Registrant’s telephone number, including area code:
(201) 808-8400
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
The approximate aggregate market value of the voting stock held by non-affiliates of the Registrant as of October 31, 2011 was $18.7 million based on the closing price of the Registrant’s Common Shares as quoted on the OTCBB as of that date.
The number of Common Shares of the Registrant outstanding as of July 6, 2012 was 47,074,942.
DOCUMENTS INCORPORATED BY REFERENCE - None
INDEX TO FORM 10-K
FOR THE YEAR ENDED APRIL 30, 2012
As used in this Annual Report on Form 10-K, “Champions Oncology, Inc.,” “Champions,” the “Company,”, “we,” “ours,” and “us” refer to Champions Oncology, Inc. and its subsidiaries, except where the context otherwise requires or as otherwise indicated.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (“Exchanges Act”) that inherently involve risk and uncertainties. Forward-looking statements may be identified by the words “project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “should,” “would,” “could,” “will,” “may,”,” “likely” or similar expressions. Forward-looking statements in this Annual Report include statements about our business strategies and product and services development activities, including the anticipated benefits and risks associated with those strategies as well as statements about the sufficiency of our capital resources. One should not place undue reliance on these forward-looking statements. We cannot guarantee that we will achieve the plans, intentions or expectations expressed or implied in our forward-looking statement. There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements we make. These important factors are described under “Risk Factors” set forth below. In addition, any forward-looking statements we make in this document speak only as of the date of this document, and we do not intend to update any such forward-looking statements to reflect events or circumstances that occur after that date, except as required by law. As a result of these and other factors, our stock price may fluctuate dramatically.
Item 1. Business
Overview
Champions Oncology, Inc. is engaged in the development of advanced technology solutions to personalize the development and use of oncology drugs. The Company’s TumorGraft Technology Platform is a novel approach to personalizing cancer care, based upon the implantation of human tumors in immune-deficient mice. The Company uses this technology, in conjunction with related services, to offer solutions for two customer groups:
Our technology platform consists of processes, physical tumors, and information that we use to personalize the development and use of oncology drugs. Our process technology involves the:
Our process is used for our POS business to test numerous drugs or drug combinations against a single patient’s tumor to determine which therapy results in the most efficacious response from the tumor.
Our platform also includes a bank of tumors that we have acquired, collected, processed, validated, and stored for use in our TOS business. We implant these tumors in mice to provide pharmaceutical and biotechnology companies the opportunity to test oncology compounds on multiple tumors to test efficacy.
We are also developing an extensive database of information about the tumors in our Tumorbank. This will include information about the patient (e.g. age, gender), the response of the tumor to different oncology drugs or drug combinations, mutational status of key oncogenes, and other genetic and epigenetic data about each tumor. Our intention is to use this database to provide our pharmaceutical and biotechnology customers with information that may assist them with the drug development process.
Our Strategy
Our strategy is to use TumorGrafting as a platform technology to drive multiple synergistic revenue streams. We continue to build this platform with investments in research and development, as well as contributions from both the POS and TOS businesses. The platform is then used to deliver products that serve both the POS and TOS customers in mutually complementary ways. The result is well-differentiated products for patients, physicians, and drug development companies. In addition, we are looking for additional opportunities to utilize the data we are gathering to develop proprietary biomarkers and signatures of response that can predict the resistance or sensitivity of individual tumors to oncology drugs.
Personalized Oncology Solutions (“POS”) Business
Our POS business offers physicians and patients information to help guide the development of personalized treatment plans. Our core offering utilizes our technology platform to empirically test the response of a patient’s tumor to multiple oncology drugs or drug combinations. The process begins by implanting a fresh fragment of the patient’s tumor, typically received within 24 hours of surgery or biopsy, in a small colony of immune-deficient mice to grow the tumor tissue. This colony is then expanded by implanting the grown tumor tissue into a limited number of generations of mice until a sufficient number of mice are available for testing. At that point, the colony is allocated to different groups, and each mouse in a group is dosed with a different drug or drug combination. The response of the tumor in each mouse is tracked over time and analyzed to determine which drug or drug combination is providing the highest level of tumor growth inhibition. Our data demonstrates that there is a high correlation between the response to drugs of the tumor in mice with the response of the tumor in the patient.
