##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission file number 001-35050
 ENDOCYTE, INC.
 (Exact name of Registrant as specified in its charter)
 
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    35-1969-140(I.R.S. Employer
Identification Number)
 3000 Kent Avenue, Suite A1-100
West Lafayette, IN 47906  (Address of Registrants principal executive offices)
 Registrants telephone number, including area code: (765) 463-7175
 Securities registered pursuant to Section 12(b) of the Act:
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



ENDOCYTE, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2011
TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTS (UNAUDITED)
    
    
    3ITEM 1A.
    
    BALANCE SHEETS AS OF DECEMBER 31, 2010 AND MARCH 31, 2011
    
    
    3ITEM 1B.
    
    STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2011
    
    
    4ITEM 1C.
    
    STATEMENTS OF
CONVERTIBLE PREFERRED STOCK, STOCKHOLDERS EQUITY (DEFICIT) AND
COMPREHENSIVE LOSS
    
    
    5ITEM 1D.
    
    STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2011
    
    
    6ITEM 1E.
    
    NOTES TO FINANCIAL STATEMENTS
    
    
    7ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    13ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    18ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    18PART II  OTHER INFORMATIONITEM 1A.
    
    RISK FACTORS
    
    
    19ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    36ITEM 5.
    
    OTHER INFORMATION
    
    
    37ITEM 6.
    
    EXHIBITS
    
    
    37SIGNATURES
    
    
    38EX-10.1EX-10.2EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Unaudited Condensed Financial Statements
 
 ENDOCYTE, INC.
 CONDENSED BALANCE SHEETS
 December 31,
    
    
    March 31,2010
    
    
    2011(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    16,872,783
    
    
    $
    13,217,363Short-term investments
    
    
    
    
    
    
    81,229,845Prepaid expenses
    
    
    2,637,783
    
    
    
    910,816Other assets
    
    
    539,659
    
    
    
    483,464Total current assets
    
    
    20,050,225
    
    
    
    95,841,488Property and equipment, net
    
    
    863,008
    
    
    
    813,197Deferred financing costs and other non-current assets
    
    
    300,985
    
    
    
    496,185Total assets
    
    $
    21,214,218
    
    
    $
    97,150,870Liabilities, Convertible Preferred Stock, and Stockholders Equity (Deficit)Current liabilities:Accounts payable
    
    $
    2,836,395
    
    
    $
    3,482,420Accrued wages and benefits
    
    
    155,102
    
    
    
    434,739Accrued interest payable
    
    
    140,427
    
    
    
    125,938Current portion of long-term debt
    
    
    4,318,078
    
    
    
    5,454,945Preferred stock warrants
    
    
    223,032
    
    
    
    Total current liabilities
    
    
    7,673,034
    
    
    
    9,498,042Long-term debt, net of current portion
    
    
    10,485,811
    
    
    
    9,380,982Subordinated notes
    
    
    9,529,413
    
    
    
    Other liabilities
    
    
    637,500
    
    
    
    637,500Total liabilities
    
    
    28,325,758
    
    
    
    19,516,524Convertible preferred stock, $0.001 par value, 14,310,992 shares authorized;
11,747,563 and 0, shares issued and outstanding at December 31, 2010 and March
31, 2011, respectively
    
    
    89,799,483
    
    
    
    Stockholders equity (deficit):Common stock: $0.001 par value, 100,000,000 shares authorized; 1,203,228 and
29,699,276 shares issued and outstanding at December 31, 2010 and March 31,
2011, respectively
    
    
    1,203
    
    
    
    29,699Additional paid-in capital
    
    
    1,156,681
    
    
    
    182,858,870Accumulated other comprehensive income
    
    
    
    
    
    
    3,280Retained deficit
    
    
    (98,068,907
    )
    
    
    (105,257,503
    )Total stockholders equity (deficit)
    
    
    (96,911,023
    )
    
    
    77,634,346Total liabilities, convertible preferred stock, and stockholders equity (deficit)
    
    $
    21,214,218
    
    
    $
    97,150,870
 See accompanying notes.
 3




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##### Table of Contents



ENDOCYTE, INC.
 CONDENSED STATEMENTS OF OPERATIONS
 For the Three MonthsEnded March 31,2010
    
