<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 1999
REGISTRATION NO. 333-87721
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ILEX ONCOLOGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 74-2699185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
11550 I.H. 10 WEST, SUITE 100
SAN ANTONIO, TEXAS 78230
(210) 949-8200
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------
MICHAEL T. DWYER
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
ILEX ONCOLOGY, INC.
11550 I.H. 10 WEST, SUITE 100
SAN ANTONIO, TEXAS 78230
(210) 949-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
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<S> <C>
PHILLIP M. RENFRO, ESQ. MARK J. MIHANOVIC, ESQ.
FULBRIGHT & JAWORSKI L.L.P. MCDERMOTT, WILL & EMERY
300 CONVENT STREET, SUITE 2200 2049 CENTURY PARK EAST, 34TH FLOOR
SAN ANTONIO, TEXAS 78205 LOS ANGELES, CALIFORNIA 90067
(210) 270-7172 (310) 277-4110
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
---------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If the registrant elects to deliver its latest annual report to security
holders or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED , 1999
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
3,500,000 SHARES
[ILEX ONCOLOGY LOGO]
COMMON STOCK
$ PER SHARE
- --------------------------------------------------------------------------------
ILEX Oncology, Inc. is offering 3,200,000 shares and the selling stockholder
identified in this prospectus is offering 300,000 shares.
The common stock is listed on The Nasdaq National Market under the symbol
"ILXO." On September 22, 1999, the last reported sale price of our common stock
on The Nasdaq National Market was $15.875 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 9.
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Price to the public................................. $ $
Underwriting discount...............................
Proceeds to ILEX....................................
Proceeds to the selling stockholder.................
</TABLE>
ILEX has granted an over-allotment option to the underwriters. Under this
option, the underwriters may elect to purchase a maximum of 525,000 additional
shares from ILEX within 30 days following the date of this prospectus to cover
over-allotments.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CIBC WORLD MARKETS
PRUDENTIAL VECTOR HEALTHCARE GROUP
A UNIT OF PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
The date of this prospectus is , 1999.
LOGO
<PAGE> 3
The Oncology Drug Development Company
PRODUCTS IN DEVELOPMENT [ILEX LOGO]
The following table summarizes the potential therapeutic indications,
development status and marketing rights for certain of our clinical and
preclinical product candidates and is qualified in its entirety by the more
detailed information appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
PRODUCT INDICATION(S) STATUS MARKETING RIGHTS
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<S> <C> <C> <C>
CAMPATH(R)(1) Chronic Lymphocytic Leukemia BLA filing in process Schering AG
Non-Hodgkin's Lymphoma Phase II
Organ Transplant Rejection Phase II
Multiple Sclerosis Phase II
EFLORNITHINE(2) Superficial Bladder Cancer Phase III ILEX
Non-Melanoma Skin Cancer Phase III
Recurrent Colon Polyps Phase IIb
Barrett's Esophagus Phase II
Prostate Cancer Phase II
OXYPURINOL Symptomatic Hyperuricemia Initiating pivotal ILEX
ILX-295501(3) Non-Small Cell Lung Cancer Phase II Lilly/ILEX
Ovarian Cancer Phase II
Kidney Cancer Phase II
Melanoma Phase II
AMINOPTERIN Refractory Endometrial Cancer Phase II ILEX
Acute Leukemia Phase II
SR-45023A(4) Solid Tumors Phase I Symphar/ILEX
ILX23-7553 Solid Tumors Phase I ILEX
ANGIOGENESIS INHIBITORS ILEX
ARRESTEN Solid Tumors Preclinical
RESTIN Solid Tumors Preclinical
CANSTATIN Solid Tumors Preclinical
TUMSTATIN Solid Tumors Preclinical
APOMIGREN Solid Tumors Preclinical
NM-3 Solid Tumors Preclinical
THP-DOX Solid Tumors Preclinical
</TABLE>
(1) We have formed a joint venture with LeukoSite to develop CAMPATH(R). The
joint venture has granted worldwide marketing rights, except for Japan and
East Asia, to Schering AG and retained co-promotion rights in the U.S.
(2) The National Cancer Institute is co-sponsoring certain eflornithine
clinical studies.
(3) We in-licensed this compound from Eli Lilly and Company. Eli Lilly can
repurchase our rights to ILX-295501 after Phase II trials, with ILEX
retaining a royalty interest.
(4) SR-45023A is being developed in collaboration with Symphar SA.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 9
Forward-Looking Statements.................................. 18
Common Stock Market Price Data.............................. 19
Use of Proceeds............................................. 20
Dividend Policy............................................. 20
Capitalization.............................................. 21
Selected Consolidated Financial Data........................ 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 28
Management.................................................. 45
Principal and Selling Stockholders.......................... 51
Certain Transactions........................................ 53
Description of Capital Stock................................ 54
Underwriting................................................ 57
Legal Matters............................................... 58
Experts..................................................... 59
Where You Can Find More Information......................... 59
</TABLE>
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Our executive offices are located at 11550 I.H. 10 West, Suite 100, San Antonio,
Texas 78230. Our telephone number is (210) 949-8200. Our website can be found at
www.ilexoncology.com. Our website does not constitute part of this prospectus.
"ILEX" is a trademark of ILEX Oncology, Inc. All other trademarks or trade names
referred to in this prospectus are the property of their respective owners.
As used in this prospectus, the terms "we," "us," "our," the "Company" and
"ILEX" mean ILEX Oncology, Inc. and its subsidiaries (unless the context
indicates a different meaning), and the term "common stock" means the Company's
common stock, $.01 par value per share. Unless otherwise stated, all information
contained in this prospectus assumes no exercise of the over-allotment option
granted to the underwriters.
The underwriters are offering the shares subject to various conditions and may
reject all or part of any order.
3
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this prospectus.
Because it is a summary, it does not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus carefully, including the Risk Factors and the reports incorporated by
reference in this prospectus.
THE COMPANY
OVERVIEW
We develop pharmaceuticals for treating and preventing cancer and provide
contract research services to other companies developing anticancer drugs. We
have a portfolio of seven anticancer products in clinical development and
several preclinical stage products. We built this portfolio by in-licensing and
acquiring product candidates developed by others and do not conduct early-stage
drug discovery research ourselves. We recently completed a pivotal clinical
trial in chronic lymphocytic leukemia, or CLL, for our most advanced product
candidate, CAMPATH(R). We are developing CAMPATH(R) in partnership with
LeukoSite, Inc. The results of this trial should enable the partnership to
complete by the end of 1999 the filing with the U.S. Food and Drug
Administration, or FDA, for marketing approval. The FDA has granted CAMPATH(R)
fast-track status, requiring agency review to be completed within six months
from acceptance of the filing. In August 1999 this partnership licensed
worldwide marketing rights (except for Japan and East Asia) for CAMPATH(R) to
Schering AG.
We operate through two subsidiaries: ILEX Products, Inc., through which we
develop our own portfolio of anticancer compounds, and ILEX Oncology Services,
Inc., or ILEX Services, which is our full service contract research
organization, or CRO. ILEX Services manages the preclinical research and
clinical trials for our own product candidates as well as oncology products
being developed by other companies. In addition to building our expertise in
cancer drug development, our CRO business generates revenue, reduces our cost to
perform our own research and development, and gives us access to product
in-licensing opportunities.
OUR MARKET
Cancer encompasses a large number of discrete diseases that afflict many
different parts of the human body. The diversity of cancer diseases and their
overall prevalence create a large need for new and improved treatments. Cancer
is the second leading cause of death in the U.S. It is estimated that one in
three Americans will be diagnosed with cancer. The worldwide oncology drug
market was estimated at $16 billion in 1998, representing 15% growth from 1997.
This market is not saturated, with novel treatments often enjoying premium
pricing and rapid market acceptance.
Fundamentals of the oncology market that are particularly advantageous for us
include:
- - accelerated approval procedures adopted by the FDA to shorten the development
process and review time for cancer drugs;
- - in-licensing opportunities created by a trend among large pharmaceutical
companies to concentrate on products with larger market potential than most
anticancer drugs;
- - favorable pricing and reimbursement for oncology drugs, with some novel agents
commanding $6,000 to $15,000 per course of therapy; and
- - a highly concentrated population of oncologists and hematologists which allows
a small sales force to be effective.
OUR STRATEGY
Our objective is to be a leading oncology drug company. We intend to market or
co-market our own products in the future and become an oncology-focused
specialty pharmaceutical company. Our strategy consists of the following
elements:
- - focus on the expanding cancer market;
- - use our expertise to identify and in-license product candidates;
- - reduce risk by developing a broad portfolio of products;
4
<PAGE> 6
- - form strategic collaborations to support development and commercialization of
our products;
- - offer a full range of oncology CRO services; and
- - use our CRO business to create in-licensing opportunities and lower our own
development costs.
ILEX PRODUCTS, INC.
We have seven drugs in clinical development and several product candidates in
late preclinical research. All of our product rights were either acquired or
in-licensed. We follow a disciplined approach to product acquisition and
development:
- - we only in-license product candidates that have shown strong preclinical or
human efficacy results;
- - we only develop drugs that are patent protected, have patents pending or can
qualify for orphan drug designation from the FDA;
- - we do not perform early-stage research;
- - we advance compounds into Phase II trials only if promising efficacy results
are seen in Phase I trials; and
- - we seek partners when deemed appropriate to share the cost and risk of
developing and commercializing our products.
In addition to traditional chemotherapy drugs that kill cancer cells, we are
developing a number of chemoprevention agents, which are intended to be
well-tolerated oral therapies aimed at preventing the occurrence, progression or
recurrence of cancer. The market potential for chemoprevention agents is
increasing as more genetic and other diagnostic tests become available to
identify people at risk of developing cancer. As long-term therapies,
chemoprevention agents have the potential to address new markets substantially
larger than most acute care cancer products. Although long-term studies are
usually needed to prove that a drug can prevent cancer, our strategy is to seek
approval based upon effectively treating a pre-cancerous condition or preventing
the recurrence of cancer, thereby shortening the approval process.
CAMPATH(R)
Our most advanced product candidate, CAMPATH(R), is a humanized monoclonal
antibody in development for treating CLL in patients resistant to currently
available drug therapies. CLL is the most common form of adult leukemia, with
approximately 120,000 patients in the U.S. and Europe suffering from the
disease. Based on pilot human studies, CAMPATH(R) may also have utility in
treating patients with non-Hodgkin's lymphoma, multiple sclerosis and organ
transplants. We are developing CAMPATH(R) in a 50/50 joint venture with
LeukoSite known as L&I Partners, L.P. The partnership recently granted worldwide
marketing rights (excluding Japan and East Asia) for CAMPATH(R) to Schering AG
under an agreement that provides the partnership with up to $30 million of
up-front and milestone payments and approximately 67% of net profits from sales.
In June 1999 we presented data from the pivotal trial of CAMPATH(R), which was
conducted in 93 patients who had failed treatments with fludarabine and an
alkylating agent, the two standard therapies for treating CLL. Of the 93
patients enrolled, 31 (33%) had a complete or partial response. Based on these
results, the partnership has filed the first two parts of its Biologics License
Application, or BLA, with the FDA and expects to file the final part by the end
of 1999.
Eflornithine
Our second most advanced product candidate is eflornithine, a chemoprevention
agent. In April 1999 we initiated a Phase III trial of eflornithine for
preventing the recurrence of superficial bladder cancer. This double-blind,
placebo-controlled, 400-patient trial is being co-sponsored by the National
Cancer Institute, or NCI. More than 140,000 patients in the U.S. have recurrent
superficial bladder cancer. With the NCI, we are also investigating eflornithine
for use in other pre-malignant conditions. The compound is in a Phase III trial
in non-melanoma skin cancer, a Phase IIb trial in recurrent colon polyps, and
Phase II trials in Barrett's esophagus. These conditions are precursors to skin,
colon and esophageal cancer, respectively.
Oxypurinol
We are developing oxypurinol for treatment of gout. The only currently available
treatment for the cause of gout is allopurinol. However, 3 to 5%
5
<PAGE> 7
of patients receiving allopurinol develop an intolerance to it. We are
developing oxypurinol as an alternative to allopurinol for these 50,000 to
90,000 patients. Based on results from our compassionate use program, we plan to
pursue marketing approval for oxypurinol under the FDA's accelerated approval
guidelines by conducting a pivotal Phase II trial in 2000 and submitting a New
Drug Application, or NDA, shortly thereafter.
Other Clinical Candidates
Our other clinical stage products include:
- - ILX-295501 -- in-licensed from Eli Lilly and initiated Phase II trials in four
cancers: ovarian, kidney, non-small cell lung and melanoma. Eli Lilly has the
right to repurchase our rights following Phase II trials, with ILEX retaining
a royalty interest;
- - Aminopterin -- in Phase II trials for acute leukemia and refractory
endometrial cancer;
- - SR-45023A -- in Phase I trials for solid tumors, being co-developed with
Symphar SA, a Swiss biotechnology company; and
- - ILX23-7553 -- a vitamin D(3) analog in Phase I trials for breast and prostate
cancers and other solid tumors.
Preclinical Anti-Angiogenesis Candidates
In July 1999 we acquired Convergence Pharmaceuticals, Inc. and its portfolio of
angiogenesis inhibitor product candidates. Angiogenesis inhibitors help block
the formation of new blood vessels that tumors require to grow larger or to
recover from chemotherapy or radiation. Our angiogenesis inhibitor pipeline
includes five proteins that would be given intravenously and a small molecule
inhibitor that would be taken orally.
We are also in preclinical development with THP-Dox, a peptide-doxorubicin
conjugate that binds to a receptor on tumor blood vessels. Doxorubicin is a
widely-used generic chemotherapy agent. We intend to develop THP-Dox as an
anti-angiogenic treatment for prostate, breast and lung cancers.
We expect to bring two of these product candidates into human trials in 2000.
ILEX ONCOLOGY SERVICES, INC.
We believe ILEX Services is the only full service provider of CRO services
focused predominantly on oncology. We offer a full range of specialized
preclinical research and clinical trial services, including chemistry and
toxicology services, small-scale manufacturing, design of clinical protocols,
organization and monitoring of clinical trials and preparation of regulatory
submissions. Based on our expertise, we aim to reduce the time normally required
to develop oncology products and increase the probability of obtaining
regulatory approval. In addition, ILEX Services provides CRO services on a
contract basis to ILEX Products and has been the source of three of the products
we now have in clinical development.
Our CRO revenues grew from $5.9 million in 1997 to $9.7 million in 1998 and were
$5.6 million in the first half of 1999. Our CRO client list includes more than
40 biotechnology and pharmaceutical companies, currently conducting
approximately 100 preclinical studies and clinical trials with us.
We work closely with prestigious cancer research institutions and groups that
give us access to top oncology clinical expertise. Our Board of Directors
includes Dr. Daniel Von Hoff, president of the American Association for Cancer
Research, and Dr. Joseph Bailes, president of the American Society of Clinical
Oncology. In addition, we have a strong relationship with CTRC Research
Foundation, or CTRC Research, our largest stockholder. CTRC Research has one of
the largest oncology Phase I trial organizations in the U.S. We also have strong
historical ties with US Oncology, Inc., the largest oncology physician practice
management organization in the U.S., whose physicians see approximately 13% of
the new cancer patients in the U.S. annually. Our strong relationships with
these groups give us access to a significant number of patients for enrollment
into clinical trials. We believe that our oncology focus combined with these
relationships make us an attractive option for companies selecting a CRO to
develop a cancer drug.
6
<PAGE> 8
THE OFFERING
Common stock offered by ILEX.......... 3,200,000 shares
Common stock offered by the selling
stockholder........................... 300,000 shares
Common stock to be outstanding after
the offering.......................... 20,445,605 shares(1)
Use of proceeds....................... We intend to use the net proceeds
from this offering to expand our
clinical trials and preclinical
research, with a particular focus on
our late-stage clinical product
candidates and our angiogenesis
inhibitors; for potential
acquisitions of complementary
technologies, products or companies;
and for general corporate purposes.
We will not receive any proceeds from
the sale of common stock by the
selling stockholder. See "Use of
Proceeds."
Nasdaq National Market symbol......... ILXO
- ---------------------------
(1) Based on shares outstanding as of September 9, 1999 and excludes:
- 1,276,876 shares of common stock issuable upon exercise of outstanding
options at a weighted average exercise price of $9.44 per share;
- 451,555 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $7.59 per share;
- 744,395 shares of common stock issuable upon exercise of options that may
be granted in the future under our Stock Option Plan and our Non-Employee
Director Plan; and
- 290,867 shares of common stock issuable upon conversion of preferred stock
of ILEX Services which is convertible beginning in September 2000, or
earlier upon the occurrence of certain events.
7
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except for per share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------- -------------------
1996 1997 1998 1998 1999
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Operating revenue:
Product development..................... $ 3,831 $ 5,027 $ 4,622 $ 2,090 $ 2,069
CRO..................................... 1,537 5,903 9,650 4,923 5,567
Licensing fees.......................... 2,775 300 -- -- --
------- ------- -------- -------- --------
Total revenue............................. 8,143 11,230 14,272 7,013 7,636
Operating expenses:
Research and development................ 3,637 6,740 15,509 9,302 7,496
General and administrative.............. 2,886 6,691 6,534 2,244 2,514
CRO..................................... 2,169 4,587 9,313 5,607 6,175
Special charges(1)...................... -- -- -- -- 13,882
------- ------- -------- -------- --------
Total operating expenses.................. 8,692 18,018 31,356 17,153 30,067
Operating loss............................ (549) (6,788) (17,084) (10,140) (22,431)
Equity in income (losses) of:
Research and development partnerships... (750) (4,295) (4,453) (2,359) (1,889)
Contract research affiliate............. -- (182) (1,541) 79 (3,310)
Interest income, net...................... 684 2,583 1,850 1,016 541
------- ------- -------- -------- --------
Net loss.................................. $ (615) $(8,682) $(21,228) $(11,404) $(27,089)
======= ======= ======== ======== ========
Net loss per share........................ $ (0.07) $ (0.72) $ (1.71) $ (0.93) $ (2.11)
======= ======= ======== ======== ========
Weighted average number of shares of
common stock outstanding................ 8,744 12,118 12,450 12,293 12,829
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
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<S> <C> <C> <C>
BALANCE SHEET DATA
Cash, cash equivalents and investments in marketable
securities............................................. $15,220 $40,347 $87,599
Working capital.......................................... 12,734 37,861 85,113
Total assets............................................. 27,011 52,138 99,390
Total stockholders' equity............................... 17,845 37,997 85,249
</TABLE>
- ---------------------------
(1) We incurred special charges of $13.9 million in the first half of 1999.
These charges included $12.3 million in one-time costs associated with the
termination of our agreement with PRN Research, Inc. and $1.6 million of
charges related to other items. You should refer to Management's Discussion
and Analysis of Financial Condition and Results of Operations and our
financial statements included in the reports incorporated by reference in
this prospectus for details of the special charges.
(2) Reflects the sale in July 1999 of $20.0 million of common stock, net of
expenses, and the sale in September 1999 of $5.0 million of preferred stock
in our subsidiary ILEX Services which is convertible in the beginning of
September 2000, or earlier upon the occurrence of certain events to IMPATH
Inc., net of expenses, and 247,526 shares of common stock issued between
June 30 and September 9, 1999 upon exercise of warrants and options.
(3) As adjusted for the sale of 3,200,000 shares of common stock by ILEX at an
assumed offering price of $15.875 per share, net of estimated underwriters'
discounts and commissions and offering expenses.
8
<PAGE> 10
RISK FACTORS
You should carefully consider the following factors and other information
included or incorporated by reference in this prospectus before deciding to
invest in our common stock.
WE HAVE ONLY A LIMITED OPERATING HISTORY AND WE EXPECT TO CONTINUE TO GENERATE
LOSSES.
We began operations in October 1994 and have only a limited operating history
upon which you can evaluate our business. We have incurred losses every year
since we began operations. As of June 30, 1999, our accumulated deficit was
approximately $58.4 million, including a net loss of approximately $21.2 million
for the year ended December 31, 1998 and a net loss of approximately $27.1
million for the six-month period ended June 30, 1999. We have not generated any
revenue from product sales to date, and it is possible that significant revenues
from product sales will never be achieved. Even if we do achieve significant
revenues from product sales or we increase revenues from our CRO business, we
expect to incur significant operating losses over the next several years. It is
possible that we will never achieve profitable operations.
IF WE ARE NOT ABLE TO DEMONSTRATE THE EFFICACY OF OUR DRUG CANDIDATES IN OUR
CLINICAL TRIALS OR OUR CLINICAL TRIALS ARE DELAYED, WE MAY NOT BE ABLE TO OBTAIN
REGULATORY CLEARANCE TO MARKET OUR DRUGS.
Many of our research and development programs are at an early stage. Clinical
testing is a long, expensive and uncertain process. The FDA has not approved any
of our product candidates and we cannot assure you that our data collected from
our clinical trials will be sufficient to support approval by the FDA. We cannot
assure you that the clinical trials will be completed on schedule or that the
FDA will ultimately approve our product candidates for commercial sale.
Furthermore, even if initially positive preclinical studies or clinical trial
results are achieved, it is possible that we will obtain different results in
the later stages of drug development. Drugs in late stages of clinical
development may fail to show the desired safety and efficacy traits despite
having progressed through initial clinical testing. For example, positive
results in early Phase I or Phase II trials may not be repeated in larger Phase
II or Phase III trials. All of our potential drug candidates are prone to the
risks of failure inherent in drug development, including the possibility that
none of our drug candidates will or can:
- - be safe and effective;
- - otherwise meet applicable regulatory standards;
- - be manufactured or produced economically and on a large scale;
- - be sold without third parties challenging us and enforcing their patent or
other rights;
- - be successfully marketed, particularly if a third party introduces an
equivalent or superior product; or
- - be reimbursed by government or private payors.
The clinical trials of any of our drug candidates could be unsuccessful, which
would prevent us from commercializing the drug. Our failure to develop safe,
commercially viable drugs would substantially impair our ability to generate
revenues to sustain operations and materially harm our business and financial
condition.
IF L&I PARTNERS IS UNABLE TO COMMERCIALIZE OUR LEAD PRODUCT CANDIDATE,
CAMPATH(R), WE MAY NOT HAVE SUFFICIENT REVENUES TO CONTINUE OPERATIONS.
CAMPATH(R) is our lead product candidate. Our success will depend, to a great
degree, on the success of CAMPATH(R). In particular, L&I Partners must be able
to:
- - establish the safety and efficacy of CAMPATH(R) in humans;
- - obtain regulatory approvals for CAMPATH(R); and
- - achieve market acceptance of CAMPATH(R).
If L&I Partners fails to successfully obtain regulatory approval for and
commercialize CAMPATH(R), our business and financial condition will be
materially harmed.
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OUR DEPENDENCE ON COLLABORATIVE PARTNERS FOR DEVELOPMENT, MANUFACTURING AND
MARKETING MAY DELAY OR IMPAIR OUR ABILITY TO GENERATE SIGNIFICANT REVENUES OR
OTHERWISE ADVERSELY AFFECT OUR PROFITABILITY.
