November
19,
2008
Mr.
Jim
B. Rosenberg
Senior
Assistant Chief Accountant
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
Washington,
DC 20549
Mail
Stop: 6010
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Re:
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Acura
Pharmaceuticals, Inc.
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Form
10-K for Fiscal Year Ended December 31, 2007
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Filed
March 5, 2008
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File
No. 001-10113
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Dear
Mr.
Rosenberg:
On
behalf
of Acura Pharmaceuticals, Inc. (the “Company”), I am writing to respond to your
letter to Andrew D. Reddick dated November 5, 2008 (the “Comment Letter”)
relating to the Company’s Annual Report Form 10-K for the year ended December
31, 2007 (the “Form 10-K”) filed by the Company on March 5, 2008.
We
have
reproduced below the comments contained in the Comment Letter and have provided
our response to each:
Item
1. Business, Page 3
Please
revise the description of the King agreement on page 8 to provide the following
additional information:
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·
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Total
amounts received to date under the agreement, if different than the
upfront cash payment of $30
million;
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·
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Any
annual fees, if applicable;
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·
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The
number of additional products you anticipate you will develop under
this
agreement; and
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E-mail:
john.reilly@leclairryan.com
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Two
Penn Plaza East, Tenth Floor
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Direct
Phone: 973.491.3354
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Newark,
New Jersey 07105
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Direct
Fax: 973.491.3392
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Phone:
973.491.3600 \ Fax: 973.491.3555
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1241259_1.DOC
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CALIFORNIA
\ CONNECTICUT \ MASSACHUSETTS \ MICHIGAN \ NEW JERSEY \
NEW YORK
\ PENNSYLVANIA \ VIRGINIA \ WASHINGTON, D.C.
David
C.
Freinberg \ Attorney in charge, Newark office \ LeClairRyan is a Virginia
professional corporation
November
19, 2008
Page
2
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·
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The
term and termination provisions, including any payments the company
would
be required to make in the event of
termination.
|
We
note
that you have been granted confidential treatment for information related to
termination provisions. The request for confidential treatment was granted
without a substantive review of the request. As we consider term and termination
provisions material, this information should be included in the discussion
of
the agreement.
Response
to Comment 1
Set
forth
below is the description of the King Agreement contained on page 8 of the Form
10-K which is marked to reflect the changes made in response to the Staff’s
comment. Specifically, additional disclosure has been included to address total
payments received under the Agreement, to provide further details on the payment
terms of the Agreement, to indicate the absence of annual fees, to provide
further details on the number of products being developed under the Agreement
and King’s right to develop additional opioid products utilizing the Company’s
Aversion®
Technology, and to describe the term and termination provisions of the
Agreement. The Company intends to include this revised disclosure of the King
Agreement in its Annual Report or Form 10-K for the year ending December 31,
2008. We kindly request the Staff’s concurrence with such prospective
disclosure.
King
Agreement
On
October 30, 2007, we and King Pharmaceuticals Research and Development,
Inc.
(“King”), a wholly-owned subsidiary of King Pharmaceuticals, Inc., entered into
a License, Development and Commercialization Agreement (the “King Agreement”) to
develop and commercialize in the United States, Canada and Mexico (the
"King
Territory") certain opioid analgesic products utilizing our proprietary
Aversion® Technologyincluding
Acurox™ Tablets.
The
Agreement providesinitially
provided
King
with an exclusive license in the King Territory for Acurox™®
Tablets
and another undisclosed opioid product candidate utilizing Aversion® Technology.
