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OXGN > SEC Filings for OXGN > Form 10-Q on 12-Aug-2013All Recent SEC Filings

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Form 10-Q for OXIGENE INC


12-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Our Management's Discussion and Analysis of Financial Condition and Results of Operations as of June 30, 2013 and June 30, 2012 should be read in conjunction with the sections of our audited consolidated financial statements and notes thereto, as well as our "Management's Discussion and Analysis of Financial Condition and Results of Operations" that is included in our Annual Report on Form 10-K for the year ended December 31, 2012, and also with the unaudited financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Overview

We are a biopharmaceutical company primarily focused on the development of vascular disrupting agents, or VDAs, for the treatment of cancer. We are pursuing what we believe to be a cost-efficient, risk-mitigated development strategy. In the United States, we are pursuing collaborations with established pharmaceutical companies with products whose efficacy we believe can be enhanced by the addition of our lead product candidate, ZYBRESTAT , and with non-profit research organizations such as the Gynecologic Oncology Group, or GOG, an organization dedicated to clinical research in the field of gynecologic cancer, for the treatment of advanced ovarian cancer. In the European Union, we are primarily focused on pursuing registration for ZYBRESTAT for anaplastic thyroid cancer (ATC), a rare and highly aggressive cancer for which we have been granted orphan drug designation, through the European Union's "exceptional circumstances" marketing authorization process. To date, we have observed ZYBRESTAT to be well tolerated in over 400 patients and to have activity in a variety of indications including ovarian cancer and ATC.

ZYBRESTAT Development Program

Our lead compound, ZYBRESTAT , is a reversible tubulin binding agent that selectively targets the endothelial cells that make up the blood vessel walls in most solid tumors and causes them to swell, obstructing the flow of blood and starving the tumor of vital nutrients including oxygen. This deprivation, also known as tumor hypoxia, results in rapid downstream tumor cell death.

Ovarian Cancer

Ovarian cancer is a relatively rare form of cancer affecting approximately 22,000 women in the U.S. each year that begins in the ovaries and because there are no mainstream screening tests, often spreads to the pelvis and abdomen prior to detection, resulting in a relatively poor prognosis. In fact, more than 60% of women diagnosed with ovarian cancer are in stage III or IV, making it difficult to treat and often fatal, with a five-year survival rate of 47%-a rate which is largely unchanged since the 1990s. There are relatively few cancer therapies that have been approved for the treatment of ovarian cancer, including carboplatin and cisplatin, doxorubicin, and Taxol (paclitaxel). Due to the unmet need in the treatment of ovarian cancer and the small size of the indication, we have been granted an orphan drug designation in both the U.S. and Europe for the use of ZYBRESTAT in the treatment of ovarian cancer.

We are pursuing multiple routes to approval in ovarian cancer, as follows:

ZYBRESTAT in combination with AVASTIN (bevacizumab)

Genentech / Roche's AVASTIN (bevacizumab) is an anti-vascular endothelial growth factor (VEGF) monoclonal antibody that is currently FDA-approved for the treatment of a variety of solid tumor indications, but not including ovarian cancer. We believe that using ZYBRESTAT in combination with AVASTIN (bevacizumab) may provide a clinically active yet potentially better tolerated alternative to the current standard of care for relapsed ovarian cancer, cytotoxic chemotherapy.

Currently, a randomized, two-arm Phase 2 trial comparing AVASTIN (bevacizumab) alone with AVASTIN (bevacizumab) plus ZYBRESTAT in patients with relapsed ovarian cancer is ongoing. The trial is being conducted by the GOG under the sponsorship of the Cancer Therapy Evaluation Program, or CTEP, of the National Cancer Institute, or NCI. The primary endpoint of the trial is progression-free survival (PFS), and secondary endpoints include safety, overall survival (OS) and objective responses by treatment. As of the date of this prospectus, the study has met its enrollment goal with 107 patients at more than 80 clinical sites in the United States participating in the study. Patients in both arms will be treated until disease progression or adverse effects prohibit further therapy.

An interim futility analysis of this Phase 2 trial was performed in the second quarter of 2013. The original purpose of the analysis was to consider early study closure to limit patient exposure in the event that the experimental regimen was deemed futile (i.e., unlikely to be declared more effective than the reference regimen at the end of the study). Since the study had completed patient accrual, the analysis was conducted for possible study termination due primarily to toxicities. It was confirmed that the trial is going to continue to its pre-specified endpoint, which is based on progression-free survival. We anticipate that preliminary data from the completed trial will be available in the first half of 2014. If the outcome of the study is positive and the statistical endpoints are met, our plan would be to request an end-of-Phase-2 meeting with FDA and, assuming that meeting leads to a pivotal registration trial, we could potentially file a new drug application in 2017 and subsequently receive regulatory approval in relapsed ovarian cancer in 2018.

