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As filed with the Securities and Exchange Commission on
July 14, 2006
Registration
No. 333-133513
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EPIX PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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2835 |
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04-3030815 |
(State or other jurisdiction of
incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification No.) |
161 First Street
Cambridge, Massachusetts 02142
(617) 250-6000
(Address, including zip code, and telephone number,
including area code, of registrants principal executive
offices)
Andrew C.G. Uprichard, M.D.
President and Chief Operating Officer
EPIX Pharmaceuticals, Inc.
161 First Street
Cambridge, Massachusetts 02142
(617) 250-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
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William T. Whelan, Esq.
Daniel T. Kajunski, Esq.
Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo P.C.
One Financial Center
Boston, Massachusetts 02111
(617) 542-6000 |
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Michael G. Kauffman, M.D., Ph.D.
Predix Pharmaceuticals Holdings, Inc.
4 Maguire Road
Lexington, Massachusetts 02421
(781) 372-3260 |
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Lawrence S. Wittenberg, Esq.
Edward A. King, Esq.
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109
(617) 570-1000 |
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this registration
statement becomes effective and upon completion of the merger
described in the enclosed joint proxy statement/ prospectus.
If the securities being registered on this Form are to be
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date (i) until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or
(ii) until the Registration Statement shall become
effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
The
information in this joint proxy statement/ prospectus is not
complete and may be changed. The securities being offered by the
use of this joint proxy statement/ prospectus may not be issued
until the registration statement filed with the Securities and
Exchange Commission, of which this proxy statement and
prospectus is a part, is declared effective. This joint proxy
statement/ prospectus is not an offer to sell these securities
nor a solicitation of any offer to buy these securities in any
jurisdiction where the offer or sale is not
permitted.
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PRELIMINARY
COPY
SUBJECT TO
COMPLETION, DATED JULY 14, 2006
ANNUAL AND SPECIAL MEETINGS OF STOCKHOLDERS
MERGER PROPOSED YOUR VOTE IS VERY IMPORTANT
The boards of directors of EPIX Pharmaceuticals, Inc.
(EPIX) and Predix Pharmaceuticals Holdings, Inc.
(Predix) have approved a merger combining EPIX and
Predix.
If the merger is consummated, Predix will be merged with and
into a wholly-owned subsidiary of EPIX. The terms of the merger
agreement provide for the issuance of shares of EPIX common
stock to Predix stockholders in exchange for all of the
outstanding shares of Predix. At the effective time of the
merger, EPIX stockholders will retain approximately 53%, and the
former Predix stockholders will own approximately 47%, of the
outstanding shares of EPIXs common stock as more fully
described in the joint proxy statement/ prospectus. EPIX will
also assume all of Predixs stock options and warrants
outstanding at the time of the merger. In addition, EPIX will
make a milestone payment of $35 million to Predix
stockholders, option holders and warrant holders upon the
occurrence of certain events. EPIX may elect to make the
milestone payment in cash or in shares of EPIX common stock, to
the extent that the aggregate amount of EPIX common stock as a
result of such milestone payment does not exceed 49.99% of the
outstanding shares of EPIX common stock immediately after such
milestone payment, when combined with all shares of EPIX common
stock issued in the merger and issuable upon exercise of all
Predix options and warrants assumed by EPIX in the merger. EPIX
common stock is listed on The NASDAQ Global Market under the
symbol EPIX. On July 13, 2006, the last trading
day before the date of this joint proxy statement/ prospectus,
the closing sale price of EPIX common stock was $4.58 per
share. The merger is intended to qualify for federal income tax
purposes as a reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as
amended.
Stockholders of EPIX will be asked, at EPIXs annual
meeting of stockholders, among other proposals, to approve the
merger, to approve an amendment to EPIXs restated
certificate of incorporation, to approve the issuance of shares
of EPIX common stock to the stockholders of Predix in the merger
and to approve authorizing the EPIX board of directors to effect
a reverse stock split. Stockholders of Predix will be asked, at
Predixs special meeting of stockholders, to approve and
adopt the merger agreement and to approve the merger.
The dates, times and places of the meetings are as follows:
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For EPIX
stockholders: ,
2006
10:00 a.m., local time
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111 |
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For Predix
stockholders: ,
2006
9:00 a.m., local time
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109 |
This joint proxy statement/ prospectus provides you with
information about EPIX, Predix and the proposed merger. You may
obtain other information about EPIX and Predix from documents
filed with the Securities and Exchange Commission. We encourage
you to carefully read the entire joint proxy statement/
prospectus.
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Andrew C.G. Uprichard, M.D.
President and Chief Operating Officer
EPIX Pharmaceuticals, Inc. |
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Michael G. Kauffman, M.D., Ph.D.
Chief Executive Officer
Predix Pharmaceuticals Holdings, Inc. |
FOR A DISCUSSION OF SIGNIFICANT MATTERS THAT SHOULD BE
CONSIDERED BEFORE VOTING AT THE STOCKHOLDER MEETINGS, SEE
RISK FACTORS BEGINNING ON PAGE 21.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES REGULATORS HAVE APPROVED OR DISAPPROVED THE EPIX
COMMON STOCK TO BE ISSUED IN THE MERGER OR DETERMINED WHETHER
THIS JOINT PROXY STATEMENT/ PROSPECTUS IS ACCURATE OR ADEQUATE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This joint proxy statement/ prospectus is
dated ,
2006, and is first being mailed to stockholders of EPIX and
Predix on or
about ,
2006.
THIS JOINT PROXY STATEMENT/ PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important
business and financial information about EPIX and Predix from
other documents that are not included in or delivered with the
joint proxy statement/ prospectus. This information is available
to you without charge upon your written or oral request. You can
obtain the documents incorporated by reference in this joint
proxy statement/ prospectus by requesting them in writing or by
telephone or over the Internet from the appropriate company at
one of the following addresses:
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EPIX Pharmaceuticals, Inc. |
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Attn: Investor Relations |
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161 First Street |
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Cambridge, Massachusetts 02142 |
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(617) 250-6000 |
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E-mail:
ahedison@epixpharma.com |
Or:
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Predix Pharmaceuticals Holdings, Inc. |
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Attn: Investor Relations |
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4 Maguire Road |
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Lexington, Massachusetts 02421 |
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(781) 372-3260 |
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E-mail:
investors@predixpharm.com |
IF YOU WOULD LIKE TO REQUEST ANY DOCUMENTS, PLEASE DO SO
BY ,
2006, THE DATE THAT IS FIVE BUSINESS DAYS BEFORE THE ANNUAL AND
SPECIAL MEETINGS, IN ORDER TO RECEIVE THEM BEFORE THE ANNUAL AND
SPECIAL MEETINGS.
See Where You Can Find More Information beginning on
page 243.
EXPLANATORY NOTE
Except as otherwise stated in this joint proxy
statement/prospectus, all per share information and other
information contained in this joint proxy statement/prospectus
does not give effect to any reverse stock split of EPIX common
stock described in EPIXs Proposal No. 3.
EPIX Pharmaceuticals
161 First Street
Cambridge, Massachusetts 02142
(617) 250-6000
NOTICE OF ANNUAL MEETING OF EPIX STOCKHOLDERS
TO BE HELD
ON ,
2006
To the Stockholders of EPIX Pharmaceuticals, Inc:
On behalf of the board of directors of EPIX Pharmaceuticals,
Inc, a Delaware corporation, we are pleased to deliver this
joint proxy statement/ prospectus for the proposed merger
combining EPIX and Predix Pharmaceuticals Holdings, Inc., a
Delaware corporation. An annual meeting of stockholders of EPIX
will be held
on ,
2006 at 10:00 a.m., local time, at the offices of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial
Center, Boston, Massachusetts, 02111 for the following purposes:
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1. To consider and vote upon the issuance of shares of EPIX
common stock in the merger as contemplated by the Agreement and
Plan of Merger, dated as of April 3, 2006, as amended, by
and among EPIX Pharmaceuticals, Inc., EPIX Delaware, Inc., a
wholly-owned subsidiary of EPIX, and Predix Pharmaceuticals
Holdings, Inc., and approve the merger of Predix Pharmaceuticals
Holdings, Inc. with and into EPIX Delaware, Inc.; |
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2. To approve an amendment to EPIXs amended and
restated certificate of incorporation to increase the number of
authorized shares of common stock from 40,000,000 shares to
100,000,000 shares, representing an additional
60,000,000 shares, which may be necessary to provide EPIX
with sufficient authorized shares of common stock to issue in
connection with the merger and is described in the joint proxy
statement/ prospectus; |
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3. To authorize the EPIX board of directors to amend in its
discretion EPIXs restated certificate of incorporation to
effect a reverse stock split of EPIXs issued and
outstanding shares of common stock, at such ratio between 1:1.25
to 1:4 to be determined by the EPIX board of directors, which
may be necessary for EPIX to maintain its eligibility for
trading on The NASDAQ Global Market after completion of the
merger, which is a condition to consummate the merger, as
described in this joint proxy statement/prospectus; |
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4. To elect two directors for a three-year term to expire
at the 2009 annual meeting of stockholders and to elect one
director for a one-year term to expire at the 2007 annual
meeting of stockholders; provided, however, that, if the merger
is completed, the EPIX board of directors will consist of the
nine persons identified in the joint proxy statement/ prospectus; |
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5. To ratify the selection of Ernst & Young LLP as
EPIXs independent registered public accounting firm for
the fiscal year ending December 31, 2006; |
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6. To consider and vote on a proposal to approve the
adjournment of the annual meeting, if necessary, to solicit
additional proxies, in the event that there are not sufficient
votes at the time of the annual meeting to approve
Proposal Nos. 1, 2 and 3; and |
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7. To transact such other business as may properly come
before the annual meeting or any adjournment or postponement
thereof. |
The board of directors of EPIX has fixed June 28, 2006 as
the record date for the determination of stockholders entitled
to notice of, and to vote at, the annual meeting and any
adjournment or postponement thereof. Only holders of record of
shares of EPIX common stock at the close of business on the
record date are entitled to notice of, and to vote at, the
annual meeting. At the close of business on the record date,
EPIX had 23,284,810 shares of common stock outstanding and
entitled to vote.
Your vote is important. The affirmative vote of the holders
of a majority of the shares present at the EPIX annual meeting
is required for approval of Proposal Nos. 1, 5 and 6
above. The affirmative vote of the holders of a majority of the
outstanding common stock on the record date is required for
approval of Proposal Nos. 2 and 3. The affirmative
vote of a plurality of the votes cast at the EPIX annual meeting
is required for approval of Proposal No. 4. Even if
you plan to attend the annual meeting in person, we request that
you sign and return the enclosed proxy and thus ensure that your
shares will be represented at the annual meeting if you are
unable to attend. If you sign, date and mail your proxy card
without indicating how you wish to vote, your proxy will be
counted as a vote in favor of Proposal Nos. 1 through 7. If
you fail to return your proxy card, the effect will be a vote
against the adoption of Proposal Nos. 2 and 3 and your
shares will not be counted for purposes of determining whether a
quorum is present at the annual meeting. If you do attend the
EPIX annual meeting and wish to vote in person, you may withdraw
your proxy and vote in person.
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By Order of the Board of Directors, |
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President and Chief Operating Officer |
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EPIX Pharmaceuticals, Inc. |
Cambridge, Massachusetts
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2006
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
THE ISSUANCE OF SHARES OF EPIX COMMON STOCK IN THE MERGER IS
ADVISABLE TO, AND IN THE BEST INTERESTS OF, EPIX AND ITS
STOCKHOLDERS AND HAS APPROVED SUCH ISSUANCE. THE EPIX BOARD OF
DIRECTORS RECOMMENDS THAT EPIX STOCKHOLDERS VOTE FOR
PROPOSAL NO. 1 TO APPROVE THE ISSUANCE OF SHARES OF EPIX
COMMON STOCK IN THE MERGER AND APPROVE THE MERGER.
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
AN AMENDMENT TO EPIXS RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 40,000,000 SHARES TO 100,000,000 SHARES, WHICH
REPRESENTS AN ADDITIONAL 60,000,000 SHARES, IS ADVISABLE TO, AND
IN THE BEST INTERESTS OF, EPIX AND ITS STOCKHOLDERS AND HAS
APPROVED SUCH AMENDMENT. THE EPIX BOARD OF DIRECTORS RECOMMENDS
THAT EPIX STOCKHOLDERS VOTE FOR PROPOSAL NO. 2
TO APPROVE AN AMENDMENT TO EPIXS RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 40,000,000 SHARES TO 100,000,000 SHARES. THE
APPROVAL OF PROPOSAL NO. 2 MAY BE NECESSARY TO ENABLE EPIX
TO ISSUE THE REQUIRED NUMBER OF SHARES OF EPIX COMMON STOCK TO
PREDIX STOCKHOLDERS, OPTION HOLDERS AND WARRANT HOLDERS IN
CONNECTION WITH THE MERGER.
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
AUTHORIZING THE EPIX BOARD OF DIRECTORS TO AMEND IN ITS
DISCRETION EPIXS RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A REVERSE STOCK SPLIT OF EPIXS ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK, AT SUCH RATIO TO BE
DETERMINED BY THE EPIX BOARD OF DIRECTORS, IS ADVISABLE TO, AND
IN THE BEST INTERESTS OF, EPIX AND ITS STOCKHOLDERS AND HAS
APPROVED SUCH AUTHORIZATION. THE EPIX BOARD OF DIRECTORS
RECOMMENDS THAT EPIX STOCKHOLDERS VOTE FOR
PROPOSAL NO. 3 TO AUTHORIZE THE EPIX BOARD OF
DIRECTORS TO AMEND IN ITS DISCRETION EPIXS RESTATED
CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF
EPIXS ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, AT
SUCH RATIO TO BE DETERMINED BY THE EPIX BOARD OF DIRECTORS. THE
APPROVAL OF PROPOSAL NO. 3 MAY BE NECESSARY FOR EPIX
TO MAINTAIN ITS ELIGIBILITY FOR TRADING ON THE NASDAQ GLOBAL
MARKET AFTER COMPLETION OF THE MERGER, WHICH IS A CONDITION TO
CONSUMMATION OF THE MERGER.
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
THE ELECTION OF TWO DIRECTORS FOR A THREE-YEAR TERM TO EXPIRE AT
THE 2009 ANNUAL MEETING OF STOCKHOLDERS AND THE ELECTION OF ONE
DIRECTOR FOR A ONE-YEAR TERM TO EXPIRE AT THE 2007 ANNUAL
MEETING OF STOCKHOLDERS IS ADVISABLE TO, AND IN THE BEST
INTERESTS OF, EPIX AND ITS STOCKHOLDERS AND HAS APPROVED AND
ADOPTED THE PROPOSAL. THE EPIX BOARD OF DIRECTORS RECOMMENDS
THAT EPIX STOCKHOLDERS VOTE FOR PROPOSAL NO. 4
TO ELECT TWO DIRECTORS FOR A THREE-YEAR TERM TO EXPIRE AT THE
2009 ANNUAL MEETING OF STOCKHOLDERS AND TO ELECT ONE DIRECTOR
FOR A ONE-YEAR TERM TO EXPIRE AT THE 2007 ANNUAL MEETING OF
STOCKHOLDERS; PROVIDED, HOWEVER, THAT, IF THE MERGER IS
COMPLETED, THE EPIX BOARD OF DIRECTORS WILL CONSIST OF THE NINE
PERSONS IDENTIFIED IN THE ACCOMPANYING JOINT PROXY STATEMENT/
PROSPECTUS
THE EPIX BOARD OF DIRECTORS HAS DETERMINED THAT THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS
EPIXS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2006 IS ADVISABLE TO,
AND IN THE BEST INTERESTS OF, EPIX AND ITS STOCKHOLDERS AND HAS
APPROVED SUCH RATIFICATION. THE EPIX BOARD OF DIRECTORS
RECOMMENDS THAT EPIX STOCKHOLDERS VOTE FOR
PROPOSAL NO. 5 TO RATIFY THE SELECTION
OF ERNST & YOUNG LLP AS EPIXS INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2006.
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
ADJOURNING THE EPIX ANNUAL MEETING, IF NECESSARY, IF A QUORUM IS
PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT
SUFFICIENT VOTES IN FAVOR OF PROPOSAL NOS. 1, 2 AND 3 IS
ADVISABLE TO, AND IN THE BEST INTERESTS OF, EPIX AND ITS
STOCKHOLDERS AND HAS APPROVED AND ADOPTED THE PROPOSAL. THE EPIX
BOARD OF DIRECTORS RECOMMENDS THAT EPIX STOCKHOLDERS VOTE
FOR PROPOSAL NO. 6 TO ADJOURN THE EPIX ANNUAL
MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT
ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF
PROPOSAL NOS. 1, 2 AND 3.
4 Maguire Road
Lexington, Massachusetts 02421
(781) 372-3260
NOTICE OF SPECIAL MEETING OF PREDIX STOCKHOLDERS
TO BE HELD
ON ,
2006
To the Stockholders of Predix Pharmaceuticals Holdings, Inc.:
On behalf of the board of directors of Predix Pharmaceuticals
Holdings, Inc., a Delaware corporation, we are pleased to
deliver this joint proxy statement/ prospectus for the proposed
merger combining EPIX Pharmaceuticals, Inc. and Predix. A
special meeting of stockholders of Predix will be held
on ,
2006 at 9:00 a.m., local time, at the offices of Goodwin Procter
LLP, Exchange Place, Boston, Massachusetts, 02109 for the
following purposes:
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1. To consider and vote on a proposal to approve and adopt
the Agreement and Plan of Merger, dated as of April 3,
2006, as amended, by and among EPIX Pharmaceuticals, Inc., EPIX
Delaware, Inc., a wholly-owned subsidiary of EPIX, and Predix
Pharmaceuticals Holdings, Inc., and approve the merger of Predix
Pharmaceuticals Holdings, Inc. with and into EPIX Delaware, Inc.; |
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2. To consider and vote on a proposal to approve the
adjournment of the special meeting, if necessary, to solicit
additional proxies, in the event that there are not sufficient
votes at the time of the special meeting to approve and adopt
the merger agreement and to approve the merger; and |
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3. To transact such other business as may properly come
before the special meeting or any adjournment or postponement
thereof. |
The board of directors of Predix has fixed June 28, 2006 as
the record date for the determination of stockholders entitled
to notice of, and to vote at, the special meeting and any
adjournment or postponement thereof. Only holders of record of
shares of Predix common stock and holders of record of shares of
Predix preferred stock at the close of business on the record
date are entitled to notice of, and to vote at, the special
meeting. Holders of Predix preferred stock vote on an
as-converted to Predix common stock basis. At the close of
business on the record date, Predix had outstanding and entitled
to vote (a) 1,097,357 shares of common stock and
(b) 273,203,492 shares of preferred stock, consisting
of 76,771,672 shares of Series AB preferred stock,
which are convertible into 4,265,060 shares of Predix
common stock and 196,431,820 shares of Series C
preferred stock, which are convertible into
10,912,838 shares of Predix common stock.
Your vote is important. The affirmative vote of the holders
of: (a) a majority of the common stock and the preferred
stock voting as a single class (on an as-converted to Predix
common stock basis); (b) 60% of the preferred stock voting
as a single class (on an as-converted to Predix common stock
basis), and
(c) 662/3%
of the shares of the Series C preferred stock (on an
as-converted to Predix common stock basis), in each case,
outstanding on the record date, is required for approval of
Proposal No. 1 above. The affirmative vote of the
holders of a majority of the outstanding common stock and the
preferred stock voting as a single class on an as-converted to
Predix common stock basis on the record date is required for
approval of Proposal Nos. 2 and 3 above. Even if you plan
to attend the special meeting in person, we request that you
sign and return the enclosed proxy and thus ensure that your
shares will be represented at the special meeting if you are
unable to attend. If you sign, date and mail your proxy card
without indicating how you wish to vote, your proxy will be
counted as a vote in favor of the approval and adoption of the
merger agreement and the approval of the merger and an
adjournment of the Predix special meeting, if necessary, if a
quorum is present, to solicit additional proxies if there are
not sufficient votes in favor of Proposal No. 1. If
you fail to return your proxy card,
the effect will be a vote against the approval and adoption
of the merger agreement and the approval of the merger and your
shares will not be counted for purposes of determining whether a
quorum is present at the Predix special meeting. If you do
attend the Predix special meeting and wish to vote in person,
you may withdraw your proxy and vote in person.
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By Order of the Board of Directors, |
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President and Chief Executive Officer |
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Predix Pharmaceuticals Holdings, Inc. |
Lexington, Massachusetts
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2006
THE PREDIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES
THAT THE MERGER IS ADVISABLE TO, AND IN THE BEST INTERESTS OF,
PREDIX AND ITS STOCKHOLDERS AND HAS APPROVED THE MERGER AND THE
MERGER AGREEMENT. THE PREDIX BOARD OF DIRECTORS RECOMMENDS THAT
PREDIX STOCKHOLDERS VOTE FOR PROPOSAL NO. 1 TO
APPROVE AND ADOPT THE MERGER AGREEMENT AND TO APPROVE THE MERGER
AND FOR PROPOSAL NO. 2 TO ADJOURN THE SPECIAL
MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT
ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF
PROPOSAL NO. 1.
TABLE OF CONTENTS
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iii
iv
QUESTIONS AND ANSWERS ABOUT THE MERGER
All references to the merger agreement contained throughout
this joint proxy statement/prospectus shall refer to the merger
agreement, as amended by amendment no. 1 thereto.
Except where specifically noted, the following information
and all other information contained in this joint proxy
statement/prospectus does not give effect to any reverse stock
split described in EPIXs Proposal No. 3.
The following section provides answers to frequently asked
questions about the effect of the merger on the holders of EPIX
common stock and Predix common stock, preferred stock, warrants
and stock options. EPIX and Predix urge you to read carefully
the remainder of this joint proxy statement/ prospectus,
including the documents attached to this joint proxy statement/
prospectus, because the information in this section does not
provide all the information that might be important to you
regarding the merger and the other matters being considered at
the EPIX annual meeting and the Predix special meeting.
|
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Q: |
|
Why are EPIX and Predix proposing the merger? (See
pages 71 and 80) |
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A: |
|
EPIX and Predix are proposing the merger because they believe
the resulting combined company will be a stronger, more diverse
company with more growth potential than either company would
have separately. |
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EPIX and Predix believe that the merger may
result in a number of benefits, including: |
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|
a broader, more balanced portfolio
of product candidates, with significant market potential; |
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|
the opportunity for each
companys stockholders to participate in the potential
growth of the combined company after the merger; and |
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|
a seasoned management team and
significant financial resources. |
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Q: |
|
Why am I receiving this joint proxy statement/ prospectus? |
|
A: |
|
You are receiving this joint proxy statement/ prospectus because
you have been identified as a stockholder of either EPIX or
Predix, and thus you are entitled to vote at EPIXs annual
meeting or Predixs special meeting, as the case may be.
This document serves as both a joint proxy statement of EPIX and
Predix, used to solicit proxies for the stockholder meetings,
and as a prospectus of EPIX, used to offer shares of EPIX common
stock in exchange for shares of Predix common stock and
preferred stock pursuant to the terms of the merger agreement.
This document contains important information about the merger
and the stockholder meetings of EPIX and Predix, and you should
read it carefully. |
|
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Q: |
|
What will a Predix stockholder receive in exchange for Predix
stock in the merger? (See pages 62 and 89) |
|
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A: |
|
Each Predix stockholder will receive 1.239411 shares of
EPIX common stock, subject to adjustment to account for the
reverse stock split if implemented, for each share of Predix
common stock or preferred stock (on an as-converted to Predix
common stock basis) that they own, and cash in lieu of
fractional shares. We refer to this as the exchange
ratio. In approving the merger agreement, the holders of
Predix preferred stock will be agreeing to accept the merger
consideration as set forth in the merger agreement in lieu of
any liquidation preferences that they would be entitled to under
the Predix restated certificate of incorporation, as amended,
prior to the consummation of the merger. |
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|
In addition, EPIX will make a milestone payment to Predix
stockholders, option holders and warrant holders in an aggregate
amount of $35 million upon the occurrence of certain
events. EPIX may elect to make the milestone payment in cash or
shares of EPIX common stock, or any combination thereof. The
milestone payment will be allocated and paid to each holder of
Predix shares, options and warrants at the time of the merger,
on a pro rata basis assuming that each Predix warrant and option
(whether or not vested) was exercised in full immediately prior
to the merger. |
v
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In no event will the shares of EPIX common stock
issuable at the effective time of the merger, including the
shares of EPIX common stock issuable upon exercise of Predix
options and warrants assumed by EPIX in the merger, exceed
49.99% of the outstanding EPIX common stock immediately after
the effective time of the merger. In addition, in no event may
the milestone be paid in shares of EPIX common stock to the
extent that such shares would exceed 49.99% of the outstanding
shares of EPIX common stock immediately after such milestone
payment, when combined with all shares of EPIX common stock
issued in the merger and issuable upon exercise of all Predix
options and warrants assumed by EPIX in the merger. |
Q: What events will trigger the milestone payment from
EPIX? (See pages 62 and 90)
|
|
A: |
Predix stockholders, option holders and warrant holders will
receive the milestone payment within 90 days following the
occurrence, as determined by the non-Predix members of the
combined companys board of directors, of any of the
following events between the date of this joint proxy statement/
prospectus and June 30, 2008: |
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receipt of statistically significant final results from a
randomized, placebo- or active comparator controlled,
double-blinded Phase II or Phase III clinical trial of: |
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PRX-00023 for the treatment of generalized anxiety disorder,
depression, attention-deficit hyperactivity disorder or other
neuropsychiatric disorder with at least 100 patients; |
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PRX-03140 for the treatment of Alzheimers disease or other
cognitive disorders with at least 60 patients; |
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PRX-08066 for the treatment of pulmonary artery hypertension,
chronic obstructive pulmonary disease or a different indication
with at least 60 patients; |
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PRX-07034 for the treatment of obesity, cognitive disorders or a
different indication with at least 60 patients; or |
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|
entering into a strategic partnership for any Predix drug
candidate, which provides milestone and research funding
payments of more than $50 million, of which
$20 million must be in unrestricted cash received by
June 30, 2008 through non-refundable license fees, research
funding payments, and/or premiums paid in connection with an
equity investment by the strategic partner within 60 days
following entry into the strategic partnership. |
|
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|
Q: |
If triggered, when will the milestone payment be made? (See
pages 62 and 90) |
|
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A: |
The milestone payment will be paid within 90 days after the
achievement of a milestone event, at the option of the
non-Predix members of the combined companys board of
directors either: |
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|
in cash, shares of EPIX common stock or any combination thereof
with the number of such shares to be issued determined based on
the five-day average closing price of EPIX common stock on The
NASDAQ Global Market ending on the trading day that is ten days
prior to the payment date; or |
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|
$20 million payable in accordance with the preceding bullet
and $15 million payable on the date that is 12 months
after the payment of the initial $20 million in shares of
EPIX common stock, with the number of such shares to be issued
determined based on 75% of the
30-day average closing
price of EPIX common stock on The NASDAQ Global Market ending on
the trading day that is ten days prior to the payment date. If,
as a result of the 49.99% limitation described below, the entire
$15 million payment cannot be made in shares of EPIX common
stock, the balance will be paid in cash plus interest calculated
from the milestone payment date at the rate of 10% per year. |
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In no event may the milestone be paid in shares of EPIX common
stock to the extent that such shares would exceed 49.99% of the
outstanding shares of EPIX common stock immediately after such
milestone payment, when combined with all shares of EPIX common
stock issued in the merger and issuable upon exercise of all
Predix options and warrants assumed by EPIX in the merger. As a
result of this limitation, if the milestone payment is triggered
before EPIX issues a significant number of new |
vi
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|
shares of its capital stock or before consummation of the
merger, all or a substantial portion of the milestone payment
will be paid in cash. Additionally, the milestone will be paid
in cash to the holders of Predix options and warrants assumed by
EPIX in the merger. |
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|
Q: |
|
Who will be the directors of EPIX following the merger? (See
page 103) |
|
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A: |
|
Following the merger, the board of directors of EPIX will
consist of nine members, of which five will be designated by
EPIX and four will be designated by Predix. The following
individuals are expected to comprise the EPIX board of directors
after the merger: |
|
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|
Christopher F.O. Gabrieli, Chairman
Patrick J. Fortune, Ph.D.
Frederick Frank
Michael Gilman, Ph.D.
Michael G. Kauffman, M.D., Ph.D.
Mark Leuchtenberger
Robert J. Perez
Gregory D. Phelps
Ian F. Smith, CPA, ACA |
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Mr. Perez will be the fifth person designated by EPIX to
serve on the board of directors of EPIX after the merger. |
|
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|
Q: |
|
Who will manage EPIX following the merger? (See
page 103) |
|
|
A: |
|
Following the merger, the management team and key employees of
EPIX will be comprised of certain key employees and members of
both EPIXs and Predixs respective management teams
prior to the merger and is expected to include the following
individuals: |
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Name |
|
Position in the Combined Company |
|
Current Position |
|
|
|
|
|
Michael G. Kauffman, M.D., Ph.D.
|
|
Chief Executive Officer and Director |
|
Predixs President and Chief Executive Officer |
Andrew C.G. Uprichard, M.D.
|
|
President |
|
EPIXs President and Chief Operating Officer |
Kimberlee C. Drapkin, CPA
|
|
Chief Financial Officer |
|
Predixs Chief Financial Officer |
Oren Becker, Ph.D.
|
|
Chief Scientific Officer |
|
Predixs Chief Scientific Officer |
Stephen R. Donahue M.D.
|
|
Vice President of Clinical & Regulatory Affairs |
|
Predixs Vice President of Clinical and Regulatory Affairs |
Philip Graham, Ph.D.
|
|
Vice President of Product Management and Imaging |
|
EPIXs Vice President of Program Management |
Silvia Noiman, Ph.D.
|
|
Senior Vice President of Pipeline Management, General Manager
Israel |
|
Predixs Senior Vice President of Pipeline Management,
General Manager Israel |
Chen Schor, CPA
|
|
Chief Business Officer |
|
Predixs Chief Business Officer |
Sharon Shacham, Ph.D.
|
|
Vice President of Preclinical Development and Product Leadership |
|
Predixs Vice President of Preclinical Development and
Product Leadership |
Brenda Sousa
|
|
Vice President of Human Resources |
|
EPIXs Vice President of Human Resources |
|
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|
|
Q: |
|
What stockholder approval is needed to complete the merger?
(See pages 58 and 60) |
|
|
|
A: |
|
To consummate the merger, EPIX stockholders must approve the
issuance of shares of EPIX common stock in the merger and
approve the merger, which requires the affirmative vote of the
holders of a majority of the shares present at the EPIX annual
meeting, whether in person or by proxy. In addition, to ensure
EPIX has sufficient shares of EPIX common stock authorized to
issue in connection with the merger and to enable EPIX to meet
the listing requirements of The NASDAQ Global Market after the
merger. EPIX is seeking stockholder approval of each of the
following: (a) the amendment to |
|
vii
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|
|
EPIXs restated certificate of incorporation increasing the
number of authorized shares of EPIX common stock, which requires
the affirmative vote of the holders of a majority of the
outstanding shares of EPIX common stock as of the record date
and (b) the authorization of the EPIX board of directors to
amend in its discretion EPIXs restated certificate of
incorporation to effect a reverse stock split of the issued and
outstanding shares of EPIX common stock at a ratio of between
1:1.25 to 1:4, which requires the affirmative vote of the
holders of a majority of the outstanding shares of EPIX common
stock as of the record date. As discussed in more detail in this
joint proxy statement/prospectus, the approval of authorization
to implement the reverse stock split will be necessary to
complete the merger only if the trading price of EPIX common
stock on The NASDAQ Global Market is below $5.00 per share upon
closing of the merger. The EPIX board of directors, however, is
seeking approval of both actions at the EPIX annual meeting to
ensure that all actions necessary to consummate the merger are
obtained at that time. Additionally, the EPIX board of directors
expects to amend EPIXs restated certificate of
incorporation to increase the number of authorized shares of
EPIX common stock, if approved, whether or not it is necessary
to consummate the merger. |
|
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|
|
In addition, Predix stockholders must vote to approve and adopt
the merger agreement and to approve the merger, which requires
the affirmative vote of the holders of: (a) a majority of
the Predix common stock and preferred stock voting as a single
class (on an as-converted to Predix common stock basis);
(b) 60% of the Predix preferred stock voting as a single
class (on an as-converted to Predix common stock basis), and
(c) 662/3
% of the shares of Predix Series C preferred stock
(on an as-converted to Predix common stock basis), in each case,
outstanding on the record date for the Predix special meeting. |
|
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|
|
In addition to obtaining stockholder approval, each of the other
closing conditions set forth in the merger agreement must be
satisfied or waived. For a more complete description of the
closing conditions under the merger agreement, we urge you to
read the section entitled The Merger Agreement
Conditions to the Completion of the Merger on page 97
of this joint proxy statement/ prospectus. |
|
|
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|
|
Q: |
|
What do I need to do now? (See pages 55 and 59) |
|
|
A: |
|
After carefully reading and considering the information
contained in and incorporated into this joint proxy statement/
prospectus, please submit your proxy card according to the
instructions on the enclosed proxy card as soon as possible. If
you do not submit a proxy card or attend the special meeting and
vote in person, your shares will not be represented or voted at
the meeting. |
|
|
Q: |
|
Will the merger trigger the recognition of gain or loss for
U.S. federal income tax purposes for Predix stockholders?
(See page 83) |
|
|
A: |
|
The closing of the merger is conditioned upon the receipt by
Predix and EPIX of opinions that the merger will constitute a
reorganization for U.S. federal income tax purposes.
Assuming the merger does constitute a reorganization, subject to
the limitations and qualifications described in The
Merger Material United States Federal Income Tax
Consequences of the Merger, each Predix stockholder
generally will recognize gain, but not loss, for federal income
tax purposes under the installment method at the time of any
cash milestone payment in the aggregate amount equal to the
lesser of (a) the amount of cash such Predix stockholder
receives in the merger or (b) the amount, if any, by which
the sum of (i) the fair market value of any EPIX common
stock such Predix stockholder receives, and (ii) the amount
of cash such Predix stockholder receives in the merger, exceeds
such Predix stockholders adjusted tax basis in its shares
of Predix common stock or preferred stock, as applicable, and
will be required to include the amount of the gain in such
stockholders gross income for federal income tax purposes
for the year in which the holder receives the cash milestone
payment attributable to the gain. Under the installment method,
a Predix stockholder will not recognize any gain in the merger
until any cash milestone payment is made. However, a Predix
stockholder electing out of the application of the installment
method will be required to recognize gain at the closing in the
amount equal to the lesser of (a) the fair market value of
the milestone payment obligation such Predix stockholder
receives in the merger or (b) the amount, if any, by which
the sum of (i) the fair market value of any EPIX common
stock such Predix stockholder receives, and (ii) the fair
market value of the milestone payment obligation such Predix
stockholder receives, exceeds such Predix stockholders
adjusted tax basis in its shares of Predix stock surrendered in
the merger. Any cash received in lieu of a fractional share of
EPIX common stock will be treated separately for federal |
viii
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|
|
income tax purposes. The tax consequences to Predix stockholders
will depend on each stockholders own circumstances. Each
Predix stockholder should consult with his, her or its tax
advisor for a full understanding of the tax consequences of the
merger to that stockholder. |
|
|
Q: |
How does the EPIX Board of Directors recommend that I
vote? |
|
A: |
After careful consideration, the EPIX board of directors
recommends that EPIX stockholders vote: |
|
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|
|
FOR Proposal No. 1 to approve the issuance
of shares of EPIX common stock in the merger and approve the
merger; |
|
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|
|
FOR Proposal No. 2 to approve an amendment
to EPIXs amended and restated certificate of incorporation
to increase the number of authorized shares of common stock from
40,000,000 shares to 100,000,000 shares; |
|
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|
|
FOR Proposal No. 3 to authorize the EPIX board of
directors to amend in its discretion EPIXs restated
certificate of incorporation to effect a reverse stock split of
EPIXs issued and outstanding shares of common stock, at
such ratio to be determined by the EPIX board of directors; |
|
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FOR Proposal No. 4 to elect two directors
for a three-year term to expire at the 2009 annual meeting of
stockholders and to elect one director for a one-year term to
expire at the 2007 annual meeting of stockholders; provided,
however, that if the merger is completed, the EPIX board of
directors will consist of the nine persons identified in this
joint proxy statement/ prospectus; |
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FOR Proposal No. 5 to ratify the selection
of Ernst & Young LLP as EPIXs independent
registered public accounting firm for the fiscal year ending
December 31, 2006; and |
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FOR Proposal No. 6 to adjourn the annual
meeting, if necessary, if a quorum is present, to solicit
additional proxies if there are not sufficient votes in favor of
Proposal Nos. 1, 2 and 3. |
|
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|
Q: |
How does the Predix Board of Directors recommend that I
vote? |
|
A: |
After careful consideration, the Predix board of directors
recommends that Predix stockholders vote: |
|
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|
FOR Proposal No. 1 to approve and adopt
the merger agreement and to approve the merger; and |
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|
FOR Proposal No. 2 to adjourn the special
meeting, if necessary, if a quorum is present, to solicit
additional proxies if there are not sufficient votes in favor of
Proposal No. 1. |
|
|
Q: |
What risks should I consider in deciding whether to vote in
favor of the share issuance, approval of the merger, the
amendment to EPIXs restated certificate of incorporation,
the approval and adoption of the merger agreement and the
authorization of the EPIX board of directors to effect a reverse
stock split? |
|
|
A: |
You should carefully review the section of this joint proxy
statement/ prospectus entitled Risk Factors
beginning on page 21, which sets forth certain risks and
uncertainties related to the merger and risks and uncertainties
to which the combined companys business will be subject,
including the individual businesses of each of EPIX and Predix. |
|
|
Q: |
What happens if I do not return a proxy card or otherwise
provide proxy instructions? |
|
|
A: |
If you are an EPIX stockholder, the failure to return your proxy
card or otherwise provide proxy instructions could be a factor
in establishing a quorum for the annual meeting of EPIX
stockholders. In addition, the failure to return your proxy card
or otherwise provide instructions will have the same effect as
voting against Proposal No. 2, the amendment of
EPIXs restated certificate of incorporation to increase
the authorized shares of EPIX common stock, the approval of
which may be necessary to enable EPIX to issue shares of EPIX
common stock to Predix stockholders, option holders and warrant
holders in connection with the merger, and Proposal No. 3,
the authorization of the EPIX board of directors to amend in its
discretion EPIXs restated certificate of incorporation to
effect a reverse stock split of EPIXs issued and
outstanding shares of common stock, at such ratio to be
determined by the EPIX board of directors, which may be
necessary for EPIX to maintain its eligibility for trading on
The NASDAQ Global Market after completion of the merger. If you
are a Predix stockholder, the |
|
ix
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|
failure to return your proxy card or otherwise provide proxy
instructions will have the same effect as voting against the
approval and adoption of the merger agreement and the approval
of the merger, and could be a factor in establishing a quorum
for the special meeting of Predix stockholders. |
|
|
Q: |
May I vote in person? |
|
|
A: |
If your shares of EPIX common stock on the record date are
registered directly in your name with EPIXs transfer agent
you are considered, with respect to those shares, the
stockholder of record, and the proxy materials and proxy card
are being sent directly to you by EPIX. If you are an EPIX
stockholder of record, you may attend the annual meeting of EPIX
stockholders to be held
on ,
2006 and vote your shares in person, rather than signing and
returning your proxy card or otherwise providing proxy
instructions. Each Predix stockholder on the record date is a
stockholder of record and may attend the special meeting of
Predix stockholders to be held
on ,
2006 and vote your shares in person, rather than signing and
returning your proxy card or otherwise providing proxy
instructions. All EPIX and Predix stockholders are requested to
return their proxy cards, even if they intend to vote in person. |
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|
Q: |
May I change my vote after I have provided proxy
instructions? |
|
A: |
Yes. You may change your vote at any time before your proxy is
voted at either the annual meeting of EPIX stockholders or the
special meeting of Predix stockholders. You can do this in one
of three ways. First, you can send a written notice stating that
you would like to revoke your proxy. Second, you can submit new
proxy instructions either on a new proxy card and if you are an
EPIX stockholder also, by telephone or via the Internet. Third,
you can attend the meeting and vote in person. Your attendance
alone will not revoke your proxy. If you have instructed a
broker to vote your shares of EPIX common stock, you must follow
directions received from your broker to change those
instructions. |
|
Q: |
Have any Predix stockholders entered into
lock-up agreements? |
|
A: |
EPIX expects to obtain
lock-up agreements from
the officers, directors and certain stockholders of Predix
covering an aggregate of approximately 9,049,530 Predix
shares (on an as-converted to Predix common stock basis), or
approximately 56% of Predixs outstanding shares, which
agreements prohibit the sale, transfer, pledge or other
disposition with respect to EPIX common stock for up to
180 days following the consummation of the merger as
follows: (a) one-third (1/3) of such holders
restricted shares will be released from the
lock-up after the
90th day
following the consummation of the merger; (b) an additional
one-third (1/3) of such holders restricted shares will be
released from the
lock-up after the
120th day
following the consummation of the merger; and (c) the
remaining one-third (1/3) of such holders restricted
shares will be released from the
lock-up after the
180th day
following the consummation of the merger. |
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In addition, prior to the closing, EPIX expects to obtain
affiliate agreements from the holders of approximately
9,049,530 Predix shares (on an as-converted to Predix
common stock basis), representing approximately 56% of Predix
outstanding shares (on an as-converted to Predix common stock
basis) as of such date. These agreements prohibit the sale,
transfer or other disposition with respect to EPIXs common
stock in violation of the Securities Act of 1933, as amended, or
the rules and regulations thereunder. |
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Q: |
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Have any EPIX stockholders entered into
lock-up agreements? |
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Yes. The chairman of the board of directors of EPIX, Christopher
F.O. Gabrieli, has agreed to enter into the same
lock-up agreement as
certain Predix stockholders with respect to his shares of EPIX
common stock. |
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Q: |
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Will Predix stockholders be able to trade the EPIX common
stock that they receive in the merger? (See page 87) |
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A: |
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EPIX has filed an initial listing application with The NASDAQ
Global Market pursuant to the Reverse Merger rules
of The NASDAQ Global Market. If such application is accepted,
EPIX anticipates that its common stock will continue to be
listed on The NASDAQ Global Market following the completion of
the |
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merger under its current trading symbol EPIX. It is
a condition to Predixs consummation of the merger that
EPIX maintain the listing of its common stock on The NASDAQ
Global Market. |
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Subject to the lock-up
agreements discussed herein, all shares of EPIX common stock
issued to Predix stockholders, other than Predix stockholders
who are deemed to be affiliates of Predix, will be freely
tradable following the merger. EPIX has agreed to file a
registration statement with respect to these shares of EPIX
common stock to be issued in the merger to persons who are
deemed to be affiliates of Predix. As a result, these shares
will also be freely tradable upon the effectiveness of this
registration statement, subject only to certain prospectus
delivery requirements and the terms of the
lock-up agreements
described herein, if applicable. |
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Q: |
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Who is paying for this proxy solicitation? |
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A: |
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EPIX and Predix are conducting this proxy solicitation and will
bear the cost of soliciting proxies, including the preparation,
assembly, printing and mailing of this joint proxy statement/
prospectus, the proxy card and any additional information
furnished to stockholders of EPIX and Predix. EPIX may also
reimburse brokerage houses and other custodians, nominees and
fiduciaries for their costs of forwarding proxy and solicitation
materials to beneficial owners. |
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Q: |
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When do you expect the merger to be completed? |
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A: |
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EPIX and Predix are working to complete the merger as quickly as
possible. EPIX and Predix expect to complete the merger by the
end of August 2006. |
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Q: |
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Should Predix stockholders send in their stock certificates
now? (See page 91) |
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A: |
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No. After the merger is completed, EPIX will send you
written instructions for exchanging your Predix stock
certificates for EPIX stock certificates. |
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Q: |
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Whom should I call with questions? (See page 243) |
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A: |
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If you are an EPIX stockholder and would like additional copies,
without charge, of this joint proxy statement/ prospectus or if
you have questions about the merger, including the procedures
for voting your shares, you should contact: |
EPIX
Pharmaceuticals, Inc.
Attn: Investor
Relations
161 First Street
Cambridge,
Massachusetts 02142
(617) 250-6000
E-mail:
ahedison@epixpharma.com
If you are a Predix
stockholder and would like additional copies, without charge, of
this joint proxy
statement/ prospectus
or if you have questions about the merger, including the
procedures for voting
your shares, you
should contact:
Predix
Pharmaceuticals Holdings, Inc.
Attn: Investor
Relations
4 Maguire Road
Lexington,
Massachusetts 02421
(781) 372-3260
E-mail:
investors@predixpharm.com
xi
SUMMARY OF THE JOINT PROXY STATEMENT/ PROSPECTUS
This summary highlights selected information from this joint
proxy statement/ prospectus and may not contain all of the
information that is important to you.
You should carefully read this entire document and the other
documents EPIX and Predix refer to for a more complete
understanding of the merger. This summary and the balance of
this document contain forward-looking statements about events
that are not certain to occur, and you should not place undue
reliance on those statements. Please carefully read
Cautionary Information Regarding Forward-Looking
Statements on page 20 of this document.
All references to the merger agreement contained throughout
this joint proxy statement/ prospectus shall refer to the merger
agreement, as amended by amendment no. 1 thereto.
Except where specifically noted, the following information
and all other information contained in this joint proxy
statement/prospectus does not give effect to any reverse stock
split described in EPIXs Proposal No. 3.
This joint proxy statement/ prospectus contains trademarks,
trade names, service marks and service names of EPIX, Predix and
other companies.
The Companies (See pages 136 and 169)
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EPIX Pharmaceuticals, Inc. |
EPIX is a pharmaceutical company focused on the discovery and
development of innovative specialty pharmaceuticals for imaging
that are designed to transform the diagnosis, treatment and
monitoring of disease. Using its proprietary Target
Visualization Technology, EPIX creates imaging agents targeted
at the molecular level. These agents are designed to enable
physicians to use magnetic resonance imaging, or MRI, to obtain
detailed information about specific disease processes. MRI has
been established as the imaging technology of choice for a broad
range of applications, including the identification and
diagnosis of a variety of medical disorders. MRI is safe,
relatively cost-effective and provides three-dimensional images
that enable physicians to diagnose and manage disease in a
minimally invasive manner.
EPIXs principal executive offices are located at 161 First
Street, Cambridge, Massachusetts 02142, and its telephone number
is (617) 250-6000. EPIXs website address is
http://www.epixpharma.com. EPIXs website is a factual
reference and it is not intended to be an active link to the
website, and the information contained in the website is not a
part of this joint proxy statement/ prospectus.
EPIX Delaware, Inc. is a wholly-owned subsidiary of EPIX that
was recently incorporated in Delaware solely for the purpose of
the merger. It does not conduct any business and has no material
assets. Its principal executive offices have the same address
and telephone number as EPIX set forth above.
