8-K: Current report filing
Published on February 18, 2009
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of
Report: February 11, 2009
(Date of earliest event
reported)
NOVELOS
THERAPEUTICS, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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333-119366
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04-3321804
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
Number)
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One
Gateway Center, Suite 504
Newton,
MA 02458
(Address of principal executive
offices)
(617)
244-1616
(Registrant's telephone number,
including area code)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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¨
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Written communications pursuant
to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting material pursuant
to Rule 14a-12 under
the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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ITEM
1.01 ENTRY INTO
A MATERIAL DEFINITIVE AGREEMENT
Collaboration
Agreement
On
February 11, 2009 Novelos Therapeutics, Inc. (“Novelos or we”) entered into a
collaboration agreement (the “Collaboration Agreement”) with
Mundipharma International Corporation Limited (“Mundipharma”) to develop and
commercialize Licensed Products (as defined in the Collaboration Agreement),
which includes Novelos’ lead compound, NOV-002, in Europe and Asia/Pacific
(excluding China) (the “Territory”).
Under the
Collaboration Agreement, Mundipharma received an exclusive license to develop,
manufacture, market, sell or otherwise distribute the Licensed Products and
improvements thereon in the Territory. Mundipharma will pay Novelos $2.5 million
upon the launch of NOV-002 in each country, up to a maximum of $25 million. In
addition, Mundipharma will make fixed sales-based payments up to an aggregate of
$60 million upon the achievement of certain annual sales levels payable once the
annual net sales exceed the specified thresholds.
Mundipharma
will also pay as royalties to Novelos, during the term of the Collaboration
Agreement, a double-digit percentage on net sales of Licensed Products in
countries within the Territory where, as of the effective date thereof, Novelos
holds patents on the licensed technology based upon a four-tier royalty
schedule. Royalties in countries in the Territory where Novelos does
not hold patents as of the effective date will be paid at 50% of the royalty
rates in countries where patents are held. The royalties will be calculated
based on the incremental net sales in the respective royalty tiers and shall be
due on net sales in each country in the Territory where patents are held until
the last patent expires in the respective country. In countries in
the Territory where Novelos does not hold patents as of the effective date of
the Collaboration Agreement, royalties will be due until the earlier of 15 years
from the date of Agreement or the introduction of a generic in the respective
country resulting in a 20% drop in Mundipharma’s market share in such
country.
The
launch of Licensed Products, including initiation of regulatory and pricing
approvals, and subsequent commercial efforts to market and sell Licensed
Products in each country in the Territory will be determined by Mundipharma
based on its assessment of the commercial viability of the Licensed Products,
the regulatory environment and other factors. Novelos has no assurance that it
will receive any amount of launch payments, fixed sales-based payments or
royalties.
Under the
Collaboration Agreement, Novelos is responsible for the cost and execution of
development, regulatory submissions and commercialization of NOV-002 outside the
Territory and Mundipharma is responsible for the cost and execution of certain
development activities, all regulatory submissions and all commercialization
within the Territory. In the unlikely event that Mundipharma is
required to conduct an additional Phase 3 clinical trial in first-line advanced
stage NSCLC in order to gain regulatory approval in Europe, Mundipharma will be
entitled to recover the full cost of such trial by reducing milestone, fixed
sales-based payments and royalty payments to Novelos by up to 50% of the
payments owed until Mundipharma recovers the full costs of such
trial. In order for Mundipharma or Novelos to access data or
intellectual property related to Independent Trials (as defined in the
Collaboration Agreement), they must pay the sponsoring party 50% of the cost of
such trial.
For
countries in which patents are held, the Collaboration Agreement expires on a
country-by-country basis within the Territory on the earlier of (1) expiration
of the last applicable Novelos patent within the country or (2) the
determination that any patents within the country are invalid, obvious or
otherwise unenforceable. For countries in which no patents are held,
the Agreement expires 15 years from effective date or upon generic product
competition in the country that results in a 20% drop in Mundipharma’s market
share. Novelos may terminate the Collaboration Agreement upon breach or default
by Mundipharma. Mundipharma may terminate the Collaboration Agreement
upon breach or default, filing of voluntary or involuntary bankruptcy by
Novelos, the termination of certain agreements with companies associated with
the originators of the licensed technology, or 30-day notice for no
reason. If any regulatory approval within the Territory is suspended
as a result of issues related to the safety of the Licensed Products, then
Mundipharma’s obligations under the Collaboration Agreement will be suspended
until the regulatory approval is reinstated. If that reinstatement
does not occur within twelve months of the suspension, then Mundipharma may
terminate the Collaboration Agreement.
The
foregoing summary descriptions of the Collaboration Agreement do not purport to
be complete and are qualified in their entirety by reference to the
Collaboration Agreement.
