SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
-----------------------------
DATE OF REPORT: JANUARY 19, 2005
NORTHFIELD LABORATORIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 000-24050 36-3378733
(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
1560 Sherman Avenue
Suite 1000
Evanston, Illinois 60201-4800
(847) 864-3500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 8.01. OTHER EVENTS
The following includes information that is contained in a prospectus
supplement filed today by Northfield Laboratories Inc. in connection with a
proposed public offering of its common stock and is being filed for the purpose
of updating, supplementing and, where appropriate, superseding prior
disclosures filed by Northfield under the Securities Exchange Act of 1934. See
Exhibit 99.1.
BUSINESS OVERVIEW
Northfield Laboratories Inc. is a leader in the development of a safe and
effective alternative to transfused blood for use in the treatment of acute
blood loss. We are presently conducting a pivotal Phase III trial of our human
hemoglobin-based blood substitute, PolyHeme(R). We believe PolyHeme has the
potential to improve survival in critically injured patients and to thereby
transform the treatment of trauma.
We are presently developing PolyHeme for a unique indication: the early
treatment of urgent, life-threatening blood loss following trauma when donated
blood may not be immediately available. We believe that this indication
addresses a critical unmet medical need, since some trauma patients bleed to
death before they have access to blood.
We are pursuing a unique regulatory strategy in order to seek Food and Drug
Administration, or FDA, approval of PolyHeme. We are conducting the first-ever
pivotal Phase III trial in the United States in which a human blood substitute
is being used to treat severely injured and bleeding patients, beginning at the
scene of injury and continuing during transport to the hospital and the early
period of hospitalization. Because of the life-saving potential of PolyHeme, our
trial is being conducted under a federal regulation, 21 CFR 50.24, that permits
certain types of emergency research using an exception from the requirement for
prospective informed consent by individual patients. Our current trial is based
on our experience in prior clinical trials documenting the potential
life-sustaining capability of PolyHeme when given in rapid, massive infusions to
critically injured patients in the hospital.
We have also taken advantage of Special Protocol Assessment, or SPA, one of the
features of the Food and Drug Modernization Act of 1997. Our SPA reflects an
agreement with FDA on our trial design, the trial endpoints and the broad
concepts for clinical indications those endpoints will support in an application
for product approval by FDA. The assessment of efficacy in our trial will be
based on the data on patient survival at 30 days. A key feature of our SPA is
the agreement on dual primary endpoints of superiority and non-inferiority
between the treatment and control groups. Either of these endpoints will provide
evidence of efficacy.
As part of our trial protocol, an Independent Data Monitoring Committee, or
IDMC, consisting of independent medical and biostatistical experts is
responsible for periodically evaluating the safety data from the trial and
making recommendations relating to continuation or modification of the trial
protocol to minimize any identified risks to patients. The IDMC has completed
its first two reviews of data on mortality and serious adverse events in the
first 120 patients enrolled in the trial and has recommended that the trial
continue without modification. This is the first time that a trial of a human
blood substitute has passed this patient evaluation milestone in a high risk
trauma population.
We believe that PolyHeme ultimately represents a substantial global market
opportunity, based on the need for a universally compatible, immediately
available oxygen carrying product and PolyHeme's potential for eventual approval
for multiple indications.
As of the date of this prospectus supplement, 16 clinical sites in the United
States were enrolling patients in our pivotal Phase III trial and two other
sites had received final Institutional Review Board, or IRB, approval and were
preparing to begin patient enrollment. Nine additional sites were engaged in the
pre-trial public disclosure and community consultation process. Each of the
sites participating in the trial is designated as a Level I trauma center,
indicating its capacity to treat the most severely injured trauma patients. We
anticipate that a total of 25 or more clinical sites across the United States
will eventually participate in the trial. The trial has an expected enrollment
of 720 patients.
As part of our trial protocol, the IDMC is responsible for periodically
evaluating the safety data from the trial and making recommendations relating to
the continuation or modification of the trial protocol to minimize any
identified risks to patients. The protocol includes four planned evaluations by
the IDMC that occur after 60, 120, 250 and 500 patients have been enrolled and
monitored for a 30-day follow up period. The IDMC focuses its reviews on
mortality and serious adverse events and evaluates all safety data as the trial
continues. We receive a recommendation from the IDMC after each review, but we
will not have access to the trial data reviewed by the IDMC until the trial is
completed.
In July 2004, the IDMC recommended that our trial continue without modification
based on the committee's initial review of blinded data on mortality and serious
adverse events from the first 60 patients enrolled in the trial. In October
2004, the IDMC again recommended continuation of the trial without modification
based on its review of data following enrollment of the first 120 patients in
our trial. The length of time for completion of the IDMC review after each
enrollment target is reached is expected to become longer as the number of
enrolled patients increases. Enrollment in the trial continues during the period
of 30-day follow-up, data preparation and analysis and meetings of the IDMC, so
the disclosure of the IDMC recommendation does not correspond to the current
status of patient enrollment. We anticipate that the IDMC will complete its
third review of trial data on the first 250 patients enrolled in our trial and
make a recommendation to us in the second calendar quarter of 2005.
Our current goal is to complete the patient enrollment phase of our trial by the
end of calendar 2005. Our ability to achieve this goal will depend, in part, on
the number of clinical sites participating in our trial and the ability of these
sites to enroll patients at the projected rates.
