the possibilities that the products will prove ineffective
or
unsafe during preclinical or clinical studies, will fail to receive necessary
regulatory approvals, will be difficult to manufacture on a large scale, will
be
uneconomical to market or will be precluded from commercialization by
proprietary rights of third parties, or that we will be unable to develop and
commercialize our proposed diagnostic kit. These risks and others are discussed
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007
that we filed with the Securities and Exchange Commission on March 31,
2008.
ITEM 2. |
Management's
Discussion and Analysis of Financial Condition and
Results of Operations.
|
Results
of Operations
Three
Months ended March 31, 2008 and 2007
License
and Other Revenue
Total
license and other revenue for the three months ended March 31, 2008 included
$2,000 received from a royalty agreement with ARUP Laboratories which we entered
into in June 2004. No license or other revenue was received during the three
months ended March 31, 2007.
Other
Income/Expense
Investment
income for the three months ended March 31, 2008 and 2007 was $135,000 and
$36,000, respectively. Income was derived from interest earned on cash and
cash
equivalents and short-term investments. The increase in investment income was
due to higher cash balances as a result of the financing in July 2007.
Our
interest expense was $1,000 for the three months ended March 31, 2008 compared
to $2,006,000 for the three months ended March 31, 2007. The decrease
was the result of interest expense relating to the private financing completed
in January 2007.
Operating
Expenses
Total
operating expenses were $2,615,000 for the three months ended March 31, 2008,
compared to $1,697,000 for the three months ended March 31, 2007, and consisted
primarily of research and development expenses in 2008 and general and
administrative expenses in 2007. Research and development expenses normally
include third-party expenses associated with pre-clinical and clinical studies,
manufacturing costs, including the development and preparation of clinical
supplies, personnel and personnel-related expenses and facility
expenses.
Research
and development expenses were $1,720,000 for the three months ended March 31,
2008, as compared $467,000 for the same period in 2007, an increase of
$1,253,000 or 268%. This increase was attributed to higher research study costs
and personnel related costs due to the resumption of clinical trials and the
addition of personnel. In 2008, of the total amount spent on research and
development expenses, we incurred $226,000 in personnel and personnel related
expense, and $1,462,000 of research study costs, inclusive of $685,000 of
clinical trial costs, $287,000 of manufacturing and storage expenses, $183,000
of research funding costs, $135,000 of patent expenses, and $96,000 of
third-party consulting costs. In 2007, of the total amount spent on research
and
development expenses, we incurred $101,000 of personal related costs and
$337,000 of research study costs, inclusive of $277,000 of clinical trial
expenses and $59,000 of third party-consulting expenses.
General
and administrative expenses were $895,000 for the three months ended March
31,
2008, as compared to $1,230,000 for the same period in 2007, for a decrease
of
$335,000 or 27%. The decrease in 2008 was related to lower corporate expenses,
primarily in the areas of facility lease expense, administrative, legal and
consulting, partially offset by an increase in personnel-related costs, repairs
and maintenance, Sarbanes Oxley compliance, public relations and additional
franchise taxes.
Net
Loss
We
had
net losses of $2,479,000 and $3,666,000 in the three months ended March 31,
2008
and 2007, respectively. We had net losses applicable to common stockholders
for
the three months ended March 31, 2008 and 2007 of $4,681,000 and $3,666,000,
inclusive of preferred
stock dividends of $2,202,000 and $0, respectively.
Liquidity
and Capital Resources
We
had
cash and cash equivalents at March 31, 2008, of $12,527,000, compared to
$15,646,000 at December 31, 2007. The decrease is primarily attributable to
$3,114,000 of net cash used in operating activities. At March 31, 2008, we
had
working capital of $10,718,000.
We
do not
have any approved products and currently derive cash from sales of our
securities, sales of our New Jersey state net operating loss carryforwards
and
interest on cash and cash equivalents. We are highly susceptible to conditions
in the global financial markets and in the pharmaceutical industry. Positive
and
negative movement in those markets will continue to pose opportunities and
challenges to us. Previous downturns in the market valuations of biotechnology
companies and of the equity markets more generally have restricted our ability
to raise additional capital on favorable terms.
On
July
25, 2007, institutional investors purchased $25,000,000 of newly created Series
B Preferred Stock and warrants to purchase shares of Series B Preferred Stock.
At the closing of the financing, we issued 10,000,000 shares of our Series
B
Preferred Stock and warrants to purchase 2,500,000 shares of Series B Preferred
Stock. The Series B Preferred Stock accrues dividends at a rate of 8.0% per
year
on the original issue price of $2.50 per share for a period of five years from
the date on which the shares of Series B Preferred Stock were issued. The
warrants are exercisable for a period of five years commencing on July 25,
2007
at an exercise price of $2.50 per share.