    
    2011(unaudited)Revenue:Grant revenue
    
    $
    
    
    
    $
    Collaboration revenue
    
    
    
    
    
    
    Total revenue
    
    
    
    
    
    
    Operating expenses:Research and development
    
    
    3,899,416
    
    
    
    4,438,382General and administrative
    
    
    1,474,998
    
    
    
    2,074,362Total operating expenses
    
    
    5,374,414
    
    
    
    6,512,744Loss from operations
    
    
    (5,374,414
    )
    
    
    (6,512,744
    )Other income (expense) net:Interest income
    
    
    3,115
    
    
    
    19,025Interest expense
    
    
    (249,435
    )
    
    
    (697,615
    )Other income
    
    
    12,179
    
    
    
    2,738Net loss
    
    
    (5,608,555
    )
    
    
    (7,188,596
    )Net loss per share  basic and diluted
    
    $
    (6.16
    )
    
    $
    (0.43
    )Weighted-average number of common shares used
in net loss per share calculation  basic
and diluted
    
    
    911,066
    
    
    
    16,907,823
 See accompanying notes.
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##### Table of Contents



ENDOCYTE, INC.
 
 STATEMENTS OF CONVERTIBLE PREFERRED STOCK, STOCKHOLDERS EQUITY (DEFICIT)
AND COMPREHENSIVE LOSS
 AccumulatedConvertible
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherPreferred Stock
    
    
    Common Stock
    
    
    Additional
    
    
    Comprehensive
    
    
    Retained
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Paid-In Capital
    
    
    Income (Loss)
    
    
    Deficit
    
    
    Total
    
    
    LossBalances, December 31, 2010
    
    
    11,747,563
    
    
    $
    89,799,483
    
    
    
    1,203,228
    
    
    $
    1,203
    
    
    $
    1,156,681
    
    
    $
    
    
    
    $
    (98,068,907
    )
    
    $
    (96,911,023
    )
    
    $
    (20,094,899
    )Fair value adjustment of the
subordinated notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (644,118
    )
    
    
    
    
    
    
    
    
    
    
    (644,118
    )
    
    
    Net proceeds from initial
public offering
    
    
    
    
    
    
    
    
    
    
    14,375,000
    
    
    
    14,375
    
    
    
    78,153,468
    
    
    
    
    
    
    
    
    
    
    
    78,167,843
    
    
    
    Conversion of preferred
stock to common stock
    
    
    (11,747,563
    )
    
    
    (89,799,483
    )
    
    
    11,747,563
    
    
    
    11,747
    
    
    
    89,787,735
    
    
    
    
    
    
    
    
    
    
    
    89,799,482
    
    
    
    Reclassify warrants to equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223,031
    
    
    
    
    
    
    
    
    
    
    
    223,031
    
    
    
    Conversion of subordinated
notes to common stock
    
    
    
    
    
    
    
    
    
    
    2,335,823
    
    
    
    2,336
    
    
    
    13,981,441
    
    
    
    
    
    
    
    
    
    
    
    13,983,777
    
    
    
    Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    37,662
    
    
    
    38
    
    
    
    16,858
    
    
    
    
    
    
    
    
    
    
    
    16,896
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183,774
    
    
    
    
    
    
    
    
    
    
    
    183,774
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,188,596
    )
    
    
    (7,188,596
    )
    
    
    (7,188,596
    )Unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,280
    
    
    
    
    
    
    
    3,280
    
    
    
    3,280Balances
March 31, 2011 (unaudited)
    
    $
    
    
    
    $
    
    
    
    
    29,699,276
    
    
    $
    29,699
    
    
    $
    182,858,870
    
    
    $
    3,280
    
    
    $
    (105,257,503
    )
    
    $
    77,634,346
    
    
    $
    (7,185,316
    )
 See accompanying notes.
 5




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##### Table of Contents



ENDOCYTE, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
 For the Three MonthsEnded March 31,2010
    
    
    2011(unaudited)Operating activitiesNet loss
    
    $
    (5,608,555
    )
    
    $
    (7,188,596
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    58,954
    
    
    
    67,420Stock-based expense
    
    
    124,259
    
    
    