In addition, the King Agreement provides King with an option to license
in the
King Territory all future opioid analgesic products developed utilizing
Acura'sAversion®
Technology.Under
theAt
September 30, 2008, King had licensed three opioid analgesic product
candidates
utilizing our Aversion® Technology. We are responsible for using commercially
reasonable efforts to develop at least three of four pre-specified opioid
analgesic product candidates to certain development and/or regulatory
milestones. The King Agreement provides that we or King may develop additional
opioid analgesic product candidates utilizing our Aversion® Technology and, if
King exercises its option to license such additional product candidates,
they
will be subject to the milestone and royalty payment and other
terms of
the King Agreement,
King made an upfront cash payment to us of $30 million which was
received in
December, 2007. Depending on the achievement of certain development and
regulatory milestones, King could also make additional cash payments
to us of up
to $28 million relating to Acurox™ Tablets and similar amounts with respect to
each subsequent Aversion® Technology product developed under the Agreement. King
will reimburse us for all
research and development expenses incurred beginning from September 19,
2007 for
Acurox™
Tablets and all
research and development expenses related
to future products after King's exercise of its option to an exclusive
license
for each future product. King will record net sales of all products
and
for sales occurring following the one year anniversary of the first commercial
sale of a licensed product, King will pay us a royalty at one of 6 rates
ranging
from 5% to 25% based on the level of combined annual net sales for all
products
subject
to the Agreement. King will also make a one-time cash payment to us of
$50
million in the first year in which the combined annual net sales of all
products
exceed $750 million. .In
addition to the four opioid analgesic product candidates pre-specified
in the
King Agreement, we are actively developing additional (undisclosed) opioid
analgesic product candidates.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
3
We
and
King have formed a joint steering committee to coordinate development and
commercialization strategies. With King’s oversight, we will conduct all
Acurox™®
Tablet
development activities through approval of a 505(b)(2) New Drug Application
(“NDA”) and thereafter King will commercialize Acurox™®
Tablets
in the U.S. With respect to all other products subject to the Agreement,
King
will be responsible for development and regulatory activities following
either
acceptance of an Investigational New Drug Application ("IND") by the U.S.
Food
and Drug Administration (“FDA”) or our demonstration of certain stability and
pharmacokinetic characteristics for each future product. All products developed
pursuant to the King Agreement will be manufactured by King or a third
party
contract manufacturer under the direction of King. Subject to the King
Agreement, King will have final decision making authority with respect
to all
development and commercialization activities for all licensed
products.
At
September 30, 2008, we had received aggregate payments of $46.3 million from
King, consisting of a $30.0 million non-refundable upfront cash payment,
$8.3
million in reimbursed of
research and development expenses relating
to our licensed product candidates, a $3.0 million option exercise fee relating
to King’s exercise of its option to license a third (undisclosed) opioid product
candidate, and a $5.0 million milestone fee relating to our successful
achievement of the primary endpoints for our pivotal Phase III clinical study
for Acurox® Tablets. The King Agreement provides for King to reimburse us for
certain
research and development expenses incurred beginning from September 19, 2007
for
Acurox®
Tablets. The King Agreement also provides for King’s payment to us of a $3.0
million fee upon King’s exercise of its option for a future opioid product
candidate. In the event that King does not exercise its option for a future
opioid product candidate, King is required to reimburse us for certain of
our
expenses relating to such future opioid product candidate. Further, we may
receive up to $23 million in additional non-refundable milestone payments
for
each product candidate licensed to King, including Acurox®, by achieving certain
regulatory milestones in specific countries in the King Territory. We can
also
receive a one-time $50 million sales milestone payment upon the first attainment
of $750 million in net sales of all of our licensed products across all King
Territories. In addition,
for
sales occurring following the one year anniversary of the first commercial
sale
of a licensed product, King will pay us a royalty at one of 6 rates ranging
from
5% to 25% based on the level of combined annual net sales for all products
licensed
by us to King across all King Territories, with the highest applicable royalty
rate applied to such combined annual sales. King’s royalty payment obligations
expire on a product by product and country-by-country basis upon the later
of
(i) the expiration of the last valid patent claim covering such product in
such
country, or (ii) fifteen (15) years from the first commercial sale of such
product in such country. No minimum annual fees are payable by either party
under the King Agreement.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
4
The
King Agreement expires upon the expiration of King’s royalty payment and other
payment obligations under the King Agreement. King may terminate the King
Agreement in its entirety or with respect to any product at anytime after
March
31, 2010, upon the provision of not less than 12 months’ prior written notice,
and in its entirety if regulatory approval of the NDA for Acurox® Tablets is not
received prior to March 31, 2010 and with respect to a particular product
with
respect to a country in which regulatory approval for such product is withdrawn
by a regulatory authority in such country. We may terminate the King Agreement
with respect to a product in the United States in the event such product
is not
commercially launched by King within 120 days after receipt of regulatory
approval of such product or in its entirety if King commences any interference
or opposition proceeding challenging the validity or enforceability any of
our
patent rights licensed to King under the King Agreement. Either party has
the
right to terminate the King Agreement on a product by product and
country-by-country basis if the other party is in material breach of its
obligations under the King Agreement relating to such product and such country,
and to terminate the Agreement in its entirety in the event the other party
makes an assignment for the benefit of creditors, files a petition in bankruptcy
or otherwise seeks relief under applicable bankruptcy laws, in each case
subject
to applicable cure periods.