Securities
Purchase Agreement
Concurrently
with the execution of the Collaboration Agreement, we sold to Purdue Pharma,
L.P. (“Purdue”) an independent associated company of Mundipharma, 200 shares of
a newly created series of our preferred stock, designated “Series E Convertible
Preferred Stock”, par value $0.00001 per share (the “Series E Preferred Stock”)
and a warrant to purchase 9,230,769 shares of our common stock for an aggregate
purchase price of $10,000,000 (the “Series E Financing”). Pursuant to
the related securities purchase agreement with Purdue (the “Purchase
Agreement”), Purdue will have the right to designate one observer to attend all
meetings of our Board of Directors, committees thereof and access to all
information made available to members of the Board. This right shall
last until such time as Purdue no longer holds at least one-half of
the Series E Preferred Stock issued to them at closing.
Series
E Preferred Stock
The
shares of Series E Preferred Stock have a stated value of $50,000 per share and
are convertible into shares of our common stock any time after issuance at the
option of the holder at $0.65 per share of common stock for an aggregate of
15,384,615 shares of common stock. If there is an effective
registration statement covering the shares of common stock underlying the Series
E Preferred Stock and the VWAP, as defined in the Series E Certificate of
Designations, of our common stock exceeds $2.00 for 20 consecutive trading days,
then the outstanding Series E Preferred Stock will automatically convert into
common stock at the conversion price then in effect. The conversion
price will be subject to adjustment for stock dividends, stock splits or similar
capital reorganizations.
The
Series E Preferred Stock will have an annual dividend rate of 9%, payable
semi-annually on June 30 and December 31. Such dividends may be paid
in cash, in shares of Series E Preferred Stock or in registered shares of our
common stock at our option, subject to certain conditions.
For as
long as any shares of Series E Preferred Stock remain outstanding, we will be
prohibited from (i) paying dividends to our common stockholders, (ii) amending
our certificate of incorporation, (iii) issuing any equity security or any
security convertible into or exercisable for any equity security at a price of
$0.65 or less or with rights senior to the Series E Preferred Stock (except for
certain exempted issuances), (iv) increasing the number of shares of Series E
Preferred Stock or issuing any additional shares of Series E Preferred Stock,
(v) selling or otherwise disposing of all or substantially all our assets or
intellectual property or entering into a merger or consolidation with another
company unless we are the surviving corporation, the Series E Preferred Stock
remains outstanding and there are no changes to the rights and preferences of
the Series E Preferred Stock, (vi) redeeming or repurchasing any capital stock
other than the Series E Preferred Stock, (vii) incurring any new debt for
borrowed money in excess of $500,000 and (viii) changing the number of our
directors.
Common
Stock Purchase Warrant
The
common stock purchase warrant is exercisable for an aggregate of 9,230,769
shares of our common stock at an exercise price of $0.65. The warrant expires on
December 31, 2015. The warrant exercise price and/or the common stock
issuable pursuant to such warrant will be subject to adjustment for stock
dividends, stock splits or similar capital reorganizations so that the rights of
the warrant holders after such event will be equivalent to the rights of warrant
holders prior to such event.
Registration
Rights Agreement
Simultaneous
with the execution of the Securities Purchase Agreement, we entered into a
registration rights agreement (the “Registration Rights Agreement”) with Purdue
and the holders (the “Series D Investors) of our existing Series D convertible
preferred stock (the “Series D Preferred Stock”). The Registration
Rights Agreement requires us to file with the Securities and Exchange Commission
no later than 5 business days following the six-month anniversary of the
execution of the Securities Purchase Agreement, a registration statement
covering the resale of (i) a number of shares of common stock equal to 100% of
the shares issuable upon conversion of the Series E Preferred Stock (excluding
12,000,000 shares of common stock issuable upon conversion of the Series E
Preferred Stock issued in exchange for shares of outstanding Series D Preferred
Stock as described below that were included on a prior registration statement),
(ii) 9,230,769 shares of common stock issuable upon exercise of the warrants
issued to Purdue and (iii) 11,865,381 shares of common stock issuable upon
exercise of warrants held by the Series D Investors. We will be required to use
our best efforts to have the registration statement declared effective and keep
the registration statement continuously effective under the Securities Act until
the earlier of the date when all the registrable securities covered by the
registration statement have been sold or the second anniversary of the
closing. In the event we fail to file the registration statement
within the timeframe specified by the Registration Rights Agreement, we will be
required to pay to Purdue and the Series D Investors liquidated damages equal to
1.5% per month (pro-rated on a daily basis for any period of less than a full
month) of the aggregate purchase price of the Series E Preferred Stock and
warrants until we file the delinquent registration statement. We will
be allowed to suspend the use of the registration statement for not more than 15
consecutive days or for a total of not more than 30 days in any 12 month
period. The Registration Rights Agreement replaces a prior agreement
dated April 11, 2008 between Novelos and the Series D Investors.