TRIAL DESIGN AND CLINICAL ENDPOINTS
We have reached agreement with FDA on Special Protocol Assessment, or SPA, for
our pivotal Phase III trial. SPA is designed to facilitate the review and
approval of drug and biological products by allowing for FDA evaluation of the
trial sponsor's proposed design and size of clinical trials intended to form the
primary basis for an efficacy claim in a Biologics License Application submitted
to FDA. If agreement is reached between FDA and the trial sponsor, SPA will
document the terms and conditions under which the clinical trial will be
conducted. Our SPA reflects an agreement with FDA on our trial design, the trial
endpoints and the broad concepts for clinical indications those endpoints will
support in an application for product approval by FDA.
Our pivotal Phase III trial is being conducted under a federal regulation that
permits research to be conducted in certain emergent, life-threatening
situations using an exception from the requirement for prospective informed
consent by individual patients. Participation by each clinical trial site is
overseen by an IRB. Under the applicable federal regulation, an IRB may give
approval for patient enrollment in trials in emergency situations without
requiring individual informed consent provided specific criteria are met.
Patients must be in a life-threatening situation for which available treatments
are unproven or unsatisfactory and scientific evidence must be needed to assess
the safety and effectiveness of alternative treatments. The experimental therapy
being evaluated must also provide patients potential for direct clinical
benefit. In addition, medical intervention must be required before informed
consent can be obtained and it must be impracticable to conduct the trial using
only consenting patients. Where informed consent is feasible, the sponsor's
consent procedures and forms must be reviewed and approved by the IRB, and
attempts to obtain informed consent must be documented by the sponsor.
Before enrollment can begin, the regulation requires public disclosure of
information about the trial, including the potential risks and benefits, and the
formation of an independent monitoring committee to oversee the trial.
Consultation must also occur with representatives of the community where the
study will be conducted and from which the study population will be drawn. Each
of the clinical sites participating in our current trial has completed the
required public disclosure and community consultation procedures and received
IRB approval to enroll patients in accordance with the trial protocol.
Under our trial protocol, patients enrolled in the trial are randomly assigned
to either a treatment group or a control group. The treatment group receives
PolyHeme at the scene of the injury or in the ambulance during transport and
continues to receive PolyHeme, if necessary, during the initial 12 hour
post-injury period in the hospital. Patients in the treatment group may receive
a maximum of six units of PolyHeme. The control group receives saline solution
in the field and donated blood, if necessary, in the hospital.
Evaluation of the efficacy data generated in our pivotal Phase III trial will
focus on patient survival at 30 days after the date of injury. The mortality
rate observed for patients in the treatment group in our trial will be compared
statistically with the mortality rate for patients in the control group. A key
feature of our SPA is the agreement on dual primary end points of superiority
and non-inferiority between the treatment and control groups. The trial design
is unusual in that meeting either of the primary endpoints of superiority or
non-inferiority will provide evidence of efficacy.
Our trial is being conducted in urban settings because urban Level I trauma
centers have the patient volume, resources and sophistication to conduct a
clinical trial of this complexity. In urban areas, however, transit times in the
ambulance may be brief, and the control group will reach the hospital, where
patients will have access to blood, in relatively short periods of time. The
observed outcome in our trial may therefore not demonstrate the expected
magnitude of survival benefit that might occur if the trial were being conducted
in the rural setting, where more extended transport times are typical and where
the availability of blood may be limited. It is therefore possible that the
observed survival rate in the treatment group may trend towards the survival
rate observed in patients in the control group who have rapid access to blood.
This outcome would represent non-inferiority, which would satisfy one of the
dual primary endpoints for efficacy in our trial protocol.
THE MARKET OPPORTUNITY
Transfused blood represents a multi-billion dollar market in the United States.
We estimate that approximately 14 million units of blood are transfused in the
United States each year. The transfusion market in the United States consists of
two principal segments. The acute blood loss segment, which we estimate
comprises approximately 60% of the transfusion market, includes transfusions
required in connection with trauma, surgery and unexpected blood loss. The
chronic blood loss segment, which we believe represents approximately 40% of the
transfusion market, includes transfusions in connection with general medical
applications and chronic anemias.
We believe that PolyHeme will be most useful in the treatment of acute blood
loss. The principal clinical settings in which patients experience acute blood
loss are unplanned blood loss in trauma, emergency surgery and other causes of
urgent hemorrhage, and planned blood loss in elective surgery. For trauma and
emergency surgical procedures, the immediate availability and universal
compatibility of PolyHeme may provide significant advantages over transfused
blood by avoiding the delay and opportunities for error associated with blood
typing. In elective surgery, PolyHeme has the potential to increase transfusion
safety for patients and health care professionals.
In addition to the foregoing applications for which blood is currently used,
there exist potential sources of demand for which blood is not currently used
and for which PolyHeme may be suitable. These include applications in which the
required blood type is not immediately available or in which transfusions are
desirable but not given for fear of a transfusion reaction due to difficulty in
identifying
compatible blood. For example, we believe PolyHeme may be used by Emergency
Medical Technicians at the scene of injury and during transport to the hospital
by ground or air ambulance. Emergicenters and surgicenters also both experience
events where PolyHeme may be useful. In addition, the United States military has
expressed interest in the use of blood substitutes for the treatment of
battlefield casualties. There may also be potential market opportunities for
PolyHeme in novel areas such as ischemia and oncology.