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Predix Pharmaceuticals Holdings, Inc. |
Predix is a privately-held pharmaceutical company focused on the
discovery and development of novel, highly selective,
small-molecule drugs that target G-Protein Coupled Receptors and
ion channels. Predix has progressed four drug candidates into
clinical trials, one of which commenced a Phase I clinical
trial on June 2, 2006, and has five additional programs in
pre-clinical development or discovery. Predix is expecting to
complete the first of at least two pivotal Phase III
clinical trials for generalized anxiety disorder, for its lead
drug candidate, PRX-00023, and receive initial data for this
trial in the second half of 2006. Predix completed a
Phase IIa clinical trial of PRX-00023 in this indication in
July 2005. Predix has two other clinical-stage drug candidates
that have completed Phase I clinical trials: PRX-03140 for
the treatment of Alzheimers disease that is expected to
enter Phase II clinical trials in the second half of 2006,
and PRX-08066 for the treatment of two types of pulmonary
hypertension, which are pulmonary
1
hypertension associated with chronic obstructive pulmonary
disease that is expected to enter Phase II clinical trials
in the second half of 2006, and pulmonary arterial hypertension.
In addition, on June 2, 2006, Predix commenced a
Phase I clinical trial of its
PRX-07034 drug
candidate for the treatment of obesity and cognitive impairment
(associated with Alzheimers disease or schizophrenia).
Predixs principal executive offices are located at 4
Maguire Road, Lexington, Massachusetts 02421, and its telephone
number is (781) 372-3260. Predixs website address is
http://www.predixpharm.com. Predixs website is a factual
reference and it is not intended to be an active link to the
website, and the information contained in the website is not a
part of this joint proxy statement/ prospectus.
At the effective time of the merger, EPIX stockholders will
retain approximately 53% of the outstanding stock of the
combined company, and the former Predix stockholders will own
approximately 47% of the outstanding stock of the combined
company, based on the number of shares of EPIX common stock and
Predix common stock and preferred stock outstanding as of the
date of the merger agreement. EPIX will also assume all
outstanding Predix options and warrants in the merger. The
combined companys board of directors is expected to
consist of five directors designated by EPIX and four Predix
directors designated by Predix. In addition, the management team
of the combined company will consist of certain current members
of both EPIX and Predix. Predixs principal executive
office is expected to be the combined companys executive
principal office.
Risks Associated with the Merger and the Combined Company,
EPIX and Predix (See page 21)
The merger poses a number of risks to each company and its
respective stockholders. In addition, both EPIX and
Predixs businesses and industries are subject to various
risks. These risks are discussed in detail under the caption
Risk Factors beginning on page 21. You are
encouraged to read and consider all of these risks carefully.
Stockholder Meetings
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The EPIX Annual Meeting (See page 55) |
Time, Date and Place. The annual meeting of the
stockholders of EPIX will be held
on ,
2006, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., One Financial Center, Boston, Massachusetts,
at 10:00 a.m., local time, to vote on Proposal No. 1
to approve the issuance of shares of EPIX common stock in the
merger and approve the merger, Proposal No. 2 to
approve an amendment to EPIXs restated certificate of
incorporation to increase the number of authorized shares of
common stock from 40,000,000 shares to
100,000,000 shares, Proposal No. 3 to authorize
the EPIX board of directors to amend in its discretion
EPIXs restated certificate of incorporation to effect a
reverse stock split of EPIXs issued and outstanding shares
of common stock, at such ratio to be determined by the EPIX
board of directors, Proposal No. 4 to elect two
directors for a three-year term to expire at the 2009 annual
meeting of stockholders and to elect one director for a one-year
term to expire at the 2007 annual meeting stockholders;
provided, however, that, if the merger is completed, the EPIX
board of directors will consist of the nine persons identified
in this joint proxy statement/ prospectus,
Proposal No. 5 to ratify the selection of
Ernst & Young LLP as EPIXs independent registered
public accounting firm for the fiscal year ending
December 31, 2006, and Proposal No. 6 to adjourn
the annual meeting, if necessary, if a quorum is present, to
solicit additional proxies if there are not sufficient votes in
favor of Proposal Nos. 1, 2 and 3.
Record Date and Voting Power for EPIX. You are entitled
to vote at the EPIX annual meeting if you owned shares of EPIX
common stock at the close of business on June 28, 2006, the
record date for the EPIX annual meeting. You will have one vote
at the annual meeting for each share of EPIX common stock you
owned at the close of business on the record date. There are
23,284,810 shares of EPIX common stock entitled to vote at
the annual meeting.
2
EPIX Required Vote. The affirmative vote of the holders
of a majority of the shares present at the EPIX annual meeting,
whether in person or by proxy, is required for approval of
Proposal Nos. 1, 5 and 6 above. The affirmative vote
of the holders of a majority of the outstanding shares of EPIX
common stock on the record date is required for approval of
Proposal Nos. 2 and 3. The affirmative vote
of a plurality of the votes cast in person or by proxy at the
EPIX annual meeting is required for approval of
Proposal No. 4.
Share Ownership of Management. As of June 28, 2006,
the current directors and executive officers of EPIX, together
with their affiliates, beneficially owned approximately 1.83% of
the shares entitled to vote at the EPIX annual meeting.
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The Predix Special Meeting (See page 59) |
Time, Date and Place. The special meeting of the
stockholders of Predix will be held
on ,
2006, at the offices of Goodwin Procter LLP, Exchange Place,
Boston, Massachusetts, at 9:00 a.m., local time, to vote on
Proposal No. 1 to approve and adopt the merger
agreement and approve of the merger and Proposal No. 2
to adjourn the Predix special meeting, if necessary, if a quorum
is present, to solicit additional proxies if there are not
sufficient votes in favor of Proposal No. 1.
Record Date and Voting Power for Predix. You are entitled
to vote at the Predix special meeting if you owned shares of
Predix common stock or preferred stock at the close of business
on June 28, 2006, the record date for the special meeting.
You will have one vote at the special meeting for each share of
Predix common stock you owned at the close of business on the
record date. You will also have one vote at the special meeting
for each share of Predix common stock issuable upon conversion
of the shares of Predix preferred stock you owned at the close
of business on the record date. There are 1,097,357 shares
of Predix common stock and 15,177,898 shares of Predix
preferred stock (on an as-converted to Predix common stock
basis) entitled to vote at the Predix special meeting.
Predix Required Vote. The affirmative vote of the holders
of (a) a majority of the Predix common stock and preferred
stock voting as a single class (on an as-converted to Predix
common stock basis), (b) 60% of the Predix preferred stock
voting as a single class (on an as-converted to Predix common
stock basis) and
(c) 662/3
% of the shares of Predix series C preferred stock
(on as as-converted to Predix common stock basis), in each case,
outstanding on the record date, is required for approval of
Proposal No. 1. The affirmative vote of the holders of
a majority of the Predix common shares and preferred shares
voting as a single class is required for approval of
Proposal No. 2.
Share Ownership of Management. As of June 28, 2006,
the directors and executive officers of Predix, together with
their affiliates, beneficially owned approximately 56% of the
shares of Predix common stock and preferred stock, on an
as-converted Predix common stock basis, entitled to vote at the
Predix special meeting. Stockholders of Predix beneficially
owning approximately 40% of the outstanding voting stock of
Predix have agreed to vote their shares in favor of the approval
and adoption of the merger agreement and the approval of the
merger. Certain of these stockholders are affiliated with
directors of Predix.
Recommendation to Stockholders
To EPIX Stockholders (See page 73). The EPIX board
of directors has determined and believes that the issuance of
shares of EPIX common stock in the merger and the merger and the
other proposals described in this joint proxy
statementprospectus are advisable to and in the best interest of
EPIX and its stockholders. The EPIX board of directors
recommends that the holders of EPIX common stock vote
FOR Proposal Nos. 1 through 6 at the annual
meeting of stockholders of EPIX.
To Predix Stockholders (See page 82). The Predix
board of directors has determined and believes that the merger
is advisable to, and in the best interest of, Predix and its
stockholders. The Predix board
3
of directors recommends that the Predix stockholders vote
FOR Proposals No. 1 and 2 at the special meeting of
stockholders of Predix.
Fairness Opinion Received by EPIX (See page 74)
Needham & Company, LLC delivered its opinion to the
EPIX board of directors that, as of March 30, 2006, and
based on and subject to the factors and assumptions set forth
therein, the consideration to be paid by EPIX in the merger is
fair to EPIX and the holders of EPIX common stock from a
financial point of view.
The full text of the written opinion of Needham &
Company, LLC, dated March 30, 2006, which sets forth the
assumptions made, procedures followed, matters considered and
limitations on the review undertaken in connection with the
opinion, is attached to this joint proxy statement/ prospectus
as Annex C. Needham & Company, LLC provided its
opinion for the information and assistance of the EPIX board of
directors in connection with its consideration of the merger.
The written opinion of Needham & Company, LLC is not a
recommendation as to how any holder of EPIX common stock should
vote with respect to the issuance of shares of EPIX common stock
in the merger, the approval of the merger or the amendment to
EPIXs restated certificate of incorporation. EPIX urges
you to read the entire opinion of Needham & Company,
LLC carefully.
Voting Agreements (See page 102)
The following stockholders of Predix entered into voting
agreements with EPIX on April 3, 2006: Caduceus Private
Investment, L.P., UBS PW Juniper Crossover Fund, L.L.C., Hare
and Company FAO: Finsbury Worldwide Pharma, Yozma II
(Israel) L.P., Yozma Venture Capital Ltd, YVC-Yozma
Management & Investments Ltd., as trustee for
Yozma II (B.V.I.) L.P., PCM Venture Capital L.P.,
Yamanouchi Venture Capital and PA International Limited. These
entities represent an aggregate of approximately 40% of the
outstanding voting shares of Predix (on an as-converted to
Predix common stock basis). Each has agreed in the voting
agreements to vote all shares of Predix common stock and
preferred stock beneficially owned by each as of the record date
in favor of the approval and adoption of the merger agreement
and the approval of the merger. Each also granted EPIX an
irrevocable proxy to vote their shares of Predix common stock
and preferred stock in favor of the adoption of the merger
agreement and the approval of the merger. Certain of these
stockholders are affiliated with directors of Predix.
Interests of EPIXs Directors and Management (See
page 87)
Some directors and management of EPIX have interests in the
merger that are different from, and in addition to, the
interests of EPIX stockholders generally.
Upon completion of the merger, Christopher F.O. Gabrieli,
Michael Gilman, Ph.D., Mark Leuchtenberger and Gregory D.
Phelps, each of whom is a current director of EPIX, are expected
to remain members of the EPIX board of directors. In addition,
certain executive officers and key employees of EPIX are
expected to serve as executive officers or key employees of EPIX
after the effective time of the merger and certain officers of
EPIX will be entitled to bonuses upon completion of the merger
and/or severance payments after completion of the merger.
Upon completion of the merger and the issuance of EPIX common
stock in the merger, the directors and officers of EPIX will
collectively beneficially own approximately 0.9% of the
outstanding stock of EPIX, calculated on the basis set forth
under EPIX Principal Stockholders.
Interests of Predixs Directors and Management (See
page 87)
Some directors and management of Predix have interests in the
merger that are different from, and in addition to, the
interests of Predix stockholders generally.
Upon completion of the merger, Patrick J. Fortune, Ph.D,
Frederick Frank, Michael G. Kauffman, M.D., Ph.D. and Ian
F. Smith, CPA, ACA, each of whom is a current director of
Predix, are
4
expected to be members of the EPIX board of directors. In
addition, certain executive officers and key employees of Predix
are expected to serve as executive officers or key employees of
EPIX at the effective time of the merger.
Moreover, Mr. Frank, the Chairman of Predixs board of
directors, is also the Vice Chairman and a director of Lehman
Brothers Inc., Predixs financial advisor in connection
with the merger. In connection with the merger, Lehman Brothers
is entitled to a fee of $2.0 million from Predix, the
entire amount of which is contingent upon consummation of the
transaction.
Certain of the stockholders of Predix who have entered into
voting agreements with EPIX, agreeing to vote all of the shares
beneficially owned by them in favor of approval and adoption of
the merger agreement and approval of the merger, are affiliated
with directors of Predix.
Pursuant to the merger agreement, upon completion of the merger,
the combined company will honor Predixs existing
obligations to indemnify its present and former directors,
officers and employees to the same extent as provided in
Predixs certificate of incorporation, by-laws or any
applicable contract or agreement. The certificate of
incorporation and by-laws of the combined company will provide
for the indemnification and limitation of liability to the same
extent as set forth in Predixs certificate of
incorporation and by-laws and the combined corporation will
indemnify and hold harmless each present and former director,
officer or employee of Predix in respect of acts or omissions
occurring prior to the completion of the merger, including in
connection with the merger agreement and the transactions
contemplated thereby.
Upon completion of the merger and the issuance of EPIX common
stock in the merger, the directors and officers of Predix will
collectively beneficially own approximately 28.2% of the
outstanding stock of EPIX, calculated on the basis set forth
under Predix Principal Stockholders.
The NASDAQ Global Market Listing (See page 88)
EPIX has filed an initial listing application with The NASDAQ
Global Market pursuant to the Reverse Merger rules
of The NASDAQ Global Market. If such application is accepted,
EPIX anticipates that its common stock will continue to be
listed on The NASDAQ Global Market following the completion of
the merger under its current trading symbol EPIX. It
is a condition to Predixs consummation of the merger that
EPIX maintain the listing of its common stock on The NASDAQ
Global Market.
Completion and Effectiveness of the Merger (See pages 89 and
97)
EPIX and Predix expect to complete the merger when all of the
conditions to completion of the merger contained in the merger
agreement have been satisfied or waived. The merger will become
effective upon the filing of a certificate of merger with the
Secretary of State of the State of Delaware.
EPIX and Predix are working toward satisfying the conditions to
the merger, and expect to complete the merger promptly following
the stockholder meetings.
Restrictions on Solicitation of Alternative Transactions by
EPIX and Predix (See page 93)
EPIX and Predix have each agreed, and have further agreed to
ensure that their representatives do not, prior to the
consummation of the merger, directly or indirectly, solicit,
encourage, have negotiations with respect to (including
furnishing information) or take any action that could reasonably
be expected to result in the initiation or submission of any
inquiries, proposals or offers regarding, or approve, endorse or
recommend, any acquisition, merger, take-over bid, sale of
substantial assets, sale of shares of capital stock (including
without limitation by way of a tender offer) or similar
transactions. EPIX and Predix have also agreed to notify each
other upon receipt of any alternative acquisition proposal or
any inquiry that would reasonably be expected to lead to an
alternative acquisition proposal, including the terms of the
alternative acquisition proposal or inquiry and the identity of
the person making the alternative acquisition proposal or
inquiry. However, if EPIX or Predix receives an unsolicited bona
fide written acquisition proposal that is a
5
superior acquisition proposal prior to the EPIX annual meeting
or Predix special meeting, respectively, then EPIX or Predix may
provide nonpublic information to, and engage in discussions and
negotiations with, the third party making the acquisition
proposal so long as certain conditions are satisfied.
Conditions to the Completion of the Merger (See
page 97)
EPIX and Predixs obligations to complete the merger are
subject to certain conditions described under the heading
The Merger Agreement Conditions to the
Completion of the Merger beginning on page 97.
Termination of the Merger Agreement and Payment of Certain
Termination Fees (See pages 99 and 100)
EPIX and Predix may terminate the merger agreement by mutual
agreement and under certain other circumstances. EPIX and Predix
have agreed that if the merger agreement is terminated under the
circumstances described under The Merger
Agreement Fees and Expenses on page 100,
a termination fee of $4.5 million may be payable by either
EPIX or Predix to the other party upon the termination of the
merger agreement.
United States Federal Tax Consequences of the Merger (See
page 83)
The closing of the merger is conditioned upon the receipt by
EPIX and Predix of opinions that the merger will constitute a
reorganization for U.S. federal income tax purposes. As
discussed in detail in the section entitled The
Merger Material United States Federal Income Tax
Consequences of the Merger beginning on page 83,
Predix stockholders will be required to pay U.S. federal income
taxes on the amount of any gain such stockholder recognizes as a
result of the merger. Determining the actual tax consequences of
the merger to you may be complex and will depend on the facts of
your own situation. You should consult your own tax advisors to
fully understand the tax consequences to you of the merger,
including estate, gift, state, local or
non-U.S. tax
consequences of the merger.
Accounting Treatment of the Merger (See page 82)
EPIX, the acquirer, will account for the merger as a purchase.
Appraisal Rights (See page 86)
Under Delaware law, Predix stockholders are entitled to
appraisal rights in connection with the merger. Please see the
section entitled The Merger Appraisal
Rights on page 86 for more information. As
EPIXs common stock is quoted on The NASDAQ Global Market,
EPIX stockholders will not be entitled to appraisal rights.
Exchange of Predix Stock Certificates (See page 91)
Following the effective time of the merger, EPIX will cause a
letter of transmittal to be mailed to all holders of Predix
common stock and preferred stock containing instructions for
surrendering their certificates. Certificates should not be
surrendered until the letter of transmittal is received, fully
completed and returned as instructed in the letter of
transmittal.
Regulatory Approvals (See page 95)
EPIX and Predix have made the required filings under the
Hart-Scott Rodino Antitrust Improvement Act of 1976, as amended,
or the HSR Act, with the Federal Trade Commission and the
Department of Justice. On May 30, 2006, the waiting period
under the HSR Act expired. However, the Federal Trade Commission
or the Department of Justice, as well as a foreign regulatory
agency or government, state or private person, may challenge the
merger at any time before or after its completion. EPIX must
also comply with applicable federal and state securities laws
and the rules and regulations of The NASDAQ
6
Global Market, including the approval of an initial listing
application, in connection with the issuance of shares of EPIX
common stock in the merger and the filing of this joint proxy
statement/ prospectus with the Securities and Exchange
Commission.
Restrictions on the Ability to Sell EPIX Common Stock (See
page 87)
Subject to the lock-up
agreements described in this joint proxy statement/ prospectus,
all shares of EPIX common stock that Predix stockholders receive
in connection with the merger will be freely transferable for
the purposes of the Securities Act of 1933, as amended, unless
you are considered an affiliate of Predix at the time the merger
agreement is submitted to Predix stockholders for approval and
adoption, in which case you will be permitted to sell the shares
of EPIX common stock you receive in the merger only pursuant to
an effective registration statement or an exemption from the
registration requirements of the Securities Act of 1933, as
amended. The registration statement of which this joint proxy
statement/ prospectus forms a part does not register the resale
of stock received by affiliates of Predix in the merger. EPIX
has agreed to file a registration statement with respect to the
shares of EPIX common stock received by the affiliates of
Predix. As a result, these shares will be freely transferable
upon the effectiveness of the registration statement, subject
only to certain prospectus delivery requirements and the terms
of the lock-up
agreements, if applicable.
Comparison of EPIX and Predix Stockholder Rights (See
page 219)
Upon completion of the merger, Predix stockholders will become
stockholders of EPIX. The internal affairs of EPIX are governed
by EPIXs restated certificate of incorporation and amended
and restated by-laws. The internal affairs of Predix are
currently governed by Predixs restated certificate of
incorporation, as amended, and amended and restated by-laws. Due
to differences between the governing documents of EPIX and
Predix, the merger will result in Predix stockholders having
different rights once they become EPIX stockholders.
7
EPIX SELECTED HISTORICAL FINANCIAL INFORMATION
The following EPIX selected historical financial information
is only a summary and you should read the following financial
information together with EPIX Managements
Discussion and Analysis of Financial Condition and Results of
Operations and EPIXs financial statements and the
notes thereto included elsewhere in this joint proxy statement/
prospectus.
The following tables present EPIXs selected statements of
operations and balance sheet data for the years ended
December 31, 2001, 2002, 2003, 2004 and 2005 and the three
months ended March 31, 2005 and 2006. EPIX has derived the
following statements of operations data for the years ended
December 31, 2003, 2004 and 2005 and the balance sheet data
as of December 31, 2004 and 2005 from EPIXs audited
financial statements which are included in this joint proxy
statement/ prospectus. EPIX has derived the following
consolidated statements of operations data for the three months
ended March 31, 2005 and 2006 and the consolidated balance
sheet data as of March 31, 2006 from EPIXs unaudited
consolidated financial statements which are included in this
joint proxy statement/ prospectus. EPIX has derived the
following statements of operations data for the years ended
December 31, 2001 and 2002 and the balance sheet data as of
December 31, 2001, 2002 and 2003 from EPIXs audited
financial statements, which are not included in this joint proxy
statement/ prospectus. EPIXs historical results for any
prior period are not necessarily indicative of results to be
expected for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
Year Ended December 31, | |
|
March 31, | |
|
|
| |
|
| |
|
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
|
2005 | |
|
2005 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
9,569 |
|
|
$ |
12,270 |
|
|
$ |
13,525 |
|
|
$ |
12,259 |
|
|
$ |
7,190 |
|
|
$ |
2,086 |
|
|
$ |
1,702 |
|
Operating loss
|
|
|
(18,841 |
) |
|
|
(22,816 |
) |
|
|
(21,083 |
) |
|
|
(20,111 |
) |
|
|
(24,802 |
) |
|
|
(6,191 |
) |
|
|
(4,919 |
) |
Loss before provision for income taxes
|
|
|
(18,156 |
) |
|
|
(22,098 |
) |
|
|
(20,714 |
) |
|
|
(20,281 |
) |
|
|
(24,269 |
) |
|
|
(6,256 |
) |
|
|
(4,484 |
) |
Provision for income taxes
|
|
|
1,092 |
|
|
|
94 |
|
|
|
80 |
|
|
|
100 |
|
|
|
42 |
|
|
|
|
|
|
|
44 |
|
Net loss
|
|
|
(19,248 |
) |
|
|
(22,191 |
) |
|
|
(20,795 |
) |
|
|
(20,381 |
) |
|
|
(24,311 |
) |
|
|
(6,256 |
) |
|
|
(4,527 |
) |
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
14,007 |
|
|
|
16,878 |
|
|
|
19,056 |
|
|
|
22,889 |
|
|
|
23,258 |
|
|
|
23,227 |
|
|
|
23,285 |
|
Net loss per share, basic and diluted
|
|
$ |
(1.38 |
) |
|
$ |
(1.31 |
) |
|
$ |
(1.09 |
) |
|
$ |
(0.89 |
) |
|
$ |
(1.05 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
|
|
| |
|
March 31, | |
|
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
|
2005 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
$ |
24,966 |
|
|
$ |
28,112 |
|
|
$ |
79,958 |
|
|
$ |
164,440 |
|
|
$ |
124,728 |
|
|
$ |
118,846 |
|
Working capital
|
|
|
8,277 |
|
|
|
12,364 |
|
|
|
57,011 |
|
|
|
136,653 |
|
|
|
113,098 |
|
|
|
109,229 |
|
Total assets
|
|
|
26,911 |
|
|
|
30,155 |
|
|
|
81,875 |
|
|
|
171,287 |
|
|
|
130,716 |
|
|
|
125,022 |
|
Long-term liabilities
|
|
|
12,844 |
|
|
|
7,829 |
|
|
|
4,331 |
|
|
|
101,210 |
|
|
|
100,756 |
|
|
|
100,699 |
|
Total stockholders equity (deficit)
|
|
|
(3,210 |
) |
|
|
5,887 |
|
|
|
54,157 |
|
|
|
41,382 |
|
|
|
17,833 |
|
|
|
14,131 |
|
8
PREDIX SELECTED HISTORICAL CONSOLIDATED FINANCIAL
INFORMATION
The following Predix selected historical financial
information is only a summary and you should read the following
financial information together with Predix
Managements Discussion and Analysis of Financial Condition
and Results of Operations and Predixs consolidated
financial statements and the notes thereto included elsewhere in
this joint proxy statement/ prospectus.
The following tables present Predixs selected consolidated
statements of operations and balance sheet data for the years
ended December 31, 2001, 2002, 2003, 2004 and 2005 and the
three months ended March 31, 2005 and 2006. Predix has
derived the following consolidated statements of operations data
for the years ended December 31, 2003, 2004 and 2005 and
the consolidated balance sheet data as of December 31, 2004
and 2005 from Predixs audited consolidated financial
statements which are included in this joint proxy statement/
prospectus. Predix has derived the following consolidated
statements of operations data for the three months ended
March 31, 2005 and 2006 and the consolidated balance sheet
data as of March 31, 2006 from Predixs unaudited
consolidated financial statements which are included in this
joint proxy statement/ prospectus. Predix has derived the
following consolidated statements of operations data for the
years ended December 31, 2001 and 2002 and the consolidated
balance sheet data as of December 31, 2001, 2002 and 2003
from Predixs audited consolidated financial statements,
which are not included in this joint proxy statement/
prospectus. Predixs historical results for any prior
period are not necessarily indicative of results to be expected
for any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | |
|
|
Year Ended December 31, | |
|
March 31, | |
|
|
| |
|
| |
|
|
2001 | |
|
2002 | |
|
2003(1) | |
|
2004 | |
|
2005 | |
|
2005 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
|
|
|
$ |
551 |
|
|
$ |
1,068 |
|
|
$ |
13 |
|
|
$ |
2,300 |
|
|
$ |
153 |
|
|
$ |
784 |
|
Operating loss(2)
|
|
|
(12,978 |
) |
|
|
(11,206 |
) |
|
|
(24,696 |
) |
|
|
(19,502 |
) |
|
|
(34,287 |
) |
|
|
(7,560 |
) |
|
|
(7,757 |
) |
Income tax benefit
|
|
|
|
|
|
|
258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(11,189 |
) |
|
|
(11,241 |
) |
|
|
(24,560 |
) |
|
|
(19,392 |
) |
|
|
(33,703 |
) |
|
|
(7,417 |
) |
|
|
(7,721 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, | |
|
|
|
|
| |
|
March 31, | |
|
|
2001 | |
|
2002 | |
|
2003 | |
|
2004 | |
|
2005 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
$ |
33,097 |
|
|
$ |
21,976 |
|
|
$ |
10,999 |
|
|
$ |
13,813 |
|
|
$ |
7,413 |
|
|
$ |
7,939 |
|
Working capital (deficit)
|
|
|
31,713 |
|
|
|
21,671 |
|
|
|
9,409 |
|
|
|
11,798 |
|
|
|
1,314 |
|
|
|
(5,486 |
) |
Total assets
|
|
|
39,568 |
|
|
|
27,098 |
|
|
|
13,462 |
|
|
|
16,717 |
|
|
|
11,799 |
|
|
|
12,476 |
|
Capital lease obligations, net of current portion
|
|
|
50 |
|
|
|
32 |
|
|
|
219 |
|
|
|
127 |
|
|
|
109 |
|
|
|
100 |
|
Lease abandonment liability, net of current portion
|
|
|
|
|
|
|
|
|
|
|
1,331 |
|
|
|
1,068 |
|
|
|
1,109 |
|
|
|
1,056 |
|
Total stockholders equity (deficit)
|
|
|
37,623 |
|
|
|
26,140 |
|
|
|
9,906 |
|
|
|
12,470 |
|
|
|
1,248 |
|
|
|
(5,395 |
) |
|
|
(1) |
In August 2003, Predix acquired all of the capital stock of
Predix Pharmaceuticals Ltd., an Israeli corporation. The
transaction was recorded as a purchase for accounting purposes
and Predixs consolidated statements of operations data
include the operating results of Predix Pharmaceuticals Ltd.
from the date of acquisition. |
|
(2) |
As a result of the acquisition of Predix Pharmaceuticals Ltd.,
Predix consolidated facilities and reduced headcount resulting
in restructuring charges in 2003 of $5.4 million. |
9
EPIX AND PREDIX
|
|
UNAUDITED PRO FORMA CONDENSED |
|
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
|
The following unaudited pro forma condensed consolidated
financial statements give effect to the merger of EPIX and
Predix in a transaction to be accounted for as a purchase by
EPIX. The unaudited pro forma condensed consolidated balance
sheet combines the historical consolidated balance sheets of
EPIX and Predix as of March 31, 2006, giving effect to the
merger as if it occurred on March 31, 2006. The unaudited
pro forma condensed consolidated statement of operations for the
year ended December 31, 2005 and the three months ended
March 31, 2006 give effect to the merger as if it occurred
on January 1, 2005 and reflect only pro forma adjustments
expected to have a continuing impact on the combined results.
The following information does not give effect to any reverse
stock split of EPIX common stock described in EPIXs
Proposal No. 3. |
|
|
These unaudited pro forma condensed consolidated financial
statements are for informational purposes only. They do not
purport to indicate the results that would have actually been
obtained had the merger been completed on the assumed date or
for the periods presented, or that may be realized in the
future. To produce the unaudited pro forma financial
information, EPIX preliminarily allocated the purchase price
using its best estimates of fair value. These estimates are
based on the most recently available information in preparing a
preliminary value. To the extent there are significant changes
to Predixs business, the assumptions and estimates herein
could change significantly. Furthermore, the parties may have
reorganization and restructuring expenses as well as potential
operating efficiencies as a result of combining the companies.
The pro forma financial information does not reflect these
potential expenses and efficiencies. The unaudited pro forma
condensed consolidated financial statements should be read in
conjunction with EPIX Managements Discussion and
Analysis of Financial Condition and Results of Operations,
Predix Managements Discussion and Analysis of
Financial Condition and Results of Operations, the
historical financial statements, including the related notes, of
EPIX and the historical consolidated financial statements,
including the related notes, of Predix, covering these periods,
included elsewhere in this joint proxy statement/ prospectus. |
|
10
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma | |
|
Note | |
|
Pro Forma | |
|
|
EPIX | |
|
Predix | |
|
Adjustments | |
|
Reference | |
|
Combined | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
ASSETS |
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
75,964 |
|
|
$ |
7,939 |
|
|
|
(6,602 |
) |
|
|
(G |
) |
|
$ |
77,301 |
|
|
Marketable securities
|
|
|
42,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,882 |
|
|
Accounts receivable
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95 |
|
|
Prepaid expenses and other current assets
|
|
|
480 |
|
|
|
2,196 |
|
|
|
(708 |
) |
|
|
(H |
) |
|
|
1,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
119,421 |
|
|
|
10,135 |
|
|
|
(7,310 |
) |
|
|
|
|
|
|
122,246 |
|
Restricted cash
|
|
|
|
|
|
|
934 |
|
|
|
|
|
|
|
|
|
|
|
934 |
|
Property and equipment, net
|
|
|
2,108 |
|
|
|
1,368 |
|
|
|
|
|
|
|
|
|
|
|
3,476 |
|
Other assets
|
|
|
3,493 |
|
|
|
39 |
|
|
|
(638 |
) |
|
|
(B |
) |
|
|
2,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
125,022 |
|
|
$ |
12,476 |
|
|
|
(7,948 |
) |
|
|
|
|
|
$ |
129,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
541 |
|
|
$ |
3,456 |
|
|
|
|
|
|
|
|
|
|
$ |
3,997 |
|
|
Accrued expenses
|
|
|
3,895 |
|
|
|
4,019 |
|
|
$ |
2,139 |
|
|
|
(B |
) |
|
|
10,053 |
|
|
Contract advances
|
|
|
5,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,425 |
|
|
Current portion of deferred revenue
|
|
|
331 |
|
|
|
1,303 |
|
|
|
|
|
|
|
|
|
|
|
1,634 |
|
|
Current portion of capital lease obligations
|
|
|
|
|
|
|
61 |
|
|
|
|
|
|
|
|
|
|
|
61 |
|
|
Current portion of lease abandonment liability
|
|
|
|
|
|
|
180 |
|
|
|
|
|
|
|
|
|
|
|
180 |
|
|
Notes payable
|
|
|
|
|
|
|
6,602 |
|
|
|
(6,602 |
) |
|
|
(G |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
10,192 |
|
|
|
15,621 |
|
|
|
(4,463 |
) |
|
|
|
|
|
|
21,350 |
|
|
Accrued rent
|
|
|
|
|
|
|
483 |
|
|
|
|
|
|
|
|
|
|
|
483 |
|
|
Convertible debt
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
Capital lease obligations, net of current portion
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
100 |
|
|
Lease abandonment liability, net of current portion
|
|
|
|
|
|
|
1,056 |
|
|
|
|
|
|
|
|
|
|
|
1,056 |
|
|
Deferred revenue, net of current portion
|
|
|
699 |
|
|
|
611 |
|
|
|
|
|
|
|
|
|
|
|
1,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
110,891 |
|
|
|
17,871 |
|
|
|
(4,463 |
) |
|
|
|
|
|
|
124,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
|
|
|
|
2,732 |
|
|
|
(2,732 |
) |
|
|
(C |
) |
|
|
|
|
|
Common stock
|
|
|
233 |
|
|
|
10 |
|
|
|
204 |
|
|
|
(A |
) |
|
|
437 |
|
|
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
(C |
) |
|
|
|
|
|
Additional paid-in capital
|
|
|
198,104 |
|
|
|
120,983 |
|
|
|
81,023 |
|
|
|
(A |
) |
|
|
283,694 |
|
|
|
|
|
|
|
|
|
|
|
|
4,567 |
|
|
|
(A |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(120,983 |
) |
|
|
(C |
) |
|
|
|
|
Accumulated other comprehensive income
|
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34 |
) |
Accumulated deficit
|
|
|
(184,172 |
) |
|
|
(129,120 |
) |
|
|
129,120 |
|
|
|
(C |
) |
|
|
(278,846 |
) |
|
|
|
|
|
|
|
|
|
|
|
(708 |
) |
|
|
(H |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(93,966 |
) |
|
|
(D |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
14,131 |
|
|
|
(5,395 |
) |
|
|
(3,485 |
) |
|
|
|
|
|
|
5,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$ |
125,022 |
|
|
$ |
12,476 |
|
|
$ |
(7,948 |
) |
|
|
|
|
|
$ |
129,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
Three Months Ended March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma | |
|
Note | |
|
Pro Forma | |
|
|
EPIX | |
|
Predix | |
|
Adjustments | |
|
Reference | |
|
Combined | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development revenue
|
|
$ |
1,083 |
|
|
$ |
597 |
|
|
|
|
|
|
|
|
|
|
$ |
1,680 |
|
|
Royalty revenue
|
|
|
458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
458 |
|
|
License fee revenue
|
|
|
162 |
|
|
|
187 |
|
|
|
|
|
|
|
|
|
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues:
|
|
|
1,703 |
|
|
|
784 |
|
|
|
|
|
|
|
|
|
|
|
2,487 |
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
3,993 |
|
|
|
7,036 |
|
|
|
242 |
|
|
|
(F |
) |
|
|
11,271 |
|
|
General and administrative
|
|
|
2,338 |
|
|
|
1,475 |
|
|
|
60 |
|
|
|
(F |
) |
|
|
3,873 |
|
|
Restructuring
|
|
|
290 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
6,621 |
|
|
|
8,541 |
|
|
|
302 |
|
|
|
|
|
|
|
15,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(4,918 |
) |
|
|
(7,757 |
) |
|
|
(302 |
) |
|
|
|
|
|
|
(12,977 |
) |
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net
|
|
|
1,304 |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
1,346 |
|
|
Interest expense
|
|
|
(869 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
(875 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income tax
|
|
|
(4,483 |
) |
|
|
(7,721 |
) |
|
|
(302 |
) |
|
|
|
|
|
|
(12,506 |
) |
Provision for income tax
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(4,527 |
) |
|
$ |
(7,721 |
) |
|
|
(302 |
) |
|
|
|
|
|
$ |
(12,550 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares, basic and diluted
|
|
|
23,285 |
|
|
|
|
|
|
|
20,409 |
|
|
|
(E |
) |
|
|
43,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma | |
|
Note | |
|
Pro Forma | |
|
|
EPIX | |
|
Predix | |
|
Adjustments | |
|
Reference | |
|
Combined | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share data) | |
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product development revenue
|
|
$ |
4,196 |
|
|
$ |
1,737 |
|
|
|
|
|
|
|
|
|
|
$ |
5,933 |
|
|
Royalty revenue
|
|
|
2,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,333 |
|
|
License fee revenue
|
|
|
661 |
|
|
|
563 |
|
|
|
|
|
|
|
|
|
|
|
1,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues:
|
|
|
7,190 |
|
|
|
2,300 |
|
|
|
|
|
|
|
|
|
|
|
9,490 |
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
20,776 |
|
|
|
29,351 |
|
|
|
784 |
|
|
|
(F |
) |
|
|
50,911 |
|
|
General and administrative
|
|
|
10,244 |
|
|
|
7,031 |
|
|
|
196 |
|
|
|
(F |
) |
|
|
17,471 |
|
|
Restructuring
|
|
|
972 |
|
|
|
205 |
|
|
|
|
|
|
|
|
|
|
|
1,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
31,992 |
|
|
|
36,587 |
|
|
|
980 |
|
|
|
|
|
|
|
69,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(24,802 |
) |
|
|
(34,287 |
) |
|
|
(980 |
) |
|
|
|
|
|
|
(60,069 |
) |
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net
|
|
|
4,146 |
|
|
|
614 |
|
|
|
|
|
|
|
|
|
|
|
4,760 |
|
|
Interest expense
|
|
|
(3,613 |
) |
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
(3,643 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision for income tax
|
|
|
(24,269 |
) |
|
|
(33,703 |
) |
|
|
(980 |
) |
|
|
|
|
|
|
(58,952 |
) |
Provision for income tax
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(24,311 |
) |
|
$ |
(33,703 |
) |
|
|
(980 |
) |
|
|
|
|
|
$ |
(58,994 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share, basic and diluted
|
|
$ |
(1.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1.35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares, basic and diluted
|
|
|
23,258 |
|
|
|
|
|
|
|
20,409 |
|
|
|
(E |
) |
|
|
43,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
|
1. |
Description of Transaction and Basis of Presentation |
On April 3, 2006, EPIX Pharmaceuticals, Inc.
(EPIX) and Predix Pharmaceuticals Holdings, Inc.
(Predix) signed an Agreement and Plan of Merger,
which was amended on July 10, 2006 by Amendment No. 1
thereto, (collectively, the Merger Agreement), under
which Predix will merge with and into EPIX Delaware, Inc., a
wholly-owned subsidiary of EPIX, in a transaction to be
accounted for as a purchase by EPIX. The assets and liabilities
of Predix will be recorded as of the acquisition date at their
estimated fair values. The reported consolidated financial
condition and results of operations of EPIX after completion of
the merger will reflect these values, but will not be restated
retroactively to reflect historical consolidated financial
position or results of operations of Predix. The transaction is
expected to qualify as a reorganization within the meaning of
Section 386(a) of the Internal Revenue Code.
Under the terms of the merger agreement, each share of Predix
common stock and preferred stock (on an as-converted to Predix
common stock basis) outstanding at the closing of the merger
will be exchanged for 1.239411 shares of EPIX common stock,
subject to adjustment to account for the reverse stock split if
implemented, plus cash in lieu of fractional shares. In
addition, options to purchase Predix capital stock that are
outstanding on the closing date will be assumed by EPIX and will
thereafter constitute an option to acquire the number of shares
of EPIX common stock determined by multiplying the number of
shares of Predix capital stock subject to the option immediately
prior to the merger by 1.239411, subject to adjustment to
account for the reverse stock split if implemented, rounded down
to the nearest whole share, with an exercise price equal to the
exercise price of the assumed Predix option divided by 1.239411,
subject to adjustment to account for the reverse stock split if
implemented, rounded up to the nearest whole cent. Each of these
options will be subject to the same terms and conditions that
were in effect for the related Predix options. In addition, EPIX
will make a milestone payment to Predix stockholders and option
holders upon the occurrence of certain events. In no event will
the shares of EPIX common stock issuable at the effective time
of the merger, including the shares issuable upon exercise of
Predix options assumed by EPIX in the merger, exceed 49.99% of
the outstanding EPIX common stock immediately after the
effective time of the merger. In addition, in no event may the
milestone be paid in shares of EPIX common stock to the extent
that such shares would exceed 49.99% of the outstanding shares
of EPIX common stock immediately after such milestone payment,
when combined with all shares of EPIX common stock issued in the
merger and issuable upon exercise of all Predix options assumed
by EPIX in the merger.
If the milestone is achieved, EPIX will account for the
contingent consideration milestone payment as additional
purchase price in accordance with Paragraph 27 of Statement
of Financial Accounting Standards, or SFAS, No. 141,
Business Combinations, or SFAS 141. As the valuation
of Predix is not final, EPIX does not know, at this time, if the
additional purchase price will result in goodwill, or in process
research and development expense, or both. If achieved, the
milestone will be accounted for when earned. If any EPIX shares
are issued, they will be valued based on the closing price of
the Companys common stock on the two full trading days
immediately preceding the measurement date (the date the
milestone is earned), the measurement date and the two full
trading days immediately following the measurement date. Any
change in the fair value of the stock from the milestone
achievement date and the value of the stock based on the terms
of the merger agreement, if any, will have no effect on the
accounting. The value of the contingent consideration is fixed
at $35 million, while the number of shares actually issued
on the subsequent payment date may be different than the number
of shares that would be issued if calculated on the measurement
date.
The merger is subject to customary closing conditions, including
approval by EPIX and Predix shareholders.
14
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A preliminary estimate of the purchase price is as follows (in
thousands):
|
|
|
|
|
Fair value of EPIX shares issued
|
|
$ |
81,227 |
|
Estimated fair value of vested Predix stock options exchanged
for EPIX stock options
|
|
|
4,567 |
|
|
|
|
|
Subtotal
|
|
|
85,794 |
|
Estimated transaction costs incurred by EPIX
|
|
|
2,777 |
|
|
|
|
|
Estimated purchase price
|
|
$ |
88,571 |
|
|
|
|
|
For pro forma purposes, the fair value of the EPIX common stock
used in determining the purchase price was $3.98 per share,
which is the implied price of EPIX common stock based on
(a) the average closing price of EPIX common stock on the
two full trading days immediately preceding the public
announcement of the merger, the trading day the merger was
announced and the two full trading days immediately following
such public announcement and (b) the exchange ratio of
1.239411, which is subject to adjustment to account for the
reverse stock split if implemented. The fair value of the EPIX
stock options exchanged was determined by using the
Black-Scholes option pricing model with the following
assumptions: stock price of $3.98, which is the value ascribed
to the EPIX common stock in determining the purchase price;
volatility of 70%; risk-free interest rate of 4.62%; and an
expected life of 4.9 years.
For pro forma purposes, the estimated purchase price has been
allocated based on a preliminary valuation of Predixs
tangible and intangible assets and liabilities based on their
estimated fair values as of March 31, 2006 (in thousands):
|
|
|
|
|
Net tangible assets acquired
|
|
$ |
(5,395 |
) |
In-process research and development
|
|
|
93,966 |
|
|
|
|
|
Total
|
|
$ |
88,571 |
|
|
|
|
|
The allocation of the purchase price is preliminary. The final
determination of the purchase price allocation will be based on
the fair values of assets acquired, including the fair values of
in-process research and development, other identifiable
intangibles and the fair values of liabilities assumed as of the
date that the merger is consummated.
The purchase price allocation will remain preliminary until EPIX
completes a valuation of significant identifiable intangible
assets acquired (including in-process research and development)
and determines the fair values of the other assets and
liabilities acquired. The final determination of the purchase
price allocation is expected to be completed as soon as
practicable after completion of the merger. The final amounts
allocated to assets and liabilities acquired could differ
significantly from the amounts presented in the unaudited pro
forma condensed consolidated financial statements.
The estimated fair value attributed to in-process research and
development represents an estimate of the fair value of
purchased in-process technology for research projects that, as
of the expected closing date of the merger, will not have
reached technological feasibility and have no alternative future
use. Only those research projects that had advanced to a stage
of development where management believed reasonable net future
cash flow forecasts could be prepared and a reasonable
likelihood of technical success existed were included in the
estimated fair value. Accordingly, the in-process research and
development primarily represents the estimated fair value of
PRX-00023, Predixs drug candidate currently in
Phase III clinical trials for the treatment of generalized
anxiety disorder, PRX-03140, Predixs drug candidate that
has completed Phase I clinical trials for the treatment of
Alzheimers disease, and
PRX-08066,
Predixs drug candidate that has completed Phase I
clinical trials for the treatment of pulmonary hypertension. The
estimated fair value of the in-process research and development
was determined based on a discounted
15
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
forecast of the estimate net future cash flows for each project,
adjusted for the estimated probability (for these purposes) of
technical success and U.S. Food and Drug Administration or
European Agency for Evaluation of Medicinal Products approval
for each research project. In-process research and development
will be expensed immediately following completion of the merger.
In determining the fair value to attribute to intangible assets,
EPIX considered several categories of intangible assets
including contract-based and technology-based intangible assets.
In accordance with paragraph 39 and Appendix A of
SFAS 141 identifiable intangible assets will be recognized
if they arise from contractual or legal rights or if they are
otherwise separable. Intangible assets that are not specifically
identifiable, have indeterminate lives or are inherent in
continuing business and related to the enterprise as a whole
will be classified as goodwill provided it is appropriate to
record goodwill relative to the valuation of the write off of
in-process research and development.
Contract-based intangible assets (licensing
arrangements): Predixs contractual relationship with
Cystic Fibrosis Foundation Therapeutics, Inc. The terms of the
agreement were considered to be ostensibly fair to both parties
thus having no value separable from goodwill.
Technology-based intangible assets (technology platform,
existing product candidates and patents, in-process research and
development): Existing products and patents were determined
to be separable from goodwill and will be valued as in-process
research and development. The technology platform was determined
to still be in-process and not complete, thus not separable from
goodwill.
In identifying the acquired in-process research and development,
the developmental projects were evaluated in the context of
interpretation 4 and paragraph 11 of
SFAS No. 2, Accounting for Research and Development
Costs, along with reference to the American Institute of
Certified Public Accountants Guide, Assets Acquired in a
Business Combination to be Used in Research and Development
Activities: A Focus on Software, Electronic Devices and
Pharmaceutical Industries.
Based upon the preliminary valuation, there are no intangible
assets other than in-process research and development that are
separable from goodwill. Once the valuation is completed, the
excess of the purchase price of Predix, if any, over the fair
value of the net tangible and identifiable assets will be
recorded as goodwill. It is, however, not currently anticipated
that there will be goodwill.
(A) To record the value of the EPIX common stock and vested
stock options issued in the merger. Cash paid in lieu of
fractional shares will be from existing cash balances and cannot
be estimated at this time.
(B) To record the estimated EPIX transactions costs not
included in the March 31, 2006 balance sheet of
$2.1 million. Transaction costs incurred by Predix will be
expensed as incurred.
(C) To eliminate Predixs historical
stockholders equity accounts.
(D) To record the estimated fair value of in-process
research and development acquired in the merger. Because this
expense is directly attributable to the acquisition and will not
have a continuing impact, it is not reflected in the pro forma
condensed statement of operations. However, this item will be
recorded as an expense immediately following the completion of
the merger.
(E) To record the issuance of EPIX shares to Predix
shareholders to effect the merger.
(F) To record amortization of deferred compensation
relating to unvested Predix options exchanged for unvested EPIX
options.
(G) To record the repayment of Predix notes payable upon
the closing of the merger.
