<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
Commission file number: 0-27406
CONNECTIVE THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3173928
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3400 WEST BAYSHORE ROAD
PALO ALTO, CALIFORNIA 94303
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 843-2800
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No
--- ---
As of July 18, 1996, 7,382,904 shares of the Registrant's common stock were
outstanding, at $0.001 par value.
<PAGE> 2
CONNECTIVE THERAPEUTICS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets at
June 30, 1996 and December 31, 1995............................................... 3
Condensed Statements of Operations
For the three and six months ended June 30, 1996 and 1995, and for
the period from inception (February 8, 1993) to June 30, 1996..................... 4
Condensed Statements of Cash Flows
For the six months ended June 30, 1996 and 1995, and for
the period from inception (February 8, 1993) to June 30, 1996..................... 5
Notes to Condensed Financial Statements........................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................... 11
Item 2. Changes in Securities............................................................... 11
Item 3. Defaults Upon Senior Securities..................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................................. 11
Item 5. Other Information................................................................... 11
Item 6. Exhibits and Reports on Form 8-K.................................................... 11
Exhibits......................................................................... 11
Reports on Form 8-K.............................................................. 12
SIGNATURE .................................................................................... 13
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONNECTIVE THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,821 $ 9,023
Short-term investments 14,993 --
Prepaid expenses and other current assets 239 154
---------- --------
Total current assets 25,053 9,177
Property and equipment, net 1,604 1,367
Notes receivable from related parties 285 414
Deposits and other assets 297 838
========== ========
$ 27,239 $ 11,796
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 487 $ 441
Accrued liabilities 405 808
Accrued process development expenses 692 668
Accrued payroll and related expenses 269 157
Current portion of capital lease obligations, capital loans and long-term debt 2,491 1,259
---------- --------
Total current liabilities 4,344 3,333
Notes payable -- 2,205
Noncurrent portion of capital lease obligations, capital loans and long-term debt 3,926 4,933
Other long-term liabilities 1,184 1,262
Commitments
Stockholders' equity:
Preferred stock, $0.001 par value: 5,000,000 shares authorized; no shares
issued and outstanding at June 30, 1996 and 3,965,137 shares issued and
outstanding at December 31, 1995 -- 4
Common stock, $0.001 par value: 50,000,000 shares authorized; 7,382,904
shares issued and outstanding at June 30, 1996 and 908,511 shares issued
and outstanding at December 31, 1995 7 1
Additional paid in capital 46,128 21,425
Notes receivable from stockholders (107) (134)
Deferred compensation, net (1,709) (1,933)
Other (18) --
Deficit accumulated during the development stage (26,516) (19,300)
---------- --------
Total stockholders' equity 17,785 63
---------- --------
$ 27,239 $ 11,796
========== ========
</TABLE>
See notes to condensed financial statements.
- 3 -
<PAGE> 4
CONNECTIVE THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THREE MONTHS ENDED SIX MONTHS ENDED (FEBRUARY 8,
JUNE 30, JUNE 30, 1993) TO
--------------------------- --------------------------- JUNE 30,
1996 1995 1996 1995 1996
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Operating Expenses:
Research and development $ 2,865 $ 2,020 $ 5,009 $ 4,666 $ 20,552
General and administrative 1,020 347 2,319 650 5,989
---------- ---------- ---------- ---------- --------
Total operating expenses 3,885 2,367 7,328 5,316 26,541
Interest income 351 145 612 219 1,055
Interest expense (236) (85) (500) (169) (1,030)
---------- ---------- ---------- ---------- --------
Net loss $ (3,770) $ (2,307) $ (7,216) $ (5,266) $(26,516)
========== ========== ========== ========== ========
Net loss per share $ (0.51) $ (0.52) $ (1.19) $ (1.19)
========== ========== ========== ==========
Shares used to calculate net loss per share 7,380,048 4,434,075 6,085,462 4,433,436
========== ========== ========== ==========
</TABLE>
See notes to condensed financial statements.
- 4 -
<PAGE> 5
CONNECTIVE THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
SIX MONTHS ENDED (FEBRUARY 8,
JUNE 30, 1993) TO
----------------------- JUNE 30,
1996 1995 1996
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,216) $ (5,266) $(26,516)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 313 176 827
Technology acquired in exchange for notes payable and other
long-term liability -- 855 2,705
Amortization of deferred compensation 369 -- 701
Changes in assets and liabilities:
Current and other assets 563 (109) (593)
Current and other long-term liabilities (300) (184) 3,146
-------- -------- --------
Net cash used by operating activities (6,271) (4,528) (19,730)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments (25,575) (9,000) (33,135)
Sales and maturities of short-term investments 10,565 6,300 18,125
Capital expenditures (302) (24) (1,378)
-------- -------- --------
Net cash used in investing activities (15,312) (2,724) (16,388)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of bank loans -- (750) --
Payment of notes payable (2,205) -- (2,205)
Proceeds from capital loans and long-term debt 216 -- 5,986
Payments on obligations under capital leases and capital loans (190) (126) (621)
Proceeds from issuance of preferred and common stock,
net of issuance costs 24,560 12,763 42,779
-------- -------- --------
Net cash provided by financing activities 22,381 11,887 45,939
-------- -------- --------
Net increase in cash and cash equivalents 798 4,635 9,821
Cash and cash equivalents at beginning of period 9,023 1,287 --
-------- -------- --------
Cash and cash equivalents at end of period $ 9,821 $ 5,922 $ 9,821
======== ======== ========
SUPPLEMENTARY INFORMATION:
Interest paid $ 619 $ 151 $ 966
======== ======== ========
</TABLE>
See notes to condensed financial statements.