We believe that the initial indication we are seeking for
PolyHeme--unavailability of red blood cells--represents the greatest clinical
and commercial opportunity for the product since it addresses a critical unmet
medical need and has the potential to provide a survival benefit. At present, no
adequate alternative to blood exists for the treatment of patients with
life-threatening hemorrhage who need replacement of lost oxygen-carrying
capacity. PolyHeme is the first human blood substitute to pursue this
indication, and our goal is for PolyHeme to be first to the market for this
indication.
We recently engaged a national consulting firm to conduct an independent
assessment of the potential market opportunity for PolyHeme. Using a variety of
primary and secondary sources along with original research, their analysis
indicates a potential market opportunity in the United States for PolyHeme's
initial indication of unavailability in excess of 350,000 units per year,
representing an estimated market value of $400 to $500 million. In addition, the
global opportunity for our initial indication, as well as multiple other
potential indications, is estimated to substantially exceed this initial
domestic market opportunity.
OUR STRATEGY
Our strategy is to achieve sustainable profitability and growth by developing,
marketing and selling an effective alternative to transfused blood for use in
the treatment of acute blood loss. To reach these goals we are focusing on the
following objectives:
complete our pivotal Phase III trial;
prepare and submit a Biologics License Application to FDA for the approval of
PolyHeme;
expand our current manufacturing capabilities to support the commercial launch
of PolyHeme; and
build sales, marketing and distribution capabilities in support of the
commercialization of PolyHeme.
OUR CORPORATE INFORMATION
We were incorporated in Delaware in 1985. Our principal executive offices are
located at 1560 Sherman Avenue, Suite 1000, Evanston, Illinois 60201-4800, and
our telephone number is (847) 864-3500. We maintain an Internet website at
www.northfieldlabs.com. We have not incorporated by reference into this
prospectus supplement or the accompanying prospectus the information in, or that
can be accessed through, our website, and you should not consider it to be a
part of this prospectus supplement or the accompanying prospectus.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should
carefully consider the following risk factors that supplement the risk factors
described in our Annual Report on Form 10-K for the year ended May 31, 2004 as
well as other information contained in our other filings with the Securities and
Exchange Commission. If any of the following risks actually occurs, our
business, financial condition and results of operations could materially suffer.
As a result, the trading price of our common stock could decline, and you might
lose all or part of your investment.
WE HAVE A HISTORY OF LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN.
From our inception through November 30, 2004, we have incurred net operating
losses totaling $134,838,000. We will require substantial additional
expenditures to complete clinical trials, to pursue regulatory approval for
PolyHeme, to establish commercial scale manufacturing processes and facilities,
and to establish marketing, sales and administrative capabilities. These
expenditures are expected to result in substantial losses for at least the next
few years and are expected to substantially exceed our currently available
capital resources. The expense and the time required to realize any product
revenues or profitability are highly uncertain. We cannot ensure that we will be
able to achieve product revenues or profitability on a sustained basis or at
all.
WE ARE REQUIRED TO COMPLETE OUR CURRENT CLINICAL TRIAL BEFORE WE MAY SELL
POLYHEME COMMERCIALLY AND WE MAY BE REQUIRED TO CONDUCT ADDITIONAL CLINICAL
TRIALS IN THE FUTURE.
The results of our clinical trials conducted to date are not sufficient to
demonstrate adequately the safety and effectiveness of PolyHeme in order to
obtain approval from FDA for the commercial sale of PolyHeme. We are currently
conducting a pivotal Phase III trial in which PolyHeme is being used for the
first time in civilian trauma applications to treat severely injured patients
before they reach the hospital. Under this protocol, treatment with PolyHeme
begins at the scene of the injury or in the ambulance and continues during
transport and the initial 12 hour post-injury period in the hospital. This trial
will be expensive and time-consuming and the timing of the FDA review process is
uncertain. Our trial may be delayed due to failure to conduct the trial in
accordance with regulatory requirements, a lower than anticipated enrollment
rate of patients or insufficient supply of product or other materials necessary
for the conduct of the trial. We or FDA may in the future suspend our clinical
trial at any time if it is believed that the subjects participating in the trial
are being exposed to unacceptable health risks.
We cannot ensure that we will be able to complete our current clinical trial
successfully or that FDA will not require us to conduct additional clinical
trials of PolyHeme in the future. If FDA approval for the commercial sale of
PolyHeme is obtained, it may include significant limitations on the indicated
uses for which PolyHeme may be marketed. FDA requires a separate approval for
each proposed indication for the use of PolyHeme in the United States. If we
want to expand PolyHeme's indications, we will have to design additional
clinical trials, submit the trial designs to FDA for review and complete those
trials successfully.
Our business, financial condition and results of operations are critically
dependent on receiving FDA approval of PolyHeme. A significant delay in our
clinical trial or a failure to achieve FDA approval for commercial sales of
PolyHeme would have a material adverse effect on us and could result in the
cessation of our business.