In
the event of termination, no payments are due except those royalties and
milestones that have accrued prior to termination under the King Agreement
and
all licenses under the King Agreement are terminated. For all Acura terminations
and termination by King where we are not in breach, the King Agreement provides
for the transition of development and marketing of the licensed products
from
King to us, including the conveyance by King to us of the trademarks and
all
regulatory filings and approvals solely used in connection with the
commercialization of such licensed products and, in certain cases, for King’s
supply of such licensed products for a transitional period at King’s cost plus a
mark-up.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
5
Comment
2
Item
11. Executive Compensation, Page 46
We
note
your statement on page 47 that the employment agreements provide for annual
bonus payments subject to the satisfaction of targets, conditions and
parameters. Additionally, we note that you have provided the bonus targets
for
2008. Please disclose the bonus targets for 2007. You have stated that the
bonus
determinations considered the fact that no bonuses were paid in the years 2004,
2005 and 2006. If you considered the achievement of performance targets in
any
of these years when determining the amount of bonus payments, these targets
should also be disclosed. The discussion should include goals for the
organization as well as goals specific to each officer.
Response
to Comment 2
Set
forth
below is the description under the caption “Salary and Bonus” contained on page
47 of the Form 10-K which is marked to reflect the changes made in response
to
the Staff’s comment, including salary and bonus performance targets for 2007 for
each of the named executive officers. The Company intends to include this
revised disclosure in its Annual Report on Form 10-K for the year ending
December 31, 2008. We kindly request the Staff’s concurrence with such
prospective disclosure.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
6
Salary
and Bonus
Each
of
Andrew Reddick, Ron Spivey and Peter Clemens are parties to employment
agreements, described under the caption “Employment Agreements” below, which
provide the minimum annual base salary to be payable to such officers, subject
to increase at the discretion of the Board. Effective January 1, 2008, Mr.
Reddick’s, Spivey’s and Clemens’ salaries were increased to $365,000 (from
$300,000), $315,000 (from $260,000) and $205,000 (from $180,000), respectively.
In addition, the employment agreements provide for annual bonus payments,
in the
discretion of the Compensation Committee or the Board, subject to the
satisfaction of such targets, conditions or parameters as may be agreed upon
from time to time by the employee and the Compensation Committee. In determining
the salary increase for each of Messrs. Reddick, Spivey and Clemens, the
Compensation Committee and the Board considered that, due to our insufficient
cash reserves, such executive officers had not received any salary increase
or
bonuses during the prior four years. The amount of the salary increases were
based on a percentage increase, on average, slightly greater than the Consumer
Price Index year for each during the four year period ended December 31,
2007.