Importantly, this trial, also known as GOG0186I, is being supported by a variety of collaborators including Genentech / Roche, which manufactures and markets AVASTIN (bevacizumab), as well as the GOG, and its sponsor, the Cancer Therapy Evaluation Program (CTEP) of the NCI. As CTEP is bearing the majority of the clinical trial costs, our ongoing expenses related to this trial are primarily related to manufacturing sufficient quantities of ZYBRESTAT .


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With additional funding, we plan to conduct two additional clinical studies in advanced ovarian cancer that we believe would further demonstrate ZYBRESTAT 's potential as a leading adjunctive cancer therapy, as follows:

ZYBRESTAT in combination with VOTRIENT (pazopanib)

GlaxoSmithKline (GSK)'s VOTRIENT (pazopanib) is an anti-angiogenic oral tyrosine kinase inhibitor that is currently FDA-approved for renal cell carcinoma (RCC) and soft tissue sarcoma (STS), and with compelling early clinical data in the treatment of relapsed ovarian cancer. We believe that using ZYBRESTAT in combination with VOTRIENT (pazopanib) may provide a clinically active yet potentially better tolerated alternative to the current standard of care for relapsed ovarian cancer, cytotoxic chemotherapy.

We intend to collaborate with a non-profit in the design of a randomized, two-arm Phase 2 trial of approximately 120 patients in the United States, European Union or Eastern Europe comparing VOTRIENT (pazopanib) with VOTRIENT (pazopanib) plus ZYBRESTAT in patients with relapsed ovarian cancer. The primary endpoint of the trial would be progression-free survival (PFS), and secondary endpoints would include safety, overall survival (OS), objective response rate, and CA125 response rate.

As in our combination therapy trial with AVASTIN (bevacizumab), we believe that there are potential collaborators that may help offset costs associated with this trial, including a non-profit cancer research organization and, potentially, GlaxoSmithKline.

ZYBRESTAT in combination with TAXOL (paclitaxel)

TAXOL (paclitaxel) is a chemotherapy agent used to treat patients with a variety of solid tumors, including lung, ovarian, breast, head and neck cancers. We believe that using ZYBRESTAT in combination with TAXOL (paclitaxel) may demonstrate how adjunctive therapy with ZYBRESTAT could improve standard of care and improve patient outcomes in certain patients with advanced ovarian cancer.

We are planning to conduct a randomized, two-arm Phase 2 trial of approximately 120 patients in the United States, European Union or Eastern Europe comparing weekly dosing of TAXOL (paclitaxel) with weekly TAXOL (paclitaxel) plus ZYBRESTAT in patients with relapsed ovarian cancer. The primary endpoint of the trial would be progression-free survival (PFS), and secondary endpoints would include safety, overall survival (OS), objective response rate, and CA125 response rate.

As in our combination therapy trial with AVASTIN (bevacizumab), we believe that there are potential collaborators that may help offset costs associated with trial, including one or more non-profit cancer research organizations.

Anaplastic Thyroid Cancer, or ATC

Anaplastic thyroid cancer (ATC) is a rare, but particularly aggressive form of thyroid cancer that is resistant to mainstream cancer therapies and that has a particularly grim prognosis, with a median survival from diagnosis of 3-4 months and a one-year survival rate of less than 10%. Due to an unmet need in the treatment of ATC and the small size of the indication, we have been granted an orphan drug designation by both the FDA and European Medicines Agency (EMA) for the use of ZYBRESTAT in the treatment of ATC.

While the FDA has asked that we conduct one or more large pivotal trials to obtain regulatory approval for ZYBRESTAT in ATC in the United States, which we believe would be prohibitively expensive for such a rare indication, the European Union has alternative pathways for potential approval of drugs that are designed to treat life-threatening, extremely rare, orphan diseases such as ATC. These include the possibility of a special marketing approval under "exceptional circumstances", known as an MAA, in the case of therapies that address urgent, unmet medical needs. We received feedback from two reviewing countries in March 2013 and the Scientific Advice Working Party, or SAWP, of the European Medicines Agency, or EMA, in July 2013, on our plan to submit an MAA for ZYBRESTAT in ATC. We intend to address and incorporate this feedback into our MAA filing, and we believe that it is possible that we could obtain an MAA for the use of ZYBRESTAT in the treatment of ATC with the existing clinical data that we have. Based on the latest guidance received from the SAWP, we currently anticipate a 2015 MAA filing and a possible subsequent 2016 authorization. If we are successful in obtaining an MAA for ZYBRESTAT in the treatment of ATC, we believe that this could lead to similar authorizations in other countries such as Japan, South Korea, China, or Canada (but not in the United States).