COMPLETION OF OUR PIVOTAL PHASE III CLINICAL TRIAL IS DEPENDENT ON THE NUMBER OF
CLINICAL TRIAL SITES PARTICIPATING IN THE TRIAL AND THE RATE AT WHICH WE ARE
ABLE TO ENROLL PATIENTS IN THE TRIAL.
Two clinical sites did not receive IRB approval for their participation in our
pivotal Phase III trial. It is possible the other prospective clinical sites may
decide not to participate in our trial or may fail to obtain IRB approval for
their participation in the trial. One or more of the clinical sites currently
enrolling patients may also discontinue their participation in our trial in the
future. Our projections relating to completion of the enrollment phase of our
trial are based, in part, on assumptions regarding the number of clinical sites
enrolling patients in our trial. If we are unable to include additional clinical
sites in our trial or our current clinical sites discontinue their participation
in our trial, the trial may be significantly delayed and we may be unable to
complete the trial.
Our pivotal Phase III trial is being conducted under a federal regulation that
allows research to be conducted in certain emergent, life-threatening situations
using an exception from the requirement for prospective informed patient
consent. Under our trial protocol, members of the public can take steps to avoid
being enrolled in our trial and patients enrolled in our trial are permitted to
terminate their participation at any time. Our trial may be delayed, and we may
be unable to complete the trial, if a significant number of individuals decline
to participate in the trial or if patients enrolled in the trial terminate their
participation before the end of the 30-day post-treatment evaluation period
required under our trial protocol.
SAFETY DATA FROM OUR PIVOTAL PHASE III CLINICAL TRIAL WILL BE REVIEWED BY AN
INDEPENDENT COMMITTEE, WHICH COULD RECOMMEND THAT THE TRIAL BE HALTED OR
MODIFIED.
As part of our trial protocol, an Independent Data Monitoring Committee, or
IDMC, consisting of independent medical and biostatistical experts is
responsible for periodically evaluating the safety data from the trial and
making recommendations relating to the continuation or modification of the trial
protocol to minimize any identified risks to patients. The IDMC focuses its
reviews on mortality and serious adverse events and evaluates all safety data as
the trial continues. We anticipate that the IDMC will complete its third review
of trial data on the first 250 patients enrolled in our trial and make a
recommendation to us in the second calendar quarter of 2005. If the IDMC
believes the data from our trial give rise to safety concerns, the IDMC could
recommend that our trial be halted or substantially modified. A recommendation
of this type could significantly delay the completion of our trial and could
prevent us from completing the trial.
THE MARKET MAY NOT ACCEPT OUR PRODUCT.
Even if PolyHeme is approved for commercial sale by FDA, the degree of market
acceptance of PolyHeme by physicians, healthcare professionals and third party
payors, and our profitability and growth will depend on a number of factors,
including:
relative convenience and ease of administration;
the prevalence and severity of any adverse side effects;
effectiveness of our sales and marketing strategy; and
the price of PolyHeme compared with other blood substitute products.
In addition, even if PolyHeme does achieve market acceptance, we may not be able
to maintain that market acceptance over time if new products are introduced that
are move favorably received than PolyHeme or render PolyHeme obsolete.
WE RELY ON THIRD PARTIES TO COORDINATE OUR CLINICAL TRIALS AND PERFORM DATA
COLLECTION AND ANALYSIS, WHICH MAY RESULT IN COSTS AND DELAYS THAT PREVENT US
FROM SUCCESSFULLY COMMERCIALIZING OUR PRODUCT.
We do not have the ability to conduct our clinical trials independently. We rely
and will continue to rely on clinical investigators, third-party clinical
research organizations and consultants to perform some or all of the functions
associated with clinical trials. In particular, as part of our trial protocol,
an Independent Data Monitoring Committee consisting of independent medical and
biostatistical
experts is responsible for periodically evaluating the safety data from the
trial and making recommendations relating to the continuation or modification of
the trial protocol to minimize any identified risks to patients.
Our clinical trial may be delayed, suspended or terminated if:
these third parties do not successfully carry out their contractual duties or
regulatory obligations or meet expected deadlines;
these third parties need to be replaced; or
the quality or accuracy of the data obtained by third parties is compromised
due to their failure to adhere to our clinical protocol or regulatory
requirements or for other reasons.
Failure to perform by these third parties may increase our development costs,
delay our ability to obtain regulatory approval and prevent the
commercialization of our product.
OUR ACTIVITIES ARE AND WILL CONTINUE TO BE SUBJECT TO EXTENSIVE GOVERNMENT
REGULATION.
Our research, development, testing, manufacturing, marketing and distribution of
PolyHeme are, and will continue to be, subject to extensive regulation,
monitoring and approval by FDA. The regulatory approval process to establish the
safety and effectiveness of PolyHeme and the safety and reliability of our
manufacturing process has already consumed considerable time and expenditures.
The data obtained from clinical trials are susceptible to varying
interpretations, which could delay, limit or prevent FDA regulatory approval.
Even if we demonstrate evidence of efficacy, our data may not demonstrate
safety. We cannot ensure that, even after extensive clinical trials, regulatory
approval will ever be obtained for PolyHeme. If PolyHeme is approved, it would
be the first human blood substitute ever to receive FDA approval.