We rely on large pharmaceutical companies for development, manufacturing,
marketing and distribution of our drug products. Our reliance on pharmaceutical
companies and other collaborative partners poses the following risks:
- - our contracts with collaborative partners may expire or be terminated and we
may not be able to replace them;
- - a partner involved in the development of our products may not commit enough
capital or other resources to successfully develop our products;
- - the terms of our contracts with collaborative partners may not be favorable to
us in the future;
- - our partners may not pursue further development and commercialization of
compounds resulting from their collaboration with us;
- - a partner with marketing and distribution rights to one or more of our
products may not commit enough resources to the marketing and distribution of
our products;
- - disputes with our partners may arise, leading to delays in or termination of
the research, development or commercialization of product candidates or
resulting in significant litigation or arbitration;
- - contracts with our partners may fail to provide significant protection or may
fail to be enforced if one of these partners fails to perform; and
- - our collaborative partners could independently develop, or develop with third
parties, drugs which compete with our products.
There is a great deal of uncertainty regarding the success of our current and
future collaborative efforts. Failure of these efforts would materially harm our
business and financial condition.
THE SUCCESS OF CAMPATH(R) IS HIGHLY DEPENDENT ON COLLABORATIONS WITH LEUKOSITE
AND SCHERING AG.
LeukoSite. As part of our joint venture with LeukoSite for the development and
commercialization of CAMPATH(R), we share 50% of the development costs of
CAMPATH(R) with LeukoSite. If we fail for any reason to make a required capital
contribution to the joint venture, then LeukoSite may gain control of the
management of the joint venture and become entitled to a greater share of any
profits derived from product sales of CAMPATH(R). At the same time, if LeukoSite
fails for any reason to make a required capital contribution to the joint
venture, then we may be required to make additional capital contributions to the
joint venture to maintain the desired level of development activities by the
joint venture. It is possible that we may not have the resources to compensate
for any failure by LeukoSite to make any capital contributions in its stead and
the joint venture may not be able to continue operations with lesser funding. In
addition, the joint venture agreement with LeukoSite does not contain a
provision to resolve a deadlock between us and LeukoSite. As such, in the event
of such a deadlock, either we or LeukoSite could prevent the joint venture from
taking action or proceeding with business. This could result in failure to gain
approval for CAMPATH(R), which would materially harm our business and financial
condition.
Schering. We intend to rely on Schering for the sales, marketing and
distribution of CAMPATH(R). If Schering does not devote adequate resources to
the marketing of CAMPATH(R) or if disputes between L&I Partners and Schering
otherwise arise in connection with the commercialization of CAMPATH(R), our
business and financial condition would be materially harmed.
WE MAY BE UNABLE TO OBTAIN THE ADDITIONAL CAPITAL NEEDED TO OPERATE AND GROW OUR
BUSINESS, THEREBY REQUIRING US TO CURTAIL OR CEASE OPERATIONS.
We will require substantial funds in order to:
- - continue our research and development programs;
- - continue our clinical trials;
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- - manufacture and, where applicable, market our products; and
- - expand our CRO operations.
We believe that our existing resources will fund our activities as currently
planned for at least two years. We may use these existing resources before that
time, however, because of changes in our research and development and
commercialization plans or other factors affecting our operating expenses or
capital expenditures, including potential acquisitions of other businesses,
assets or technologies.
We cannot be sure that we will be able to obtain any future funds that we may
require, either in the public or private equity markets or otherwise on
acceptable terms, or at all. In addition, under the terms of our agreement with
IMPATH Inc. we are prohibited from incurring any debt without its consent.
If adequate funds are not available, we may have to delay, scale back or
eliminate one or more of our development programs, or obtain funds by entering
into more arrangements with collaborative partners or others that may require us
to relinquish rights to certain of our products or technologies that we would
not otherwise relinquish. These consequences, in turn, could materially harm our
business.
OUR LACK OF OPERATING EXPERIENCE MAY CAUSE US DIFFICULTY IN MANAGING OUR GROWTH.
We have no experience in selling pharmaceutical products and only limited
experience in negotiating, establishing and maintaining strategic relationships,
in manufacturing or procuring products in commercial quantities and conducting
other later-stage phases of the regulatory approval process. We have less than
three years experience operating our CRO business. Our ability to manage our
growth, if any, will require us to improve and expand our management and our
operational and financial systems and controls (particularly with respect to our
CRO business). If our management is unable to manage growth effectively, our
business and financial condition would be materially harmed. In addition, if
rapid growth occurs, it may strain our operational, managerial and financial
resources.
IF WE FAIL TO COMPLY WITH EXTENSIVE REGULATIONS ENFORCED BY DOMESTIC AND FOREIGN
REGULATORY AUTHORITIES, THE COMMERCIALIZATION OF CAMPATH(R) AND OUR OTHER
PRODUCTS WOULD BE PREVENTED OR DELAYED AND OUR ABILITY TO CONDUCT OUR CRO
BUSINESS COULD BE LIMITED.
Our products, including CAMPATH(R), are subject to extensive government
regulations related to development, clinical trials, manufacturing and
commercialization. The process of obtaining FDA and other regulatory approvals
is costly, time-consuming, uncertain and subject to unanticipated delays.
The FDA may refuse to approve an application if it believes that applicable
regulatory criteria are not satisfied. The FDA may also require additional
testing for safety and efficacy. Foreign regulatory authorities may also refuse
to grant any approval. Even after U.S. regulatory approval is obtained for
CAMPATH(R) or any of our other products, we will be subject to continual review.
Newly discovered or developed safety or efficacy data may result in revocation
of our marketing approval. Moreover, if and when such approval is obtained, the
marketing of CAMPATH(R) and any of our other product candidates will be subject
to extensive regulatory requirements administered by the FDA and other
regulatory bodies. Product manufacturing facilities are also subject to
continual review and periodic inspection and approval of manufacturing
modifications. Domestic manufacturing facilities are subject to biennial
inspections by the FDA and must comply with the FDA's current Good Manufacturing
Practices, or cGMP, and other regulations. In complying with these regulations,
manufacturers must spend funds, time and effort in the areas of production,
record keeping, personnel and quality control to ensure full technical
compliance. The FDA stringently applies regulatory standards for manufacturing.
Failure to comply with any of these post-approval requirements can result in,
among other things, warning letters, product seizures, recalls, fines,
injunctions, suspensions or revocations of marketing licenses, operating
restrictions and criminal prosecutions. Any such enforcement action could
materially harm our business. Unanticipated changes in existing regulatory
requirements or the adoption of new requirements could materially harm our
business and financial condition.
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The European Union, Japan and other countries also extensively regulate
pharmaceuticals, including biological drug products. No assurance can be given
that we will be able to obtain or maintain other countries' approvals for
CAMPATH(R) or any of our other products.
IF ANY OF OUR LICENSE AGREEMENTS FOR INTELLECTUAL PROPERTY UNDERLYING CAMPATH(R)
OR ANY OTHER PRODUCT IS TERMINATED, WE MAY LOSE OUR RIGHTS TO DEVELOP OR MARKET
THAT PRODUCT.
We have licensed intellectual property, including patents, patent applications
and know-how, from pharmaceutical companies, research institutions and others,
including the intellectual property underlying our most advanced product
candidates: CAMPATH(R), eflornithine and oxypurinol. Some of our product
development programs depend on our ability to maintain rights under these
licenses.
Each licensor has the power to terminate its agreement with us if we fail to
meet our obligations under that license. We may not be able to meet our
obligations under these license agreements.
If we default under any of these license agreements, we may lose our right to
market and sell any products based on the licensed technology. Losing our
marketing and sales rights would materially harm our business and financial
condition.
THERE ARE POTENTIAL LIMITATIONS ON THIRD-PARTY REIMBURSEMENT AND OTHER
PRICING-RELATED MATTERS THAT COULD REDUCE POTENTIAL SALES OF OUR PRODUCTS AND
MAY DELAY OR IMPAIR OUR ABILITY TO GENERATE SIGNIFICANT REVENUES.
The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of government and
third-party payors to reduce the cost of health care through various means. In
the U.S., there have been, and we expect that there will continue to be, a
number of federal and state proposals to implement government control regarding
pricing and profitability of prescription pharmaceuticals. An increasing
emphasis on managed care in the U.S. will also continue to exert downward
pressure on pharmaceutical pricing. In addition, sales of prescription
pharmaceuticals are dependent in part on the availability of reimbursement to
the consumer from third-party payors, such as government and private insurance
plans that often mandate rebates or predetermined discounts from list prices.
In certain foreign markets, pricing or profitability of prescription
pharmaceuticals is subject to government control. In particular, individual
pricing negotiations are often required in many countries of the European Union,
irrespective of separate government approval to market a drug.
If we succeed in bringing one or more products to the market, there can be no
assurance that these products will be considered cost effective or that
reimbursement to the consumer will be available or will be sufficient to allow
us to sell our products economically. The level of reimbursement available for
CAMPATH(R) will greatly impact the profitability of our joint venture with
LeukoSite and, in turn, ILEX. There can be no assurance that chemoprevention
drugs which we develop, if any, would be eligible for reimbursement.
FAILURE TO ATTRACT AND RETAIN KEY PERSONNEL AND CONSULTANTS COULD ADVERSELY
AFFECT OUR ABILITY TO OBTAIN FINANCING, CONDUCT PRECLINICAL STUDIES AND CLINICAL
TRIALS OR DEVELOP CAMPATH(R) AND OUR OTHER PRODUCT CANDIDATES.
Our success depends greatly on our ability to attract and retain qualified
scientific and technical personnel. Due to the technical expertise and knowledge
required in our identification and evaluation of potentially viable oncology
compounds or technology in-licensing or acquisition targets, we rely
particularly heavily upon Daniel Von Hoff, M.D., a founder of ILEX, member of
the Board of Directors and Co-Chairman of our Scientific Advisory Board. The
consulting agreement between us and Dr. Von Hoff does not obligate Dr. Von Hoff
to devote any specified level of time or resources to the development of
potential products for us. Dr. Von Hoff has other substantial professional time
commitments, including serving on the scientific advisory boards of other
companies, and it is possible that he will not provide us with any product
opportunities in the future.
We do not have an employment agreement with Mr. Richard Love, our president and
chief executive officer. Loss of the services of Dr. Von Hoff or Mr. Love would
be detrimental to:
- - our product development and manufacturing programs;
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- - our ability to identify and obtain rights to commercially viable oncology
compounds; and
- - our ability to raise additional funds should we need to do so.
We are also highly dependent on the other principal members of our scientific
and management staff, and the loss of the services of such personnel could
materially harm our business and financial condition.
To expand our research and development programs, pursue our product development
plans and expand our CRO business, we will be required to hire additional
qualified scientific and technical personnel, as well as personnel with
expertise in clinical testing and government regulation. There is intense
competition for qualified staff, and there can be no assurance that we will be
able to attract and retain the necessary qualified staff for the development of
our business. The failure to attract and retain key scientific and technical
personnel would materially harm our business and financial condition.
WE MAY NOT BE ABLE TO OBTAIN EFFECTIVE PATENTS TO PROTECT OUR TECHNOLOGIES FROM
USE BY OTHER COMPANIES WITH COMPETITIVE PRODUCTS, AND PATENTS OF OTHER COMPANIES
COULD PREVENT US FROM DEVELOPING OR MARKETING CAMPATH(R) OR OUR OTHER PRODUCT
CANDIDATES.
Our success will depend to a significant degree on our ability to:
- - obtain, maintain and enforce patents;
- - license rights to patents from third parties;
- - protect trade secrets; and
- - operate without infringing on the proprietary rights of others.
To date, we have no patents issued in our name. It is possible that we will not
develop technologies, drugs or processes that result in obtaining a patent. It
is also possible that our patent position will not provide sufficient protection
against competitors or that patents issued to or licensed by us will be
infringed or will be challenged, invalidated or circumvented. Competitors may
have filed patent applications, may have been issued patents or may obtain
additional patents and proprietary rights relating to technologies, drugs and
processes that compete with our technologies, drugs and processes. If we fail to
adequately protect our technologies, drugs and processes covered by issued
patents or to obtain patents, our business and financial condition could be
materially harmed.
We have not conducted in-depth validity and infringement studies on the patent
applications that we have in-licensed. These patents and patent applications
which we have in-licensed are subject to potential challenge and may not provide
protection for our compounds. Oxypurinol and aminopterin do not have patent
protection.
If we infringe on the intellectual property rights of others, there can be no
assurance that we would be able to obtain licenses to use the technology on
commercially reasonable terms, or at all.
A third party biotechnology company has offered to license certain technology to
L&I Partners which the biotechnology company has indicated relates to
CAMPATH(R). L&I Partners is in the process of evaluating the necessity of this
license. We are informed that significant questions have been raised concerning
the validity of the patents relating to the third party's technology. We have
not, however, conducted an independent analysis of this technology. There is no
assurance a license regarding this technology will be available to L&I Partners
in the future on acceptable terms, if at all. In the event L&I Partners does not
license this technology and the third party asserts that CAMPATH(R) or its
method of manufacture is an infringement of the third party's rights, the
ability of L&I Partners to commercialize CAMPATH(R) could be materially harmed.
We also rely on trade secret protection for our unpatented proprietary
technology. Trade secrets are difficult to protect. Other parties could
independently develop substantially equivalent proprietary information and
techniques or gain access to our trade secrets.
We have attempted to prevent the disclosure and use of our know-how and trade
secrets by entering into confidentiality agreements with our employees,
consultants and third parties. However, there are risks that:
- - these parties will not honor our confidentiality agreements;
- - others will independently develop equivalent or competing technology;
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- - disputes will arise concerning the ownership of intellectual property or the
applicability of confidentiality obligations; or
- - disclosure of our trade secrets will occur regardless of these contractual
protections.
We often work with consultants and research collaborators at universities and
other research organizations. If any of these consultants or research
collaborators use intellectual property owned by others as part of their work
with us, disputes may arise between us and these other parties as to which one
of us has the rights to intellectual property related to or resulting from the
work done.
Costly litigation might be necessary to protect our orphan drug designations or
patent position or to determine the scope and validity of third-party
proprietary rights, and it is possible that we will not have the required
resources to pursue such litigation or to protect our patent rights. An adverse
outcome in litigation with respect to the validity of any of our patents could
subject us to significant liabilities to third parties, require disputed rights
to be licensed from third parties or require us to cease using a product or
technology. Any of these results could materially harm our business and
financial condition.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE WHICH COULD RESULT IN
PRODUCTS SUPERIOR TO THOSE WE ARE DEVELOPING.
The technological areas in which we work evolve at a rapid pace. Our future
success depends upon our ability to compete in the research, development and
commercialization of products and technologies in oncology, our area of focus.
Many of our competitors have substantially greater research and development
capabilities and experience and greater manufacturing, marketing, financial and
managerial resources than do we. These competitors may develop products that are
superior to those we are developing and render our products or technologies
non-competitive or obsolete. In addition, we may not be able to keep pace with
technological change.
Products currently exist in the market that will compete directly with the
products that we are seeking to develop. Any product candidate that we develop
and for which we gain regulatory approval must then compete for market
acceptance and market share. Product competition is particularly intense in
markets that we may target with CAMPATH(R) in the future, including
non-Hodgkin's lymphoma and multiple sclerosis.
Significant competitive factors determining whether we will be able to compete
successfully include:
- - capabilities of our collaborators;
- - efficacy and safety of our products;
- - timing and scope of regulatory approval;
- - product availability;
- - marketing and sales capabilities;
- - reimbursement coverage from insurance companies and others;
- - degree of clinical benefits of our product candidates relative to their costs;
- - method of administering a product;
- - price; and
- - patent protection.
Competitive disadvantages in any of these factors could materially harm our
business and financial condition.
In addition, in our CRO business, we primarily compete against in-house
departments of pharmaceutical companies, other CROs and, to a lesser extent,
universities and teaching hospitals, many of which have substantially greater
capital, technical and other resources. We may not be able to compete
successfully in the CRO business in the future.
WE DEPEND ON A RELATIVELY LIMITED NUMBER OF CLIENTS AND INDUSTRIES FOR OUR CRO
REVENUES.
We have in the past derived, and in the future will derive, a significant
portion of our CRO revenue from a relatively limited number of major projects or
clients. For the year ended December 31, 1998, our top five CRO customers
accounted for 85% of our CRO revenue. Our top three clients represented 28%, 22%
and 20% of our 1998 CRO revenue. The loss of business from a significant client
could materially harm our business and financial condition.
Our revenues are highly dependent on research and development expenditures by
the pharmaceu-
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tical and biotechnology industries. Decreases in these expenditures, including
decreases resulting from an economic downturn in these industries or from
mergers or other consolidations, could have a material adverse effect on us.
Additionally, we have benefited from the trend in these industries to outsource
an increasing percentage of clinical trial projects. A reversal of this trend
could materially harm our business and financial condition.
IF WE ARE UNABLE TO MAINTAIN OUR RELATIONSHIPS WITH CTRC, US ONCOLOGY AND THEIR
RELATED ENTITIES, OUR ABILITY TO CONDUCT CLINICAL TRIALS AND OUR CRO BUSINESS
COULD BE MATERIALLY HARMED.
We have working relationships with CTRC and US Oncology, two of the most active
organizations conducting oncology clinical trials, to support our CRO business.
If we are unable to maintain these relationships, including the elements
providing us with access to patients of affiliated doctors, investigators and to
potential CRO clients, our business and financial condition could be materially
harmed.
THERE ARE RISKS ASSOCIATED WITH THE NATURE AND PRICING OF OUR CRO CONTRACTS.
Most of our CRO contracts can be terminated upon 60 to 90 days notice by our
customer. Customers terminate or delay service contracts for a variety of
reasons, including:
- - the failure of a compound being tested to satisfy safety requirements;
- - unexpected or undesired clinical results of the compound;
- - the customer's decision to forgo a particular study;
- - insufficient patient enrollment or investigator recruitment; or
- - production problems resulting in shortages of the compound.
The loss or delay of a large contract or the loss or delay of multiple contracts
could materially harm our business and financial condition.
All of our CRO contracts for the provision of services are fixed-price or
fee-for-service with a cap. Our CRO revenues are earned under contracts which
generally range in duration from a few months to two years. For the six-month
period ended June 30, 1999, fixed-price contracts accounted for 47% of our CRO
net revenues and fee-for-service accounted for 53% of our CRO net revenues. We
bear the risks of cost overruns in contracts structured as fixed-price contracts
or fee-for-service with a cap. Underpricing of contracts or significant cost
overruns could materially harm our business and financial condition.
Competition in the CRO industry has resulted in significant price and other
competition. Further increases in such competition, and the resultant price
pressure, could materially harm our business and financial condition.
MANY CRO CUSTOMERS AND POTENTIAL CUSTOMERS MAY PERCEIVE A CONFLICT OF INTEREST
BETWEEN THEIR BUSINESS AND ILEX PRODUCTS, INC. WHICH MAY DETER THEM FROM
CONTRACTING WITH US FOR CRO SERVICES.
Many potential customers of our CRO business are other drug development
companies which may be, or may perceive themselves to be, competitors of ILEX in
the context of our product development business. These drug development
companies may thus be deterred from contracting with us for CRO services and
thereby limit revenue growth potential for our CRO business.
IF WE BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS IN OUR CRO BUSINESS OR IN
CONNECTION WITH COMMERCIALIZATION OF OUR PRODUCTS, THEY MAY RESULT IN DAMAGES
EXCEEDING OUR INSURANCE LIMITATION OR REDUCE DEMAND FOR THE APPLICABLE PRODUCTS.
Clinical research involves the testing of new drugs on human volunteers, and
such testing involves a risk of liability for personal injury or death to
patients from possible unforeseen adverse side effects or improper
administration of the new drug. Many of these patients are already seriously ill
and at risk of further illness or death. Although we maintain our own product
liability and clinical trial insurance and generally obtain indemnification from
our clients, our business could be materially harmed if we were required to pay
damages or incur defense costs:
- - in connection with a claim outside the scope of indemnity or insurance
coverage;
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- - if the indemnity, although applicable, were not performed in accordance with
the terms of the relevant contract; or
- - if our liability exceeded the amount of applicable insurance coverage.
In addition, we cannot be sure such insurance will continue to be available on
terms acceptable to us, if at all, or that the insurance coverage, if obtained,
will be sufficient to cover any potential claims or liabilities. Similar risks
would exist for product liability upon the commercialization or marketing of any
products by us or our partners. In addition, regardless of merit or eventual
outcome, product liability claims may result in decreased demand for the
applicable product or our products in general and in injury to our general
reputation.
OUR LACK OF EXPERIENCE IN HANDLING HAZARDOUS MATERIALS AND IN OTHER
ENVIRONMENTAL MATTERS MAY CAUSE US TO INCUR SUBSTANTIAL COSTS.
We use hazardous materials, chemicals and various other toxic compounds in our
development and other programs. We are therefore subject to federal, state and
local laws and regulations governing the use, manufacture, storage, handling and
disposal of hazardous materials and certain waste products. We cannot eliminate
the risk of contamination or injury from these materials. In such event, we
could be held liable for any damages that result and any such liability could
exceed our resources. We may also incur substantial costs to comply with
environmental regulations if and when we develop commercial-scale manufacturing
capacity.
OUR ABILITY TO CONDUCT ANIMAL TESTING COULD BE LIMITED IN THE FUTURE.
Certain of our CRO business activities involve animal testing. Such activities
have been the subject of controversy and adverse publicity. Animal rights groups
and various other organizations and individuals have attempted to stop animal
testing activities by pressing for legislation and regulation in these areas. To
the extent the activities of these groups are successful, our business could be
materially harmed.
THERE ARE A SUBSTANTIAL NUMBER OF UNREGISTERED SHARES OF OUR COMMON STOCK WHICH,
WHEN AVAILABLE FOR SALE OR SOLD, COULD RESULT IN A DECREASE IN OUR STOCK PRICE
OR IMPAIR OUR ABILITY TO RAISE FUNDS IN FUTURE EQUITY OFFERINGS.
The sale, or availability for sale, of substantial amounts of our common stock
in the public market could materially decrease the market price of our common
stock and could impair our ability to raise additional capital.
At September 9, 1999, approximately 7,231,677 shares of common stock,
representing 41.9% of our common stock outstanding, were unregistered and
eligible for sale subject to compliance with Rule 144 of the Securities Act.
In addition, we have agreed to file, no later than 30 days after the
effectiveness of the registration statement regarding this offering, a separate
registration statement covering at least 2,389,201 shares of common stock.
Holders of an additional 8,473,266 shares will be entitled to "piggyback"
registration rights to include their shares in the separate registration
statement. While the holders of substantially all of the 10,862,467 shares
eligible to be included in the separate registration statement will be subject
to lock-up agreements with the underwriters in this offering, prohibiting
disposition of their shares for 90 days after this offering, sales of a
substantial number of shares of common stock could occur at any time thereafter.
This may have an adverse effect on the price of our common stock and may impair
our ability to raise capital in the future.
OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY, WHICH MAY MAKE IT DIFFICULT TO
RESELL YOUR SHARES WHEN YOU WANT TO AT PRICES YOU FIND ATTRACTIVE.
