UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

 

Commission File Number 000-51134

 

 

Favrille, Inc.

(Exact name of registrant as specified in its charter)

 

 

10421 Pacific Center Court, Suite 150
San Diego, CA 92121

(Address of principal executive offices, including zip code)

 

(858) 526-8000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value per share

(Title of class)

 

 

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 o   No ý

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   Yes o   No ý

 

The aggregate market value of the voting stock held by non-affiliates of the registrant based upon the closing price of the common stock listed on the Nasdaq National Market on March 18, 2005 was $38,602,869, based on a closing price of $5.49 per share, excluding 13,270,433 shares of the registrant’s common stock held by current executive officers, directors and stockholders whose ownership exceeds 5% of the common stock outstanding at March 18, 2005.  Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the registrant. The registrant has elected to use March 18, 2005 as the calculation date, as on June 30, 2004 (the last business day of the registrant’s second fiscal quarter) the registrant was a privately held concern.

 

As of March 18, 2005, there were 20,301,921 shares of the registrant’s common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

FAVRILLE, INC.

 

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

 

TABLE OF CONTENTS

 

PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
SIGNATURES

 

 

Cautionary Note Regarding Forward-Looking Statements

 

This annual report on Form 10-K contains forward-looking statements that involve many risks and uncertainties. These statements relate to future events and our future performance and are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. In some cases, you can identify forward-looking statements by terms such as “would,” “could,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “targets,” “seek,” or “continue,” the negative of these terms or other variations of such terms. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business and other characterizations of future events or circumstances, are forward-looking statements. These statements are only predictions based upon assumptions made that are believed to be reasonable at the time, and are subject to risk and uncertainties. Therefore, actual events or results may differ materially and adversely from those expressed in any forward-looking statement. In evaluating these statements, you should specifically consider the risks described under the caption “Factors That May Affect Future Operating Results” and elsewhere in this Form 10-K. These factors may cause our actual results to differ materially from any forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

PART I

 

Item 1.            Business

 

Overview

 

We are a biopharmaceutical company focused on the research, development and commercialization of targeted immunotherapies for the treatment of cancer and diseases of the immune system. We have developed a proprietary technology that enables us to manufacture active immunotherapy products that are designed to stimulate a patient’s immune system to mount a specific and sustained response to disease. Our lead product candidate, FavId, is an active immunotherapy for the treatment of B-cell non-Hodgkin’s lymphoma, or NHL. FavId entered a pivotal Phase 3 clinical trial in follicular B-cell NHL in July 2004.

 

The American Cancer Society estimates that 56,390 people will be diagnosed with NHL in the United States in 2005, and the National Cancer Institute, or NCI, has most recently estimated that approximately 332,000 patients suffer from this disease. Approximately 85% of NHL patients have B-cell NHL. We believe that approximately half of these patients have the slow-growing, or indolent, form of the disease. The majority of the remaining patients have a faster growing form of the disease, commonly referred to as aggressive NHL.  Only half of these are cured with currently available standards of care.  A number of therapies are used to treat indolent B-cell NHL, including Rituxan, which had sales in the United States of approximately $1.6 billion in 2004 for indolent B-cell NHL and other indications. Despite the benefits of current therapies, patients with indolent B-cell NHL still relapse following treatment, and the disease is considered to be incurable.

 

Our lead product candidate, FavId, is being developed to be used following treatment with existing standards of care to extend time to disease progression, or TTP, in patients with B-cell NHL. Our Phase 3 clinical trial is designed to evaluate FavId’s ability to extend the time to disease progression, in patients with follicular B-cell NHL, following treatment with Rituxan. We believe this regimen will provide patients with B-cell NHL the option of an all-biologic therapy that avoids many of the side effects associated with chemotherapy. To date, FavId has been evaluated in several multi-center, open-label Phase 2 clinical trials involving over 120 patients. Preliminary results from these trials suggest that FavId can induce remissions when used alone and may increase TTP following treatment with Rituxan.