We will be required to submit a Biologics License Application, or BLA, with FDA
in order to obtain regulatory approval for the commercial sale of PolyHeme in
the United States. Under FDA guidelines, FDA may comment upon the acceptability
of a BLA following its submission. After a BLA is submitted there is an initial
review by FDA to be sure that all of the required elements are included in the
submission. There can be no assurance that the submission will be accepted for
filing or that FDA may not issue a refusal to file, or RTF. If an RTF is issued,
there is opportunity for dialogue between the sponsor and FDA in an effort to
resolve all concerns. There can be no assurance that such a dialogue will be
successful in leading to the filing of the BLA. We received an RTF from FDA in
November 2001 in connection with our submission of a BLA seeking approval to
market PolyHeme for use in the treatment of urgent, life-threatening blood loss
based on data from patients in the hospital setting only. The subsequent
dialogue with FDA resulted in the mutual decision to proceed with our current
pivotal Phase III trial, which starts in the prehospital setting. If a new BLA
submission is filed, the timing of the FDA review process is uncertain and there
can be no assurance that the full review will result in product approval.
Moreover, if regulatory approval of PolyHeme is granted, the approval may
include limitations on the indicated uses for which PolyHeme may be marketed.
Further clinical trials will likely be required to gain approval to promote the
use of PolyHeme for any additional indications.
Further, discovery of previously unknown problems with PolyHeme or unanticipated
problems with our manufacturing facilities, even after FDA approval of PolyHeme
for commercial sale, may result in the imposition of significant restrictions,
including withdrawal of PolyHeme from the market or restrictions on approved
indications. Additional laws and regulations may also be enacted which could
prevent or delay regulatory approval of PolyHeme, including laws or regulations
relating to the price or cost-effectiveness of medical products. Other laws and
regulations may be enacted that could require us to comply with post-marketing
requirements for PolyHeme that may be time-consuming and expensive. Any delay or
failure to achieve regulatory approval of commercial sales of PolyHeme or to
maintain compliance with current or future laws and regulations is likely to
have a material adverse effect on our financial condition.
FDA continues to monitor products even after they receive approval. If and when
FDA approves PolyHeme, its manufacture and marketing will be subject to ongoing
regulation, including compliance with current good manufacturing practices,
adverse event reporting requirements and FDA's general prohibitions against
promoting products for unapproved or "off-label" uses. We are also subject to
inspection and market surveillance by FDA for compliance with these and other
requirements. Any enforcement action resulting from failure, even by
inadvertence, to comply with these requirements could affect the manufacture and
marketing of PolyHeme. In addition, FDA could withdraw a previously approved
product from the market upon receipt of newly discovered information. FDA could
also require us to conduct additional, and potentially expensive, studies in
areas outside our approved indicated uses.
The lack of established criteria for evaluating the safety and effectiveness of
blood substitute products could also delay or prevent FDA approval. In October
2004, FDA published for comment a draft guidance document indicating suggested
criteria for testing the safety and efficacy of oxygen therapeutics as
substitutes for human red blood cells and providing guidance on the design of
clinical trials to assess the risks and benefits associated with the use of such
products. The draft guidance document was based in part on a conference on blood
substitute products convened at National Institutes of Health in 1999. The draft
guidance will not be finalized and implemented until completion of a public
comment process. We cannot be certain when the definitive guidance will be
issued by FDA or what effect, if any, the definitive guidance may have on our
clinical trial. It is possible that, as a result of the definitive guidance, we
may be required to undertake additional pre-clinical or clinical trials or
modify the way data from our trial are analyzed or presented. FDA's definitive
guidance relating to the evaluation of the effectiveness of blood substitute
products could delay or prevent FDA regulatory approval of PolyHeme. In
addition, delay or rejection could be caused by other future changes in FDA
policies and regulations.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO CONTINUE OUR BUSINESS.
We currently believe we have sufficient capital resources to complete the
enrollment phase of our clinical trials. As more fully described under "Use of
Proceeds," we intend to use the proceeds of this offering to fund our
post-enrollment activities in our clinical trial, to prepare and submit a BLA
application to FDA, to construct a 75,000 unit per year manufacturing facility
to produce PolyHeme for commercial sale, to build sales, marketing and
distribution capabilities and for other general corporate purposes. We may be
required to raise capital, in addition to the proceeds of this offering, to
continue our business. Our future capital requirements will depend on many
factors, including the scope and results of our clinical trials, the timing and
outcome of regulatory reviews, administrative and legal expenses, the status of
competitive products, the establishment of manufacturing capacity and the
establishment of collaborative relationships. We cannot ensure that additional
funding will be available or, if it is available, that it can be obtained on
terms and conditions we will deem acceptable. Any additional funding derived
from the sale of equity securities may result in significant dilution to our
existing stockholders, including purchasers in this offering.
WE CURRENTLY MANUFACTURE POLYHEME AT A SINGLE LOCATION AND, IF WE WERE UNABLE TO
UTILIZE THIS FACILITY, OUR ABILITY TO MANUFACTURE POLYHEME WILL BE SIGNIFICANTLY
AFFECTED, AND WE WILL BE DELAYED OR PREVENTED FROM COMPLETING OUR CLINICAL
TRIALS AND COMMERCIALIZING POLYHEME.