    183,774Gain on disposal of property and equipment
    
    
    (5,278
    )
    
    
    Accretion of bond discount
    
    
    (1,174
    )
    
    
    33,048Non cash interest expense
    
    
    37,794
    
    
    
    328,392Change in fair value on preferred stock warrants
    
    
    (5,294
    )
    
    
    Change in operating assets and liabilities:Accounts and accrued interest receivable
    
    
    
    
    
    
    (97,867
    )Prepaid expenses and other assets
    
    
    34,622
    
    
    
    1,509,776Accounts payable
    
    
    (27,029
    )
    
    
    948,292Accrued interest, wages, benefits and other liabilities
    
    
    (180,809
    )
    
    
    61,988Net cash used in operating activities
    
    
    (5,572,510
    )
    
    
    (4,153,773
    )Investing activitiesPurchases of property and equipment
    
    
    (71,096
    )
    
    
    (17,610
    )Proceeds from disposal of property and equipment
    
    
    5,278
    
    
    
    Purchases of investments
    
    
    (12,295,753
    )
    
    
    (111,258,286
    )Proceeds from sale of investments
    
    
    14,708,200
    
    
    
    29,998,673Net cash provided by (used in) investing activities
    
    
    2,346,629
    
    
    
    (81,277,223
    )Financing activitiesProceeds from issuance of convertible preferred stock, net of issuance costs
    
    
    (865
    )
    
    
    Proceeds from borrowings, net of issuance costs
    
    
    
    
    
    
    Proceeds from issuance of subordinated convertible notes, net of issuance costs
    
    
    
    
    
    
    3,590,837Principal payments on borrowings
    
    
    (1,506,229
    )
    
    
    Proceeds from initial public offering, net of issuance costs
    
    
    
    
    
    
    78,167,843Proceeds from the exercise of stock options
    
    
    
    
    
    
    16,896Net cash provided by (used in) financing activities
    
    
    (1,507,094
    )
    
    
    81,775,576Net decrease in cash and cash equivalents
    
    
    (4,732,975
    )
    
    
    (3,655,420
    )Cash and cash equivalents at beginning of period
    
    
    8,699,372
    
    
    
    16,872,783Cash and cash equivalents at end of period
    
    $
    3,966,397
    
    
    $
    13,217,363
 See accompanying notes.
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##### Table of Contents



ENDOCYTE, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 1. Nature of Business and Organization
  Initial Public Offering
  Stock Split
  2. Significant Accounting Policies
 Basis of Presentation
  Segment Information
  Use of Estimates
  7




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Cash and Cash Equivalents
  Short-Term Investments
 Investments  Debt and Equity Securities
 Research and Development Expenses
  Research and Development Arrangements
 Stock-Based Compensation
 Compensation  Stock
Compensation
 Net Loss Per Share
   8




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##### Table of Contents



Historical net loss per share
 Three months ended March 31,2010
    
    
    2011Numerator:Net loss
    
    $
    (5,608,555
    )
    
    $
    (7,188,596
    )Denominator:Weighted-average common shares outstanding
    
    
    911,066
    
    
    
    16,907,823Basic and diluted net loss per share
    
    $
    (6.16
    )
    
    $
    (0.43
    )
 Common stock equivalents
  Three months ended March 31,2010
    
    
    2011Outstanding common stock options
    
    
    2,039,146
    
    
    
    2,073,654Outstanding restricted stock
    
    
    222,510
    
    
    
    26,175Outstanding warrants
    
    
    69,294
    
    
    
    133,968Common stock issuable upon conversion of preferred stock
    
    
    11,747,563
    
    
    
    Total
    
    
    14,078,513
    
    
    
    2,233,797
  Comprehensive Income (Loss)
  Three Months Ended March 31,2010
    
    
    2011Net loss
    
    $
    (5,608,555
    )
    
    $
    (7,188,596
    )Unrealized gain (loss) on available-for-sale securities
    
    
    (3,605
    )
    
    
    3,280Comprehensive loss
    
    $
    (5,612,160
    )
    
    $
    (7,185,316
    )
 3. New Accounting Pronouncements
 Recently Adopted Accounting Standards
 Revenue Recognition  Multiple Element Arrangements
  9