 

Researchers have been conducting clinical trials of active immunotherapies in patients with B-cell NHL for more than a decade. The results of clinical trials at the Stanford University Medical Center and the NCI suggest that active immunotherapies similar to FavId, when used following chemotherapy, may induce long-term remission and improve survival time among indolent B-cell NHL patients. Despite the promising

 

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results of these trials, we believe manufacturing limitations have hindered commercialization of these immunotherapies. We believe that our proprietary technology will enable us to manufacture FavId in a timely and cost-effective manner and will therefore allow us to offer a treatment option not currently available to physicians and patients.

 

We believe FavId may be effective in treating other types of B-cell NHL. Five additional Phase 2 clinical trials of FavId are either ongoing or expected to begin during 2005. One of these clinical trials will be conducted under a separate physician-sponsored IND in the United States. A second of these will be conducted as a physician-sponsored clinical trial in Switzerland. Moreover, we believe our active immunotherapy expertise and proprietary manufacturing technology will enable us to develop additional product candidates for other oncology indications, such as T-cell lymphoma, and for autoimmune diseases, with an initial focus on multiple sclerosis. We are currently developing a second product candidate, FAV-201, for the treatment of T-cell lymphoma and intend to initiate a Phase 1/2 clinical trial evaluating the safety and preliminary efficacy of FAV-201 in the second half of 2005. We have retained exclusive worldwide commercialization rights to all of our product candidates.

 

The Immune System

 

The immune system is the body’s major defense against foreign pathogens, such as viruses and bacteria. The principal cells that make up the immune system are termed white blood cells. A subset of white blood cells known as lymphocytes is essential in generating an effective immune response to disease-causing agents. Lymphocytes consist primarily of B-cells and T-cells, which normally recognize and respond to antigens found within proteins derived from foreign pathogens. The B-cell receptor that recognizes an antigen is called an antibody. Once B-cells recognize antigens, they initiate a sequence of events that results in the immune system’s production of large amounts of antibodies specific to that antigen. These antibodies then circulate throughout the body and bind to their target antigen, thereby flagging pathogens for destruction. This type of immune response is known as the antibody-based, or humoral, immune response.

 

T-cells are responsible for carrying out what is known as the cell-mediated immune response. T-cell receptors recognize antigens presented on the surface of other cells. When a T-cell recognizes its target, it responds in one of two ways. Either it destroys the target directly, or it produces a variety of proteins that cause the growth and activation of itself and other T-cells and B-cells, which can then destroy the target.

 

Although any one B-cell or T-cell can recognize and respond to only a single antigen, the human immune system has evolved such that the collective B-cell and T-cell populations can respond to virtually every possible foreign pathogen that a person may encounter in his or her lifetime. Furthermore, the humoral and cell-mediated immune responses have an additional feature of “memory,” which enables B-cells and T-cells to recall an interaction with a foreign antigen and to respond to this antigen in a more rapid and aggressive fashion in the future.

 

The immune system is generally very effective in destroying pathogens that it recognizes as foreign. For this reason, a properly functioning immune system is highly regulated to ensure that its destructive power is not directed against normal tissue. If this regulation breaks down, an immune response may be generated against normal tissue, which can lead to autoimmune diseases, such as multiple sclerosis, rheumatoid arthritis and lupus. In the case of cancer, this strict regulation of the immune system may prevent an effective immune response from being mounted because of the body’s inability to distinguish the cancer as foreign. Researchers believe that teaching the immune system to recognize the proteins associated with cancer cells as foreign will enable the immune system to identify and eliminate cancers, such as lymphoma.

 

Immunotherapy

 

Immunotherapy is designed to use a person’s immune system to fight diseases, including cancer. Immunotherapy enables the immune system to target and destroy diseased cells and has far fewer side effects than other therapies, such as surgery, chemotherapy and radiation therapy. There are two types of immunotherapy used to treat cancer: passive immunotherapy and active immunotherapy.