We currently manufacture PolyHeme at a single location and we have no
alternative manufacturing capacity in place at this time. Damage to this
manufacturing facility due to fire, contamination, natural
disaster, power loss, unauthorized entry or other events could force us to cease
the manufacturing of PolyHeme. Any lack of supply could, in turn, delay our
clinical trials and any potential commercial sales. In addition, if the facility
or the equipment in the facility is significantly damaged or destroyed for any
reason, we may not be able to replace our manufacturing capacity for an extended
period of time, and our business, financial condition and results of operations
will be materially and adversely affected.
FAILURE TO INCREASE MANUFACTURING CAPACITY MAY IMPAIR POLYHEME'S MARKET
ACCEPTANCE AND PREVENT US FROM ACHIEVING PROFITABILITY.
Currently, we have a manufacturing capacity of approximately 10,000 units of
PolyHeme per year. Commercial-scale manufacturing of PolyHeme will require the
construction of a manufacturing facility significantly larger than that
currently being used to produce PolyHeme for our clinical trials. A
commercial-scale manufacturing facility will be subject to FDA inspections and
extensive regulation, including compliance with current good manufacturing
practices and FDA approval of scale-up changes. Failure to comply may result in
enforcement action, which may significantly delay or suspend manufacturing
operations. We have no experience in large-scale manufacturing, and there can be
no assurance that we can achieve large-scale manufacturing capacity. It is also
possible that we may incur substantial cost overruns and delays compared to
existing estimates in building and equipping a large-scale manufacturing
facility. Moreover, in order to seek FDA approval of the sale of PolyHeme
produced at a larger-scale manufacturing facility, we may be required to conduct
additional studies with product manufactured at that facility. A significant
delay in achieving scale-up of commercial manufacturing capabilities would have
a material adverse effect on sales of PolyHeme.
OUR PROFITABILITY WILL BE AFFECTED IF WE INCUR PRODUCT LIABILITY CLAIMS IN
EXCESS OF OUR INSURANCE COVERAGE.
The testing and marketing of medical products, even after FDA approval, have an
inherent risk of product liability. Claims by users of PolyHeme, or by others
selling PolyHeme, could expose us to substantial product liability. We maintain
limited product liability insurance coverage for our clinical trials in the
total amount of $10 million. However, our profitability would be adversely
affected by a successful product liability claim in excess of our insurance
coverage. We cannot ensure that product liability insurance will be available in
the future or be available on reasonable terms.
Our pivotal Phase III trial is being conducted under a federal regulation that
allows research to be conducted in certain emergent, life-threatening situations
using an exception from the requirement for informed patient consent. Under the
applicable federal regulation, an IRB may give approval for patient enrollment
in trials in emergency situations without requiring individual informed consent
provided specific criteria are met. Individual informed consent is often a
defense raised against product liability claims asserted by patients
participating in clinical trials of medical products. We cannot ensure that IRB
approval of patient enrollment in our trial, even if given in full compliance
with the applicable federal regulations, will provide us with a defense against
product liability claims by patients participating in our trial. It is also
possible that we may be subject to legal claims by patients objecting to being
enrolled in our trial without their individual informed consent, even if the
patients do not suffer any injuries in connection with our trial.
OUR ABILITY TO GENERATE REVENUE FROM OUR PRODUCT WILL DEPEND ON REIMBURSEMENT
AND DRUG PRICING POLICIES AND REGULATIONS.
Our ability to achieve acceptable levels of reimbursement for PolyHeme by
governmental authorities, private health insurers and other organizations will
have an effect on our ability to successfully commercialize PolyHeme. We cannot
be sure that reimbursement in the United States, Europe or elsewhere will be
available for PolyHeme or, if reimbursement should become available, that it
will not be decreased or eliminated in the future. If reimbursement is not
available or is available only at limited levels, we may not be able to
successfully commercialize PolyHeme, and may not be able to obtain a
satisfactory financial return on PolyHeme.
Third-party payers increasingly are challenging prices charged for medical
products and services. Also, the trend toward managed health care in the United
States and the changes in health insurance programs, as well as legislative
proposals to reform health care or reduce government insurance programs, may
result in lower prices for pharmaceutical products, including PolyHeme.
Cost-cutting measures that health care providers are instituting, and the effect
of any health care reform, could harm our ability to sell PolyHeme. Moreover, we
are unable to predict what additional legislation or
regulation, if any, relating to the health care industry or third-party coverage
and reimbursement may be enacted in the future or what effect this legislation
or regulation would have on our business. In the event that governmental
authorities enact legislation or adopt regulations which affect third-party
coverage and reimbursement, demand for PolyHeme may be reduced, thereby harming
our sales and profitability.
FAILURE TO OBTAIN REGULATORY APPROVAL IN FOREIGN JURISDICTIONS WOULD PREVENT OUR
PRODUCT FROM BEING MARKETED ABROAD.