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##### Table of Contents



4. Short-Term Investments
 Fair Value Measurements and Disclosures
  Level 1
 Level 2
 Level 3
   Fair Value(CarryingDescription
    
    Cost
    
    
    Level 1
    
    
    Value)U.S. Treasuries
    
    $
    78,221,775
    
    
    $
    78,225,189
    
    
    $
    78,225,189U.S. Government agency obligations
    
    
    3,004,790
    
    
    
    3,004,656
    
    
    
    3,004,656$
    81,226,565
    
    
    $
    81,229,845
    
    
    $
    81,229,845
  Notes Payable
  As of
    
    
    As ofDecember 31,
    
    
    March 31,2010
    
    
    2011Notes payable to Mid Cap
Financial, or Mid-Cap, and Silicon
Valley Bank, or SVB, with fixed
interest rate of 9.75%, monthly
payments through September 1, 2013
    
    $
    15,000,000
    
    
    $
    15,000,000Less unamortized discount
    
    
    (196,111
    )
    
    
    (164,072
    )14,803,889
    
    
    
    14,835,928Less current portion
    
    
    (4,318,078
    )
    
    
    (5,454,945
    )$
    10,485,811
    
    
    $
    9,380,983
  6. Subordinated Notes
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##### Table of Contents



7. Convertible Preferred Stock
  TotalProceeds(Net ofConvertible
    
    Shares
    
    
    Shares
    
    
    Price per
    
    
    OfferingPreferred Stock
    
    Authorized
    
    
    Issued
    
    
    Share
    
    
    Costs)Series A-1
    
    
    750,261
    
    
    
    750,167
    
    
    $
    1.91
    
    
    $
    1,470,370Series A-2
    
    
    241,884
    
    
    
    241,634
    
    
    
    5.73
    
    
    
    1,430,749Series B
    
    
    936,649
    
    
    
    936,241
    
    
    
    8.12
    
    
    
    7,530,180Series C-1
    
    
    1,937,172
    
    
    
    1,895,765
    
    
    
    8.12
    
    
    
    15,320,640Series C-2
    
    
    2,801,047
    
    
    
    2,787,791
    
    
    
    8.12
    
    
    
    22,447,353Series C-3
    
    
    7,643,979
    
    
    
    5,135,965
    
    
    
    8.12
    
    
    
    41,600,191$
    89,799,483
 8. Stockholders Equity (Deficit)
 Common Stock
  Stock Options
   11




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##### Table of Contents



Three monthsendedMarch 31,2010
    
    2011Weighted-average volatility
    
    
    34
    %
    
    
    80
    %Risk-free interest rate
    
    
    3.86
    %
    
    
    2.43
    %Weighted-average expected life (in years)
    
    
    10.0
    
    
    
    6.1Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
 12




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##### Table of Contents



Weighted-AverageWeighted-
    
    RemainingAverage
    
    Contractual
    
    AggregateExercise
    
    Term
    
    IntrinsicOptions
    
    Price
    
    (In Years)
    
    ValueOutstanding at January 1, 2010
    
    
    2,019,333
    
    
    $
    2.82Granted during period
    
    
    115,022
    
    
    
    6.40Exercised during period
    
    
    (37,662
    )
    
    
    0.45Expired during period
    
    
    (23,039
    )
    
    
    7.64Forfeited during period
    
    
    Outstanding at March 31, 2011
    
    
    2,073,654
    
    
    
    3.01
    
    
    
    7.12
    
    
    $
    11,532,189Exercisable at March 31, 2011
    
    
    1,330,431
    
    
    $
    2.44
    
    
    
    6.25
    
    
    $
    8,159,102
  9. Income Taxes
 Income Taxes
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 This quarterly report on Form 10-Q contains certain statements that are forward-looking
statements within the meaning of federal securities laws. When used in this report, the words
may, will, should, could, would, anticipate, estimate, expect, plan, believe,
predict, potential, project, target, forecast, intend and similar expressions are
intended to identify forward-looking statements. Forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ materially from those projected. These
risks and uncertainties include the important risks and uncertainties that may affect our future
operations as discussed in Part II  Item 1A of this Quarterly Report on Form 10-Q and any other
filings made with the Securities and Exchange Commission. Readers of this report are cautioned not
to place undue reliance on these forward-looking statements. While we believe the assumptions on
which the forward-looking statements are based are reasonable, there can be no assurance that these
forward-looking statements will prove to be accurate. This cautionary statement is applicable to
all forward-looking statements contained in this report.
 Overview
  13