In addition, in December 2007, Messrs. Reddick, Spivey and Clemens were awarded
bonuses of $850,000, $650,000 and $180,000, respectively. These amounts were
based on a percentage of such executive’s base salary, ranging from 25% to 70%,
for each year during the four year period ended December 31, 2007 (corresponding
to the period over which no bonuses were paid to senior management because
of
our limited cash reserves). The
2007
salary and bonus performance targets for Messrs. Reddick, Spivey and Clemens
consisted of the completion of a private offering of our securities resulting
in
net proceeds of at least $10.0 million to
fund operations, the conversion of our outstanding, short-term bridge loans
into
equity or long term debt instructions, the repayment of our $5.0 million
secured
promissory note and the license of product candidates utilizing our Aversion®
Technology to a pharmaceutical company partner. Such performance targets
were
both organization and individual goals. The salary increases and bonus awards
for Messrs. Reddick, Spivey and Clemens reflect the achievement of such
performance targets. The salary increases were implemented and the bonus
awards made following the closing of the King Agreement. The
salary and bonus performance targets for Messrs. Reddick, Spivey and Clemens
for
2008 consist of advancing our Acurox™®
(oxycodone HCl and niacin) Tablets and other products using our Aversion®
Technology through proof of concept and clinical developmentsdevelopment,
implementing the King Agreement, licensing of additional products to King
through the exercise of King’’s
options
under the King Agreement and licensing products derivedfromutilizing
our
Aversion® Technology outside of North America.
Such performance targets are both organization and individual
goals.
No
compensation will be earned with respect to a performance measure unless
a
performance "floor" for that measure is exceeded; the incentive opportunity
with
respect to a measure will be earned if the target is achieved; achievement
between the floor and the target results in a lower amount of award with
respect
to that performance measure. An amount larger than the incentive opportunity
for
each performance measure can be earned, up to and possibly exceeding a specified
limit, for exceeding the target for that measure. In setting compensation
levels, the Compensation Committee compares our Company to companies of
comparable business focus, market capitalization, technological capabilities
and
market in which we compete for executives. As part of this process, the
Compensation Committee and the Board does not use the compensation levels
of
comparable companies as benchmarks, rather as a factor in evaluating the
compensation levels of the named, executive officer. To date, compensation
consultants have not been retained by the Compensation Committee or the Board
as
part of this process.
In
ascertaining the achieved level of performance against the targets, the effects
of certain extraordinary events, as determined by the Compensation Committee,
such as (i) major acquisitions and divestitures, (ii) significant one-time
charges, and (iii) changes in accounting principles required by the Financial
Accounting Standards Board, are "compensation neutral" for the year in which
they occurred; that is, they are not taken into account in determining the
degree to which the targets are met in that year.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
7
The
Compensation Committee may, after a review of an executive’s performance,
recommend to
the
Board that a bonus award be made to such executives based upon other
non-enumerated performance targets (whether or not they are parties to
employment agreements). This could result in the award of salary increases
or
bonuses above a targeted range amount. In 2007, as reflected in the Summary
Compensation Table, bonuses were paid after the closing of the King
Agreement.
For
those
named executive officers not subject to an employment contract (Messrs. Emigh
and Seiser), the Compensation Committee will set the annual salary for such
named executive officers between December and March and establish potential
bonus compensation that such executives may earn based upon quantitative
and, if
applicable, qualitative performance goals established by the Compensation
Committee. Effective January 1, 2008, Messrs. Emigh’s and Seiser’s salaries were
increased to $160,000 (from $140,000) and $160,000 (from $133,000),
respectively. In determining the salary increase for each of Messrs. Emigh
and
Seiser, the Compensation Committee and the Board considered that, due to
our
insufficient cash reserves, such executive officers had not received any
salary
increase or bonuses during the prior four years. The amount of the salary
increases were based on a percentage increase, on average, slightly greater
than
the Consumer Price Index for each year during the four year period ended
December 31, 2007. In addition, in December 2007, Messrs.
Emigh
and SpiveySeiser
were
each awarded bonuses of $140,000. This amount was based on a percentage of
such
executive’s base salary, ranging from 26% to 32%, for each year in the four year
period ended December 31, 2007 (corresponding to the period over which no
bonuses were paid to senior management because of our limited cash reserves).
