Quarterly report pursuant to Section 13 or 15(d)

Licensing and Collaborative Agreements

Licensing and Collaborative Agreements
6 Months Ended
Sep. 30, 2012
Notes to Financial Statements  
NOTE 8 - Licensing and Collaborative Agreements

University Health Network


On September 17, 2007, the Company and University Health Network ("UHN") entered into a Sponsored Research Collaboration Agreement (“SRCA”) to develop certain stem cell technologies for drug discovery and drug rescue technologies. The SRCA was amended on April 19, 2010 to extend the term to five years and give the Company various options to extend the term for an additional three years. On December 15, 2010, the Company and UHN entered into a second amendment to expand the scope of work to include induced pluripotent stem cell technology and to further expand the scope of research and term extension options. On April 25, 2011, the Company and UHN amended the SRCA a third time to expand the scope to include therapeutic and stem cell therapy applications of induced pluripotent cells and to extend the date during which the Company may elect to fund additional projects to April 30, 2012.  On October 24, 2011, the Company and UHN amended the SRCA a fourth time to identify five key programs that will further support the Company’s core drug rescue initiatives and potential cell therapy applications.  Under the terms of the fourth amendment, the Company committed to making monthly payments of $50,000 per month from October 2011 through September 2012 to fund these programs.  As disclosed in Note 11, Subsequent Events, on October 10, 2012, the Company issued a promissory note in the principal amount of $549,500 and a warrant to UHN as payment in full for services rendered under the fourth amendment and also entered into a fifth amendment to the SRCA.


Concurrent with the execution of the fourth amendment to the SRCA, the Company and UHN entered into a License Agreement under the terms of which UHN granted the Company exclusive rights to the use of a novel molecule that can be employed in the identification and isolation of mature and immature human cardiomyocytes from pluripotent stem cells, as well as methods for the production of cardiomyocytes from pluripotent stem cells that express this marker.  In consideration for the grant of the license, the Company has agreed to make payments to UHN totaling $3.9 million, if, and when, it achieves certain milestones set forth in the License Agreement, and to pay UHN royalties based on the receipt of revenue by the Company attributable to the licensed patents.


U.S. National Institutes of Health


During fiscal years 2006 through 2008, the U.S. National Institutes of Health ("NIH") awarded the Company a $4.2 million grant to support preclinical development of AV-101, the Company’s lead drug candidate for treatment of neuropathic pain and other neurodegenerative diseases such as Huntington’s and Parkinson’s diseases.  In June 2009, the NIH awarded the Company a $4.2 million grant to support the Phase I clinical development of AV-101, which amount was subsequently increased to a total of $4.6 million in July 2010.  The Company recognized NIH grant revenue related to AV-101 in the amounts of $187,000 and $731,000 in the six-month periods ended September 30, 2012 and 2011, respectively.  The grant expired in the ordinary course on June 30, 2012 and has not been extended or renewed.


Cato Research Ltd.


The Company has built a long-term strategic development relationship with Cato Research Ltd. ("CRL"), a global contract research and development organization, or CRO.  CRL has provided the Company with access to essential CRO services and regulatory expertise supporting its AV-101 preclinical and clinical development programs and other projects.  The Company recorded research and development expenses for CRO services provided by CRL in the amounts of $291,800 and $514,400 in the three month and six month periods ended September 30, 2012, respectively, and $221,000 and $659,000 in the three month and six month periods ended September 30, 2011, respectively. At September 30, 2012, the Company owed $895,300 to CRL for research, development and regulatory compliance services rendered by CRL. As disclosed in Note 11, Subsequent Events, the Company issued an unsecured promissory note in the principal amount of $1,009,000, and a warrant exercisable for 1,009,000 shares of the Company’s common stock, as payment in full of all amounts owed to CRL as of September 30, 2012 and for CRO services to be rendered to the Company through December 31, 2012.