16
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(H) To record the amortization of the value of the warrants
issued in connection with the Predix notes issued. Because this
expense is directly attributable to the acquisition and will not
have a continuing impact, it is not reflected in the pro forma
condensed statement of operations.
The pro forma condensed consolidated financial statements at
March 31, 2006 do not include $2.9 million of the
bridge financing debt Predix entered into after March 31,
2006. At March 31, 2006, $6.6 million of the total
notes issued of $9.5 million had been issued. See Note 15
to Predixs consolidated financial statements included
elsewhere in this joint proxy statement/prospectus.
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4. |
The Pro Forma Condensed Consolidated Statement of
Operations |
Other than the adjustment to reflect the amortization of
deferred compensation, the pro forma condensed consolidated
statement of operations does not include any pro forma
adjustments as the expense associated with the fair value of the
In Process Research and Development acquired in the merger will
not have a continuing impact, therefore, it is not reflected
above. In addition, the historical costs of the assets and
liabilities acquired in the merger approximate their fair value
as they are the result of fairly recent transactions. As such,
there are no pro forma adjustments to the pro forma condensed
consolidated statement of operations. The final amounts
allocated to assets and liabilities acquired could differ
significantly from the amounts presented in these unaudited pro
forma condensed financial statements.
17
COMPARATIVE PER SHARE DATA
The following table sets forth selected historical share, net
loss per share and book value per share information of EPIX and
unaudited pro forma share, net loss per share and book value per
share information after giving effect to the merger between EPIX
and Predix, assuming that an aggregate of 20,408,767 shares
of EPIX common stock had been issued in exchange for outstanding
shares of Predix common stock and preferred stock (on an
as-converted to Predix common stock basis). You should read this
information in conjunction with the selected historical
financial information included elsewhere in this joint proxy
statement/ prospectus. The unaudited pro forma share, net loss
per share and book value per share information is derived from,
and should be read in conjunction with, the unaudited pro forma
condensed consolidated financial statements and related notes
included elsewhere in this joint proxy statement/ prospectus.
The historical share, net loss per share and book value per
share information is derived from financial statements of EPIX
as of and for the three months ended March 31, 2006. The
amounts set forth below are in thousands, except per share
amounts and does not give effect to any reverse stock split of
EPIX common stock.
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March 31, 2006 | |
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EPIX | |
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Historical | |
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Pro Forma | |
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Basic and diluted net loss per share
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$ |
(0.19 |
) |
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$ |
(0.29 |
) |
Book value per share
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0.61 |
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0.12 |
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Shares used in calculating basic and diluted net loss per share
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23,285 |
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43,694 |
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Shares used in calculating book value per share
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23,285 |
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43,694 |
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18
MARKET PRICE AND DIVIDEND INFORMATION
EPIX
EPIXs common stock currently trades on The NASDAQ Global
Market under the symbol EPIX. The following table
shows the high and low sales price for the common stock by
quarter, as reported by The NASDAQ Global Market for the periods
indicated:
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Price Range | |
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Period |
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High | |
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Low | |
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Fiscal Year Ending December 31, 2006
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First Quarter
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$ |
5.17 |
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$ |
3.33 |
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Second Quarter (through July 13, 2006)
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4.95 |
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2.70 |
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Fiscal Year Ended December 31, 2005
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First Quarter
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$ |
18.18 |
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$ |
6.80 |
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Second Quarter
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9.80 |
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6.26 |
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Third Quarter
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10.79 |
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7.07 |
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Fourth Quarter
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8.47 |
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3.78 |
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Fiscal Year Ended December 31, 2004
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First Quarter
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$ |
23.40 |
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$ |
15.94 |
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Second Quarter
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26.37 |
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20.34 |
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Third Quarter
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22.58 |
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15.80 |
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Fourth Quarter
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20.00 |
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15.28 |
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On March 31, 2006, the last full trading day immediately
preceding the public announcement of the merger, and on
July 13, 2006, the most recent practicable date prior to
the mailing of this joint proxy statement/ prospectus, the last
reported sales prices of EPIXs common stock, as reported
by The NASDAQ Global Market, were $3.50 and $4.58 per
share, respectively. You are encouraged to obtain current
trading prices for EPIXs common stock in considering
whether to vote to approve the merger. As of June 28, 2006,
there were approximately 76 holders of record of
EPIXs common stock. EPIX has not paid cash dividends on
its common stock and has no intention to do so in the
foreseeable future.
Predix
Predixs common stock and preferred stock are not listed
for trading on any securities exchange, and Predix does not
currently file reports with the Securities and Exchange
Commission. As of June 28, 2006, there were approximately
120 holders of record of Predixs common stock and
63 holders of record of Predixs preferred stock.
Predix has never declared or paid cash dividends on its capital
stock. Predix does not anticipate paying any cash dividends on
its capital stock in the foreseeable future. Predix currently
intends to retain all available funds and any future earnings to
fund the development and growth of its business.
The NASDAQ Global Market Listing
EPIX has filed an initial listing application with The NASDAQ
Global Market pursuant to the Reverse Merger rules
of The NASDAQ Global Market. If such application is accepted,
EPIX anticipates that its common stock will continue to be
listed on The NASDAQ Global Market following the completion of
the merger under its current trading symbol EPIX.
19
CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING
STATEMENTS
This joint proxy statement/ prospectus includes statements with
respect to EPIX which constitute forward-looking
statements within the meaning of the safe harbor
provisions of the United States Private Securities Litigation
Reform Act of 1995. Words such as anticipate,
believes, budget, continue,
could, estimate, expect,
forecast, intend, may,
plan, potential, predicts,
project, should, will and
similar expressions are intended to identify such
forward-looking statements. Forward-looking statements in this
joint proxy statement/ prospectus include, without limitation,
statements regarding benefits of the proposed merger and future
expectations concerning available cash and cash equivalents of
the combined company, the expected timing of the conclusion of
clinical trials, the timing of regulatory filings, and other
matters that involve known and unknown risks, uncertainties and
other factors that may cause actual results, levels of activity,
performance or achievements to differ materially from results
expressed in or implied by this joint proxy statement/
prospectus. Such risk factors include, among others:
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difficulties encountered in integrating merged businesses; |
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uncertainties as to the timing of the merger, approval of the
transaction by the stockholders of the companies and the
satisfaction of closing conditions to the transaction, including
the receipt of regulatory approvals, if any; |
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the competitive environment in the life sciences industry; |
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whether the companies can successfully develop new products and
the degree to which these gain market acceptance; |
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the success and timing of our pre-clinical studies and clinical
trials; |
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the companies ability to obtain and maintain regulatory
approval for their product candidates and the timing of such
approvals; |
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the companies ability to research, develop and
commercialize their product candidates; |
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regulatory developments in the United States and foreign
countries; and |
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the companies ability to obtain and maintain intellectual
property protection for their product candidates. |
Actual results may differ materially from those contained in the
forward-looking statements in this joint proxy statement/
prospectus. You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the
date of this joint proxy statement/ prospectus. All prior and
subsequent written and oral forward-looking statements
concerning the merger and other matters addressed in this joint
proxy statement/ prospectus and attributable to EPIX or any
person acting on its behalf are expressly qualified in their
entirety by the cautionary statements included or referred to in
this section. Except to the extent required by applicable law or
regulation, EPIX does not undertake any obligation to republish
revised forward-looking statements to reflect events and
circumstances after the date of this joint proxy statement/
prospectus or to reflect the occurrence of unanticipated events.
20
RISK FACTORS
You should consider the following risk factors in evaluating
whether to vote for the approval and adoption of the merger
agreement, the approval of the merger, the approval of the
issuance of the EPIX common stock in the merger and/or the
approval of the amendment to EPIXs restated certificate of
incorporation. These factors should be considered in conjunction
with the other information included in this joint proxy
statement/ prospectus. References to we,
us, our and other first person
declarations in these risk factors refer to the operations of
the combined company following the completion of the merger.
Where we use the words describing either EPIX or Predix, as the
case may be, we are referring to such entity as a stand alone
company or their respective lines of business and industry as
they relate to the combined company.
RISKS RELATING TO THE MERGER
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If we are not successful in integrating our organizations,
we may not be able to operate efficiently after the
merger. |
Achieving the benefits of the merger will depend in part on the
successful integration of our operations and personnel in a
timely and efficient manner. The integration process requires
coordination of different development, regulatory, manufacturing
and commercial teams, and involves the integration of systems,
applications, policies, procedures, business processes and
operations. This may be difficult and unpredictable because of
possible cultural conflicts and different opinions on scientific
and regulatory matters. The combination of EPIX and
Predixs organizations may result in greater competition
for resources and the elimination of research and development
programs that might otherwise be successfully completed. If we
cannot successfully integrate our operations and personnel, we
may not realize the expected benefits of the merger.
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Integrating our companies may divert managements
attention away from our operations. |
Successful integration of our operations, product candidates and
personnel may place a significant burden on our management and
our internal resources. The integration will require efforts
from each company, including the coordination of their general
and administrative functions. For example, integration of
administrative functions includes coordinating employee
benefits, payroll, financial reporting, purchasing and
disclosure functions. Delays in successfully integrating and
managing employee benefits could lead to dissatisfaction and
employee turnover. Problems in integrating purchasing and
financial reporting could result in control issues, including
unplanned costs. In addition, the combination of EPIXs and
Predixs organizations may result in greater competition
for resources and elimination of research and development
programs that might otherwise be successfully completed,
especially in light of the difference in EPIXs current
imaging focus and Predixs current therapeutic focus. The
diversion of managements attention and any difficulties
encountered in the transition and integration process could
result in delays in the companies clinical trial programs
and could otherwise harm our business, financial condition and
operating results.
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We expect to incur significant costs in connection with
the merger and in integrating the companies into a single
business. |
We estimate that EPIX and Predix will incur aggregate direct
transaction costs of approximately $5.8 million associated
with the merger. In addition, we expect to incur significant
costs integrating our operations, product candidates and
personnel, which cannot be estimated accurately at this time.
These costs may include costs for:
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severance; |
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conversion of information systems; |
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combining development, regulatory, manufacturing and commercial
teams and processes; |
21
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reorganization of facilities; and |
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relocation or disposition of excess equipment. |
If the total costs of the merger exceed our estimates, or
benefits of the merger do not exceed the total costs of the
merger, the financial results of the combined company could be
adversely affected.
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We may be unable to repay, repurchase or redeem
EPIXs 3.0% Convertible Senior Notes due 2024 if, and
when, required. |
The entire $100 million outstanding principal amount of
EPIXs 3.0% Convertible Senior Notes will become due
and payable at maturity in 2024. In addition, noteholders may
require us to repurchase these notes at par, plus accrued and
unpaid interest, on June 15, 2011, 2014 and 2019 and upon
certain other designated events under the notes, which include a
change of control of EPIX or termination of trading of EPIX
common stock on The NASDAQ Global Market. The definition of
change in control set forth in the indenture governing the notes
does not include certain mergers and similar transactions that
are not deemed a change in control. While we believe that the
merger does not constitute a change of control of EPIX under the
indenture, we cannot assure you that we will not become
obligated to repurchase these notes, in whole or in part, as a
result of this merger. Based on the current trading price of
EPIXs common stock, we anticipate that in such event most,
if not all, of the noteholders would tender their notes for
repurchase. We may not have enough funds or be able to arrange
for additional financing to repurchase the notes tendered by the
holders upon a designated event or otherwise. Any failure to
repurchase tendered notes would constitute an event of default
under the indenture, which might also constitute a default under
the terms of EPIXs other debt. If we are required to
repurchase or redeem these notes prior to their maturity,
whether as a result of this merger or otherwise, the financial
position of the combined company would be materially adversely
affected and the anticipated benefits of the merger would be
significantly diminished.
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EPIXs failure to comply with the initial listing
standards of The NASDAQ Global Market will subject its stock to
delisting from The NASDAQ Global Market, which listing is a
condition to the consummation of the merger. |
EPIXs common stock is currently listed for trading on The
NASDAQ Global Market. Immediately prior to the consummation of
the merger, EPIX will be required to meet the initial listing
requirements to maintain the listing and continued trading of
its shares on The NASDAQ Global Market. These initial listing
requirements are more difficult to achieve than the continued
listing requirements under which EPIX is now trading. Based on
information currently available to EPIX, EPIX anticipates that
it will be unable to meet the $5.00 minimum bid price initial
listing requirement at the closing of the merger unless it
effects a reverse stock split as discussed in EPIXs
Proposal No. 3. If EPIX is unable to satisfy these
requirements, NASDAQ will notify EPIX that its stock will be
subject to delisting from The NASDAQ Global Market. It is a
condition to Predixs obligation to consummate the merger
that EPIX maintain the listing of its common stock on The NASDAQ
Global Market. In addition, oftentimes a reverse stock split
will not result in a trading price for the affected common stock
that is proportional to the ratio of the split. EPIX believes
that a reverse stock split is in the best interest of the
combined company and its stockholders. However, EPIX cannot
assure you that the implementation of the reverse stock split
will have a positive impact on the price of its common stock.
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If we fail to retain key employees, the benefits of the
merger could be diminished. |
The successful combination of EPIX and Predix will depend in
part on the retention of key personnel, including
Michael G. Kauffman, M.D., Ph.D, Andrew C.G.
Uprichard, M.D. and Kimberlee C. Drapkin, the expected
Chief Executive Officer, President and Chief Financial Officer
of the combined company, respectively. There can be no assurance
that we will be able to retain our key management and scientific
personnel. Although Dr. Kauffman and Ms. Drapkin are
subject to employment agreements with Predix, the employment
agreements may be terminated by either party for any reason and
there is no guarantee
22
that Dr. Kauffman, Dr. Uprichard or Ms. Drapkin
will remain with the combined company. If we fail to retain such
key employees, particularly those identified in this joint proxy
statement/ prospectus as the expected management of the combined
company, we may not realize the anticipated benefits of the
merger. The business of each of EPIX and Predix is also subject
to risks associated with the retention of key employees which
are discussed in greater detail below.
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If one or more of the product candidates in the combined
company cannot be shown to be safe and effective in clinical
trials, is not approvable or not commercially successful, then
the benefits of the merger may not be realized. |
The combined company will have five product candidates in the
clinic and several additional product candidates planned to
enter clinical testing in the next several years. All of these
product candidates must be rigorously tested in clinical trials,
and shown to be safe and effective before the U.S. Food and
Drug Administration, or FDA, or its foreign counterparts, will
consider them for approval. Failure to demonstrate that one or
more of the product candidates is safe and effective, or
significant delays in demonstrating safety and efficacy, could
diminish the benefits of the merger. All of these product
candidates must be approved by a government authority such as
the FDA before they can be commercialized. Failure of one or
more of the product candidates to obtain such approval, or
significant delays in obtaining such approval, could diminish
the benefits of the merger. Even if approved for sale, these
product candidates must be successfully commercialized. Failure
to commercialize successfully one or more of these product
candidates could diminish the benefits of the merger.
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Because Predix stockholders will receive a fixed number of
shares of EPIX common stock in the merger, rather than a fixed
value, if the market price of EPIX common stock declines, Predix
stockholders will receive consideration in the merger of lesser
value and if the market price of EPIX common stock increases,
EPIX will pay consideration in the merger of greater
value. |
The aggregate number of shares of common stock of EPIX to be
issued to Predix stockholders is fixed. Accordingly, the
aggregate number of shares that Predix stockholders will receive
in the merger will not change, even if the market price of EPIX
common stock changes. In recent years, the stock market in
general, and the securities of biotechnology companies in
particular, including EPIXs securities, have experienced
extreme price and volume fluctuations. These market fluctuations
may adversely affect the market price of EPIX common stock. The
market price of EPIX common stock upon and after the
consummation of the merger could be lower than the market price
on the date of the merger agreement or the current market price,
which would decrease the value of the consideration to be
received by Predix stockholders in the merger. Predix
stockholders should obtain recent market quotations of EPIX
common stock before they vote on the merger.
In addition, the market price of EPIX common stock upon and
after the consummation of the merger could be higher than the
market price on the date of the merger agreement or the current
market price. As a result of the fixed number of shares of EPIX
common stock issuable in the merger, increases in the market
price of the EPIX common stock would increase the value of the
consideration payable by EPIX in the merger. EPIX stockholders
should obtain recent market quotations of EPIX common stock
before they vote on the matters set forth in this joint proxy
statement/ prospectus.
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The merger may fail to qualify as a reorganization for
U.S. federal income tax purposes, resulting in recognition
of taxable gain or loss by Predix stockholders in respect of
their Predix stock. |
EPIX and Predix intend for the merger to qualify as a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended. Although the Internal
Revenue Service, or IRS, will not provide a ruling on the
matter, both EPIX and Predix will, as a condition to closing,
obtain a legal opinion from their respective tax counsel that
the merger will constitute a reorganization for
U.S. federal income tax purposes. These opinions do not
bind the IRS, nor do they prevent the IRS from adopting a
contrary position. If the merger fails to qualify as a
reorganization, each Predix stockholder generally will be
treated as exchanging its Predix stock in a fully taxable
transaction for
23
EPIX common stock and the milestone payment obligation. In
addition, the merger would be treated as a sale of all of the
assets of Predix to EPIX, with a corporate level tax liability
owed by EPIX for the period in which the merger occurs. Such a
tax liability may be significant and could have a material
adverse effect on the financial position of the combined company.
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Failure to complete the merger could adversely affect
EPIXs stock price and EPIXs and Predixs future
business and operations. |
The merger is subject to the satisfaction of various closing
conditions, including the approval by both EPIX and Predix
stockholders, and neither EPIX nor Predix can guarantee that the
merger will be successfully completed. In the event that the
merger is not consummated, EPIX and Predix will be subject to
many risks, including the costs related to the merger, such as
legal, accounting and advisory fees, which must be paid even if
the merger is not completed, or the payment of a termination fee
under certain circumstances. If the merger is not consummated,
the market price of EPIX common stock could decline.
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Certain directors and management of EPIX and Predix may
have interests that are different from, or in addition to, those
of the respective EPIX and Predix stockholders generally. |
The directors and management of EPIX and Predix may have
interests in the merger that are different from, or are in
addition to, those of the respective EPIX and Predix
stockholders generally, including the following:
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Upon the closing of the merger, Christopher F.O. Gabrieli,
Michael Gilman, Ph.D., Mark Leuchtenberger and Gregory D.
Phelps, each of whom is a current director of EPIX, is expected
to be a member of the combined companys board of directors. |
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It is anticipated that certain current officers and key
employees of EPIX, including Andrew C.G. Uprichard, M.D., Philip
Graham, Ph.D., and Brenda Sousa, will be executive officers or
key employees of the combined company. |
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Upon completion of the merger, Brenda Sousa, EPIXs Vice
President of Human Resources, is entitled to a bonus of $47,500.
In addition, Philip Chase, EPIXs Vice President and
General Counsel, is entitled to a bonus of $72,000 upon
completion of the merger. |
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Upon the closing of the merger, the executive officers of
Predix, including Michael G.
Kauffman, M.D., Ph.D., Silvia Noiman, Ph.D., Oren
Becker, Ph.D., Chen Schor and Kimberlee C. Drapkin
will become executive officers of the combined company. |
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EPIX will maintain all rights to indemnification existing in
favor of Predix directors and officers for their acts and
omissions occurring prior to the completion of the merger and
will maintain the directors and officers liability
insurance to cover any such liabilities for six years following
the completion of the merger. |
In addition, you should be aware that Frederick Frank,
Michael G. Kauffman, M.D., Ph.D., Patrick J. Fortune, Ph.D.
and Ian F. Smith, CPA, ACA will have a relationship with
both EPIX and Predix due to their positions as current directors
of Predix and future directors of EPIX. Moreover,
Mr. Frank, the Chairman of the Predix board of directors,
is also the Vice Chairman and a director of Lehman Brothers
Inc., Predixs financial advisor in connection with the
merger. Lehman Brothers is entitled to a fee of
$2.0 million from Predix, all of which is contingent upon
consummation of the merger, as well as reimbursement of up to
$50,000 of its expenses. Please see the sections entitled
The Merger Interests of Predixs
Directors and Management in the Merger and Current
Management of Predix and Related Information Certain
Transactions with Management and Affiliates.
In addition, options, with exercise prices ranging from $0.81 to
$2.99, held by each of Michael G. Kauffman, M.D., Ph.D., Silvia
Noiman, Ph.D., Oren Becker, Ph.D., Chen Schor and Kimberlee C.
Drapkin to purchase 594,679, 308,096, 261,376, 251,213, and
144,996 shares, respectively, will become
24
immediately exercisable in full if, within 12 months after
the merger, the officer is terminated without cause or
terminates his or her employment due to a material change in
duties, authority or responsibilities.
These interests may influence these directors in making their
recommendation that you vote in favor of the approval and
adoption of the merger agreement, the approval of the merger
and/or the approval of the amendment to EPIXs restated
certificate of incorporation. You should be aware of these
interests when you consider the respective Predix and EPIX
boards of directors recommendations that you vote in favor
of the approval and adoption of the merger agreement, the
approval of the merger and/or the approval of the amendment to
EPIXs restated certificate of incorporation.
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EPIX and Predix stockholders will have a reduced ownership
and voting interest after the merger and will exercise less
influence over management of the combined company following the
merger. |
After the merger, the stockholders of each of EPIX and Predix
will own a significantly smaller percentage of the combined
company than their respective ownership of Predix and EPIX. At
the effective time of the merger, EPIX stockholders will
collectively own approximately 53% of the outstanding shares of
the combined company and Predix stockholders will collectively
own approximately 47% of the outstanding shares of the combined
company, based on the number of shares of EPIX common stock and
Predix common stock and preferred stock outstanding as of the
date of the merger agreement. Consequently, stockholders of EPIX
and Predix will be able to exercise less influence over the
management and policies of the combined company that they
currently exercise over the management and policies of their
respective companies.
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Future sales of common stock by existing EPIX and Predix
stockholders may cause the stock price of the combined company
to fall. |
The market price of our common stock could decline as a result
of sales by existing EPIX stockholders and former Predix
stockholders in the market after the completion of the merger,
or the perception that these sales could occur. These sales
might also make it more difficult for the combined company to
sell equity securities at an appropriate time and price.
25
RISKS RELATING TO THE COMBINED COMPANY
Risks Relating to the Business
of EPIX and the Combined Company
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Research and Development Risks |
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EPIX may never receive marketing approval for any of its
product candidates in the United States, including Vasovist and
EP-2104R. |
EPIX is not able to market any of its product candidates in the
United States, Europe or in any other jurisdiction without
marketing approval from the FDA, the European Commission, or any
equivalent foreign regulatory agency. The regulatory process to
obtain marketing approval for a new drug or biologic takes many
years and requires the expenditure of substantial resources.
This process can vary substantially based on the type,
complexity, novelty and indication of the product candidate
involved.
Although the European Medicines Agency, or the EMEA, granted
approval of Vasovist for all 25 member states of the E.U.
in October 2005, Vasovist has not been approved in the United
States. In December 2003, EPIX submitted a new drug application,
or NDA, for Vasovist to the FDA, and in June 2004, EPIXs
development partner Schering AG submitted a Marketing
Authorization Application, to the EMEA. In January 2005, EPIX
received an approvable letter from the FDA for Vasovist in which
the FDA requested additional clinical trials prior to approval.
In May 2005, EPIX submitted a response to the FDA approvable
letter, which was accepted by the FDA as a complete response in
June 2005. In November 2005, the FDA provided EPIX with a second
approvable letter. Although no safety or manufacturing issues
were raised in the second approvable letter, the second
approvable letter indicated that at least one additional
clinical trial and a re-read of images obtained in certain
previously completed Phase III trials will be necessary
before the FDA could approve Vasovist. EPIX believes that these
trials would require a substantial period of time to complete.
EPIX has had two meetings with the FDA since receiving the
second approvable letter to discuss the path forward for
Vasovist in the United States. After considering the
parameters of the additional clinical trials requested by the
FDA, EPIX filed a formal appeal with the FDA asking the FDA to
approve Vasovist and to utilize an advisory committee as part of
the appeal process. The approval, timeliness of approval or
labeling of Vasovist are subject to significant uncertainties
related to a number of factors, including the outcome of the
appeal, the process of reaching agreement with the FDA on the
clinical data and on any clinical trial protocol required for
regulatory approval of Vasovist, a re-read, or reanalysis, of
images obtained from completed Phase III trials by a new
group of radiologists, the timing and process of conducting any
clinical trials that may be ultimately required if the appeal is
denied, obtaining the desired outcomes of any required clinical
trials and the FDAs review process and conclusions
regarding any additional Vasovist regulatory submissions. EPIX
cannot assure you that its appeal will be successful or that
EPIX will be able to reach agreement with the FDA on the design
or clinical endpoints required for additional clinical trials or
re-read of images from the completed Phase III trials that
may be required if the appeal is denied. Further, EPIX cannot
assure you that any such agreed upon clinical trials will be
feasible for EPIX to conduct or whether such trials will be
completed in a commercially reasonable timeframe, if at all. Any
further clinical trials that are required could take several
years to complete.
If the FDA does not approve Vasovist, then EPIX will not receive
revenues based on sales of Vasovist in the United States. Even
if ultimately approved, EPIX does not expect revenues from the
commercial sales of any of its product candidates, other than
Vasovist, for at least several years.
EPIX completed a Phase IIa clinical trial of EP-2104R.
Schering AG had an option to exclusively license EP-2104R, which
it declined to exercise. As a result of Schering AG deciding not
to exercise this option, EPIX intends to pursue a collaboration
for the continued development of
EP-2104R with other
potential partners. The future clinical development plan of
EP-2104R is uncertain
at this time, and the timing and number of future clinical
trials depends upon many factors, including EPIXs ability
to enter into a collaboration to continue the development of
EP-2104R. If EPIX is
unable to find a new collaborative partner, EPIX may bear the
expenses of further clinical development itself, which expenses
would be significant. Regardless, the FDA, the EMEA and other
regulatory agencies to which EPIX or its
26
partners submit applications for marketing authorization may not
agree that EPIXs product candidate is safe and effective
and may not approve EPIXs product candidate, in which case
EPIXs ability to receive any revenues, milestone payments
or royalty payments related to EP-2104R will be significantly
reduced.
The relevant regulatory authorities may not approve any of
EPIXs applications for marketing authorization relating to
any of its product candidates, including Vasovist and EP-2104R,
or additional applications for or variations to marketing
authorizations that EPIX may make in the future as to these or
other product candidates. Among other things, EPIX has had only
limited experience in preparing applications and obtaining
regulatory approvals. If approval is granted, it may be subject
to limitations on the indicated uses for which the product
candidate may be marketed or contain requirements for costly
post-marketing testing and surveillance to monitor safety or
efficacy of the product candidate. If approval of an application
to market product candidates is not granted on a timely basis or
at all, or if EPIX is unable to maintain its approval,
EPIXs business may be materially harmed.
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EPIX is currently focusing its development efforts on only
two product candidates and one research program and will have
limited prospects for successful operations if its two lead
product candidates do not prove successful in clinical trials or
if its only research program does not produce another product
candidate suitable for clinical trials. |
As a result of the FDAs second approvable letter regarding
Vasovist, EPIX eliminated approximately 50% of its workforce in
January 2006. As part of this reorganization, EPIX plans to
focus its resources primarily on the development of its lead
product candidates, Vasovist and EP-2104R. Accordingly, EPIX has
decided to cease work on the majority of its research projects
related to imaging. EPIX continues to allocate resources to one
high-priority research project. EPIXs efforts may not lead
to commercially successful products for a number of reasons,
including the inability to be proven safe and effective in
clinical trials, the lack of regulatory approvals or obtaining
regulatory approvals that are narrower than EPIX seeks,
inadequate financial resources to complete the development and
commercialization of EPIXs product candidates or their
lack of acceptance in the marketplace. Given EPIXs limited
focus on two lead product candidates and only one research
program, if Vasovist and EP-2104R do not prove successful in
clinical trials or are not commercialized for any reason, EPIX
will have only one operational research program from which to
seek additional product candidates. If EPIX is not able to
identify additional product candidates from this single research
program, it may be required to suspend or discontinue its
operations and you could lose your entire investment in EPIX.
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If EPIXs clinical trials are not successful, EPIX
may not be able to develop and commercialize its product
candidates. |
To obtain regulatory approvals for the commercial sale of
EPIXs potential products, EPIX and its partners will be
required to complete extensive clinical trials in humans to
demonstrate the safety and efficacy of its product candidates.
Vasovist and EP-2104R are currently EPIXs only product
candidates that have undergone human clinical trials and EPIX
cannot be certain that any of its other research projects will
yield a product candidate suitable for substantial human
clinical testing.
With respect to both EPIXs current product candidates in
human clinical trials and its research product candidates which
may be suitable for testing in human clinical trials at some
point in the future, EPIX may not be able to commence or
complete the required clinical trials in any specified time
period, or at all, either because the FDA or other regulatory
agencies object, because EPIX is unable to attract or retain
clinical trial participants, or for other reasons.
Even if EPIX completes a clinical trial of one of its potential
products, the data collected from the clinical trial may not
demonstrate that its product candidate is safe or effective to
the extent required by the FDA, the EMEA, or other regulatory
agencies to approve the potential product candidate, or at all.
For example, in January and November 2005, the FDA informed EPIX
that the clinical efficacy data for Vasovist that EPIX submitted
in connection with its NDA was not adequate for approval.
27
The results from pre-clinical testing of a product candidate
that is under development may not be predictive of results that
will be obtained in human clinical trials. In addition, the
results of early human clinical trials may not be predictive of
results that will be obtained in larger scale, advanced-stage
clinical trials. Furthermore, EPIX, one of its collaborators, or
a regulatory agency with jurisdiction over the trials may
suspend clinical trials at any time if the patients
participating in such trials are being exposed to unacceptable
health risks, or for other reasons.
The timing of completion of clinical trials is dependent in part
upon the rate of enrollment of patients. Patient accrual is a
function of many factors, including the size of the patient
population, the proximity of patients to clinical sites, the
eligibility criteria for the trial, the existence of competitive
clinical trials, and the availability of alternative treatments.
Delays in planned patient enrollment may result in increased
costs and prolonged clinical development. In addition, patients
may withdraw from a clinical trial for a variety of reasons. If
EPIX fails to accrue and maintain the number of patients into
one of its clinical trials for which the clinical trial was
designed, the statistical power of that clinical trial may be
reduced which would make it harder to demonstrate that the
product candidates being tested in such clinical trial are safe
and effective.
Regulatory authorities, clinical investigators, institutional
review boards, data safety monitoring boards and the hospitals
at which EPIXs clinical trials are conducted all have the
power to stop EPIXs clinical trials prior to completion.
If EPIXs trials are not completed, EPIX would be unable to
show the safety and efficacy required to obtain marketing
authorization for its product candidates.
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EPIX must receive government regulatory approval for its
product candidates before they can be marketed and sold in the
United States or in other countries and this approval process is
uncertain, time-consuming and expensive. |
Vasovist and EP-2104R are regulated by the FDA as drugs. Under
the Food, Drug and Cosmetic Act and the FDAs implementing
regulations, the FDA regulates the research, development,
manufacture and marketing, among other things, of pharmaceutical
products. The process required by the FDA before Vasovist and
EPIXs other product candidates may be marketed in the
United States typically involves the performance of pre-clinical
laboratory and animal tests; submission of an investigational
new drug application, or IND; completion of human clinical
trials; submission of an NDA to the FDA; and FDA approval of an
NDA.
This regulatory approval process is lengthy and expensive.
Although some of EPIXs employees have experience in
obtaining regulatory approvals, EPIX has only limited experience
in filing or pursuing applications necessary to gain regulatory
approvals. Pre-clinical testing of EPIXs product
development candidates is subject to good laboratory practices,
as prescribed by the FDA, and the manufacture of any products
developed by EPIX will be subject to current good manufacturing
practices, as prescribed by the FDA, or cGMP. EPIX may not
obtain the necessary FDA approvals and subsequent approvals in a
timely manner, if at all. EPIX cannot be sure as to the length
of the clinical trial period or the number of patients that will
be required to be tested in the clinical trials in order to
establish the safety and efficacy of Vasovist for regulatory
approval in the United States or any of its future product
candidates. For example, EPIX has received two approvable
letters from the FDA and has had two meetings with the FDA to
discuss the path forward for Vasovist in the United States and
EPIX has filed a formal appeal of the FDAs decision not to
approve Vasovist without data from additional clinical trials.
EPIX cannot predict whether the appeal or additional trials
would be completed timely or successfully. EPIXs clinical
trials may not be successful and EPIX may not complete them in a
timely manner. EPIX could report serious side effects as the
clinical trials proceed. EPIXs results from early clinical
trials may not predict results that it obtains in later clinical
trials, even after promising results in earlier trials. The rate
of completion of EPIXs clinical trials depends upon, among
other things, the rate of patient enrollment and subsequent
blinded reading of images and data analysis.
Furthermore, EPIX, or the FDA or other regulatory authorities
may suspend or terminate clinical trials at any time, including
terminating clinical trials for safety reasons. In addition, the
FDA may suggest
28
or require alterations to clinical trials at any time. For
example, in September 2001, after discussions with the FDA, EPIX
expanded its initial target indication for Vasovist from one
specific body region, the aortoiliac region, to a broader
indication that included the entire bodys vascular system,
except for the heart. This expansion required EPIX to add two
new clinical trials to its then existing Phase III clinical
trial program; one to determine the efficacy of
Vasovist-enhanced magnetic resonance angiography for the
detection of vascular disease in the renal arteries, and another
to determine the efficacy of Vasovist-enhanced magnetic
resonance angiography for the detection of vascular disease in
the pedal arteries. Although providing EPIX with greater market
potential for the sale of Vasovist upon approval, this change to
the Phase III clinical trial program and the associated
delay in the startup of new clinical centers resulted in an
approximate 15-month
delay in EPIXs NDA submission and an increase in costs
associated with the program. If EPIX does not successfully
complete clinical trials for its product candidates, it will not
be able to market these product candidates.
In addition, EPIX may encounter unanticipated delays or
significant costs in its efforts to secure necessary approvals.
EPIXs analysis of data obtained from pre-clinical and
clinical activities is subject to confirmation and
interpretation by regulatory authorities which could delay,
limit or prevent FDA regulatory approval. In addition, the FDA
may require EPIX to modify its future clinical trial plans or to
conduct additional clinical trials in ways that it cannot
currently anticipate, resulting in delays in its obtaining
regulatory approval. Delays in obtaining government regulatory
approval could adversely affect EPIXs, or its
partners, marketing as well as the ability to generate
significant revenues from commercial sales.
Future U.S. legislative or administrative actions also
could prevent or delay regulatory approval of EPIXs
product candidates. Even if EPIX obtains regulatory approvals,
they may include significant limitations on the indicated uses
for which EPIX may market a product. A marketed product also is
subject to continual FDA and other regulatory agency review and
regulation. Later discovery of previously unknown problems or
failure to comply with the applicable regulatory requirements
may result in restrictions on the marketing of a product or
withdrawal of the product from the market as well as possible
civil or criminal sanctions. Further, many academic institutions
and companies conducting research and clinical trials in the
magnetic resonance imaging, or MRI, contrast agent field are
using a variety of approaches and technologies. If researchers
obtain any adverse results in pre-clinical studies or clinical
trials, it could adversely affect the regulatory environment for
MRI contrast agents in general. In addition, if EPIX obtains
marketing approval, the FDA may require post-marketing testing
and surveillance programs to monitor the products efficacy
and side effects. Results of these post-marketing programs may
prevent or limit the further marketing of the monitored product.
If EPIX, or its partners, such as Schering AG, cannot
successfully market EPIXs product candidates, EPIX will
not generate sufficient revenues to achieve or maintain
profitability.
EPIX and its strategic partners are also subject to numerous and
varying foreign regulatory requirements governing the design and
conduct of clinical trials and the manufacturing and marketing
of EPIXs product candidates. The foreign regulatory
approval process may include all of the risks associated with
obtaining FDA approval set forth above and EPIX may not obtain
foreign regulatory approvals on a timely basis, if at all,
thereby compromising its ability to market its product
candidates abroad.
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Gadolinium-based imaging agents, such as Vasovist and
EP-2104R, may cause
adverse side effects which could limit EPIXs ability to
receive approval for these product candidates and its ability to
effectively market these product candidates, if approved. |
EPIXs Vasovist and
EP-2104R, both MRI
contrast drugs, contain gadolinium. In May 2006, the Danish
Medicines Agency announced that it was investigating a possible
link between the use of Omniscan, an imaging agent containing
gadolinium, and the development of a very rare skin disease in
25 patients with severely impaired renal function who had
been administered the imaging agent. Although the Danish
Medicines Agency stated that a causal relationship between
Omniscan and the skin changes had not been documented, they are
conducting further investigations with respect to all MRI
contrast media containing gadolinium. Although EPIX has reviewed
its safety databases for Vasovist and
29
EP-2104R and has found
no instances of this rare skin disease, its databases may be too
small to show such an effect, if it exists. In the event
gadolinium-based imaging agents such as Vasovist and
EP-2104R are linked to
this very rare skin disease or other unanticipated side effects,
such safety concerns could have a material adverse affect on
EPIXs ability to obtain marketing approval for Vasovist
and/or EP-2104R or any such approval for use may be revoked, or
could materially harm EPIXs and its partners ability
to successfully market Vasovist and/or
EP-2104R.
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If EPIX fails to comply with the extensive regulatory
requirements to which it and its product candidates are subject,
EPIXs product candidates could be subject to restrictions
or withdrawal from the market and EPIX could be subject to
penalties. |
EPIX is subject to extensive U.S. and foreign governmental
regulatory requirements and lengthy approval processes for its
product candidates. The development and commercial use of
EPIXs product candidates will be regulated by numerous
federal, state, local and foreign governmental authorities in
the United States, including the FDA and foreign regulatory
agencies. The nature of EPIXs research and development and
manufacturing processes requires the use of hazardous substances
and testing on certain laboratory animals. Accordingly, EPIX is
subject to extensive federal, state and local laws, rules,
regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling
and disposal of certain materials and wastes as well as the use
of and care for laboratory animals. If EPIX fails to comply or
if an accident occurs, EPIX may be exposed to legal risk and be
required to pay significant penalties or be held liable for any
damages that result. Such liability could exceed EPIXs
financial resources. Furthermore, current laws could change and
new laws could be passed that may force EPIX to change its
policies and procedures, an event which could impose significant
costs on EPIX.
EPIX is required to maintain pharmacovigilance systems for
collecting and reporting information concerning suspected
adverse reactions to its product candidates. In response to
pharmacovigilance reports, regulatory authorities may initiate
proceedings to revise the prescribing information for
EPIXs product candidates or to suspend or revoke its
marketing authorizations. Procedural safeguards are often
limited, and marketing authorizations can be suspended with
little or no advance notice.
Both before and after approval of a product, quality control and
manufacturing procedures must conform to cGMP. Regulatory
authorities, including the EMEA and the FDA, periodically
inspect manufacturing facilities to assess compliance with cGMP.
Accordingly, EPIX and its contract manufacturers will need to
continue to expend time, funds, and effort in the area of
production and quality control to maintain cGMP compliance.
In addition to regulations adopted by the EMEA, the FDA, and
other foreign regulatory authorities, EPIX is also subject to
regulation under the Occupational Safety and Health Act, the
Toxic Substances Control Act, the Resource Conservation and
Recovery Act, and other federal, state, and local regulations.
In addition, the testing, manufacturing, labeling, advertising,
promotion, export and marketing, among other things, of
EPIXs product candidates, both before and after approval,
are subject to extensive regulation by governmental authorities
in the United States, Europe and elsewhere throughout the world.
Failure to comply with the laws administered by the FDA, the
EMEA, or other governmental authorities could result in any of
the following:
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delay in approval or refusal to approve a product candidate; |
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product candidate recall or seizure; |
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interruption of production; |
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operating restrictions; |
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warning letters; |
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injunctions; |
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criminal prosecutions; and |
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unanticipated expenditures. |
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EPIXs research and development efforts may not
result in product candidates appropriate for testing in human
clinical trials. |
EPIX has historically spent significant resources on research
and development and pre-clinical studies of product candidates.
However, these efforts may not result in the development of
product candidates appropriate for testing in human clinical
trials. For example, EPIXs research may result in product
candidates that are not expected to be effective in treating
diseases or may reveal safety concerns with respect to product
candidates. In connection with EPIXs recent restructuring,
it postponed or terminated several research and development
programs, and it may postpone or terminate research and
development of a product candidate or a program at any time for
any reason such as the safety or effectiveness of the potential
product, allocation of resources or unavailability of qualified
research and development personnel. The failure to generate
high-quality research and development candidates would
negatively impact EPIXs ability to advance product
candidates into human clinical testing and ultimately,
negatively impact its ability to market and sell products.
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EPIX has have a limited manufacturing capability and it
intends to outsource manufacturing of Vasovist to third parties,
who may not perform as EPIX expects. |
EPIX does not have, nor does it currently have plans to develop,
full-scale manufacturing capability for Vasovist. While EPIX has
manufactured small amounts of Vasovist for research and
development efforts, it relies on, and it intends to continue to
rely on, Tyco/ Mallinckrodt as the primary manufacturer of
Vasovist for any future human clinical trials and commercial
use. Together with Schering AG, EPIX is considering alternative
manufacturing arrangements for Vasovist for commercial use,
including the transfer of manufacturing to Schering AG. In the
event that Tyco/ Mallinckrodt fails to fulfill its manufacturing
responsibilities satisfactorily, Schering AG has the right to
purchase Vasovist from a third party or to manufacture the
compound itself. However, either course of action could
materially delay the manufacture and development of Vasovist.
Schering AG may not be able to find an alternative manufacturer.
In addition, Schering AG may not be able to manufacture Vasovist
itself in a timely manner or in sufficient quantities. If EPIX
experiences a delay in manufacturing, it could result in a delay
in the approval or commercialization of Vasovist and have a
material adverse effect on its business, financial condition and
results of operations.
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If MRI manufacturers are not able to enhance their
hardware and software sufficiently, EPIX will not be able to
complete development of its contrast agent for the evaluation of
cardiac indications. |
Although MRI hardware and software is sufficient for the
evaluation of non-coronary vascular disease, which is
EPIXs initial target indication, EPIX believes that the
technology is not as advanced for cardiac applications.
EPIXs initial NDA filing for Vasovist is related to
non-coronary vascular disease. Based on feasibility studies EPIX
completed in 2001, however, the imaging technology available for
cardiac applications, including coronary angiography and cardiac
perfusion imaging, was not developed to the point where there
was clear visualization of the cardiac region due to the effects
of motion from breathing and from the beating of the heart. In
2004, EPIX initiated Phase II feasibility trials of
Vasovist for cardiac indications using available software and
hardware that can be adapted for coronary and cardiac perfusion
data acquisition, and preliminary review of the data indicates
that EPIX has not resolved the technical issues related to this
use of Vasovist. EPIX has collaborated with a number of leading
academic institutions and with GE Healthcare, Siemens Medical
Systems and Philips Medical Systems to help optimize cardiac
imaging with Vasovist. EPIX does not know when, or if, these
techniques will enable Vasovist to provide clinically relevant
images in cardiac indications. If MRI device manufacturers are
not able to enhance their scanners to perform clinically useful
cardiac imaging, EPIX will not be able to
31
complete its development activities of Vasovist for that
application, thereby reducing the potential market for a product
in this area.
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EPIX depends on exclusively licensed technology from the
Massachusetts General Hospital and if EPIX loses this license,
it is unlikely it could obtain this technology elsewhere, which
would have a material adverse effect on EPIXs
business. |
Under the terms of a license agreement that EPIX has with the
Massachusetts General Hospital, or MGH, EPIX is the exclusive
licensee to certain technology, which relate to royalties it
receives and to Vasovist. The license agreement imposes various
commercialization, sublicensing, royalty and other obligations
on EPIX. The license agreement expires on a country-by-country
basis when the patents covered by the license agreement expire.
For example, the patents covered by this license agreement are
currently expected to expire in November 2006, although the life
of these patents may be extended. One of these patents has been
extended through Supplementary Protection Certificates for
Primovist through May 2011 in certain European countries. The
license agreement does not contain a renewal provision. If EPIX
fails to comply with these and other requirements, its license
could convert from exclusive to nonexclusive, or terminate
entirely. It is unlikely that EPIX would be able to obtain this
technology elsewhere. Any such event would mean that EPIX would
not receive royalties from Bracco for MultiHance or Schering AG
for Primovist, and that EPIX or Schering AG could not sell
Vasovist, either of which would have a material adverse effect
on EPIXs business, financial condition and results of
operations. Currently, EPIX believes it is in compliance with
the terms of the license agreement and its does not have any
reason to believe that this license may be terminated.
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EPIX depends on patents and other proprietary rights, and
if they fail to protect its business, EPIX may not be able to
compete effectively. |
The protection of EPIXs proprietary technologies is
material to its business prospects. EPIX pursues patents for its
product candidates in the United States and in other countries
where it believes that significant market opportunities exist.
EPIX owns or has an exclusive license to patents and patent
applications on aspects of its core technology as well as many
specific applications of this technology. These patents relate
to MRI signal generation technology, Vasovist, EP-2104R and
EPIXs other research projects and include method of use
patents. Some of EPIXs patents related to Vasovist will
expire in 2006. Other patents related to Vasovist will not
expire until 2015. Protection for Vasovist manufacturing
processes in the United States will not expire until 2017.
Patents related to certain methods of using Vasovist will not
expire until 2021. A patent related to EP-2104R will not expire
until 2022. If all of EPIXs pending patent applications
issue with claims substantially similar to those currently set
forth in such applications, further patent protection for
EP-2104R may not expire until 2022. Even though EPIX holds
numerous patents and has made numerous patent applications,
because the patent positions of pharmaceutical and
biopharmaceutical firms, including EPIXs patent positions,
generally include complex legal and factual questions,
EPIXs patent positions remain uncertain. For example,
because most patent applications are maintained in secrecy for a
period after filing, EPIX cannot be certain that the named
applicants or inventors of the subject matter covered by its
patent applications or patents, whether directly owned or
licensed to EPIX, were the first to invent or the first to file
patent applications for such inventions. Third parties may
oppose, challenge, infringe upon, circumvent or seek to
invalidate existing or future patents owned by or licensed to
EPIX. A court or other agency with jurisdiction may find
EPIXs patents invalid, not infringed or unenforceable and
EPIX cannot be sure that patents will be granted with respect to
any of its pending patent applications or with respect to any
patent applications filed by it in the future. Even if EPIX has
valid patents, these patents still may not provide sufficient
protection against competing products or processes. If EPIX is
unable to successfully protect its proprietary methods and
technologies, or if its patent applications do not result in
issued patents, EPIX may not be able to prevent other companies
from practicing its technology and, as a result, its competitive
position may be harmed.
