UNITED
STATES
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 (Date of earliest event reported): January 31, 2008
Manhattan
Pharmaceuticals, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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001-32639
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36-3898269
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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810
Seventh Avenue, 4th Floor
New
York, New York 10019
(Address
of principal executive offices) (Zip Code)
(212)
582-3950
(Registrant's
telephone number, including area code)
Not
applicable
(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:
| o |
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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| o |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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| o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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| o |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR
240.13e-4(c))
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Item
1.01 Entry
into a Material Definitive Agreement
On
January 31, 2008, Manhattan Pharmaceuticals, Inc. (the “Company”) and Nordic
Biotech Advisors ApS through its fund Nordic Biotech Venture Fund II K/S
(“Nordic”) entered into a joint venture agreement (the “JV Agreement”) to
develop and commercialize the Company's North American rights (under license)
to
its Hedrin product. On February 5, 2008, the Company issued a press release
announcing its entry into the JV Agreement and describing the transactions
contemplated thereby, the full text of which is attached hereto as Exhibit
99.1.
Pursuant
to the JV Agreement, Nordic will form a new Danish limited partnership (the
"Limited Partnership") and provide it with initial funding of $2.5 million.
The
Company will assign and transfer its North American rights in Hedrin to the
Limited Partnership in return for a $2.0 million cash payment and equity in
the
Limited Partnership representing 50% of the nominal equity interests in the
Limited Partnership (valued at $2.5 million).
Should
the Limited Partnership be successful in achieving a payment milestone, namely
that by September 30, 2008, the Food and Drug Administration determines to
treat
Hedrin as a medical device, Nordic will purchase an additional $2.5 million
of
equity in the Limited Partnership, whereupon the Limited Partnership will pay
the Company an additional $1.5 million in cash and issue to the Company an
additional $2.5 million in equity in the Limited Partnership, thereby
maintaining the Company’s 50% ownership interest in the Limited
Partnership.
The
Limited Partnership will be responsible for the development and
commercialization of Hedrin for the North American market and all associated
costs including clinical trials, if required, regulatory costs, patent costs,
and future milestone payments owed to Thornton & Ross Limited, the licensor
of Hedrin.
The
Limited Partnership will engage the Company to provide management services
to
the Limited Partnership in exchange for an annualized management fee, which
for
2008 on an annualized basis, is $527,000.
Nordic
will pay to the Company a non-refundable fee of $150,000 at the closing for
the
right to receive a warrant covering 7.1 million shares of the Company’s common
stock, exercisable for $0.14 per share. The warrant is issuable 90 days from
closing, provided Nordic has not exercised all or a part of its put, as
described below. The per share exercise price of the warrant is based on the
volume weighted average price of the Company’s common stock for the period prior
to the signing of the JV Agreement.
Nordic
has an option to put all or a portion of its equity interest in the Limited
Partnership to the Company in exchange for the Company’s common stock. The
shares of the Company’s common stock to be issued upon exercise of the put will
be calculated by multiplying the percentage of Nordic’s equity in the Limited
Partnership that Nordic decides to put to the Company multiplied by the dollar
amount of Nordic’s investment in Limited Partnership divided by $0.14, as
adjusted from time to time. The put option is exercisable immediately and
expires at the earlier of ten years or when Nordic’s distributions from the
Limited Partnership exceed five times the amount Nordic invested in the Limited
Partnership.
The
Company has an option to call all or a portion of Nordic’s equity interest in
the Limited Partnership in exchange for the Company’s common stock. The Company
cannot begin to exercise its call until the price of the Company’s common stock
has closed at or above $1.05 per share for 30 consecutive trading days. During
the first 30 consecutive trading day period in which the Company’s common stock
closes at or above $1.05 per share the Company can exercise up to 25% of its
call option. During the second 30 consecutive trading day period in which the
Company’s common stock closes at or above $1.05 per share the Company can
exercise up to 50% of its call option on a cumulative basis. During the third
30
consecutive trading day period in which the Company’s common stock closes at or
above $1.05 per share the Company can exercise up to 75% of its call option
on a
cumulative basis. During the fourth 30 consecutive trading day period in which
the Company’s common stock closes at or above $1.05 per share the Company can
exercise up to 100% of its call option on a cumulative basis. The shares of
the
Company’s common stock to be issued upon exercise of the call will be calculated
by multiplying the percentage of Nordic’s equity in the Limited Partnership that
the Company calls, as described above, multiplied by the dollar amount of
Nordic’s investment in the Limited Partnership divided by $0.14. Nordic can
refuse the Company’s call by either paying the Company up to $2 million or
forfeiting all or a portion of their put, calculated on a pro rata basis for
the
percentage of the Nordic equity interest called by the Company.