The market price of our common stock has been highly volatile. This volatility
may adversely affect the price of our common stock in the future. You may not be
able to resell your shares of common stock following periods of volatility
because of the market's adverse reaction to this volatility. We anticipate that
this volatility, which frequently affects the stock prices of biotechnology and
pharmaceutical companies, will continue. Factors that could cause such
volatility include:
- - our quarterly operating results;
- - deviations in our operating results from the estimates of securities analysts;
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- - FDA and/or international regulatory actions;
- - limited trading volumes;
- - general economic conditions or economic conditions specific to the
biotechnology and pharmaceutical industries; and
- - other developments affecting our competitors or us.
On occasion the equity markets, and in particular the markets for biotechnology
and pharmaceutical stocks, have experienced significant price and volume
fluctuations. These fluctuations have affected the market price for many
companies' securities even though the fluctuations are often unrelated to the
companies' operating performance.
WE HAVE BROAD DISCRETION AS TO USE OF THE NET PROCEEDS WE RECEIVE FROM THIS
OFFERING AND, IF WE DO NOT ALLOCATE THESE PROCEEDS WISELY, YOUR INVESTMENT COULD
SUFFER.
We expect to use the net proceeds we receive from this offering to expand our
clinical trials and preclinical research, with a particular focus on our
late-stage clinical product candidates and our angiogenesis inhibitors, for
potential acquisitions of complementary technologies, products or companies and
for general corporate purposes. We may change the allocation of these proceeds
in response to economic or industry developments or changes. Our Board of
Directors and management can determine to spend the proceeds from this offering
in ways with which the stockholders may not agree. We cannot be certain that the
proceeds will be invested to yield a favorable return.
WE ARE SUBJECT TO INFLUENCE FROM PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND
DIRECTORS; AND WE ARE SUBJECT TO VARIOUS PROVISIONS THAT COULD DISCOURAGE OR
PREVENT A CHANGE OF CONTROL OF THE COMPANY.
Our executive officers and directors (and their affiliates), in the aggregate,
will beneficially own or control approximately 33.7% of our outstanding common
stock after this offering and will therefore have the ability to exercise
substantial influence over the outcome of most stockholders' actions, including
the election of the members of the Board of Directors. This concentration of
ownership could have an adverse effect on the price of our common stock or have
the effect of delaying or preventing a change in control of the Company. In
addition, certain provisions of Delaware law and our Certificate of
Incorporation could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, control of ILEX. These
provisions could limit the price that certain investors might be willing to pay
in the future for shares of our common stock. These provisions of Delaware law
and our Certificate of Incorporation may also discourage or prevent certain
types of transactions involving an actual or threatened change in control of
ILEX (including unsolicited takeover attempts), even though such a transaction
may offer our stockholders the opportunity to sell their stock at a price above
the prevailing market price. Certain of these provisions allow us to issue
preferred stock without any vote or further action by the stockholders. These
provisions may make it more difficult for stockholders to take certain corporate
actions and could have the effect of delaying or preventing a change in control
of ILEX. In addition, certain of our corporate partners have the right to
terminate their respective agreements with us upon certain changes in control of
ILEX, which may discourage acquisitions or other changes in control (including
those in which our stockholders might otherwise receive a premium for their
shares over then-current market prices).
WE FACE RISKS RELATING TO THE YEAR 2000.
We recognize that the arrival of the year 2000 poses a challenge to the ability
of computer systems to recognize the date change from 1999 to the year 2000 and
beyond. It is possible that non-compliant third-party computers may not
interface properly with our system. This could result in disruptions of our
business through delays in processing customer invoices and orders and in
compiling administrative and financial reporting information. This could
materially harm our business and financial condition.
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FORWARD-LOOKING STATEMENTS
This prospectus and the documents we have filed with the Securities and Exchange
Commission which we have referenced under "Where You Can Find More Information"
on page 59 contain forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements represent our management's judgment regarding future
events. 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. All forward-looking statements other than statements of historical
fact included in this prospectus regarding our financial position, business
strategy and plans or objectives for future operations are forward-looking
statements. We cannot guarantee the accuracy of the forward-looking statements,
and you should be aware that our actual results could differ materially from
those contained in the forward-looking statements due to a number of factors,
including:
- - competitive factors;
- - general economic conditions;
- - relationships with pharmaceutical and biotechnology companies;
- - the ability to develop safe and efficacious drugs;
- - variability of royalty, license and other revenue;
- - failure to satisfy performance obligations;
- - ability to enter into future collaborative agreements;
- - failure to achieve positive results in clinical trials;
- - failure to complete current or secure new contracts with CRO customers;
- - uncertainty regarding our patents and patent rights (including the risk that
we may be forced to engage in costly litigation to protect such patent rights
and the material harm to us if there were an unfavorable outcome of any such
litigation);
- - governmental regulation and suspension;
- - technological change;
- - changes in industry practices; and
- - one-time events.
You should also consider carefully the statements under "Risk Factors" and other
sections of this prospectus and in the other documents filed with the SEC, which
address additional factors that could cause our results to differ from those set
forth in the forward-looking statements. All subsequent written and oral
forward-looking statements attributable to ILEX or persons acting on our behalf
are expressly qualified in their entirety by the applicable cautionary
statements. We have no plans to update these forward-looking statements.
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COMMON STOCK MARKET PRICE DATA
Since February 21, 1997, our common stock has been traded on The Nasdaq National
Market under the symbol "ILXO." The following table sets forth, for the periods
indicated, the high and low closing sales prices for our common stock, as
reported on The Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997
First Quarter (beginning February 21, 1997)............... $13 1/8 $12
Second Quarter............................................ 23 3/8 12
Third Quarter............................................. 20 1/4 12
Fourth Quarter............................................ 12 6 1/2
1998
First Quarter............................................. $10 1/8 $ 7 5/8
Second Quarter............................................ 17 9 1/2
Third Quarter............................................. 10 6
Fourth Quarter............................................ 14 1/8 7
1999
First Quarter............................................. $12 7/8 $ 9 1/2
Second Quarter............................................ 11 3/8 8 1/4
Third Quarter (through September 23, 1999)................ 19 3/4 9 5/16
</TABLE>
On September 22, 1999, the last reported sale price of our common stock on The
Nasdaq National Market was $15.875 per share. As of September 9, 1999, there
were approximately 130 holders of record of our common stock.
19
<PAGE> 21
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of common stock we
are offering will be approximately $47.3 million. If the underwriters fully
exercise the over-allotment option, the net proceeds from the shares of common
stock we are offering will be $55.1 million. "Net proceeds" is what we expect to
receive after we pay the underwriting discount and other expenses for this
offering. For the purpose of estimating net proceeds, we are assuming that the
public offering price will be $15.875 per share. We will not receive any
proceeds from the sale of shares by the selling stockholder.
We intend to use the net proceeds of this offering primarily for the following
purposes:
- - to expand our clinical trials and preclinical research, with a particular
focus on our late-stage clinical product candidates and our angiogenesis
inhibitors;
- - for potential acquisitions of complementary technologies, products or
companies; and
- - for general corporate purposes.
The timing and amount of our actual expenditures is subject to change and will
be based on many factors, including:
- - competitive, technological, market and other developments;
- - the rate of progress of our research and development programs;
- - patient recruitment;
- - the results of our clinical trials;
- - the time and costs of obtaining regulatory approvals;
- - cash flow from our CRO business and other operations;
- - our ability to establish and maintain collaborative relationships; and
- - costs incurred in obtaining and enforcing patent and other proprietary rights.
We have discussions on an ongoing basis regarding potential acquisitions and
in-licensing opportunities that are complementary to our business. Although we
may use a portion of the net proceeds for this purpose, we currently have no
agreements or commitments in this regard. We reserve the right, at the sole
discretion of our Board of Directors, to reallocate our use of proceeds in
response to these and other factors. Until we use the net proceeds of this
offering, we intend to invest the funds in short-term, investment-grade,
interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid dividends on our common stock. We anticipate that
we will retain all earnings, if any, to support operations and to finance the
growth and development of our business. Therefore, we do not expect to pay cash
dividends in the foreseeable future. Any future determination as to the payment
of dividends will be at the sole discretion of our Board of Directors and will
depend on our financial condition, results of operations, capital requirements
and other factors our Board of Directors deems relevant.
20
<PAGE> 22
CAPITALIZATION
The following table sets forth:
- - our actual capitalization at June 30, 1999;
- - our pro forma capitalization at June 30, 1999 adjusted to give effect to the
July 1999 private placement of 2,389,201 shares of common stock for $20.0
million less costs associated therewith, the September 1999 $5.0 million sale
of ILEX Services preferred stock (shown as a minority interest) less costs
associated therewith, and 247,526 shares of common stock issued between June
30 and September 9, 1999 upon exercise of warrants and options; and
- - our pro forma as adjusted capitalization at June 30, 1999 assuming our sale in
this offering of 3,200,000 shares of common stock at an assumed public
offering price of $15.875 per share less our costs associated with the
offering.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999(1)
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations....................................... $ 491 $ 491 $ 491
-------- -------- --------
Minority interest........................................... -- 4,975 4,975
Stockholders' equity:
Common stock, $.01 par value; 40,000,000 shares
authorized; 12,979,678 shares issued and outstanding,
and 629,200 shares to be issued at June 30, 1999,
actual; 16,245,605 shares issued and outstanding, pro
forma; and 19,445,605 shares issued and outstanding,
pro forma as adjusted.................................. 136 162 194
Preferred stock, $.01 par value; 20,000,000 shares
authorized; no shares issued and outstanding........... -- -- --
Additional paid-in capital................................ 76,598 96,724 143,944
Accumulated deficit....................................... (58,372) (58,372) (58,372)
Treasury stock............................................ (517) (517) (517)
-------- -------- --------
Total stockholders' equity............................. 17,845 37,997 85,249
-------- -------- --------
Total capitalization.............................. $ 18,336 $ 43,463 $ 90,715
======== ======== ========
</TABLE>
- ---------------------------
(1) Excludes, as of June 30, 1999: (i) 1,191,725 shares of common stock issuable
upon exercise of outstanding options at a weighted average exercise price
per share of $9.41, (ii) 1,041,668 shares of common stock issuable upon
exercise of outstanding warrants at a weighted average exercise price per
share of $9.05, (iii) 829,546 additional shares reserved for issuance
pursuant to the Company's 1995 Stock Option Plan and 1996 Non-Employee
Director Plan and (iv) 290,867 shares of common stock issuable upon
conversion of preferred stock of ILEX Oncology Services, Inc. which is
convertible beginning in September 2000, or earlier upon the occurrence of
certain events.
21
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
This section presents selected historical data. You should read carefully the
financial statements included in the reports incorporated by reference in this
prospectus, including the notes to the financial statements included in those
reports. The selected data in this section is not intended to replace the
financial statements.
We derived the statement of operations data for the years ended December 31,
1994, 1995, 1996, 1997 and 1998 and the balance sheet data as of December 31,
1994, 1995, 1996, 1997 and 1998 from our audited financial statements included
in the reports incorporated by reference in this prospectus. We derived the
statement of operations data for the six months ended June 30, 1998 and 1999 and
the balance sheet data as of June 30, 1998 and 1999 from our unaudited financial
statements included in the reports incorporated by reference in this prospectus.
We believe that the unaudited historical financial statements contain all
adjustments needed to present fairly the information included in those financial
statements and that the adjustments made consist only of normal recurring
adjustments. Historical results are not necessarily indicative of results that
may be expected in the future.
<TABLE>
<CAPTION>
INCEPTION SIX MONTHS ENDED
(OCT. 1, 1994) YEARS ENDED DECEMBER 31, JUNE 30,
THROUGH ------------------------------------- -------------------
DEC. 31, 1994 1995 1996 1997 1998 1998 1999
-------------- ------ ------ -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue:
Product development.................... $1,065 $3,551 $3,831 $5,027 $4,622 $2,090 $2,069
CRO.................................... 188 658 1,537 5,903 9,650 4,923 5,567
Licensing fees......................... -- -- 2,775 300 -- -- --
------ ------ ------ -------- -------- -------- --------
Total revenue............................ 1,253 4,209 8,143 11,230 14,272 7,013 7,636
Operating expenses:
Research and development............... 945 3,213 3,637 6,740 15,509 9,302 7,496
General and administrative............. 156 1,312 2,886 6,691 6,534 2,244 2,514
CRO.................................... 197 529 2,169 4,587 9,313 5,607 6,175
Special charges(1)..................... -- -- -- -- -- -- 13,882
------ ------ ------ -------- -------- -------- --------
Total operating expenses................. 1,298 5,054 8,692 18,018 31,356 17,153 30,067
Operating loss........................... (45) (845) (549) (6,788) (17,084) (10,140) (22,431)
Equity in income (losses) of:
Research and development
partnerships......................... -- -- (750) (4,295) (4,453) (2,359) (1,889)
Contract research affiliate............ -- -- -- (182) (1,541) 79 (3,310)
Interest income (expense), net........... (1) 133 684 2,583 1,850 1,016 541
------ ------ ------ -------- -------- -------- --------
Net loss................................. $ (46) $ (712) $ (615) $ (8,682) $(21,228) $(11,404) $(27,089)
====== ====== ====== ======== ======== ======== ========
Net loss per share....................... $(0.01) $(0.09) $(0.07) $ (0.72) $ (1.71) $ (0.93) $ (2.11)
====== ====== ====== ======== ======== ======== ========
Weighted average number of shares of
common stock outstanding............... 7,555 7,747 8,744 12,118 12,450 12,293 12,829
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
------------------------------------------------ -------------------
1994 1995 1996 1997 1998 1998 1999
------ ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments in
marketable securities....................... $ 79 $ 9,636 $22,984 $ 42,646 $ 26,025 $ 32,029 $ 15,220
Working capital............................... (122) 9,004 11,682 33,089 23,942 28,771 12,734
Total assets.................................. 1,166 11,257 27,374 55,311 42,340 47,601 27,011
Total stockholders' equity.................... (57) 9,511 24,826 51,076 35,904 42,963 17,845
</TABLE>
- ---------------------------
(1) We incurred special charges of $13.9 million in the first half of 1999.
These charges included $12.3 million in one-time costs associated with the
termination of our agreement with PRN Research, Inc. and $1.6 million of
charges related to other items. You should refer to Management's Discussion
and Analysis of Financial Condition and Results of Operations for details of
the special charges.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read this discussion together with the financial statements and other
financial information included in this prospectus and in the reports
incorporated by reference in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those indicated in these forward-looking
statements.
OVERVIEW
We develop pharmaceuticals for treating and preventing cancer and provide
contract research services to other companies developing anticancer drugs. We
have a portfolio of seven anticancer products in clinical development and
several preclinical stage products. We built this portfolio by in-licensing and
acquiring product candidates developed by others and do not conduct early-stage
drug discovery research ourselves. We recently completed a pivotal clinical
trial in CLL for our most advanced product candidate, CAMPATH(R). We are
developing CAMPATH(R) in partnership with LeukoSite. The results of this trial
should enable the partnership to complete by the end of 1999 the filing with the
FDA for marketing approval. The FDA has granted CAMPATH(R) fast-track status,
requiring agency review to be completed within six months from acceptance of the
filing. In August 1999, the partnership licensed worldwide marketing rights
(except for Japan and East Asia) for CAMPATH(R) to Schering. In the future we
plan to market or co-market our own products and become an oncology-focused
specialty pharmaceutical company.
We operate through two reportable segments: ILEX Products, through which we
develop our own portfolio of anticancer compounds, and ILEX Services, which is
our full service CRO. ILEX Services manages the preclinical research and
clinical trials for our own product candidates as well as oncology products
being developed by other companies. In addition to building our expertise in
cancer drug development, our CRO business generates revenue, reduces our cost to
perform our own research and development, and gives us access to product
in-licensing opportunities.
We currently have no products available for sale. We have incurred losses since
inception and had an accumulated deficit through June 30, 1999 of $58.4 million.
Our losses have resulted primarily from product development activities,
including in-licensing of products for which we pay fees, and related
administrative expenses. We expect to continue to incur operating losses for the
next several years. To date we have not generated any revenue from the sale of
our drug candidates.
Our revenue for the foreseeable future will be limited to product development
funding under our collaborative relationships, our CRO revenue, interest income,
and other miscellaneous income. In addition, if marketing approval is received
from the FDA with respect to our lead product candidate, CAMPATH(R), and
CAMPATH(R) is successfully commercialized, we will receive a portion of the
profits generated by its sale. The partnership may not obtain marketing approval
of CAMPATH(R), successfully commercialize it or ever generate profits from its
sale.
Most of the development of CAMPATH(R) has been conducted by us on behalf of L&I
Partners. L&I Partners pays us for these services. We have historically
accounted for these CAMPATH(R) development activities as follows:
- - our operating revenue includes product development revenue we receive from L&I
Partners;
- - our research and development expenses include all of the development costs for
CAMPATH(R), which are largely offset by L&I Partners' revenue we receive; and
- - our actual share of CAMPATH(R) development costs is reported as equity in
losses of research and development partnerships.
Our CRO business generates revenue by performing services for companies within
the pharmaceutical and biotechnology industries. The terms of our contracts
vary, ranging from several months to two years, and
23
<PAGE> 25
generally may be terminated upon notice of 60 to 90 days by our customers. We
recognize revenue with respect to our services either on a
percentage-of-completion or fee-for-service basis as work is performed. The CRO
business performs all of the development services for ILEX Products; however,
our consolidated CRO revenue does not include any amounts related to the
services provided to ILEX Products.
In June 1999 ILEX Services acquired certain assets and liabilities of PFK, our
European contract research affiliate. The acquisition provides us with two
locations from which European clinical trials will be managed and supported:
Edinburgh, Scotland and Guildford, England.
In July 1999 we acquired Convergence and its portfolio of angiogenesis
inhibitors in exchange for 1,000,000 shares of our common stock, and an
additional earn-out of up to 1,000,000 shares of our common stock which will be
issued to Convergence's founders if certain development milestones are met. As
part of the earn-out, we may issue 500,000 shares by the end of 2000. We
anticipate expensing approximately $11.0 million in the third quarter of 1999 as
a non-cash in-process research and development cost for this acquisition.
In July 1999 we completed a $20.0 million private placement of our common stock.
In September 1999 ILEX Services completed a $5.0 million sale of its preferred
stock, which is convertible, subject to certain conditions, into 290,867 shares
of our common stock.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Operating Revenue. Total revenue increased 9% from $7.0 million in the first
half of 1998 to $7.6 million in the first half of 1999. Product development and
licensing revenue remained unchanged at $2.1 million. CRO revenue increased 13%
from $4.9 million to $5.6 million. The $0.6 million increase in CRO revenue
reflected an increase in the number of our customers and an increase in the
number, size and duration of our projects. We believe that this 13% rate of
increase in CRO revenue over the corresponding six month period in 1998 may be
more indicative of future rates than the substantially higher rates of growth in
earlier periods. This is due to a higher revenue base that has been reached and
is more in line with current industry growth averages.
Research and Development. Product development costs decreased 19% from $9.3
million in the first half of 1998 to $7.5 million in the first half of 1999.
This decrease of $1.8 million reflected a one-time cost of $3.3 million incurred
in March 1998 for the in-licensing of THP-Dox, offset primarily by increased
costs in 1999 associated with the development of eflornithine.
General and Administrative. General and administrative costs increased 14% from
$2.2 million in the first half of 1998 to $2.5 million in the first half of
1999. This increase of $0.3 million was primarily attributable to costs
associated with the increased number of our accounting and information
technology employees.
CRO. CRO costs increased 11% from $5.6 million in the first half of 1998 to $6.2
million in the first half of 1999. This increase of $0.6 million was primarily
attributable to increased staffing expenses and facility and equipment
expansion.
Special Charges. We incurred special charges of $13.9 million in the first half
of 1999. These charges include $12.3 million in costs associated with the
termination of our agreement with PRN Research, Inc., or PRN. In July 1997, we
entered into a service agreement with PRN to jointly market our ability to
conduct clinical trials. As part of our arrangement, we issued to PRN 626,788
shares of our common stock in 1997 and 1998. The value of these shares was
recorded as an intangible asset to be amortized over the term of the relevant
agreement. Effective June 30, 1999, ILEX and PRN terminated the agreement and we
issued to PRN the remaining 629,200 shares of our common stock issuable under
this agreement. We recorded a $12.3 million special charge associated with the
value of such common stock and the write-off, in accordance with Financial
Accounting Standard 121, of the net intangible asset associated with our
arrangement with PRN. We have no further obligation to PRN with respect to this
arrangement.
24
<PAGE> 26
The remaining $1.6 million in special charges consists of:
- - a $0.8 million accrual for a debt guarantee of an unaffiliated site management
organization which we believe is uncollectible;
- - a $0.4 million write-down of computer equipment; and
- - a $0.4 million write-off of an operating lease commitment for manufacturing
equipment which we have determined will no longer be utilized.
Equity in Income (Losses) of Research and Development Partnerships and Contract
Research Affiliate. Equity in losses of research and development partnerships
decreased 21% from $2.4 million in the first half of 1998 to $1.9 million in the
first half of 1999. This decrease of $0.5 million was due to the reduction in
manufacturing costs for CAMPATH(R). During the first half of 1998, L&I Partners
incurred substantial expense related to the manufacturing of CAMPATH(R) for use
in clinical trials; this expense did not recur in 1999.
Equity in income (losses) of contract research affiliate decreased from $79,000
in income during the first half of 1998 to $3.3 million in losses during the
first half of 1999. These losses resulted from our obligation under our debt
guarantee to PFK (our European contract research affiliate), a write-off of our
remaining investment in PFK, and our share of its operating losses.
Net Interest Income. Net interest income decreased 50% from $1.0 million in the
first half of 1998 to $0.5 million in the first half of 1999. This decrease of
$0.5 million was attributable to lower aggregate average balances of cash, cash
equivalents and investments in marketable securities during the first half of
1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Operating Revenue. Total revenue increased 28% from $11.2 million in 1997 to
$14.3 million in 1998. Product development revenue and licensing revenue
decreased 13% from $5.3 million in 1997 to $4.6 million in 1998. The reduction
in product development and licensing revenue reflected the termination of our
development of certain compounds and was partially offset by increased
development revenue from CAMPATH(R). CRO revenue increased 64% from $5.9 million
to $9.7 million. The $3.8 million increase in CRO revenue reflected an increase
in the number of our CRO customers and an increase in the number, size and
duration of our CRO projects. We established marketing and business development
programs for our CRO business in 1998, which led to our increased CRO revenue.
Research and Development. Product development costs increased 131% from $6.7
million in 1997 to $15.5 million in 1998. This increase of $8.8 million included
a $3.3 million expense related to the acquisition of THP-Dox in 1998 and an
increase in spending for the development of CAMPATH(R) and our other product
candidates.
General and Administrative. General and administrative costs decreased 3% from
$6.7 million in 1997 to $6.5 million in 1998.
CRO. CRO costs increased 102% from $4.6 million in 1997 to $9.3 million in 1998.
This increase of $4.7 million was attributable to the increased amortization of
the service agreement with PRN, additional CRO marketing and business
development costs and operating expenses required to support growth in the
number and size of CRO projects being conducted.