Agreement
to Exchange and Consent and Amendments to Prior Agreements with Series D
Investors
We also
entered into a Consent and Agreement to Exchange (the “Exchange Agreement”) with
the Series D Investors. Pursuant to the Exchange Agreement, the
Series D Investors exchanged all 413.5 outstanding shares of Series D Preferred
Stock and accumulated but unpaid dividends thereon for 445.442875 shares of
Series E Preferred Stock. The rights and preferences of the Series E
Preferred Stock are substantially the same as the Series D Preferred Stock. In
addition, the Series D Investors waived liquidated damages that had accrued
through date of the Exchange Agreement as a result of our failure to file a
registration statement covering the shares of common stock underlying the Series
D Preferred Stock and warrants not covered by an existing registration
statement. In connection with the execution of the Exchange
Agreement, the warrants held by the Series D Investors were amended to extend
the expiration of the warrants to December 31, 2015 and to remove the forced
exercise provision. Also, we entered into an amendment to the registration
rights agreement dated May 2, 2007 with the Series D Investors to revise the
definition of registrable securities under the agreement refer to Series E
Preferred Stock.
Advisor
Fees
Ferghana
Partners, Inc. received a cash fee equal to seven percent (7%) of the gross
proceeds from the sale of Series E Preferred Stock and Common Stock Purchase
Warrants to Purdue. Ferghana will also receive cash fees equal to six
percent (6%) of all payments to Novelos by Mundipharma under the Collaboration
Agreement other than royalties on net sales.
ITEM
3.02 UNREGISTERED
SALES OF EQUITY SECURITIES
As
described in Item 1.01 above, on February 11, 2009 we sold 200 shares of Series
E Preferred Stock, receiving aggregate gross proceeds of $10
million.
This sale
was exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended.
ITEM
5.03 AMENDMENTS
TO ARTICLES OF INCORPORATION OR BYLAWS
Effective
February 11, 2009 our certificate of incorporation was amended to eliminate the
Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock. There had not been any shares of Series B preferred
stock outstanding since April 2008.
Effective
February 11, 2009 our certificate of incorporation was amended to include the
Certificate of Designations, Preferences and Rights of Series E Convertible
Preferred Stock. A summary of the terms of Series E Convertible Preferred Stock
is included in Item 1.01 of this filing and is incorporated by
reference.
In
connection with the Series E Financing and Exchange Agreement, the holders of
our Series C preferred stock consented and agreed that the Series E preferred
stock would be senior to the Series C Preferred Stock with respect to the
payment of dividends and liquidation preference.
Effective
February 12, 2009 our certificate of incorporation was amended to eliminate the
Certificate of Designations, Preferences and Rights of Series D Convertible
Preferred Stock. All outstanding shares of Series D preferred stock
were exchanged effective upon the closing of the Series E
Financing.
ITEM
7.01 REGULATION
FD DISCLOSURE
A copy of
the press release issued by us on February 11, 2009 announcing the transactions
described in Item 1.01 is filed as Exhibit 99.1 and is incorporated by
reference.
ITEM
9.01 FINANCIAL
STATEMENTS AND EXHIBITS
(c) Exhibits
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Number
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Title
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4.1
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Certificate
of Designations, Preferences and Rights of Series E Convertible Preferred
Stock of Novelos Therapeutics, Inc.
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4.2
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Common
Stock Purchase Warrant
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4.3
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Certificate
of Elimination of Series B Convertible Preferred Stock
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4.4
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Certificate
of Elimination of Series D Convertible Preferred Stock
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10.1
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Securities
Purchase Agreement dated February 11, 2009
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10.2
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Registration
Rights Agreement dated February 11, 2009
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10.3
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Series
D Preferred Stock Consent and Agreement to Exchange dated February 10,
2009
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10.4
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Warrant
Amendment Agreements dated February 11, 2009
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10.5
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Amendment
No. 2 to Registration Rights Agreement dated February 11,
2009
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99.1
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Press
Release dated February 11, 2009 entitled “Novelos Therapeutics and
Mundipharma Sign Exclusive Collaboration in Europe and
Japan”
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SIGNATURE
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 hereunto
duly authorized.
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Dated:
February 18, 2009
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NOVELOS
THERAPEUTICS, INC.
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By:
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/s/
Harry S. Palmin
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Harry
S. Palmin
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President
and Chief Executive
Officer
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EXHIBIT
INDEX
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Number
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Title
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4.1
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Certificate
of Designations, Preferences and Rights of Series E Convertible Preferred
Stock of Novelos Therapeutics, Inc.
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4.2
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Common
Stock Purchase Warrant
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4.3
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Certificate
of Elimination of Series B Convertible Preferred Stock
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4.4
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Certificate
of Elimination of Series D Convertible Preferred Stock
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10.1
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Securities
Purchase Agreement dated February 11, 2009
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10.2
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Registration
Rights Agreement dated February 11, 2009
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10.3
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Series
D Preferred Stock Consent and Agreement to Exchange dated February 10,
2009
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10.4
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Warrant
Amendment Agreements dated February 11, 2009
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10.5
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Amendment
No. 2 to Registration Rights Agreement dated February 11,
2009
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99.1
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Press
Release dated February 11, 2009 entitled “Novelos Therapeutics and
Mundipharma Sign Exclusive Collaboration in Europe and
Japan”
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