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EPIX may need to initiate lawsuits to protect or enforce
its patents and other intellectual property rights, which could
result in its incurrence of substantial costs and which could
result in the forfeiture of these rights. |
EPIX may need to bring costly and time-consuming litigation
against third parties in order to enforce its issued patents,
protect its trade secrets and know how, or to determine the
enforceability, scope and validity of proprietary rights of
others. In addition to being costly and time-consuming, such
lawsuits could divert managements attention from other
business concerns. These lawsuits could also result in the
invalidation or a limitation in the scope of EPIXs patents
or forfeiture of the rights associated with its patents or
pending patent applications. EPIX may not prevail and a court
may find damages or award other remedies in favor of an opposing
party in any such lawsuits. During the course of these suits,
there may be public announcements of the results of hearings,
motions and other interim proceedings or developments in the
litigation. Securities analysts or investors may perceive these
announcements to be negative, which could cause the market price
of EPIXs stock to decline. In addition, the cost of such
litigation could have a material adverse effect on EPIXs
business and financial condition.
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Other rights and measures that EPIX relies upon to protect
its intellectual property may not be adequate to protect its
products and services and could reduce its ability to compete in
the market. |
In addition to patents, EPIX relies on a combination of trade
secrets, copyright and trademark laws, non-disclosure agreements
and other contractual provisions and technical measures to
protect its intellectual property rights. While EPIX requires
employees, collaborators, consultants and other third parties to
enter into confidentiality and/or non-disclosure agreements,
where appropriate, any of the following could still occur:
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the agreements may be breached; |
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EPIX may have inadequate remedies for any breach; |
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proprietary information could be disclosed to EPIXs
competitors; or |
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others may independently develop substantially equivalent
proprietary information and techniques or otherwise gain access
to EPIXs trade secrets or disclose such technologies. |
If, as a result of the foregoing or otherwise, EPIXs
intellectual property is disclosed or misappropriated, it would
harm EPIXs ability to protect its rights and its
competitive position. Moreover, several of EPIXs
management and scientific personnel were formerly associated
with other pharmaceutical and biotechnology companies and
academic institutions. In some cases, these individuals are
conducting research in similar areas with which they were
involved prior to joining EPIX. As a result, EPIX, as well as
these individuals, could be subject to claims of violation of
trade secrets and similar claims.
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EPIXs success will depend partly on its ability to
operate without infringing the intellectual property rights of
others, and if EPIX is unable to do so, it may not be able to
sell its products. |
EPIXs commercial success will depend, to a significant
degree, on its ability to operate without infringing upon the
patents of others in the United States and abroad. There may be
pending or issued patents held by parties not affiliated with
EPIX relating to technologies EPIX uses in the development or
use of certain of its contrast agents. If any judicial or
administrative proceeding upholds these or any third- party
patents as valid and enforceable, EPIX could be prevented from
practicing the subject matter claimed in such patents, or would
be required to obtain licenses from the owners of each such
patent, or to redesign its product candidates or processes to
avoid infringement. For example, in November 2003, EPIX entered
into an intellectual property agreement with Dr. Martin R.
Prince, an early innovator in the field of magnetic resonance
angiography, relating to dynamic magnetic resonance
angiography, which involves capturing magnetic resonance
angiography images during the limited time, typically 30 to 60
seconds, available for imaging with extracellular agents. Under
the terms of the intellectual property agreement,
Dr. Prince granted EPIX certain discharges, licenses and
releases in connection with the historic and
33
future use of Vasovist by EPIX and agreed not to sue EPIX for
intellectual property infringement related to the use of
Vasovist. In consideration of Dr. Prince entering into the
agreement, EPIX agreed to pay him an upfront fee of $850,000 and
royalties on sales of Vasovist consistent with a non-exclusive
early stage academic license and agreed to deliver to him
132,000 shares of EPIXs common stock, with a value of
approximately $2.3 million based on the closing price of
EPIXs common stock on the date of the agreement. In
addition, EPIX agreed to supply Dr. Prince with
approximately $140,000 worth of Vasovist. If EPIX is unable to
obtain a required license on acceptable terms, or are unable to
design around these or any third-party patents, it may be unable
to sell its products, which would have a material adverse effect
on its business.
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If EPIX fails to get adequate levels of reimbursement from
third-party payors for its product candidates after they are
approved in the United States and abroad, EPIX may have
difficulty commercializing its product candidates. |
EPIX believes that reimbursement in the future will be subject
to increased restrictions, both in the United States and in
foreign markets. EPIX believes that the overall escalating cost
of medical products and services has led to, and will continue
to lead to, increased pressures on the health care industry,
both foreign and domestic, to reduce the cost of products and
services, including products offered by it. There can be no
assurance, in either the United States or foreign markets, that
third-party reimbursement will be available or adequate, that
current reimbursement amounts will not be decreased in the
future or that future legislation, regulation, or reimbursement
policies of third-party payors will not otherwise adversely
affect the demand for EPIXs product candidates or its
ability to sell its product candidates on a profitable basis,
particularly if MRI exams enhanced with EPIXs contrast
agents are more expensive than competing vascular imaging
techniques that are equally effective. The unavailability or
inadequacy of third-party payor coverage or reimbursement could
have a material adverse effect on EPIXs business,
financial condition and results of operations.
EPIX could be adversely affected by changes in reimbursement
policies of governmental or private healthcare payors,
particularly to the extent any such changes affect reimbursement
for procedures in which its product candidates would be used.
Failure by physicians, hospitals and other users of EPIXs
product candidate to obtain sufficient reimbursement from
third-party payors for the procedures in which EPIXs
product candidate would be used or adverse changes in
governmental and private third-party payors policies
toward reimbursement for such procedures may have a material
adverse effect on EPIXs ability to market its product
candidate and, consequently, it could have an adverse effect on
EPIXs business, financial condition and results of
operations. If EPIX obtains the necessary foreign regulatory
approvals, market acceptance of its product candidates in
international markets would be dependent, in part, upon the
availability of reimbursement within prevailing healthcare
payment systems. Reimbursement and healthcare payment systems in
international markets vary significantly by country, and include
both government sponsored health care and private insurance.
EPIX and its strategic partners intend to seek international
reimbursement approvals, although EPIX cannot assure you that
any such approvals will be obtained in a timely manner, if at
all, and failure to receive international reimbursement
approvals could have an adverse effect on market acceptance of
EPIXs product candidate in the international markets in
which such approvals are sought.
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If EPIX is unable to attract and retain key management and
other personnel, it would hurt EPIXs ability to
compete. |
EPIXs future business and operating results depend in
significant part upon its ability to attract and retain
qualified directors, senior management and key technical
personnel. In September 2005, the EPIX board of directors
appointed Michael J. Astrue as Interim Chief Executive Officer.
Mr. Astrue replaced Michael Webb, who resigned from EPIX
and its board of directors in September 2005. Mr. Astrue
resigned as Interim Chief Executive Officer on May 5, 2006.
In addition, EPIXs Chief Financial Officer resigned in
July 2005. Andrew C.G. Uprichard, M.D., EPIXs
President and Chief Operating Officer, is currently acting as
EPIXs principal executive officer and EPIX currently has
no Chief Financial Officer
34
and its Executive Director, Finance, is currently serving as its
principal financial and accounting officer. In addition,
Mr. Pelletier and EPIX have agreed that Mr. Pelletier will
resign as EPIXs Executive Director of Finance in August
2006. Christopher F.O. Gabrieli, the Chairman of the EPIX board
of directors, is a candidate for the Governor of the
Commonwealth of Massachusetts, the general election for which is
scheduled in November 2006. If elected, Mr. Gabrieli will
step down from the EPIX board of directors. EPIXs
inability to attract and retain qualified individuals to these
positions and others, the loss of any of EPIXs key
management and other personnel, or their failure to perform
their current positions could have a material adverse effect on
EPIXs business, financial condition and results of
operations, and its ability to achieve its business objectives
or to operate or compete in its industry may be seriously
impaired. Competition for personnel is intense and EPIX may not
be successful in attracting or retaining such personnel. If EPIX
were to lose these employees to its competition, it could spend
a significant amount of time and resources to replace them,
which would impair its research and development or
commercialization efforts. If the merger is not consummated,
EPIX must compete with companies that have greater resources
and/or superior product candidates or products to rebuild its
senior management team and attract other personnel.
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EPIX currently depends on its strategic collaborators for
support in product development and the regulatory approval
process and, in the future, will depend on them for product
marketing support as well. These efforts could be materially
harmed if EPIX experiences problems with its
collaborators. |
EPIX depends on strategic collaborators for support in product
development and the regulatory approval process as well as a
variety of other activities including manufacturing, marketing
and distribution of its product candidate in the United States
and abroad, when, and if, the FDA and corresponding foreign
agencies approve its product candidates for marketing. To date,
EPIX has entered into strategic alliances and collaborations
with Schering AG, Tyco/ Mallinckrodt, GE Healthcare, Philips
Medical Systems and Siemens Medical Systems. Three of
EPIXs key agreements include two collaboration agreements
with Schering AG to perform joint research and to develop and
commercialize Vasovist and other MRI vascular agents worldwide,
and an agreement with Tyco/ Mallinckrodt granting Tyco/
Mallinckrodt rights to enter into an agreement with Schering AG
to manufacture Vasovist for clinical development and commercial
use. EPIX may not receive milestone payments from these
alliances should Vasovist fail to meet certain performance
targets in development and commercialization. On July 12,
2006, Schering AG notified EPIX that it decided not to exercise
its option to exclusively license
EP-2104R. As a result,
EPIX intends to pursue a collaboration for the continued
development of EP-2104R
with new potential partners. Further, EPIXs receipt of
revenues from strategic alliances is affected by the level of
efforts of its collaborators. EPIXs collaborators may not
devote the resources necessary to complete development and
commence marketing of Vasovist, EP-2104R or other product
candidates in their respective territories, or they may not
successfully market Vasovist, EP-2104R or other product
candidates. In addition, Schering AG and Tyco/ Mallinckrodt
currently manufacture imaging agents for other technologies that
will compete against Vasovist, and Schering AG will be
responsible for setting the price of the product candidate
worldwide. Accordingly, Schering AG may not set prices in a
manner that maximizes revenues for EPIX. EPIXs failure to
receive future milestone payments, or a reduction or
discontinuance of efforts by its partners would have a material
adverse effect on EPIXs business, financial condition and
results of operations.
Furthermore, EPIXs collaboration agreement with Schering
AG may be terminated early under certain circumstances,
including if there is a material breach of the agreement by
either party. In October 2005, EPIX announced that it had
entered into an amendment to its research collaboration
agreement with Schering AG. This amendment narrowed the
definition of the field of collaboration to exclude from the
research collaboration certain specific types of imaging
technology, including certain nanotechnology-based imaging
agents. This research collaboration concluded in May 2006. EPIX
is in discussions, and expects to continue discussions, with
Schering AG regarding the disposition of the research products
under this research collaboration. While the research agreement
is separate from EPIXs agreement with
35
Schering AG relating to Vasovist, EPIX cannot predict how the
disposition or winding down of the individual research programs
will occur, or whether it will be able to take forward any of
these research programs itself or find alternative partners for
these programs.
In addition, EPIX intends to seek additional collaborations with
third parties, particularly for the continued development of
EP-2104R, who may
negotiate provisions that allow them to terminate their
agreements with EPIX prior to the expiration of the negotiated
term under certain circumstances. EPIX is substantially
dependent upon Schering AG to commercialize Vasovist,
EPIXs lead product candidate, in the United states and
Europe. If Schering AG or any other third-party collaborator
were to terminate its agreements with EPIX, if EPIX is unable to
negotiate an acceptable agreement with Schering AG relating to a
new research agreement or if Schering AG or any other
third-party collaborator otherwise fail to perform its
obligations under EPIXs collaboration or to complete them
in a timely manner, EPIX could lose significant revenue. If EPIX
is unable to enter into future strategic alliances with capable
partners on commercially reasonable terms, it may delay the
development and commercialization of future product candidates
and could possibly postpone them indefinitely.
In addition, Bayer AG recently extended an offer to acquire all
of the outstanding shares of Schering AG. Although EPIX has not
yet determined the impact this acquisition may have on its
relationship with Schering AG or the marketing of Vasovist, if
the strategy of Bayer AG and Schering AG after the acquisition
differs from that of Schering AGs current strategy with
respect to the marketing of Vasovist, EPIXs expectations
regarding the marketing of Vasovist could be negatively impacted
which could have a material adverse effect on EPIXs
business.
In addition, EPIX relies on certain of its collaborators, such
as GE Healthcare, Siemens Medical Systems and Philips Medical
Systems, to develop software that can be used to enhance or
suppress veins or arteries from Vasovist-enhanced magnetic
resonance angiography images. Although not required for clinical
use of Vasovist, the ability to separate veins from arteries
using Vasovist-enhanced magnetic resonance angiography may be
useful to clinicians in reading Vasovist-enhanced images for the
evaluation of vascular disease. Therefore, if EPIXs
collaborators do not develop or implement the required software
successfully, some clinicians may not be able to easily
interpret the information provided from Vasovist-enhanced images
and may not be inclined to use the product candidate.
EPIXs inability to market Vasovist successfully to
clinicians would have a material adverse effect on EPIXs
business.
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EPIXs stock price is volatile. It is possible that
you may lose all or part of your investment. |
The market prices of the capital stock of medical technology
companies have historically been very volatile and the market
price of the shares of EPIXs common stock fluctuates. The
market price of EPIXs common stock is affected by numerous
factors, including:
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actual or anticipated fluctuations in EPIXs operating
results; |
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announcements of technological innovation or new commercial
products by EPIX or its competitors; |
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new collaborations entered into by EPIX or its competitors; |
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developments with respect to proprietary rights, including
patent and litigation matters; |
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results of pre-clinical studies and clinical trials; |
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the timing of EPIXs achievement of regulatory milestones; |
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conditions and trends in the pharmaceutical and other technology
industries; |
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adoption of new accounting standards affecting such industries; |
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changes in financial estimates by securities analysts; |
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perceptions of the value of corporate transactions; and |
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degree of trading liquidity in EPIXs common stock and
general market conditions. |
During the period from January 1, 2006 through
July 13, 2006, the closing price of EPIXs common
stock ranged from $5.02 to $2.77. The last reported closing
price for EPIXs common stock on March 31, 2006, the
last trading day before the public announcement of the merger,
was $3.50 and it was $4.58 on July 13, 2006. Significant
declines in the price of EPIXs common stock could impede
EPIXs ability to obtain additional capital, attract and
retain qualified employees and reduce the liquidity of its
common stock.
In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly
affected the market prices for the common stock of similarly
staged companies. These broad market fluctuations may adversely
affect the market price of EPIXs common stock. In the
past, following periods of volatility in the market price of a
particular companys securities, shareholders have often
brought class action securities litigation against that company.
Such litigation could result in substantial costs and a
diversion of managements attention and resources. For
example, in January 2005, a securities class action was filed in
U.S. District Court for the District of Massachusetts
against EPIX and certain of its officers on behalf of persons
who purchased EPIXs common stock between July 10,
2003 and January 14, 2005. The complaint alleged that EPIX
and the other defendants violated the Securities Exchange Act of
1934, as amended, by issuing a series of materially false and
misleading statements to the market throughout the class period,
which statements had the effect of artificially inflating the
market price of EPIXs securities. In January 2006, the
U.S. District Court for the District of Massachusetts
granted EPIXs Motion to Dismiss for Failure to Prosecute
the shareholder class action lawsuit against EPIX. The dismissal
was issued without prejudice after a hearing, which dismissal
does not prevent another suit to be brought based on the same
claims.
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EPIX has never generated revenues from commercial sales of
its product candidates. |
EPIX currently has one product for sale in Europe and it cannot
guarantee that it will ever have additional marketable product
candidates. Vasovist was approved for commercial sale in Europe
in October 2005 and is currently being marketed in Europe by
EPIXs partner, Schering AG. If Schering AG fails to launch
Vasovist in all European countries or fails to achieve
significant sales, EPIXs revenues could be materially
harmed and EPIX may receive even less royalty income than it
currently expects to receive. EPIX expects to receive a typical
pharmaceutical royalty based on the sale of Vasovist by Schering
AG in Europe. Even if Schering AG continues its launch of
Vasovist and it is able to successfully market and sell Vasovist
throughout Europe, EPIX does not expect any significant
royalties for 2006 sales.
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EPIX has never generated positive cash flow, and if EPIX
fails to generate revenue, it will have a material adverse
effect on its business. |
To date, EPIX has received revenues from payments made under
licensing, royalty arrangements and product development and
marketing agreements with strategic collaborators. In
particular, EPIXs revenue for the three months ended
March 31, 2006 was $1.7 million and consisted of
$1.1 million of product development revenue from Schering
AG, $458,000 of royalty revenue related to the Bracco and
Schering AG agreements, and $162,000 of license fee revenue
related to the Schering AG, Tyco/ Mallinckrodt strategic
collaborations and Bracco agreements. In addition to these
sources of revenue, EPIX has financed its operations to date
through public stock and debt offerings, private sales of equity
securities and equipment lease financings.
Although EPIX believes that it is currently in compliance with
the terms of its collaboration and licensing agreements, the
revenues derived from them are subject to fluctuation in timing
and amount. EPIX may not receive anticipated revenue under its
existing collaboration or licensing agreements, these agreements
may be subject to disputes and, additionally, these agreements
may be terminated upon certain circumstances. Therefore, to
achieve profitable and sustainable operations, EPIX, alone or
with others, must successfully develop, obtain regulatory
approval for, introduce, market and sell products. EPIX may
37
not receive revenue from the sale of any of its product
candidates for the next several years because it, and its
partners, may not:
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successfully complete EPIXs product development efforts; |
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obtain required regulatory approvals in a timely manner, if at
all; |
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manufacture EPIXs product candidates at an acceptable cost
and with acceptable quality; or |
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successfully market any approved products. |
As a result, EPIX may never generate revenues from sales of its
product candidates and its failure to generate positive cash
flow could cause its business to fail.
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EPIX anticipates future losses and may never become
profitable. |
EPIXs future financial results are uncertain. EPIX has
experienced significant losses since it commenced operations in
1992. EPIXs accumulated net losses as of March 31,
2006 were approximately $184.2 million. These losses have
primarily resulted from expenses associated with EPIXs
research and development activities, including pre-clinical
studies and clinical trials, and general and administrative
expenses. EPIX anticipates that its research and development
expenses will remain significant in the future and it expects to
incur losses over at least the next several years as it
continues its research and development efforts, pre-clinical
testing and clinical trials and as it implements manufacturing,
marketing and sales programs. In particular, EPIX may be
required to conduct additional clinical trials in order to
achieve FDA approval of Vasovist, which trials would be
expensive and which could contribute to EPIX continuing to incur
losses. As a result, EPIX cannot predict when it will become
profitable, if at all, and if it does, it may not remain
profitable for any substantial period of time. EPIXs
expenses after the merger may increase significantly as a result
of the addition of Predixs research and development and
commercialization efforts. In addition, Predixs
independent accountants raised substantial doubts about
Predixs ability to continue as a going concern and EPIX
will assume approximately $9.5 million in debt in
connection with its acquisition of Predix. Therefore, the merger
may also result in losses to be sustained over a longer period
of time than EPIX would experience on its own without the
acquisition of Predix and require EPIX to raise additional funds
sooner than if it did not acquire Predix. If EPIX fails to
achieve profitability within the timeframe expected by investors
or if the acquisition of Predix and its research and development
programs negatively impacts EPIXs results of operations,
the market price of its common stock may decline and
consequently its business may not be sustainable.
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If the market does not accept EPIXs technology and
product candidates, EPIX may not generate sufficient revenues to
achieve or maintain profitability. |
The commercial success of Vasovist and EPIXs other product
candidates, even if approved for marketing by the FDA and
corresponding foreign agencies, depends on their acceptance by
the medical community and third-party payors as clinically
useful, cost-effective and safe. While contrast agents are
currently used in an estimated 25% to 35% of all MRI exams,
there are no MRI agents approved by the FDA for vascular
imaging. Furthermore, clinical use of magnetic resonance
angiography has been limited and use of magnetic resonance
angiography for some vascular disease imaging has occurred
mainly in research and academic centers. Market acceptance, and
thus sales of EPIXs products, will depend on several
factors, including:
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safety; |
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cost-effectiveness relative to alternative vascular imaging
methods; |
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availability of third-party reimbursement; |
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ease of administration; |
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clinical efficacy; and |
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availability of competitive products. |
Market acceptance will also depend on EPIXs ability and
that of its strategic partners to educate the medical community
and third-party payors about the benefits of diagnostic imaging
with Vasovist-enhanced magnetic resonance angiography compared
to imaging with other technologies. Vasovist represents a new
approach to imaging the non-coronary vascular system, and market
acceptance both of magnetic resonance angiography as an
appropriate imaging technique for the non-coronary vascular
system, and of Vasovist, is critical to EPIXs success. If
Vasovist or any of EPIXs other product candidates, when
and if commercialized, do not achieve market acceptance, EPIX
may not generate sufficient revenues to achieve or maintain
profitability.
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EPIX may need to raise additional funds necessary to fund
its operations, and if EPIX does not do so, it may not be able
to implement its business plan. |
Since inception, EPIX has funded its operations primarily
through its public offerings of common stock, private sales of
equity securities, debt financing, equipment lease financings,
product development revenue, and royalty and license payments
from its strategic partners. Although EPIX believes that it has
adequate funding for the foreseeable future, it may need to
raise substantial additional funds for research, development and
other expenses through equity or debt financings, strategic
alliances or otherwise. EPIXs future liquidity and capital
requirements will depend upon numerous factors, including the
following:
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the progress and scope of clinical trials; |
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the timing and costs of filing future regulatory submissions; |
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the timing and costs required to receive both U.S. and foreign
governmental approvals; |
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the cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights; |
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the extent to which EPIXs product candidates gain market
acceptance; |
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the timing and costs of product introductions; |
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the extent of EPIXs ongoing and any new research and
development programs; |
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the costs of training physicians to become proficient with the
use of EPIXs product candidates; and |
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the costs of developing marketing and distribution capabilities. |
Based on EPIXs current plans, expense rates, targeted
timelines and its view regarding acceptance of Vasovist in the
marketplace, EPIX estimates that cash, cash equivalents and
marketable securities on hand as of March 31, 2006 will be
sufficient to fund its operations for at least the next several
years. However, EPIX premises this expectation on its current
operating plan, which may change as a result of many factors,
including the acquisition of Predix. Taking into consideration
the acquisition of Predix and incorporating its research and
development programs into the operations of EPIX, EPIX estimates
that cash, cash equivalents and marketable securities on hand as
of July 13, 2006, together with expected revenue from the
sale of Vasovist and reimbursement of clinical trial costs by
Schering AG, and the cash, cash equivalents and marketable
securities acquired from Predix, will fund the combined
companys operations into 2008. If, however, EPIX considers
other opportunities, changes its planned activities or is
required to pay all or a substantial portion of the milestone
payment in cash under the merger agreement, it may require
additional funding before currently expected. In this regard,
Predix is engaged in discussions with third parties regarding
prospective collaborations for its drug candidates. If these
discussions were to result in Predix entering into a definitive
agreement for such a collaboration that triggered the milestone
payment before EPIX issues a significant number of new shares of
its capital stock or before the consummation of the merger, EPIX
may be required to pay all or a substantial portion of the
milestone payment in cash.
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EPIXs competitors may have greater financial
resources, superior products or product candidates,
manufacturing capabilities and/or marketing expertise, and EPIX
may not be able to compete with them successfully. |
The healthcare industry is characterized by extensive research
efforts and rapid technological change and there are several
companies that are working to develop products similar to
EPIXs product candidates. However, there are a number of
general use MRI agents approved for marketing in the United
States. and in certain foreign markets that, if used or
developed for magnetic resonance angiography, are likely to
compete with Vasovist. Such products include Magnevist and
Gadovist by Schering AG, Dotarem by Guerbet, S.A., Omniscan by
GE Healthcare, ProHance and MultiHance by Bracco and
OptiMARK by Tyco/ Mallinckrodt. EPIX is aware of five agents
under clinical development that have been or are being evaluated
for use in magnetic resonance angiography: Schering AGs
Gadomer and SHU555C, Guerbets Vistarem, Braccos
B-22956/1, Ferropharms Code VSOP-C184, and Advanced
Magnetics Ferumoxytol. EPIX cannot assure you that its
competitors will not succeed in the future in developing
products that are more effective than any that EPIX is
developing. EPIX believes that its ability to compete in
developing MRI contrast agents depends on a number of factors,
including the success and timeliness with which it completes FDA
trials, the breadth of applications, if any, for which its
product candidates receive approval, and the effectiveness,
cost, safety and ease of use of its product candidates in
comparison to the products of its competitors. Public
information on the status of clinical development and
performance characteristics for these agents is limited.
However, many of these competitors have substantially greater
capital and other resources than EPIX does and may represent
significant competition for EPIX. These companies may succeed in
developing technologies and products that are more effective or
less costly than any of those that EPIX may develop. In
addition, these companies may be more successful than EPIX is in
developing, manufacturing and marketing their products.
Moreover, there are several well-established medical imaging
methods that currently compete and will continue to compete with
MRI, including digital subtraction angiography, which is an
improved form of X-ray angiography, computed tomography
angiography, nuclear medicine and ultrasound, and there are
companies that are actively developing the capabilities of these
competing methods to enhance their effectiveness in vascular
system imaging.
EPIX cannot guarantee that it will be able to compete
successfully in the future, or that developments by others will
not render Vasovist or its future product candidates obsolete or
non-competitive, or that its collaborators or customers will not
choose to use competing technologies or products. Any inability
to compete successfully on EPIXs part will have a
materially adverse impact on its operating results.
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Product liability claims could increase EPIXs costs
and adversely affect its results of operations. |
The clinical testing of EPIXs products and the
manufacturing and marketing of any approved products may expose
EPIX to product liability claims and it may experience material
product liability losses in the future. EPIX currently has
limited product liability insurance for the use of its approved
products and product candidates in clinical research, which is
capped at $10.0 million, but its coverage may not continue
to be available on terms acceptable to it or adequate for
liabilities EPIX actually incur. EPIX does not have product
liability insurance coverage for the commercial sale of its
product candidates, but intends to obtain such coverage when and
if EPIX commercializes its product candidates. However, EPIX may
not be able to obtain adequate additional product liability
insurance coverage on acceptable terms, if at all. A successful
claim brought against EPIX in excess of available insurance
coverage, or any claim or product recall that results in
significant adverse publicity against EPIX, may have a material
adverse effect on EPIXs business and results of operations.
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EPIX significantly increased its leverage as a result of
the sale of 3.0% Convertible Senior Notes due 2024. |
In connection with the sale of 3.0% Convertible Senior
Notes due 2024, EPIX has incurred indebtedness of
$100 million. In addition, holders of EPIXs 3%
Convertible Senior Notes due 2024 may require EPIX to repurchase
these notes at par, plus accrued and unpaid interest, on
June 15, 2011, 2014 and 2019. The amount of EPIXs
indebtedness could, among other things:
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make it difficult for EPIX to make payments on the notes; |
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make it difficult for EPIX to obtain financing for working
capital, acquisitions or other purposes on favorable terms, if
at all; |
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make EPIX more vulnerable to industry downturns and competitive
pressures; and |
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limit EPIXs flexibility in planning for, or reacting to
changes in, its business. |
EPIXs ability to meet its debt service obligations will
depend upon its future performance, which will be subject to
regulatory approvals and sales of its products, as well as other
financial and business factors affecting its operations, many of
which are beyond EPIXs control.
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Certain anti-takeover clauses in EPIXs charter and
by-laws and in Delaware law may make an acquisition of EPIX more
difficult. |
EPIXs restated certificate of incorporation authorizes the
EPIX board of directors to issue, without stockholder approval,
up to 1,000,000 shares of preferred stock with voting,
conversion and other rights and preferences that could adversely
affect the voting power or other rights of the holders of
EPIXs common stock. The issuance of preferred stock or of
rights to purchase preferred stock could be used to discourage
an unsolicited acquisition proposal. In addition, the possible
issuance of preferred stock could discourage a proxy contest,
make more difficult the acquisition of a substantial block of
EPIXs common stock or limit the price that investors might
be willing to pay for shares of EPIXs common stock. The
restated certificate of incorporation provides for staggered
terms for the members of the EPIX board of directors. A
staggered EPIX board of directors and certain provisions of
EPIXs by-laws and of the state of Delaware law applicable
to EPIX could delay or make more difficult a merger, tender
offer or proxy contest involving EPIX. EPIX is subject to
Section 203 of the General Corporation Law of the State of
Delaware, which, subject to certain exceptions, restricts
certain transactions and business combinations between a
corporation and a stockholder owning 15% or more of the
corporations outstanding voting stock for a period of
three years from the date the stockholder becomes an interested
stockholder. These provisions may have the effect of delaying or
preventing a change in control of EPIX without action by the
stockholders and, therefore, could adversely affect the price of
EPIXs stock.
Risks Relating to the Business of Predix and the Combined
Company
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If Predix does not obtain required regulatory approval of
its drug candidates, Predix will be unable to market and sell
Predixs drug candidates. |
PRX-00023, PRX-03140, PRX-08066 and PRX-07034 and any other drug
candidates Predix may discover or acquire and seek to
commercialize are subject to extensive regulation by the FDA and
similar regulatory agencies in other countries relating to
development, clinical trials, manufacturing and
commercialization. In the United States and in many foreign
jurisdictions, rigorous pre-clinical testing and clinical trials
and an extensive regulatory review process must be successfully
completed before a new drug can be sold. Satisfaction of these
and other regulatory requirements is costly, time consuming,
uncertain and subject to unanticipated delays. The time required
to obtain approval by the FDA is unpredictable but typically
exceeds five years following the commencement of clinical
trials, depending upon many factors, including the complexity of
the drug candidate. Predix initiated clinical trials for
PRX-00023, PRX-03140 and PRX-08066 in February 2004, December
2004 and May 2005, respectively, and thus far, these drug
41
candidates have been studied in only a small number of patients.
In addition, a Phase I clinical trial for PRX-07034
recently commenced on June 2, 2006. Early-stage clinical
trials in small numbers of patients are often not predictive of
results in later-stage clinical trials with a larger and more
diverse patient population. Even drug candidates with favorable
results in late-stage pivotal clinical trials may fail to get
approved for commercialization for many reasons, including:
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Predixs failure to demonstrate to the satisfaction of the
FDA or comparable foreign regulatory authorities that a drug
candidate is safe and effective for a particular indication; |
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Predixs inability to demonstrate that a drug
candidates benefits outweigh its risks; |
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Predixs inability to demonstrate that the drug candidate
presents a significant advantage over existing therapies; |
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the FDAs or comparable foreign regulatory
authorities disagreement with the manner in which Predix
and Predixs collaborators interpret the data from
pre-clinical studies or clinical trials; |
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the FDAs or comparable foreign regulatory
authorities failure to approve Predixs manufacturing
processes or facilities or the processes or facilities of
Predixs collaborators; or |
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a change in the approval policies or regulations of the FDA or
comparable foreign regulatory authorities. |
It is possible that none of Predixs drug candidates or any
other drug candidates Predix may seek to develop in the future
will ever obtain the appropriate regulatory approvals necessary
for Predix to begin selling them.
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Predixs clinical trials may not yield results that
will enable Predix to obtain regulatory approval for
Predixs drug candidates. |
Predix will only receive regulatory approval to commercialize a
drug candidate if Predix can demonstrate to the satisfaction of
the FDA or the applicable foreign regulatory agency, in
well-designed and conducted clinical trials, that the drug
candidate is safe and effective and otherwise meets the
appropriate standards required for approval for a particular
indication. Clinical trials are lengthy, complex and extremely
expensive processes with uncertain results. Predix has limited
experience in conducting and managing the clinical trials
necessary to obtain regulatory approvals, including filing and
prosecuting the applications necessary to gain approval by the
FDA. To date, Predix has not completed a Phase III clinical
trial or submitted an NDA to the FDA for any of its drug
candidates. This limited experience may result in longer
regulatory processes in connection with Predixs efforts to
obtain approval of its product candidates. In connection with
the clinical trials for PRX-00023, PRX-03140 and PRX-08066 as
well as the recently commenced Phase I clinical trial for
PRX-07034 and any other drug candidate Predix may seek to
develop in the future, Predix faces risks including that:
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the drug candidate may not prove to be safe and efficacious; |
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the dosage form of the drug candidate may not deliver
reproducible amounts of drug to patients; |
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patients may die or suffer other adverse effects for reasons
that may or may not be related to the drug candidate being
tested; |
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the results of later-stage clinical trials may not confirm the
positive results of earlier trials; |
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the results may not meet the level of statistical significance
required by the FDA or other regulatory agencies for
approval; and |
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the FDA or other regulatory agencies may require additional or
expanded trials. |
Of the large number of drugs in development, only a small
percentage result in the submission of an NDA to the FDA and
even fewer are approved for commercialization. If Predix fails
to demonstrate the safety and efficacy of Predixs drug
candidates, Predix will not be able to obtain the required
regulatory
42
approvals to commercialize these drug candidates. Furthermore,
even if Predix does receive regulatory approval to market a
commercial product, any such approval may be subject to
limitations on the indicated uses for which Predix or a
collaborator may market the product.
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If Predix does not obtain additional financing, its
ability to implement its business plan will be significantly
harmed. |
Predix has incurred substantial losses to date and Predix
expects to incur substantial losses for the foreseeable future.
Predix has no current sources of material ongoing revenue. As of
March 31, 2006, Predix had an accumulated deficit of
approximately $129.8 million. As a result, Predixs
independent accountant has indicated that it has substantial
doubts that Predix can continue as a going concern. To address
this matter, Predix entered into a bridge financing agreement
with certain of its shareholders, in which Predix issued notes
totaling approximately $9.5 million. This bridge financing
will increase the combined companys outstanding debt
obligations following the merger. In the event that the merger
is not consummated, Predix will be required to raise additional
capital in 2006 through the sale of debt or equity securities or
through research and development collaborations to fund its
operations for the next 12 months. There can be no
assurance that any such financing will be available, or that
Predix will be able to enter such collaborations, on favorable
terms, if at all. Predixs independent accountants
going concern opinion may negatively affect Predixs
ability to raise additional funds. If Predix fails to raise
sufficient capital, Predix will not be able to implement its
business plan and may need to cease its operations.
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Predix has never had commercially available products and,
because all of Predixs drug candidates are in early stages
of development, there is a high risk of failure, and Predix may
never succeed in developing marketable products or generating
product revenue. |
Predix has never had any drug candidates receive regulatory
approval for commercial sale. Predixs most advanced drug
candidate, PRX-00023, completed a Phase IIa clinical trial
in July 2005, and Predix is expecting to complete the first of
at least two pivotal Phase III clinical trials for
generalized anxiety disorder for this drug candidate in the
second half of 2006. Predix has three other clinical-stage drug
candidates: PRX-03140 for the treatment of Alzheimers
disease that is expected to enter Phase II clinical trials
in the second half of 2006;
PRX-08066 for the
treatment of two types of pulmonary hypertension, which are
pulmonary hypertension associated with chronic obstructive
pulmonary disease that is expected to enter Phase II
clinical trials in the second half of 2006, and pulmonary
arterial hypertension; and PRX-07034 for the treatment of
obesity and cognitive impairment, that commenced Phase I
clinical testing on June 2, 2006. In addition, PRX-08066
has never been tested in patients with pulmonary arterial
hypertension or pulmonary hypertension associated with chronic
obstructive pulmonary disease and PRX-07034 has never been
tested in patients with obesity and cognitive impairment. Predix
does not expect to have any commercial products on the market
for at least the next several years, if at all. Predix is
exploring human diseases at the cellular level and attempting to
develop drug candidates that regulate cellular processes. Trial
and error is inherent in drug discovery and development, and
Predix may fail at numerous stages along the way. Success in
pre-clinical studies of a drug candidate may not be predictive
of similar results in humans during clinical trials, and
successful results from early clinical trials of a drug
candidate may not be replicated in later clinical trials. A
number of companies in the pharmaceutical and biotechnology
industries have suffered significant setbacks in late-stage
clinical trials even after achieving promising results in
early-stage development. For example, Sanofi-Aventis recently
discontinued the development of its product candidate for the
treatment of Alzheimers disease designed to target the
5-HT4 protein receptor due to lack of efficacy. This compound is
believed to have the same mechanism of action as PRX-03140, was
more advanced in the clinic and was more potent in
in vitro assays. Accordingly, the results from the
completed and ongoing studies and trials for PRX-00023,
PRX-03140, PRX-08066 and PRX-07034 may not be predictive of the
results Predix may obtain in later-stage trials.
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If clinical trials for Predixs drug candidates are
prolonged or delayed, Predix may be unable to commercialize
Predixs drug candidates on a timely basis, which would
require Predix to incur additional costs and delay Predixs
receipt of any revenue from potential product sales. |
Predix may encounter problems with Predixs completed,
ongoing or planned clinical trials that will cause Predix or any
regulatory authority to delay or suspend those clinical trials
or delay the analysis of data derived from them. A number of
events, including any of the following, could delay the
completion of Predixs ongoing and planned clinical trials
and negatively impact Predixs ability to obtain regulatory
approval for, and to enter into collaborations, market and/or
sell, a particular drug candidate, including Predixs
clinical-stage drug candidates PRX-00023, PRX-03140, PRX-08066
and PRX-07034:
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conditions imposed on Predix by the FDA or any foreign
regulatory authority regarding the scope or design of
Predixs clinical trials; |
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delays in obtaining, or Predixs inability to obtain,
required approvals from institutional review boards or other
reviewing entities at clinical sites selected for participation
in Predixs clinical trials; |
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delay in developing a clinical dosage form, insufficient supply
or deficient quality of Predixs drug candidates or other
materials necessary to conduct Predixs clinical trials; |
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negative or inconclusive results from clinical trials, or
results that are inconsistent with earlier results, that
necessitate additional clinical study; |
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negative or inconclusive results from clinical trials, or
results that are inconsistent with earlier results, that
necessitate additional clinical study; |
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serious and/or unexpected drug-related side effects experienced
by subjects in clinical trials; or |
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failure of Predixs third-party contractors or
Predixs investigators to comply with regulatory
requirements or otherwise meet their contractual obligations to
Predix in a timely manner. |
In addition, the number and complexity of clinical trials needed
to achieve regulatory approval for Predixs lead drug
candidates, PRX-00023
for the treatment of generalized anxiety disorder and depression
and PRX-03140 for the
treatment of Alzheimers disease, could be significant.
Achieving primary efficacy endpoints in these trials is
difficult due to the significant placebo effect in these patient
populations. In addition, the clinical path of PRX-00023 may be
delayed because Predix has less clinical data and clinical
experience with
PRX-00023 than it would
have had it followed the more common practice of conducting more
than one Phase II clinical trial for
PRX-00023. Instead,
after meeting with the FDA regarding the design, endpoints and
statistical plan of its Phase III clinical trial, Predix
elected to progress
PRX-00023 directly into
Phase III development. In addition, Predix must also submit
the results of a two-year carcinogenicity study of
PRX-00023 prior to its
approval. Predix has not yet initiated this study and intends to
conduct this study prior to submitting an NDA to the FDA. If the
clinical development of PRX-00023 is delayed as a result of
these matters, additional requirements set forth by the FDA,
including requirements related to confirming the correct dose
for PRX-00023, or
otherwise, the time and cost of the development of PRX-00023
could increase significantly.
Predixs clinical trials may not begin as planned, may need
to be restructured, and may not be completed on schedule, if at
all. Delays in Predixs clinical trials may result in
increased development costs for Predixs drug candidates.
In addition, if Predixs clinical trials are delayed,
Predixs competitors may be able to bring product
candidates to market before Predix does and the commercial
viability of Predixs drug candidates, including PRX-00023,
PRX-03140, PRX-08066 and PRX-07034, could be significantly
reduced.
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If Predix encounters difficulties enrolling subjects in
Predixs clinical trials, or subjects drop out of trials in
progress, Predixs trials could be delayed or otherwise
adversely affected. |
Clinical trials for Predixs drug candidates require
sufficient patient enrollment. Predix may not be able to enroll
a sufficient number of qualified patients in a timely or
cost-effective manner. For example,
44
Predix experienced difficulty in enrolling healthy elderly
volunteers in Predixs Phase I clinical trial for
PRX-03140. Any future delays in patient enrollment could result
in increased costs and longer development times. Enrollment of
patients is affected by many factors, including:
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the limited size of the patient population and the availability
of commercial products for certain target indications, including
pulmonary arterial hypertension and pulmonary hypertension
associated with chronic obstructive pulmonary disease; |
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the nature and design of the trial protocol; |
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the proximity of patients to clinical sites; |
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the availability of other effective treatments for the relevant
disease (whether approved or experimental); |
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the eligibility criteria for enrollment in Predixs
clinical trials; |
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perceived risks and benefits of the drug candidate under
study; and |
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competing studies or trials. |
Predixs failure to enroll patients in Predixs
clinical trials could delay the completion of these clinical
trials. Furthermore, enrolled patients may drop out of
Predixs clinical trials, which could impair the validity
or statistical significance of the clinical trials. In addition,
the FDA could require Predix to conduct clinical trials with a
larger number of subjects than Predix has projected for any of
Predixs drug candidates. If Predix has difficulty
enrolling or retaining a sufficient number of patients to
participate and complete Predixs clinical trials as
planned, Predix may need to delay or terminate ongoing or
planned clinical trials. Delays in enrolling patients in
Predixs clinical trials or the withdrawal of subjects
enrolled in Predixs clinical trials would adversely affect
Predixs ability to develop and seek approval for
Predixs drug candidates, could delay or eliminate
Predixs ability to generate drug candidates and revenue
and could impose significant additional costs on Predix.
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Predixs drug candidates are currently
unformulated. |
All of Predixs drug candidates, including its lead product
candidate, PRX-00023, are currently unformulated. The lack of an
optimized and commercially-viable formulation during clinical
trials may have a significant impact in the overall development
and commercialization of these drug candidates, including:
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the current dosage may not provide reproducible amounts of drug; |
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the pharmaceutical development of a commercially viable
formulation may add significant cost and time to Predixs
clinical development programs; |
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additional trials may be required if the new formulation is not
bioequivalent to formulations already used in clinical trials; |
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future clinical trials may be delayed in order to identify,
develop, optimize, manufacture and certify a commercially viable
formulation; and |
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regulatory filings, and/or commercial launch may be delayed due
to the lack of a commercial process for cGMP manufacturing of
the new formulation. |
The occurrence of any of the foregoing could materially harm
Predixs business.
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If Predix fails to obtain the additional capital necessary
to fund Predixs operations, Predix will be unable to
successfully develop and commercialize Predixs drug
candidates. |
Predix will require substantial future capital to continue to
complete clinical development and commercialize Predixs
clinical-stage drug candidates, PRX-00023, PRX-03140, PRX-08066
and PRX- 07034, and to
conduct the research and development and clinical and regulatory
activities necessary to bring other drug candidates to market.
Predixs future capital requirements will depend on many
factors that are currently unknown to us, including:
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the progress and results of Predixs first Phase III
clinical trial for PRX-00023 and any other trials Predix may
initiate based on the results of this trial; |
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Predixs ability to enter into a strategic collaboration,
licensing or other arrangement, particularly with respect to
PRX-00023, on terms favorable to Predix; |
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the progress and results of any future clinical trials Predix
may initiate with PRX-03140 and
PRX-08066 based on the
Phase I results obtained to date; |
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the results of Predixs pre-clinical studies and testing
for Predixs pre-clinical programs, and any decisions to
initiate clinical trials if supported by the pre-clinical
results; |
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the costs, timing and outcome of regulatory review of PRX-00023,
PRX-03140, PRX-08066 and PRX-07034, and any pre-clinical drug
candidates that progress to clinical trials; |
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the scope, progress, results and cost of pre-clinical
development, manufacturing, pharmaceutical development, clinical
trials and regulatory review of any new drug candidates Predix
may discover or acquire; |
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the costs of preparing, filing and prosecuting patent
applications, maintaining and enforcing Predixs issued
patents, and defending intellectual property-related claims; |
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the costs of establishing sales and marketing functions and of
establishing commercial manufacturing arrangements if any of
Predixs drug candidates is approved; |
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the costs to satisfy Predixs obligations under potential
future collaborations; and |
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the timing, receipt and amount of sales or royalties, if any,
from PRX-00023, PRX-03140,
PRX-08066 and
PRX-07034, and any other drug candidates. |
Predix cannot assure you that additional funds will be available
when Predix needs them on terms that are acceptable to Predix,
or at all. Companies at Predixs stage of development have
recently encountered difficulties raising money under current
conditions in the capital markets. For example, Predix
commenced, but did not successfully complete, an initial public
offering of its common stock in 2005. If adequate funds are not
available on a timely basis, Predix may be required to:
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terminate or delay pre-clinical studies, manufacturing,
pharmaceutical development, clinical trials or other development
for one or more of Predixs drug candidates, including the
initiation of clinical development of PRX-00023 for a depression
indication; |
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delay Predixs establishment of sales and marketing
capabilities or other activities that may be necessary to
commercialize any of Predixs drug candidates; or |
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curtail significant drug discovery programs that are designed to
identify new drug candidates. |
Based on Predixs current plans, expense rates, targeted
timelines and its view regarding the progression of its product
candidates through clinical trials, Predix estimates that cash,
cash equivalents and marketable securities on hand as of
July 13, 2006 will be sufficient to fund its operations
through the anticipated closing of the merger. As a result,
there exists substantial doubt about Predixs ability to
continue as a going concern through December 31, 2006
without additional funding or the successful completion of the
merger. However, Predix premises this expectation on its current
operating plan, which may change as a result of many factors
including its acquisition by EPIX and the access to EPIXs
cash,
46
cash equivalents and marketable securities if the merger is
completed. However, Predix may need additional funds sooner than
planned. In addition, Predix may seek additional capital if
market conditions permit or for strategic considerations even if
Predix believes Predix has sufficient funds for Predixs
current or future operating plans.
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Failure to comply with foreign regulatory requirements
governing human clinical trials and marketing approval for drugs
could prevent Predix from selling Predixs drug candidates
in foreign markets, which may adversely affect Predixs
operating results and financial condition. |
The requirements governing the conduct of clinical trials,
product licensing, pricing and reimbursement for marketing
Predixs drug candidates outside the United States vary
greatly from country to country and may require additional
testing. Predix has no experience in obtaining foreign
regulatory approvals. The time required to obtain approvals
outside the United States may differ from that required to
obtain FDA approval. Predix may not obtain foreign regulatory
approvals on a timely basis, if at all. Approval by the FDA does
not ensure approval by regulatory authorities in other
countries, and approval by one foreign regulatory authority does
not ensure approval by regulatory authorities in other countries
or by the FDA. Failure to comply with these regulatory
requirements or obtain required approvals could impair
Predixs ability to develop foreign markets for
Predixs drug candidates.
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Predixs drug candidates will remain subject to
ongoing regulatory requirements even if they receive marketing
approval, and if Predix fails to comply with requirements,
Predix could lose these approvals and the sale of any approved
commercial products could be temporarily or permanently
suspended. |
Even if Predix receives regulatory approval to market a
particular drug candidate, the product will remain subject to
extensive regulatory requirements, including requirements
relating to manufacturing, labeling, packaging, adverse event
reporting, storage, advertising, promotion and record keeping.