Equity in Losses of Research and Development Partnerships and Contract Research
Affiliate. Equity in losses in research and development partnerships and
contract research affiliate increased 33% from $4.5 million in 1997 to $6.0
million in 1998. This increase of $1.5 million was primarily attributable to
increased losses of the contract research affiliate.
25
<PAGE> 27
Net Interest Income. Net interest income decreased 27% from $2.6 million in 1997
to $1.9 million in 1998. This decrease of $0.7 million was attributable to lower
average balances of cash, cash equivalents and investments in marketable
securities during 1998.
Years Ended December 31, 1997 Compared to December 31, 1996
Operating Revenue. Total revenue increased 38% from $8.1 million in 1996 to
$11.2 million in 1997. Product development revenue increased 32% from $3.8
million in 1996 to $5.0 million in 1997. The increase of $1.2 million in product
development revenue was primarily from new development agreements, including the
CAMPATH(R) agreement, which was entered into in May 1997. Licensing fees
decreased $2.5 million in 1997 due to a one-time licensing fee received in 1996.
CRO revenue increased 293% from $1.5 million to $5.9 million. The increase of
$4.4 million in CRO revenues reflected an increase in the number of our CRO
customers and an increase in the number, size and duration of our CRO projects.
Research and Development. Product development costs increased 86% from $3.6
million in 1996 to $6.7 million in 1997. This increase of $3.1 million was
attributable to spending on development of CAMPATH(R), eflornithine and other
product candidates.
General and Administrative. General and administrative costs increased 131% from
$2.9 million in 1996 to $6.7 million in 1997. This increase of $3.8 million was
attributable in part to increases in rental expense, business development
activities and compensation related to additional administrative staff. We also
incurred increased legal and accounting fees upon becoming a publicly traded
company in February 1997.
CRO. CRO costs increased 109% from $2.2 million in 1996 to $4.6 million in 1997.
This increase of $2.4 million was attributable to the amortization of the
service agreement with PRN and additional CRO operating expenses required to
support growth in the number and size of CRO projects being conducted.
Equity in Losses of Research and Development Partnerships and Contract Research
Affiliate. Equity in losses of research and development partnerships and
contract research affiliate increased 463% from $0.8 million in 1996 to $4.5
million in 1997, an increase of $3.7 million. Our joint ventures were not formed
until December 1996 and May 1997, respectively, and the agreement with our
contract research affiliate was not entered into until August 1997.
Net Interest Income. Net interest income increased 271% from $0.7 million in
1996 to $2.6 million in 1997. This increase of $1.9 million was attributable to
higher average balances of cash, cash equivalents and investments in marketable
securities. We completed private placements of our securities in the last half
of 1996 and our initial public offering of common stock in February 1997.
LIQUIDITY AND CAPITAL RESOURCES
We historically have financed our operations primarily from the sale of our
capital stock and receipt of product development and licensing fee revenue and
CRO revenue. The majority of our expenditures have been for product development
activities, including associated general and administrative expenses and losses
incurred by our research and development partnerships and our contract research
affiliate. We expect product development expenses to increase for the next
several years as our development programs progress. In addition, general and
administrative expenses necessary to support these expanded programs are also
expected to increase over the next several years.
At June 30, 1999, we had cash, cash equivalents and investments in marketable
securities of $15.2 million and working capital of $12.7 million. Cash, cash
equivalents and investments in marketable securities increased to $33.6 million
on July 31, 1999 as a result of a $20.0 million private placement of our common
stock. Also in July 1999 we repaid debt of $1.0 million in connection with our
acquisition of Convergence. In addition, in September 1999 we received $5.0
million from the sale of preferred stock of our subsidiary, ILEX Services, to
IMPATH Inc.
Our cash requirements are expected to continue to increase each year as we
expand our activities and operations. It is possible we will never be able to
generate significant product revenue or achieve or sustain
26
<PAGE> 28
profitability. We expect our current funds, including the proceeds from this
offering, will be adequate to cover all of our obligations for at least two
years following this offering.
Until our business can generate sufficient levels of cash from product sales, we
expect to continue to finance our operations through:
- - existing cash;
- - revenue from collaborative relationships;
- - CRO revenue; and
- - proceeds from the sale of equity securities.
We plan to continue our policy of investing available funds in government
securities and investment-grade, interest-bearing securities, primarily with
maturities of one year or less. We do not invest in derivative financial
instruments, as defined by Statement of Financial Accounting Standards No. 119.
At December 31, 1998, we had federal income tax net operating loss (NOL) and
research credit carryforwards of $27.9 million and $0.7 million, respectively,
which expire at various times during the period from 2010 through 2018. When an
ownership change (as defined under the Internal Revenue Code) occurs, the tax
law places an annual limitation on the subsequent carryforwards. We believe that
common stock issued in July 1999 caused an ownership change. Accordingly, only
$6.4 million of our carryforwards are available in any single year during the
carryforward period from 2000 through 2018.
YEAR 2000 READINESS
The "Year 2000" issue concerns the potential exposures related to the automated
generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the application year of business transactions. We
have assessed our computer systems to identify the systems that could be
affected by the Year 2000, and we have determined that no material changes are
required for our computer systems to be Year 2000 compliant. Accordingly, we
believe that, based upon currently available information, we will not incur any
material costs associated with becoming Year 2000 compliant. We are in the
process of confirming the Year 2000 readiness of our material customers, service
providers, key licensees and material vendors. Failure by us, our software
providers, material customers, service providers, key licensees or material
vendors to adequately address the Year 2000 issue could result in misstatement
of reported financial information or scientific data or otherwise materially
harm our business and financial condition.
The above Year 2000 disclosure constitutes a "Year 2000 Readiness Disclosure" as
defined in the "Year 2000 Information and Readiness Disclosure Act" which was
signed into law on October 19, 1998. Such act provides added protection from
liability for certain public and private statements concerning a company's Year
2000 readiness.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to some market risk through interest rates related to our
investment of our current cash, cash equivalents and marketable securities.
These funds are generally invested in highly liquid treasury bills and money
market accounts with short-term maturities. As these instruments mature and the
funds are reinvested, we are exposed to changes in market interest rates. We do
not consider this risk to be material. We manage this risk by continuing to
evaluate the best investment rates available for short-term investment-grade
securities. We have not used derivative financial instruments in our investment
portfolio.
Our European operations are denominated in local currency, and we have unhedged
transaction exposures in these currencies. We have not entered into any forward
foreign exchange contracts for speculative, trading or other purposes.
27
<PAGE> 29
BUSINESS
OVERVIEW
We develop pharmaceuticals for treating and preventing cancer and provide
contract research services to other companies developing anticancer drugs. We
have a portfolio of seven anticancer products in clinical development and
several preclinical stage products. We built this portfolio by in-licensing and
acquiring product candidates developed by others and do not conduct early-stage
drug discovery research ourselves. We recently completed a pivotal clinical
trial in chronic lymphocytic leukemia, or CLL, for our most advanced product
candidate, CAMPATH(R). A pivotal clinical trial produces data from human
patients to enable the FDA to determine whether to approve a product for sale.
We are developing CAMPATH(R) in partnership with LeukoSite. The results of this
trial should enable the partnership to complete by the end of 1999 the filing
with the FDA for marketing approval. The FDA has granted CAMPATH(R) fast-track
status, requiring agency review to be completed within six months from
acceptance of the filing. In August 1999 the partnership licensed worldwide
marketing rights (except for Japan and East Asia) for CAMPATH(R) to Schering.
We operate through two subsidiaries: ILEX Products, through which we develop our
own portfolio of anticancer compounds, and ILEX Services, which is our full
service CRO. ILEX Services manages the preclinical research and clinical trials
for our own product candidates as well as oncology products being developed by
other companies. In addition to building our expertise in cancer drug
development, our CRO business generates revenue, reduces our cost to perform our
own research and development, and gives us access to product in-licensing
opportunities.
OUR MARKET
Cancer encompasses a large number of discrete diseases that afflict many
different parts of the human body. The diversity of cancer diseases and their
overall prevalence create a large need for new and improved treatments. Cancer
is the second leading cause of death in the U.S. It is estimated that one in
three Americans will be diagnosed with cancer at some point in their lives. The
worldwide oncology drug market was estimated at $16 billion in 1998,
representing 15% growth from 1997. This market is not saturated, with novel
treatments often enjoying premium pricing and rapid market acceptance.
Cancer is characterized by uncontrolled cell division resulting in the growth of
a mass of cells commonly known as a tumor. Cancer cells, if not eradicated, can
spread, or metastasize, throughout the body. Cancerous tumors can arise in
almost any tissue or organ. Cancer is believed to occur as a result of a number
of factors, including genetic predisposition, environmental agents and
irradiation. These factors may adversely affect the ability of cells to regulate
normally their own growth and division.
There are approximately 475 investigational agents currently in clinical
development for treating patients with cancer. This number is higher than at any
time in history. Many of these agents are being developed for treatment of
advanced disease. Due to the life-threatening nature of cancer, the FDA has
adopted fast-track procedures for accelerating the approval of oncology agents,
thereby reducing the amount of time required to bring such agents to market.
Under these procedures, an oncology drug can be approved for marketing prior to
Phase III if it is shown to shrink tumors in Phase II studies and if the
developing company commits to performing and completing Phase III trials after
the approval.
Other fundamentals of the oncology market that are particularly advantageous for
us include:
- - in-licensing opportunities created by a trend among large pharmaceutical
companies to concentrate commercialization efforts on products with larger
market potential than most disease-specific anticancer drugs;
- - favorable pricing and reimbursement for oncology drugs, with some novel agents
commanding $6,000 to $15,000 per course of therapy; and
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- - a highly concentrated population of oncologists and hematologists which allows
a small sales force to be effective.
Treatment of Cancer. The three most prevalent methods of treating patients with
cancer are surgery, radiation therapy and chemotherapy. A cancer patient often
receives a combination of two or all three of these treatment methods. Surgery
and radiation therapy are generally effective in patients in which the disease
has not yet spread (metastasized) to other tissues or organs. Chemotherapy is
the principal treatment for tumors that have metastasized. The purpose of
chemotherapy is to interfere with the molecular and cellular processes that
control the development, growth and survival of malignant tumor cells.
Chemotherapy involves the administration of cytotoxic drugs, which are designed
to kill cancer cells, or the administration of hormone analogs to either reduce
the production of, or block the action of, certain hormones (such as estrogens
and androgens) which affect the growth of tumors. In many cases, chemotherapy
involves the administration of several different drugs in combination. Because
chemotherapeutic agents generally attack rapidly dividing cells
indiscriminately, damaging normal as well as cancerous cells, use of such agents
often has adverse effects.
Prevention of Cancer. There are a number of conditions which can currently be
diagnosed and which predispose an individual to developing cancer. For example:
- - actinic keratosis, a type of sun-induced skin lesion, often progresses to skin
cancers;
- - recurrent colon polyps can lead to colon cancer;
- - Barrett's esophagus is regarded as a precursor to esophageal cancer; and
- - individuals who have had a local tumor removed are at high risk for having a
second tumor.
We are developing a number of chemoprevention agents, which are intended to be
well-tolerated oral therapies aimed at preventing the occurrence, progression or
recurrence of cancer. As long term therapies, these chemoprevention agents
address new markets that could be substantially larger than most acute care
cancer products. The market potential for chemoprevention agents is increasing
as more genetic and other diagnostic tests become available to identify people
at risk of developing cancer. Although long term studies are usually needed to
prove that a drug can prevent cancer, our strategy is to seek marketing approval
based upon effectively treating a precancerous condition or preventing the
recurrence of cancer, thereby shortening the approval process.
STRATEGY
Our objective is to be a leading oncology drug company. We plan to market or
co-market our own products in the future and become an oncology-focused
specialty pharmaceutical company. Our strategy consists of the following
elements:
Focus on the Expanding Cancer Market
The worldwide oncology drug market was estimated at $16 billion in 1998,
representing 15% growth from 1997. Despite the enormous effort undertaken by the
pharmaceutical industry to develop oncology products, cancer remains the second
leading cause of death in the U.S. and remains a largely unmet medical need. In
the U.S., over 1.2 million new cancer cases are diagnosed each year and 565,000
patients die each year of cancer. Given the life-threatening nature of cancer,
the FDA has adopted fast-track procedures, requiring agency review to be
completed within six months, to accelerate approval of oncology agents. These
factors combine to create a major opportunity for cancer drug development and
for providing oncology CRO services.
Use Our Expertise to Identify and In-License Compounds
We use the expertise of our management and scientific team and Scientific
Advisory Board, along with the relationships we have developed through our CRO
business, to identify and in-license anticancer products.
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We focus on in-licensing compounds that have previously shown anti-tumor
activity in preclinical or early clinical studies. We do not conduct extensive
early-stage drug discovery. We believe that many of the approximately 475 cancer
drugs in clinical development worldwide may become available for in-licensing or
equity participation by ILEX or other market participants because:
- - industry consolidation has caused pharmaceutical and biotechnology companies
to prioritize research and development programs, resulting in numerous
licensing opportunities;
- - an anticancer compound's market potential can be underestimated if evaluated
based on its initial indication; and
- - large development companies sometimes consider the market potential of certain
of these compounds to be too small.
Reduce Risk by Developing a Broad Portfolio of Products
We are developing multiple products simultaneously, which reduces our exposure
to the impact of any single product failure and increases our flexibility to
eliminate programs we deem less promising. We believe our portfolio approach
increases the likelihood that we will successfully develop pharmaceutical
products.
Form Strategic Collaborations to Support Development and Commercialization of
Our Products
We often deem it advantageous to partner with large pharmaceutical and
biotechnology companies to obtain funding and marketing support for our
development activities. These collaborations generally:
- - enable us to develop a greater number of products than otherwise would be
possible;
- - lower the substantial financial investment that is required of us to develop
our oncology drugs; and
- - provide us with domestic and international marketing and sales expertise for
our partnered products once approved.
Offer a Full Range of Oncology CRO Services
We believe we are the largest full service provider of CRO services focused
predominantly on oncology. The range of specialized preclinical research and
clinical trial services we offer includes chemistry and toxicology services,
small-scale manufacturing, design of clinical protocols, organization and
monitoring of clinical trials and preparation of regulatory submissions. We
believe that our oncology expertise accelerates the drug development process for
our clients, increases the probability of obtaining regulatory approval and
makes us an attractive option for a company seeking a CRO to develop a cancer
drug.
Use Our CRO Business to Generate In-licensing Opportunities and Lower Our Own
Development Costs
We believe our CRO business is highly complementary to our ILEX Products
business. In addition to building our cancer drug development expertise and
generating revenue, our CRO business enhances our ability to:
- - monitor oncology drug development trends;
- - improve our overall drug development and regulatory filing capabilities;
- - identify novel compounds to in-license or acquire (CAMPATH(R), SR-45023A and
ILX-295501 are examples of compounds in-licensed as a result of our CRO); and
- - spread overhead and development costs that would otherwise have to be
supported entirely out of our internal research and development budget.
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ILEX PRODUCTS
We have seven drugs in clinical development and several product candidates in
late preclinical research. All of our product rights were either acquired or
in-licensed. We follow a disciplined approach to product acquisition and
development:
- - we only in-license product candidates that have shown strong preclinical or
human efficacy results;
- - we only develop drugs that are patent protected, have patents pending, or can
qualify for orphan drug designation;
- - we do not perform early-stage research;
- - we advance products into Phase II trials only if promising efficacy results
are seen in Phase I trials; and
- - we seek partners when deemed appropriate to share the cost and risk of
developing and commercializing our products.
The following table summarizes the potential therapeutic indications,
development status and marketing rights for our clinical and preclinical product
candidates.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PRODUCT INDICATION(S) STATUS MARKETING RIGHTS
- ----------------------------------------------------------------------------------------------------------------
CAMPATH(R)(1) Chronic Lymphocytic Leukemia BLA Filing in Process Schering AG
Non-Hodgkin's Lymphoma Phase II
Organ Transplant Rejection Phase II
Multiple Sclerosis Phase II
Eflornithine(2) Superficial Bladder Cancer Phase III ILEX
Non-Melanoma Skin Cancer Phase III
Recurrent Colon Polyps Phase IIb
Barrett's Esophagus Phase II
Prostate Cancer Phase II
Oxypurinol Symptomatic Hyperuricemia Initiating Pivotal ILEX
ILX-295501(3) Non-Small Cell Lung Cancer Phase II Lilly/ILEX
Ovarian Cancer Phase II
Kidney Cancer Phase II
Melanoma Phase II
Aminopterin Refractory Endometrial Cancer Phase II ILEX
Acute Leukemia Phase II
SR-45023A(4) Solid Tumors Phase I Symphar/ILEX
ILX23-7553 Solid Tumors Phase I ILEX
Angiogenesis Inhibitors ILEX
Arresten Solid Tumors Preclinical
Restin Solid Tumors Preclinical
Canstatin Solid Tumors Preclinical
Tumstatin Solid Tumors Preclinical
Apomigren Solid Tumors Preclinical
NM-3 Solid Tumors Preclinical
THP-Dox Solid Tumors Preclinical
</TABLE>
(1) We formed a joint venture with LeukoSite to develop CAMPATH(R). The joint
venture has granted worldwide marketing rights, except for Japan and East
Asia, to Schering and retained co-promotion rights in the U.S.
(2) The National Cancer Institute is co-sponsoring certain eflornithine clinical
studies.
(3) ILEX has in-licensed this compound from Eli Lilly. Eli Lilly can repurchase
our rights to ILX-295501 after Phase II trials with ILEX retaining a royalty
interest.
(4) SR-45023A is being developed in collaboration with Symphar SA.
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Our product development activities are managed by employees of ILEX Services and
by employees that became a part of ILEX through our acquisition of Convergence.
The former Convergence employees remain focused on developing our angiogenesis
inhibitors. We have spent approximately $3.6 million, $6.7 million, and $15.5
million on research and development for 1996, 1997 and 1998, respectively.
CAMPATH(R)
Our most advanced product candidate, CAMPATH(R), is a humanized monoclonal
antibody, in development for treating CLL in patients who have failed currently
available drug therapies. CLL is the most common form of adult leukemia. We are
developing CAMPATH(R) through L&I Partners, a 50/50 joint venture with
LeukoSite. In addition to CLL, the partnership is pursuing other potential
cancer and non-cancer related therapeutic applications for CAMPATH(R) including
non-Hodgkin's lymphoma, multiple sclerosis and organ transplant rejection. The
product will be marketed worldwide (excluding Japan and East Asia) by Schering.
CAMPATH(R) binds to cancer cells expressing the CD52 antigen. CAMPATH(R) acts as
a marker enabling a patient's immune system to recognize and destroy the cancer
cells to which it binds. Because the CD52 antigen is not expressed on bone
marrow stem cells, CAMPATH(R) selectively destroys lymphocytes while sparing
healthy stem cells.
Market Opportunity. CLL is the most prevalent form of adult leukemia. Although
the disease progresses slowly, most patients who contract CLL ultimately die
from their disease. On average, patients survive six to nine years after initial
diagnosis. However, when patients no longer respond to chemotherapy, life
expectancy for most patients is generally six to nine months. Currently, the two
standard treatments for CLL are alkylating agents and fludarabine phosphate
(Fludara), a nucleoside analog. Although initially effective, patients
eventually become resistant to these drugs leaving no alternative approved
treatments.
Approximately 120,000 patients currently suffer from CLL in the U.S. and Europe.
Approximately 20,000 patients in the U.S. and Europe develop CLL each year, and
it is estimated that an equivalent number become resistant to chemotherapy. In
addition to CLL, CAMPATH(R) has shown activity in patients:
- - with non-Hodgkin's lymphoma (NHL) -- approximately 100,000 patients in the
U.S. and Europe develop this disease each year, and there are approximately
560,000 patients currently suffering with this disease;
- - with multiple sclerosis (MS), which afflicts approximately 700,000 patients in
the U.S. and Europe; and
- - who need organ transplants -- approximately 20,000 patients undergo solid
organ transplants in the U.S. each year.
Development Status and Clinical Data. A pivotal Phase II trial was completed
with CAMPATH(R) in early 1999 in CLL patients who had been previously treated
with an alkylating agent and failed Fludara. In the trial:
- - patients received an intravenous infusion of CAMPATH(R) three times per week
for a four to twelve week period;
- - the dose was stepped up during the first week and patients received preventive
anti-infective drugs;
- - the primary endpoint was complete and partial response rate as defined by
published NCI definitions. Responses were determined by a review board of CLL
experts who did not participate in the trial; and
- - patient enrollment was completed in just four months, indicative of the unmet
need for the patients targeted in the trial.
The results from the pivotal trial showed that of the 93 patients who had failed
chemotherapy, 31 (or 33%) achieved a complete or partial response. Furthermore,
an additional 55 patients (or 59%) had their
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disease stabilized. The FDA had previously told us that a response rate of 20%
or greater would be considered an important medical advance in this patient
population.
Although median survival has not yet been reached, median survival already
exceeds 15 months, substantially higher than the six to nine months generally
observed in this patient population.
We believe, based on discussions with the trial investigators, that the safety
profile of CAMPATH(R) indicated in the trial is an acceptable endstage for CLL
patients. Adverse effects were mostly mild to moderate infusion-related
symptoms. Reduction in white blood cell counts and platelets was also observed
in most patients. Approximately 20% of patients in the trial had a serious
infection. It should be noted, however, that low white blood cell counts, low
platelets and infections are commonly observed in this patient population. In
fact, serious infection is the most common cause of death in CLL patients.
The results of these trials were consistent with two additional Phase II trials
conducted previously in a total of 76 CLL patients who had received prior
chemotherapy. The response rate in those studies as determined by an independent
review board was also 33%. Median survival was 21 months.
The first two parts of the BLA for marketing approval in the U.S. have been
filed with the FDA, and L&I Partners plans to file the final part of the BLA by
the end of 1999. The FDA has designated CAMPATH(R) for fast-track development,
clearing the way for expedited review of our application for marketing approval
in the U.S. L&I Partners plans to file for marketing approval in Europe during
the first six months of 2000.
CAMPATH(R) is currently being distributed on a compassionate use basis.
Additional CLL studies are in progress exploring the use of CAMPATH(R) in
previously untreated patients, in patients with minimum residual disease and in
combination with Fludara. Studies are also in progress in patients with NHL.
Other studies are being organized in patients with MS or organ transplants.
The following are results of some of the published studies that have been
conducted with CAMPATH(R):
- - Previously untreated CLL. Eight of the first nine patients (89%) treated in a
study of previously untreated CLL patients had a complete or partial response
to CAMPATH(R).
- - Non-Hodgkin's lymphoma (NHL). CAMPATH(R) demonstrated a 20% response rate in a
group of 50 patients with NHL who had received extensive prior chemotherapy.
In this study, four of eight patients (50%) with T-cell lymphoma had a
complete or partial response.
- - Multiple sclerosis (MS). In a study of 29 patients with secondary progressive
MS treated with CAMPATH(R), no clinical relapses were observed in these
patients from two months following CAMPATH(R) treatment out to the end of the
18-month observation period. In addition, no new MRI-enhancing lesions were
observed during the study.
- - Organ transplant rejection. Thirty-one patients receiving a kidney transplant
were treated with CAMPATH(R) followed by low dose cyclosporine (approximately
half the normal dose) and without steroids or other immunosuppressive agents.