In addition to our core product, we also offer related personalized oncology services to our customers, including personalized tumor panels. Personalized tumor panels are designed to provide access to world-renowned oncologists with expertise in particular tumor types. These panels can be done in person or by teleconference and can include from 3 to more than 15 physicians. The physicians on the panel receive an overview of the patient’s history of treatment and current status, typically from the treating physician, and may include advanced molecular and sensitivity testing, which may include information based on our TumorGraft testing. Based on their expertise and the cutting edge information available to them from their academic institutions and colleagues, these physicians can offer useful insight into possible treatments.
We rely on the internet, word of mouth, and a small sales force to market these products to patients and physicians.
For the year ended April 30, 2012, our revenues from POS totaled $2,332,000, a 31% decrease from the previous year. The decrease was due to the strategic decision to make the core products affordable to a broader patient base, lower prices in an effort to maximize synergies between our POS and TOS business, increase our tumor model offerings to our TOS sponsors, and increase the number of models in our Tumorbank.
Translational Oncology Solutions (“TOS”) Business
Our TOS business utilizes our technology platform to assist pharmaceutical and biotechnology companies with the drug development process. We provide studies that predict the efficacy of experimental oncology drugs or approved drugs as stand-alone therapies or in combination with other drugs. These studies include in vivo studies that rely on implanting multiple tumors from our Tumorbank in mice and testing the therapy of interest on these tumors. Studies may also include bioinformatics analyses that reveal the differences in the genetic signatures of the tumors that responded to a therapy as compared to the tumors that did not respond. Our studies can be used to determine which types of cancer, if any, are inhibited by a drug. The studies can also be used to identify specific sub-populations, often characterized by particular genetic mutations that are differentially sensitive or resistant to a drug or drug combination. These studies, used in pre-clinical testing or during phase I or II of a clinical trial, can help guide the clinical development path of new compounds and find new indications or combinations for compounds that are already approved by the United States Food and Drug Administration (“FDA”). The results can lead to lower costs and shorter timeframes for drug development.
Our sales and marketing efforts are dependent on a dedicated sales force that sells directly to pharmaceutical and biotechnology companies. Currently, we have contracts with 32 different biotechnology and pharmaceutical companies, of which 13 were repeat customers in fiscal 2012, having entered into more than one contracted study with us.
For the year ended April 30, 2012, our revenues from TOS services totaled $4,817,000, an increase of 38% from the previous year
Operations and Recent Developments
Until fiscal 2011, we relied solely on a single contract research organization (“CRO”) for substantially all of our in vivo studies and Tumorbank development. During the fourth quarter of 2011, we started the process of developing in-house capabilities to supplement the activities of the CRO.
During fiscal 2012, we modified our POS business strategy to focus on growing our core technology products, which includes TumorGraft implants and drug studies. As part of this strategy, we significantly reduced the price of our core technology products to make the products affordable to a broader patient base, to increase the number of models available in our Tumorbank, and to increase offerings to our TOS sponsors. In addition, we have increased spending on sales and marketing efforts to support this strategy. We will continue to offer related personalized oncology services to our customers; however, we expect future POS revenues to be driven by our core products.
During the second half of fiscal 2012, we transitioned the laboratory activities that support the POS and TOS businesses from the third-party CRO to our facility in Baltimore, Maryland. We believe that bringing these activities in-house will significantly reduce the future cost of providing our services and allow us to implement and maintain a more competitive pricing strategy. To facilitate this strategy and support the increase in current and expected volume, we have invested in the infrastructure and increased our laboratory staff.
Currently, all POS, TOS, and Tumorbank models are being expanded in-house. Additionally, all POS and new TOS drug studies are now solely performed in our laboratory. We are evaluating options to increase our lab capacity to meet expected future demand.
In-licensed Compounds
Historically, our strategy was to use our technology platform to identify promising compounds that could be in-licensed during the preclinical phase. The strategy was to invest in the clinical development of these compounds and then seek a partner that would bring them to market in exchange for some combination of upfront payments, milestone payments and royalties on future sales. Since 2007, we pursued this strategy with four compounds. All four of these compounds were subjected to TumorGraft testing, and the results of one of the compounds, Irinophore C, were positive and merited further investment.