The
salary and bonus performance targets in 2007 for Messrs. Emigh and Seiser
were
the same as those described above for Messrs. Reddick, Spivey and Clemens,
and
were both organization and individual goals. The salary increases and bonus
awards for Messrs. Emigh and Seiser reflect the achievement of such performance
targets. Such salary increases were implemented and bonus awards made following
the closing of the King Agreement. The salary and bonus performance targets
for
both Messrs. Emigh and Seiser for 2008 consist of advancing our Acurox® Tablets
and other products utilizing our Aversion® Technology through proof of concept
and clinical development, implementing the King Agreement, licensing of
additional products to King through the exercise of King’s options under the
King Agreement, and licensing products utilizing our Aversion® Technology
outside of North America. Such performance targets are both organization
and
individual goals.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
8
Comment
3
Exhibit
Index - 3
Please
revise your exhibit list to incorporate by reference Exhibit 10.30, Form of
Secured Promissory Note of the Registrant related to January 31, 2006 Loan
Agreement.
Response
to Comment 3
Set
forth
below is the revised description of Exhibit 10.30 which includes the
incorporation of such Exhibit by reference to the Company’s Form 8-K filed on
January 31, 2007. Such revised description will be included in the Company’s
Annual Report on Form 10-K for the year ending December 31, 2008.
|
Exhibit Number
|
Exhibit
Description
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10.30
|
Form
of Secured Promissory Note of the Registrant relating to January
31, 2006
Loan Agreement (incorporated by reference to the Form 8-K filed on
January
31, 2006).
|
Comment
4
Consolidated
Financial Statements, page F-1
Notes
To Consolidated Financial Statements, page F-8
Note
B
– License, Development and Commercialization Agreement, page
F-14
Please
revise your disclosure of the Agreement with King to include a description
of
all your rights and obligations, the performance period, all deliverables,
and
the contractual cash flows as stipulated within the agreement. Describe the
revenue recognition method your employ for each deliverable and the basis for
using each revenue recognition method. Please tell us and disclose how you
have
incorporated your obligation to participate in a joint steering committee into
your EITF 00-21 analysis.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
9
Response
to Comment 4
Provided
below a revised description of the King Agreement marked to reflect changes
marked to address the Staff’s Comment 1 and this Comment 4, including a more
detailed description of the general terms of the King Agreement, payment terms
and amounts received by the Company through September 30, 2008, the number
of
products being developed under the King Agreement and King’s right to develop
additional opioid products utilizing the Company’s Aversion®
Technology, the performance period for each licensed product candidate, and
the
term and termination provisions of the Agreement. We have also included in
the
revised disclosure below a cross reference to Item 9 of Note A to the Company’s
financial statements included in the Form 10-K which contains a description
of
the revenue recognition method employed by the Company for each deliverable
and
the basis for using such revenue recognition method.
With
respect to the Company’s EITF 00-21 analysis given the Company’s obligation to
participate in a joint steering committee with King, we advise the Staff that
we
believe the criteria for concluding that participation in a joint steering
committee constitutes a separate unit of accounting is not met. Specifically,
we
reference application guidance in EITF 00-21 9(a)(b)(c). This guidance states
that the “delivered item” should be considered a separate unit of accounting if
all of the following criteria are met:
| a) |
The
delivered item has value to the customer on a standalone
basis,
|
| b) |
There
is objective and reliable evidence of the fair value of the undelivered
item, and
|
| c) |
If
the arrangement includes a general right of return relative to the
delivered item, delivery or performance of the undelivered item is
considered probable and substantially in the control of the
vendor.
|
The
Company’s participation in the joint steering committee is designed primarily to
allow knowledge of and seek input into King’s plans for developing and
commercializing the Company’s products licensed to King, and does not meet the
foregoing requirements.
The
revised description of the King Agreement provided below includes disclosure
of
the Company’s EITF 00-21 analysis.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
10
NOTE
B – LICENSE, DEVELOPMENT AND COMMERCIALIZATION
AGREEMENT
On
October 30, 2007, we and King Pharmaceuticals Research and Development,
Inc.