Carcinoid Syndrome

Carcinoid syndrome refers to an array of symptoms, such as flushing, diarrhea and, less frequently, bronchoconstriction and heart failure, that occur secondary to carcinoid tumors in approximately 5% of patients. These symptoms are caused by overproduction of biologically active substances such as serotonin and kallikrein, that are released directly into systemic circulation, bypassing hepatic degradation. While drug treatment with somatostatin analogues helps to control the symptoms of carcinoid


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syndrome, patients who are or become refractory (unresponsive) to somatostatin have limited therapeutic options, and we believe that treatment with ZYBRESTAT may improve outcomes for these patients. Approximately 14,000 people in the United States are diagnosed with carcinoid syndrome each year.

In June 2012, we announced the establishment of an exclusive, worldwide licensing agreement with Angiogene Pharmaceuticals Ltd., a U.K.-based drug development company that had previously been developing a competing VDA, for intellectual property covering the use of VDAs in treatment of symptoms related to carcinoid syndrome and other neuroendocrine tumors. We enhanced this intellectual property with data collected from various preclinical studies of ZYBRESTAT , some of which are ongoing. Assuming positive results and sufficient financial resources, we are considering launching a Phase 1b/2a clinical program in carcinoid syndrome, although we view ovarian cancer as a more immediate priority.

Ophthalmic Indications

In addition to developing ZYBRESTAT as an intravenously administered therapy for a number of solid tumor indications, we believe that ZYBRESTAT may also be useful as a therapy for a variety of ophthalmological diseases and conditions such as wet age-related macular degeneration (AMD) and diabetic retinopathy that are characterized by abnormal blood vessel growth within the eye that result in loss of vision, many of which are currently treated with anti-vascular endothelial growth factor (VEGF) therapies. While this program is not an immediate priority, we are actively seeking one or more potential development and commercialization partners with expertise in ophthalmology that would allow us to leverage our existing assets and move forward.

OXi4503 Development Program

In addition to pursuing development of ZYBRESTAT , we are also pursuing the development of a second product candidate, OXi4503, a novel second-generation, dual-mechanism VDA, which not only has been shown to reduce tumor blood flow but which also forms an antiproliferative metabolite.

We believe that this dual mechanism differentiates OXi4503 from other VDAs and may result in enhanced anti-tumor activity in certain tumor types as compared with other VDA drug candidates. Based on preclinical data, we believe that OXi4503 may be particularly active in hepatocellular carcinoma, melanoma, and leukemias of the myeloid lineage, all of which have relatively high levels of the enzymes that facilitate the conversion of OXi4503 into a chemical that directly kills tumor cells. Similar to ZYBRESTAT , OXi4503 has shown potent anti-tumor activity in preclinical studies of solid tumors and acute myelogenous leukemia, both as a single agent and in combination with other cancer therapies.

Our current development program for OXi4503 is as follows:

Acute Myelogenous Leukemia, or AML

AML is a relatively rare cancer of the myeloid blood cells, with approximately 10,500 new cases each year in the United States and accounting for approximately 1.2% of cancer deaths. AML is characterized by the rapid growth of abnormal white blood cells that pollute bone marrow and interfere with the production of normal blood cells. Due to an unmet need in the treatment of AML and the small size of the indication, we have been granted an orphan drug designation in the United States for the use of OXi4503 in the treatment of AML.

OXi4503 has demonstrated potent activity against AML in animal models, and these results were published in the journal Blood in September 2010. Shortly thereafter, we entered into a clinical trial agreement with the University of Florida related to an investigator-sponsored Phase 1 study of OXi4503 in up to 36 patients with AML or myelodysplastic syndrome, or MDS, which trial was subsequently initiated in May 2011. As the University of Florida and a non-profit research organization, The Leukemia & Lymphoma Society's Therapy Acceleration Program, is covering the majority of the costs of this trial, our ongoing expenses related to this trial are primarily related to manufacturing sufficient quantities of OXi4503.