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Critical Accounting Policies
  14




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##### Table of Contents



Results of Operations
 Comparison of Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2011
 Three Months EndedMarch 31,
    
    
    Increase/2010
    
    
    2011
    
    
    (Decrease)
    
    
    %(In thousands)Statement of operations data:Revenue
    
    $
    
    
    
    $
    
    
    
    $Operating expenses:Research and development
    
    
    3,899
    
    
    
    4,439
    
    
    
    540
    
    
    
    14
    %General and administrative
    
    
    1,476
    
    
    
    2,074
    
    
    
    598
    
    
    
    41
    %Total operating expenses
    
    
    5,375
    
    
    
    6,513
    
    
    
    1,138
    
    
    
    21
    %Loss from operations
    
    
    (5,375
    )
    
    
    (6,513
    )
    
    
    1,138
    
    
    
    21
    %Interest income
    
    
    3
    
    
    
    19
    
    
    
    16
    
    
    
    533
    %Interest expense
    
    
    (249
    )
    
    
    (698
    )
    
    
    449
    
    
    
    180
    %Other income (expense), net
    
    
    12
    
    
    
    3
    
    
    
    (9
    )
    
    
    75
    %Net loss
    
    $
    (5,609
    )
    
    $
    (7,189
    )
    
    $
    1,580
    
    
    
    28
    %
 Research and Development
    General and Administrative
   Interest Income
  Interest Expense
  15




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##### Table of Contents



Other Income, Net
  Liquidity and Capital Resources
        Three Months EndedMarch 31,2010
    
    
    2011(unaudited)(In thousands)Net cash provided by (used in) operating activities
    
    $
    (5,573
    )
    
    $
    (4,154
    )Net cash provided by (used in) investing activities
    
    
    2,347
    
    
    
    (81,277
    )Net cash provided by (used in) financing activities
    
    
    (1,507
    )
    
    
    81,776Net decrease in cash and cash equivalents
    
    $
    (4,733
    )
    
    $
    (3,655
    )
 Operating Activities
  16




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##### Table of Contents



Investing Activities
  Financing Activities
  Credit Facilities
  Operating Capital Requirements
    
    
    the number and characteristics of the SMDCs and companion imaging diagnostics we pursue;
    
    the scope, progress, results and costs of researching and developing our SMDCs and companion imaging diagnostics
and conducting preclinical and clinical trials;
    
    the timing of, and the costs involved in, obtaining regulatory approvals for our SMDCs and companion imaging
diagnostics;
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##### Table of Contents




    
    the cost of commercialization activities if any of our SMDCs and companion imaging diagnostics are approved for
sale, including marketing sales and distribution costs;
    
    the cost of manufacturing any of our any SMDCs and companion imaging diagnostics we successfully commercialize;
    
    our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial
terms of such agreements;
    
    the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims,
including litigation costs and the outcome of such litigation; and
    
    the timing, receipt and amount of sales of, or royalties on, our SMDCs and companion imaging diagnostics, if any.
 Contractual Obligations and Commitments
  Off-Balance Sheet Arrangements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risks
    
 Item 4.
    
    Controls and Procedures
 Conclusion Regarding Effectiveness of Disclosure Controls and Procedures
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Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1A.
    
    Risk Factors
 Risk factors which could cause actual results to differ from our expectations and which could
negatively impact our financial condition and results of operations are discussed below and
elsewhere in this report. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties not presently known to us or that are currently not
believed to be significant to our business may also affect our actual results and could harm our
business, financial condition and results of operations. If any of the risks or uncertainties
described below or any additional risks and uncertainties actually occur, our business, results of
operations and financial condition could be materially and adversely affected.
 Risks Related to Our Business and Industry
 We have incurred significant losses since our inception and anticipate that we will continue to
incur losses for the foreseeable future. We may never achieve or sustain profitability.
  We are a clinical-stage company with no approved products, which makes it difficult to assess our
future viability.
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We are highly dependent on the success of our lead SMDC, EC145, and we cannot give any assurance
that we will successfully complete its clinical development, or that it will receive regulatory
approval or be successfully commercialized.
  The results of previous clinical trials may not be predictive of future results, and our current
and planned clinical trials may not satisfy the requirements of the FDA or other non-U.S.
regulatory authorities.
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Our efforts to obtain conditional marketing approval of EC145 and EC20 from the European Medicines
Agency may be unsuccessful.
   