The investigator reported an acute rejection rate of less than 15% compared to
a normal rejection rate of 30 to 40%, with a patient follow-up of up to 24
months.
Partners. We and LeukoSite, our development partner, have formed an
equally-owned joint venture, L&I Partners, L.P., to develop CAMPATH(R). L&I
Partners licensed CAMPATH(R) from LeukoSite, which licensed the compound from a
third party.
On August 24, 1999, L&I Partners signed a worldwide marketing partnership
agreement with Schering AG for CAMPATH(R), excluding Japan and East Asia.
Schering and its U.S. affiliate, Berlex Laboratories, Inc., have extensive
experience and strategic interest in CLL as the marketers of Fludara, one of the
leading drugs for the treatment of patients with CLL. The material terms of the
agreement are:
- - up to $30.0 million in up-front and milestone payments payable by Schering to
L&I Partners;
- - 67% of net profits from sales in the U.S. will be split evenly between
LeukoSite and us, and 33% to Berlex, Schering's U.S. affiliate;
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- - net profits from sales are determined after allowing for sales and marketing
expenses and costs of additional CLL trials and clinical trials to support new
indications for CAMPATH(R), currently anticipated to include non-Hodgkin's
lymphoma, multiple sclerosis and organ transplant rejection. Our share of
these development and sales and marketing expenses is anticipated to be
approximately $10.0 million to $15.0 million over the next 24 months;
- - for sales outside the U.S., L&I will receive approximately the same profit
split in the form of royalty payments from Schering;
- - L&I Partners has co-promotion rights; and
- - L&I Partners will receive additional payments if milestones for non-oncology
indications are met.
Of the $30.0 million in up-front and milestone payments, L&I Partners is
required to pay $5.3 million to a third party from whom LeukoSite licensed
CAMPATH(R). In addition, L&I Partners is required to pay certain royalties to
this third party.
L&I Partners has also entered into an agreement with Boehringer Ingleheim Pharma
KG for the manufacture of CAMPATH(R).
Proprietary Position. L&I Partners obtained an exclusive, worldwide sublicense
to CAMPATH(R) in April 1997. CAMPATH(R) is protected by five patents issued in
the U.S., major European countries, Australia, Canada and New Zealand. Patent
applications are pending in Denmark, Japan and South Africa. The European patent
issued in February 1989 and the U.S. patent in December 1998. In addition,
CAMPATH(R) was granted orphan drug status in late 1997.
Eflornithine
Eflornithine is an inhibitor of ornithine decarboxylase, or ODC, an enzyme
elevated in most tumors and pre-malignant lesions. Eflornithine is potentially
effective both as a preventive therapy in early-stage, precancerous disease
conditions and as a treatment to prevent recurrence of cancer. We believe that,
as an oral agent, eflornithine has the potential to be used as a long-term
therapy. We are currently developing eflornithine for the treatment of patients
with superficial bladder cancer. We are also investigating eflornithine for use
in various premalignant conditions in collaboration with the NCI.
Market Opportunity. Approximately 140,000 people in the U.S. have recurrent,
superficial bladder cancer and 54,000 new cases of bladder cancer are diagnosed
per year. Standard treatment for newly diagnosed cases is surgery. However, 40
to 50% of the cancers recur within two years. Many of these patients are
candidates for therapeutic measures aimed at preventing the recurrence of their
bladder tumors after surgery.
There are several other conditions that could benefit from a chemoprevention
agent. Examples of these conditions include recurrent colon polyps, a precursor
to colon cancer (which afflicts a total of approximately 800,000 patients in the
U.S. and Europe), and Barrett's esophagus, a precursor to esophageal cancer
(which afflicts approximately 25,000 new patients in the U.S. and Europe each
year). In addition, non-melanoma skin cancer afflicts approximately 1,000,000
new patients in the U.S. each year who could benefit from an agent that prevents
recurrence.
Development Status and Clinical Data. In collaboration with the NCI, in April
1999 we initiated a pivotal Phase III trial of eflornithine in patients that
have been treated for superficial bladder cancer. The double-blind,
placebo-controlled, 400-patient trial is evaluating time to recurrence as its
primary endpoint. As of September 1999, 35 clinical sites have been opened for
patient enrollment.
We are also working with the NCI and independent investigators to evaluate
eflornithine in non-melanoma skin cancer (Phase III), recurrent colon polyps
(Phase IIb), Barrett's esophagus (Phase II) and prostate cancer (Phase II).
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In Phase I and II trials for the treatment of various cancers, eflornithine was
well tolerated when taken orally for up to one year. Eflornithine was shown in
published clinical trials to reverse premalignant conditions before they become
cancerous and to be active in treating early-stage cancers before they progress.
For example, eflornithine has been shown to reverse cervical dysplasia (a
precursor of cervical cancer), reduce the number of actinic keratosis lesions (a
precursor to skin cancer) and normalize ODC levels in tumor tissue in patients
with superficial bladder cancer.
Proprietary Position. In August 1995 we obtained an exclusive, worldwide license
to patents held by Marion Merrell Dow Inc. covering the composition and use of
eflornithine for the treatment of cancer and various parasitic infections. Five
of these patents have issued in the U.S., and expire from August 2000 through
March 2014. In addition, we have filed seven patent applications for the use of
eflornithine alone and in combination with other drugs to treat and to prevent
various cancers and for certain novel formulations.
Oxypurinol
Oxypurinol is the only non-cancer product candidate in our pipeline. We acquired
the rights to oxypurinol as part of a broader agreement with Burroughs Wellcome
in 1995. Given the promising clinical results seen with this product candidate,
we decided to pursue development despite targeting a disease outside oncology.
We are developing oxypurinol for treatment of symptomatic hyperuricemia, or
gout, in allopurinol intolerant patients. Gout is caused by elevated uric acid
levels. Gout is often very painful for the patient and can develop into a
crippling, chronic condition. The only currently available treatment for the
cause of gout is allopurinol. Oxypurinol is the active metabolite of
allopurinol, a xanthine oxidase inhibitor. Approximately 3 to 5% of patients
receiving allopurinol develop an intolerance to the drug. This intolerance may
be severe and, in some cases, can result in death. Oxypurinol is the only
alternative xanthine oxidase inhibitor to allopurinol for these patients. We
have been distributing oxypurinol on a compassionate use basis since 1995.
Market Opportunity. We believe approximately 50,000 to 90,000 of the
approximately 2.5 million gout patients in the U.S. are intolerant to
allopurinol and would benefit from oxypurinol.
Development Status and Clinical Data. We have designed, in consultation with the
FDA, a pivotal Phase II trial of oxypurinol in gout patients who have become
intolerant to allopurinol. We are in the process of organizing this trial, and
expect to begin enrollment in early 2000.
In a study of 237 patients who received oxypurinol under a compassionate use
program, serum uric acid reduction was statistically significant and 83% of
these allopurinol-intolerant patients tolerated oxypurinol well. Performance
status and pain levels were improved in most patients for whom data was
available.
Proprietary Position. In March 1995 we obtained an exclusive, worldwide license
to technology held by Burroughs Wellcome related to the synthesis and use of
oxypurinol. Oxypurinol is not protected by patents, but we have been granted
orphan drug status that will protect the drug for seven years following FDA
marketing approval.
Other Clinical Candidates
ILX-295501. ILX-295501 is a novel sulfonylurea compound. ILX-295501 has
demonstrated in vivo anti-tumor activity against a broad spectrum of solid
tumors. Multiple Phase I trials were conducted by Eli Lilly where responses were
observed in patients with either non-small cell lung, kidney or bladder cancers.
The recommended dosing schedule for Phase II trials was established in these
trials. We have initiated four Phase II trials in patients with melanoma,
ovarian, non-small cell lung and kidney cancer.
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We licensed ILX-295501 from Eli Lilly in February 1999. As part of our
agreement:
- - Eli Lilly purchased $2.5 million of our common stock;
- - we agreed to conduct the four Phase II trials discussed above;
- - at the end of Phase II trials, Eli Lilly has the option to purchase our rights
to ILX-295501 for an up-front fee and future royalties; and
- - if Eli Lilly does not exercise its buy-back option, we can obtain an
exclusive, worldwide license by paying Eli Lilly a commercial opportunity fee,
milestone payments and royalties.
This compound is covered by a composition of matter patent issued in the U.S.
and major international markets.
Aminopterin. Aminopterin is an anti-folate in the same family as methotrexate, a
widely used anticancer drug. This family of cancer drugs kills cells by
interfering with their ability to synthesize DNA. We are developing aminopterin
in Phase II trials for metastatic endometrial cancer resistant to methotrexate
and other drugs. In addition, a Phase II trial in acute lymphocytic leukemia is
ongoing under a physician investigational new drug study. Based on the results
of these trials, we will determine whether to proceed with additional trials.
Aminopterin has received orphan drug status, and a method-of-use patent
application has been filed in the U.S.
SR-45023A. SR-45023A is a novel, orally active bisphosphonate ester derivative.
Unlike other members of the bisphosphonate class, SR-45023A appears to work by
inducing programmed cell death (apoptosis) in tumor cells. SR-45023A has
exhibited antitumor activity in preclinical tumor models, including in a number
of chemoresistant cell lines. The drug was well tolerated in Phase I trials in
healthy volunteers. We initiated two additional Phase I trials in patients with
a variety of solid tumors in the first half of 1999.
We believe that, if successful, SR-45023A may be used broadly in a variety of
cancers, including ovarian, breast, colon and prostate cancer, and in
combination with other forms of chemotherapy. Because of its apparent
selectivity for neoplastic cells and its low toxicity, we believe that SR-45023A
may also find a role as a chemoprevention agent.
SR-45023A was originally discovered by Symphar SA, a Swiss biotechnology
company. In September 1998, we entered into a co-development agreement with
Symphar pursuant to which we obtained an equity interest in the compound of at
least 30% in exchange for CRO services and have the right of first negotiation
for an exclusive worldwide license. The compound is covered by a composition of
matter patent.
ILX23-7553. ILX23-7553 is a vitamin D(3) analog. Vitamin D(3) is known to kill
cancer cells in animal models of prostate, head-and-neck and breast cancers.
However, vitamin D(3) therapy also causes high blood calcium levels
(hypercalcemia), which can lead to confusion, constipation, nausea or even coma
or death. At therapeutic concentrations, ILX23-7553 appears to cause
substantially less hypercalcemia. We expect to develop ILX23-7553 as both an
acute care cancer therapy and a chemoprevention agent.
In March 1999 we initiated the first Phase I trial. We plan to initiate two
additional Phase I trials with different dosing schedules in patients with
cancer. We expect these trials to be followed by a Phase I or II trial of the
compound in combination with chemotherapy. The compound is covered by a
composition of matter patent.
Preclinical Angiogenesis Inhibitors
We believe we have one of the most extensive portfolios of drug candidates that
inhibit angiogenesis, the formation of new blood vessels that supply oxygen and
nutrients to tumors. Angiogenesis inhibitors help block this formation of new
blood vessels that tumors require to grow or to recover from chemotherapy or
radiation.
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In July 1999 we purchased Convergence, a private company with a portfolio of
novel angiogenesis inhibitors. The pipeline includes five novel proteins and one
small molecule with broad anti-angiogenic properties. We believe our
angiogenesis inhibitors:
- - inhibit multiple different growth factors produced by the endothelial cells
that line new blood vessels (not just vascular endothelial growth factor, or
VEGF);
- - are specific to new blood vessel cells;
- - are potent at stopping the growth of these cells; and
- - can be readily manufactured.
The product candidates we acquired in the Convergence transaction are covered by
16 pending patent applications.
In addition to the Convergence technology, ILEX has rights to another patented
angiogenesis inhibitor, THP-Dox. THP-Dox is based on a novel drug delivery
technology, which links a tumor homing peptide (THP) to one of the most widely
used chemotherapy drugs, doxorubicin. The tumor homing peptide binds
specifically to a receptor on blood vessels that feed tumors, thereby delivering
doxorubicin directly to the tumor site. THP-Dox works by destroying the blood
vessels that feed the tumor, thereby starving the tumor itself. We believe
THP-Dox may be effective in treating a variety of solid tumors (breast, colon,
lung, prostate, kidney, etc.)
We hope to initiate clinical trials with two of these product candidates in the
year 2000.
In-Licensing Agreements
As a part of our business strategy, we actively seek to expand our product
portfolio. Historically, we entered into exclusive licensing arrangements with a
number of universities, research institutions, biotechnology companies and
pharmaceutical companies. Our in-license agreements generally require us to
develop the compounds and technologies licensed. Each license requires us to pay
royalties on sales of products covered by that license, ranging from 3 to 10% of
net sales and, in several instances, minimum annual royalty payments. All of our
licenses provide that the licensor may terminate the license if we breach our
obligations under the license or, in some instances, if we become insolvent or
file bankruptcy. In addition, some of our licenses will terminate if we do not
achieve certain development milestones by specified dates or make payments
extending these dates. We intend to continue our licensing program, focusing on
clinical stage oncology compounds.
OUR CRO BUSINESS
We believe ILEX Services is currently the only full service provider of CRO
services focused predominantly on oncology. We offer a full range of specialized
preclinical research and clinical trial services, including chemistry and
toxicology services, small-scale manufacturing, design of clinical protocols,
organization and monitoring of clinical trials and preparation of regulatory
submissions. We believe that our oncology expertise accelerates the drug
development process for our clients, increases the probability of obtaining
regulatory approval and makes us an attractive option for a company seeking a
CRO to develop a cancer drug. In addition, ILEX Services provides CRO services
on a contract basis to ILEX Products and has been the source of three of the
products we now have in clinical development.
We work closely with prestigious cancer research institutions and groups that
give us access to top oncology clinical expertise. Our Board of Directors
includes Dr. Daniel Von Hoff, president of the American Association for Cancer
Research, and Dr. Joseph Bailes, president of the American Society of Clinical
Oncology. In addition, we have a strong relationship with CTRC Research, our
largest stockholder. CTRC Research has one of the largest oncology Phase I trial
organizations in the U.S. We also have strong historical ties with US Oncology,
Inc., the largest oncology physician practice management organization in the
U.S., whose physicians see approximately 13% of the new cancer patients in the
U.S. annually. Our relationships with these groups give us access to a
significant number of patients
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for enrollment into clinical trials. We believe that our oncology focus combined
with these relationships make us an attractive option for companies selecting a
CRO to develop a cancer drug. In addition, these relationships put us in a
strong position to identify and license novel anticancer drugs for development.
There are approximately 475 cancer drugs currently in clinical development
worldwide. This number is higher than at any time in history. Companies
developing oncology drugs face unique challenges related to conducting cancer
trials, therefore increasing the need for CROs with oncology expertise. Because
patients are increasingly being treated by physicians in community practice
rather than at teaching institutions, the traditional clinical trial sites often
cannot provide sufficient numbers of patients. With the FDA approving new
oncology drugs more rapidly and the large number of oncology drugs currently in
development, it is critical that clinical trial designs take into account
competing clinical trials and changing treatment practices.
Our CRO revenue grew from $5.9 million in 1997 to $9.7 million in 1998 and were
$5.6 million in the first half of 1999. Our client list includes more than 40
biotechnology and pharmaceutical companies, currently conducting approximately
100 preclinical studies and clinical trials with us. For the year ended December
31, 1998, and the six months ended June 30, 1999, our top five CRO customers
accounted for 85% and 71%, respectively, of our CRO revenue. The loss of
business from a significant client could materially harm our business and
financial condition.
[TO COME]
Preclinical Services
Chemistry and Manufacturing. Oncology drugs are complex, toxic molecules that
can be difficult to synthesize and require special handling procedures. We
manufacture bulk drug products for preclinical studies and clinical trials at
our approximately 9,000 square foot cGMP facility which was specifically
designed to handle such toxic materials. In addition, we provide support
activity for preclinical drug development including:
- - formulation development;
- - stability testing of drug candidates; and
- - fill, finish and package on a small scale.
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Toxicology. We design and perform drug safety studies that satisfy regulatory
requirements and support the intended clinical dosing regimens to be used in
clinical trials. We conduct toxicology studies in a laboratory on the campus of
The University of Texas Health Science Center at San Antonio, or UTHSCSA.
Clinical Services
Our experience in oncology adds value for our clients by accelerating the
development process. We accomplish this by:
- - offering strategic planning throughout the product development process;
- - consulting on clinical trial design;
- - accelerating patient accrual through our associations with leading cancer
treatment institutions and providers and appropriate site selection;
- - enhancing data collection by using experienced clinical research associates;
- - providing experienced project leadership; and
- - maintaining regular communication and a positive relationship with the FDA.
We provide management of clinical trials. Our project teams have substantial
oncology experience and can develop a strategic plan focused on eventual market
approval. Service elements within clinical trials management include:
- - protocol design;
- - study site identification;
- - investigator recruitment;
- - clinical study budgeting and agreements;
- - site initiation and training;
- - site monitoring;
- - independent response reviews;
- - medical monitoring and serious adverse event reporting;
- - regulatory affairs consulting services; and
- - preparation of regulatory submissions.
Because fewer than 5% of adult cancer patients in the U.S. participate in
clinical trials, affiliations with sites are a key criteria to our success. We
have access to leading sites and investigators through our relationships with
CTRC and US Oncology, which enroll large numbers of oncology patients into
clinical trials. We also work to streamline many processes through continued
experience with these organizations.
Strategic Alliances of Our CRO Business
CTRC Research. We began operations in 1994, after the transfer of drug
development programs, intellectual property rights and commercial opportunities
from CTRC Research. CTRC Research was formed as part of a program begun by
Cancer Therapy and Research Center of South Texas, or CTRC, a regional cancer
treatment and research center located in San Antonio, Texas. CTRC was founded in
1972 and today, in conjunction with the UTHSCSA, is an NCI-designated
Comprehensive Cancer Center, one of two in the state of Texas. Under the
leadership of Charles Coltman, Jr., M.D., Co-Chairman of our Scientific Advisory
Board, CTRC has become known for its expertise in clinical research. Dr. Coltman
is also Chairman of the Southwest Oncology Group. Daniel Von Hoff, M.D., the
other Co-Chairman of our Scientific Advisory Board, was appointed Director of
Research at CTRC in 1988. In 1991, under the direction of Dr. Von Hoff, CTRC
established the Institute for Drug Development, or IDD, under a Program
Agreement with the UTHSCSA, with the mission of accelerating the development of
oncology drugs. Primarily through the efforts of Dr. Von Hoff, IDD has since
established one of the largest groups in the U.S. for conducting Phase I
clinical trials of oncology drugs. CTRC and CTRC Research and their
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related entities have had some level of participation in the clinical
development of a majority of the U.S. anticancer drugs developed over the past
ten years.
Following this offering, CTRC Research will own approximately 12.1% of our
common stock.
CTRC Research provides technical assistance to us on a fee-for-service basis. We
expect to continue to engage CTRC Research to conduct clinical studies of ILEX's
products, enabling us to receive timely feedback regarding the efficacy and
safety of new drugs.
IMPATH. In September 1999 ILEX Services sold $5.0 million of its preferred stock
(convertible beginning in September 2000, or earlier upon the occurrence of
certain events, into 290,867 shares of our common stock) to IMPATH Inc. IMPATH
is a leading source of cancer information and analysis with a database of more
than 475,000 analyzed cases to date. IMPATH uses sophisticated technologies to
provide patient-specific cancer diagnostic and prognostic information to
pathologists, oncologists, and transplant centers. As part of the transaction,
IMPATH will become our preferred provider of these services.
We believe that our association with IMPATH will optimize our clinical trial
design capabilities. The molecular pathology services and cancer outcomes
database offered by IMPATH should allow us to more effectively identify
appropriate patients for clinical trials and thereby achieve better outcomes.
GOVERNMENT REGULATION
The design, research, development, testing, manufacture, labeling, promotion,
marketing, advertising and distribution of drug products are extensively
regulated by the FDA in the U.S. and similar regulatory bodies in other
countries. The steps ordinarily required before a new drug may be marketed in
the U.S., which are similar to steps required in most other countries, include:
- - preclinical laboratory tests, preclinical studies in animals, formulation
studies and the submission to the FDA of an investigational new drug, or IND,
application for a new drug;
- - adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug for each indication;
- - the submission of an NDA to the FDA; and
- - FDA review and approval of the NDA.
Preclinical tests include laboratory evaluation of product chemistry toxicity
and formulation, as well as animal studies. The results of preclinical testing
are submitted to the FDA as part of an IND application. A 30-day waiting period
after the filing of each IND application is required prior to the commencement
of clinical testing in humans. At any time during this 30-day period or at any
time thereafter, the FDA may halt proposed or ongoing clinical trials until the
FDA authorizes trials under specified terms. The IND application process may be
extremely costly and substantially delay development of our products. Moreover,
positive results of preclinical tests will not necessarily indicate positive
results in subsequent clinical trials.
Clinical trials to support NDAs are typically conducted in three sequential
phases, but the phases may overlap. During Phase I, the initial introduction of
the drug into healthy human subjects or patients, the drug is tested to assess
metabolism, pharmacokinetics and pharmacological actions and safety, including
side effects associated with increasing doses. Phase II usually involves studies
in a limited patient population to:
- - assess the efficacy of the drug in specific, targeted indications;
- - assess dosage tolerance and optimal dosage; and
- - identify possible adverse effects and safety risks.
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If a compound is found to be potentially effective and to have an acceptable
safety profile in Phase II evaluations, Phase III trials are undertaken to
further demonstrate clinical efficacy and to further test for safety within an
expanded patient population at geographically dispersed clinical trial sites.
After successful completion of the required clinical trials, an NDA is generally
submitted. The FDA may request additional information before accepting an NDA
for filing, in which case the application must be resubmitted with the
additional information. Once the submission has been accepted for filing, the
FDA reviews the application and responds to the applicant. The review process is
often significantly extended by FDA requests for additional information or
clarification. The FDA may refer the NDA to an appropriate advisory committee
for review, evaluation and recommendation as to whether the application should
be approved, but the FDA is not bound by the recommendation of an advisory
committee.
If FDA evaluations of the NDA and the manufacturing facilities are favorable,
the FDA may issue an approval letter or an "approvable" letter. An approvable
letter will usually contain a number of conditions that must be met in order to
secure final approval of the NDA and authorization of commercial marketing of
the drug for certain indications. The FDA may also refuse to approve the NDA or
issue a not approvable letter, outlining the deficiencies in the submission and
often requiring additional testing or information.
The FDA may designate a product as an "orphan drug" if the drug is intended to
treat a rare disease or condition. A disease or condition is considered rare if
it affects fewer than 200,000 people in the U.S., or if it affects more than
200,000 people but will be sold for less money than it will cost to develop. If
a sponsor obtains the first FDA marketing approval for a certain orphan drug,
the sponsor will have a seven-year exclusive right to market the drug for the
orphan indication.
The manufacturers of approved products and their manufacturing facilities are
subject to continual review and periodic inspections. Because we currently
intend to contract with third parties for commercial scale manufacturing of our
products, our ability to control compliance with FDA requirements will be
limited.