In addition, as clinical experience with a drug expands after
approval because it is typically used by a greater number of
patients after approval than during clinical trials, side
effects and other problems may be observed after approval that
were not seen or anticipated during pre-approval clinical
trials. If Predix fails to comply with the regulatory
requirements of the FDA and other applicable U.S. and foreign
regulatory authorities or previously unknown problems with any
approved commercial products, manufacturers or manufacturing
processes are discovered, Predix could be subject to
administrative or judicially imposed sanctions or other
setbacks, including:
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restrictions on the products, manufacturers or manufacturing
processes; |
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civil or criminal penalties; |
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fines; |
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injunctions; |
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product seizures or detentions; |
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import bans; |
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product recalls and related publicity requirements; |
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total or partial suspension of production; and |
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refusal to approve pending applications for marketing approval
of new products or supplements to approved applications. |
The imposition on Predix of any of the foregoing could
materially harm Predixs business.
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Predix deals with hazardous materials and must comply with
environmental laws and regulations, which can be expensive and
restrict how Predix does business. |
Predixs activities may involve the controlled storage, use
and disposal of a small amount of hazardous materials, including
infectious agents, corrosive, explosive and flammable chemicals
and various radioactive compounds. Predix is subject to federal,
state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of these hazardous
materials. Although Predix is not currently, nor has it been,
the subject of any investigations by a regulatory authority, it
cannot assure you that it will not become the subject of any
such investigation. Although Predix believes that Predixs
safety procedures for handling and disposing of these materials
comply with the standards prescribed by these laws and
regulations, Predix cannot eliminate the risk of accidental
contamination or injury from these materials.
In the event of an accident, state or federal authorities may
curtail Predixs use of these materials and interrupt
Predixs business operations. In addition, Predix could be
liable for any civil damages that result, which may exceed
Predixs financial resources and may seriously harm
Predixs business. Due to the small amount of hazardous
materials that Predix generates, Predix has determined that the
cost to secure insurance coverage for environmental liability
and toxic tort claims far exceeds the benefits. Accordingly,
Predix does not maintain any insurance to cover pollution
conditions or other extraordinary or unanticipated events
relating to Predixs use and disposal of hazardous
materials. Additionally, an accident could damage, or force
Predix to shut down, Predixs operations. In addition, if
Predix develops a manufacturing capacity, Predix may incur
substantial costs to comply with environmental regulations and
would be subject to the risk of accidental contamination or
injury from the use of hazardous materials in Predixs
manufacturing process.
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Predix is focusing Predixs drug discovery and
development efforts on
G-Protein Coupled
Receptor and ion channel-targeted drug candidates, which have
historically had a high incidence of adverse side
effects. |
Despite commercial success, many
G-Protein Coupled
Receptor, or GPCR, and ion channel-targeted drugs have been
associated with a high incidence of adverse side effects due in
part to poor selectivity in binding to their target protein,
resulting in also binding to other off-target
proteins. Predix believes it is designing its drug candidates to
be more selective and to have a more favorable side-effect
profile. However, all of Predixs drug candidates are in
early stages of development, and although Predixs clinical
drug candidates have to date exhibited acceptable side-effect
profiles in clinical trials in a limited number of subjects,
Predix cannot assure you that these results will be repeated in
larger-scale trials. If serious side effects occur in
later-stage clinical trials of Predixs drug candidates,
Predix may not receive regulatory approval to commercialize
them. Even if any of Predixs drug candidates receive
regulatory approval, if they do not exhibit a more favorable
side-effect profile than existing therapies, Predixs
competitive position could be substantially diminished.
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The application of Predixs in silico drug discovery
technology and approach may be limited to a subset of
therapeutically useful and ion channel proteins, which may
reduce the opportunities to develop and commercialize drug
candidates against other important therapeutic targets. |
To date, Predixs technology and approach has generated
clinical drug candidates, including
PRX-00023, PRX-03140,
PRX-08066 and PRX-07034, which mimic the activity of a small
molecule, serotonin, within a class of
G-Protein Coupled
Receptors, or GPCRs, known as serotonergic receptors. The
activity is achieved through binding of the ligand, serotonin,
to a lipophilic region of the transmembrane spanning domain.
These GPCRs and mechanisms of interaction represent a small
subset of all known therapeutically-relevant GPCRs. The
application of Predixs in silico technology to
other known therapeutically-relevant GPCR targets based on large
molecule ligands, hydrophilic interactions or surface
interactions is unknown. Ion channels can consist of multiple
protein subunits that have complex and subtle mechanisms of
activation and inactivation. Therefore, it may be difficult to
apply Predixs proprietary drug discovery technology to
small-molecule ion channel programs. Although Predix believes
that the in silico technology platform can be utilized
and developed to discover such small molecules,
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Predix cannot ensure that its in silico technology and
approach will generate clinical candidates for all GPCRs and ion
channels that are important targets for therapeutic intervention.
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Predix may not be able to keep up with the rapid
technological change in the biotechnology and pharmaceutical
industries, which could make any of Predixs future
approved products obsolete and reduce Predixs
revenue. |
Biotechnology and related pharmaceutical technologies have
undergone and continue to be subject to rapid and significant
change. Predixs future will depend in large part on
Predixs ability to maintain a competitive position with
respect to these technologies. Predix believes that its
proprietary drug discovery technology and approach enables
structure-based discovery and optimization of certain
G-Protein Coupled
Receptor and ion channel-targeted drug candidates. However,
Predixs competitors may render Predixs technologies
obsolete by advances in existing GPCR and ion channel-targeted
drug discovery approaches or the development of new or different
approaches. In addition, any future products that Predix
develops, including Predixs clinical-stage drug
candidates, PRX-00023, PRX-03140, PRX-08066 and PRX-07034 may
become obsolete before Predix recovers expenses incurred in
developing those products, which may require that Predix raise
additional funds to continue Predixs operations.
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Predixs competitors may develop products that are
less expensive, safer or more effective, which may diminish or
eliminate the commercial success of any future products that
Predix may commercialize. |
Competition in the pharmaceutical and biotechnology industries
is intense and expected to increase. Predix faces competition
from pharmaceutical and biotechnology companies, as well as
numerous academic and research institutions and governmental
agencies engaged in drug discovery activities or funding, both
in the United States and abroad. Some of these competitors have
products or are pursuing the development of drug candidates that
target the same diseases and conditions that are the focus of
Predixs three most advanced clinical-stage product
candidates, including the following:
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PRX-00023. If approved, PRX-00023, the drug candidate
Predix is developing for the treatment of anxiety and
depression, will compete with approved products from such
pharmaceutical companies as Forest Laboratories,
GlaxoSmithKline, Pfizer and Wyeth, and may compete with several
drug candidates in clinical development from other companies,
including Eli Lilly and MediciNova. Predix believes that there
are over 35 drug candidates in clinical trials or that have
been submitted for approval for the treatment of anxiety and
over 45 drug candidates in clinical trials or that have
been submitted for approval for the treatment of depression. |
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PRX-03140. If approved, PRX-03140, the drug candidate
Predix is developing for the treatment of Alzheimers
disease, will compete with approved products from such
pharmaceutical companies as Forest Laboratories,
Johnson & Johnson, Novartis and Pfizer, and may compete
with several drug candidates in clinical development from other
companies, including Myriad Genetics and Neurochem. Predix
believes that there are over 60 drug candidates in clinical
trials for the treatment of Alzheimers disease. |
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PRX-08066. If approved, PRX-08066, the drug candidate
Predix is developing for the treatment of pulmonary
hypertension, will compete with approved products from such
pharmaceutical companies as Actelion, CoTherix, GlaxoSmithKline,
Pfizer and United Therapeutics, and may compete with several
drug candidates in clinical development by other companies such
as Encysive Pharmaceuticals and Myogen. Predix believes that
there are approximately ten drug candidates in clinical trials
or that have been submitted for approval for the treatment of
pulmonary arterial hypertension and/or pulmonary hypertension
associated with chronic obstructive pulmonary disease. |
Many patents covering commercial products for these indications
will expire within the next four to nine years, which will
result in greater competition in these indications resulting
from companies producing generic versions of the commercial
drugs. In addition, many of Predixs competitors and their
collaborators have substantially greater capital, research and
development resources, manufacturing, sales and marketing
experience and capabilities. Smaller companies also may prove to
be significant competitors, particularly
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through proprietary research discoveries and collaboration
arrangements with large pharmaceutical and established
biotechnology companies. Many of Predixs competitors have
products that have been approved or are in advanced development
and may develop superior technologies or methods to identify and
validate drug targets and to discover novel small-molecule
drugs. Predixs competitors, either alone or with their
collaborators, may succeed in developing drugs that are more
effective, safer, more affordable or more easily administered
than Predixs and may achieve patent protection or
commercialize drugs sooner than Predix. Predixs
competitors may also develop alternative therapies that could
further limit the market for any drugs that Predix may develop.
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If a successful product liability claim or series of
claims is brought against Predix for uninsured liabilities or in
excess of insured liabilities, Predix could be forced to pay
substantial damage awards. |
The use of any of Predixs drug candidates in clinical
trials, and the sale of any approved products, might expose
Predix to substantial product liability claims. Predix currently
maintains product liability insurance coverage in the amount of
$10 million to cover Predix against such claims. However,
such insurance coverage might not protect Predix against all of
the claims to which Predix might become subject. Predix might
not be able to maintain adequate insurance coverage at a
reasonable cost or in sufficient amounts or scope to protect
Predix against potential losses. If a claim is brought against
Predix, Predix might be required to pay legal and other expenses
to defend the claim, as well as uncovered damages awards
resulting from a claim brought successfully against Predix.
Furthermore, whether or not Predix is ultimately successful in
defending any such claims, Predix might be required to direct
significant financial and managerial resources to such defense
and adverse publicity is likely to result.
Risks Relating to
Predixs Dependence on Third Parties
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Predix relies on third parties to conduct Predixs
clinical trials, and those third-parties may not perform
satisfactorily, including failing to meet established deadlines
for the completion of such trials. |
Predix does not have the ability to independently conduct
clinical trials for Predixs drug candidates, and Predix
relies on third parties such as contract research organizations,
medical institutions and clinical investigators to enroll
qualified patients and conduct Predixs clinical trials.
Predixs reliance on these third parties for clinical
development activities reduces Predixs control over these
activities. Accordingly, these third-party contractors may not
complete activities on schedule, or may not conduct
Predixs clinical trials in accordance with regulatory
requirements or Predixs trial design. To date, Predix
believes Predixs contract research organizations and other
similar entities with which Predix is working have performed
well. However, if these third parties do not successfully carry
out their contractual duties or meet expected deadlines, Predix
may be required to replace them. Although Predix believes that
there are other third-party contractors Predix could engage to
continue these activities, it may result in a delay of the
affected trial. Accordingly, Predixs efforts to obtain
regulatory approvals for and commercialize Predixs drug
candidates may be delayed.
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Predixs drug candidates require significant
biological testing, pre-clinical testing, manufacturing and
pharmaceutical development expertise and investment. Predix
relies primarily on external partners to complete these
activities. |
Predix does not have in-house biological or pre-clinical testing
capabilities. Therefore, it relies on third parties to perform
in vitro potency, in vivo functional
efficacy, animal toxicology and pharmacokinetics testing prior
to advancing its product candidates into clinical trials. Predix
also does not have internal expertise to scale up, manufacture
or formulate its drug candidates. Predix currently relies solely
on Johnson Matthey Pharma Services for its drug substance
manufacturing and testing, and solely on Aptuit, Inc. for
its drug product manufacturing and testing. Although Predix
believes that it could replace these suppliers on commercially
reasonable terms, if any of these third parties fail to fulfill
their obligations to Predix or do not successfully compete the
testing in a timely or acceptable manner, Predixs drug
development efforts could be negatively impacted and/or delayed.
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If Predix does not establish a collaboration to further
develop and commercialize PRX-00023 or other drug candidates,
Predix may have to alter Predixs development plans. |
Predix estimates that, from inception through March 31,
2006, its out-of-pocket payments to third parties for
pre-clinical study support, clinical supplies and clinical
trials associated with Predixs three most advanced
clinical-stage drug candidates, PRX-00023,
PRX-03140 and
PRX-08066, totaled approximately $29 million. Predixs
drug development programs and potential commercialization of
Predixs drug candidates will require substantial
additional cash to fund expenses. Predixs strategy
includes collaborating with a leading pharmaceutical or
biotechnology company to assist Predix in further developing and
potentially commercializing
PRX-00023 and its other
drug candidates requiring large commercial sales and marketing
infrastructures. Predix may also seek to enter into such
collaborations for Predixs other drug candidates,
especially for target indications in which the potential
collaborator has particular therapeutic expertise or that
involve a large, primary care market that must be served by
large sales and marketing organizations. Predix faces
significant competition in seeking appropriate collaborators and
these collaborations are complex and time-consuming to negotiate
and document. Although Predix has had, and is currently in,
discussions with prospective collaborative partners with respect
to development programs, Predix does not currently have any
agreement or arrangement with respect to any such collaboration.
Predix may not be able to enter into any such collaboration on
terms that are acceptable to Predix, or at all. If that were to
occur, Predix may have to curtail the development of a
particular drug candidate, reduce or delay its development
program or one or more of Predixs other development
programs, delay its potential commercialization, or increase
Predixs expenditures and undertake development or
commercialization activities at Predixs own expense. If
Predix elects to increase Predixs expenditures to fund
development or commercialization activities on Predixs
own, Predix will need to obtain additional capital, which may
not be available to Predix on acceptable terms, or at all. If
Predix does not obtain sufficient funds, Predix will not be able
to complete clinical development of Predixs drug
candidates or bring Predixs drug candidates to market and
generate product revenue.
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If physicians and patients do not accept Predixs
product candidates, Predix may be unable to generate significant
revenue, if any. |
Even if PRX-00023, PRX-03140, PRX-08066 and PRX-07034, or any
other drug candidates Predix may develop or acquire in the
future, obtain regulatory approval, they may not gain market
acceptance among physicians, healthcare payors, patients and the
medical community. Physicians may elect not to recommend these
drugs for a variety of reasons including:
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timing of market introduction of competitive products; |
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lower demonstrated clinical safety and efficacy compared to
other products; |
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lack of cost-effectiveness; |
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lack of availability of reimbursement from managed care plans
and other third-party payors; |
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convenience and ease of administration; |
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prevalence and severity of adverse side effects; |
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other potential advantages of alternative treatment
methods; and |
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ineffective marketing and distribution support. |
If Predixs approved drugs, if any, fail to achieve market
acceptance, Predix would not be able to generate significant
revenue.
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If the government and third-party payors fail to provide
coverage and adequate payment rates for Predixs product
candidates, if any, Predixs revenue and prospects for
profitability will be harmed. |
In both domestic and foreign markets, Predixs sales of any
product candidates will depend in part upon the availability of
reimbursement from third-party payors. Such third-party payors
include
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government health programs such as Medicare, managed care
providers, private health insurers and other organizations.
These third-party payors are increasingly attempting to contain
healthcare costs by demanding price discounts or rebates and
limiting both coverage on which drugs they will pay for and the
amounts that they will pay for new drugs. As a result, they may
not cover or provide adequate payment for Predixs drugs.
Predix might need to conduct post-marketing studies in order to
demonstrate the cost-effectiveness of any future products to
such payors satisfaction. Such studies might require
Predix to commit a significant amount of management time and
financial and other resources. Predixs future products
might not ultimately be considered cost-effective. Adequate
third-party reimbursement might not be available to enable
Predix to maintain price levels sufficient to realize an
appropriate return on investment in product development.
U.S. and foreign governments continue to propose and pass
legislation designed to reduce the cost of healthcare. For
example, in some foreign markets, the government controls the
pricing of prescription pharmaceuticals. In the United States,
Predix expects that there will continue to be federal and state
proposals to implement similar governmental controls. In
addition, recent changes in the Medicare program and increasing
emphasis on managed care in the United States will continue to
put pressure on pharmaceutical product pricing. Cost control
initiatives could decrease the price that Predix would receive
for any products in the future, which would limit Predixs
revenue and profitability. Accordingly, legislation and
regulations affecting the pricing of pharmaceuticals might
change before Predixs drug candidates are approved for
marketing. Adoption of such legislation could further limit
reimbursement for pharmaceuticals.
Risks
Relating to Predixs Intellectual Property
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If Predixs patent position does not adequately
protect Predixs drug candidates or any future products,
others could compete against Predix more directly, which would
harm Predixs business. |
As of June 28, 2006, Predixs patent portfolio
included a total of 18 pending patent applications in the United
States as well as counterpart applications in certain foreign
countries having composition of matter, method of use and
process claims related to Predixs programs. PRX-00023 is
the subject of one pending patent application filed in 21
jurisdictions since 2004. PRX-03140 is the subject of three
pending patent applications filed in six jurisdictions since
2004. PRX-08066 is covered in U.S. Patent 7,030,240. The
patent claims cover PRX-08066 and related compounds. This patent
expires in 2023. Two pending patent applications are directed to
other aspects of Predixs 5-HT2B drug development program,
from which PRX-08066 was delivered. PRX-07034 is the subject of
two pending patent applications filed in two jurisdictions.
Physiome Sciences, Inc., a predecessor of Predix, received U.S.
Patent 5,947,899, which covers a computational system and method
for modeling the heart. This patent expires in 2016.
Predixs commercial success will depend in part on
Predixs ability to cause patents to issue on these
applications, obtain additional patents and protect
Predixs existing patent position as well as Predixs
ability to maintain adequate protection of other intellectual
property for Predixs technologies, drug candidates and any
future products in the United States and other countries. If
Predix does not adequately protect Predixs intellectual
property, competitors may be able to use Predixs
technologies and erode or negate any competitive advantage
Predix may have, which could harm Predixs business and
ability to achieve profitability. Patents may also issue to
third parties which could interfere with Predixs ability
to bring one or more of Predixs drug candidates to market.
The laws of some foreign countries do not protect Predixs
proprietary rights to the same extent as the laws of the United
States, and Predix may encounter significant problems in
protecting Predixs proprietary rights in these countries.
The patent positions of biotechnology and pharmaceutical
companies, including Predixs patent position, involve
complex legal and factual questions, and, therefore, any patents
issued to Predix may be challenged, deemed unenforceable,
invalidated or circumvented. Predix will be able to protect
Predixs proprietary rights from unauthorized use by third
parties only to the extent that Predixs proprietary
technologies, drug candidates, and any future products are
covered by valid and enforceable patents or are effectively
maintained as trade secrets.
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The degree of future protection for Predixs proprietary
rights is uncertain, and Predix cannot ensure that:
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Predix or Predixs licensors were the first to make the
inventions covered by each of Predixs pending patent
applications; |
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Predix or Predixs licensors were the first to file patent
applications for these inventions; |
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others will not independently develop similar or alternative
technologies or duplicate any of Predixs technologies; |
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any of Predixs or Predixs licensors pending
patent applications will result in issued patents; |
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any of Predixs or Predixs licensors patents
will be valid or enforceable; |
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any patents issued to Predix or Predixs licensors and
collaborators will provide a basis for commercially viable
products, will provide Predix with any competitive advantages or
will not be challenged by third parties; |
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Predix will develop additional proprietary technologies or drug
candidates that are patentable; or |
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the patents of others will not have an adverse effect on
Predixs business. |
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Predix may be unable to adequately prevent disclosure of
trade secrets and other proprietary information. |
Predix relies on trade secrets to protect Predixs
proprietary technologies, including Predixs G-Protein
Coupled Receptor and ion channel structures, especially where
Predix does not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect.
Predix relies in part on confidentiality agreements with
Predixs employees, consultants, outside scientific
collaborators, sponsored researchers and other advisors to
protect Predixs trade secrets and other proprietary
information. These agreements may not effectively prevent
disclosure of confidential information and may not provide an
adequate remedy if unauthorized disclosure of confidential
information occurs. In addition, others may independently
discover Predixs trade secrets and proprietary
information. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of Predixs
proprietary rights, and failure to obtain or maintain trade
secret protection could adversely affect Predixs
competitive business position. Predix relies on trade secrets
and confidentiality in particular with respect to Predixs
drug discovery technology and any future competitive advantage
provided by it. Predix may not enjoy any such competitive
advantage if Predix is not able to effectively maintain and
enforce any trade secret rights relating to Predixs drug
discovery technology.
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Litigation or other proceedings or third-party claims of
intellectual property infringement would require Predix to spend
time and money and could prevent Predix from developing or
commercializing Predixs drug candidates. |
Predixs commercial success will depend in part on not
infringing the patents and proprietary rights of other parties.
Although Predix is not currently aware of any litigation or
other proceedings or third-party claims of intellectual property
infringement related to Predixs drug candidates, the
pharmaceutical industry is characterized by extensive litigation
regarding patents and other intellectual property rights. Other
parties may obtain patents in the future and claim that
Predixs use of technologies infringes these patents or
that Predix is employing their proprietary technology without
authorization. If another party claims Predix is infringing or
misappropriating its technology, Predix could:
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be required to defend a lawsuit, which is very expensive and
time consuming, even if Predix ultimately prevails; |
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be required to defend against an interference proceeding in the
United States Patent and Trademark Office, which can also be
very expensive and time consuming, regardless of the outcome; |
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receive an adverse decision in a lawsuit or in an interference
proceeding resulting in the loss of some or all of Predixs
rights to Predixs intellectual property, drug products or
drug candidates; |
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be required to pay a large sum for damages, including possible
punitive damages, if Predix is found to be infringing; |
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be prohibited from developing, making, using, selling or
offering for sale Predixs drug candidates until Predix
obtains a license from the infringed party, and this license may
not be granted to Predix at all or may not be granted on
satisfactory terms; and |
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be forced to develop non-infringing products, technologies and
methods which, even if possible, could require substantial
additional capital, could necessitate additional regulatory
approval and could delay commercialization. |
Although Predix has not received any communications from third
parties challenging Predixs patents or patent applications
covering Predixs drug candidates to date, third parties
may challenge Predixs rights to, or the scope or validity
of, Predixs patents.
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Predix may be subject to claims that Predix or
Predixs employees have wrongfully used or disclosed
alleged trade secrets of their former employers. |
As is commonplace in Predixs industry, Predix employs
individuals who were previously employed at other biotechnology
or pharmaceutical companies, including Predixs potential
competitors. Predix may be subject to claims that these
employees or Predix has inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend
against these claims. Even if Predix is successful in defending
against these claims, litigation could result in substantial
costs and be a distraction to management.
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Risks Relating to Predixs Israel Operations |
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Political and military instability and other factors may
adversely affect Predixs operations in Israel. |
Predix has significant operations in Israel and regional
instability, military conditions, terrorist attacks, security
concerns and other factors in Israel may directly affect these
operations. Predixs employees in Israel are primarily
computational chemists and are responsible for the computational
chemistry for all of Predixs discovery stage programs.
Accordingly, any disruption in Predixs Israeli operations
could adversely affect Predixs ability to advance
Predixs discovery stage programs into clinical trials.
Since the establishment of the State of Israel in 1948, a number
of armed conflicts have taken place between Israel and its Arab
neighbors. A state of hostility, varying in degree and
intensity, has led to security and economic problems for Israel,
and in particular since 2000, there has been an increased level
of violence between Israel and the Palestinians. Any armed
conflicts or political instability in the region could harm
Predixs operations in Israel. In addition, many of
Predixs employees in Israel are obligated to perform
annual military reserve duty, and, in the event of a war,
military or other conflict, Predixs employees could be
required to serve in the military for extended periods of time.
Predixs operations could be disrupted by the absence for a
significant period of time of one or more of Predixs key
employees or a significant number of Predixs other
employees due to military service. Furthermore, several
countries restrict business with Israel and Israeli companies,
and these restrictive laws and policies could harm Predixs
business.
54
THE ANNUAL MEETING OF EPIX STOCKHOLDERS
Date, Time and Place
The annual meeting of EPIX stockholders will be held
on ,
2006, at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., commencing at 10:00 a.m., local time. We are
sending this joint proxy statement/ prospectus to you in
connection with the solicitation of proxies by the EPIX board of
directors for use at the EPIX annual meeting and any
adjournments or postponements of the annual meeting.
Purposes of the EPIX Annual Meeting
The purposes of the EPIX annual meeting are:
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1. To consider and vote upon the issuance of shares of EPIX
common stock in the merger as contemplated by the Agreement and
Plan of Merger, dated as of April 3, 2006, as amended, by
and among EPIX Pharmaceuticals, Inc., EPIX Delaware, Inc., a
wholly-owned subsidiary of EPIX, and Predix Pharmaceuticals
Holdings, Inc., and approve the merger of Predix Pharmaceuticals
Holdings, Inc. with and into EPIX Delaware, Inc.; |
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2. To approve an amendment to EPIXs amended and
restated certificate of incorporation to increase the number of
authorized shares of common stock from 40,000,000 shares to
100,000,000 shares, representing an additional
60,000,000 shares, which may be necessary to provide EPIX
with sufficient authorized shares of common stock to issue in
connection with the merger, as described in this joint proxy
statement/ prospectus; |
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3. To authorize the EPIX board of directors to amend in its
discretion EPIXs restated certificate of incorporation to
effect a reverse stock split of EPIXs issued and
outstanding shares of common stock, at such ratio to be
determined by the EPIX board of directors, which may be
necessary for EPIX to maintain its eligibility for trading on
The NASDAQ Global Market after completion of the merger, which
is a condition to consummate the merger, as described in this
joint proxy statement/ prospectus; |
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4. To elect two directors for a three-year term to expire
at the 2009 annual meeting of stockholders and to elect one
director for a one-year term to expire at the 2007 annual
meeting of stockholders; provided, however, that, if the merger
is completed, the EPIX board of directors will consist of the
nine persons identified in this joint proxy statement/
prospectus; |
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5. To ratify the selection of Ernst & Young LLP as
EPIXs independent registered public accounting firm for
the fiscal year ending December 31, 2006; |
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6. To consider and vote on a proposal to approve the
adjournment of the annual meeting, if necessary, to solicit
additional proxies, in the event that there are not sufficient
votes at the time of the annual meeting to approve
Proposal Nos. 1, 2 and 3; and |
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7. To transact such other business as may properly come
before the annual meeting or any adjournment or postponement
thereof. |
Recommendation of EPIXs Board of Directors
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
THE ISSUANCE OF SHARES OF EPIX COMMON STOCK IN THE MERGER IS
ADVISABLE TO, AND IN THE BEST INTERESTS OF, EPIX AND ITS
STOCKHOLDERS AND HAS APPROVED SUCH ISSUANCE. THE EPIX BOARD OF
DIRECTORS RECOMMENDS THAT EPIX STOCKHOLDERS VOTE FOR
PROPOSAL NO. 1 TO APPROVE THE ISSUANCE OF SHARES OF EPIX
COMMON STOCK IN THE MERGER AND APPROVE THE MERGER.
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THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
AN AMENDMENT TO EPIXS RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 40,000,000 SHARES TO 100,000,000 SHARES, WHICH
REPRESENTS AN ADDITIONAL 60,000,000 SHARES, IS ADVISABLE TO, AND
IN THE BEST INTERESTS OF, EPIX AND ITS STOCKHOLDERS AND HAS
APPROVED SUCH AMENDMENT. THE EPIX BOARD OF DIRECTORS RECOMMENDS
THAT EPIX STOCKHOLDERS VOTE FOR PROPOSAL NO. 2
TO APPROVE AN AMENDMENT TO EPIXS RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 40,000,000 SHARES TO 100,000,000 SHARES. THE
APPROVAL OF PROPOSAL NO. 2 MAY BE NECESSARY TO ENABLE EPIX
TO ISSUE THE REQUIRED NUMBER OF SHARES OF EPIX COMMON STOCK TO
PREDIX STOCKHOLDERS, OPTION HOLDERS AND WARRANT HOLDERS IN
CONNECTION WITH THE MERGER.
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
AUTHORIZING THE EPIX BOARD OF DIRECTORS TO AMEND IN ITS
DISCRETION EPIXS RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A REVERSE STOCK SPLIT OF EPIXS ISSUED AND
OUTSTANDING SHARES OF COMMON STOCK, AT SUCH RATIO TO BE
DETERMINED BY THE EPIX BOARD OF DIRECTORS, IS ADVISABLE TO, AND
IN THE BEST INTERESTS OF, EPIX AND ITS STOCKHOLDERS AND HAS
APPROVED SUCH AUTHORIZATION. THE EPIX BOARD OF DIRECTORS
RECOMMENDS THAT EPIX STOCKHOLDERS VOTE FOR
PROPOSAL NO. 3 TO AUTHORIZE THE EPIX BOARD OF DIRECTORS TO
AMEND IN ITS DISCRETION EPIXS RESTATED CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF EPIXS
ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, AT SUCH RATIO TO
BE DETERMINED BY THE EPIX BOARD OF DIRECTORS. THE APPROVAL OF
PROPOSAL NO. 3 MAY BE NECESSARY FOR EPIX TO MAINTAIN ITS
ELIGIBILITY FOR TRADING ON THE NASDAQ GLOBAL MARKET AFTER
COMPLETION OF THE MERGER, WHICH IS A CONDITION TO CONSUMMATION
OF THE MERGER.
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
THE ELECTION OF TWO DIRECTORS FOR A THREE-YEAR TERM TO EXPIRE AT
THE 2009 ANNUAL MEETING OF STOCKHOLDERS AND THE ELECTION OF ONE
DIRECTOR FOR A ONE-YEAR TERM TO EXPIRE AT THE 2007 ANNUAL
MEETING OF STOCKHOLDERS IS ADVISABLE TO, AND IN THE BEST
INTERESTS OF, EPIX AND ITS STOCKHOLDERS AND HAS APPROVED AND
ADOPTED THE PROPOSAL. THE EPIX BOARD OF DIRECTORS RECOMMENDS
THAT EPIX STOCKHOLDERS VOTE FOR PROPOSAL NO. 4
TO ELECT TWO DIRECTORS FOR A THREE-YEAR TERM TO EXPIRE AT THE
2009 ANNUAL MEETING OF STOCKHOLDERS AND TO ELECT ONE DIRECTOR
FOR A ONE-YEAR TERM TO EXPIRE AT THE 2007 ANNUAL MEETING OF
STOCKHOLDERS PROVIDED, HOWEVER, THAT, IF THE MERGER IS
COMPLETED, THE EPIX BOARD OF DIRECTORS WILL CONSIST OF THE NINE
PERSONS IDENTIFIED IN THE ACCOMPANYING JOINT PROXY STATEMENT/
PROSPECTUS.
THE EPIX BOARD OF DIRECTORS HAS DETERMINED THAT THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS
EPIXS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2006 IS ADVISABLE TO,
AND IN THE BEST INTERESTS OF, EPIX AND ITS STOCKHOLDERS AND HAS
APPROVED SUCH RATIFICATION. THE EPIX BOARD OF DIRECTORS
RECOMMENDS THAT EPIX STOCKHOLDERS VOTE FOR
PROPOSAL NO. 5 TO RATIFY THE SELECTION OF ERNST &
YOUNG LLP AS EPIXS INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31,
2006.
THE EPIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT
ADJOURNING THE EPIX ANNUAL MEETING, IF NECESSARY, IF A QUORUM IS
PRESENT,
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TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT
VOTES IN FAVOR OF PROPOSAL NOS. 1, 2 AND 3 IS
ADVISABLE TO, AND IN THE BEST INTERESTS OF, EPIX AND ITS
STOCKHOLDERS AND HAS APPROVED AND ADOPTED THE PROPOSAL. THE EPIX
BOARD OF DIRECTORS RECOMMENDS THAT EPIX STOCKHOLDERS VOTE
FOR PROPOSAL NO. 6 TO ADJOURN THE EPIX ANNUAL
MEETING, IF NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT
ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF
PROPOSAL NOS. 1, 2 AND 3.
Record Date and Voting Power
Only holders of record of EPIX common stock at the close of
business on the record date, June 28, 2006, are entitled to
notice of, and to vote at, the EPIX annual meeting. There were
approximately 76 holders of record of EPIX common stock at the
close of business on the record date. Because many of such
23,284,810 shares are held by brokers and other
institutions on behalf of stockholders, EPIX is unable to
estimate the total number of stockholders represented by these
record holders. At the close of business on the record date,
shares of EPIX common stock were issued and outstanding. Each
share of EPIX common stock entitles the holder thereof to one
vote on each matter submitted for stockholder approval. See
EPIX Principal Stockholders for information
regarding persons known to the management of EPIX to be the
beneficial owners of more than 5% of the outstanding shares of
EPIX common stock.
Voting and Revocation of Proxies
The proxy accompanying this joint proxy statement/ prospectus is
solicited on behalf of the EPIX board of directors for use at
the EPIX annual meeting.
If you are a stockholder of record, you may vote in person at
the annual meeting or vote by proxy using the enclosed proxy
card. Whether or not you plan to attend the meeting, we urge you
to vote by proxy to ensure your vote is counted. You may still
attend the meeting and vote in person if you have already voted
by proxy.
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To vote in person, come to the annual meeting and we will give
you a ballot when you arrive. |
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To vote using the proxy card, simply mark, sign and date your
proxy card and return it promptly in the postage-paid envelope
provided. If you return your signed proxy card to us before the
annual meeting, we will vote your shares as you direct. |
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To vote over the telephone, dial toll-free 1-800-652-VOTE (8683)
in the United States or Canada using a touch-tone phone and
follow the recorded instructions. You will be asked to provide
the company number and control number from the enclosed proxy
card. Your vote must be received by 1:00 a.m., Eastern Time
on ,
2006 to be counted. |
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To vote on the Internet, go to www.computershare.com/expressvote
to complete an electronic proxy card. You will be asked to
provide the company number and control number from the enclosed
proxy card. Your vote must be received by 1:00 a.m.,
Eastern Time
on ,
2006 to be counted. |
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All properly executed proxies that are not revoked will be voted
at the EPIX annual meeting and at any adjournments or
postponements of the annual meeting in accordance with the
instructions contained in the proxy. If a holder of EPIX common
stock executes and returns a proxy and does not specify
otherwise, the shares represented by that proxy will be voted
FOR Proposal No. 1 to approve the issuance
of shares of EPIX common stock in the merger and to approve the
merger; FOR Proposal No. 2 to approve an
amendment to EPIXs restated certificate of incorporation
to increase the number of authorized shares of common stock from
40,000,000 shares to 100,000,000 shares, which
represents an additional 60,000,000 shares; FOR
Proposal No. 3 to authorize the EPIX board of directors to amend
in its discretion EPIXs restated certificate of
incorporation to effect a reverse stock split of EPIXs
issued and outstanding shares of common stock, at such ratio
between 1:1.25 to 1:4 to be determined by the EPIX board of
directors; FOR Proposal No. 4 to elect two
directors for a three-year term to expire at the 2009 annual
meeting of stockholders and to elect one director for a one-year
term to expire at the
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2007 annual meeting of stockholders; provided, however,
that, if the merger is completed, the EPIX board of directors
will consist of the nine persons identified in this joint proxy
statement/ prospectus; FOR Proposal No. 5
to ratify the selection of Ernst & Young LLP as
EPIXs independent registered public accounting firm for
the fiscal year ending December 31, 2006; and
FOR Proposal No. 6 to adjourn the annual
meeting, if necessary, if a quorum is present, to solicit
additional proxies if there are not sufficient votes in favor of
Proposal Nos. 1, 2 and 3 in accordance with the
recommendation of the EPIX board of directors.
An EPIX stockholder who has submitted a proxy may revoke it at
any time before it is voted at the EPIX annual meeting by
executing and returning a proxy bearing a later date, providing
proxy instructions via the telephone or the Internet (your
latest telephone or Internet proxy is counted), filing written
notice of revocation with the Secretary of EPIX stating that the
proxy is revoked or attending the annual meeting and voting in
person.
Required Vote
The presence, in person or by proxy, at the annual meeting of
the holders of a majority of the shares of EPIX common stock
outstanding and entitled to vote at the annual meeting is
necessary to constitute a quorum at the meeting. Abstentions and
broker non-votes will be counted towards a quorum. The
affirmative vote of the holders of a majority of the shares
present at the EPIX annual meeting, whether in person or by
proxy, is required for approval of Proposal Nos. 1, 5
and 6 above. The affirmative vote of the holders of a majority
of the outstanding common stock on the record date is required
for approval of Proposal Nos. 2 and 3. The affirmative
vote of a plurality of the votes cast in person or by proxy at
the EPIX annual meeting is required for approval of
Proposal No. 4.
Votes will be counted by the inspector of election appointed for
the meeting, who will separately count For,
Withhold and Against votes, abstentions
and broker non-votes. Abstentions will be counted towards the
vote total for each proposal and will have the same effect as
Against votes. Broker non-votes have no effect and
will not be counted towards the vote total for
Proposal Nos. 1, 4, 5 and 6 and will have the
same effect as Against votes with respect to
Proposal Nos. 2 and 3.
At the record date for the EPIX annual meeting, the current
directors and executive officers of EPIX owned approximately
1.83% of the outstanding shares of EPIX common stock entitled to
vote at the meeting.
Solicitation of Proxies
In addition to solicitation by mail, the directors, officers,
employees and agents of EPIX may solicit proxies from
EPIXs stockholders by personal interview, telephone,
telegram or otherwise. EPIX will bear the costs of the
solicitation of proxies from its stockholders. Arrangements will
also be made with brokerage firms and other custodians, nominees
and fiduciaries who are record holders of EPIX common stock for
the forwarding of solicitation materials to the beneficial
owners of EPIX common stock. EPIX will reimburse these brokers,
custodians, nominees and fiduciaries for the reasonable
out-of-pocket expenses
they incur in connection with the forwarding of solicitation
materials.
Other Matters
As of the date of this joint proxy statement/ prospectus, the
EPIX board of directors does not know of any business to be
presented at the EPIX annual meeting other than as set forth in
the notice accompanying this joint proxy statement/ prospectus.
If any other matters should properly come before the annual
meeting, it is intended that the shares represented by proxies
will be voted with respect to such matters in accordance with
the judgment of the persons voting the proxies.
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THE SPECIAL MEETING OF PREDIX STOCKHOLDERS
Date, Time and Place
The special meeting of Predix stockholders will be held
on ,
2006, at the offices of Goodwin Procter LLP, One Exchange Place,
Boston, Massachusetts, commencing at 9:00 a.m., local time.
We are sending this joint proxy statement/ prospectus to you in
connection with the solicitation of proxies by the Predix board
of directors for use at the Predix special meeting and any
adjournments or postponements of the special meeting.
Purposes of the Predix Special Meeting
The purposes of the Predix special meeting are:
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1. To consider and vote upon Proposal No. 1 to
approve and adopt the merger agreement and approve of the merger. |
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2. To consider and vote on Proposal No. 2 to
adjourn the special meeting, if necessary, if a quorum is
present, to solicit additional proxies if there are not
sufficient votes in favor of Proposal No. 1. |
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3. To transact such other business as may properly come
before the special meeting or any adjournments or postponements
of the special meeting. |
Recommendations of Predixs Board of Directors
THE PREDIX BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES
THAT THE MERGER IS ADVISABLE TO, AND IN THE BEST INTERESTS OF,
PREDIX AND ITS STOCKHOLDERS AND HAS APPROVED THE MERGER AND THE
MERGER AGREEMENT. THE PREDIX BOARD OF DIRECTORS RECOMMENDS THAT
PREDIX STOCKHOLDERS VOTE FOR PROPOSAL NO. 1 TO
APPROVE AND ADOPT THE MERGER AGREEMENT AND APPROVE OF THE
MERGER.
THE PREDIX BOARD OF DIRECTORS HAS CONCLUDED THAT THE
PROPOSAL TO ADJOURN THE PREDIX SPECIAL MEETING, IF
NECESSARY, IF A QUORUM IS PRESENT, TO SOLICIT ADDITIONAL PROXIES
IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF THE FOREGOING
PROPOSAL NO. 1 IS ADVISABLE TO, AND IN THE BEST INTERESTS
OF, PREDIX AND ITS STOCKHOLDERS AND HAS APPROVED AND ADOPTED THE
PROPOSAL. ACCORDINGLY, THE PREDIX BOARD OF DIRECTORS RECOMMENDS
THAT PREDIX STOCKHOLDERS VOTE FOR PROPOSAL NO.
2 TO ADJOURN THE PREDIX SPECIAL MEETING, IF NECESSARY, IF A
QUORUM IS PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE
NOT SUFFICIENT VOTES IN FAVOR OF PROPOSAL NO. 1.
Record Date and Voting Power
Only holders of record of Predix common stock and holders of
record of Predix preferred stock at the close of business on the
record date, June 28, 2006, are entitled to notice of, and
to vote at, the Predix special meeting. Each share of Predix
common stock entitles the holder thereof to one vote on each
matter submitted for stockholder approval. The shares of Predix
preferred stock entitle the holder thereof to one vote for each
share of common stock into which such shares of preferred stock
are convertible. The outstanding shares of Predix preferred
stock currently convert into common stock on an
18-to-1 basis. There
were 120 holders of record of Predix common stock with
1,097,357 shares of common stock issued and outstanding, 63
holders of record of Predix preferred stock, with
273,203,492 shares of Predix preferred stock, which are
convertible into 15,177,898 shares of Predix common stock,
issued and outstanding at the close of business on the record
date. See Predix Principal Stockholders for
information regarding persons known to the management of Predix
to be the beneficial owners of more than 5% of the outstanding
shares of Predix capital stock.
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Voting and Revocation of Proxies
The proxy accompanying this joint proxy statement/ prospectus is
solicited on behalf of the Predix board of directors for use at
the Predix special meeting.
If you are a stockholder of record, you may vote in person at
the Predix special meeting or vote by proxy using the enclosed
proxy card. Whether or not you plan to attend the meeting, we
urge you to vote by proxy to ensure your vote is counted. You
may still attend the meeting and vote in person if you have
already voted by proxy.
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To vote in person, come to the special meeting and you will be
given a ballot when you arrive. |
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To vote using the proxy card, simply mark, sign and date your
proxy card and return it promptly in the postage-paid envelope
provided. If you return your signed proxy card to us before the
special meeting, we will vote your shares as you direct. |
All properly executed proxies that are not revoked will be voted
at the Predix special meeting and at any adjournments or
postponements of the special meeting in accordance with the
instructions contained in the proxy. If a holder of Predix
common stock or preferred stock executes and returns a proxy and
does not specify otherwise, the shares represented by the proxy
will be voted FOR Proposal No. 1 to
approve and adopt the merger agreement and approve of the merger
and FOR Proposal No. 2 to adjourn the
special meeting, if necessary, if a quorum is present, to
solicit additional proxies if there are not sufficient votes in
favor of Proposal No. 1, in accordance with the
recommendation of the Predix board of directors.
A Predix stockholder who has submitted a proxy may revoke it at
any time before it is voted at the Predix special meeting by
executing and returning a proxy bearing a later date, filing
written notice of revocation with the Secretary of Predix
stating that the proxy is revoked or attending the special
meeting and voting in person.
Required Vote
The presence, in person or by proxy, at the special meeting of
the holders of a majority of the shares of Predix common and
preferred stock outstanding (on an as-converted to Predix common
stock basis) and entitled to vote at the Predix special meeting
is necessary to constitute a quorum at the Predix special
meeting. Approval of Proposal No. 1 requires the
affirmative vote of the holders of: (a) a majority of the
common stock and the preferred stock voting as a single class
(on an as-converted to Predix common stock basis), (b) 60%
of the Predix preferred stock voting as a single class (on an
as-converted to Predix common stock basis) and
(c) 662/3
% of the shares of Predix Series C preferred stock
(on an as-converted to Predix common stock basis), in each case,
outstanding on the record date. Abstentions will be counted
towards a quorum and will have the same effect as negative votes
on Proposal No. 1, but will not be counted for any
purpose in determining whether Proposal No. 2 is
approved.
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The following Predix stockholders entered into voting agreements
with EPIX on April 3, 2006: Caduceus Private Investment,
L.P., UBS PW Juniper Crossover Fund, L.L.C., Hare and Company
FAO: Finsbury Worldwide Pharma, Yozma II (Israel) L.P.,
Yozma Venture Capital Ltd, YVC-Yozma Management &
Investments Ltd., as trustee for Yozma II (B.V.I.) L.P.,
PCM Venture Capital L.P., Yamanouchi Venture Capital and PA
International Limited. Each has agreed in the voting agreements
to vote all shares of Predix common stock and preferred stock
beneficially owned by each as of the record date in favor of the
approval and adoption of the merger agreement and the approval
of the merger. Each also granted EPIX an irrevocable proxy to
vote their shares of Predix common stock and preferred stock in
favor of the adoption of the merger agreement and the approval
of the merger. Approximately 120,069 shares of Predix
common stock and 6,769,289 shares of Predix preferred stock
(on an as-converted to Predix common stock basis), which
represents approximately 40% of the outstanding Predix voting
stock and as of the record date, are subject to the voting
agreements and irrevocable proxies. See Voting
Agreements.
Solicitation of Proxies
In addition to solicitation by mail, the directors, officers,
employees and agents of Predix may solicit proxies from Predix
stockholders by personal interview, telephone, telegram or
otherwise. Predix will bear the costs of the solicitation of
proxies from its stockholders.
Other Matters
As of the date of this joint proxy statement/ prospectus, the
Predix board of directors does not know of any business to be
presented at the Predix special meeting other than as set forth
in the notice accompanying this joint proxy statement/
prospectus. If any other matters should properly come before the
special meeting, it is intended that the shares represented by
proxies will be voted with respect to such matters in accordance
with the judgment of the persons voting the proxies.
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THE MERGER
This section of the joint proxy statement/ prospectus
describes the material aspects of the merger. While EPIX and
Predix believe that the description covers the material terms of
the merger, this summary may not contain all of the information
that is important to you. For a more complete understanding of
the merger, you should carefully read this entire joint proxy
statement/ prospectus, the attached annexes and the other
documents referred to in this joint proxy statement/
prospectus.
General Description of the Merger
At the effective time of the merger, Predix will merge with and
into EPIX Delaware, Inc., a wholly-owned subsidiary of EPIX,
with EPIX Delaware, Inc. surviving the merger as a wholly-owned
subsidiary of EPIX. Predix stockholders will receive shares of
EPIX common stock in exchange for the shares of Predix stock
they own. All options to purchase Predix common stock then
outstanding granted under Predixs 2003 Stock Incentive
Plan and Physiome Sciences, Inc. 1997 Stock Option Plan, as
amended, and all warrants to purchase Predix common stock or
preferred stock then outstanding at the effective time of the
merger shall be assumed by EPIX.
The terms of the merger agreement provide for the issuance of
EPIX common stock to Predix stockholders in exchange for all of
the outstanding shares of Predix, with Predix stockholders
receiving 1.239411 shares of EPIX common stock, subject to
adjustment to account for the reverse stock split if
implemented, for each share of Predix common stock and preferred
stock, on an as-converted to Predix common stock basis, that
they hold. In approving the merger agreement, the holders of
Predix preferred stock will be agreeing to accept the merger
consideration as set forth in the merger agreement in lieu of
any liquidation preferences that they would be entitled to under
the Predix restated certificate of incorporation, as amended,
prior to the consummation of the merger. Upon completion of the
merger, EPIX stockholders will retain approximately 53%, and the
former Predix stockholders will own approximately 47%, of
outstanding shares of EPIXs common stock, based on the
number of shares of EPIX common stock and Predix common stock
and preferred stock outstanding as of the date of the merger
agreement.