    
    complete the Phase 3 study;
    
    confirm that the patient risk-benefit is positive; and
    
    complete an annual renewal process.
  There is a high risk that our development and clinical activities will not result in commercial
products, and we will have invested in our current development and clinical programs, to the
exclusion of others, for several more years before it is known whether one or more of our product
candidates will receive regulatory approval or be commercially introduced.
  The coverage and reimbursement status of newly approved biopharmaceuticals is uncertain, and
failure to obtain adequate coverage and adequate reimbursement of EC145 or other product candidates
could limit our ability to generate revenue.
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Our development activities could be delayed or stopped for a number of reasons, many of which are
outside our control, including failure to recruit and enroll patients for clinical trials.
  
    
    limited number of, and competition for, suitable sites to conduct our clinical trials;
    
    government or regulatory delays and changes in regulatory requirements, policy and
guidelines;
    
    delay or failure to obtain sufficient supplies of the product candidate for our clinical
trials as a result of our suppliers non-compliance with cGMP, or for other reasons;
    
    delay or failure to reach agreement on acceptable clinical trial agreement terms with
prospective sites or investigators; and
    
    delay or failure to obtain IRB approval to conduct a clinical trial at a prospective
site.
  
    
    slower than expected rates of patient recruitment and enrollment;
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
    
    unforeseen safety issues;
    
    lack of efficacy evidenced during clinical trials, which risk may be heightened given the
advanced state of disease and lack of response to prior therapies of patients in our
clinical trial for EC145 in PROC;
    
    termination of our clinical trials by an IRB at one or more clinical trial sites;
    
    inability or unwillingness of patients or medical investigators to follow our clinical
trial protocols; and
    
    inability to monitor patients adequately during or after treatment or high patient
dropout rates.
   Even if we are able to obtain regulatory approval of EC145 based on our initial phase 3 clinical
trial, marketing will be limited to our intended indication of PROC and not ovarian cancer
generally, or any other type of cancer.
  Our product candidates may cause undesirable side effects that could delay or prevent their
regulatory approval or commercialization.
   
    
    regulatory authorities may withdraw their approval of this product;
    
    we may be required to recall this product, change the way this product is administered,
conduct additional clinical trials or change the labeling of this product;
    
    this product may be rendered less competitive and sales may decrease; or
    
    our reputation may suffer generally both among clinicians and patients.
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We may not obtain government regulatory approval to market our product candidates or negotiate
satisfactory pricing for our product candidates which could adversely impact our future
profitability.
   We may require substantial additional funding which may not be available to us on acceptable terms,
or at all.
   
    
    our need to expand our research and development activities;
    
    the rate of progress and cost of our clinical trials and the need to conduct clinical
trials beyond those planned;
    
    the outcome of the applications we intend to file with the EMA for conditional marketing
authorization for EC145 and EC20;
    
    the costs associated with establishing a sales force and commercialization capabilities;
    
    the costs of acquiring, licensing or investing in businesses, product candidates and
technologies;
    
    the costs and timing of seeking and obtaining approval from the FDA and non-U.S.
regulatory authorities;
    
    our ability to maintain, defend and expand the scope of our intellectual property
portfolio;
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
    
    our need and ability to hire additional management and scientific and medical personnel;
    
    the effect of competing technological and market developments;
    
    our need to implement additional internal systems and infrastructure, including financial
and reporting systems appropriate for a public company; and
    
    the economic and other terms and timing of collaboration, licensing or other arrangements
into which we may enter.
   Raising additional capital may cause dilution to existing stockholders, restrict our operations or
require us to relinquish rights.
  If our competitors develop and market products that are more effective, safer or less expensive
than our product candidates, our commercial opportunities will be negatively impacted.
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
    