We
expect
to utilize cash and cash equivalents to fund our operating activities, including
continued development of SYI-2074 and alagebrium and development of a diagnostic
kit. Based on our projected spending levels, the remaining cost of our current
trials and the development of such a diagnostic kit, which are expected to
continue into 2009, exclusive of our internal costs, is estimated to be
$4,500,000. The cost includes executed, but cancelable, agreements with outside
organizations. The amount and timing of our future capital requirements will
depend on numerous factors, including the
progress and timing of our
research and development programs, the number and characteristics of product
candidates that we pursue, the conduct of preclinical tests and clinical
studies, the status and timelines of regulatory submissions, the costs
associated with protecting patents and other proprietary rights, the ability
to
complete strategic collaborations and the availability of third-party funding,
if any. The Company expects to have sufficient cash and cash equivalents to
satisfy its working capital requirements into the first quarter of
2009.
We
will
require, over the longer term, substantial additional funding to continue
development and commercialization of SYI-2074, alagebrium and our other product
candidates and to continue our operations. We believe that satisfying these
capital requirements over the long term will require successful
commercialization of our product candidates. However, it is uncertain whether
any product candidates will be approved or will be commercially
successful.
Selling
securities to satisfy our capital requirements may have the effect of materially
diluting the current holders of our outstanding stock. We may also seek
additional funding through corporate collaborations and other financing
vehicles. There can be no assurances that such funding will be available at
all
or on terms acceptable to us. If funds are obtained through arrangements with
collaborative partners or others, we may be required to relinquish rights to
our
technologies or product candidates and alter our plans for the development
of
our product candidates. If we are unable to obtain the necessary funding, we
may
be forced to cease operations. There can be no assurance that the products
or
technologies that we are currently developing will result in revenues to us
or
any meaningful return on investment to our stockholders.
Critical
Accounting Policies
As
of the
date of the filing of this quarterly report, we believe there have been no
material changes to our critical accounting policies and estimates during the
three months ended March 31, 2008.
Forward-Looking
Statements and Cautionary Statements
Statements
in this Form 10-Q that are not statements or descriptions of historical facts
are "forward-looking" statements under Section 21E of the Securities Exchange
Act of 1934, as amended, and the Private Securities Litigation Reform Act of
1995, and are subject to numerous risks and uncertainties. These forward-looking
statements and other forward-looking statements made by us or our
representatives are based on a number of assumptions. The words "believe,"
"expect," "anticipate," "intend," "estimate" or other expressions, which are
predictions of or indicate future events and trends and which do not relate
to
historical matters, identify forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements, as they involve
risks and uncertainties, and actual results could differ materially from those
currently anticipated due to a number of factors, including those set forth
in
this section and elsewhere in this Form 10-Q. These factors include, but are
not
limited to, the risks set forth below.
The
forward-looking statements represent our judgments and expectations as of the
date of this Report. We assume no obligation to update any such forward-looking
statements.
ITEM
3. Qualitative
and Quantitative Disclosures about Market Risk.
Our
exposure to market risk for changes in interest rates relates primarily to
our
investment in marketable securities. We do not use derivative financial
instruments in our investments. All of our investments resided in money market
accounts. Accordingly, we do not believe that there is any material market
risk
exposure with respect to derivative or other financial instruments that would
require disclosure under this Item.
ITEM
4T. Controls
and Procedures.
a) Evaluation of
Disclosure Controls and Procedures.
Our
management has evaluated, with the participation of our Chief Executive Officer
and our Director of Finance and Financial Reporting, the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
as
of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.
Based upon that evaluation, the Chief Executive Officer and the Director of
Finance and Financial Reporting have concluded that as of the end of such fiscal
quarter, our current disclosure controls and procedures as
of
that date were effective to ensure that information required to be disclosed
in
the reports filed under the Exchange Act was recorded, processed, summarized
and
reported on an accurate and timely basis.
b) Changes
in Internal Control Over Financial Reporting. There
were no changes in our internal control over financial reporting (as defined
in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended
March 31, 2008 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
PART
II – OTHER INFORMATION
Exhibits
See
the
“Exhibit Index” on page 18 for exhibits required to be filed with this Quarterly
Report on Form 10-Q.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this Report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date:
May
14, 2008
SYNVISTA
THERAPEUTICS, INC.
|
|
By:
/s/ Noah Berkowitz, M.D., Ph.D.
|
Noah
Berkowitz, M.D., Ph.D.
|
President
and Chief Executive Officer
|
(principal
executive officer)
|
|
By:
/s/ Wendy A. Milici
|
Wendy
A. Milici
|
(principal
financial officer)
|
|
By:
/s/ Alex D’Amico
|
Alex
D’Amico
|
(principal
accounting officer)
|
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
10.1*
|
|
License
Agreement by and between Novel Therapeutic Technology Inc. and
Synvista
|
|
|
Therapeutics,
Inc. dated January 20, 2008.
|
|
|
|
31.1
|
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
31.2
|
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
32.1
|
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
____________
*
Portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request.