 

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Passive immunotherapy utilizes large doses of infused antibodies that bind to antigens primarily expressed by a tumor cell and by few or no normal cells. These antibodies circulate throughout the bloodstream, binding to antigens on targeted cells, thereby flagging them for destruction. One of the most widely used passive immunotherapies for the treatment of B-cell NHL is Rituxan. Rituxan has demonstrated the ability to induce a clinical response—at least a 50% reduction in tumor burden—in approximately 50% of patients with indolent B-cell NHL with few side effects. In patients who respond to Rituxan, this response lasts on average approximately 12 months. Despite their widespread use in fighting cancer, passive immunotherapies such as Rituxan suffer from significant limitations, including a limited duration of efficacy and the development of resistance. Additional passive immunotherapies have attempted to overcome the shortcomings of Rituxan by linking antibodies to radioactive molecules that can directly destroy the cell to which the antibody is bound. However, improvements in time to disease progression, if any, have been modest.

 

Active immunotherapy teaches the patient’s own immune system to recognize and fight cancer. Active immunotherapy is designed to program the immune system to generate a sustained and robust humoral and cell-mediated immune response. Idiotype immunotherapy, including our product candidate, FavId, for the treatment of B-cell NHL, is an example of active immunotherapy. In the case of B-cell NHL, the antibody protein made by a person’s B-cell NHL is used as a target for immune attack. The unique antigens in this antibody protein are referred to as the idiotype. The immune system can differentiate between lymphoma cells and normal B-cells based on their idiotype. As a result, following successful idiotype immunotherapy, a patient’s immune response is specific to their B-cell lymphoma.

 

Development of Active Idiotype Immunotherapy

 

Active idiotype immunotherapy has been studied in patients with B-cell NHL since the late 1980’s and has shown substantial promise in clinical trials. Trials conducted at the Stanford University Medical Center and the NCI evaluated the use of active idiotype immunotherapy in treating patients with indolent B-cell NHL. The results suggest that active idiotype immunotherapy significantly increases the duration of response in patients previously placed into remission with chemotherapy. Remission is defined as at least a 50% reduction in tumor burden. The immunotherapy administered in both the Stanford and NCI trials was similar to FavId in that it involved the combination of an idiotype protein derived from a patient’s tumor with a foreign protein, keyhole limpet hemocyanin, or KLH. KLH is a protein derived from shellfish that elicits a strong immune response.

 

In the Stanford trial, 21 of 41 patients treated with idiotype immunotherapy mounted an immune response to their idiotype protein. The median TTP in these patients was calculated to be 7.9 years, compared to a median TTP of 1.3 years for the patients who failed to mount an immune response. For purposes of this trial, TTP was defined as the interval between the date of last dose of chemotherapy and the recurrence of disease. The median TTP for the responding patients was calculated based on available data using a statistical method known as Kaplan-Meier analysis, which allows for the estimation of a median time when not all of the patients have reached the event being measured at the time of analysis. The results from this trial were published in the medical journal Blood in May 1997.

 

In an attempt to increase the idiotype-specific immune response, the NCI trial supplemented the idiotype immunotherapy with GM-CSF, a white blood cell growth factor designed to enhance the immune response. Lymphoma-specific immune responses were reported for 19 of the 20 patients in the trial, and the most recent update from this trial in August 2003 indicates that with a median follow-up time of 7.2 years, 50% of patients remain in continuous complete remission with an overall survival rate of 90%. The trial also showed that the immunotherapy converted eight of 11 patients tested to a molecular remission, which means no evidence of tumor could be seen even at the more sensitive level of DNA detection. The preliminary results from the NCI trial were published in the medical journal Nature Medicine in October 1999, and the most recent update from this trial was published in the medical journal Blood in November 2003.

 

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Barriers to Commercialization

 

Although the Stanford and NCI clinical trials demonstrated favorable results, substantial manufacturing difficulties have limited further development of an active idiotype immunotherapeutic approach to the treatment of B-cell NHL. The manufacturing process used to produce the idiotype immunotherapies studied at Stanford and the NCI has lengthy and inconsistent production timelines and is labor-intensive, with a reported manufacturing failure rate as high as 15%. As a result, we believe this process would be difficult to commercialize.