Approved drugs and manufacturing facilities are subject to ongoing compliance
requirements. Identification of certain side effects or the occurrence of
manufacturing problems after any of our drugs are on the market could cause
subsequent withdrawal of approval, reformulation of the drug, and additional
preclinical studies or clinical trials.
Outside the U.S., our ability to market our products will also be contingent
upon receiving marketing authorizations from the appropriate regulatory
authorities. The foreign regulatory approval process includes all of the
complexities associated with FDA approval described above. The requirements
governing the conduct of clinical trials and marketing authorization vary widely
from country to country. At present, foreign marketing authorizations are
applied for at a national level, although within the European Union, or the EU,
procedures are available to companies wishing to market a product in more than
one member state.
Under a new regulatory system in the EU, marketing authorizations may be
submitted at either a centralized, a decentralized or a national level. The
centralized procedure is mandatory for the approval of biotechnology products
and high technology products and available at the applicant's option for other
products. The centralized procedure provides for the grant of a single marketing
authorization that is valid in all EU member states. The decentralized procedure
is available for all medicinal products that are not subject to the centralized
procedure. The decentralized procedure provides for mutual recognition of
national approval decisions, changes existing procedures for national approvals
and establishes procedures for coordinated EU actions on products, suspensions
and withdrawals. Under this procedure, the holder of a national marketing
authorization for which mutual recognition is sought may submit an application
to one or more EU member states, certify that the dossier is identical to that
on which the first approval was based or explain any differences and certify
that identical dossiers are being submitted to all member states for which
recognition is sought. Within 90 days of receiving the application and
assessment report, each EU member state must decide whether to recognize
approval. The procedure encourages member states to work with applicants and
other regulatory authorities to resolve disputes concerning mutual recognition.
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Lack of objection of a given country within 90 days automatically results in
approval from the member state.
We will choose the appropriate route of European regulatory filing to accomplish
the most rapid regulatory approvals. However, the chosen regulatory strategy may
not secure regulatory approvals or approvals of the chosen product indications.
L&I Partners intends to file for European regulatory approval for the use of
CAMPATH(R) for CLL in parallel with its U.S. and Canadian regulatory filings.
One element of our strategy is to develop chemoprevention agents that may
prevent the progression of cancer. The clinical development path for
chemoprevention agents is uncertain and may require long-term clinical studies.
PATENTS AND PROPRIETARY RIGHTS
Patents and other proprietary rights are vital to our business. Although our
policy is to seek appropriate patent protection both in the U.S. and abroad for
our proprietary technology, to date, we have no patents issued in our name. In
addition to seeking our own patents, we enter into license agreements with
various pharmaceutical companies and research, educational and governmental
institutions to obtain patent rights from them to develop and potentially sell
products which use the compounds and technologies protected by those patents.
Our compounds acquired pursuant to in-licensing arrangements are protected by
patents obtained or applied for by our licensors. This includes seven U.S.
patents, 22 U.S. patent applications, 66 foreign patents and 29 foreign patent
applications. We have not conducted in-depth validity and infringement studies
on the patents and patent applications that we have in-licensed from major
biotechnology and pharmaceutical companies, and it is possible that these
patents or patent applications will be challenged or will not provide protection
for our compounds.
CAMPATH(R) is protected by five patents issued in the U.S., European major
market countries, Australia, Canada and New Zealand, which expired between 2011
and 2015. Patent applications are pending in Denmark, Japan and South Africa.
The European patent issued in February 1989 and the U.S. patent in December
1998. We have licensed five U.S. issued patents on eflornithine that expire
between 2000 and 2014. In addition, we have filed seven patent applications for
the use of eflornithine alone and in combination with other drugs to treat and
to prevent various cancers and in certain novel formulations. Oxypurinol and
aminopterin do not have patent protection, but have received orphan drug
designation and a method-of-use patent application has been filed in the U.S.
for aminopterin. ILX-295501, SR-45023A and ILX23-7553 are each covered by issued
composition of matter patents. In addition, numerous patent applications have
been filed on our portfolio of angiogenesis inhibitors.
A third party biotechnology company has offered to license certain technology to
L&I Partners which the biotechnology company has indicated relates to
CAMPATH(R). L&I Partners is in the process of evaluating the necessity of this
license. We are informed that significant questions have been raised concerning
the validity of the patents relating to the third party's technology. We have
not, however, conducted an independent analysis of this technology. There is no
assurance a license regarding this technology will be available to L&I Partners
in the future on acceptable terms, if at all. In the event L&I Partners does not
license this technology and the third party asserts that CAMPATH(R) or its
method of manufacture is an infringement of the third party's rights, the
ability of L&I Partners to commercialize CAMPATH(R) could be materially harmed.
The patent positions of biotechnology and pharmaceutical companies are generally
uncertain and involve complex legal and factual issues. No assurance can be
given that any patent issued to or licensed by us will provide protection that
has commercial significance. We cannot assure you that:
- - our patents will afford protection against competitors with similar compounds
or technologies;
- - our patent applications will issue;
- - others will not obtain patents claiming aspects similar to those covered by
our patents or applications;
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- - the patents of others will not have an adverse effect on our ability to do
business; or
- - the patents issued to or licensed by us will not be infringed, challenged,
invalidated or circumvented.
Moreover, we believe that obtaining foreign patents may, in some cases, be more
difficult than obtaining domestic patents because of differences in patent laws.
We also recognize that our patent position may generally be stronger in the U.S.
than abroad. In addition, the protection provided by foreign patents may be
weaker than that provided by domestic patents.
We also rely upon unpatented trade secrets and improvements, unpatented know-how
and continuing technological innovation to develop and maintain our competitive
position. We generally protect this information with confidential agreements
that provide that all confidential information developed or made known to others
during the course of the employment, consulting or business relationship shall
be kept confidential except in specified circumstances. Agreements with
employees provide that all inventions conceived by the individual while employed
by us are our exclusive property. We cannot guarantee, however, that these
agreements will be honored, that we will have adequate remedies for breach if
they are not honored or that our trade secrets will not otherwise become known
or be independently discovered by competitors.
ILEX is a U.S. trademark.
COMPETITION
Product Development
The pharmaceutical industry is characterized by rapidly evolving technology and
intense competition. Many companies of all sizes, including a number of large
pharmaceutical companies as well as several specialized biotechnology companies,
are developing cancer drugs similar to ours. There are products on the market
that will compete directly with the products that we are seeking to develop. In
addition, colleges, universities, governmental agencies and other public and
private research institutions will continue to conduct research and are becoming
more active in seeking patent protection and licensing arrangements to collect
license fees, milestone payments and royalties in exchange for license rights to
technologies that they have developed, some of which may directly compete with
our technologies. These companies and institutions also compete with us in
recruiting qualified scientific personnel. Many of our competitors have
substantially greater financial, research and development, human and other
resources than do we. Furthermore, large pharmaceutical companies have
significantly more experience than we do in preclinical testing, human clinical
trials and regulatory approval procedures.
Our competitors may:
- - develop safer and more effective products;
- - obtain patent protection or intellectual property rights that limit our
ability to commercialize products; or
- - commercialize products earlier than us.
We expect technology developments in our industry to continue to occur at a
rapid pace. Commercial developments by our competitors may render some or all of
our potential products obsolete or non-competitive, which would materially harm
our business and financial condition.
CRO
In our CRO business, we primarily compete against in-house departments of
pharmaceutical companies, other more broad-based CROs and, to a lesser extent,
universities and teaching hospitals. Many of these
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competitors have substantially greater capital, technical, human and other
resources than ILEX. CROs generally compete on the basis of:
- - previous experience;
- - relative expertise and sophistication in specific therapeutic areas;
- - the quality of contract research;
- - the ability to organize and manage trials on a global basis;
- - pricing;
- - the ability to manage large and complex medical databases;
- - the ability to provide statistical and regulatory services;
- - the ability to recruit investigators and enroll patients;
- - the ability to integrate information technology with systems to improve the
efficiency of contract research;
- - an international presence with strategically located facilities; and
- - financial viability.
We may not be able to compete favorably in these areas.
EMPLOYEES
As of September 1, 1999, we had approximately 200 employees. Our employees do
not have a collective bargaining agreement. We have not experienced any work
stoppages. We consider our relations with our employees to be good.
PROPERTIES
Our corporate headquarters are located in approximately 47,000 square feet in
San Antonio, Texas occupied under a lease expiring December 31, 2003.
We also lease and operate an 8,945 square-foot manufacturing facility located in
San Antonio that has been designed to produce multi-kilogram lot sizes of
anticancer compounds under cGMP. We have a 15-year lease to the facility with
three five-year extension options. The initial term of the lease expires in
2010.
Our facility has sufficient capacity to manufacture the materials necessary to
satisfy the requirements for conducting clinical trials of our current CRO
business and our own product development. We will be required to expand our
manufacturing facilities or to contract with other manufacturers in the event
our CRO manufacturing business is expanded or there is a need for commercial
quantities of our compounds.
LEGAL PROCEEDINGS AND INSURANCE
From time to time, we are involved in certain litigation arising out of our
operations. We maintain liability insurance, including product liability
coverage, in amounts deemed adequate by management. An uninsured or partially
insured claim, or claim for which indemnification is not available, could
materially harm our financial condition, however. We are not currently engaged
in any legal proceedings that we expect would materially harm our business or
financial condition.
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MANAGEMENT
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning our executive
officers and directors as of September 1, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard L. Love(1)(2).................. 56 President, Chief Executive Officer and
Director
Michael T. Dwyer....................... 54 Vice President and Chief Financial
Officer, ILEX Oncology, Inc.; President
and Chief Operating Officer, ILEX
Oncology Services, Inc.
Deirdre K. Tessman, Ph.D. ............. 54 Managing Director, ILEX Services,
Limited
Timothy J. Williamson.................. 56 Senior Vice President, Marketing and
Business Development, ILEX Products,
Inc.
Pedro Santabarbara, M.D., Ph.D. ....... 47 Vice President, Medical Affairs, ILEX
Products, Inc.
Terry A. Rugg, MBChB, FFRad (T)(SA).... 40 Vice President, Medical Affairs, ILEX
Oncology Services, Inc.
Glenn C. Rice, Ph.D. .................. 43 Vice President, Research and Director
Gary V. Woods(1)(3).................... 55 Chairman of the Board
Joseph S. Bailes, M.D. ................ 43 Director
A. Dana Callow, Jr.(1)(3).............. 47 Director
John L. Cassis(1)(3)(4)................ 51 Director
Jason S. Fisherman, M.D.(2)(4)......... 42 Director
Ruskin C. Norman, M.D.(4).............. 80 Director
Daniel D. Von Hoff, M.D. .............. 52 Director and Co-Chairman of Scientific
Advisory Board
</TABLE>
- ---------------------------
(1) Member of the Compensation Committee
(2) Member of the Relationship Oversight Committee
(3) Member of the Stock Option Committee
(4) Member of the Audit Committee
Richard L. Love has served as President, Chief Executive Officer and a Director
of ILEX since we began operations in October 1994. Mr. Love has more than 32
years of industry experience with more than 19 years in the biosciences
industry. Prior to forming ILEX, Mr. Love was Chief Operating Officer of CTRC
Research from April 1991 to September 1994. From 1983 through 1991, Mr. Love
served as CEO of Triton Biosciences Inc., a subsidiary of Shell Oil Company, and
led the sale of Triton to Berlex Laboratories, Inc., a subsidiary of Schering.
Mr. Love earned his B.S. and M.S. in Chemical Engineering from Virginia
Polytechnic Institute.
Michael T. Dwyer has served as President and Chief Operating Officer of ILEX
Services since March 1999, and as Vice President and Chief Financial Officer of
ILEX since joining the Company in May 1998. Prior to that, he served as Senior
Vice President and Chief Operating Officer of CerebroVascular Advances, Inc.
(CVA), a San Antonio-based contract research organization, from December 1993 to
April 1998. CVA was acquired by Quintiles Transnational Corporation in July
1997. Mr. Dwyer is a Certified Public Accountant and spent 16 years with Arthur
Andersen LLP as a partner before joining CVA Mr. Dwyer holds a B.B.A. in
accounting from Angelo State University.
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Deirdre K. Tessman, Ph.D., has served as Managing Director of ILEX Services,
Limited, a wholly-owned subsidiary of ILEX Services based in the United Kingdom,
since its formation in June 1999. Prior to that, she had served as Senior Vice
President, European Operations of ILEX since December 1997. From October 1994 to
December 1997, she served as Vice President, Drug Development of ILEX. From
January 1991 to October 1994, Dr. Tessman served as Director, Worldwide
Pharmaceutical Projects for Schering AG, and from 1987 to 1991 as Director of
Pharmaceutical Project Development at Triton Biosciences Inc. Dr. Tessman has
also served as Director of Clinical Research at Roskon Research Corporation, as
Manager of Clinical Research at Medco Research, Inc. and as a Scientist with
Warner-Lambert/Parke Davis. Dr. Tessman earned her B.S. from Marygrove College,
her M.B.A. from the University of Michigan and her Ph.D. from California Coast
University.
Timothy J. Williamson has served as Senior Vice President, Marketing and
Business Development of ILEX Products since its formation in August 1997. Prior
to that, he held the same position with ILEX beginning in October 1994. From
April 1990 through October 1994, Mr. Williamson served as Vice President for
Marketing and Sales with Boehringer Mannheim Pharmaceutical Corporation. Prior
to joining Boehringer, Mr. Williamson served as Regional Sales Director at
Genentech, Inc. and held various positions with Merck Sharp & Dohme, the U.S.
pharmaceutical division of Merck & Co. Inc. Mr. Williamson holds his B.A. from
the University of Texas.
Pedro Santabarbara, M.D., Ph.D., has served as Vice President, Medical Affairs
for ILEX Products since its formation in August 1997, and served ILEX in the
same capacity beginning in August 1996. He was Director of Clinical Research
Oncology for Rhone-Poulenc Rorer Pharmaceuticals in North America from August
1994 to August 1996, and served in the medical oncology department at
Bristol-Myers Squibb Company in domestic and international positions from
February 1988 to August 1994. Dr. Santabarbara earned his M.D. and Ph.D. degrees
from the University of Barcelona, where he specialized in Internal Medicine and
Medical Oncology.
Terry A. Rugg, MB.CH.B, MMED, FFRAD(T)(SA), joined ILEX Services in January 1999
as Vice President, Medical Affairs. Prior to joining ILEX, Dr. Rugg was with
British Biotech, Inc. in Annapolis, Maryland from May 1996 to December 1998.
Previously, with Zeneca Pharmaceuticals in England, he was employed as a medical
advisor for the Tomudex oncology program from June 1995 to May 1996. He was with
Eli Lilly from September 1990 to May 1995. Dr. Rugg earned a doctorate degree
from the University of Rhodesia, now Zimbabwe, and is a Licentiate of the Royal
Colleges of Medicine and Surgery, Edinburgh and Glasgow. He also has specialist
qualifications with a Master of Medicine in clinical oncology and radiotherapy
from the University of Natal and completed a fellowship in Therapeutic Radiology
at the College of Medicine of South Africa.
Glenn C. Rice, Ph.D., has been Vice President of Research and a Director of ILEX
since July 1999. He was President of Convergence Pharmaceuticals, Inc. from
February 1999 until its acquisition by ILEX in July 1999. Dr. Rice served as
Vice President of Research of Cytokine Networks, Inc., a company he helped
found, from its inception in 1996 through 1999. Previously, he was a Corporate
Officer and Strategic Technical Director for Cell Therapeutics, Inc. from 1992
to 1995 and Director of the Genentech Cell Analysis Laboratory from 1987 to
1992.
Gary V. Woods has served as a Director of ILEX since our formation in December
1993 and was elected Chairman of the Board in October 1994. Since 1979, Mr.
Woods has been employed as President of McCombs Enterprises, Inc., an
organization which invests in automobile dealerships, oil and gas ventures, real
estate and broadcasting. He currently serves on the Board of Directors of
several organizations, including CTRC, and is Chairman of the Board of Trustees
of CTRC Research. Mr. Woods previously served as a director of Titan Holdings,
Inc. and the Greater San Antonio Chamber of Commerce. He also served as
President of the San Antonio Spurs of the National Basketball Association from
1988 to 1993. Mr. Woods has been the President of the Minnesota Vikings of the
National Football League since August 1998. Mr. Woods received his B.B.A. from
Southwest Texas State University and his M.B.A. from Southern Methodist
University and is a Certified Public Accountant.
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Joseph S. Bailes, M.D., has served as a Director of ILEX since August 1997. He
has been Executive Vice President, Clinical Affairs for US Oncology, Inc. since
it was formed in June 1999 through the merger of American Oncology Resources,
Inc. and Physician Reliance Network, Inc. (PRN). Dr. Bailes served as Executive
Vice President and National Medical Director of PRN since its formation in 1993.
Since 1986 he has been employed as an oncologist by Texas Oncology, P.A. A board
certified oncologist, Dr. Bailes received his medical degree from The University
of Texas Southwestern Medical School in Dallas. He currently is the President of
the American Society of Clinical Oncology. Dr. Bailes serves as an advisory
director of Texas Regional Bancshares.
A. Dana Callow, Jr. has been a Director of ILEX since October 1995. Since
January 1997, he has been Managing General Partner of Boston Millennia Partners.
Mr. Callow is also a General Partner of Boston Capital Ventures, which he
co-founded in 1982. Prior to that, he was a management consultant for Braxton
Associates, Inc. He is or has been a director of many companies, including
PAREXEL International, Inc., Medical Management of New England, Inc., Tektagen,
Inc., and Brand Direct Marketing Corporation. Mr. Callow received his A.B. from
Tufts University and his M.B.A. from The Amos Tuck School at Dartmouth College.
John L. Cassis has been a Director of ILEX since September 1995. Mr. Cassis is a
partner with Cross-Atlantic Partners, Inc., formerly Hambro Health
International, which he joined in 1994. Prior to that, he was a Director of
Salomon Brothers Inc., where he co-founded Salomon Brothers Venture Capital in
1986 and headed it from 1990 to 1994. From 1981 to 1986, Mr. Cassis was CEO of
Tower Hall, Inc., a private merchant bank. From 1976 to 1981, he was a Managing
Director of Ardshiel Associates, Inc. (currently Ardshiel Inc.), a merchant
bank. In 1972, Mr. Cassis was employed by Johnson & Johnson where he founded the
Johnson & Johnson Development Corporation, that firm's venture capital arm, and
was its Manager of Acquisitions. Mr. Cassis is currently on the Board of
Directors of The Codman Group and National Healthcare Networks, and is Chairman
of the Board of Directors of IMPATH Inc. and Dome Imaging Systems, Inc. Mr.
Cassis received his A.B. and M.B.A. from Harvard University.
Jason S. Fisherman, M.D., has been a Director of ILEX since September 1995. Dr.
Fisherman is currently a Partner at Advent International, one of the world's
largest private equity investment firms. Prior to joining Advent, Dr. Fisherman
served as Senior Director of Medical Research for Enzon, Inc. from 1991 to 1994.
Between 1989 and 1992, he managed clinical development of a number of anticancer
drugs at the NCI. Dr. Fisherman is currently a director of several private
health care companies. Dr. Fisherman received his B.A. in Molecular Biophysics
and Biochemistry from Yale, his M.D. from the University of Pennsylvania, and
his M.B.A. from Wharton. He is board-certified in internal medicine and medical
oncology.
Ruskin C. Norman, M.D., has been a Director of ILEX since our formation in
December 1993. Dr. Norman is a past member (Senior Partner) of Radiology
Physician Associates, as well as a previous President of St. Luke's Lutheran
Hospital in San Antonio. In 1978, he served as Chairman of the National Medical
Advisory Committee of the American Health Care Association. Dr. Norman is
currently a director of several companies, including CTRC and Compass Bank-San
Antonio. Dr. Norman received his B.S. in Pharmacy from the St. Louis College of
Pharmacy and his M.D. from the Northwestern University Medical School.
Daniel D. Von Hoff, M.D., has served as Co-Chairman of the Scientific Advisory
Board and a Director of ILEX since we began operations in October 1994. Dr. Von
Hoff was named Director of the Arizona Cancer Center in August 1999 and
Professor of Medicine at the University of Arizona Health Sciences Center in
Tucson. Prior to that, he served as the Director of the IDD since 1989, Chief
Executive Officer of CTRC Research since 1995, and a Clinical Professor of
Medicine at the UTHSCSA since 1995. He is currently the President of the
American Association for Cancer Research and is the Co-Director of Research for
US Oncology, Inc. He is widely regarded as one of the world's most experienced
developers of new anticancer agents. Dr. Von Hoff has served on the FDA's
Oncology Drug Advisory Committee (ODAC) and was a member of the Board of
Directors of the American Society of Clinical Oncology. He is the recipient of
numerous awards and honors including the K. Bagshawe Honorary Lecture for the
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<PAGE> 49
British Association for Cancer Research, the EORTC Michel Clavel Lectureship and
the Therapeutic Frontiers Lecture Award from the American College of Clinical
Pharmacy. He is a Fellow of the American Association for the Advancement of
Science and is a recipient of both the Outstanding Professor Award and the
Presidential Teaching Award from UTHSCSA. Dr. Von Hoff received his B.S. from
Carroll College and his M.D. from Columbia College of Physicians and Surgeons.
SCIENTIFIC ADVISORY BOARD
We have organized a Scientific Advisory Board which consists of recognized
scientists with expertise in oncology. The members of the Scientific Advisory
Board are appointed by our Board of Directors and review and comment upon our
ongoing and proposed scientific projects. The Scientific Advisory Board also
advises us on potential areas of clinical interest and provides scientific
evaluations on products under development. The Scientific Advisory Board meets
semi-annually and certain members meet in smaller groups or individually with
ILEX as needed.
All members of our Scientific Advisory Board have commitments to and/or
consulting contracts with other organizations, including our competitors and
potential competitors, that may limit their availability to us. With the
exception of Dr. Von Hoff, none of these individuals is expected to devote more
than a small portion of his or her time to ILEX. The following are the members
of our Scientific Advisory Board:
For a biography of Daniel D. Von Hoff, M.D., Co-Chairman of our Scientific
Advisory Board, see "Board of Directors and Executive Officers" on page 45 of
this prospectus.
Charles A. Coltman, Jr., M.D., has served as Co-Chairman of ILEX's Scientific
Advisory Board since November 1994. Dr. Coltman is Professor of Medicine at the
UTHSCSA, the Director of the San Antonio Cancer Institute, President and CEO of
CTRC and Chairman of the Southwest Oncology Group. He has received numerous
citations for his research in cancer control and the treatment of leukemia,
lymphomas, and Hodgkin's disease. Dr. Coltman holds his M.D. from the University
of Pittsburgh School of Medicine.
David Samuel Alberts, M.D., is a Professor of Medicine, Pharmacology and Public
Health and Associate Dean for Research in the College of Medicine, Arizona
Cancer Center, Tucson and has been Director of Cancer Prevention and Control at
the Arizona Cancer Center since 1988. He served as Chairman of the Oncology Drug
Advisory Committee to the FDA from 1982 to 1984 and is a member of the
Scientific Advisory Board to Dr. Richard Klausner at the NCI. Dr. Alberts
received his B.S. from Trinity College in 1962 and his M.D. from the University
of Virginia in 1966.