(“King”), a wholly-owned subsidiary of King Pharmaceuticals, Inc., entered into
a License, Development and Commercialization Agreement (the “King Agreement”) to
develop and commercialize in the United States, Canada and Mexico (the
"King
Territory") certain opioid analgesic products utilizing our proprietary
Aversion® (abuse
deterrent)TechnologyincludingACUROX™
Tablets.
The
Agreement providesinitiallyprovided
King
with an exclusive license in the King Territory for ACUROX™Acurox®Tablets
and another undisclosed opioid product candidate utilizingAcura's
Aversion® Technology. In addition, the King Agreement provides King with an
option to license in the King Territory all future opioid analgesic products
developed utilizing Acura'sAversion®
Technology.Underthe
At
September 30, 2008, King had licensed three opioid analgesic product candidates
utilizing our Aversion® Technology. We are responsible for using commercially
reasonable effort to develop at least three of four pre-specified opioid
analgesic product candidates to certain development and/or regulatory
milestones. The King Agreement provides that we or King may develop additional
opioid analgesic product candidates utilizing our Aversion® Technology and, if
King exercises its option to license such additional product candidates,
they
will be subject to the milestone and royalty payment and other
terms of
the King Agreement,
King made an upfront cash payment to Acura of $30 million which was
received
in December, 2007. Depending on the achievement of certain development
and
regulatory milestones, King could also make additional cash payments to
Acura of
up to $28 million relating to ACUROX™ Tablets and similar amounts with respect
to each subsequent Aversion® Technology product developed under the Agreement.
King will reimburse Acura for all
research and development expenses incurred beginning from September 19,
2007 for
ACUROX™
Tablets and all
research and development expenses related
to future products after King's exercise of its option to an exclusive
license
for each future product. King will record net sales of all products
and
for sales occurring following the one year anniversary of the first commercial
sale of a licensed product,
and King will pay Acura
a royalty at one of 6 rates ranging from 5% to 25% based on the level of
combined annual net sales for all products
subject to the Agreement. King will also make a one-time cash payment to
Acura
of $50 million in the first year in which the combined annual net sales
of all
products exceed $750 million. .
In
addition to the four opioid analgesic product candidates pre-specified
in the
King Agreement, we are actively developing additional (undisclosed) opioid
analgesic product candidates.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
11
At
September 30, 2008, we had received aggregate payments of $46.3 million from
King, consisting of a $30.0 million non-refundable upfront cash payment,
$8.3
million in reimbursed of
research and development expenses relating
to our licensed product candidates, a $3.0 million option exercise fee relating
to King’s exercise of its option to license a third (undisclosed) opioid product
candidate, and a $5.0 million milestone fee relating to our successful
achievement of the primary endpoints for our pivotal Phase III clinical study
for Acurox® Tablets. The King Agreement provides for King to reimburse us for
certain
research and development expenses incurred beginning from September 19, 2007
for
Acurox®
Tablets. The King Agreement also provides for King’s payment to us of a $3.0
million fee upon King’s exercise of its option for a future opioid product
candidate. In the event that King does not exercise its option for a future
opioid product candidate, King is required to reimburse us for certain of
our
expenses relating to such future opioid product candidate. Further, we may
receive up to $23 million in additional non-refundable milestone payments
for
each product candidate licensed to King, including Acurox®, by achieving certain
regulatory milestones in specific countries in the King Territory. We can
also
receive a one-time $50 million sales milestone payment upon the first attainment
of $750 million in net sales of all of our licensed products across all King
Territories. In addition,
for
sales occurring following the one year anniversary of the first commercial
sale
of a licensed product,
King will pay us
a
royalty at one of 6 rates ranging from 5% to 25% based on the level of combined
annual net sales for all products
licensed by us to King across all King Territories, with the highest applicable
royalty rate applied to such combined annual sales. King’s royalty payment
obligations expire on a product by product and country-by-country basis upon