The
Limited Partnership's Board will consist of 4 members, 2 appointed by the
Company and 2 appointed by Nordic. Nordic has the right to appoint one of the
directors as chairman of the Board. The chairman has certain tie breaking
powers. In the event that the payment milestone described above is not achieved
by June 30, 2008, then the Limited Partnership's Board will increase to 5
members, 2 appointed by the Company and 3 appointed by Nordic.
After
the
closing, at Nordic's request, the Company will nominate a person identified
by
Nordic to serve on its Board of Directors.
The
Company will grant Nordic registration rights for the shares to be issued upon
exercise of the warrant, the put or the call. The Company is required to file
an
initial registration statement within 10 calendar days of filing its Form 10-K
for the year ended December 31, 2007. The Company is required to file additional
registration statements, if required, within 45 days of the date the Company
first knows that such additional registration statement was required. The
Company is required to use commercially reasonable efforts to cause the
registration statement to be declared effective by the Securities and Exchange
Commission (“SEC”) within 105 calendar days from the filing date. If the Company
fails to file a registration statement on time or if a registration statement
is
not declared effective by the SEC with 105 days of filing the Company will
be
required to pay to Nordic, or its assigns, an amount in cash, as partial
liquidated damages, equal to 0.5% per month of the amount invested in the
Limited Partnership by Nordic until the registration statement is declared
effective by the SEC. In no event shall the aggregate amount payable by the
Company exceed 9% of the amount invested in the Limited Partnership by
Nordic.
The
profits of the Limited Partnership will be shared by the Company and Nordic
in
accordance with their respective equity interests in the Limited Partnership,
which are currently 50% to each, except that Nordic will get a minimum
guaranteed return from the Limited Partnership equal to 5% on Hedrin sales,
as
adjusted for any change in Nordic’s equity interest in the Limited Partnership.
If the Limited Partnership realizes a profit equal to or greater than a 10%
royalty on Hedrin sales, then profits will be shared by the Company and Nordic
in accordance with their respective equity interests in the Limited Partnership.
However, in the event of a liquidation of the Limited Partnership, Nordic’s
distribution in liquidation will be at least equal to the amount Nordic invested
in the Limited Partnership ($5 million if the payment milestone described above
is met, $2.5 million if it is not met) plus 10% per year, less the cumulative
distributions received by Nordic from the Limited Partnership.
The
closing of the transactions contemplated by the JV Agreement is subject to
customary closing conditions, including, among others,
that the Company shall have satisfied all of the requirements of the
financial viability exemption from stockholder approval set forth in Section
710(b) of the American
Stock Exchange Company Guide (the "AMEX Company Guide").
Following
the parties' entrance into the JV Agreement, the American Stock Exchange
("AMEX")
informed the
Company
that the financial viability exemption is not available to the
Company.
Accordingly,
the
Company and Nordic are considering alternatives to this condition, including,
among other things, the possibility of Nordic's waiving such condition and
instead, requiring that the Company
obtain stockholder approval
of the
issuance of the securities of the Company under the JV Agreement
or limiting
the number of shares
of the
Company's common stock
into which the put/call and warrant are exercisable to below 20% of the
Company's outstanding shares
of
common stock,
until such time as stockholder approval has been obtained. There
can
be no assurance, however, that the Company and Nordic will agree to these or
any
other alternatives to the condition to closing that the Company shall
have satisfied all of the requirements of Section
710(b) of the AMEX
Company Guide, that
stockholder approval will be obtained or that
the
Company's common stock
will remain listed on AMEX.
Nordic
has represented to the Company that it is an "accredited investor," as that
term
is defined in Rule 501(a) of Regulation D under the Securities Act of 1933,
as
amended (the "Securities Act"), and the issuance of securities of the Company
under the JV Agreement will be made in reliance on exemptions provided by
Regulation D and Section 4(2) of the Securities Act.
The
description of the JV Agreement set forth herein does not purport to be complete
and is qualified in its entirety by reference to the full text of the JV
Agreement, a copy of which will be filed as an exhibit to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2007.