In December 2012, the investigators at the University of Florida presented compelling data from this Phase 1 study at the 2012 annual meeting of the American Society of Hematology (ASH) in Atlanta, Georgia, indicating that OXi4503 was active, generating responses in patients, and had a manageable safety profile. More specifically, results from five initial patients with refractory AML enrolled between May 2011 and August 2012 revealed an increase in plasma LDH and uric acid levels by at least two-fold within hours after OXi4503 infusions, suggesting leukemia cell destruction. Adverse events attributable to OXi4503 infusion included bone pain, fever, anemia and thrombocytopenia, as well as hypertension, the latter of which was readily manageable.

This open-label, dose-escalating study for the treatment of up to 36 patients will evaluate the safety profile, maximum tolerated dose and biologic activity of OXi4503 in these patients. New patients are continuing to be enrolled in this study. As of August 2, 2013, 11 patients have been enrolled into this study, and a maximum tolerated dose has not been observed.


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Financial Resources

Since the fall of 2011, we have focused our capital resources on our most promising early-stage clinical programs with the goal of reducing our cash utilization. Accordingly, our resources have been focused primarily on supporting our ovarian Phase 2 clinical trial which is being conducted by the GOG, our Phase 1 clinical trial in acute myeloid leukemia, or AML, being conducted by the University of Florida, our distribution agreement with Azanta, preclinical programs and the manufacture of clinical supply of our product candidates to support our programs. We have also spent resources completing our ATC trial (the FACT trial) and designing a Phase 3 registrational study in anaplastic thyroid cancer, or ATC (the FACT 2 trial), and while we were successful in receiving a special protocol assessment, or SPA, with the FDA for the FACT 2 trial in 2012, we have subsequently determined that this trial is not financially feasible at this time with our limited financial resources. We are now focusing our efforts in this area on pursuing the commercialization of ZYBRESTAT in Europe for the treatment of ATC with a marketing authorization under exceptional or conditional circumstances.

We are committed to a disciplined fiscal strategy and as such maintain a limited employee and facilities base, with development, scientific, finance and administrative functions, which include, among other things, product development, regulatory oversight and clinical testing. Our research and development team members typically work on a number of research and development projects concurrently. Accordingly, we do not separately track the costs for each of these research and development projects to enable separate disclosure of these costs on a project-by-project basis. We conduct scientific activities pursuant to collaborative arrangements with universities. Regulatory and clinical testing functions are generally contracted out to third-party, specialty organizations.

We have experienced net losses every year since our inception and, as of June 30, 2013, had an accumulated deficit of approximately $228,966,000. We expect to incur significant additional operating losses over at least the next several years, principally as a result of our plans to commercialize ZYBRESTAT for the treatment of ATC in Europe, including the cost of manufacturing registrational lots, continuing clinical trials and anticipated research and development expenditures. The principal source of our working capital to date has been the proceeds of private and public equity financings and to a significantly lesser extent the exercise of warrants and stock options. We currently have no recurring material amount of licensing or other income. As of June 30, 2013, we had approximately $7,752,000 in cash and restricted cash.

Currently, we have two potential vehicles for raising capital, and we recently completed a financing in April 2013, as described in detail in Note 2 to the Condensed Financial Statements for the quarter ended June 30, 2013 and under the heading Liquidity and Capital Resources below. We have an "at the market" equity offering sales agreement, or the ATM Agreement, with MLV & Co. LLC, or MLV, pursuant to which we may issue and sell shares of our common stock from time to time through MLV who will act as our sales agent and underwriter. We are limited as to how many shares we can sell under the ATM Agreement due to limitations imposed by the Securities and Exchange Commission, or the SEC, on the number of shares issuable pursuant to a Form S-3 registration statement in a primary offering by smaller reporting companies such as us. Subject to this restriction, as of July 31, 2013 the total dollar amount of common stock that we could sell under the ATM Agreement during the next twelve months is approximately $264,000 under our current registration statement. We may be able to sell more shares under this agreement over the next twelve months depending on several factors including our stock price, the number of shares of our common stock outstanding as well as the timing of the occurrence of the sales. Additionally, subject to a minimum purchase price of $6.00 per share and other conditions of the arrangement, we may sell up to a total of $20,000,000 of our common stock to Lincoln Park Capital Fund, LLC, or LPC, pursuant to a stock purchase agreement, the LPC Purchase Agreement. The price of our common stock as of August 8, 2013 was $2.74 and therefore the facility is not available to us at this time.

Based on our limited ongoing programs and operations we expect our existing cash to support our operations through the middle of the second quarter of 2014. However, while this level of cash utilization does not allow us to initiate any significant projects, including clinical trials, to further the development of our most advanced product candidates, it allows for initial drug manufacturing activities that we may undertake in connection with the planned filing of a European Marketing Authorization application for ZYBRESTAT in ATC. Any significant further development of ZYBRESTAT or other capital intensive activities will be contingent upon our ability to raise additional capital in addition to our existing financing arrangements, as to which we can give you no assurance.