 

Our Solution for the Commercial Production of Active Idiotype Immunotherapy

 

We have developed a proprietary technology that we believe enables us to overcome historical limitations to the manufacturing and commercialization of active idiotype immunotherapies. Our technology utilizes an insect-cell virus that carries genetic information that is identical to a patient’s lymphoma. By introducing this virus into an insect cell line, we can produce sufficient quantities of idiotype protein for our immunotherapy. We believe our manufacturing process will have the following benefits:

 

• Rapid Production Cycle. We believe our production cycle time is a number of months shorter than previously reported cycle times for manufacturing idiotype immunotherapies for B-cell NHL. Our production timeline allows us to administer FavId at what we believe is the optimal time following treatment with Rituxan.

 

• Reliable Manufacturing. To date, our success rate in providing product is approximately 95%. Our underlying production method for each patient will not change regardless of the number of units of FavId produced. This small-scale unit operation is easily replicated to produce multiple patient therapies simultaneously without the risks associated with traditional scale-up for commercial production.

 

• Automation. This small-scale unit operation is amenable to automation. The time required to identify the genetic information used to construct the insect-cell expression vector has been reduced by technological advances, including automation, some of which are the result of the human genome project. We believe that many other steps in the production of FavId can be automated.

 

Our production process requires only standardized small volumes, is readily reproducible, and requires limited production time. As a result, we believe our cost of production can allow for a commercially viable product with gross margins similar to those seen for other biopharmaceuticals and enable physicians to use FavId in concert with all existing standards of care for indolent B-cell NHL, including Rituxan.

 

Our Development Programs

 

The chart below summarizes the status of ongoing, recently completed and currently planned clinical and preclinical development programs. We have retained exclusive worldwide commercialization rights to all of our product candidates.

 

Product		Indication		Patient Population		Status
FavId
Following Rituxan		Follicular B-cell NHL		Treatment-naïve or relapsed/refractory patients(1)		Phase 3 trial enrolling patients
Following Rituxan		Follicular B-cell NHL		Treatment-naïve or relapsed/refractory patients		Phase 2 trial enrollment complete: patients in long-term follow-up
Single agent		Indolent B-cell NHL		Relapsed/refractory patients		Phase 2 trial enrollment complete: patients in long-term follow-up

 

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Following autologous stem cell transplant		Indolent B-cell NHL		Patients eligible for autologous stem cell transplant		Phase 2 trial enrolling patients(2)
With maintenance Rituxan		Indolent B-cell NHL		Treatment-naïve patients		Phase 2 trial enrolling patients
Single agent		Non-follicular B-cell NHL		Treatment-naïve or relapsed/refractory patients		Phase 2 trial enrolling patients(2)
Following prior therapy		Follicular B-cell NHL		Patients who progressed in our Phase 3 trial without receiving FavId		Phase 2 trial enrolling patients
Following chemotherapy/Rituxan in patients with aggressive NHL		Aggressive B-cell NHL		Treatment-naïve patients		Phase 2 trial expected start: second half 2005
FAV-201		T-cell lymphoma		Previously treated patients		Phase 1/2 trial expected start: second half 2005
Autoimmune Disease Candidate		Multiple sclerosis		Not applicable		Preclinical development expected start: second quarter 2005

 

(1) Patients are considered relapsed if their lymphoma has returned after a response to prior therapy. Patients are considered refractory if they have not responded to prior treatments.

 

(2) This trial is physician-sponsored, which means that a physician, rather than Favrille, will be responsible for managing the conduct of the trial and the resulting data. The responsible physician has filed or is expected to file an Investigational New Drug application, or IND, with the FDA for the study and is or will be the owner of that IND. We will provide FavId at our own expense for use in physician-sponsored trials and, in some cases, funding.

 

FavId for B-Cell NHL

 

Overview

 

Our lead product candidate, FavId, is an active immunotherapy that is based upon unique genetic information extracted from a patient’s tumor. We initiated a pivotal Phase 3 clinical trial evaluating FavId in treatment-naïve or relapsed or refractory follicular B-cell NHL patients following treatment with Rituxan in July 2004. Follicular lymphoma accounts for the majority of all indolent B-cell NHL cases. To date, we have conducted several multi-center, open-label Phase 2 clinical trials of FavId involving over 120 indolent B-cell NHL patients. Five additional Phase 2 clinical trials of FavId are either ongoing or expected to begin during 2005. One of these clinical trials is being conducted under a separate physician-sponsored IND in the United States.  A second is being conducted as a physician-sponsored clinical trial in Switzerland. We currently retain exclusive worldwide commercialization rights to FavId.