In February 2010, we entered into an exclusive option agreement to review Irinophore C, a nanoparticle drug compound, for the treatment of various forms of cancer, including melanoma, prostate, breast and lung cancer through April 2011, and we exercised our option to license Irinophore C in March 2011. During the end of fiscal 2011, we modified our strategy and no longer plan to in-license additional compounds and will instead focus on developing advanced technologies to personalize the development and use of oncology drugs. As such, we terminated the license agreements for all compounds, with the exception of Irinophore C. We are currently evaluating strategic options, including finding a partner, to finance the future development of Irinophore C.
Competition
Our TumorGraft Technology Platform is proprietary and requires significant know-how to both initiate and operate, but is not patented. It is, therefore, possible for competitors to develop other implantation procedures or to discover the same procedures utilized by the Company that could compete with the Company in its market. Competition in our industry is intense and based significantly on scientific, technological, and market forces, which include the availability of patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain government approval for testing, manufacturing, and marketing. The Company faces significant competition from other healthcare companies in the United States and abroad. The majority of these competitors are, and will be, substantially larger than the Company, and have substantially greater resources and operating histories. There can be no assurance that developments by other companies will not render our products or technologies obsolete or non-competitive or that we will be able to keep pace with the technological or product developments of our competitors. These companies, as well as academic institutions, governmental agencies, and private research organizations also compete with us in recruiting and retaining highly qualified scientific, technical and professional personnel and consultants.
Patent Applications
It is our intention to protect our proprietary property through the filing of United States and international patent applications, where necessary and reasonable. In February 2007, we acquired rights to a U.S. and international patent application family filed October 6, 2005 entitled “LIPOSOMES WITH IMPROVED DRUG RETENTION FOR TREATMENT OF CANCER”. The Japanese and Australian patents in this group have issued, and the remaining patent applications are still being pursued.
In certain instances where we have previously filed (or acquired) U.S. and/or international patent applications and subsequently decided to no longer pursue the development of the compounds which are the subject of the applications, we have opted to no longer pursue the patent applications.
Research and Development
For the years ended April 30, 2012 and 2011, we spent approximately $2,937,000 and $2,910,000, respectively, to develop our TumorGraft Technology Platform. Champions continues to expand its TumorGraft bank through the acquisition of tumor tissue and implanted models from procurement sites, as well as through the POS business. The increase from 2012 to 2011 is primarily related to increased spending on our technology platform, offset by decreased spending on evaluating in-licensed compounds. Our research and development efforts were focused on increasing our understanding of our TumorGraft models, their clinical predictability, improving growth and tumor take rates, and other biological and molecular characteristics of the models.
Government Regulation
The research, development, and marketing of our products are generally subject to federal, state, local, or foreign legislation or regulation, including the interpretation of and compliance with existing, proposed, and future regulatory requirements imposed by the FDA and by comparable authorities in other countries.
Employees
As of April 30, 2012, we had 36 full-time equivalent employees (FTEs), including 12 with doctoral or other advanced degrees. Of our workforce, 18 FTEs are engaged in research and development and laboratory operations, 11 FTEs are engaged in sales and marketing, and 7 FTEs are engaged in finance and administration. None of our employees are represented by a labor union or covered by collective bargaining agreements. We have never experienced a work stoppage and believe our relationship with our employees is good.
Company History
Our predecessor was incorporated under the laws of the State of Delaware on June 4, 1985, as “International Group, Inc.” In September 1985, we completed a public offering and shortly thereafter, acquired the world-wide rights to the Champions sports-theme restaurant concept and changed our name to “Champions Sports, Inc.” In November 1997, we sold our Champions service mark and concept to Marriott International, Inc. and until 2005, were a consultant to Marriott International, Inc. and operated one Champions sports bar restaurant. In January 2007, we changed our business direction to focus on biotechnology and subsequently changed our name to Champions Biotechnology, Inc. In April 2011, we changed our name to Champions Oncology, Inc. to reflect the Company's new strategic focus on developing advanced technologies to personalize the development and use of oncology drugs.
Available Information
Our internet website address is www.championsoncology.com. Through our website, we make available, free of charge, access to all reports filed with the United States Securities and Exchange Commission (“SEC”), including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and amendments to those reports, as filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Copies of any materials we file with, or furnish to, the SEC can also be obtained free of charge through the SEC’s website at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.