Forward
Looking Statements
This
Current Report on Form 8-K contains forward-looking statements made pursuant
to
the safe harbor provisions of the Private Securities Litigation Reform Act
of
1995. Forward-looking statements typically are identified by use of terms such
as "may," "will," "should," "plan," "expect," "anticipate," "estimate" and
similar words, although some forward-looking statements are expressed
differently. Forward-looking statements represent our management's judgment
regarding future events. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, the Company can
give no assurance that such expectations will prove to be correct. All
statements other than statements of historical fact included in this Current
Report on Form 8-K are forward-looking statements. The Company cannot guarantee
the accuracy of the forward-looking statements, and you should be aware that
the
Company's actual results could differ materially from those contained in the
forward-looking statements due to a number of factors, including the statements
under "Risk Factors" contained in the Company's Annual Report on Form 10-KSB
for
the fiscal year ended December 31, 2006 filed with the Securities and Exchange
Commission.
Item
3.02 Unregistered Sales of
Equity Securities
The
information set forth under Item 1.01 of this Current Report on Form 8-K is
incorporated by reference in response to this Item 3.02.
Item
9.01 Financial Statements
and Exhibits.
| (d) |
Exhibits
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Exhibit
99.1 - Press
release, dated February 5,
2008.
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SIGNATURE
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.
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MANHATTAN
PHARMACEUTICALS, INC.
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Date: February
6, 2008
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By: | /s/ Michael G. McGuinness |
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Michael G. McGuinness |
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Chief
Financial Officer
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Exhibit
99.1
Manhattan
Pharmaceuticals Announces Joint Venture With Nordic Biotech for Lead Product
Hedrin
Companies
Sign $9.65M Deal to Develop and Commercialize Hedrin, a Next Generation
Treatment for Pediculitis (Head Lice)
NEW
YORK, Feb 5, 2008 (PrimeNewswire via COMTEX News Network) -- Manhattan
Pharmaceuticals, Inc. (AMEX:MHA) today announced that it has entered into a
joint venture agreement with Nordic Biotech Advisors ApS (Nordic) to develop
and
commercialize Hedrin™,
the company's novel, non-insecticide treatment for head lice. Manhattan
Pharmaceuticals, Inc. currently owns North American rights to Hedrin and is
pursuing development as a medical device in the U.S.
The
total deal, valued at up to $9.65M, provides for the formation of a 50/50 joint
venture entity that will own, develop and secure a commercialization partner
for
Hedrin. Under terms of the agreement, the Nordic Biotech Venture Fund II K/S
will invest up to $5.0M in the joint venture in exchange for a 50% ownership
interest, and Manhattan Pharmaceuticals will assign and transfer its North
American rights to Hedrin to the joint venture in exchange for a 50% ownership
interest valued at up to $5.0M plus up to $3.65M in cash and payments.
Manhattan
Pharmaceuticals will receive an up front payment from the joint venture
consisting of $2.0M in cash plus $2.5M equity in the joint venture. Upon
receiving medical device designation for Hedrin by the U.S. FDA, Manhattan
Pharmaceuticals will receive an additional $1.5M in cash plus an additional
$2.5M equity in the joint venture.
The
joint venture will be responsible for the development and commercialization
of
Hedrin in North America and all costs associated with the project including
any
necessary U.S. clinical trials, patent costs, and future milestones owed to
the
original licensor, Thornton & Ross Limited.
"Hedrin
has been successfully launched in Europe and is a market leader there as a
next
generation, non-insecticide treatment for pediculitis," stated Florian
Schonharting, partner of Nordic Biotech. "We are very excited to be invested
in
this global product, and anticipate a successful development and launch in
the
large North American market."
"This
deal strategically provides Hedrin with the resources to pursue development
as a
medical device. We are excited to work with Nordic Biotech on this commercially
validated product," said Douglas Abel, president and chief executive officer
of
Manhattan Pharmaceuticals.
In
accordance with a milestone expected to be achieved on April 30, 2008, Nordic
has the right to receive, on such date, a warrant to purchase approx 7.1 million
shares of Manhattan Pharmaceuticals common stock at $0.14 per share. If fully
exercised, this warrant will yield an additional $1.0M of capital for the
Company. In addition to the investment in the joint venture noted above, Nordic
will make an upfront payment of $150,000 to the Company.
Nordic
has an option to put its interest in the joint venture to Manhattan
Pharmaceuticals in exchange for shares of Manhattan Pharmaceuticals common
stock, and under certain conditions, Manhattan Pharmaceuticals has the option
to
call Nordic's interest in the joint venture in exchange for Manhattan
Pharmaceuticals common stock.
About
Hedrin
To
date, Hedrin has been clinically studied in 326 subjects and has demonstrated
clinical equivalence to widely used insecticide head lice treatments. It is
currently marketed as a device in Western Europe and as a pharmaceutical in
the
United Kingdom (U.K.). In Europe, Hedrin has been launched in 21 countries
and
has achieved annual sales through its licensees of approximately $45 million
at
in-market public prices (which equates to a projected 21% market share), and
is
the market leader in the U.K. with $11 million in sales (23% market share)
and
France with a 21% market share.