 

Market Opportunity

 

The American Cancer Society cites NHL as the sixth most common form of cancer and the sixth leading cause of death among cancers in the United States. The American Cancer Society estimated that 56,390 people will be diagnosed with NHL in the United States in 2005, and the NCI has most recently estimated that approximately 332,000 patients suffer from this disease. B-cell NHL is a cancer of B-cell lymphocytes, the body’s white blood cells principally responsible for fighting disease. Approximately 85% of NHL patients in the United States have B-cell NHL. We believe that approximately half of these patients have

 

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the indolent form of the disease. Although indolent B-cell NHL is slow-growing, it is incurable with existing therapies and inevitably fatal. The median survival time for patients diagnosed with advanced stages of indolent B-cell NHL is estimated to be between seven and ten years.

 

Current Treatments

 

Overview. The B-cell NHLs are a diverse group of malignancies with varying patterns of behavior and responses to treatment. Both the prognosis for patients with this disease, and the treatment that they are likely to receive, depend on the histologic type and stage. B-cell NHLs are commonly divided into two groups: the indolent NHLs and the aggressive NHLs.  Indolent B-cell NHLs have a relatively good prognosis, with a median survival as long as 10 years. Early-stage indolent B-cell NHL can be effectively treated and often cured with radiation therapy alone.  Patients with advanced stage indolent B-cell NHL are not considered curable but generally respond to treatment with a remission. These remissions are generally temporary, however, and patients with indolent B-cell NHL typically relapse within 18 months to three years of initial chemotherapy treatment. Aggressive B-cell NHLs have a shorter natural history. Only 50% of these patients can be cured with chemotherapy alone or with combinations of chemotherapy and Rituxan. If patients relapse after treatment, the vast majority of relapses occur in the first two years following therapy.

 

Chemotherapy.              Chemotherapy has traditionally been used as the primary therapy for most patients with B-cell NHL. Chemotherapy is typically administered in repeated cycles over three to eight months and can substantially reduce the amount of lymphoma and often achieve remission.  Patients receiving chemotherapy generally experience a number of side effects, including fatigue, nausea, hair loss and increased risk of infection. These side effects may result in the need for supportive care, including additional therapies and hospitalization. Patients also experience late side effects such as sterility, myelodysplastic syndromes, second cancers, and heart dysfunction.  The toxicity and inconvenience of chemotherapy can impose a heavy strain on a patient’s overall quality of life.

 

Passive Immunotherapy.  Several passive immunotherapy products have been approved for the treatment of B-cell NHL, including Rituxan, Zevalin and Bexxar. Rituxan is the leading passive immunotherapy approved for the treatment of B-cell NHL and is being used for both indolent and aggressive B-cell NHL. Standard treatment with Rituxan alone involves four weekly intravenous infusions over a 22-day period. Rituxan is considered to be significantly less toxic to the bone marrow than chemotherapy. Rituxan is a monoclonal antibody that can induce a remission in approximately 50% of patients with indolent B-cell NHL. In these responding patients, the remission lasts approximately 12 months. Unfortunately, as with patients with indolent B-cell NHL who receive chemotherapy, patients treated with Rituxan eventually relapse. Several clinical trials have suggested that additional doses of Rituxan as a maintenance therapy can improve the time before patients with follicular B-cell NHL relapse. In addition, combinations of Rituxan and chemotherapeutic or immunostimulatory drugs at various doses and schedules may provide patients with an increase in TTP over that expected with Rituxan alone.  When administered with chemotherapy to patients with aggressive B-cell NHL, Rituxan can increase the cure rate and the TTP.