    our ability to design and successfully execute appropriate clinical trials;
    
    our ability to recruit and enroll patients for our clinical trials;
    
    the results of our clinical trials and the efficacy and safety of our product candidates;
    
    the speed at which we develop our product candidates;
    
    achieving and maintaining compliance with regulatory requirements applicable to our
business;
    
    the timing and scope of regulatory approvals, including labeling;
    
    adequate levels of reimbursement under private and governmental health insurance plans,
including Medicare;
    
    our ability to protect intellectual property rights related to our product candidates;
    
    our ability to commercialize and market any of our product candidates that may receive
regulatory approval;
    
    our ability to have our partners manufacture and sell commercial quantities of any
approved product candidates to the market;
    
    acceptance of our product candidates by physicians, other healthcare providers and
patients; and
    
    the cost of treatment in relation to alternative therapies.
  If we fail to attract and retain key management and scientific personnel, we may be unable to
successfully develop or commercialize our product candidates.
   As we evolve from a company primarily involved in clinical development to a company also involved
in commercialization, we may encounter difficulties in managing our growth and expanding our
operations successfully.
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If we are unable to establish sales, marketing and distribution capabilities or to enter into
agreements with third parties to do so, we may be unable to successfully market and sell any
products, even if we are able to obtain regulatory approval.
  If we do not establish development or commercialization collaborations, we may have to alter our
development and marketing plans.
  We rely on third parties to conduct clinical trials for our product candidates and plan to rely on
third parties to conduct future clinical trials. If these third parties do not successfully carry
out their contractual duties or meet expected deadlines, it may cause delays in commencing and
completing clinical trials of our product candidates or we may be unable to obtain regulatory
approval for or commercialize our product candidates.
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We rely on third parties to manufacture and supply our product candidates.
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We are subject to risks associated with the availability of key raw materials such as
technetium-99m.
   If a successful product liability claim or series of claims is brought against us for uninsured
liabilities or in excess of insured liabilities, we could be forced to pay substantial damage
awards.
  Each of our product candidates will remain subject to ongoing regulatory review even if it receives
marketing approval. If we or our contractors fail to comply with continuing regulations, we or they
may be subject to enforcement action that could adversely affect us.
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We deal with hazardous materials and must comply with environmental laws and regulations, which can
be expensive and restrict how we do business.
   Our ability to use net operating losses to offset future taxable income may be subject to certain
limitations.
  Risks Related to Intellectual Property
 Our proprietary rights may not adequately protect our technologies and product candidates.
   
    
    we or our licensors were the first to make the inventions covered by each of our issued
patents and pending patent applications;
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
    
    we or our licensors were the first to file patent applications for these inventions;
    
    any of our product candidates will be Orange Book eligible;
    
    others will independently develop similar or alternative technologies or duplicate any of
our technologies;
    
    any of our or our licensors pending patent applications will result in issued patents;
    
    any of our or our licensors patents will be valid or enforceable;
    
    any patents issued to us or our licensors and collaboration partners will provide us with
any competitive advantages, or will be challenged by third parties;
    
    we will develop additional proprietary technologies that are patentable;
    
    the U.S. government will exercise any of its statutory rights to our intellectual
property that was developed with government funding; or
    
    our business may infringe the patents or other proprietary rights of others.
   The intellectual property protection for our product candidates is dependent on third parties.
  If we breach any of the agreements under which we license commercialization rights to our product
candidates or technology from third parties, we could lose license rights that are important to our
business.
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The patent protection for our product candidates may expire before we are able to maximize their
commercial value, which may subject us to increased competition and reduce or eliminate our
opportunity to generate product revenue.
  We may not be able to protect our intellectual property rights throughout the world.
   If we are sued for infringing intellectual property rights of third parties, litigation will be
costly and time-consuming and could prevent us from developing or commercializing our product
candidates.
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
    
    infringement and other intellectual property claims, which would be costly and
time-consuming to defend, whether or not the claims have merit, and which could delay the
regulatory approval process and divert managements attention from our business;
    
    substantial damages for past infringement, which we may have to pay if a court determines
that our product candidates or technologies infringe a competitors patent or other
proprietary rights;
    