Lawrence H. Einhorn, M.D., has been associated with Indiana University since
1973 and currently holds the title of Distinguished Professor of Medicine. Dr.
Einhorn has won numerous awards related to his cancer research, especially in
testicular cancer, and is the recipient of a National Cancer Institute
Outstanding Investigator Grant from 1985 through 1999. Dr. Einhorn received his
M.D. degree from the State University of Iowa Medical School in 1967.
Thomas R. Fleming, Ph.D., is Chair of the Department of Biostatistics at the
University of Washington and a member of the Fred Hutchinson Cancer Research
Center in Seattle. He has been extensively involved in the design, conduct and
analysis of clinical trials, most notably in AIDS and cancer research. His areas
of special research interest include survival analysis and clinical trials
methods with focus on the role of surrogate markers and data safety and
monitoring boards. Dr. Fleming is the author of the Fleming Two-Stage Design, an
innovative clinical trial design used extensively in cancer research to reduce
the costs and time needed to evaluate experimental compounds. He received his
B.A. in mathematics from the College of St. Thomas and holds an M.A. and his
Ph.D. in statistics, both from the University of Maryland.
Mark R. Green, M.D., is the Gilbreth Professor of Clinical Oncology, Chief of
Hematology Oncology and Director of the Hollings Cancer Center at the Medical
University of South Carolina in Charleston, South Carolina. Between 1985 and
1990, he served as the Director of the University of California San Diego Cancer
Center (UCSD), an NCI-designated Clinical Cancer Center, and, in 1992, Dr. Green
was appointed the first Edwin and Evelyn Tasch Professor in Cancer Research at
UCSD. He held that position
48
<PAGE> 50
until moving to the Medical University of South Carolina as Director of the
Hollings Cancer Center in August 1996. Dr. Green's research interests are in
clinical investigation with a focus in lung cancer. He attended Harvard College
and Harvard Medical School, receiving his B.A. degree in 1966, and his M.D. in
1970.
Waun Ki Hong, M.D., is an American Cancer Society Clinical Research Professor,
and Professor of Medicine and Chairman of the Department of Thoracic/Head and
Neck Medical Oncology at M.D. Anderson Cancer Center, where he also holds the
Charles A. LeMaistre Distinguished Chair in Thoracic Oncology. He received his
oncology training at Memorial Sloan-Kettering Cancer Center, and afterward
served as Chief of Medical Oncology at the Boston V.A. Medical Center until
joining M.D. Anderson in 1984. Dr. Hong is dedicated to translational research
in the chemoprevention of both head and neck and lung cancer.
Raghu Kalluri, Ph.D. is currently an Assistant Professor of Medicine at Harvard
Medical School, Renal Division in the Department of Medicine at the Beth Israel
Deaconess Medical Center. Dr. Kalluri is an expert in extracellular matrix and
vascular basement membrane regulation of blood vessel cell growth and has cloned
and characterized numerous novel anti-angiogenic factors. He holds a B.S. degree
in genetics and psychology from Nizam College, Osmania University in India and a
Ph.D. in biochemistry and molecular biology from the University of Kansas
Medical Center, with post-doctoral training at the University of Pennsylvania.
Donald W. Kufe, M.D. is currently Professor of Medicine, Chief of Cancer
Pharmacology and Deputy Director, Dana Farber Cancer Center, Harvard Medical
School. Dr. Kufe is a world renowned expert in chemotherapy and is an advisor to
numerous pharmaceutical and biotech companies, as well as being a founder of
GenVec, Inc. Dr. Kufe has pioneered new target discovery in cancer therapy,
recently focusing on DNA repair and stress activated signaling pathways and
their roles in modulating chemotherapy and radiotherapy responses in resistant
tumors. Dr. Kufe has also developed numerous immunotherapy approaches for cancer
therapy. Dr. Kufe is also Director of the Harvard Phase I Clinical Oncology
Group and directs many early stage clinical trials of novel agents. He earned an
A.B. from Bowdoin College and his M.D. from the University of Rochester School
of Medicine.
Alexandra M. Levine, M.D., joined the staff at the University of Southern
California (USC) School of Medicine in 1977 and is currently a Professor of
Medicine and Chief, Division of Hematology. She also is Medical Director of
USC/Norris Cancer Hospital. Dr. Levine served as the Executive Associate Dean of
the University of Southern California School of Medicine from 1985 to 1990. Dr.
Levine's research interests include the hematologic malignancies. She began an
active program in AIDS research in 1981, focused primarily on the cancers
related to AIDS, and most recently on HIV disease in women. She worked with Dr.
Jonas Salk from 1987 until his death in 1995 on a potential AIDS vaccine. Dr.
Levine was appointed to the Presidential HIV/AIDS Advisory Council by President
Clinton in June 1995, and currently serves as Chair of the Research Committee
for the Presidential Council. Dr. Levine graduated from the University of
California at Berkeley, and received her M.D. from the University of Southern
California School of Medicine. She received training in Internal Medicine and
Hematology at the University of Southern California School of Medicine, and in
Oncology at Emory University.
Vikas P. Sukhatme, M.D., Ph.D. is currently Professor of Medicine at Harvard
Medical School, Chief of the Renal Division in the Department of Medicine at the
Beth Israel Deaconess Medical Center and member of its Cancer Center. Dr.
Sukhatme is a leader in the field of anti-angiogenesis as well as being an
expert in gene regulation and signal transduction, including development of
novel gene therapy techniques. Dr. Sukhatme is an advisor to numerous biotech
and pharmaceutical companies and is an active clinician with clinical trial
participation. He holds an S.B. and Ph.D. in physics from M.I.T. and earned an
M.D., cum laude, from the Harvard Medical School and Harvard-M.I.T. Program in
Health Sciences and Technology.
Jeffrey M. Trent, Ph.D., serves as both the Scientific Director and the Chief of
the Cancer Genetics Branch, National Human Genome Research Institute. Dr. Trent
was recruited to the NIH Bethesda campus to establish the Intramural Research
Program of the National Human Genome Research Institute.
49
<PAGE> 51
He received his Bachelor's Degree from Indiana University and his Ph.D. from The
University of Arizona. He remained on the faculty at The University of Arizona
for several years, where he served as the Director of Basic Research for the
Arizona Comprehensive Cancer Center. He then accepted an Endowed Chair in
Oncology at the University of Michigan in Ann Arbor where he also directed the
Basic Science Program of the Cancer Center. His research interests are in the
molecular genetics and cytogenetics of human cancer.
Ralph R. Weichselbaum, M.D. is currently Harold H. Hines Professor and Chairman
of Radiation Oncology, University of Chicago. Dr. Weichselbaum has been a
leading researcher in molecular and clinical aspects of radiation and drug
therapy and has developed novel drugs and gene therapy approaches in overcoming
tumor resistance. He is a consultant for numerous pharmaceutical companies and
an active clinician and directs numerous clinical trials involving novel cancer
therapeutics. He holds a B.S. degree from the University of Wisconsin and an
M.D. from the University of Illinois.
50
<PAGE> 52
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth as of September 9, 1999, immediately before this
offering and immediately after this offering, the ownership of our common stock
by:
- - each stockholder we know to be the beneficial owner of more than 5% of our
common stock (including the selling stockholder);
- - each of our directors;
- - each of our executive officers named in the Summary Compensation Table
contained in our proxy statement for our 1999 Annual Meeting of Stockholders;
and
- - by all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE NUMBER OF OWNED AFTER THE
OFFERING(2) SHARES TO OFFERING
------------------------- BE SOLD IN ----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT(1)(3) OFFERING NUMBER PERCENT(4)
- --------------------------------------- --------- ------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
CTRC Research Foundation(5)........... 2,782,127 16.1% 300,000 2,482,127 12.1%
8122 Datapoint
San Antonio, Texas 78229
Advent International Group(6)......... 1,431,176 8.3 -- 1,431,176 7.0
75 State Street
Boston, Massachusetts 02109
PRN Research, Inc. ................... 1,255,988 7.3 -- 1,255,988 6.1
16825 Northchase Drive, Suite 1300
Houston, Texas 77060
Daniel D. Von Hoff, M.D.(7)(8)........ 394,925 2.3 -- 394,925 1.9
Richard L. Love(7).................... 298,300 1.7 -- 298,300 1.5
Glenn C. Rice, Ph.D................... 130,000 * -- 130,000 *
Deirdre K. Tessman, Ph.D.(9).......... 62,462 * -- 62,462 *
Gary V. Woods(10)(11)(12)............. 60,201 * -- 60,201 *
Timothy J. Williamson(13)............. 56,900 * -- 56,900 *
A. Dana Callow, Jr.(14)(15)........... 26,910 * -- 26,910 *
Ruskin C. Norman, M.D.(10)(11)(16).... 35,354 * -- 35,354 *
Pedro Santabarbara, M.D., Ph.D.(17)... 32,113 * -- 32,113 *
John L. Cassis(10)(18)................ 15,286 * -- 15,286 *
Jason S. Fisherman, M.D.(10)(19)...... 15,286 * -- 15,286 *
Joseph S. Bailes, M.D.(20)............ 11,718 * -- 11,718 *
Richard Marcel(21).................... -- -- -- -- --
All executive officers and directors as
a group (14 persons including those
listed above)(7)(8)(13)(14)
(15)(16)(17)(18)(19)(22)............ 1,150,456 6.6 -- 1,150,456 5.6
</TABLE>
- ---------------------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the
number of shares of common stock beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
options and warrants held by that person that are currently exercisable or
exercisable within 60 days of September 9, 1999, are deemed outstanding.
These shares, however, are not deemed outstanding for the purposes of
51
<PAGE> 53
computing the percentage ownership of any other person. Except as otherwise
noted, the street address of the named beneficial owner is 11550 I.H. 10
West, Suite 100, San Antonio, Texas 78230.
(2) To our knowledge, unless otherwise indicated, the persons and entities
named in the table have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community property laws where
applicable.
(3) Based on 17,245,605 shares of common stock issued and outstanding on
September 9, 1999.
(4) Assumes 20,445,605 shares of common stock will be issued and outstanding
upon completion of this offering.
(5) Does not include an aggregate of 30,572 shares of common stock issuable
upon exercise of options granted to Mr. Woods and Dr. Norman, who are
members of the Board of Trustees of CTRC Research. Mr. Woods and Dr. Norman
have agreed to donate economic gain from these options to CTRC Research.
Mr. Woods and Dr. Norman disclaim beneficial ownership of the shares of
common stock held by CTRC Research.
(6) Represents shares held by various funds managed by Advent International
Group, which exercise sole voting and investment power with respect to the
shares held by these funds.
(7) Includes 28,546 shares of common stock issuable upon exercise of options.
(8) Includes 1,000 shares of common stock held by Dr. Von Hoff's spouse.
(9) Includes 20,378 shares of common stock issuable upon exercise of options.
(10) Includes 15,286 shares of common stock issuable upon exercise of options.
(11) Does not include 2,782,127 shares of common stock beneficially owned by
CTRC Research. See Footnote (5).
(12) Includes 3,274 shares of common stock issuable upon exercise of warrants.
(13) Includes 9,400 shares of common stock issuable upon exercise of options.
(14) Excludes 64,129 shares of common stock issuable upon exercise of warrants
to Boston Capital Ventures III, Limited Partnership, or BCV. Does not
include 407,418 shares of common stock beneficially owned by BCV. Mr.
Callow, a general partner of the general partner of BCV, may be deemed to
be a beneficial owner of the shares of common stock beneficially owned by
BCV. Mr. Callow disclaims beneficial ownership of such shares.
(15) Includes 1,081 shares of common stock issuable upon exercise of warrants,
15,286 shares of common stock issuable upon exercise of options, 500 shares
of common stock held in Mr. Callow's IRA and 1,000 shares of common stock
jointly held by Mr. Callow and his spouse. Mr. Callow has assigned his
economic interest in the 15,286 shares of common stock issuable upon
exercise of options to BCV.
(16) Includes 1,159 shares of common stock issuable upon exercise of warrants.
(17) Represents 23,408 shares of common stock issuable upon exercise of options.
(18) Does not include 375,836 shares of common stock and warrants to purchase
24,552 shares of common stock beneficially owned by Cross-Atlantic
Partners, K/S and Cross-Atlantic Partners II, K/S, and 9,065 shares of
common stock beneficially owned by CAP/Hambro, L.P. Mr. Cassis, a principal
of these entities, may be deemed to be a beneficial owner of the shares of
common stock beneficially owned by these entities. Mr. Cassis disclaims any
such beneficial ownership.
(19) Does not include 1,431,176 shares beneficially owned by entities under the
control of Advent International Group. Dr. Fisherman is a Partner in Advent
and may be deemed to be the beneficial owner of such shares. Dr. Fisherman
disclaims beneficial ownership of such shares.
(20) Represents shares of common stock issuable upon exercise of options. Does
not include 1,255,988 shares of common stock beneficially owned by PRN. Dr.
Bailes is an executive officer of U.S. Oncology, the parent entity of PRN,
and may, therefore, be deemed to be the beneficial owner of such shares of
common stock. Dr. Bailes disclaims beneficial ownership of such shares.
(21) Mr. Marcel resigned from his positions with the Company effective March 15,
1999, and the information provided is from the Company's transfer agent
report dated September 9, 1999.
(22) Includes an aggregate of 213,941 shares of common stock issuable upon
exercise of options and 5,514 shares of common stock issuable upon exercise
of warrants.
52
<PAGE> 54
CERTAIN TRANSACTIONS
We began operations in October 1994, after the transfer of drug development
programs, intellectual property rights and commercial opportunities from CTRC
Research. ILEX and CTRC Research have an agreement not to commence any legal
action against, in the case of CTRC Research, our Board of Directors (other than
Directors who are also employees or officers of or consultants to ILEX), or, in
the case of ILEX, the Board of Trustees of CTRC Research, for any claim that
would have been covered by any directors' and officers' liability insurance
policies maintained by CTRC or ILEX, as applicable, subject to certain
exceptions. Although this agreement terminated upon consummation of our initial
public offering of common stock in February 1997, it remains in effect with
respect to any activity occurring prior to its termination.
We also lease from CTRC Research office space, a lab and a manufacturing
facility. For the year ended December 31, 1998, and the six months ended June
30, 1999, we paid CTRC Research approximately $280,000 and $240,000 under these
leases, respectively. We lease our manufacturing facility from a non-profit
corporation that is controlled in part by CTRC Research. During the year ended
December 31, 1998, and the six months ended June 30, 1999, we incurred expenses
related to CTRC Research of approximately $700,000 and $800,000, respectively,
for various subcontracting and consulting services. At June 30, 1999, we had
payables to CTRC Research of approximately $180,000 related to these lease
agreements and services.
CTRC Research and Sanofi SA are parties to various research and development
funding agreements pursuant to which Sanofi has an exclusive option to license
all products or rights arising from the research conducted under the these
agreements. We have entered into a subordinated option agreement with CTRC
Research expiring March 2000. This agreement provides that, in the event Sanofi
does not exercise its option to license a CTRC Research product or right, we
have the first right to negotiate with CTRC Research to license such product or
right. In addition, upon the expiration of the Sanofi agreements, we have the
first right to negotiate a funding and licensing agreement with CTRC Research
for programs formerly funded by Sanofi.
53
<PAGE> 55
DESCRIPTION OF CAPITAL STOCK
GENERAL
We are authorized to issue 40,000,000 shares of common stock, $.01 par value,
and 20,000,000 shares of preferred stock, $.01 par value.
This summary does not purport to be complete and is subject to, and qualified in
its entirety by: the provisions of our Certificate of Incorporation, as amended;
various documents and agreements evidencing warrants and registration rights,
all of which are included as exhibits to the Registration Statement of which
this prospectus is a part; and applicable provisions of Delaware law.
COMMON STOCK
As of September 9, 1999, we had issued and outstanding 17,245,605 shares of
common stock held of record by approximately 130 stockholders. Holders of common
stock are entitled to one vote per share for the election of directors and all
other matters submitted to a vote of our stockholders. Subject to the rights of
any holders of preferred stock which may be issued in the future, the holders of
common stock are entitled to share ratably in such dividends as may be declared
by our Board of Directors out of funds legally available therefor. In the event
of our dissolution, liquidation or winding up, holders of common stock are
entitled to share ratably in all assets remaining after payment of all
liabilities and liquidation preferences of any preferred stock. Holders of
common stock have no preemptive, subscription, redemption, conversion rights or
similar rights. Our Certificate of Incorporation does not provide for cumulative
voting rights with respect to the election of directors. All outstanding common
stock is, and the common stock to be issued in connection with this offering
will be, fully paid and nonassessable.
PREFERRED STOCK
Our Board of Directors has the authority, without any action by our
stockholders, to issue preferred stock in one or more series with such
designations, rights and preferences (including dividend, conversion, voting or
other rights or liquidation preferences) as determined by our Board of
Directors. The issuance of preferred stock could delay, defer or prevent a
change of control of ILEX and could decrease the amount of earnings and assets
available for distribution to, or adversely affect the voting power or other
rights of, holders of common stock. In addition, the issuance of preferred stock
could have the effect of decreasing the market price of common stock. At
present, there are no shares of preferred stock outstanding.
WARRANTS
On September 29, 1995, we issued a warrant, which has not been exercised as of
September 9, 1999, to purchase 97,054 shares of common stock at $3.50 per share
to Vector Securities International, Inc., who has subsequently assigned it to
VSII Stockholders Trust II, in connection with the provision of certain
financial consulting services. This warrant may be exercised in whole at any
time or in part from time to time prior to its expiration in September 2000.
In connection with the private placement of our series C preferred stock in July
1996, the Company issued warrants to purchase 355,913 shares of common stock, of
which 343,796 remain unexercised as of September 9, 1999. The exercise price of
these warrants is $8.71 per share. These warrants may be exercised in whole at
any time or in part from time to time prior to their expiration in July 2001.
The exercise price of all our outstanding warrants is subject to customary
adjustments upon stock splits, stock dividends or subdivisions. Additionally,
the warrants are subject to customary adjustments upon a sale of all or
substantially all of our assets or upon our reorganization, reclassification,
consolidation or merger. The exercise price of all of the warrants other than
the Vector Securities warrant is also subject to adjustment in the event of our
issuance of common stock subsequent to the date of the warrants at a price per
share less than the exercise price of the warrants. None of our warrants confer
upon the holder any
54
<PAGE> 56
voting or any other rights of our stockholders, and are subject to certain
registration rights agreements described below.
CONVERTIBLE SECURITIES
In September 1999 ILEX Services issued shares of its series A preferred stock to
IMPATH Inc. These shares are convertible into 290,867 shares of our common
stock, at the request of the holder(s) of a majority of such shares, either at
any time beginning September 24, 2000, or prior to such date either upon an
initial public offering of ILEX Services common stock or upon our "change of
control." Our "change of control" is generally defined as any of the following:
- - the acquisition by any person of 30% or more of our voting securities;
- - our merger, consolidation or reorganization with any other person if, after
such transaction, our stockholders hold less than 50% of the combined voting
securities of such person following such transaction; or
- - the sale or other transfer of all or substantially all of our assets if, after
such transaction, our stockholders hold less than 50% of the voting securities
of such person.
The ILEX Services series A preferred stock is also entitled to annual cumulative
dividends of $1.0314 per share, certain rights to convert into ILEX Services
common stock and a $14.95 per share liquidation preference (plus accrued and
unpaid dividends), and is subject to certain redemption rights.
REGISTRATION RIGHTS
Within 30 days after the completion of this offering, we are required to file a
separate registration statement registering under the Securities Act 2,389,201
shares of common stock issued in our July 1999 private placement. The holders of
8,473,266 shares of our common stock, or the "registrable stock," will have
"piggy-back" rights with respect to the separate registration statement.
However, the holders of substantially all of the shares of our common stock
which may be included in the separate registration statement have entered into
lockup agreements with the underwriters of this offering the terms of which
prohibit the disposition by those holders of their shares of common stock for 90
days from the completion of this offering. Under the terms of our agreements
with the holders of the registrable stock, if we propose to register any of our
securities, either for our own account or otherwise, those holders are entitled
to notice of such registration and may be entitled to include their registrable
stock therein. In addition, the holders of 8,009,894 shares of the registrable
stock have demand registration rights, pursuant to which, subject to certain
conditions, they may require us to register their shares under the Securities
Act at our own expense, and we are required to use our best efforts to effect
such registration. All of such registrations are subject to customary conditions
and limitations.
CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
BYLAWS AND DELAWARE LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, known as the Anti-Takeover Law, regulating corporate takeovers.
The Anti-Takeover Law prevents certain Delaware corporations from engaging,
under certain circumstances, in a "business combination" (which includes a
merger or sale of more than 10% of the corporation's assets) with any
"interested stockholder" (a stockholder who acquired 15% or more of the
corporation's outstanding voting stock without the prior approval of the
corporation's board of directors) for three years following the date that such
stockholder became an "interested stockholder." A corporation may "opt out" of
the Anti-Takeover Law, which we have not done.
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<PAGE> 57
TRANSFER AGENT
The Transfer Agent for our common stock is ChaseMellon Shareholder Services
L.L.C. Their address is Overpeck Centre, 85 Challenger Road, Ridgefield Park,
New Jersey 07660. Their phone number is (800) 635-9270.
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<PAGE> 58
UNDERWRITING
ILEX and the selling stockholder have entered into an underwriting agreement
with the underwriters named below. CIBC World Markets Corp., Prudential
Securities Incorporated and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ----------
<S> <C>
CIBC World Markets Corp. ...................................
Prudential Securities Incorporated..........................
U.S. Bancorp Piper Jaffray Inc. ............................
----------
Total............................................. 3,500,000
==========
</TABLE>
This is a firm commitment underwriting. This means that the underwriters have
agreed to purchase all of the shares offered by this prospectus (other than
those covered by the over-allotment option described below) if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances.
The representatives have advised ILEX and the selling stockholder that the
underwriters propose to offer the shares directly to the public at the public
offering price that appears on the cover page of this prospectus. In addition,
the representatives may offer some of the shares to certain securities dealers
at this price less a concession of $ per share. The underwriters may also
allow, and such dealers may reallow, a concession not in excess of
$ per share to other dealers. After the shares are released for sale to
the public, the representatives may change the offering price and other selling
terms at various times.
We have granted the underwriters an over-allotment option. This option, which is
exercisable for up to 30 days after the date of this prospectus, permits the
underwriters to purchase a maximum of 525,000 additional shares from us to cover
over-allotments. If the underwriters exercise all or part of this option, they
will purchase shares covered by the option at the public offering price that
appears on the cover page of this prospectus, less the underwriting discount. If
this option is exercised in full, the total price to public will be $ ,
and the total proceeds to ILEX will be $ . The underwriters have
severally agreed that, to the extent the over-allotment option is exercised,
they will each purchase a number of additional shares proportionate to the
underwriter's initial amount reflected in the foregoing table.
The following table provides information regarding the amount of the discount to
be paid to the underwriters by ILEX and the selling stockholder.
<TABLE>
<CAPTION>
TOTAL WITH FULL EXERCISE
TOTAL WITHOUT EXERCISE OF OVER-ALLOTMENT
PER SHARE OF OVER-ALLOTMENT OPTION OPTION
--------- ------------------------ ------------------------
<S> <C> <C> <C>
ILEX.................................... $ $ $
Selling stockholder.....................