 

We believe that the standard of care for the treatment of B-cell NHL patients will increasingly involve the use of Rituxan. Sales of Rituxan in the United States have grown from $162 million in 1998 to approximately $1.6 billion in 2004.  Our clinical registration strategy involves the administration of FavId to the group of patients who would otherwise receive Rituxan. We believe this approach will provide patients with indolent B-cell NHL the option of an all-biologic therapy that avoids many of the side effects associated with chemotherapy.

 

Clinical Development

 

Pivotal Phase 3 Clinical Trial—FavId Following Rituxan.  We initiated a randomized, double-blind, placebo-controlled Phase 3 clinical trial of FavId in patients with follicular B-cell NHL in July 2004. The trial is open to patients who are treatment-naive and to patients who have relapsed from, or are refractory to, prior therapies. The trial is being conducted at 67 centers in the United States and require at least 342 evaluable patients. The chart below summarizes the treatment schedule of patients in this trial:

 

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We obtain tumor cells via biopsy from each patient to establish the genetic profile of the tumor for our use in manufacturing the patient’s FavId. In addition, a CT scan is conducted in order to measure tumor burden before Rituxan treatment. Each patient then receives the standard four doses of Rituxan alone at one-week intervals while the patient’s FavId is being manufactured. Five weeks after the last dose of Rituxan is administered, the patient is re-evaluated and a CT scan is conducted to assess the patient’s response to Rituxan. A patient whose disease remains stable or improves following treatment with Rituxan is randomized to receive either FavId with GM-CSF or placebo with GM-CSF. During the induction phase, randomized patients receive monthly injections of FavId or placebo for six months. If a patient’s lymphoma remains under control after the induction phase, the patient receives maintenance injections of FavId or placebo given every other month for a year and then every third month until the time of disease progression. Throughout the trial, patients receive CT scans every three months to determine whether their lymphoma is under control. During the trial, patients do not receive any cancer therapy other than that administered in the trial. However, once a patient’s disease progresses, the patient’s participation in the trial terminates.

 

The primary endpoint of the trial is TTP, which in this protocol is the time that elapses between randomization and disease progression. The trial is designed to demonstrate a statistically significant improvement in median TTP in those patients treated with FavId compared to those patients treated with placebo. We estimate an 18-month patient enrollment period and an additional 18-month evaluation period for our pivotal Phase 3 clinical trial for FavId. The trial will include an interim analysis based on a secondary endpoint,  response rate improvement or RRI, which we expect will occur approximately nine months into the follow-up period.

 

In May 2004, we received a Special Protocol Assessment, or SPA, from the FDA for our Phase 3 clinical trial. In the SPA process, the FDA reviewed the design, size and planned analysis of our Phase 3 clinical trial and provided comments regarding the trial’s adequacy to form a basis for approval of a Biologics Licensing Application, or BLA, if the trial is successful in meeting its predetermined objectives. The FDA’s comments are binding on its review decision, except in limited circumstances, such as when a substantial scientific issue essential to determining the safety or effectiveness of a product candidate is identified after the Phase 3 clinical trial is commenced. We also intend to apply for fast track designation from the FDA for FavId during the first half of 2005, which, if obtained, may result in an expedited review of our BLA.

 

Phase 2 Clinical Trial—FavId Following Rituxan.    We initiated a Phase 2 clinical trial of FavId in patients with follicular B-cell NHL who were candidates for Rituxan therapy in June 2002. Initially, this

 

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trial was limited to relapsed or refractory patients who had previously undergone treatment with Rituxan, chemotherapy or both. In April 2003, we expanded the entry criteria for this trial to include patients with no prior treatment for their lymphoma. The trial was conducted at 20 sites. Enrollment in this trial was completed in December 2003.

 

We obtained tumor cells via biopsy from each patient to establish the genetic profile of the tumor for our use in manufacturing the patient’s FavId. In addition, a CT scan was conducted in order to measure tumor burden before Rituxan treatment. Each patient then received four doses of Rituxan alone at one-week intervals while the patient’s FavId was being manufactured. Approximately eight weeks after the last dose of Rituxan, the patient was re-evaluated and a CT scan was conducted to assess the patient’s response to Rituxan. Patients whose disease remained stable or improved following Rituxan treatment received monthly injections of FavId and GM-CSF for six months. If a patient remains progression free after this induction period, the patient continues to receive maintenance injections of FavId given every other month for a year and then every third month until the time of disease progression. Throughout the trial, patients receive CT scans every three months to determine whether their lymphoma is under control. During the trial, patients do not receive any cancer therapy other than that administered in the trial. However, once a patient’s disease progresses, the patient’s participation in the trial terminates.