the
later of (i) the expiration of the last valid patent claim covering such
product
in such country, or (ii) fifteen (15) years from the first commercial sale
of
such product in such country. No minimum annual fees are payable by either
party
under the King Agreement. Reference is made to Item 9 of Note A above entitled
“Revenue Recognition and Deferred Program Fee Revenue” for a description of the
revenue recognition method employed by the Company for each deliverable under
the King Agreement.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
12
The
King Agreement expires upon the expiration of King’s royalty payment and other
payment obligations under the King Agreement. King may terminate the King
Agreement in its entirety or with respect to any product at anytime after
March
31, 2010, upon the provision of not less than 12 months’ prior written notice,
in its entirety if regulatory approval of the NDA for Acurox® Tablets is not
received prior to March 31, 2010 and with respect to a particular product
with
respect to a country in which regulatory approval for such product is withdrawn
by a regulatory authority in such country. We may terminate the King Agreement
with respect to a product in the United States in the event such product
is not
commercially launched by King within 120 days after receipt of regulatory
approval of such product or in its entirety if King commences any interference
or opposition proceeding challenging the validity or enforceability any of
our
patent rights licensed to King under the King Agreement. Either party has
the
right to terminate the King Agreement on a product by product and
country-by-country basis if the other party is in material breach of its
obligations under the King Agreement relating to such product and such country,
and to terminate the Agreement in its entirety in the event the other party
makes an assignment for the benefit of creditors, files a petition in bankruptcy
or otherwise seeks relief under applicable bankruptcy laws, in each case
subject
to applicable cure periods.
In
the event of termination, no payments are due except those royalties and
milestones that have accrued prior to termination under the King Agreement
and
all licenses under the King Agreement are terminated. For all Acura terminations
and termination by King where we are not in breach, the King Agreement provides
for the transition of development and marketing of the licensed products
from
King to us, including the conveyance by King to us of the trademarks and
all
regulatory filings and approvals solely used in connection with the
commercialization of such licensed products and, in certain cases, for King’s
supply of such licensed products for a transitional period at King’s cost plus a
mark-up.
Comment
5
Note
F
– Notes Payable, page F-15
We
note
your disclosure on page F-16 stating that in year 2006 “The Company assigned a
value of $19.951 million to these conversion features at date of modification
and reflected that loss as a non-cash deemed dividend.” Please provide reference
to the authoritative literature used in supporting your omission of the line
items “Deemed Dividend” and “Net Loss Attributable to Common Shareholders” from
your Consolidated Statement of Operations for this transaction.
Acura_Ltr
to Jim B. Rosenberg (5)
November
19, 2008
Page
13
Response
to Comment 5
Upon
review of the relevant accounting literature, we agree with the Staff’s comment
to include the line items “Deemed Dividend” and “Net Loss Attributable to Common
Shareholders’ on the Consolidated Statement of Operations. Inasmuch as this item
was disclosed in Note F – Notes Payable under the caption “(a) Convertible
Bridge Term Notes,” and the value of the conversion feature was included in the
calculation of earnings (loss) loss per share in the Consolidated Statement
of
Operations, the Company requests the Staff’s concurrence to include the line
items “Deemed Dividend” and “Net Loss Attributable to Common Shareholders” in
the Consolidated Statement of Operations included in the Company’s Form 10-K for
the year ending December 31, 2008.
On
behalf
of the Company we acknowledge that:
|
·
|
the
Company is responsible for the adequacy and accuracy of the disclosure
in
the filings;
|
|
·
|
staff
comments or changes to disclosure in response to staff comments do
not
foreclose the Commission from taking any action with respect to the
filings; and
|
|
·
|
the
Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
|
|
Sincerely,
|
|
|
/s/
John P. Reilly
|
|
|
John
P. Reilly
|
JPR/rr
|
cc:
|
James
Peklenk
|
|
Joel
Parker
|
|
|
Laura
Crotty
|
|
|
Suzanne
Hayes
|
|
|
Andrew
Reddick, CEO
|
|
|
Robert
Jones, COO
|
|
|
Peter
Clemens, CFO
|
Acura_Ltr
to Jim B. Rosenberg (5)