We have entered into license agreements with Pfizer Inc., formerly known as
Pharmacia Corporation, and Hemocare Ltd., an Israeli corporation, to develop,
manufacture and distribute PolyHeme in certain European, Middle Eastern and
African countries. The license agreements permit Pfizer and Hemocare to sell
PolyHeme in return for the payment of royalties based upon sales of PolyHeme in
the licensed territories. In order for Pfizer, Hemocare or anyone else,
including us, to market our products in the European Union and many other
foreign jurisdictions, we or licensees must obtain separate regulatory approvals
and comply with numerous and varying regulatory requirements. The approval
procedure varies among countries and can involve additional testing. The time
required to obtain approval may differ from that required to obtain FDA
approval. The foreign regulatory approval process entails all of the risks
associated with obtaining FDA approval. We and our licensees may fail to obtain
foreign regulatory approvals on a timely basis, if at all. Approval by 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 foreign countries or by FDA. We and our licensees may not
be able to file for, and may not receive, necessary regulatory approvals to
commercialize our product in any market. If we or our licensees fail to obtain
these approvals, our business, financial condition and results of operations
could be materially and adversely affected.
OUR FINANCIAL RESULTS COULD BE AFFECTED BY CHANGES IN THE ACCOUNTING RULES
GOVERNING THE RECOGNITION OF STOCK-BASED COMPENSATION EXPENSE.
The Financial Accounting Standards Board recently issued its Statement of
Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment
(Statement 123R), which addresses the accounting for employee stock options.
Statement 123R requires that the cost of all employee stock options, as well as
other equity-based compensation arrangements, be reflected in financial
statements based on the estimated fair value of the awards. We expect to adopt
SFAS 123R for the period ending November 30, 2005. We will assess the impact of
the transition to this new accounting standard during the upcoming months. Upon
our implementation of Statement 123R, we could be required to recognize
significant additional compensation expense.
FAILURE TO MAINTAIN EFFECTIVE INTERNAL CONTROLS OVER FINANCIAL REPORTING COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, OPERATING RESULTS AND STOCK
PRICE.
Beginning with our annual report for our fiscal year ending May 31, 2005,
Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include a
report by our management on our internal controls over financial reporting. This
report must contain an assessment by management of the effectiveness of our
internal controls over financial reporting as of the end of our fiscal year and
a statement as to whether or not our internal controls are effective. The report
must also contain a statement that our independent auditors have issued an
attestation report on management's assessment of such internal controls.
In order to achieve timely compliance with Section 404, we have begun a process
to document and evaluate our internal controls over financial reporting. Our
efforts to comply with Section 404 have resulted in, and are likely to continue
to result in, significant costs, the commitment of time and
operational resources and the diversion of management's attention. If our
management identifies one or more material weaknesses in our internal controls
over financial reporting, we will be unable to assert our internal controls are
effective. If we are unable to assert that our internal controls over financial
reporting are effective, or if our independent auditors are unable to attest
that our management's report is fairly stated or they are unable to express an
opinion on our management's evaluation or on the effectiveness of our internal
controls, our business may be harmed. Market perception of our financial
condition and the trading price of our stock may be adversely affected and
customer perception of our business may suffer.
WE ARE SUBJECT TO A VARIETY OF FEDERAL, STATE AND LOCAL LAWS, RULES AND
REGULATIONS RELATED TO THE DISCHARGE OR DISPOSAL OF TOXIC, VOLATILE OR OTHER
HAZARDOUS CHEMICALS.
Although we believe that we are in material compliance with these laws, rules
and regulations, the failure to comply with present or future regulations could
result in fines being imposed on us, suspension of production or cessation of
operations. Third parties may also have the right to sue to enforce compliance.
Moreover, it is possible that increasingly strict requirements imposed by
environmental laws and enforcement policies thereunder could require us to make
significant capital expenditures. The operation of a manufacturing plant entails
the inherent risk of environmental damage or personal injury due to the handling
of potentially harmful substances, and there can be no assurance that we will
not incur material costs and liabilities in the future because of an accident or
other event resulting in personal injury or unauthorized release of such
substances to the environment. In addition, we generate hazardous materials and
other wastes that are disposed of at various offsite facilities. We may be
liable, irrespective of fault, for material cleanup costs or other liabilities
incurred at these disposal facilities in the event of a release of hazardous
substances by such facilities into the environment.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
OUR SUCCESS DEPENDS UPON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND
OUR PROPRIETARY TECHNOLOGY.
Our success depends in part on our ability to obtain and maintain intellectual
property protection for PolyHeme as well as our technology and know-how. Our
policy is to seek to protect PolyHeme and our technologies by, among other
methods, filing United States and foreign patent applications related to our
proprietary technology, inventions and improvements that are important to the
development of PolyHeme. The patent positions of companies like ours are
generally uncertain and involve complex legal and factual questions. Our ability
to maintain and solidify our proprietary position for our technology will depend
on our success in obtaining effective patent claims and enforcing those claims
once granted. We do not know whether any of our patent applications will result
in the issuance of any patents. Our issued patents and those that may issue in
the future may be challenged, invalidated, rendered unenforceable or
circumvented, which could limit our ability to stop competitors from marketing
related products or the length of term of patent protection that we may have for
PolyHeme. Our United States patents have expiration dates that extend to 2017.
The broadest of our issued patents expires in May 2006. Although we expect to be
granted an extension of this patent to 2011, we cannot ensure that an extension
will not be for less than five years or that it will be granted at all. In
addition, the rights granted under any issued patents may not provide us with
competitive advantages against competitors with similar compounds or
technologies. Furthermore, our competitors may independently develop similar
technologies or duplicate any technology developed by us in a manner that does
not infringe our patents or other intellectual property. Because of the
extensive time required for development, testing and regulatory review of
PolyHeme, it is possible that, before
PolyHeme can be commercialized, any related patent may expire or remain in force
for only a short period following commercialization, thereby reducing any
advantages of the patent.