In addition, EPIX will make a milestone payment to Predix
stockholders, option holders and warrant holders in the amount
of $35 million upon the occurrence of certain events. EPIX
may elect to make the milestone payment in cash or shares of
EPIX common stock, or any combination thereof. The milestone
payment will be allocated and paid to each Predix holder of
record of Predix shares, options or warrants that they hold at
the time of the merger, in each case, pro rata based upon the
percentage of the initial merger consideration that such holder
would have received at the time of the merger and assuming that,
for the purpose of the milestone payment only, that each Predix
warrant and option to purchase Predix shares (whether or not
vested) was exercised in full immediately prior to the merger.
In no event will the shares of EPIX common stock issuable at the
effective time of the merger, including the shares of EPIX
common stock issuable upon exercise of Predix options and
warrants assumed by EPIX in the merger, exceed 49.99% of the
outstanding EPIX common stock immediately after the effective
time of the merger.
Predix stockholders, option holders and warrant holders will be
entitled to receive the milestone payment within 90 days
following the occurrence, as determined by the non-Predix
members of the combined companys board of directors,
whether before or after the consummation of the merger, of any
of the following events between the date of this joint proxy
statement/ prospectus and June 30, 2008:
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receipt of statistically significant final results from a
randomized, placebo- or active comparator- controlled,
double-blinded Phase II or Phase III clinical trial of: |
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PRX-00023 for the treatment of generalized anxiety disorder,
depression, attention deficit hyperactivity disorder or other
neuropsychiatric disorder with at least 100 patients; |
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PRX-03140 for the treatment of Alzheimers disease or other
cognitive disorders with at least 60 patients; |
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PRX-08066 for the treatment of pulmonary artery hypertension,
chronic obstructive pulmonary disease or a different indication
with at least 60 patients; |
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PRX-07034 for the treatment of obesity, cognitive disorders or a
different indication with at least 60 patients; or |
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entering into a strategic partnership for any Predix drug
candidate, which provides milestone and research funding
payments of more than $50 million, of which
$20 million must be received by June 30, 2008 in
unrestricted cash through non-refundable license fees, research
funding payments, and/or premiums paid in connection with an
equity investment by the strategic partner within 60 days
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The milestone payment will be paid within 90 days after the
achievement of a milestone event, at the option of the
non-Predix members of the combined companys board of
directors, either:
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in cash, shares of EPIX common stock or any combination thereof
with the number of such shares to be issued determined based on
the five-day average closing price of EPIX common stock on The
NASDAQ Global Market ending on the trading day that is ten days
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$20 million payable in accordance with the preceding bullet
and $15 million payable on the date that is 12 months
after the payment of the initial $20 million in shares of
EPIX common stock, with the number of such shares to be issued
determined based on 75% of the
30-day average closing
price of EPIX common stock on The NASDAQ Global Market ending on
the trading day that is ten days prior to the payment date. If,
as a result of the 49.99% limitation described below, the entire
$15 million payment cannot be made in shares of EPIX common
stock, the balance will be paid in cash plus interest calculated
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In no event may the milestone be paid in shares of EPIX common
stock to the extent that such shares would exceed 49.99% of the
outstanding shares of EPIX common stock immediately after such
milestone payment, when combined with all shares of EPIX common
stock issued in the merger and issuable upon exercise of all
Predix options and warrants assumed by EPIX in the merger. As a
result of this limitation, if the milestone payment is triggered
before EPIX issues a significant number of new shares of its
capital stock or before consummation of the merger, all or a
substantial portion of the milestone payment will be paid in
cash. Additionally, the milestone will be paid in cash to the
holders of Predix options and warrants assumed by EPIX in the
merger.
Background of the Merger
On September 14, 2005, the EPIX board of directors
appointed Michael J. Astrue as Interim Chief Executive Officer.
Mr. Astrue replaced Michael Webb, who resigned from EPIX
and its board of directors after Mr. Webb and the EPIX board of
directors came to the mutual decision that EPIX needed a change
in leadership to help it execute its business plan in the
diagnostic imaging field and define and pursue opportunities for
growth beyond diagnostic imaging. Mr. Astrue was hired to,
among other things, pursue opportunities for growth beyond the
diagnostic imaging field and to assist the EPIX board of
directors in the search for a permanent Chief Executive Officer.
During the interview and recruitment process prior to his
appointment as EPIXs Interim Chief Executive Officer and
continuing thereafter, Mr. Astrue had informal discussions
with members of the EPIX board of directors about strategies for
pursuing opportunities for growth beyond the diagnostic imaging
field. After his appointment in September 2005, Mr. Astrue
and the EPIX board of directors agreed to develop a list of
companies with whom to discuss the possibility of a combination
with EPIX. The criteria used to evaluate potential merger
candidates included (a) the number of drug candidates such
companies have in human clinical trials, (b) the quality
and depth of management of the merger candidate, (c) the
geographic location of such companies, with a clear preference
given to Massachusetts-based or virtual companies, and
(d) the avoidance of more speculative technologies. Based
on these
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criteria, Mr. Astrue and the EPIX board of directors agreed
to develop a list of potential merger candidates.
During October 2005, EPIX identified approximately
30 companies that broadly matched these criteria. Of these,
ten companies, including Predix, were prioritized as the
companies that most closely matched these criteria. Each of the
ten companies prioritized by EPIX had at least one product in
clinical trials or expected to be in clinical trials within six
months, was based in eastern Massachusetts, had technology that
was not speculative based on a preliminary evaluation by
EPIXs management and ranged in value from approximately
$30 million to $200 million, based on the estimates of
EPIXs management. The EPIX board of directors instructed
EPIXs management to review these companies more closely
and asked EPIXs management to arrange for representatives
of these companies to meet the EPIX board of directors.
Mr. Astrue and/or Sheila DeWitt, Ph.D., EPIXs
Vice President of Business Development and Strategic Planning,
contacted each of these companies about the possibility of a
combination with EPIX. Each of the companies contacted during
this process was invited to make a presentation to the EPIX
board of directors. As part of the process of contacting these
companies, on October 23, 2005, Mr. Astrue telephoned
Dr. Michael Kauffman, President and Chief Executive Officer
of Predix. During this conversation Mr. Astrue and
Dr. Kauffman discussed EPIXs potential interest in
acquiring Predix.
During October and November 2005, EPIXs management
reviewed publicly available material related to the ten
companies identified by the EPIX board of directors and held
preliminary discussions with each of these companies. The
discussions with each of the ten companies included some or all
of the following topics: an overview of the technology of the
potential merger candidate; an overview of any products being
developed by the potential merger candidate, including any
potential significant technical, clinical or regulatory hurdles
and the size of the likely commercial markets for such products;
a financial overview of the potential merger candidate; the
depth of management of the potential merger candidate; an
overview of EPIXs technology, products and regulatory
status; an overview of EPIXs financial position; and an
overview of EPIXs partnership with Schering AG. At no
point in these discussions did EPIX make or receive a formal
offer from any of these potential merger candidates.
In August 2005, Predix filed with the Securities and Exchange
Commission a registration statement on
Form S-1 covering
the sale of $70,000,000 of Predix common stock in connection
with its proposed initial public offering. In October 2005,
Predix postponed the offering, and subsequently withdrew the
registration statement. The withdrawal of the offering and the
uncertainty of the public equity market required Predix to
consider alternative capital-raising transactions, including
combinations with other companies, strategic collaborations and
private placements of debt or equity securities with existing or
new investors that would result in sufficient capital, now and
in the future, to fund Predixs product development
programs.
In late September and early October 2005, EPIX engaged
Dr. Neil Kirby and Dr. Michael Gilman as consultants
to assist EPIX in its due diligence review of these companies,
specifically to analyze each companys product development
plans and technology, respectively. Certain of EPIXs
existing consultants also assisted EPIX in its review of these
companies.
On October 25, 2005, Dr. Kauffman contacted
Mr. Astrue via
e-mail to indicate that
Predix was interested in participating in EPIXs process
for evaluating potential merger candidates and accepted the
invitation to present an overview of Predixs business and
technology to the EPIX board of directors.
On October 27, 2005, the EPIX board of directors met to
discuss the status of discussions with potential merger
candidates. Three of the merger candidates made presentations to
the EPIX board of directors at this meeting. These presentations
included an overview of the presenting companys business
and technology as well as a rationale for a combination with
EPIX.
On October 28, 2005, EPIX and Predix entered into a
confidentiality agreement.
Throughout October and November 2005, EPIX conducted preliminary
due diligence on each of the potential merger candidates.
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On November 1, 2005, EPIX engaged Chestnut Securities, Inc.
to assist EPIX in evaluating the previously identified merger
candidates and to explore other opportunities to diversify.
Throughout November 2005, EPIX and Chestnut Securities had
numerous discussions about the possibility of a combination of
each previously identified merger candidate with EPIX.
Throughout November and December 2005, Predix was also exploring
a potential private placement of its securities and
opportunities to enter into a strategic transaction with a
public company with sufficient capital to fund its product
development programs, and was conducting active discussions and
due diligence with respect to such potential opportunities. At
no point in these discussions did Predix make or receive a
formal offer regarding such opportunities. Predixs
decision to pursue a transaction with EPIX over these other
potential opportunities was based on, among other things, the
preliminary valuations of Predix being discussed with respect to
the potential transaction, EPIXs assets, financial
position and access to public markets, and the likelihood of
being able to consummate a transaction on terms acceptable to
the Predix board of directors.
On November 21, 2005, the EPIX board of directors again met
to discuss the status of discussions with potential merger
candidates. Five of the merger candidates, including Predix,
made presentations to the EPIX board of directors regarding the
possibility of a business combination between such companies and
EPIX. On the basis of these presentations and the preliminary
due diligence performed by EPIXs management, the EPIX
board of directors determined that Predix was an attractive
merger candidate, and instructed EPIXs management to
continue discussions with Predix about the possibility of a
combination of the two companies. This determination was based
upon the fact that: (a) Predix had several advanced-stage
clinical programs, including PRX-00023 in development for the
treatment of generalized anxiety disorder and PRX-03140 in
development for the treatment of Alzheimers disease;
(b) if approved, the EPIX board of directors believed that
the commercial markets for PRX-00023 and PRX-03140 were likely
to be substantial; (c) the EPIX board of directors viewed
the Predix board of directors and members of Predixs
senior management as capable and experienced; (d) Predix
was based in Massachusetts which the EPIX board of directors
believed would ease the integration of EPIX and Predix upon
completion of the proposed transaction; (e) Predix had a
discovery platform that the EPIX board of directors believed was
capable of producing additional compounds for clinical
development; and (f) Predix expressed an interest in
pursuing EPIXs core diagnostic imaging franchise together
with its therapeutic products under development.
On November 29, 2005, EPIX hired Philip Chase as Vice
President and General Counsel to assist in the analysis,
negotiation and potential consummation of a merger transaction.
On November 29, 2005, the Predix board of directors met to
discuss strategic alternatives following the withdrawal of
Predixs initial public offering, including a possible
merger with another public biotechnology company candidate
engaged in drug discovery.
On November 29, 2005, Frederick Frank, Chairman of the
Predix board of directors, telephoned Mr. Astrue to discuss
the potential valuation of Predix. Specifically, Mr. Frank
indicated that Predix believed that $175 million was an
appropriate valuation of Predix.
Between November 29, 2005 and April 3, 2006,
Mr. Astrue and Christopher Gabrieli, Chairman of the EPIX
board of directors, regularly discussed with Mr. Frank and
Dr. Kauffman the proposed terms and structure of a
potential merger between EPIX and Predix.
On December 2, 2005, members of the EPIX board of directors
met with members of EPIX management to discuss the status of
negotiations between EPIX and potential partners.
On December 2, 2005, EPIX engaged Health Advances to assist
EPIX in conducting due diligence by analyzing the market
potential of product candidates owned or licensed by potential
merger candidates, including Predix.
65
On December 13, 2005, Predix engaged Lehman Brothers as its
financial advisor to advise Predix with regard to a potential
business combination or other strategic transaction, including
the transaction with EPIX, and, if requested by Predix, to
participate in negotiations on Predixs behalf.
On December 14, 2005, Messrs. Astrue, Wirth and
Gabrieli and Albert Holman of Chestnut Securities met with
Dr. Kauffman and Mr. Frank and Jonathan Silverstein, a
director of Predix, at Logan International Airport in Boston,
Massachusetts to discuss the process EPIX intended to use for
evaluating potential merger candidates and the range of possible
valuations of Predix. In addition, there was substantial
discussion about the form of consideration that EPIX would pay
in a transaction and the structure of a transaction. EPIX and
Predix also agreed to begin formal due diligence on one another.
On December 15, 2005, the EPIX board of directors met to
discuss the status of the discussions with the various potential
merger candidates. Based on the previous presentations of the
candidates to the EPIX board of directors and the EPIX board of
directors evaluation of these merger candidates, the EPIX
board of directors decided to narrow the list of potential
merger candidates to four companies, of which Predix was one.
The considerations relied on by the EPIX board of directors to
narrow the list of potential acquisition candidates to four
included excessive valuation expectations of the excluded
parties, EPIXs evaluation of technical and commercial
feasibility of a potential partners drug candidates and
the perceived quality of management of the potential partner.
The EPIX board of directors instructed management to continue
negotiations with Predix and three other companies identified as
attractive merger candidates.
Between December 15, 2005 and April 3, 2006, EPIX
continued discussions with each of the four companies identified
by the EPIX board of directors as the preferred potential merger
candidates, including Predix. EPIX indicated to the three
companies other than Predix that EPIX had identified and was in
negotiations with a preferred potential merger candidate and
that EPIX would be interested in exploring opportunities to
complete a transaction with each should the discussions with the
preferred merger candidate fail to result in a definitive
agreement. Each of these three companies agreed to continue to
have limited discussions with EPIX, including discussions
involving additional review of technical, clinical and
regulatory data of the potential merger candidates and periodic
updates on EPIXs view of the likelihood of entering into a
definitive agreement with its preferred potential merger
candidate. At no point in these discussions did EPIX make or
receive a formal offer from any potential merger candidate other
than Predix.
On December 15, 2005, the Predix board of directors again
met to discuss strategic alternatives available to Predix. The
Predix board of directors discussed the potential advantages and
disadvantages of either entering into a merger transaction with
one of the two public company merger candidates, of which EPIX
was one, being considered by Predix, or undertaking a private
offering of Predixs securities.
Between December 15, 2005 and April 3, 2006, the
management team of EPIX met regularly internally and with
EPIXs outside legal counsel, Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., and financial advisors, Chestnut
Securities, and Needham & Company, LLC after their
engagement on February 16, 2006, to discuss the status of
on-going negotiations and due diligence with the merger
candidates, including Predix.
On December 19, 2005, Dr. Kauffman and other members
of senior management of Predix presented a technical overview of
Predixs lead product candidates to Mr. Astrue and
other members of EPIXs management and consultants at
EPIXs offices in Cambridge, Massachusetts.
On December 21, 2005, Dr. Kauffman contacted
Mr. Gabrieli via
e-mail to discuss the
timing of a potential transaction and the possibility of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. beginning the
preparation of the legal documentation, including a merger
agreement, for the proposed transaction while the parties
continued due diligence and discussions concerning structure and
consideration.
On December 29, 2005, Mr. Frank telephoned
Mr. Astrue to continue discussions regarding the valuation
of Predix and form of consideration to be paid by EPIX.
Messrs. Astrue and Frank discussed whether the initially
proposed $175 million valuation of Predix was appropriate.
66
Between December 31, 2005 and April 3, 2006, the
management of EPIX met regularly with Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., Chestnut Securities, and
Needham & Company, LLC after their engagement on
February 16, 2006, and the management of Predix met with
their outside legal counsel, Goodwin Procter LLP, and Lehman
Brothers to discuss the status of ongoing negotiations and due
diligence. In addition, during the same period, representatives
of Chestnut Securities and Lehman Brothers, regularly discussed
the terms and structure of a potential merger between EPIX and
Predix and performed and discussed due diligence.
On January 6 and January 10, 2006, a team of
EPIXs management and representatives of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. and Chestnut Securities
performed due diligence at the offices of Goodwin Procter LLP in
Boston, Massachusetts, and on January 9, 2006, a team of
EPIXs management and EPIXs advisors performed
additional technical due diligence at the offices of Predix in
Lexington, Massachusetts.
On January 12, 2006, Mr. Holman and Mr. Frank
agreed that EPIX would pay most of the purchase price in stock.
They also discussed the process for valuing EPIX and Predix for
purposes of determining the consideration to be paid to
Predixs equity holders in a potential transaction.
Specifically, Mr. Holman and Mr. Frank discussed using the
market value of EPIX common stock at the time an agreement was
signed for determining the value of consideration to be paid.
Mr. Holman and Mr. Frank agreed that the parties needed to agree
on a specific value for Predix, but did not discuss such value
at that time.
On January 20, 2006, Health Advances presented the EPIX
board of directors and consultants a commercial analysis of
Predixs lead product candidate, PRX-00023, for the
treatment of generalized anxiety disorder. This commercial
analysis included an overview of the current market, competitive
landscape and revenue projections. In addition, the EPIX board
of directors discussed the potential terms of a transaction with
Predix and instructed EPIXs management and Chestnut
Securities to continue to perform due diligence on Predix. In
particular, the EPIX board of directors discussed the valuation
of Predix. The EPIX board of directors noted that its valuation
of Predix was predicated on Predixs receipt of positive
clinical data or the consummation of a substantial business
development transaction. The EPIX board of directors discussed
the possibility of including a milestone payment relating to
significant clinical efficacy or consummation of a substantial
business development transaction in the potential transaction.
On January 24, 2006, management of EPIX and Health Advances
and Dr. Kauffman and other members of Predixs
management and representatives of Chestnut Securities discussed
the market size for generalized anxiety disorder and depression.
After these discussions, EPIX decided to contact individuals
identified by Predix and to engage independent experts to assist
the EPIX board of directors to accurately estimate the potential
market size for treatments for both generalized anxiety disorder
and depression.
After these discussions, EPIX engaged Dr. Maurizio Fava and
Dr. Jerrold Rosenbaum to assist it in analyzing the
potential safety and efficacy profile of PRX-00023 and
Dr. Brad Hyman to assist it in analyzing the potential
safety and efficacy profile of Predixs second product
candidate, PRX-03140 for the treatment of Alzheimers
disease.
On January 30 and January 31, 2006, representatives of
EPIX and Predix discussed outstanding due diligence items,
including the status of discussions between Predix and potential
out-licensing partners for Predixs product candidates and
the status of potential in-licensing opportunities for EPIX.
On February 1, 2006, Dr. Kauffman and members of
Predixs management met with representatives of Health
Advances at the offices of EPIX in Cambridge, Massachusetts to
discuss Health Advances assessment of the generalized
anxiety disorder market. Mr. Astrue and other members of
EPIXs management and EPIX advisors were also present.
On February 7, 2006, several members of Predixs
management conducted due diligence of EPIX at the offices of
EPIX in Cambridge, Massachusetts. Messrs. Chase and Holman
separately discussed with Dr. Kauffman the possibility of
Dr. Kauffman addressing the EPIX board of directors
regarding Predixs lead product candidates and the market
potential of PRX-00023 in each of generalized anxiety disorder
and depression.
67
Between February 6 and February 9, 2006,
representatives of Lehman Brothers had several discussions with
representatives of EPIX regarding the proposed terms of the
potential transaction. During this time, Messrs. Gabrieli and
Frank also discussed the valuation of Predix. Mr. Gabrieli
proposed total consideration, including contingent payments, of
approximately $120 million to $125 million and
Mr. Frank indicated that Predix believed that total
consideration, including contingent payments, of approximately
$130 million to $135 million was appropriate. Messrs.
Gabrieli and Frank agreed to make some portion of the
consideration to be paid to Predix equity holders contingent on
the receipt of positive clinical data or the consummation of a
substantial business development transaction although they
continued to discuss what portion of the total consideration
should be contingent. Other topics of discussion included the
upcoming board of directors meetings of EPIX and Predix,
including a discussion of Dr. Kauffmans proposed
presentation.
On February 10, 2006, the EPIX board of directors met to
discuss the status of due diligence and negotiations. At that
meeting, Drs. Fava, Rosenbaum and Hyman presented an
analysis of the risks and potential benefits associated with
PRX-00023 and PRX-03140. Also at that meeting, Dr. Gilman
presented conclusions with respect to the strengths and
weaknesses of Predixs technology platform. Each of
Drs. Fava, Rosenbaum, Hyman and Gilman also answered
questions from members of the EPIX board of directors.
Representatives of Health Advances also led a discussion
regarding additional commercial analyses performed by them
related to PRX-00023
for both the treatment of generalized anxiety disorder and
depression. These analyses included an overview of the current
market, competitive landscape and revenue projections.
Dr. Kauffman also presented Predixs perspective on
the analyses performed by Health Advances and provided an
overview of the potential product pipeline and management of the
combined company. In addition, Mr. Holman discussed a
preliminary financial valuation analysis of Predix with the EPIX
board of directors, which included various assumptions
regarding, among other things, the success of Predixs
future clinical trials and the probability of Predix entering
into a substantial business development transaction. The EPIX
board of directors reiterated the importance of making a
significant portion of consideration sought by Predix contingent
upon the receipt of positive clinical data or the consummation
of a substantial business development transaction.
On February 10, 2006, representatives of Lehman Brothers
discussed with representatives of EPIX the consideration to be
paid by EPIX in the transaction. EPIX and Predix agreed that,
based on EPIXs market capitalization at that time, the
consideration to be paid to Predix equity holders in a potential
transaction would consist of approximately 49% of the EPIX
common stock outstanding after the transaction, on a
fully-diluted basis, and a contingent payment based on the
receipt of positive clinical data or the consummation of a
substantial business development transaction within
approximately two years of closing the merger transaction. In
determining the value of the contingent payment, the parties
discussed a valuation of Predix of up to approximately
$128 million, subject to adjustments for any future
financing of Predix.
On February 13, 2006, the Predix board of directors
convened by teleconference to discuss the proposed merger
transaction with EPIX, including the proposed deal structure and
terms, and the advantages and disadvantages of the proposed
transaction.
After the February 10, 2006 meeting of the EPIX board of
directors and the February 13, 2006 meeting of the Predix
board of directors, each board of directors authorized
management of their respective company to negotiate the terms of
a merger agreement consistent with the terms generally discussed
at each board of directors meeting.
On February 15, 2006, EPIX engaged Needham &
Company, LLC to assist it in evaluating the potential merger and
valuing Predix.
On February 15, 2006, Predix circulated via electronic mail
to the members of the Predix board of directors an analysis
prepared by Lehman Brothers. The analysis compared a potential
EPIX transaction with potential scenarios for Predix as a going
concern on a stand-alone basis.
On February 16, 2006, EPIX provided Predix with the initial
draft of the merger agreement.
68
Between February 16 and April 3, 2006, EPIX and Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Predix and
Goodwin Procter LLP exchanged numerous drafts of the merger
agreement and its various exhibits, including the form of voting
agreement, the form of lock-up agreement and the form of
affiliates agreement. Throughout this period, EPIX, Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Chestnut
Securities and Predix, Goodwin Procter LLP and Lehman Brothers
engaged in negotiations regarding the merger agreement and
related documentation. During this period, the parties also
discussed termination fees, closing conditions, possible
financing mechanisms for Predix and the terms of thereof,
potential board and management structures of the combined
company and the structure of the transaction. Throughout this
period, representatives of EPIX and Predix continued their
diligence investigation of the other party.
On February 22, 2006, Dr. Kauffman and an advisor met
with Mr. Astrue and his advisors at EPIX to discuss
communication strategies in the event that EPIX and Predix
entered into a transaction.
On February 27, 2006, Mr. Astrue met with a member of
the board of directors and the chief executive officer of a
company he had previous discussions with about a possible
transaction with EPIX, but was not involved in EPIXs
formal review process to again discuss the possible combination
of EPIX and this company.
On March 1, 2006, members of management of EPIX, Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Chestnut
Securities and Predix, Goodwin Procter LLP and Lehman Brothers
met at the offices of Goodwin Procter LLP in Boston,
Massachusetts to discuss significant issues related to a
potential merger between EPIX and Predix and the then-current
draft of the merger agreement, including the composition of the
management and board of directors of the combined company, the
circumstances in which any contingent payment would be made to
the Predix equity holders, the circumstances in which either
party would have the right to terminate the merger agreement and
the circumstances in which any termination fee would be paid by
either company in the event that the merger was not consummated.
On March 2, 2006, as a follow up to Mr. Astrues
February 27, 2006 meetings, members of EPIXs
management met with members of management of the new merger
candidate to discuss this candidates product portfolio.
On March 3, 2006, Messrs. Gabrieli and Frank discussed
possible financing mechanisms for Predix pending the closing of
any transaction with EPIX, the possibility of making a minimum
stock price for EPIX a closing condition to the merger,
composition of the combined companys board of directors
and management and other issues related to the structure of the
transaction.
On March 6, 2006, the EPIX board of directors met and
discussed the status of negotiations with Predix. The EPIX board
of directors also discussed the possibility of adding additional
members to the EPIX board of directors. The management of the
new merger candidate also presented to the EPIX board of
directors. The EPIX board of directors instructed EPIXs
management to begin due diligence on this company.
Throughout March 2006, members of EPIXs management met
several times with representatives of the new merger candidate
to perform due diligence.
On March 8, 2006, the Predix board of directors convened by
teleconference to discuss the merger transaction. A
representative of Lehman Brothers provided a detailed summary of
the proposed terms of a merger between Predix and EPIX.
Mr. Gabrieli then joined the meeting and presented
EPIXs view of the proposed merger. Following the
presentations, the Predix board of directors discussed the
proposed transaction, after which they authorized Predix to
continue negotiations in connection with a potential merger
transaction with EPIX.
From March 13 through March 27, 2006,
Messrs. Gabrieli and Astrue and Dr. Kauffman, along
with representatives of Chestnut Securities and Lehman Brothers,
discussed at various times the structure, timing and terms of
the proposed transaction as well as possible communication
strategies related to the announcement of the potential merger.
69
On March 16, 2006, the Predix board of directors met to
discuss the status of the proposed merger transaction with EPIX,
as well as the possibility of a financing of Predix. A
representative of Lehman Brothers provided the directors with an
update regarding the status of negotiations regarding the
structure and terms of the merger transaction with EPIX.
On March 27, 2006, the EPIX board of directors met
telephonically to discuss the terms of a potential merger with
Predix. In particular, the EPIX board of directors discussed
open issues relating to the size, timing and form of a milestone
payment.
On March 29, 2006, the Predix board of directors convened
by teleconference to discuss the merger transaction as well as a
proposed financing of Predix by certain existing Predix
investors. The Predix board of directors resolved to authorize
Predix to enter into the financing arrangement, along with all
other acts necessary to complete the financing, including
amendments to the certificate of incorporation and the
stockholders agreement.
Between March 29 and April 1, 2006,
Messrs. Gabrieli and Frank and representatives of Chestnut
Securities and Lehman Brothers discussed the circumstances in
which a milestone payment would be paid and the possibility of
deferring a portion of the milestone payment.
On March 30, 2006, the EPIX board of directors met to
discuss the status of and the terms of the potential merger with
Predix. Representatives of Needham & Company, LLC,
financial advisor to EPIX, discussed the results of
Needham & Company, LLCs analyses of stock trading
history, selected recent mergers and acquisitions in the
biotechnology industry, selected recent initial public offerings
of biotechnology companies and selected companies comparable to
Predix. Based on these analyses, a representative of
Needham & Company, LLC reported that, in the opinion of
Needham & Company, LLC, as of March 30, 2006, the
consideration to be paid by EPIX in the proposed acquisition of
Predix is fair to EPIX and its stockholders from a financial
point of view. The board of directors discussed the status of
negotiations, the advisability of entering into the transaction
and provided guidance with respect to how to resolve open issues
in the negotiations between EPIX and Predix.
On April 1, 2006, Messrs. Gabrieli and Frank and
representatives of Chestnut Securities and Lehman Brothers
agreed to fix the aggregate contingent milestone payment at
$35 million.
On April 2, 2006, the parties completed their diligence
reviews and finalized the terms of the merger agreement and
related documentation.
On April 2, 2006, the Predix board of directors convened by
teleconference to discuss the merger agreement and merger,
including the material terms of the transaction and the
consideration to be received by the Predix stockholders.
Following the discussion, the Predix board of directors approved
the merger transaction with EPIX and the merger agreement and
authorized all acts necessary to complete the merger.
On April 2, 2006, the EPIX board of directors met
telephonically. Mr. Holman led a discussion regarding the
resolution to the outstanding issues identified at the meeting
of the board of directors held on March 30, 2006. After
discussion of these issues and other matters relating to the
merger, the EPIX board of directors voted unanimously to approve
the merger with Predix and to recommend that stockholders of
EPIX approve the merger with Predix.
On April 3, 2006, EPIX and Predix entered into a definitive
merger agreement and issued a joint press release announcing the
transaction.
On July 10, 2006, EPIX and Predix entered into amendment
no. 1 to the merger agreement to provide for the extension
of the termination date of the merger agreement from
July 31, 2006 to August 31, 2006 and to reflect
certain technical modifications.
70
EPIXs Reasons for the Merger
In evaluating the merger, the EPIX board of directors consulted
with EPIXs management, EPIXs outside legal and
financial advisors and external experts in various aspects of
its review of Predixs clinical development programs, the
potential markets for Predixs drug candidates and various
other market analyses. These consultations included, among other
things, extensive discussions regarding: (a) strategic
alternatives to the merger, including extensive discussions of
other potential merger candidates and of continuing to operate
the EPIX business without entering into a merger transaction,
(b) the business and strategic plans of the combined
company and of an independent EPIX, (c) the risks
associated with executing the business and strategic plans of
the combined company and of an independent EPIX, (d) the
financial position of the combined company and of an independent
EPIX, (e) the status of the FDAs approval process for
Vasovist in particular and imaging products in general,
(f) the prospects for executing the EPIX board of
directors previously disclosed strategy of obtaining
therapeutic products through internal development, in-licensing
transactions, or alternative transformative transactions,
(g) the historical trading prices of EPIXs common
stock and (h) the terms and conditions of the merger
agreement.
The EPIX board of directors also considered that it had
previously made the determination that EPIX should diversify
from the diagnostic imaging business and expand into the
development of therapeutic drug products. Since making that
determination, the EPIX board of directors has examined several
possible means of acquiring therapeutic products, including
through internal development, in-licensing and corporate
acquisitions. In September 2005, the EPIX board of directors
hired Michael J. Astrue as Interim Chief Executive Officer to
thoroughly examine the prospects of EPIX entering into a merger
transaction. In light of EPIXs prior efforts to in-license
technology and to develop therapeutic products internally, EPIX
determined that it needed to supplement those means of obtaining
therapeutic products by exploring the possibility of entering
into a corporate acquisition.
As discussed more fully in the Background of the
Merger above, EPIX entered into a process by which it
examined a number of potential merger candidates and determined
that Predix was the most suitable candidate with which to enter
into a merger transaction. In reaching this determination, the
EPIX board of directors considered a number of additional
positive factors, including the following:
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In examining the quality of potential merger candidates, EPIX
focused on a number of factors, including the depth of the
potential candidates product pipeline. In particular, EPIX
reviewed companies with at least two products in clinical
development. The EPIX board of directors noted that Predix has
three product candidates in clinical development, and that
Predix expects to submit an IND to the FDA for a fourth product
candidate in 2006. The EPIX board of directors also considered
that some of Predixs product candidates are being or will
be investigated for multiple indications. The EPIX board of
directors noted that Predix had as many or more product
candidates in clinical development than any of the other
potential merger candidates considered by the EPIX board of
directors. |
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In examining the quality of potential partners, EPIX also
focused on the presence or absence of a technology platform that
could provide the basis for development of additional product
candidates. The EPIX board of directors noted Predixs drug
development history, including the speed and efficiency with
which Predixs discovery scientists were able to produce
drug candidates with affinity for the intended target receptor
and a lack of affinity for other off-target receptors. The EPIX
board of directors believes that Predixs efficient and
effective drug discovery platform is well-positioned to continue
to deliver product candidates for development by the combined
company. |
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The EPIX board of directors noted that there are a large number
of therapeutics companies that develop therapeutic product
candidates based on technologies that the EPIX board of
directors considers speculative, including gene therapy products
and RNA interference products. The EPIX board of directors
deliberately sought companies whose technology it believed was
less speculative and based on established science and drug
development methods. Although the EPIX board of directors
recognized that substantial risks still remain in the
development of therapeutic products, it |
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noted that Predixs technology allows for the discovery and
development of drug candidates that interact with clinically and
commercially validated target proteins. The EPIX board of
directors believes that the acceptance of these proteins as
viable therapeutic targets and Predixs ability to develop
drug candidates that have affinity for these target receptors
and lack affinity for other off-target receptors substantially
reduces the risks inherent in drug discovery and development. |
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In examining the quality of potential merger candidates, EPIX
focused on the presence or absence of a strong permanent
management team. The EPIX board of directors noted at the time
that Mr. Astrues agreement with EPIX was scheduled to
expire in May 2006. In addition, EPIX has been without a Chief
Financial Officer since July 2005. The EPIX board of directors
also noted that several other of EPIXs significant
management positions are currently filled by consultants or by
employees operating in an interim capacity. For the foregoing
reasons, the EPIX board of directors considered the capability
of the management of each of the potential merger candidates to
lead a combined company after the departure of Mr. Astrue
and the others filling management positions at EPIX on a
short-term basis. The EPIX board of directors believes
Dr. Kauffman, in particular, has the leadership skills and
track record of success in the clinical development of
therapeutic products to lead the combined company. The EPIX
board of directors also noted that strengths of the other
members of Predixs management were highly complementary to
the strengths of the full-time members of EPIXs management
team. |
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The EPIX board of directors also considered the commitment of
potential merger candidates to maintain EPIXs core
franchise in medical imaging in order to build a diversified
specialty pharmaceuticals company. |
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The EPIX board of directors noted the difficulties inherent in
combining any two organizations and also noted the significant
incremental difficulty in integrating two organizations that are
geographically diverse. The EPIX board of directors, therefore,
limited its search to companies in and around Boston,
Massachusetts, or to virtual companies whose management
expressed a willingness to move to the greater Boston,
Massachusetts area. Predix, based in Lexington Massachusetts,
clearly met this pre-specified criteria. |
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The EPIX board of directors also considered the opinion that
Needham & Company, LLC rendered that, as of
March 30, 2006, the consideration to be paid by EPIX in the
merger to the equity holders of Predix (including the holders of
options and warrants) was fair, from a financial point of view,
to EPIX and the holders of EPIX common stock. |
The members of the EPIX board of directors also identified and
considered a number of factors, uncertainties and risks,
including the following:
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the risk that the potential benefits of the merger might not be
realized, including the risk that EPIX will not successfully
convert its focus from solely developing diagnostics product
candidates to developing a combination of diagnostic product
candidates and therapeutic product candidates; |
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the fact that Predixs product candidates are at early
stages of development, are subject to significant development
risks and target extremely competitive markets, which the EPIX
board of directors weighed against the portfolio of other
potential transaction candidates that were considered and
against the risks inherent in continuing to pursue the approval
of Vasovist in the United States; |
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the price volatility of EPIXs common stock, which may
increase the value of the EPIX common stock that Predix
stockholders will receive upon the consummation of the merger
and, in particular, possibly result in the holders of Predix
common stock and preferred stock receiving significantly more
consideration in the merger; |
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the inability of EPIXs stockholders to realize the
long-term value of the successful execution of EPIXs
current strategy as an independent company; |
72
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the possible loss of key management, technical or other
personnel of either of the combining companies as a result of
the management and other changes that will be implemented in
integrating the businesses; |
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the risk of diverting managements attention from other
strategic priorities to implement merger integration efforts; |
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the risk that the merger may not be completed, and that a more
limited range of alternative strategic transactions would be
available to EPIX in that event; |
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the substantial charges expected to be incurred in connection
with the merger, including transaction fees and expenses arising
from or in connection with the merger; and |
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various other applicable risks associated with the combined
company and the merger, including those described under the
section entitled Risk Factors elsewhere in this
joint proxy statement/ prospectus. |
The EPIX board of directors weighed the benefits, advantages and
opportunities of a potential transaction against the negative
factors described above, including the possible diversion of
management attention for an extended period of time. The EPIX
board of directors realized that there can be no assurance about
future results, including results expected or considered in the
factors listed above. However, the EPIX board of directors
concluded that the potential benefits outweighed the potential
risks of completing the merger.
After consideration of the foregoing factors, among others, the
EPIX board of directors has unanimously approved the merger
agreement, the merger and the issuance of EPIX common stock as a
result thereof and recommends approval of the issuance of the
shares of EPIX common stock in the merger, the merger and the
approval of the amendment to EPIXs restated certificate of
incorporation by the shareholders of EPIX.
In reaching its decision, the EPIX board of directors consulted
with EPIXs management with respect to strategic and
operational matters and with EPIXs legal counsel with
respect to the merger agreement and the transactions
contemplated thereby. The EPIX board of directors also consulted
with Chestnut Securities and Needham & Company, LLC
with respect to the financial aspects of the merger.
The preceding discussion of the reasons for the EPIX board of
directors recommendation is not intended to be exhaustive,
but does set forth all material factors considered by the EPIX
board of directors in reaching its recommendation. The EPIX
board of directors did not quantify or otherwise assign relative
weights to the specific factors considered while determining its
recommendation. In addition, individual members of the EPIX
board of directors may have given different weights to different
factors.
Recommendation of EPIXs Board of Directors
After careful consideration, the EPIX board of directors
unanimously approved the merger agreement and the merger and
determined that the merger and the merger agreement are
advisable, and in the best interests of, the stockholders of
EPIX. Therefore, the EPIX board of directors recommends EPIX
stockholders vote FOR the issuance of the shares of EPIX
common stock in the merger, the approval of the merger, the
approval of the amendment to EPIXs restated certificate of
incorporation and the authorization of the EPIX board of
directors to amend in its discretion EPIXs restated
certificate of incorporation to effect a reverse stock split.
In considering the recommendation of the EPIX board of directors
with respect to the issuance of the shares of EPIX common stock
in the merger, the merger and the approval of the amendment to
EPIXs restated certificate of incorporation, you should be
aware that directors and executive officers of EPIX may have
interests in the merger that are different from, or are in
addition to, the interests of EPIX stockholders. Please see
The Merger Interests of EPIXs Directors
and Management.
73
Opinion of EPIXs Financial Advisor
The board of directors engaged Needham & Company, LLC,
or Needham & Company, to render a fairness opinion with
respect to the merger. At a meeting of the EPIX board of
directors on March 30, 2006, Needham & Company
delivered its oral opinion, which opinion was subsequently
confirmed in writing, to the effect that, as of March 30,
2006, and based upon and subject to the factors, assumptions and
limitations set forth in the written opinion and described
below, the consideration to be paid by EPIX in the merger to the
equity holders of Predix (including the holders of options and
warrants) was fair, from a financial point of view, to EPIX and
the holders of EPIX common stock.
The amount and form of consideration to be paid in the merger
was determined through arms-length negotiations between
EPIX and Predix and not by Needham & Company.
Needham & Company was not asked to consider, and the
Needham & Company opinion does not address, the
underlying business decision of EPIX to engage in the merger,
the relative merits of the merger as compared to other business
strategies that might exist for EPIX, or the effect of any other
transaction in which EPIX might engage.
The complete text of the written opinion of Needham &
Company, dated March 30, 2006, which sets forth the
assumptions made, matters considered, limitations on and scope
of the review undertaken by Needham & Company, is
attached to this joint proxy statement/ prospectus as
Annex C and is incorporated herein by reference, all as
consented to by Needham & Company. You are encouraged to,
and should, read the Needham & Company opinion
carefully and this summary of the written opinion of
Needham & Company is qualified in its entirety by
reference to the full text of such opinion. A materially
complete discussion of the fairness opinion is set forth in this
joint proxy statement/prospectus. The Needham & Company
opinion addresses only the fairness, from a financial point of
view, to EPIX and to the holders of EPIX common stock of the
consideration to be paid by EPIX in the proposed merger to the
equity holders of Predix (including the holders of options and
warrants). The Needham & Company opinion does not
address any other aspect of the merger and does not express an
opinion or recommendation to any director, stockholder or other
person as to how to vote or act with respect to the merger. No
limitations were imposed by the EPIX board of directors with
respect to the investigations made or procedures followed by
Needham & Company in rendering its opinion.
In arriving at its opinion, Needham & Company reviewed
the following:
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(a) a draft of the merger agreement dated March 29,
2006 together with the exhibits and schedules thereto; |
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(b) certain publicly available information concerning EPIX
and Predix, including publicly available filings and the
websites of EPIX and Predix, and certain other relevant
financial and operating data of EPIX and Predix furnished to us
by EPIX and Predix; |
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(c) materials prepared by EPIX concerning the business,
operations and prospects of EPIX and Predix and the combined
company; |
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(d) materials prepared by Predix concerning the business,
operations and prospects of Predix; |
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(e) financial forecasts with respect to EPIX, Predix and
the combined company prepared by the management of EPIX; |
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(f) financial forecasts with respect to Predix prepared by
the management of Predix; |
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(g) certain publicly available financial data of companies
whose securities are traded in the public markets and that
Needham & Company deemed relevant to similar data for
EPIX; |
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(h) the trading history of EPIX common stock; and |
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(i) the financial terms of certain other business
combinations that Needham & Company deemed generally
relevant. |
74
In addition, Needham & Company held discussions with
members of management of EPIX and Predix concerning the
business, operations and prospects of EPIX, Predix and the
combined company, including the potential cost savings and other
synergies that may be achieved by the combined company.
Needham & Company also performed and/or considered such
other studies, analyses, inquiries, correspondence and
investigations as it deemed appropriate.
In connection with its review and arriving at its opinion,
Needham & Company, with Predixs and EPIXs
consent, assumed and relied upon the accuracy and completeness
of all financial and other information discussed with or
reviewed by Needham & Company for purposes of its
opinion and neither attempted to verify independently nor
assumed responsibility for verifying such information. With
respect to the financial forecasts for EPIX, Predix and the
combined company and the prospects of the combined company
provided to Needham & Company by Predix and EPIXs
managements, Needham & Company assumed, with Predix and
EPIXs consent and based upon discussions with
Predixs and EPIXs managements, that such forecasts
have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of such management,
at the time of preparation, of the future operating and
financial performance of EPIX, Predix and the combined company.
Needham & Company relied upon the estimates of EPIX and
Predixs managements of the potential cost savings and
other synergies, including the amount and timing thereof, that
may be achieved as a result of the merger. Needham &
Company expressed no opinion with respect to any of such
forecasts or estimates or the assumptions on which they were
based.
Needham & Company relied on advice of counsel given to
EPIX as to all legal matters and advice of independent
accountants given to EPIX as to all financial reporting matters,
all with respect to EPIX, the merger and the draft merger
agreement. Needham & Company did not assume any
responsibility for or make or obtain any independent evaluation,
appraisal or physical inspection of the assets or liabilities of
EPIX or Predix, nor was Needham & Company furnished
with these materials. Needham & Companys services
to EPIX in connection with the merger were comprised of
rendering an opinion of the fairness, from a financial point of
view, of the consideration to be paid by EPIX in connection with
the merger to the equity holders of Predix (including the
holders of options and warrants). Needham &
Companys opinion was necessarily based upon economic,
monetary and market conditions and other circumstances as they
existed and could be evaluated by Needham & Company on
the date of its opinion. It should be understood that, although
subsequent circumstances and events may affect its opinion,
Needham & Company does not have any obligation to
update, revise or reaffirm its opinion and Needham &
Company expressly disclaims any responsibility to do so.
In rendering its opinion, Needham & Company assumed
that the merger would qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended, and would be consummated upon the terms and
subject to the conditions set forth in the merger agreement
without material alteration or variation thereof.
The following is a summary of the principal financial analyses
Needham & Company performed to arrive at its opinion.
Some of the summaries of financial analyses set forth below
include information presented in tabular format. In order to
fully understand the financial analyses, the tables must be read
together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses.
Considering the data set forth in the tables without considering
the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of the
financial analyses. Additionally, although the financial metrics
of the comparable companies were used for comparison purposes,
none of them is directly comparable to Predix.
To provide contextual data regarding the timing of EPIXs
decision to enter into the merger agreement, Needham &
Company reviewed the historical market prices of EPIX common
stock at various
75
points over the 24 months ended March 28, 2006. This review
illustrated the correlation between the historical market prices
of EPIX common stock and the business and operations of EPIX,
and the status of the regulatory approval process for each of
EPIXs product candidates during the same period. Needham
& Company noted that, over the 24 months ended
March 28, 2006, the high and low closing prices of EPIX
common stock were $25.99 and $3.53, respectively, with the low
occurring on March 28, 2006. From March 28, 2006 to
July 13, 2006, the high and low closing prices of EPIX
common stock were $4.85 and $2.77, respectively.
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Comparable Transactions Analysis |
Needham & Company reviewed selected data for Predix and
compared this data to corresponding data from a group of 20
selected merger and acquisition transactions, which
Needham & Company believed to be comparable to the
merger based on a number of factors, including but not limited
to the timing of the transaction, whether the companies had
therapeutic programs in a similar stage of development and the
indication targeted to be addressed. Each of the comparable
merger and acquisition transactions involved a transaction
announced and completed since January 1, 2003 and a target
company that had a therapeutic program that was in a similar
stage of development as Predixs therapeutic program. The
comparable merger and acquisition transactions reviewed by
Needham & Company were:
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Xcyte Therapies, Inc.s acquisition of Cyclacel Ltd. |
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Maxim Pharmaceuticals, Incs merger with EpiCept Corporation |
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Corgentech, Incs merger with AlgoRx Pharmaceuticals, Inc. |
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Vernalis plcs acquisition of Cita Neuropharmaceuticals,
Inc. |
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Clinical Data, Incs acquisition of Genaissance
Pharmaceuticals, Inc. |
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Celtic Pharmaceutical Holdings LPs acquisition of Xenova
Group plc |
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Epimmune, Incs merger with IDM Pharma, Inc. |
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GlaxoSmithKline, Inc.s acquisition of Corixa Corporation |
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Cephalon, Inc.s acquisition of Salmedix, Inc. |
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Johnson & Johnsons acquisition of Peninsula
Pharmaceuticals, Inc. |
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Johnson & Johnsons acquisition of TransForm
Pharmaceuticals, Inc. |
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Aphton Corporations acquisition of Igeneon AG |
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VI Technologies, Inc.s merger with Panacos
Pharmaceuticals, Inc. |
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MGI Pharma, Incs acquisition of Zycos, Inc. |
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MGI Pharma, Incs acquisition of Aesgen Pharmaceuticals,
Inc. |
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Amgen Corporations acquisition of Tularik, Inc. |
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Pfizer, Inc.s acquisition of Esperion Therapeutics, Inc. |
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Cell Therapeutics, Inc.s merger with Novuspharma Spa |
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Allergan, Inc.s acquisition of Oculex Pharmaceuticals, Inc. |
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OSI Pharmaceuticals, Inc.s acquisition of Cell Pathways,
Inc. |
Of these 20 transactions reviewed, four had contingent payments.