Total......................... $ $ $
</TABLE>
The Company will pay all of its and the selling stockholder's expenses
associated with the offering, excluding the underwriting discount, which
expenses we estimate to be approximately $500,000.
57
<PAGE> 59
ILEX and the selling stockholder have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933.
ILEX, its officers and directors, the selling stockholder and certain other
stockholders have agreed to a 90-day "lockup" with respect to approximately
9,665,310 shares of common stock and certain other ILEX securities that they
beneficially own, including securities that are convertible into shares of
common stock and securities that are exchangeable or exercisable for shares of
common stock. This means that, subject to certain exceptions, for a period of 90
days following the date of this prospectus, ILEX and such persons may not,
directly or indirectly, offer, sell, pledge or otherwise dispose of ILEX
securities without the prior written consent of CIBC World Markets Corp.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the shares
is completed. However, the underwriters may engage in the following activities
in accordance with the rules:
- - Stabilizing transactions -- The representatives may make bids or purchases for
the purpose of pegging, fixing or maintaining the price of the shares, so long
as stabilizing bids do not exceed a specified maximum.
- - Over-allotments and syndicate covering transactions -- The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created in
connection with the offering, the representatives may engage in syndicate
covering transactions by purchasing shares in the open market. The
representatives may also elect to reduce any short position by exercising all
or part of the over-allotment option.
- - Penalty bids -- If the representatives purchase shares in the open market in a
stabilizing transaction or syndicate covering transaction, they may reclaim a
selling concession from the underwriters and selling group members who sold
those shares as part of this offering.
- - Passive market making -- Market makers in the shares who are underwriters or
prospective underwriters may make bids for or purchases of shares, subject to
certain limitations, until the time, if ever, at which a stabilizing bid is
made.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of such transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither ILEX nor the underwriters make any representation or prediction as to
the effect that the transactions described above may have on the price of the
shares. These transactions may occur on The Nasdaq National Market or otherwise.
If these transactions are commenced, they may be discontinued without notice at
any time.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of shares of
common stock offered by this prospectus will be passed upon for us by Fulbright
& Jaworski L.L.P., San Antonio, Texas. Certain legal matters will be passed upon
for the underwriters by McDermott, Will & Emery.
58
<PAGE> 60
EXPERTS
The consolidated balance sheets of ILEX Oncology, Inc. and its subsidiaries for
the years ended December 31, 1996, 1997 and 1998 and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1998, included and incorporated by
reference in this prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included and
incorporated by reference herein in reliance upon the authority of such firm as
experts in accounting and auditing in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement on Form S-3 with the SEC in connection
with this offering. We are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and file annual, quarterly and
current reports, proxy statements and other information with the SEC. This
prospectus is a part of the Registration Statement and does not contain all of
the information included in the Registration Statement. Whenever a reference is
made in this prospectus to any contract or other document, the reference may not
be complete and you should refer to the exhibits that are part of the
Registration Statement for a copy of the contract or document. You may read and
copy the Registration Statement and any other documents we file with the SEC at
the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Washington, D.C. 20549 13th Floor 500 West Madison Street, Suite 1400
New York, New York 10048 Chicago, Illinois 60661-2511
</TABLE>
You may obtain further information regarding the Public Reference Room by
calling the SEC at 1-800-SEC-0330. SEC filings are also available to the public
at the SEC's website at "http://www.sec.gov." In addition, we maintain a website
that contains information regarding us at "http://www.ilexoncology.com." The
contents of our website are not part of this prospectus.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus. We incorporate by reference those documents
listed below:
(a) Annual Report on Form 10-K for the year ended December 31, 1998;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999;
(c) Current Report on Form 8-K Filed July 30, 1999; and
(d) Current Report on Form 8-K/A Filed September 21, 1999.
59
<PAGE> 61
You may request a copy of these filings (other than exhibits to such documents
which are not specifically incorporated by reference in these documents), at no
cost, by writing or telephoning us at the following address:
ILEX Oncology, Inc.
11550 I.H. 10 West, Suite 100
San Antonio, Texas 78230
(210) 949-8200
Attention: Investor Relations
You should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone to
provide you with different information. You should not assume that information
in this prospectus is accurate as of any date other than the date in the front
of this document.
60
<PAGE> 62
- --------------------------------------------------------------------------------
[ILEX ONCOLOGY LOGO]
ILEX ONCOLOGY, INC.
3,500,000 SHARES
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
, 1999
CIBC WORLD MARKETS
PRUDENTIAL VECTOR HEALTHCARE GROUP
A UNIT OF PRUDENTIAL SECURITIES
U.S. BANCORP PIPER JAFFRAY
LOGO
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF
THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
<PAGE> 63
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by ILEX in connection with the sale of the
common stock being registered hereby. All the amounts shown are estimated,
except the SEC registration fee and The Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 17,938
The Nasdaq National Market Listing Fee...................... 15,000
NASD Filing Fee............................................. 6,056
Printing Expenses........................................... 100,000
Legal Fees and Expenses..................................... 225,000
Accounting Fees and Expenses................................ 50,000
Blue Sky and Counsel Fees................................... 15,000
Transfer Agent and Registrar Fees........................... 5,000
Miscellaneous............................................... 66,006
--------
Total............................................. $500,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company maintains directors' and officers' liability insurance that covers
the directors and officers of the Company.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibit Index
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
1.1 -- Underwriting Agreement*
2.1 -- Plan of Merger and Acquisition Agreement dated July 16,
1999, by and among ILEX Oncology, Inc., ILEX Acquisition
Inc., Convergence Pharmaceuticals, Inc., Vikas Sukhatme,
Raghuram Kalluri, Ralph Weichselbaum, Donald Kufe, Glenn
C. Rice and Tsuneya Ohno (incorporated herein by
reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K filed July 30, 1999)
3.1 -- Amended and Restated Certificate of Incorporation of the
Registrant (incorporated herein by reference to Exhibit
3.1 of the Company's Registration Statement No. 333-17769
on Form S-1 filed December 12, 1996, as amended)
3.2 -- Bylaws of the Registrant, as amended (incorporated herein
by reference to Exhibit 3.2 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
4.1 -- Specimen of certificate representing Common Stock, $.01
par value, of the Registrant (incorporated herein by
reference to Exhibit 4.1 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
5.1 -- Opinion of Fulbright & Jaworski L.L.P. regarding
legality*
</TABLE>
II-1
<PAGE> 64
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.1 -- Assignment of Rights and Assets dated November 1994 from
CTRC Research Foundation to the Company (incorporated
herein by reference to Exhibit 10.4 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.2 -- First Amendment to Assignment of Rights and Assets dated
September 1995 between ILEX Oncology, Inc. and CTRC
Research Foundation (incorporated herein by reference to
Exhibit 10.5 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.3 -- Services Agreement dated November 18, 1994 between CTRC
Research Foundation and the Company (incorporated herein
by reference to Exhibit 10.6 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.4 -- Covenant Not to Sue dated September 1995 between CTRC
Research Foundation and the Company (incorporated herein
by reference to Exhibit 10.7 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.5 -- Lease Agreement dated September 1, 1995 between CTRC
Research Foundation and the Company (incorporated herein
by reference to Exhibit 10.10 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.6 -- Commercial Industrial Sublease Agreement between
TRTF/CTRCRF Building Corporation and the Company
(incorporated herein by reference to Exhibit 10.11 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.7+ -- License Agreement [Oxypurinol] dated March 31, 1995 by
and among BW Wellcome Co., The Welcome Foundation Limited
and the Company (incorporated herein by reference to
Exhibit 10.14 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.8+ -- License Agreement [Eflornithine] between ILEX Oncology,
Inc. and Marion Merrell Dow Inc. and its subsidiaries
Merrell Dow Pharmaceuticals Inc. and Marion Merrell Dow
France Et Cie (incorporated herein by reference to
Exhibit 10.17 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.9+ -- Agreement dated November 25, 1996 between Hoffmann-La
Roche, Inc. and the Company [RO23-7553] (incorporated
herein by reference to Exhibit 10.21 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.10 -- Warrant for the purchase of shares of Common Stock dated
September 1995 between the Company and Vector Securities
International, Inc. (incorporated herein by reference to
Exhibit 10.32 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.11 -- Warrant for the purchase of shares of Common Stock dated
July 1996 between the Company and Chestnut Partners, Inc.
(incorporated herein by reference to Exhibit 10.33 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
</TABLE>
II-2
<PAGE> 65
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.12 -- Institute for Drug Development Program Agreement dated
September 20, 1994 between CTRC Research Foundation and
The University of Texas Health Science Center at San
Antonio (incorporated herein by reference to Exhibit
10.34 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.13 -- Subordinated Option Agreement dated March 27, 1995
between CTRC Research Foundation and the Company
(incorporated herein by reference to Exhibit 10.35 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.14 -- 1995 Stock Option Plan for the Company (incorporated
herein by reference to Exhibit 10.47 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.15 -- 1996 Non-Employee Director Stock Option Plan for the
Company (incorporated herein by reference to Exhibit
10.48 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.16 -- Form of Non-Employee Director Stock Option Agreement
(incorporated herein by reference to Exhibit 10.49 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.17 -- Third Amended and Restated Registration Rights Agreement
between the Company, CTRC and the holders of the Series
B, C, D and E Preferred Stock (incorporated herein by
reference to Exhibit 10.50 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
10.18+ -- Exclusive License Agreement [Oxypurinol] dated November
27, 1996 between MGI Pharma, Inc. and the Company
(incorporated herein by reference to Exhibit 10.56 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.19 -- Stock Purchase Agreement dated April 11, 1995 between
Daniel Von Hoff and the Company (incorporated herein by
reference to Exhibit 10.58 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
10.20 -- Stock Purchase Agreement dated April 11, 1995 between
Richard L. Love and the Company (incorporated herein by
reference to Exhibit 10.60 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
10.21 -- Lease Agreement between the Company and N.W.A. Limited
Partnership, dated October 15, 1996 (incorporated herein
by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q filed August 14, 1997)
10.22 -- First Amendment to Lease Agreement between the Company
and N.W.A. Limited Partnership, dated March 26, 1997
(incorporated herein by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q filed August 14,
1997)
10.23 -- Registration Rights Agreement dated July 9, 1997, between
the Company and PRN Research, Inc. (incorporated herein
by reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q filed August 14, 1997)
10.24 -- Drug Development and Commercialization Agreement dated
March 27, 1998, between the Company and The Burnham
Institute, Inc. (incorporated herein by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q filed May 15, 1998)
</TABLE>
II-3
<PAGE> 66
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.25 -- Office Building Lease Agreement dated April 8, 1998,
between the Company and N.W.A. Limited Partnership
(incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q filed August 14,
1998)
10.26 -- Consulting Services Agreement dated July 1, 1997, between
the Company and Dr. Daniel D. Von Hoff, M.D.
(incorporated herein by reference to Exhibit 10.61 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998)
10.27 -- Stock Purchase Agreement dated January 22, 1999 between
the Company and Eli Lilly and Company (incorporated
herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q filed May 17, 1999)
10.28 -- Registration Rights Agreement dated January 22, 1999
between the Company and Eli Lilly and Company
(incorporated herein by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q filed May 17,
1999)
10.29 -- Letter of Credit Agreement dated April 5, 1999 between
the Company and PFK-ILEX (incorporated herein by
reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q filed May 17, 1999)
10.30 -- Employment Agreement dated July 16, 1999 by and between
ILEX Products, Inc. and Glenn C. Rice (incorporated
herein by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed July 30, 1999)
10.31 -- Registration Rights Agreement dated July 16, 1999 among
ILEX Oncology, Inc., Vikas Sukhatme, Raghuram Kalluri,
Ralph Weichselbaum, Donald Kufe, Glenn C. Rice, Tsuneya
Ohno, Stephan Dolezalek, Beth Israel Deaconess Medical
Center and Arch Development Corporation (incorporated
herein by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed July 30, 1999)
10.32 -- Stock Purchase Agreement dated July 16, 1999 by and
between ILEX Oncology, Inc. and each of the Investors (as
defined therein) (incorporated herein by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q filed August 16, 1999)
10.33+ -- Distribution and Development Agreement between L&I
Partners L.P. and Schering AG dated August 24, 1999
(incorporated herein by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed September 21,
1999)
11.1 -- Computation of pro forma earnings (loss) per share,
(incorporated herein by reference to Exhibit 11.1 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998)
21.1 -- Subsidiaries of the Company (incorporated herein by
reference to Exhibit 21.1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998)
23.1 -- Consent of Fulbright & Jaworski L.L.P. (included on
signature page of initial filing of this Registration
Statement)*
23.2 -- Consent of Arthur Andersen L.L.P.**
24.1 -- Power of attorney (on signature page)*
</TABLE>
- ---------------------------
* Previously filed
** Filed herewith
+ Confidential treatment has been requested with respect to portions of this
exhibit
All other Exhibits were previously filed as indicated.
II-4
<PAGE> 67
(b) Financial Statement Schedules. None.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Act") may be permitted to directors, officers, and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Act, as
amended, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE> 68
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies it has reasonable grounds to believe that it meets all
requirements for filing Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of San Antonio, Texas, on October 5, 1999.
ILEX ONCOLOGY, INC.
By: /s/ MICHAEL T. DWYER
----------------------------------
Michael T. Dwyer
Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GARY V. WOODS*
- -----------------------------------------------------
Chairman of the Board October 5, 1999
Gary V. Woods
/s/ RICHARD L. LOVE*
- ----------------------------------------------------- October 5, 1999
Richard L. Love President, Chief Executive
Officer, and a Director
(Principal Executive
Officer)
/s/ MICHAEL T. DWYER
- ----------------------------------------------------- October 5, 1999
Michael T. Dwyer Vice President and Chief
Financial Officer (Principal
Financial and Accounting
Officer)
/s/ DANIEL D. VON HOFF, M.D.*
- ----------------------------------------------------- Director October 5, 1999
Daniel D. Von Hoff, M.D.
/s/ JOHN L. CASSIS*
- -----------------------------------------------------
Director October 5, 1999
John L. Cassis
/s/ A. DANA CALLOW, JR.*
- -----------------------------------------------------
Director October 5, 1999
A. Dana Callow, Jr.
/s/ RUSKIN C. NORMAN, M.D.*
- -----------------------------------------------------
Director October 5, 1999
Ruskin C. Norman, M.D.
/s/ JASON S. FISHERMAN, M.D.*
- -----------------------------------------------------
Director October 5, 1999
Jason S. Fisherman, M.D.
</TABLE>
II-6
<PAGE> 69
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOSEPH S. BAILES, M.D.*
- -----------------------------------------------------
Director October 5, 1999
Joseph S. Bailes, M.D.
/s/ GLENN C. RICE, PH.D.*
- -----------------------------------------------------
Director October 5, 1999
Glenn C. Rice, Ph.D.
* By: /s/ MICHAEL T. DWYER
-----------------------------------------------
Michael T. Dwyer
(Attorney-in-Fact)
</TABLE>
II-7
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
1.1 -- Underwriting Agreement*
2.1 -- Plan of Merger and Acquisition Agreement dated July 16,
1999, by and among ILEX Oncology, Inc., ILEX Acquisition
Inc., Convergence Pharmaceuticals, Inc., Vikas Sukhatme,
Raghuram Kalluri, Ralph Weichselbaum, Donald Kufe, Glenn
C. Rice and Tsuneya Ohno (incorporated herein by
reference to Exhibit 2.1 to the Company's Current Report
on Form 8-K filed July 30, 1999)
3.1 -- Amended and Restated Certificate of Incorporation of the
Registrant (incorporated herein by reference to Exhibit
3.1 of the Company's Registration Statement No. 333-17769
on Form S-1 filed December 12, 1996, as amended)
3.2 -- Bylaws of the Registrant, as amended (incorporated herein
by reference to Exhibit 3.2 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
4.1 -- Specimen of certificate representing Common Stock, $.01
par value, of the Registrant (incorporated herein by
reference to Exhibit 4.1 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
5.1 -- Opinion of Fulbright & Jaworski L.L.P. regarding
legality*
10.1 -- Assignment of Rights and Assets dated November 1994 from
CTRC Research Foundation to the Company (incorporated
herein by reference to Exhibit 10.4 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.2 -- First Amendment to Assignment of Rights and Assets dated
September 1995 between ILEX Oncology, Inc. and CTRC
Research Foundation (incorporated herein by reference to
Exhibit 10.5 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.3 -- Services Agreement dated November 18, 1994 between CTRC
Research Foundation and the Company (incorporated herein
by reference to Exhibit 10.6 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.4 -- Covenant Not to Sue dated September 1995 between CTRC
Research Foundation and the Company (incorporated herein
by reference to Exhibit 10.7 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.5 -- Lease Agreement dated September 1, 1995 between CTRC
Research Foundation and the Company (incorporated herein
by reference to Exhibit 10.10 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.6 -- Commercial Industrial Sublease Agreement between
TRTF/CTRCRF Building Corporation and the Company
(incorporated herein by reference to Exhibit 10.11 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.7+ -- License Agreement [Oxypurinol] dated March 31, 1995 by
and among BW Wellcome Co., The Welcome Foundation Limited
and the Company (incorporated herein by reference to
Exhibit 10.14 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.8+ -- License Agreement [Eflornithine] between ILEX Oncology,
Inc. and Marion Merrell Dow Inc. and its subsidiaries
Merrell Dow Pharmaceuticals Inc. and Marion Merrell Dow
France Et Cie (incorporated herein by reference to
Exhibit 10.17 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.9+ -- Agreement dated November 25, 1996 between Hoffmann-La
Roche, Inc. and the Company [RO23-7553] (incorporated
herein by reference to Exhibit 10.21 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.10 -- Warrant for the purchase of shares of Common Stock dated
September 1995 between the Company and Vector Securities
International, Inc. (incorporated herein by reference to
Exhibit 10.32 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.11 -- Warrant for the purchase of shares of Common Stock dated
July 1996 between the Company and Chestnut Partners, Inc.
(incorporated herein by reference to Exhibit 10.33 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.12 -- Institute for Drug Development Program Agreement dated
September 20, 1994 between CTRC Research Foundation and
The University of Texas Health Science Center at San
Antonio (incorporated herein by reference to Exhibit
10.34 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.13 -- Subordinated Option Agreement dated March 27, 1995
between CTRC Research Foundation and the Company
(incorporated herein by reference to Exhibit 10.35 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.14 -- 1995 Stock Option Plan for the Company (incorporated
herein by reference to Exhibit 10.47 of the Company's
Registration Statement No. 333-17769 on Form S-1 filed
December 12, 1996, as amended)
10.15 -- 1996 Non-Employee Director Stock Option Plan for the
Company (incorporated herein by reference to Exhibit
10.48 of the Company's Registration Statement No.
333-17769 on Form S-1 filed December 12, 1996, as
amended)
10.16 -- Form of Non-Employee Director Stock Option Agreement
(incorporated herein by reference to Exhibit 10.49 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.17 -- Third Amended and Restated Registration Rights Agreement
between the Company, CTRC and the holders of the Series
B, C, D and E Preferred Stock (incorporated herein by
reference to Exhibit 10.50 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
10.18+ -- Exclusive License Agreement [Oxypurinol] dated November
27, 1996 between MGI Pharma, Inc. and the Company
(incorporated herein by reference to Exhibit 10.56 of the
Company's Registration Statement No. 333-17769 on Form
S-1 filed December 12, 1996, as amended)
10.19 -- Stock Purchase Agreement dated April 11, 1995 between
Daniel Von Hoff and the Company (incorporated herein by
reference to Exhibit 10.58 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.20 -- Stock Purchase Agreement dated April 11, 1995 between
Richard L. Love and the Company (incorporated herein by
reference to Exhibit 10.60 of the Company's Registration
Statement No. 333-17769 on Form S-1 filed December 12,
1996, as amended)
10.21 -- Lease Agreement between the Company and N.W.A. Limited
Partnership, dated October 15, 1996 (incorporated herein
by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q filed August 14, 1997)
10.22 -- First Amendment to Lease Agreement between the Company
and N.W.A. Limited Partnership, dated March 26, 1997
(incorporated herein by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q filed August 14,
1997)
10.23 -- Registration Rights Agreement dated July 9, 1997, between
the Company and PRN Research, Inc. (incorporated herein
by reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q filed August 14, 1997)
10.24 -- Drug Development and Commercialization Agreement dated
March 27, 1998, between the Company and The Burnham
Institute, Inc. (incorporated herein by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q filed May 15, 1998)
10.25 -- Office Building Lease Agreement dated April 8, 1998,
between the Company and N.W.A. Limited Partnership
(incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q filed August 14,
1998)
10.26 -- Consulting Services Agreement dated July 1, 1997, between
the Company and Dr. Daniel D. Von Hoff, M.D.
(incorporated herein by reference to Exhibit 10.61 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998)
10.27 -- Stock Purchase Agreement dated January 22, 1999 between
the Company and Eli Lilly and Company (incorporated
herein by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q filed May 17, 1999)
10.28 -- Registration Rights Agreement dated January 22, 1999
between the Company and Eli Lilly and Company
(incorporated herein by reference to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q filed May 17,
1999)
10.29 -- Letter of Credit Agreement dated April 5, 1999 between
the Company and PFK-ILEX (incorporated herein by
reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-Q filed May 17, 1999)
10.30 -- Employment Agreement dated July 16, 1999 by and between
ILEX Products, Inc. and Glenn C. Rice (incorporated
herein by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed July 30, 1999)
10.31 -- Registration Rights Agreement dated July 16, 1999 among
ILEX Oncology, Inc., Vikas Sukhatme, Raghuram Kalluri,
Ralph Weichselbaum, Donald Kufe, Glenn C. Rice, Tsuneya
Ohno, Stephan Dolezalek, Beth Israel Deaconess Medical
Center and Arch Development Corporation (incorporated
herein by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed July 30, 1999)
10.32 -- Stock Purchase Agreement dated July 16, 1999 by and
between ILEX Oncology, Inc. and each of the Investors (as
defined therein) (incorporated herein by reference to
Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q filed August 16, 1999)
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<C> <S>
10.33+ -- Distribution and Development Agreement between L&I
Partners L.P. and Schering AG dated August 24, 1999
(incorporated herein by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed September 21,
1999)
11.1 -- Computation of pro forma earnings (loss) per share,
(incorporated herein by reference to Exhibit 11.1 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998)
21.1 -- Subsidiaries of the Company (incorporated herein by
reference to Exhibit 21.1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998)
23.1 -- Consent of Fulbright & Jaworski L.L.P. (included on
signature page of initial filing of this Registration
Statement)*
23.2 -- Consent of Arthur Andersen L.L.P.**
24.1 -- Power of attorney (on signature page)*
</TABLE>
- ---------------------------
* Previously filed
** Filed herewith
+ Confidential treatment has been requested with respect to portions of this
exhibit
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated January 29, 1999,
included in ILEX Oncology, Inc.'s Form 10-K for the year ended December 31,
1998, and to all references to our firm included in this Registration
Statement.
ARTHUR ANDERSEN LLP
San Antonio, Texas
October 5, 1999