WE RELY ON TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION TO MAINTAIN OUR
PROPRIETARY POSITION.
In addition to patent protection, we also rely on protection of trade secrets,
know-how and confidential and proprietary information. To maintain the
confidentiality of trade secrets and proprietary information, we have entered
into confidentiality agreements with our employees, consultants and
collaborators upon the commencement of their relationships with us. These
agreements require that all confidential information developed by the individual
or made known to the individual by us during the course of the individual's
relationship with us be kept confidential and not disclosed to third parties.
Our agreements with employees also provide that inventions conceived by the
individual in the course of rendering services to us will be our exclusive
property. Individuals with whom we have these agreements may not comply with
their terms. In the event of the unauthorized use or disclosure of our trade
secrets or proprietary information, these agreements, even if obtained, may not
provide meaningful protection for our trade secrets or other confidential
information. To the extent that our employees, consultants or contractors use
technology or know-how owned by others in their work for us, disputes may arise
as to the rights in related inventions. Adequate remedies may not exist in the
event of unauthorized use or disclosure of our confidential information. The
disclosure of our trade secrets would impair our competitive position and could
have a material adverse effect on our operating results, financial condition and
future growth prospects.
WE MAY BE INVOLVED IN LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH COULD BE
EXPENSIVE AND TIME CONSUMING.
Competitors may infringe our patents. To counter infringement or unauthorized
use, we may be required to file infringement claims, which can be expensive and
time-consuming. In addition, in an infringement proceeding, a court may decide
that a patent of ours is not valid or is unenforceable, or may refuse to stop
the other party from using the technology at issue on the grounds that our
patents do not cover its technology. An adverse determination of any litigation
or defense proceedings could put one or more of our patents at risk of being
invalidated or interpreted narrowly and could put our patent applications at
risk of not issuing.
Interference proceedings brought by the United States Patent and Trademark
Office may be necessary to determine the priority of inventions with respect to
our patent applications or those of our collaborators or licensors. Litigation
or interference proceedings may fail and, even if successful, may result in
substantial costs and be a distraction to our management. We may not be able to
prevent misappropriation of our proprietary rights, particularly in countries
where the laws may not protect such rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk that some of
our confidential information could be compromised by disclosure during this type
of litigation. In addition, during the course of this kind of litigation, there
could be public announcements of the results of hearings, motions or other
interim proceedings or developments. If securities analysts or investors
perceive these results to be negative, it could have a substantial adverse
effect on the price of our common stock.
We may not prevail in any litigation or interference proceeding in which we are
involved. Even if we do prevail, these proceedings can be very expensive and
distract our management.
THIRD PARTIES MAY OWN OR CONTROL PATENTS OR PATENT APPLICATIONS THAT ARE
INFRINGED BY OUR PRODUCT OR TECHNOLOGIES.
Our success depends in part on avoiding the infringement of other parties'
patents and proprietary rights. In the United States, patent applications filed
in recent years are confidential for 18 months, while older applications are not
published until the patent issues. As a result, there may be patents of which we
are unaware, and avoiding patent infringement may be difficult. We may
inadvertently infringe third-party patents or patent applications. These third
parties could bring claims against us that, even if resolved in our favor, could
cause us to incur substantial expenses and, if resolved against us, could
additionally cause us to pay substantial damages. Further, if a patent
infringement suit were brought against us, we could be forced to stop or delay
research, development, manufacturing or sales of PolyHeme in the country or
countries covered by the patent we infringe, unless we can obtain a license from
the patent holder. Such a license may not be available on acceptable terms, or
at all, particularly if the third party is developing or marketing a product
competitive with PolyHeme. Even if we were able to obtain a license, the rights
may be nonexclusive, which would give our competitors access to the same
intellectual property.
We also may be required to pay substantial damages to the patent holder in the
event of an infringement. Under some circumstances in the United States, these
damages could be triple the actual damages the patent holder incurs. If we have
supplied infringing products to third parties for marketing or licensed third
parties to manufacture, use or market infringing products, we may be obligated
to indemnify these third parties for any damages they may be required to pay to
the patent holder and for any losses the third parties may sustain themselves as
the result of lost sales or damages paid to the patent holder.
Any successful infringement action brought against us may also adversely affect
marketing of PolyHeme in other markets not covered by the infringement action.
Furthermore, we may suffer adverse consequences from a successful infringement
action against us even if the action is subsequently reversed on appeal,
nullified through another action or resolved by settlement with the patent
holder. The damages or other remedies awarded, if any, may be significant. As a
result, any infringement action against us would likely delay the regulatory
approval process, harm our competitive position, be very costly and require
significant time and attention of our key management and technical personnel.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit 99.1 Northfield Laboratories Inc. Press Release dated
January 19, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Northfield Laboratories Inc.
Date: January 19, 2005 By: /s/ Jack J. Kogut
----------------------------------------
Jack J. Kogut
Senior Vice President and Chief Financial
Officer
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
99.1 Northfield Laboratories Inc. Press Release dated January 19, 2005.