76
The financial and valuation data analyzed as part of this
analysis included:
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Low | |
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Median | |
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Mean | |
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High | |
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Predix | |
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(At March 28, 2006) | |
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(In millions) | |
Initial Equity Purchase Price
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$ |
25.2 |
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$ |
112.2 |
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$ |
260.2 |
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$ |
1,675.2 |
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$ |
82.2 |
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Enterprise Value(1)
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$ |
7.2 |
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$ |
91.7 |
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$ |
240.9 |
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$ |
1,486.3 |
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$ |
127.8 |
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Enterprise Value(2)
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$ |
7.2 |
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$ |
87.5 |
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$ |
233.3 |
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$ |
1,486.3 |
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$ |
90.0 |
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(1) |
Includes contingent payment |
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(2) |
Does not include contingent payment |
This data illustrates that the Predix initial equity purchase
price and enterprise value, both with and without the contingent
payment, are below the mean from the identified comparable
transactions, consistent with the conclusions presented by
Needham & Company in its fairness opinion.
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Comparable Public Companies Analysis |
Needham & Company reviewed selected data, including
cash and indebtedness, sufficient to determine the equity and
enterprise value of Predix and compared this data to certain
publicly available financial, operating and stock market data,
including shares outstanding, last publicly reported sale price
of common stock, cash and indebtedness, sufficient to determine
the equity and enterprise values of selected publicly traded
companies that are in the biotechnology industry and have lead
therapeutic programs that Needham & Company believes
are similar to those of Predix. Needham & Company then
analyzed the relevance and comparability of these companies
based on various factors, including but not limited to the sizes
of the companies and whether the company had a therapeutic
program in a similar stage of development. The comparable public
companies reviewed by Needham & Company were:
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Myriad Genetics, Inc. |
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Neurochem, Inc. |
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Nastech Pharmaceutical Company, Inc. |
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Acadia Pharmaceuticals, Inc. |
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NeuroSearch A/ S |
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Cortex Pharmaceuticals, Inc. |
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Amarin Corporation |
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Neurogen Corp. |
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Cypress Bioscience, Inc. |
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Cytrx Corporation |
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Corcept Therapeutics, Inc. |
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Memory Pharmaceuticals Corp. |
77
The financial and valuation data analyzed as part of this
analysis included:
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Comparable Public Company Values |
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(At March 28, 2006) |
|
Predix |
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Low |
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Median |
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Mean |
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High |
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(At March 28, 2006) |
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(In millions) |
Equity Value
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$ |
104.8 |
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$ |
206.6 |
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$ |
301.5 |
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$ |
997.8 |
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$ |
82.2 |
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Enterprise Value
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$ |
60.4 |
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$ |
158.2 |
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$ |
233.9 |
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$ |
762.7 |
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$ |
127.8 |
(1) |
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(1) |
Includes contingent payment. |
For each of these comparable companies, Needham &
Company calculated equity value and enterprise value, based on
closing stock prices on March 28, 2006.
This data illustrates that both the equity and enterprise value
of Predix were below the median and the mean of the identified
comparable public companies, consistent with the conclusions
presented by Needham & Company in its fairness opinion.
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Comparable Biotechnology Initial Public Offerings
Analysis |
Needham & Company reviewed selected data for Predix and
compared this data to certain publicly available financial,
operating and stock market data for selected initial public
offerings of the stock of companies in the biotechnology
industry during the period from January 1, 2005 through
March 28, 2006. The comparable biotechnology initial public
offerings reviewed were:
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Alexza Pharmaceuticals, Inc. |
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Iomai Corp. |
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SGX Pharmaceuticals, Inc. |
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Altus Pharmaceuticals, Inc. |
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Somaxon Pharmaceuticals, Inc. |
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CombinatoRx Corporation |
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Accentia Biopharmaceuticals, Inc. |
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Coley Pharmaceutical Group, Inc. |
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Advanced Life Sciences Holdings, Inc. |
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XenoPort, Inc. |
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Aspreva Pharmaceuticals Corp. |
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Threshold Pharmaceuticals, Inc. |
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Icagen, Inc. |
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Favrille, Inc. |
78
The financial and valuation data analyzed as part of this
analysis included:
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Comparable IPO Values | |
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(At March 28, 2006) | |
|
Predix | |
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Low | |
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Median | |
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Mean | |
|
High | |
|
(At March 28, 2006) | |
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| |
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| |
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| |
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| |
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| |
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(In millions) | |
Equity Value
|
|
$ |
85.2 |
|
|
$ |
189.7 |
|
|
$ |
203.7 |
|
|
$ |
396.8 |
|
|
$ |
82.2 |
|
Enterprise Value
|
|
$ |
57.4 |
|
|
$ |
106.0 |
|
|
$ |
132.4 |
|
|
$ |
287.9 |
|
|
$ |
127.8 |
(1) |
|
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(1) |
Includes contingent payment. |
This data illustrates that both the equity and enterprise value
of Predix were below the mean of the identified comparable
biotechnology initial public offerings, consistent with the
conclusions presented by Needham & Company in its fairness
opinion.
An analysis of the above-presented comparison results is not
purely mathematical, but instead involves complex considerations
and judgments concerning differences in historical financial and
operating characteristics of the companies involved and other
factors that could affect the trading value of such companies.
Although the summary set forth above does not purport to be a
complete description of the analyses performed by
Needham & Company in connection with the rendering of
its opinion, the material analyses performed by
Needham & Company in rendering its opinion have been
summarized above. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant
quantitative and qualitative methods of financial analyses and
the application of those methods to the particular
circumstances; and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description.
Needham & Company did not attribute any particular
weight to any analysis or factor considered by it, but rather
made qualitative judgments as to the significance and relevance
of each analysis and factor. Accordingly, Needham &
Company believes, and has advised the EPIX board of directors,
that its analyses must be considered as a whole and that
selecting portions of its analyses or the factors it considered,
without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its
opinion. In its analyses, Needham & Company made
numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many
of which are beyond the control of EPIX and Predix or the
combined company. Included in these assumptions were that there
would be no material changes in the regulatory and other legal
framework in which EPIX and Predix operate, that the market
would be accepting of the products being developed by EPIX and
Predix, that there would not be a material change in the
competitive landscape in which EPIX and Predix operate and that
there would be continued general economic stability. These
analyses performed by Needham & Company are not
necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less
favorable. Additionally, analyses relating to the values of
businesses or assets do not purport to be appraisals or
necessarily reflect the prices at which businesses or assets may
actually be sold. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty, being based upon
numerous factors or events beyond the control of EPIX and Predix
or the combined company or their respective advisors. None of
EPIX, Predix, the combined company, Needham & Company
or any other person assumes responsibility if future results are
materially different from those projected. Needham &
Companys opinion and its related analyses were only one of
many factors considered by the EPIX board of directors in its
evaluation of the merger and should not be viewed as
determinative of the views of the EPIX board of directors with
respect to the fairness of the total consideration payable to
the equity holders of Predix (including the holders of options
and warrants) in connection with the merger.
Needham & Company and its affiliates in the ordinary
course of business have from time to time provided, and in the
future may continue to provide, investment banking and financial
advisory services to EPIX and have received, and may in the
future receive, fees for the rendering of such services. In 2004,
79
Needham & Company provided advisory services to EPIX in
connection with a convertible debt offering by EPIX and received
a fee of $458,380.01 in connection therewith. In August 2005,
Needham & Company was paid a $50,000 retainer by EPIX
for financial advisory services. A private equity fund, which is
an affiliate of Needham & Company, is a stockholder of
Predix. In addition, Needham & Company and its
affiliates may actively trade the equity securities of EPIX for
their own account or for the accounts of their customers and,
accordingly, may at any time hold a long or short position in
such securities.
Needham & Company received from EPIX a fee of $300,000
in connection with rendering its fairness opinion in this
transaction, none of which was contingent upon consummation of
the transaction with Predix. In addition to this fee, EPIX will
also reimburse Needham & Company for all of its
out-of-pocket expenses
and EPIX has agreed to indemnify Needham & Company
against certain liabilities, including liabilities under federal
securities laws, in connection with the delivery of its opinion.
The terms of the fee arrangement with Needham &
Company, which are customary in transactions of this nature,
were negotiated on an arms-length basis between EPIX and
Needham & Company, and the EPIX board of directors was
aware of the arrangement, including the fact that a portion of
the fee payable to Needham & Company was contingent
upon delivery of the fairness opinion.
Needham & Company was selected by the EPIX board of
directors to render an opinion to the EPIX board of directors
because Needham & Company is a internationally
recognized investment banking firm and because, as part of its
investment banking business, Needham & Company is
continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for
corporate and other purposes.
Predixs Reasons for the Merger
In approving and authorizing the merger agreement and the
merger, the Predix board of directors considered a number of
factors. Although the following discussion sets forth the
material factors considered by the Predix board of directors in
reaching its determination, it may not include all of the
factors considered by the Predix board of directors. In light of
the number and wide variety of factors considered in connection
with its evaluation of the merger agreement and the merger, the
Predix board of directors did not consider it practicable to,
and did not attempt to, quantify or otherwise assign relative
weights to the specific factors it considered in reaching its
determination. The Predix board of directors viewed its position
and determinations as being based on all of the information
available and the factors presented to and considered by it. In
addition, individual directors may have given different weight
to different factors.
In reaching its decision, the Predix board of directors
consulted with Predixs management with respect to
strategic and operational matters and with Predixs legal
counsel with respect to the merger agreement and the
transactions contemplated thereby. The Predix board of directors
also consulted with Lehman Brothers, Predixs financial
advisor, with respect to the financial aspects of the merger and
reviewed an analysis prepared by Lehman Brothers comparing the
merger with potential scenarios for Predix as a going concern on
a stand-alone basis.
Among the factors considered by the Predix board of directors in
its decision to approve the merger agreement were the following:
(a) the judgment, advice and analysis of Predixs
senior management with respect to the potential benefits of the
merger, including EPIXs available resources, intellectual
property and employees, as well as EPIXs liabilities,
based in part on the business, technical, financial, accounting
and legal due diligence investigations performed with respect to
EPIX; (b) historical and current information concerning
Predixs business, including its financial performance and
condition, operations, management and competitive position,
current industry and economic conditions, and Predixs
prospects if it was to remain an independent company, including:
(i) the risk of adverse outcomes in its clinical trials;
and (ii) and its need to obtain additional financing and
the likely terms on which it would be able to
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obtain that financing; (c) the current conditions of the
equity markets, as it relates to Predixs ability to raise
additional capital from new investors for the continued growth
of Predixs business, and as it relates to the potential
prospects for the combined company; (d) the current
conditions in the pharmaceutical and biotechnology marketplace
and the positioning of EPIX within that market after the merger;
(e) the status of EPIXs imaging product candidates
and of Predixs drug candidates; and (f) the terms of
the merger agreement, including the merger consideration and
milestone payment, as well as the parties representations,
warranties and covenants and the conditions to their respective
obligations.
In reaching its determination to approve the merger agreement
and the merger, the members of the Predix board of directors
identified and considered a number of the potential benefits of
the merger, including the following:
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the expectation that the merger will be treated as a tax-free
reorganization for U.S. federal income tax purposes; |
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the relative percentage ownership of EPIX stockholders and
Predix stockholders in the combined company that is fixed; |
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the skills and abilities of the anticipated post-merger
management team; |
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given Predixs prospects as a stand-alone entity, it would
be difficult for Predix to raise capital at an attractive
valuation to fund its current business plan, and any such
financing could, therefore, be highly dilutive to Predixs
stockholders; |
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that the merger will provide Predix stockholders with shares of
EPIX common stock, a publicly traded company, which would
provide Predix stockholders with the possibility of liquidity; |
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the range of options available to the combined organization to
access private and public equity markets to fund future capital
needs, which would likely be greater than the options available
to Predix alone; |
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the contribution of EPIXs cash, intellectual property and
other assets to a combined company, which could help accelerate
Predixs development plans and Predixs ability to
generate products while also preserving the accumulated value in
Predixs product candidates and research platform; |
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the status of EPIXs product candidates, and the prospect
that they may provide additional sources of revenue sooner than
many of Predixs product candidates; and |
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the conclusion of Predixs board of directors that the
$4.5 million termination fee, and the circumstances when
such fee may be payable, were reasonable. |
The members of the Predix board of directors also identified and
considered a number of uncertainties and risks, including the
following:
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the risk that the potential benefits of the merger might not be
realized; |
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the price volatility of EPIXs common stock, which may
reduce the value of the EPIX common stock that Predix
stockholders will receive upon the consummation of the merger
and, in particular, possibly result in the holders of Predix
common stock and preferred stock receiving significantly less
consideration in the merger; |
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the risk that the $35 million milestone payment may not be
triggered, thereby significantly decreasing the value of the
merger to holders of Predix stock, option and warrants; |
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the inability of Predixs stockholders to realize the
long-term value of the successful execution of Predixs
current strategy as an independent company; |
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the possible loss of key management, technical or other
personnel of either of the combining companies as a result of
the management and other changes that will be implemented in
integrating the businesses; |
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the risk of diverting managements attention from other
strategic priorities to implement merger integration efforts; |
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the risk that the merger may not be completed, and that a more
limited range of alternative strategic transactions would be
available to Predix in that event; |
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the substantial charges expected to be incurred in connection
with the merger, including the $2.0 million fee to be paid
to Lehman Brothers, the entire amount of which is contingent
upon the consummation of the merger, and other transaction fees
and expenses arising from or in connection with the
merger; and |
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various other applicable risks associated with the combined
company and the merger, including those described under the
section entitled Risk Factors elsewhere in this
joint proxy statement/ prospectus. |
The Predix board of directors weighed the benefits, advantages
and opportunities of a potential transaction against the
negative factors described above, including the possible
diversion of management attention for an extended period of
time. The Predix board of directors realized that there can be
no assurance about future results, including results expected or
considered in the factors listed above. However, the Predix
board of directors concluded that the potential benefits
significantly outweighed the potential risks of completing the
merger.
After taking into account these and other factors, the Predix
board of directors approved and authorized the merger agreement
and the transactions contemplated thereby, including the merger.
Recommendation of Predixs Board of Directors
After careful consideration, the Predix board of directors
approved the merger agreement and the merger and determined that
the merger and the merger agreement are advisable to, and in the
best interests of, the stockholders of Predix. Therefore, the
Predix board of directors recommends Predix stockholders vote
FOR the approval and adoption of the merger agreement and
the approval of the merger.
In considering the recommendation of the Predix board of
directors with respect to the merger agreement and the merger,
you should be aware that directors and executive officers of
Predix may have interests in the merger that are different from,
or are in addition to, the interests of Predix stockholders.
Please see The Merger Interests of
Predixs Directors and Management.
EPIX has obtained the agreement from certain Predix
stockholders, representing approximately 40% of the outstanding
voting power of Predixs capital stock (on an as-converted
to Predix common stock basis), to vote the shares of Predix
capital stock beneficially owned by them in favor of the
approval and adoption of the merger agreement and the approval
of the merger.
Accounting Treatment
EPIX intends to account for the merger as a purchase for
accounting purposes. The total estimated purchase price is
allocated to the net tangible and intangible assets of the
acquired entity based on their estimated fair values as of the
completion of the transaction. A final determination of these
fair values will include managements consideration of a
valuation. This valuation will be based on the actual net
tangible and intangible assets of Predix that exist as of the
closing date of the merger.
82
Material United States Federal Income Tax Consequences of the
Merger
The following discussion summarizes the material
U.S. federal income tax consequences of the merger that are
expected to apply generally to Predix stockholders upon an
exchange of their Predix common stock and preferred stock for
EPIX common stock in the merger. This summary is based upon
current provisions of the Internal Revenue Code of 1986, as
amended, or the Code, existing Treasury regulations and current
administrative rulings and court decisions, all in effect as of
the date thereof and all of which are subject to change. Any
change, which may or may not be retroactive, could alter the tax
consequences to EPIX, Predix or the Predix stockholders as
described in this summary. No attempt has been made to comment
on all U.S. federal income tax consequences of the merger
that may be relevant to particular holders, including holders
who do not hold their shares as capital assets; holders such as
dealers in securities; banks; insurance companies; other
financial institutions; mutual funds; real estate investment
trusts; tax-exempt organizations; investors in pass-through
entities; stockholders who are subject to the alternative
minimum tax provisions of the Code; stockholders who hold Predix
shares as part of a hedge, wash sale, synthetic security,
conversion transaction, or other integrated transaction;
U.S. holders, as defined below, that have a functional
currency other than the U.S. dollar; traders in securities
who elect to apply a
mark-to-market method
of accounting; stockholders who acquired shares of Predix stock
pursuant to the exercise of options or otherwise as compensation
or through a tax-qualified retirement plan; and certain
expatriates or former long-term residents of the United States.
Stockholders described in this paragraph are urged to consult
their own tax advisors regarding the consequences to them of the
merger.
In case of a stockholder that is a partnership, the
U.S. federal income tax treatment of a partner in the
partnership will generally depend upon the status of the partner
and the activities of the partnership. Partnerships that are
holders of Predix common stock or preferred stock and partners
in such partnerships are urged to consult their own tax advisors
regarding the consequences to them of the merger.
In addition, the following discussion does not address the tax
consequences of the merger under state, local or
non-U.S. tax laws.
Furthermore, the following discussion does not address
(a) the tax consequences of transactions effectuated
before, after or at the same time as the merger, whether or not
they are in connection with the merger, including, without
limitation, transactions in which shares of Predix common stock
or preferred stock are acquired or shares of EPIX common stock
are disposed of, (b) the tax consequences to holders of
options or warrants issued by Predix which are assumed in
connection with the merger or (c) the tax consequences of
the receipt of shares of EPIX common stock other than in
exchange for shares of Predix common stock and preferred stock
pursuant to the merger agreement.
Holders of Predix common stock and preferred stock are urged
to consult their own tax advisors regarding the
U.S. federal income tax consequences of the merger in light
of their personal circumstances and the consequences under
state, local and
non-U.S. tax
laws.
For purposes of this discussion:
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a U.S. holder is a beneficial owner of Predix
common stock or preferred stock, that is (a) an individual
citizen or resident of the United States, (b) a corporation
or any other entity taxable as a corporation created or
organized in or under the laws of the United States or of a
state of the United States or the District of Columbia,
(c) a trust (i) in respect of which a U.S. court
is able to exercise primary supervision over the administration
of the trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust or
(ii) that was in existence on August 20, 1996 and
validly elected to continue to be treated as a domestic trust,
or (d) an estate that is subject to U.S. federal
income tax on its worldwide income from all sources; and |
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a
non-U.S. holder
is any individual, corporation, trust or estate which holds
common stock or preferred stock of Predix, other than a
U.S. holder. |
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In the opinion of each of Mintz, Levin, Cohn, Ferris, Glovsky,
and Popeo P.C. and Goodwin Procter LLP, counsel for EPIX and
Predix, respectively, the merger will constitute a
reorganization within the meaning of Section 368(a) of the
Code. These tax opinions are subject to certain assumptions and
qualifications and will be based in part on the truth and
accuracy of certain representations made by EPIX, EPIX Delaware,
Inc. and Predix. No ruling from the Internal Revenue Service has
been or will be requested in connection with the merger, and
Predix stockholders should be aware that the tax opinions
discussed in this section are not binding on the Internal
Revenue Service, the Internal Revenue Service could adopt a
contrary position which could be sustained by a court. The
opinions of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo P.C.
and Goodwin Procter LLP are conditioned upon, among other
things, the receipt by Predix stockholders in the merger, in the
aggregate, of EPIX common shares with a value equal to at least
40% of the combined value of the total consideration paid for
all Predix shares, taking into account, among other things, the
amount of cash paid or deemed paid to Predix stockholders in
connection with the merger and cash to be paid to Predix
stockholders in lieu of fractional EPIX common shares.
If a U.S. holder reports the disposition of its Predix stock in
the merger under the installment method, and
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if such U.S. holders basis in the Predix stock exchanged
in the merger does not exceed the fair market value of EPIX
common stock such holder receives in the merger, such U.S.
holder will recognize gain in the amount of cash received (net
of interest imputed under the Code) at the time of the milestone
payment under the installment method; |
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if such U.S. holders basis in the Predix stock exchanged
by it exceeds the fair market value of EPIX common stock such
holder receives in the merger, such U.S. holder will recognize
gain in the amount equal to the excess of cash received (net of
interest imputed under the Code) over the excess of the basis in
Predix stock over the fair market value of EPIX common stock
received in the merger, at the time of the milestone payment
under the installment method. |
A U.S. holder will be required to include the amount of the gain
in such stockholders gross income for federal income tax
purposes for the year in which the holder receives the cash
milestone payment attributable to the gain. A U.S. holder will
not recognize gain upon receipt of any portion of the milestone
payment made in EPIX common stock. A portion of any milestone
payment will be treated as taxable interest income, calculated
using the applicable federal rate pursuant to the Code. Predix
stockholders should be aware that the law in this area is not
fully established and each stockholder is advised to consult
his, her or its own tax advisors about the tax consequences of
the merger to such stockholder.
If a U.S. holder elects to have the installment method not apply
to its disposition of its Predix shares in the merger, such
U.S. holder will recognize gain, but not loss, for federal
income tax purposes in an amount equal to the lesser of
(a) the fair value of the milestone obligation such
stockholder receives in the merger or (b) the amount, if
any, by which the sum of (i) the fair market value of any
EPIX common shares such stockholder receives in the merger and
(ii) the fair value of the milestone obligation such
stockholder receives in the merger, exceeds such
stockholders adjusted tax basis in its shares of Predix
stock.
The aggregate basis of the shares of EPIX common stock received
by a Predix stockholder in the merger (including any fractional
share deemed received) will be: (a) if the stockholder does not
elect out of the application of the installment method, the same
as the aggregate basis of the shares of Predix stock surrendered
in the merger, up to the fair market value of the EPIX common
stock received and (b) if the stockholder elects out of the
application of the installment method, the same as the aggregate
basis of the shares of Predix stock surrendered in exchange
therefore, reduced by the fair value of the milestone obligation
received in exchange for shares of Predix stock in the merger
and increased by the amount of gain recognized in the exchange.
The holding period of the shares of EPIX common stock received
by a
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Predix stockholder in the merger will include the holding period
of the shares of Predix common stock or preferred stock
surrendered in exchange therefor. U.S. holder who receives
cash in lieu of a fractional share will recognize gain or loss
equal to the difference, if any, between such stockholders
basis in the fractional share and the amount of cash received.
Such gain or loss will be a long-term capital gain or loss, if
the U.S. holders holding period is greater than one
year as of the date of the closing of the merger. For
U.S. holders who are individuals, any long-term capital
gain generally will be taxed at a premium U.S. federal
income tax rate of 15%. The deductibility of capital losses is
subject to limitations.
For this purpose, gain or loss must be calculated separately for
each identifiable block of shares surrendered in the exchange,
and a loss realized on one block of shares may not be used to
offset a gain realized on another block of shares. Gain
recognized upon the exchange generally will be capital gain,
unless the receipt of the milestone payment by a Predix
stockholder has the effect of a distribution of a dividend, in
which case the gain will be treated as dividend income to the
extent of the stockholders ratable share of our earnings
and profits as calculated for federal income tax purposes. Any
recognized capital gain will be long-term capital gain if the
stockholder has held the shares of Predix stock for more than
one year.
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Certain Requirements for Reorganization under
Section 368(a) |
One of the requirements that must be satisfied for the merger to
qualify as a reorganization under
Section 368(a) of the Code is the continuity of interest
requirement. This requirement will be satisfied if Predix
stockholders exchange a substantial portion of the value of
their proprietary interest in Predix for proprietary interests
in EPIX. In the opinion of Goodwin Procter LLP, the continuity
of interest requirement will be satisfied if the value of EPIX
common shares received in connection with the merger by Predix
stockholders equals or exceeds 40% of the total consideration
paid or deemed paid in exchange for all Predix shares, taking
into account, among other things, the amount of cash paid or
deemed paid to Predix stockholders in connection with the merger
and cash to be paid to Predix stockholders in lieu of fractional
EPIX common shares.
In addition, for the merger to qualify as a
reorganization, EPIXs wholly-owned subsidiary,
EPIX Delaware, Inc., must acquire substantially all of the
assets of Predix. Specifically, EPIX Delaware, Inc. must acquire
at least 70% of the fair value of Predixs gross assets and
at least 90% of the fair value of its net assets. All of
Predixs pre-merger assets must be taken into account in
the calculation. The merger also must satisfy certain other
common law requirements for a reorganization:
continuity of business enterprise and business purpose.
If the merger is not treated as a reorganization
within the meaning of Section 368(a) of the Code, then each
U.S. holder will generally will be treated as exchanging
its Predix stock in a fully taxable transaction for EPIX common
stock and the milestone payment obligation. Further, if the
merger is not treated as a reorganization within the
meaning of Section 368(a) of the Code, Predix will be
subject to tax on the deemed sale of its assets to EPIX with
gain or loss for this purpose measured by the difference between
Predixs tax basis in its assets and the fair market value
of the consideration deemed to be received therefor, or, in
other words, the milestone payment and EPIX common shares. This
gain or loss would be reported on Predixs final tax
return, subject to the effect of any tax carryovers and the
effect of its other income or loss for that period, and EPIX
Delaware, Inc. would become liable for any such tax liability by
virtue of the merger.
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U.S. Holders Backup Withholding and Reporting
Requirements |
A noncorporate Predix stockholder may be subject to backup
withholding at a rate of 28% with respect to a milestone payment
received by a Predix stockholder. However, backup withholding
will not apply to a stockholder who either (a) furnishes a
correct taxpayer identification number and certifies that he or
she is not subject to backup withholding by completing the
substitute
Form W-9 that will
be included as part of the letter of transmittal, or
(b) otherwise proves to EPIX and its exchange agent that
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the stockholder is exempt from backup withholding. Backup
withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be allowed as a refund or a
credit against your U.S. federal income tax liability
provided the required information is timely furnished to the
Internal Revenue Service.
Each Predix stockholder that receives EPIX common stock in the
merger will be required to file a statement with his, her or its
federal income tax return setting forth his, her or its basis in
the Predix common stock or preferred stock surrendered and the
fair market value of the EPIX common stock and milestone payment
received in the merger, and to retain permanent records of these
facts relating to the merger.
A non-U.S. holder
of Predix common stock or preferred stock will not be subject to
U.S. federal income or withholding tax on gain with respect
to the merger as long as:
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such gain is not effectively connected with the conduct by the
non-U.S. holder
of a trade or business within the United States or, if a tax
treaty applies, is not attributable to a permanent establishment
or fixed place of business maintained by the
non-U.S. holder in
the United States; |
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in the case of certain capital gains, the
non-U.S. holder
either is not considered, for U.S. federal income tax
purposes, to be present in the United States for 183 days
or more during the taxable year in which the capital gain is
recognized or otherwise qualifies for an exemption; |
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the
non-U.S. holder
qualifies for an exemption from backup withholding, as discussed
below; |
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Predix is not and has not been a U.S. real property holding
corporation at any time within the shorter of the five-year
period ending on the date on which the proposed transaction is
consummated or such
non-U.S. holders
holding period; and |
Generally, a corporation is a U.S. real property
holding corporation if the fair market value of its
U.S. real property interests, as defined in the Code and
applicable regulations, equals or exceeds 50% of the aggregate
fair market value of its worldwide real property interests and
its other assets used or held for use in a trade or business.
Predix does not believe that it is or has been a U.S. real
property holding corporation within the last five years and does
not expect to become a U.S. real property holding
corporation prior to the date of the closing of the merger.
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Non-U.S. Holders
Information Reporting and Backup Withholding |
The milestone payment to Predix stockholders may be subject to
backup withholding at a 28% rate. In order to qualify for an
exemption from backup withholding with respect to the milestone
payment received in the merger, a
non-U.S. holder
may be required to provide a taxpayer identification number,
certify the
non-U.S. holders
foreign status or otherwise establish an applicable exemption.
Predix stockholders receiving EPIX common stock may be subject
to information reporting.
Appraisal Rights
Under Delaware corporate law, Predix stockholders are entitled
to appraisal rights in connection with the merger. Under
Delaware corporate law, holders of EPIX common stock are not
entitled to appraisal rights in connection with the merger. The
text of the relevant provisions of Delaware law are attached to
this joint proxy statement/ prospectus as Annex D.
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Federal Securities Laws Consequences
This joint proxy statement/ prospectus does not cover any
resales of the EPIX common stock received in the merger, and no
person is authorized to make any use of this joint proxy
statement/ prospectus in connection with any such resale.
All shares of EPIX common stock received by Predix stockholders
in the merger should be freely transferable, except that if a
Predix stockholder is deemed to be an affiliate of Predix under
the Securities Act of 1933, as amended, at the time of the
special meeting, the Predix stockholder may resell those shares
only in transactions permitted by Rule 145 under the
Securities Act of 1933, as amended, or as otherwise permitted
under the Securities Act of 1933, as amended. Persons who may be
affiliates of Predix under the Securities Act of 1933, as
amended, generally include individuals or entities that control,
are controlled by, or are under common control with, Predix, and
generally would not include stockholders who are not officers,
directors or principal stockholders of Predix. EPIX has agreed
to file a registration statement with respect to the shares of
EPIX common stock to be issued in the merger to persons who are
deemed to be affiliates of Predix. As a result, these shares
shall also be freely tradable upon the effectiveness of this
registration statement, subject only to certain prospectus
delivery requirements and the terms of the
lock-up agreements
described herein, if applicable.
Interests of EPIXs Directors and Management
EPIXs directors and management have interests in the
merger as individuals in addition to, and that may be different
from, the interests of EPIXs stockholders. The EPIX board
of directors was aware of these interests and considered them,
among other matters, in its decision to approve the merger
agreement.
Christopher F.O. Gabrieli, Michael Gilman, Ph.D., Mark
Leuchtenberger and Gregory D. Phelps, each of whom is a current
director of EPIX, is expected to be a member of the EPIX board
of directors after the merger.
Although no employment or similar agreements have been entered
into as of July 13, 2006, it is anticipated that certain
current officers and key employees of EPIX will be executive
officers or key employees of EPIX after the merger as specified
below:
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Position in the Combined Company |
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Current Position with EPIX |
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Andrew C.G. Uprichard, M.D.
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President |
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EPIXs President and Chief Operating Officer |
Philip Graham, Ph.D.
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Vice President of Product Management and Imaging |
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EPIXs Vice President of Program Management |
Brenda Sousa
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Vice President of Human Resources |
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EPIXs Vice President of Human Resources |
Upon completion of the merger, Brenda Sousa, Vice President of
Human Resources, is entitled to a bonus of $47,500. In addition,
Philip Chase, Vice President and General Counsel, is entitled to
a bonus of $72,000 upon completion of the merger.
As a result of the foregoing, the directors and executive
officers of EPIX may be more likely to vote to approve the
merger than EPIX stockholders generally.
Interests of Predixs Directors and Management
Predixs directors and management have interests in the
merger as individuals in addition to, and that may be different
from, the interests of Predixs stockholders. The Predix
board of directors was aware of these interests and considered
them, among other matters, in its decision to approve the merger
agreement.
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Patrick J. Fortune, Ph.D., Frederick Frank, Michael G.
Kauffman, M.D., Ph.D., and Ian F. Smith, CPA, ACA, each of
whom is a current director of Predix, is expected to be a member
of the EPIX board of directors after the merger. These
relationships may have influenced their decision to vote in
favor of the merger and to recommend that Predix stockholders
vote in favor of the merger and related transactions. In
addition, certain of the current executive officers or key
employees of Predix are expected to serve as executive officers
or key employees of EPIX at the effective time of the merger.
In addition, options, with exercise prices ranging from $0.81 to
$2.99, held by each of Michael G. Kauffman, M.D., Ph.D., Silvia
Noiman, Ph.D., Oren Becker, Ph.D., Chen Schor and Kimberlee C.
Drapkin to purchase 594,679, 308,096, 261,376, 251,213, and
144,996 shares, respectively, will become immediately
exercisable in full if, within 12 months after the merger,
the officer is terminated without cause or terminates his or her
employment due to a material change in duties, authority or
responsibilities.
Moreover, Mr. Frank, the Chairman of the Predix board of
directors, is also the Vice Chairman and a director of Lehman
Brothers Inc., Predixs financial advisor in connection
with the merger. Lehman Brothers is entitled to
$2.0 million in fees from Predix, the entire amount of
which is contingent upon consummation of the merger. In
addition, Lehman Brothers is entitled to up to $50,000 in
reimbursement of its expenses in connection with the transaction.
Pursuant to the merger agreement, upon the completion of the
merger, the combined company will fulfill and honor the
obligations of Predix which existed prior to the merger to
indemnify Predixs present and former directors, officers
and employees. After the completion of the merger, the combined
company will, to the fullest extent permitted under law and
under its certificate of incorporation, indemnify and hold
harmless, each present and former director, officer or employee
of Predix in respect of acts or omissions occurring prior to the
completion of the merger, including in connection with the
merger agreement and the transactions contemplated thereby, to
the same extent as provided in Predixs certificate of
incorporation, by-laws or any applicable contract or agreement
for a period of six years after the completion of the merger.
Certain of the Predix stockholders who have entered into voting
agreements with EPIX, agreeing to vote all shares beneficially
owned by them in favor of approval and adoption of the merger
agreement and approval of the merger, are affiliated with
directors of Predix.
As a result of the foregoing, the directors and executive
officers of Predix may be more likely to vote to approve the
merger than Predix stockholders generally.
The NASDAQ Global Market Listing
EPIXs common stock is currently listed on The NASDAQ
Global Market under the symbol EPIX. It is a
condition to Predixs obligations to effect the merger that
the EPIX common stock issued in the merger shall have been
approved for listing on The NASDAQ Global Market as of
consummation of the merger. In addition, pursuant to the terms
of the merger agreement, EPIX has agreed to use reasonable
efforts to obtain approval for listing on The NASDAQ Global
Market of the shares of EPIX common stock Predix securityholders
will be entitled to receive pursuant to the merger.
Immediately prior to the consummation of the merger, EPIX will
be required to meet the initial listing requirements to maintain
the listing and continued trading of its shares on The NASDAQ
Global Market. EPIX has filed an initial listing application
with The NASDAQ Global Market pursuant to the Reverse
Merger rules of The NASDAQ Global Market. If such
application is accepted, EPIX anticipates that its common stock
will continue to be listed on The NASDAQ Global Market following
the completion of the merger under its current trading symbol
EPIX.
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THE MERGER AGREEMENT
All references to the merger agreement contained throughout
this joint proxy statement/ prospectus shall refer to the merger
agreement, as amended by amendment no. 1 thereto.
The following summary describes the material provisions of
the merger agreement. The full text of the merger agreement is
attached as Annex A to this joint proxy statement/
prospectus and is incorporated herein by reference. This summary
may not contain all of the information that is important to you,
and you are encouraged to read carefully the entire merger
agreement. The following description is subject to, and is
qualified in its entirety by reference to, the merger
agreement.
The merger agreement is described herein, and included as
Annex A hereto, only to provide you with information
regarding its terms and conditions, and not to provide any other
factual information regarding EPIX, Predix or their respective
businesses. Accordingly, the representations and warranties and
other provisions of the merger agreement should not be read
alone, and you should read the information provided elsewhere in
this document and in the other public filings EPIX makes with
the Securities and Exchange Commission, which are available
without charge at www.sec.gov, for information regarding EPIX
and Predix and their respective businesses. The representations
and warranties described below and included in the merger
agreement were made by each of EPIX, together with EPIX
Delaware, Inc., and Predix to the other. These representations
and warranties were made as of specific dates and may be subject
to important qualifications, limitations and supplemental
information agreed to by EPIX and Predix in connection with
negotiating the terms of the merger agreement. In addition, the
representations and warranties may have been included in the
merger agreement for the purpose of allocating risk between EPIX
and Predix rather than to establish matters as facts.
Structure of the Merger
At the effective time of the merger, Predix will merge with and
into EPIXs wholly-owned subsidiary, EPIX Delaware, Inc.
Upon completion of the merger, EPIX Delaware, Inc. will be the
surviving corporation and a wholly-owned subsidiary of EPIX.
Effective Time of the Transaction
The closing of the transaction contemplated by the merger
agreement will occur no later than the second business day after
the last of the conditions to the transaction have been
satisfied or waived, or at another time as EPIX and Predix may
agree. Contemporaneously with, or as soon as practicable after
the closing, EPIX and Predix will file a certificate of merger
with the Secretary of State of the State of Delaware. The
transaction will become effective upon the filing of this
certificate.
Officers and Directors
At the effective time, the officers of EPIX Delaware, Inc. shall
be the officers of the surviving corporation, subject to change
thereafter, and the directors of EPIX Delaware, Inc. will be the
directors of the surviving corporation.
Conversion of Predix Shares
Each share of Predix common stock and preferred stock (on an
as-converted to Predix common stock basis) issued and
outstanding immediately prior to the effective time of the
merger will be automatically converted into the right to receive
a number of shares of common stock of EPIX equal to the exchange
ratio and cash in lieu of fractional shares.
The Exchange Ratio and Milestone Payment
On the date of the merger agreement, every share of Predix
common stock and preferred stock (on an as-converted to Predix
common stock basis) issued and outstanding immediately prior to
the effective time would have been converted into the right to
receive 1.248509 shares of validly issued, fully paid and
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nonassessable EPIX common stock. As a result of the cancellation
of some previously outstanding Predix options and the grant of
additional options by Predix since the date of the merger
agreement, the initial exchange ratio of 1.248509 has been
automatically adjusted under the merger agreement to 1.239411,
which is subject to further adjustment to account for the
reverse stock split if implemented. If EPIX or Predix issues
additional equity securities before the effective time, the
exchange ratio shall be further adjusted to reflect fully the
effect of the issuance of any such equity securities. In
addition, the exchange ratio shall be adjusted to reflect fully
the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities
convertible into EPIX common stock), reorganization,
recapitalization or other like change with respect to EPIX
common stock occurring after the date of the merger agreement
and prior to the effective time of the merger. In approving the
merger agreement, the holders of Predix preferred stock will be
agreeing to accept the merger consideration as set forth in the
merger agreement in lieu of any liquidation preferences that
they would be entitled to under the Predix restated certificate
of incorporation, as amended, prior to the consummation of the
merger.
In addition, EPIX will make a milestone payment to Predix
stockholders, option holders and warrant holders in the amount
of $35 million upon the occurrence of certain events. EPIX
may elect to make the milestone payment in cash or shares of
EPIX common stock, or any combination thereof; provided, that
the milestone payment made to holders of an option or warrant to
purchase Predix common stock or Predix preferred stock shall be
made solely in cash. The milestone payment will be allocated and
paid to each Predix holder of record of Predix shares, options
or warrants that they hold at the effective time of the merger,
in each case, pro rata based upon the percentage of the initial
merger consideration that such holder would have received at the
effective time of the merger and assuming that, for the purpose
of the milestone payment only, that each Predix warrant and
option to purchase Predix shares (whether or not vested) was
exercised in full immediately prior to the effective time of the
merger. In no event will the shares of EPIX common stock
issuable at the effective time of the merger, including the
shares of EPIX common stock issuable upon exercise of Predix
options and warrants assumed by EPIX in the merger, exceed
49.99% of the outstanding EPIX common stock immediately after
the effective time of the merger.
Predix stockholders, option holders and warrant holders will
receive the milestone payment within 90 days following the
occurrence, as determined by the non-Predix members of the
combined companys board of directors, of any of the
following events between the date of this joint proxy statement/
prospectus and June 30, 2008:
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receipt of statistically significant final results from a
randomized, placebo- or active comparator-controlled,
double-blinded Phase II or Phase III clinical trial of: |
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PRX-00023 for the treatment of generalized anxiety disorder,
depression, attention-deficit hyperactivity disorder or other
neuropsychiatric disorder with at least 100 patients; |
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PRX-03140 for the treatment of Alzheimers disease or other
cognitive disorders with at least 60 patients; |
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PRX-08066 for the treatment of pulmonary artery hypertension,
chronic obstructive pulmonary disease or a different indication
as selected by Predix or, after the effective time, by the
non-Predix members of the combined companys board of
directors, with at least 60 patients; |
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PRX-07034 for the treatment of obesity, cognitive disorders or a
different indication as selected by Predix or, after the
effective time, by the non-Predix members of the combined
companys board of directors, with at least
60 patients; or |
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entering into a strategic partnership for any Predix drug
candidate, which provides milestone and research funding
payments of more than $50 million, of which
$20 million must be received by June 30, 2008 in
unrestricted cash through non-refundable license fees, research
funding payments and/or premiums paid in connection with an
equity investment by the strategic partner within 60 days
following entry into the strategic partnership. |
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The milestone payment will be paid within 90 days after the
achievement of a milestone event, at the option of the
non-Predix members of the combined companys board of
directors, either:
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in cash, shares of EPIX common stock or any combination thereof
with the number of such shares to be issued determined based on
the five-day average closing price of EPIX common stock on The
NASDAQ National Market ending on the trading day that is ten
days prior to the payment date; or |
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$20 million payable in accordance with paragraph (a)
above and $15 million payable on the date that is
12 months after the payment of the initial $20 million
in shares of EPIX common stock, with the number of such shares
to be issued determined based on 75% of the
30-day average closing
price of EPIX common stock on The NASDAQ National Market ending
on the trading day that is ten days prior to the payment date.
If, as a result of the 49.99% limitation described below, the
entire $15 million payment cannot be made in shares of EPIX
common stock, the balance will be paid in cash plus interest
calculated from the milestone payment date at the rate of
10% per year. |
In no event may the milestone be paid in shares of EPIX common
stock to the extent that such shares would exceed 49.99% of the
outstanding shares of EPIX common stock immediately after such
milestone payment, when combined with all shares of EPIX common
stock issued in the merger and upon exercise of all Predix
options and warrants assumed by EPIX in the merger. As a result
of this limitation, if the milestone payment is triggered before
EPIX issues a significant number of new shares of its capital
stock or before consummation of the merger, all or a substantial
portion of the milestone payment will be paid in cash.
Additionally, the milestone will be paid in cash to holders of
Predix options and warrants assumed by EPIX in the merger.
Stock Options and Warrants
At the effective time of the merger, all options to purchase
Predix common stock then outstanding under Predixs Amended
and Restated 2003 Stock Incentive Plan and the Physiome
Sciences, Inc. 1997 Stock Option Plan shall be assumed by EPIX.
At the effective time of the merger, all warrants to purchase
Predix common stock or preferred stock then outstanding shall be
assumed by EPIX.
Fractional Shares
No fractional shares of EPIX common stock will be issued in the
merger. Instead, each holder of Predix common stock and
preferred stock otherwise entitled to receive a fraction of a
share of EPIX common stock shall receive from EPIX an amount of
cash (rounded to the nearest whole cent), without interest,
determined by multiplying that fraction by the average of the
closing sale prices of EPIX common stock on The NASDAQ National
Market on the five trading days ending on the trading day prior
to the effective time of the merger.
Surrender of Predix Certificates
Following the effective time of the merger, the exchange agent,
selected by EPIX, will mail to each holder of Predix common
stock and preferred stock a letter of transmittal and
instructions regarding the details of the exchange. The holders
will use the letter of transmittal to exchange Predix stock
certificates for the shares of EPIX common stock and cash in
lieu of fractional shares of EPIX common stock to which the
holders of Predix common and preferred stock are entitled to
receive in connection with the merger.
After the effective time of the merger and until so surrendered,
outstanding Predix certificates will be deemed to be evidence of
the right to receive EPIX common stock, the right to receive an
amount of cash in lieu of the issuance of any fractional shares
and the right to receive the milestone payment to which the
record holders of Predix common stock and preferred stock are
entitled to receive in connection with the
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merger. No interest will be payable on cash distributed to
Predix stockholders in lieu of any fractional shares of EPIX
common stock.
United States Tax Consequences
It is intended by both EPIX and Predix that the merger shall
constitute a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as
amended, or the Code.
Representations and Warranties
The merger agreement contains customary representations and
warranties of EPIX, together with EPIX Delaware, Inc. and Predix
made to, and solely for the benefit of, each other. The
representations and warranties expire at the effective time of
the merger. The assertions embodied in those representations and
warranties are qualified by information in confidential
disclosure schedules that EPIX and Predix have exchanged in
connection with signing the merger agreement. While EPIX and
Predix do not believe that these disclosures schedules contain
information securities laws require the parties to publicly
disclose other than information that has already been so
disclosed, the disclosure schedules do contain information that
modifies, qualifies and creates exceptions to the
representations and warranties set forth in the attached merger
agreement. Accordingly, you should not rely on the
representations and warranties as characterizations of the
actual state of facts, since they were only made as of the date
of the merger agreement and are modified in important part by
the underlying disclosure schedules. These disclosure schedules
contain information that has been included in the
companies general prior public disclosures, as well as
additional non-public information. Moreover, information
concerning the subject matter of the representations and
warranties may have changed since the date of the merger
agreement, which subsequent information may or may not be fully
reflected in the companies public disclosures.