    a court prohibiting us from selling or licensing our technologies or our product
candidates unless the third-party licenses its patents or other proprietary rights to us on
commercially reasonable terms, which it is not required to do;
    
    if a license is available from a third party, we may have to pay substantial royalties or
lump sum payments or grant cross-licenses to our patents or other proprietary rights to
obtain that license; and
    
    redesigning our products so they do not infringe, which may not be possible or may
require substantial monetary expenditure and time.
   We may become involved in lawsuits to protect enforce our patents or other intellectual property
rights, which could be expensive, time-consuming and unsuccessful.
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Risks Related to Ownership of Our Common Stock
 The price of our common stock may be volatile and our shares may suffer a decline in value.
  
    
    results from, and any delays in, our current or planned clinical trials, including
PROCEED;
    
    announcements of FDA non-approval of our product candidates, including EC145, or delays
in FDA or other non-U.S. regulatory authority review processes;
    
    FDA or other U.S. or non-U.S. regulatory actions affecting us or our industry;
    
    litigation or public concern about the safety of our product candidates;
    
    failure or discontinuation of any of our research or clinical trial programs;
    
    delays in the commercialization of our product candidates;
    
    our ability to effectively partner with collaborators to develop or sell our products;
    
    market conditions in the pharmaceutical, biopharmaceutical and biotechnology sectors and
issuance of new or changed securities analysts reports or recommendations;
    
    actual and anticipated fluctuations in our quarterly operating results;
    
    developments or disputes concerning our intellectual property or other proprietary
rights;
    
    introduction of technological innovations or new products by us or our competitors;
    
    issues in manufacturing our product candidates;
    
    market acceptance of our product candidates;
    
    deviations in our operating results from the estimates of securities analysts;
    
    coverage and reimbursement policies of governments and other third-party payors;
    
    sales of our common stock by our officers, directors or significant stockholders;
    
    price and volume fluctuations in the overall stock market from time to time;
    
    general economic conditions and trends;
    
    major catastrophic events;
    
    our ability to expand our operations, domestically and internationally, and the amount
and timing of expenditures related to this expansion; and
    
    additions or departures of key personnel.
  Sales of substantial amounts of our shares could adversely affect the market price of our common
stock.
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Our existing stockholders have substantial control of our management and affairs, which could limit
your ability to influence the outcome of key transactions, including a change of control.
  Provisions in our certificate of incorporation and bylaws and under Delaware law might discourage,
delay or prevent a change of control of our company or changes in our management and, therefore,
depress the trading price of our common stock.
  
    
    establishing a classified board so that not all members of our Board of Directors are
elected at one time;
    
    authorizing blank check preferred stock that our Board of Directors could issue to
increase the number of outstanding shares to discourage a takeover attempt;
    
    eliminating the ability of stockholders to call a special stockholder meeting;
    
    eliminating the ability of stockholders to act by written consent;
    
    being subject to provisions of Section 203 of the Delaware General Corporate Law
regulating corporate takeovers;
    
    providing that our Board of Directors is expressly authorized to make, alter or repeal
our bylaws; and
    
    establishing advance notice requirements for nominations for elections to our Board of
Directors or for proposing other matters that can be acted upon by stockholders at
stockholder meetings.
 If we fail to establish and maintain proper internal controls, our ability to produce accurate
financial statements or comply with applicable regulations could be impaired.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Unregistered Sales of Equity Securities
  Use of Proceeds from Registered Securities
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Item 5. Other Information
  
 Item 6. Exhibits
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SIGNATURES
  ENDOCYTE, INC.Date:  May 13, 2011
    By:
    /s/  P. Ron EllisP. Ron EllisPresident and Chief Executive Officer (Principal
Executive Officer)Date:  May 13, 2011
    By:
    /s/  Michael A. ShermanMichael A. ShermanChief Financial Officer (Principal Financial and
Accounting Officer) 38




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EXHIBIT INDEX
 ExhibitNumber
    
    Description10.1
    
    Extension of Lease dated
April 1, 2011 between Endocyte, Inc. and Purdue Research Foundation.10.2
    
    Lease dated April 1, 2011
between Endocyte, Inc. and Purdue Research Foundation.31.1
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
of the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934
of the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 39