 

Out of a total of 103 patients who received Rituxan in this trial, sufficient quantities of FavId were available for 99 patients, which comprised the intent to treat, or ITT, population. Eleven of these patients had disease progression following their Rituxan treatment resulting in an evaluable population of 88 patients.  As of December 31, 2004, a median observation time of approximately one year for ITT population, approximately 70% were progression free.

 

As this Phase 2 clinical trial enrolled both patients that were relapsed or refractory from prior treatment and patients who had received no prior treatment for their lymphoma, we can only compare our preliminary results for these subsets of our patient population with available published data. One study published by Dr. Thomas E. Witzig in the Journal of Clinical Oncology in May 2002 reported results for 58 follicular B-cell NHL patients relapsed from or refractory to chemotherapy who were subsequently treated with Rituxan alone. In our Phase 2 clinical trial we treated 26 follicular B-cell NHL patients relapsed from or refractory to chemotherapy whom we believe to be comparable with respect to the patient characteristics in the Witzig study. A comparison of the results published by Witzig with our preliminary results is illustrated in the Kaplan-Meier analysis below.

 

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TTP in Patients Relapsed or Refractory from Prior Chemotherapy

 

 

The median TTP for the subset of follicular patients in the Witzig trial was 10.2 months. At a median observation period of 11 months, approximately 70% of the 26 patients relapsed or refractory from chemotherapy in our Phase 2 clinical trial shown in the figure above were free from disease progression. Though it is not yet possible to estimate a median TTP for this population, we believe these data show a positive trend to a longer TTP in patients treated with Rituxan followed by FavId compared to patients treated with Rituxan alone.

 

We have also compared our 39 treatment-naïve patients with the results of a study published by Dr. John D. Hainsworth in the Journal of Clinical Oncology in October 2002. In this publication, Hainsworth reported results for treatment-naïve patients who received Rituxan every six months for two years or until their disease progressed.

 

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TTP in Treatment Naïve Patients

 

 

*Administered in Hainsworth trial only

 

The median observation period for the treatment-naïve patients in our Phase 2 clinical trial was 12 months and at this time approximately 80% of these patients are free from disease progression. We believe these data show a trend towards an equivalent TTP in patients treated with one course of Rituxan followed by FavId compared to patients treated with a course of Rituxan alone every six months for two years.

 

A secondary endpoint in this study was response rate improvement, or RRI.  RRI attempts to measure the additional responses that occur as a result of FavId.  In this study, RRI was defined as the improvement in responses that occurred after three months from the start of Rituxan.  Improvement in response can be seen in three different ways.  Patients who have stable disease at month three can go on to have a response (either a complete or partial response) sometime after month three.  In addition, a patient with a partial response at month three can go on to have a complete response at some time following month three.  Using this definition, as reported at the American Society of Hematology meeting in December of 2004, we found that 23 out of 83 or 28% of our patients experienced an improvement in their response category after month three.  The amount of RRI did not differ significantly between those patients who were treatment naïve and those who had relapsed from prior treatment – 29% and 27% respectively.  Of the 88 patients who received, FavId, three achieved a complete response at the first assessment following Rituxan and, therefore, could not have an RRI and two were not yet assessable in December 2004.

 

The positive interim results found in this Phase 2 clinical trial do not guarantee final results, and our positive initial assessment of FavId in this clinical trial could differ from our assessment of FavId following completion of the clinical trial. An analysis of the characteristics of those patients in our trial whose disease relapsed, compared to those whose disease had not, has allowed us to refine the design of our planned Phase 3 clinical trial.

 

Phase 2 Clinical Trial—FavId as a Single Therapeutic Agent in Relapsed or Refractory NHL Patients.    In September 2002, we completed enrollment of a Phase 2 clinical tri