Conduct of Business Prior to the Completion of the Merger
Under the terms of the merger agreement, EPIX and Predix have
agreed that until the earlier of the termination of the merger
agreement or the effective time of the merger, subject to
certain exceptions, each company will carry on its business in
the ordinary course, in substantially the same manner as
previously conducted. In addition, except as required by law and
subject to certain exceptions, each company has agreed to
additional restrictions that prohibit it from:
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changing its certificate of incorporation or by-laws, or
otherwise altering its corporate structure; |
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selling, pledging, disposing of or encumbering any assets except
for in the ordinary course of business; |
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issuing, disposing of or encumbering any shares of capital stock
of any class, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest except pursuant to stock
options or warrants outstanding on the date of the merger
agreement; |
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accelerating, amending or changing the period of exercisability
of options granted under any stock plans or warrants, as the
case may be, or authorizing cash payments in exchange for any
options or warrants; |
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declaring, setting aside, or paying any dividend or other
distribution in respect of any of its capital stock; |
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splitting, combining, or reclassifying any of its capital stock
or issuing or authorizing or proposing the issuance of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock; |
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amending the terms of, repurchasing, redeeming or otherwise
acquiring, any of its securities; |
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selling, transferring, licensing, sublicensing or otherwise
disposing of any intellectual property, or amending or modifying
any existing agreements with respect to any intellectual
property; |
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acquiring (by merger, consolidation, or acquisition of stock or
assets or otherwise) any corporation, partnership or other
business organization or division thereof; |
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incurring any indebtedness for borrowed money or assuming,
guaranteeing or endorsing or becoming responsible for the
obligations of any person; |
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making any loans or advances in excess of $100,000 except in the
ordinary course of business consistent with past practice; |
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entering into or amending any material contract or agreement
other than in the ordinary course of business; |
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authorizing any capital expenditures or purchase of fixed assets
which are, in the aggregate, in excess of $100,000, taken as a
whole; |
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increasing the compensation payable or to become payable to its
officers, employees or consultants, except for increases in
salary or wages of employees who are not officers in accordance
with past practices, or granting any severance or termination
pay to, or entering into any employment or severance agreement
with, any director, officer (except for officers who are
terminated on an involuntary basis) or other employee, or
establishing, adopting, entering into or amending any employee
benefit plan, provided, that each may provide their officers and
employees retention bonuses to retain such officers or
employees services through the effective time of the
merger, valued at not more than 20% of such officers or
employees yearly base salary as of the date of the merger
agreement, payable in cash, stock or an option to purchase stock
that becomes payable or vests on or after the effective time of
the merger, if each party has notified the other party in
writing at least five business days prior to granting any such
retention bonus and included in such notification is a
description of the circumstances giving rise to such retention
bonus, provided, further, that the aggregate value of all
retention bonuses granted by each shall not exceed $350,000; |
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taking any action, other than as required by generally accepted
accounting principals, to change accounting policies or
procedures; |
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making any material tax election inconsistent with past
practices or settling or compromising any material federal,
state, local or foreign tax liability or agree to an extension
of a statute of limitations for any assessment of any tax; |
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paying, discharging or satisfying any claims, liabilities or
obligations, other than in the ordinary course of business and
consistent with past practice; |
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entering into any material partnership arrangements, joint
development agreements, strategic alliances or collaborations; |
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except as may be required by law, taking any action to terminate
or amend any employee plans other than in connection with the
merger; or |
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taking any action which would make any of the representations or
warranties of either party contained in the merger agreement to
be untrue or incorrect or prevent either party from performing,
or cause either party not to perform, its covenants thereunder
or result in any of the conditions to the merger not being
satisfied. |
No Solicitation
Both parties have agreed, subject to limitations described
below, that neither Predix and its subsidiaries nor EPIX will
directly or indirectly through any officer, director, employee,
representative or
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agent, without the prior written consent of both parties
solicit, encourage or have negotiations with respect to
(including by way of furnishing information) the initiation or
submission of any inquiries, proposals or offers regarding any
acquisition, merger, take-over bid, sale of substantial assets,
sale of shares of capital stock (including without limitation by
way of a tender offer) or similar transactions involving either
party, or an Acquisition Proposal; provided, however, that prior
to the adoption of the merger agreement and the approval of the
merger by the stockholders of Predix or EPIX, as applicable,
Predix and EPIX may furnish nonpublic information regarding such
party to any third party in response to a superior offer that is
submitted to such party by such third party (and not withdrawn)
if: (a) such party shall not have breached the no
solicitation provisions of the merger agreement; (b) the
board of directors of such party concludes in good faith based
on the advice of outside legal counsel, that (i) the
failure to take such action would be inconsistent with the
fiduciary duties of the EPIX board of directors under applicable
law, with respect to EPIX and (ii) taking such action would
be required in order to comply with the fiduciary duties of the
Predix board of directors under applicable law, with respect to
Predix and; (c) such party complies with the provisions of
the merger agreement; and (d) such party receives from such
third party an executed confidentiality agreement containing
provisions at least as favorable to such party as those
contained in the confidentiality agreement dated
October 28, 2005 between EPIX and Predix.
EPIX and Predix have further agreed (a) that both parties
shall immediately notify the other party after receipt of any
Acquisition Proposal or any request for nonpublic information
relating to either party in connection with an Acquisition
Proposal or for access to the properties, books or records of
either entity by any person or entity that informs the board of
directors of that party that it is considering making, or has
made, an Acquisition Proposal. Such notice to either party shall
be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions
of such proposal, inquiry or contact, (b) both parties
shall immediately cease and cause to be terminated any existing
discussions or negotiations with any parties (other than each
other) conducted with respect to any acquisition, merger,
take-over bid, sale of substantial assets, sale of shares of
capital stock (including without limitation by way of a tender
offer) or similar transactions involving either party. Both
parties agree that it will not release any third party from any
confidentiality or standstill agreement to which either is a
party and (c) both parties shall ensure that the officers,
directors and employees of each and any investment banker or
other advisor or representative retained by either party are
aware of these restrictions, and shall be responsible for any
breach of these restrictions by such officers, directors,
employees, bankers, advisors and representatives.
Additional Agreements
Under the terms of the merger agreement EPIX and Predix have
each agreed:
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to file, as promptly as practicable after execution of the
merger agreement, this joint proxy statement/ prospectus with
the Securities and Exchange Commission, and that EPIX will
prepare and file the registration statement in which the joint
proxy statement/ prospectus is included; |
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to cooperate with each other in the preparation and filing of
the joint proxy statement/ prospectus; and |
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to promptly notify one another of any comments from the
Securities and Exchange Commission with respect to the joint
proxy statement/ prospectus. |
In addition, EPIX and Predix have agreed:
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to mail the joint proxy statement/ prospectus to their
respective stockholders at the earliest practicable time after
the registration statement is declared effective by the
Securities and Exchange Commission; |
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to promptly take all steps necessary to hold and convene their
respective stockholders meeting, and use commercially
reasonable efforts to solicit from their respective stockholders
proxies in favor of the adoption of the merger agreement and the
approval of the merger; and |
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that their respective boards of directors shall recommend the
adoption of the merger agreement and the approval of the merger
to their respective stockholders, and, except in certain
circumstances, neither the board of directors of EPIX or Predix
shall withdraw, amend or modify the recommendation. |
Continuing Obligation to Convene Stockholders
Meeting
Notwithstanding anything to the contrary contained in the merger
agreement, both parties will remain obligated to call, give
notice of, convene and hold their respective stockholders
meeting which shall not be limited or affected by the
commencement, disclosure, announcement or submission to either
party of any superior offer.
Confidentiality
Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject,
Predix and EPIX shall each afford to the officers, employees,
accountants, counsel and other representatives of the other,
reasonable access, during the period prior to the effective
time, to all of its and its subsidiaries properties,
books, contracts, commitments and records and, during such
period, Predix and EPIX each shall furnish promptly to the other
all information concerning its and its subsidiaries
business, properties and personnel as such other party may
reasonably request, and each shall make available to the other
the appropriate individuals (including attorneys, accountants
and other professionals) for discussion of the others
business, properties and personnel as either party may
reasonably request. Each party shall keep such information
confidential in accordance with the terms of the confidentiality
agreement dated October 28, 2005 between EPIX and Predix.
Regulatory Filings
Predix, EPIX and EPIX Delaware, Inc. shall coordinate and
cooperate with one another and shall use all commercially
reasonable efforts to comply with all legal requirements and
make all filings required by any governmental entity in
connection with the merger and related transactions contemplated
by the merger. Predix and EPIX shall prepare and file, if any,
(a) the notification, report and any forms required to be
filed under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, or the HSR Act, and (b) as
promptly as practicable thereafter respond in compliance with
any inquiries or requests received from the Federal Trade
Commission, the Department of Justice or from any state attorney
general, foreign antitrust or competition authority or other
governmental authority in connection with antitrust or
competition matters. Predix and EPIX will notify the other
promptly upon the receipt of any comments, responses or requests
from any governmental entity or official in connection with any
filings made pursuant to the merger agreement and the merger.
Notification of Certain Matters
Predix shall give prompt notice to EPIX, and EPIX shall give
prompt notice to Predix, of (a) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause any representation or warranty
contained in the merger agreement to be materially untrue or
inaccurate, and (b) any failure of Predix or EPIX, as the
case may be, materially to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it
thereunder; provided, however, that the delivery of any notice
pursuant to the merger agreement shall not limit or otherwise
affect the remedies available thereunder to the party receiving
such notice; and provided, further, that
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failure to give such notice shall not be treated as a breach of
covenant for the purposes of the merger agreement unless the
failure to give such notice results in material prejudice to the
other party.
Each of Predix and EPIX shall give prompt notice to the other of
(a) any notice or other communication from any person
alleging that the consent of such person is or may be required
in connection with the merger or other transactions contemplated
by the merger agreement; (b) any notice or other
communication from any governmental authority in connection with
the merger or other transactions contemplated by the merger
agreement; (c) any litigation relating to or involving or
otherwise affecting Predix, its subsidiaries or EPIX that
relates to the merger or other transactions contemplated by the
merger agreement; (d) the occurrence of a default or event
that, with notice or lapse of time or both, is reasonably likely
to become a default under a Predix contract; and (e) any
change that would be considered reasonably likely to result in a
material adverse effect, or is likely to impair in any material
respect the ability of either Predix or EPIX to consummate the
transactions contemplated by the merger agreement.
Indemnification
From and after the merger, EPIX Delaware, Inc., as the surviving
corporation, will fulfill and honor in all respects the
obligations of Predix which exist prior to the date thereof to
indemnify Predixs present and former directors, officers,
employees and their heirs, executors and assigns. The
certificate of incorporation and by-laws of EPIX Delaware, Inc.
will contain provisions with respect to indemnification and
elimination of liability for monetary damages set forth in
Predixs restated certificate of incorporation, as amended,
and by-laws on the date of the merger agreement, which
provisions will not be amended, repealed or otherwise modified
for a period of six years from the merger in any manner that
would adversely affect the rights thereunder of individuals who,
at the time of the merger, were directors, officers, employees
or agents of Predix, unless such modification is required by law
and then only to the minimum extent required by such law.
Predix shall use commercially reasonable efforts, after
consultation with EPIX, to negotiate and secure a
tail on its existing directors, officers and company
liability insurance policies for a period of six years, at a
total cost not to exceed $25,000 per year of coverage,
which cost shall be paid by EPIX.
Listing of EPIX Common Stock
EPIX shall use its reasonable best efforts to cause the shares
of EPIX common stock to be issued in the merger to be approved
for listing on The NASDAQ National Market prior to the effective
time of the merger.
Public Announcements
EPIX and Predix shall consult with each other before issuing any
press release or otherwise making any public statements with
respect to the merger and shall not issue any such press release
or make any such public statement without the prior consent of
the other parties, which shall not be unreasonably withheld or
delayed; provided, however, that, on the advice of legal
counsel, EPIX may comply with any Securities and Exchange
Commission requirements under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended,
which requires any public disclosure, without the consent of
Predix.
Taxes
EPIX and Predix shall cooperate in the preparation, execution
and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales,
use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar
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taxes which become payable in connection with the transactions
contemplated by the merger agreement that are required or
permitted to be filed on or before the effective time of the
merger. EPIX shall pay all such taxes and fees.
Severance Payments
If at any time between the effective time of the merger and the
12-month anniversary of
the effective time of the merger, EPIX, the surviving
corporation or its subsidiaries causes any full-time employee of
EPIX, Predix or its subsidiaries as of the date of the merger
agreement and the effective time of the merger, other than
Philip Chase, Mia Moore and Sheila DeWitt, Ph.D., to be
terminated for any reason other than cause or to resign as a
result of a substantial diminution of salary, such employee
shall be entitled to, among other things, severance payments
ranging from three months to 15 months of their base salary
from EPIX, EPIX Delaware, Inc. or their subsidiaries, as the
case may be, all as set forth in the merger agreement. To the
extent such an employee has an individual agreement providing
for severance, such employee may choose to receive the benefits
under their individual agreement or as set forth in the merger
agreement.
EPIX Board of Directors
The EPIX board of directors shall cause the EPIX board of
directors, immediately after the effective time, to consist of
no more than nine persons, and, with respect to such board of
directors: (a) to appoint four Predix nominees, which shall
include Frederick Frank, Michael G.
Kauffman, M.D., Ph.D., Patrick J. Fortune, Ph.D.
and Ian F. Smith, CPA, ACA, (b) to appoint five EPIX
nominees, which may include EPIXs directors immediately
prior to the effective time of the merger. In addition, EPIX
shall cause the Chief Executive Officer of Predix immediately
prior to the effective time of the merger to be the Chief
Executive Officer of EPIX immediately after the effective time
of the merger pursuant to an employment agreement upon mutually
agreeable terms and conditions.
Treatment as Reorganization
Predix, EPIX and EPIX Delaware, Inc. will not take any action
prior to or after the effective time of the merger that would
reasonably be expected to cause the merger to fail to qualify as
a reorganization with the meaning of Section 368(a) of the
Code.
Conditions to the Completion of the Merger
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Conditions to Obligations of Each Party |
The obligations of EPIX and Predix to effect the transaction are
subject to the satisfaction or waiver of various conditions,
which include the following:
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the registration statement relating to the shares of EPIX common
stock to be issued in connection with the merger, of which this
joint proxy statement/ prospectus is a part, shall have been
declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and no stop order
suspending the effectiveness of the registration statement shall
have been issued by the Securities and Exchange Commission nor
shall such proceeding have been initiated or, to the knowledge
of EPIX and Predix, threatened by the Securities and Exchange
Commission; |
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all approvals of, declarations or filings, with any governmental
authority necessary for the consummation of the merger, if any,
shall have been obtained or made, including the expiration or
termination of the waiting period (and any extension thereof)
under the HSR Act, if required; |
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the merger agreement shall have been adopted by the requisite
vote of the stockholders of EPIX and Predix, respectively, in
accordance with General Corporation Law of the State of Delaware
and EPIXs and Predixs respective certificates of
incorporation and by-laws; and the issuance of shares of EPIX
common stock by virtue of the merger shall have been approved by
the requisite vote of the stockholders of EPIX under the rules
of the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.; |
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no order (whether temporary, preliminary or permanent) issued by
any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the merger shall be
in effect, nor shall any proceeding brought by any governmental
authority seeking any of the foregoing be pending; |
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EPIX and Predix shall have received the written opinion of
Goodwin Procter LLP and Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., respectively, to the effect that the merger
will constitute a reorganization within the meaning of
Section 368 of the Code; and |
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no injunction, or final, non-appealable judgment, decree or
order issued by any court of competent jurisdiction shall be in
effect which would result in the acceleration of payment of the
amounts outstanding under that certain Indenture, dated as of
June 7, 2004, between EPIX and U.S. Bank National
Association, as trustee, or any notes issued thereunder. |
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Additional Conditions to the Obligations of EPIX |
The obligations of EPIX to effect the merger shall be subject to
the satisfaction at or prior to the effective time of the merger
of each of the following conditions:
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the representations and warranties of Predix contained in the
merger agreement shall be true and correct in all respects on
and as of the effective time; |
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Predix shall have performed or complied with all agreements and
covenants required by the merger agreement to be performed or
complied with by it on or prior to the effective time of the
merger; |
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there shall not have been instituted, pending or threatened any
action or proceeding by any governmental authority, nor shall
there be in effect any judgment, decree or order of any
governmental authority, in either case, seeking to prohibit or
limit EPIX from exercising all material rights and privileges
pertaining to its ownership of the surviving corporation; |
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there shall have been no change, occurrence or circumstance in
the business, results of operations or financial condition of
Predix or any subsidiary of Predix having or reasonably likely
to have, individually or in the aggregate, a material adverse
effect on Predix; |
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EPIX shall have received from each affiliate of Predix, the
affiliate agreements, described elsewhere in this joint proxy
statement/ prospectus, and such agreement shall be in full force
and effect; |
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Predix shall have received all consents and approvals required
to consummate the merger under Predixs and its
subsidiaries agreements listed in the merger agreement; |
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stockholders of Predix holding an aggregate of approximately 40%
of the voting shares of Predix shall have entered into voting
agreements, described elsewhere in this joint proxy statement/
prospectus, and such agreements shall be in full force and
effect; and |
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EPIX shall have received from Goodwin Procter LLP, counsel to
Predix, an opinion, addressed to EPIX dated as of the effective
date of the merger. |
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Additional Conditions to the Obligations of Predix |
The obligations of Predix to effect the merger shall be subject
to the satisfaction at or prior to the effective time of the
merger of each of the following conditions:
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the representations and warranties of EPIX contained in the
merger agreement shall be true and correct in all respects on
and as of the effective time; |
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EPIX shall have performed or complied with all agreements and
covenants required by the merger agreement to be performed or
complied with by it on or prior to the effective time of the
merger; |
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there shall not have been instituted, pending or threatened any
action or proceeding (or any investigation or other inquiry that
might result in such an action or proceeding) by any
governmental authority, nor shall there be in effect any
judgment, decree or order of any governmental authority, in
either case, seeking to prohibit or limit Predix from exercising
all material rights and privileges pertaining to its ownership
of the surviving corporation; |
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there shall have been no change, occurrence or circumstance in
the business, results of operations or financial condition of
EPIX having or reasonably likely to have, individually or in the
aggregate, a material adverse effect on EPIX; |
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the EPIX common stock shall be listed on The NASDAQ National
Market as of and from the date of the merger agreement through
the consummation of the merger and the shares of EPIX common
stock issued in the merger shall have been approved for listing
on The NASDAQ National Market as of the consummation of the
merger; |
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Predix shall have received from Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., counsel to EPIX, an opinion,
addressed to Predix dated as of the effective date of the merger; |
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the sum of EPIXs cash, cash equivalents, restricted cash
and securities available for sale at the effective time of the
merger less the aggregate amount of any and all liabilities and
obligations associated with (a) severance or similar
obligations of EPIX as of the effective time; (b) fees
payable to any financial advisor to EPIX; (c) fees owed or
payable to EPIXs independent public accountants;
(d) bonus payments to employees upon consummation of the
merger; and (e) legal fees of EPIX in connection with the
negotiation and execution of the merger agreement and
consummation of the merger shall be no less than the
$110 million; |
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EPIX shall have caused the board of directors of EPIX to be
constituted as set forth the merger agreement; and |
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each of the current officers of EPIX who is not named in the
merger agreement shall have delivered to EPIX their written
resignations as officers of EPIX and each of the individuals
named in the merger agreement shall have been appointed officers
of EPIX. |
Termination of the Merger Agreement
The merger agreement may be terminated at any time before the
effective time of the merger, notwithstanding approval thereof
by the board of directors and stockholders of Predix and EPIX,
under the following circumstances:
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by mutual written consent duly authorized by the board of
directors of EPIX and Predix; |
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by either EPIX or Predix if the merger shall not have been
consummated by August 31, 2006; provided, that the right to
terminate the merger agreement for this reason shall not be
available to any party whose failure to fulfill any obligation
under the merger agreement has been the cause of or resulted in
the failure of the merger to occur on or before such date; |
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by either EPIX or Predix if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission
shall have issued a non-appealable final order, decree or ruling
or taken any other action prohibiting the merger; |
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by EPIX, if the board of directors of Predix shall have withheld
or withdrawn its recommendation in favor of the merger, or if
there shall have occurred any material adverse effect with
respect to Predix since the date of the merger agreement; |
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by Predix, if the board of directors of EPIX shall have withheld
or withdrawn its recommendation in favor of the merger, or if
there shall have occurred any material adverse effect with
respect to EPIX since the date of the merger agreement; |
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by either EPIX or Predix, if the required approval of the
stockholders of EPIX or Predix shall not have been obtained by
reason of the failure to obtain the requisite vote, provided,
that the right to terminate the merger agreement for this reason
shall not be available to any party where the failure to obtain
stockholder approval of such party shall have been caused by the
action or failure of such party in breach of the merger
agreement; |
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by either EPIX or Predix, upon a breach of any covenant or
agreement on the part of Predix or EPIX, respectively, set forth
in the merger agreement, in either case, such that certain
conditions set forth in the merger agreement, would not be
satisfied, or a Terminating Breach, provided, that, if such
Terminating Breach is curable through the exercise of
commercially reasonable efforts prior to the expiration of five
days from its occurrence (but in no event later than
August 31, 2006) by EPIX or Predix, neither Predix nor
EPIX, respectively, may terminate the merger agreement unless
such 5-day period
expires without such Terminating Breach having been
cured; or |
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by either EPIX or Predix, if such party is not in material
breach of any of its respective obligations under the merger
agreement, if any representation or warranty on the part of the
other party set forth in the merger agreement proves to have
been untrue on the date of thereof, if such failure to be true
would reasonably be likely to have a material adverse effect. |
Notice/ Effect of Termination
Any termination of the merger agreement will be effective
immediately upon the delivery of written notice of the
terminating party to the other parties thereto. In the event of
the termination of the merger agreement, the merger agreement
shall forthwith become void and there shall be no liability on
the part of any party thereto or any of its affiliates,
directors, officers or stockholders except that nothing therein
shall relieve any party from liability for any willful breach
thereof. No termination of the merger agreement shall affect the
obligations of the parties contained in the confidentiality
agreement dated October 28, 2005 between EPIX and Predix.
Fees and Expenses
Except as set forth in the merger agreement, all fees and
expenses incurred in connection with the merger agreement and
the transactions contemplated thereby shall be paid by the party
incurring such expenses, whether or not the merger is
consummated. In addition, EPIX shall be solely responsible for
all fees and expenses incurred in relation to the preparation,
printing and filing of this joint proxy statement/ prospectus
(including the preliminary materials related thereto) and the
registration statement of which this joint proxy statement/
prospectus forms a part, in each case, including without
limitation any amendments or supplements thereto.
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Predix shall pay EPIX a fee of $4.5 million upon the
termination of the merger agreement by EPIX if:
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there is an uncured breach of any covenant or agreement; |
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the board of directors of Predix shall have withheld or
withdrawn its recommendation in favor of the merger; |
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there shall have occurred any material adverse effect with
respect to Predix since the date of the merger agreement; or |
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Predix fails to obtain the requisite stockholder vote to approve
the merger. |
EPIX shall pay Predix a fee of $4.5 million upon the
termination of the merger agreement by Predix if:
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there is an uncured breach of any covenant or agreement; |
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the board of directors of EPIX shall have withheld or withdrawn
its recommendation in favor of the merger; |
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there shall have occurred any material adverse effect with
respect to EPIX since the date of the merger agreement; or |
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EPIX fails to obtain the requisite stockholder vote to approve
the merger. |
The fee payable pursuant to a termination under the merger
agreement shall be paid within three business days after the
first to occur of the events described in such sections.
Amendment and Waiver
The merger agreement may be amended by the parties thereto by
action taken by or on behalf of their respective boards of
directors at any time prior to the effective time; provided,
however, that, after approval of the merger by the boards of
directors and stockholders of EPIX and Predix, no amendment may
be made which by law requires further approval by such
stockholders or boards of directors without such further
approval. The merger agreement may not be amended except by an
instrument in writing signed by the parties thereto.
At any time prior to the effective time, any party to the merger
agreement may, with respect to any other party thereto,
(a) extend the time for the performance of any of the
obligations or other acts, (b) waive any inaccuracies in
the representations and warranties contained therein or in any
document delivered pursuant thereto and (c) waive
compliance with any of the agreements or conditions contained
therein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties
to be bound.
Amendment No. 1
On July 10, 2006, EPIX and Predix entered into amendment
no. 1 to the merger agreement to provide for the extension
of the termination date of the merger agreement from
July 31, 2006 to August 31, 2006 and to reflect
certain technical modifications.
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THE VOTING AGREEMENTS
The following description of the voting agreements describes
the material terms of the voting agreements. This description of
the voting agreements is qualified in its entirety by reference
to the form of voting agreement which is attached as
Annex B to this joint proxy statement/ prospectus and is
incorporated herein by reference. EPIX and Predix encourage you
to read the entire form of voting agreement.
The following Predix stockholders entered into each entered into
voting agreements with EPIX on April 3, 2006: Caduceus
Private Investment, L.P., UBS PW Juniper Crossover Fund, L.L.C.,
Hare and Company FAO: Finsbury Worldwide Pharma, Yozma II
(Israel) L.P., Yozma Venture Capital Ltd, YVC-Yozma
Management & Investments Ltd., as trustee for
Yozma II (B.V.I.) L.P., PCM Venture Capital L.P.,
Yamanouchi Venture Capital and PA International Limited. In the
voting agreements, each has agreed to vote all shares of Predix
common stock and preferred stock beneficially owned by them as
of the record date (a) in favor of the approval and
adoption of the merger agreement and the approval of the merger,
(b) against any action that would preclude fulfillment of a
condition under the merger agreement to EPIXs or EPIX
Delaware, Inc.s obligation to consummate the merger,
(c) against any action or agreement that would result in a
breach in any material respect of any covenant, representation
or warranty or any other obligation of Predix under the merger
agreement and (d) against any acquisition transaction
(other than the one contemplated by the merger agreement). In
addition, they have each granted EPIX an irrevocable proxy to
vote their shares of Predix common stock and preferred stock in
the manner set forth above. Further, each has agreed that it
will not (a) solicit proxies or participate in a
solicitation in opposition to or in competition with the
approval of the merger agreement or take any other action that
would compete with or interfere with the timely consummation of
the merger, (b) directly or indirectly encourage, initiate
or cooperate in a stockholders vote or action by written
consent of Predixs stockholders in opposition to or in
competition with the approval of the merger agreement, or
(c) become a member of a group with respect to any voting
securities of Predix for the purpose of opposing or competing
with the approval of the merger agreement. During the term of
the voting agreements, each has also agreed to not transfer,
sell, offer, exchange, pledge or otherwise dispose of any shares
of Predix common stock and preferred stock, or any options to
purchase shares of Predix common stock, owned by them.
Approximately 120,069 shares of Predix common stock and
6,769,289 shares of Predix preferred stock (on an
as-converted to Predix common stock basis), which represents
approximately 40% of the outstanding shares of Predix voting
stock as of June 28, 2006 are subject to voting agreements
and irrevocable proxies. The voting agreements will terminate on
the earlier of the consummation of the merger or termination of
the merger agreement pursuant to its terms.
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MANAGEMENT OF EPIX AFTER THE MERGER
Management and Board of Directors of EPIX After the Merger
Upon consummation of the merger, the EPIX board of directors is
expected to be comprised of nine members. The following table
lists the names, ages and positions of individuals designated by
EPIX and Predix to be the management team and key employees of
EPIX upon consummation of the merger and the expected members of
the EPIX board of directors after the merger. The ages of the
individuals are provided as of June 28, 2006.
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Name |
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Age | |
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Position |
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Management Team:
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Michael G. Kauffman, M.D., Ph.D.*
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42 |
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Chief Executive Officer |
Andrew C.G. Uprichard, M.D.*
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48 |
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President |
Kimberlee C. Drapkin, CPA*
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38 |
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Chief Financial Officer |
Oren Becker, Ph.D.*
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45 |
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Chief Scientific Officer |
Stephen R. Donahue, M.D.
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41 |
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Vice President of Clinical & Regulatory Affairs |
Philip Graham, Ph.D.
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43 |
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Vice President of Product Management and Imaging |
Silvia Noiman, Ph.D.*
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50 |
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Senior Vice President of Pipeline Management, General Manager
Israel |
Chen Schor, CPA*
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34 |
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Chief Business Officer |
Sharon Shacham, Ph.D.
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35 |
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Vice President of Preclinical Development and Product Leadership |
Brenda Sousa
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42 |
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Vice President of Human Resources |
Directors:
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Christopher F.O. Gabrieli
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46 |
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Chairman of the Board |
Patrick J. Fortune, Ph.D.
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59 |
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Director |
Frederick Frank
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73 |
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Director |
Michael Gilman, Ph.D.
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51 |
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Director |
Michael G. Kauffman, M.D., Ph.D.
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42 |
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Director |
Mark Leuchtenberger
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50 |
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Director |
Robert J. Perez
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41 |
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Director |
Gregory D. Phelps
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57 |
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Director |
Ian F. Smith, CPA, ACA
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39 |
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Director |
Mr. Perez will be the fifth person designated by EPIX to
serve on the board of directors of EPIX after the merger.
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Management and Key Employees of EPIX After the
Merger |
Michael G. Kauffman, M.D., Ph.D. has served as
Predixs President and Chief Executive Officer and as a
member of Predixs board of directors since August 2003.
From September 2002 until August 2003, Dr. Kauffman served
as President and Chief Executive Officer of Predix
Pharmaceuticals, Inc., the wholly-owned U.S. subsidiary of
Predix Pharmaceuticals Ltd., an Israeli corporation that Predix
acquired in August 2003. From March 2000 to September 2002,
Dr. Kauffman served as Vice President, Medicine, and
Proteasome Inhibitor (Velcade) Program Leader at Millennium
Pharmaceuticals Inc. Dr. Kauffman held senior positions at
Millennium Predictive Medicine, Inc., as cofounder and Vice
President of Medicine from September 1997 to February 2000. From
September 1995 to September 1997, Dr. Kauffman served as
Medical Director at Biogen Corporation (now Biogen Idec). He
currently serves on the board of directors of Bioenvision, Inc.,
a publicly traded biopharmaceutical company, CombinatoRx, Inc.,
a publicly traded biopharmaceutical company. Dr. Kauffman
received his M.D. and Ph.D.
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(Molecular Biology and Biochemistry) at Johns Hopkins and his
postdoctoral training at Harvard University. He received his
B.A. in Biochemistry summa cum laude from Amherst College
and is board certified in Internal Medicine.
Andrew C.G. Uprichard, M.D. joined EPIX as President
and Chief Operating Officer in July 2004. Dr. Uprichard has
an extensive background in discovery research and development in
the biopharmaceutical industry. Prior to joining EPIX,
Dr. Uprichard served as Chief Operating Officer at ArQule,
Inc. from 2002 to 2003 and at Curis, Inc. from 2000 to 2002. For
the preceding 11 years, Dr. Uprichard held numerous
management positions at Parke-Davis/ Warner-Lambert (now part of
Pfizer) in pharmaceutical research, where his
experience spanning drug discovery, pre-clinical and
clinical development included the oversight of a
number of IND filings. From 1997 to 2000, Dr. Uprichard was
Vice President, Drug Development; from 1994 to 1997, the Senior
Director, Cardiovascular Pharmacology; and from 1989 to 1994,
Dr. Uprichard held various oversight positions in
Cardiovascular Clinical Development. In the late 1980s,
Dr. Uprichard was a Cardiology and Postdoctoral Fellow at
the University of Michigan Medical School. Dr. Uprichard
holds M.B., Ch.B. and M.D. degrees from the University of
Edinburgh, Scotland; is a Fellow of the Royal College of
Physicians of Edinburgh; a Fellow of the Faculty of
Pharmaceutical Medicine and a Fellow of the American College of
Physicians.
Kimberlee C. Drapkin, CPA has served as Predixs
Chief Financial Officer since February 2005. From 1995 to
February 2005, Ms. Drapkin held senior positions of
increasing responsibility within the finance organization at
Millennium Pharmaceuticals, Inc. with leadership responsibility
for financial reporting, technical accounting, Sarbanes Oxley
compliance and internal audit. Ms. Drapkin began her
professional career at Price Waterhouse (now
PricewaterhouseCoopers LLP) and is a Certified Public
Accountant. Ms. Drapkin is a graduate of Babson College,
holding a B.S. in Accounting summa cum laude.
Oren Becker, Ph.D. has served as Predixs Chief
Scientific Officer since August 2003. Dr. Becker founded
Predix Pharmaceuticals Ltd. and served as its Chief Technology
Officer and on its board of directors from its inception in
November 2000 through August 2003. Before founding Predix,
Dr. Becker held a position as a visiting professor at
Harvard University from 1999 to 2000 and a professor at Tel-Aviv
University from 1994 to 2000. Dr. Becker received his B.Sc.
in Physics and Chemistry summa cum laude, a B.A. in
Philosophy magna cum laude and a Ph.D. in Theoretical
Chemical Physics from the Hebrew University of Jerusalem and his
postdoctoral training at Harvard University.
Stephen R. Donahue, M.D. has served as Predixs
Vice President, Clinical and Regulatory Affairs since October
2004. From June 2003 to October 2004 he served as the medical
director overseeing clinical research in atherosclerosis and
metabolism at Merck, where he played a key role in securing
regulatory approval of Vytorin (ezetimibe/simvastatin). From
1997 to June 2003, Dr. Donahue held several senior clinical
positions at Bristol-Myers Squibb, in clinical pharmacology,
metabolism and cardiovascular diseases. Dr. Donahue is a
graduate of Georgetown University Medical School and Brown
University. He completed his residency in internal medicine at
Georgetown University Medical Center and is Board Certified in
both Internal Medicine and Clinical Pharmacology.
Philip Graham, Ph.D. joined EPIX in October 1994 as
a scientist after more than 5 years at Eli Lilly and
Company. During his time at EPIX, Dr. Graham had management
responsibility for chemical and analytical development along
with pharmacology and toxicology. He played an important role in
the research and development of Vasovist as well as leading the
thrombus imaging program from lead optimization through the
initiation of Phase II proof-of concept trials with
EP-2104R. Dr. Graham received his Bachelor of Science
(Hons, 1st Class) degree from the University of Otago, New
Zealand, and his Ph.D. in Analytical Chemistry from the
University of Massachusetts, Amherst.
Silvia Noiman, Ph.D. has served as Senior Vice
President of Pipeline Management and General Manager of
Predixs subsidiary in Israel since August 2003.
Dr. Noiman founded Predix Pharmaceuticals Ltd. and served
as its Chief Operating Officer from November 2000 until August
2003. Before founding Predix Pharmaceuticals Ltd.,
Dr. Noiman performed private entrepreneurship activities in
the Biotechnology Industry in Israel from 1998 to 2000.
Dr. Noiman held an academic position at the
104
Weizmann Institute of Science from 1993 to 1996. Dr. Noiman
received her Ph.D. (Molecular Biology) and MBA at Tel-Aviv
University.
Chen Schor, CPA has served as Predixs Chief
Business Officer since January 2004. From 1998 to December 2003
Mr. Schor served as Partner, Life Sciences, and Chief
Financial Officer, at Yozma Venture Capital Group. Yozma was one
of the lead investors in Predix Pharmaceuticals Ltd. when the
company was founded in 2000. Mr. Schor served as a member
of the board of directors of Predix Pharmaceuticals Ltd. from
November 2000 to August 2003 and Predix Pharmaceuticals, Inc.
from September 2001 until August 2003. Mr. Schor served as
a member of Predixs board of directors from August 2003
until December 2003. Mr. Schor previously held positions at
Arthur Andersen from 1995 to 1996 and BDO consultants from 1996
to 1998 and holds an MBA, B.A. in Biology, B.A. in Economics and
is a Certified Public Accountant.
Sharon Shacham, Ph.D. has been a member of
Predixs scientific management team since Predix was
founded in 2000. Dr. Shacham joined Predix with its
founders and was the lead scientist in
G-Protein Coupled
Receptor modeling; her Ph.D. thesis provided the basis for much
of Predixs original and current computational technology,
including in silico screening protocols and early hit
identification. As one of the original employees of Predix,
Dr. Shacham has played a key role in the discovery and
development of Predixs clinical and pre-clinical drug
candidates. In January 2006, Dr. Shacham was promoted to
Vice President of Preclinical Development and Product
Leadership. Prior to joining Predix, she received a B.Sc. in
Chemistry magna cum laude, a Ph.D. in Biochemistry and
Biophysics, and an MBA, from Tel Aviv University.
Brenda Sousa joined EPIX in June 1998. Ms. Sousa joined
EPIX from RKS Health Ventures and the Spence Center for
Womens Health where she was the Director of Human
Resources from June 1995 to May 1998. Prior to 1998,
Ms. Sousa spent ten years in the hospitality industry with
Hilton, Stouffers and Sonesta hotels in a variety of sales and
marketing positions. She is a member of the board of directors
for a nonprofit organization, Career Collaborative, and is the
Chair of their Employer Advisory Committee. Ms. Sousa holds
an Associates Degree in Psychology.
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Board of Directors of EPIX After the Merger |
Christopher F.O. Gabrieli has been a member of the board
of directors of EPIX since 1994, and he is the Chairman of the
board of directors. Mr. Gabrieli is the Chairman of
Massachusetts 2020, a non-profit public policy organization. He
is a member of the general partners of Bessemer Venture
Partners III L.P. and Bessemer Venture Partners IV
L.P. and related venture capital partnerships, where he worked
from 1986 to 2000. Mr. Gabrieli is a candidate for the
Governor of the Commonwealth of Massachusetts, the general
election for which is scheduled in November 2006.
Patrick J. Fortune, Ph.D. has served as a member of
Predixs board of directors since January 2005.
Dr. Fortune has been a partner at Boston Millennia Partners
since August 2001. He was previously President and Chief
Operating Officer of New Era of Networks from 1999 to July 2001;
Vice President at Monsanto from 1995 to 1999; Vice President at
Bristol-Myers Squibb from 1991 to 1994; Group President at
Baxter International from 1984 to 1989 and Vice President of
Research and Development at Baxter International from 1982 to
1984. Dr. Fortune currently serves on the board of
directors of Parexel International Corp. and several private
companies. He has served on the engineering and scientific
advisory boards of the University of Wisconsin, the University
of Illinois and the University of Chicago. Dr. Fortune
holds a B.A. from the University of Wisconsin, an MBA from
Northwestern University and a Ph.D. in Physical Chemistry from
the University of Wisconsin.
Frederick Frank joined Predixs board of directors
as chairman in January 2001. Mr. Frank is Vice Chairman and
a Director of Lehman Brothers. Before joining Lehman Brothers as
a Partner in September 1969, Mr. Frank was co-director of
research, as well as Vice President and Director, of Smith,
Barney & Co. Incorporated. He is a Chartered Financial
Analyst, member of The New York Society of Security Analysts and
a past president of the Chemical Processing Industry Analysts.
Mr. Frank is a director of Diagnostic Products Corporation,
Landec Corporation and Pharmaceutical Product Development, Inc.,
all
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of which are publicly traded companies. He also serves on the
boards of directors of Business Engine, Digital Arts &
Sciences, Inc. and eSoft, Inc. He is Chairman of the National
Genetics Foundation, a director of the Salk Institute, a member
of the Pharmaceutical Executive Magazine advisory board, a
member of the Board of Governors of the National Center for
Genome Resources, Chairman of the Board of The Irvington
Institute for Immunological Research, a member of the Advisory
Board of The Harvard School of Public Health and also the John
Hopkins Bloomberg School of Public Health. Mr. Frank
holds a B.A. from Yale University and an MBA from Stanford
Business School.
Michael Gilman, Ph.D. has been a director of EPIX since
April 2006. Most recently he was Executive Vice President,
Research at Biogen Idec. He joined Biogen in 1999 as Director of
Molecular Biology and became head of research at Biogen in 2000.
Dr. Gilman was Executive Vice President and Chief
Scientific Officer of ARIAD Pharmaceuticals from 1995 to 2000.
Prior to that, Dr. Gilman spent eight years on the
scientific staff of Cold Spring Harbor Laboratory in New York,
where his research focused on mechanisms of signal transduction
and gene regulation. Dr. Gilman holds a Ph.D. in
Biochemistry from University of California, Berkeley, and a S.B.
in Life Sciences from Massachusetts Institute of Technology.
Michael G. Kauffman, M.D., Ph.D. See
Dr. Kauffmans biography set forth under
Management and Key Employees of EPIX After the
Merger above.
Mark Leuchtenberger has been a member of the board of
directors of EPIX since September 2004. Mr. Leuchtenberger
is the President and Chief Executive Officer of Therion
Biologics, a privately held biotechnology company developing
therapeutic vaccines for cancer. Prior to joining Therion in
2002, Mr. Leuchtenberger spent 11 years at Biogen,
Inc., where he led the development and launch of Avonex and ran
North American and international commercial operations. Prior to
Biogen, he was a consultant at Bain & Company
specializing in healthcare. Mr. Leuchtenberger also serves
on boards for the Massachusetts Biotechnology Council, Beth
Israel Deaconess Medical Center and Wake Forest University.
Robert J. Perez is a nominee for election to the EPIX
board of directors at the upcoming 2006 annual stockholders
meeting and if the merger is consummated, he will be the fifth
person designated by EPIX to serve on the board of directors of
EPIX after the merger. Mr. Perez has served as Senior Vice
President, Commercial Operations for Cubist Pharmaceuticals
since July 2004 and served as Cubists Senior Vice
President, Sales and Marketing from August 2003 to July 2004.
Prior to joining Cubist, Mr. Perez served as Vice President
of Biogens Central Nervous System Business Unit since 2001
and was responsible for leading the U.S. neurology
franchise, including Biogens product Avonex, along with
customer support, medical affairs, reimbursement and training.
From 1995 to 2001 he served as a Regional Director, Director of
Sales, and Avonex Commercial Executive at Biogen. From 1987 to
1995, Mr. Perez held various sales and marketing positions
at Zeneca Pharmaceuticals, ultimately serving as Regional
Business Manager, responsible for strategic planning and
profitability of a regional business unit, managing both
national accounts and regional sales managers. Mr. Perez
received a BS from California State University, Los Angeles and
an MBA from The Anderson School at UCLA.
Gregory D. Phelps has been a Director of EPIX since July
2004. Mr. Phelps is the Chairman of the Board, President
and Chief Executive Officer of RenaMed Biologics, Inc., a
biotechnology company developing therapeutic products. He has
previously held positions of Chief Executive Officer of Ardais
Corporation, Viagene, Inc. and ZymoGenetics, Inc. He has also
served as Vice Chairman of Dyax Corporation, Executive Vice
President of Genzyme Corporation and Vice President of Baxter
Travenol Laboratories, Inc. (now Baxter Healthcare).
Ian F. Smith, CPA, ACA has been a member of Predixs
board of directors since May 2005. Mr. Smith is currently
Senior Vice President and Chief Financial Officer of Vertex
Pharmaceuticals Incorporated. He began as Vice President and
Chief Financial Officer in October 2001, and was promoted to
Senior Vice President and Chief Financial Officer in November
2003. Prior to joining Vertex Mr. Smith was a partner in
the Life Science and Technology Practice of Ernst &
Young, LLP since 1999. He had various responsibilities in
Ernst & Youngs accounting, auditing and mergers
and acquisitions groups. Mr. Smith initially joined
Ernst & Youngs U.K. firm in 1987, and then joined
its Boston office in
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1995. Mr. Smith holds a B.A. in Accounting and Finance from
Manchester Metropolitan University, U.K., is a member of the
American Institute of Certified Public Accountants and is a
Chartered Accountant of England and Wales.
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Board Composition of EPIX After the Merger |
Upon the closing of the merger, EPIXs board of directors
will be divided into three classes, with each director serving a
three-year term and one class being elected at each years
annual meeting of stockholders. A majority of the members of the
EPIX board of directors after the merger will be independent
within the meaning of the director independence standards of The
NASDAQ Global Market and the applicable rules of the Securities
and Exchange Commission. Messrs. Gabrieli and Perez and
Dr. Fortune will be in the class of directors whose initial
term expires at the 2007 annual meeting of stockholders. Messrs.
Phelps, Frank and Smith will be in the class of directors whose
initial term expires at the 2008 annual meeting of the
stockholders. Mr. Leuchtenberger and Drs. Gilman and
Kauffman will be in the class of directors whose initial term
expires at the 2009 annual meeting of stockholders. This
classification of the EPIX board of directors will make it more
difficult for a third party to acquire control of EPIX after the
merger.
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Committees of the Board of EPIX After the Merger |
The EPIX board of directors has established three standing
committees: the audit committee, the compensation committee and
the corporate nominating and governance committee. In addition,
after the merger the composition of the committees will change
as a result of the resignation of certain existing EPIX
directors and the election of four Predix directors to the board
of directors of EPIX.
Audit Committee. EPIXs audit committee after the
merger will consist of Ian F. Smith CPA, ACA, Christopher F.O.
Gabrieli and Gregory D. Phelps, each of whom will be independent
within the meaning of the director independence standards of The
NASDAQ Global Market and the applicable rules of the Securities
and Exchange Commission. Mr. Smith will serve as Chairman
of EPIXs audit committee after the merger and also qualify
as an audit committee financial expert, as that term
is defined under the recently adopted Securities and Exchange
Commission rules. Each member of EPIXs audit committee
after the merger will meet the then current independence and
financial literacy requirements promulgated by the Securities
and Exchange Commission and by The NASDAQ Global Market.
EPIXs audit committee after the merger will be responsible
for preparing such reports, statements or charters as may be
required by The NASDAQ Global Market or federal securities laws,
as well as, among other things:
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reviewing the engagement of independent accountants and
retaining and terminating the services of independent
accountants; |
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considering matters relating to accounting policy and internal
controls and reviewing the scope of annual audits; |
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reviewing annual financial statements; |
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preparing the report that Securities and Exchange Commission
rules require be included in its annual proxy statement; |
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overseeing and monitoring its independent registered public
accounting firms qualifications, independence and
performance; |
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providing the EPIX board of directors with the results of its
monitoring and recommendations; and |
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providing to the EPIX board of directors after the merger
additional information and materials as it deems necessary to
make the EPIX board of directors aware of significant financial
matters that require the attention of the EPIX board of
directors. |
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Compensation Committee. EPIXs compensation
committee after the merger will be composed of Patrick J.
Fortune, Ph.D., Mark Leuchtenberger and Michael Gilman, Ph.D.,
each of whom will be independent within the meaning of the
director independence standards of The NASDAQ Global Market and
the applicable rules of the Securities and Exchange Commission.
Mr. Leuchtenberger will serve as Chairman of EPIXs
compensation committee after the merger. The compensation
committee will be responsible for, among other things:
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determining the compensation of EPIXs Chief Executive
Officer, (conducting its decision making process with respect to
that issue without the Chief Executive Officer present); |
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formulating, evaluating and approving the compensation of the
EPIX directors, other executive officers and key
employees; and |
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administering EPIXs equity plans. |
Corporate Nominating and Governance Committee.
EPIXs corporate nominating and governance committee after
the merger will be composed of Frederick Frank, Mark
Leuchtenberger and Gregory D. Phelps, each of whom will be
independent within the meaning of the director independence
standards of The NASDAQ Global Market and the applicable rules
of the Securities and Exchange Commission. Mr. Phelps will
serve as Chairman of EPIXs corporate nominating and
governance committee after the merger. The corporate nominating
and governance committee will be responsible for, among other
things, making recommendations to the full board of directors of
EPIX as to the size and composition of the EPIX board of
directors and to make recommendations as to particular nominees.
For all potential candidates, the corporate nominating and
governance committee will consider all factors it deems
relevant, such as a candidates personal integrity and
sound judgment, business and professional skills and experience,
independence, knowledge of the industry in which the combined
company operates, possible conflicts of interest, diversity, the
extent to which the candidate would fill a present need on the
EPIX board of directors, and concern for the long-term interests
of EPIXs stockholders. In general, persons recommended by
stockholders will be considered on the same basis as candidates
from other sources. If a stockholder wishes to nominate a
candidate to be considered for election as a director of EPIX,
it must follow the procedures described in EPIXs by-laws.
If a stockholder wishes simply to propose a candidate for
consideration as a nominee by the corporate nominating and
governance committee, it should submit any pertinent information
regarding the candidate to the attention of the Chairman of the
corporate nominating and governance committee, EPIX
Pharmaceuticals, Inc., 161 First Street, Cambridge, MA
02142.
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Compensation Committee Interlocks and Insider
Participation with Respect to EPIX |
Each member of EPIXs compensation committee after the
merger will be an outside director as that term is
defined in Section 162(m) of the Internal Revenue Code of
1986, as amended, and a
non-employee
director within the meaning of
Rule 16b-3 of the
rules promulgated under the Securities Exchange Act
of 1934, as amended. At the effective time of the merger,
it is not expected that any of EPIXs executive officers
will serve as a member of the board of directors or compensat