We will require significant additional funding to fund operations and to continue the development of our product candidates. Such funding may not be available to us on acceptable terms, or at all. If we are unable to access additional funds when needed, we may not be able to continue the development of our product candidates or we could be required to delay, scale back or eliminate some or all of our development programs and other operations. Any additional equity financing, which may not be available to us or may not be available on favorable terms, most likely will be dilutive to our current stockholders and debt financing, if available, may involve restrictive covenants. If we access funds through collaborative or licensing arrangements, we may be required to relinquish rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize on our own, on terms that are not favorable to us. Our ability to access capital when needed is not assured and, if not achieved on a timely basis, will materially harm our business, financial condition and results of operations.


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Results of Operations

Three and Six Months Ended June 30, 2013 and June 30, 2012

Revenue

We did not recognize any revenue in the three month periods ended June 30, 2013 or June 30, 2012. We recognized approximately $0 and $114,000 in product revenue for the six month periods ended June 30, 2013 and June 30, 2012, respectively. Product revenue in 2012 represents amounts recognized under our distribution agreement with Azanta which we entered into in December 2011. We recognized product revenues in the six month period ended June 30, 2012, after delivery of ZYBRESTAT for compassionate use to Azanta and the 30 day inspection period had expired at which point the drug was deemed accepted. As of July 31, 2013, we expect to recognize revenue of approximately $95,000 in the second half of 2013 based on orders of ZYBRESTAT placed by Azanta, to date. We do not anticipate any additional orders by or revenues from Azanta in 2013, although there can be no assurance of this at this time.

ZYBRESTAT is expensed in the period in which it is manufactured because it is in the development stage and does not have an alternative future use. As a result, the product provided to Azanta had a zero cost basis, and therefore there is no cost-of-goods sold.

Our future revenues will depend upon our ability to establish collaborations with respect to, and generate revenues from, products currently under development by us. We expect that we will not generate meaningful revenue in the near term future, unless and until we enter into new collaborations providing for funding through the payment of licensing fees and up-front payments.

Research and development expenses

The table below summarizes the most significant components of our research and development expenses for the periods indicated in thousands and provides the percentage change in these components:

                                         Three months ended               Change                Six months ended               Change
                                              June 30,               2013 versus 2012               June 30,              2013 versus 2012
                                         2013           2012        Amount           %          2013         2012        Amount           %
External services                      $    242       $    513     $    (271 )       -53 %    $     601     $   780     $    (179 )       -23 %
Employee compensation and related           211            341          (130 )       -38 %          488         599          (111 )       -19 %
Employee Stock-based compensation            12             30           (18 )       -60 %           49          46             3           7 %
Other                                       138            196           (58 )       -30 %          211         309           (98 )       -32 %

Total research and development         $    603       $  1,080     $    (477 )       -44 %    $   1,349     $ 1,734     $    (385 )       -22 %

The decrease in external services expense for the three and six month periods ended June 30, 2013 compared to the same three and six month periods in 2012 is primarily attributable to reductions in costs associated with our previous clinical programs that have been completed or placed on hold, including those we conducted in anaplastic thyroid cancer. The decrease was also attributable to costs associated with manufacturing our drug product for research and clinical trials, which is expensed as manufactured, and can be impacted by the timing of when we need drug product for these activities. The decrease in external services expense was in part off-set by costs associated with our ovarian Phase 2 clinical trial which is being conducted by the GOG, under the sponsorship of CTEP. While CTEP bears most of the cost of the trial, we pay for some costs related to this trial.

The decrease in employee compensation and related expenses for the three and six month periods ended June 30, 2013 compared to the same three and six month periods in 2012 was due to a reduction of clinical employees and related costs in the 2013 period due to delays in initiating new clinical trials. The decrease in the six month period ended June 30, 2013 was offset in part by an increase in employee compensation and related expenses in the first quarter of 2013 as compared to the first quarter of 2012 due to the transition of employees during the first quarter of 2012 in which some positions were vacant.

Employee stock-based compensation expense decreased for the three month period ended June 30, 2013 compared to the same three month period in 2012 due to the decrease of clinical employees as discussed above and due to the timing and vesting of option grants. Employee stock-based compensation expense increased for the six month period ended June 30, 2013 compared to the same six month period in 2012 due to the timing and vesting of stock option grants and was offset in part by the decrease in the three month period ended June 30, 2013 due . . .

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