Hedrin
is a unique, proprietary combination of silicones (dimeticone and
cyclomethicone) that acts as a pediculicidal (lice killing) agent by disrupting
the insect's mechanism for managing fluid and breathing. Hedrin contains no
traditional chemical insecticides in contrast with most currently available
lice
treatments. Recent studies have indicated that resistance to traditional
chemical insecticides may be increasing and therefore contributing to
insecticide treatment failure. Because Hedrin kills lice by preventing the
louse
from excreting waste fluid and by asphyxiation (smothering), rather than by
acting on the central nervous system, the insects cannot build up resistance
to
the treatment.
About
Pediculitis
According
to the American Academy of Pediatrics, an estimated 6-12 million Americans
have
Pediculitis each year, with pre-school and elementary age children and their
families affected most often.
About
Manhattan Pharmaceuticals, Inc.
Manhattan
Pharmaceuticals, Inc. is a pharmaceutical company that acquires and develops
novel, high-value drug candidates primarily for the treatment of dermatologic
and immune disorders. With a pipeline consisting of four clinical stage product
candidates, Manhattan Pharmaceuticals is developing potential therapeutics
for
large, underserved patient populations seeking superior treatments for
conditions including pedicultitis (head lice), psoriasis, atopic dermatitis
(eczema), and mastocytosis. (http://www.manhattanpharma.com)
About
Nordic Biotech
Nordic
Biotech Advisors ApS is the investment advisor to Nordic Biotech K/S and Nordic
Biotech Venture Fund II K/S, and was founded in 2001 by Christian Hansen and
Florian Schonharting. Key investors in the Nordic Biotech fund family are major
institutions and family foundations. Nordic Biotech focuses on global special
situations opportunities and currently has a portfolio in excess of 10
companies. (http://www.nordicbiotech.com/)
Note
Regarding Forward-Looking Statements
This
press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve risks
and uncertainties that could cause Manhattan Pharmaceuticals, Inc.'s actual
results to differ materially from the anticipated results and expectations
expressed in these forward-looking statements. These statements are often,
but
not always, made through the use of words or phrases such as "anticipates,"
"expects," "plans," "believes," "intends," "will," and similar words or phrases.
These statements are based on Manhattan Pharmaceuticals, Inc.'s current
expectations, forecasts and assumptions, which are subject to risks and
uncertainties, which could cause actual outcomes and results to differ
materially from these statements. Among other things, there can be no assurances
that our joint venture with Nordic will be able to meet the milestone which
will
obligate Nordic to make the second payment referred to in this press release
(the failure to meet that milestone will give Nordic enhanced control over
the
joint venture's operations and other important decision-making), that liquidated
damages will accrue if we are unable to register the shares of common stock
underlying the warrants and the put/call rights referred to in this press
release in a timely manner, that AMEX will provide a financial viability
exception to its rule that would require us to obtain stockholder approval
for
this transaction (which would materially delay the transaction and result in
financial hardship for the company), that Manhattan Pharmaceuticals, Inc.'s
development efforts relating to Hedrin or any other current or future product
candidates will be successful, that any clinical study will be completed or
will
return positive results, or that we will be able to out-license its discontinued
programs to other companies on terms acceptable to Manhattan Pharmaceuticals,
Inc. or at all. Other risks that may affect forward-looking information
contained in this press release include the company's extremely limited capital
resources, the possibility of being unable to obtain regulatory approval of
Manhattan Pharmaceuticals, Inc.'s product candidates, or obtain the treatment
we
are seeking for Hedrin, the risk that the results of clinical trials may not
support the company's claims, the risk that the company's product candidates
may
not achieve market acceptance in North America or elsewhere, the company's
reliance on third-party researchers to develop its product candidates,
availability of patent protection, the risk that sufficient capital may not
be
available to develop and commercialize the company's product candidates, and
the
company's lack of experience in developing and commercializing pharmaceutical
products. Additional risks are described in the company's filings with the
Securities and Exchange Commission, including its Annual Report on Form 10-KSB
for the year ended December 31, 2006. Manhattan Pharmaceuticals, Inc. assumes
no
obligation to update these statements, whether as a result of new information,
future events, or otherwise, except as required by law.
This
news release was distributed by PrimeNewswire, www.primenewswire.com
SOURCE:
Manhattan Pharmaceuticals, Inc.
Manhattan
Pharmaceuticals, Inc. Douglas Abel, Chief Executive Officer (212)
582-3950