- 5 -
<PAGE> 6
CONNECTIVE THERAPEUTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of Connective
Therapeutics, Inc. (the "Company" or "Connective") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and pursuant to the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, such financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring accrual adjustments, considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 1996 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1996.
These financial statements and notes should be read in conjunction with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1995 included in the Company's Registration Statement on Form S-1
(Reg. No. 33-80261) and related prospectus for the Company's initial public
offering of its Common Stock, which was completed on February 6, 1996.
2. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of shares of
common stock outstanding. Common equivalent shares from stock options and
convertible preferred stock are excluded from the computation as their effect is
antidilutive, except that, pursuant to Securities and Exchange Commission Staff
Accounting Bulletins, common equivalent shares issued during the twelve-month
period prior to the initial public offering are presumed to have been issued in
contemplation of the public offering and have been included in the calculation
as if they were outstanding for all periods through December 31, 1995 (using the
treasury stock method for stock options and the anticipated public offering
price).
The supplemental calculation of net loss per share presented below has been
computed using the weighted average number of shares of common stock and
preferred stock outstanding.
<TABLE>
<CAPTION>
THREE MONTH PERIOD SIX MONTH PERIOD
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Supplemental net loss per share $ (0.51) $ (0.49) $ (1.05) $ (1.31)
========== ========== ========== ==========
Shares used in computation 7,380,048 4,691,784 6,878,489 4,021,524
========== ========== ========== ==========
</TABLE>
3. LICENSE AGREEMENTS
In April 1996, the Company acquired exclusive rights to relaxin (ConXn(TM)) in
Japan, the Republic of Korea and the Republic of China from Mitsubishi Chemical
Corporation. Mitsubishi was the original licensee of relaxin in these Asian
territories under a previous agreement with Genentech, Inc. The completion of
this transaction provides the Company with worldwide rights to relaxin.
In June 1996, the Company entered into an exclusive License Agreement with
Soltec Research PTY Ltd. (the "Licensor"), to develop and market betamethasone
mousse (a foam mousse formulation of the dermatologic drug, betamethasone
valerate) in North America. Under the terms of the
- 6 -
<PAGE> 7
Agreement, the Company will pay a licensing fee to the Licensor, plus royalties
on sales of products, if any, arising from the licensed technology . The Company
also has an exclusive option on the Licensor's foam mousse system for the
delivery of other compounds.
- 7 -
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains certain forward looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from the results anticipated in these forward looking statements as a
result of certain factors set forth under the heading "Risk Factors" in the
Company's Registration Statement on Form S-1 (Reg. No. 33-80261) dated January
31, 1996 relating to the Company's initial public offering and under the heading
"Additional Factors that May Affect Future Results" in the Company's Report on
Form 10-Q for the quarter ended March 31, 1996.
The following discussion should be read in conjunction with the unaudited
condensed financial statements and notes thereto included in Part I, Item 1 of
this Quarterly Report and with Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Prospectus and
Registration Statement on Form S-1 (Reg. No. 33-80261) dated January 31, 1996
relating to the Company's initial public offering.
OVERVIEW
Connective is focused on the development of therapeutics to address serious
diseases involving the connective tissues of the body.
The Company's products under development include gamma interferon for the
treatment of atopic dermatitis and keloids; betamethasone mousse for the
treatment of scalp psoriasis and other scalp dermatoses; ConXn(TM) (relaxin) for
the treatment of scleroderma and other fibrotic disorders and TCR vaccines for
the treatment of multiple sclerosis and rheumatoid arthritis. At present, all
products are under development and no revenues have been derived from the sale
of products.
In June 1996, the Company held an end-of-Phase II meeting with the FDA and
discussed the design of a Phase III protocol for evaluating gamma interferon for
the treatment of atopic dermatitis. An Investigational New Drug application was
subsequently submitted to the agency and the Company expects to begin the Phase
III trial upon final clearance.
Also in June 1996, the Company signed an agreement with Soltec Research PTY Ltd.
which granted Connective an exclusive license to develop and market
betamethasone mousse (a foam mousse formulation of the dermatologic drug,
betamethasone valerate) in North America. The product has been approved in the
United Kingdom and is being marketed by Evans Medical Ltd. Using Phase III
clinical data from European trials, Connective expects to conduct activities
necessary to register betamethasone mousse in scalp psoriasis and to submit a
New Drug Application for marketing the product in the United States.
As planned, in June 1996, the Company initiated a Phase II clinical trial of
ConXn(TM) (recombinant human relaxin H2) for the treatment of scleroderma, a
serious, life threatening connective tissue disorder. This multicenter,
double-blind, placebo-controlled trial is expected to enroll 60 scleroderma
patients. The primary objectives of the study are to evaluate the safety of
administration of the product over 24 weeks, to confirm efficacy and to
determine endpoints to be used in subsequent pivotal clinical studies. In
addition, a separate, open-label extended study of ConXn(TM) in 11 scleroderma
patients was initiated earlier this year. Enrollment is complete and preliminary
safety and efficacy data from long-term (24 weeks) administration of the drug is
expected to be available by year end.
Connective gained worldwide rights to ConXn(TM) with the addition of exclusive
rights to the product in Japan, the Republic of Korea and the Republic of China
from Mitsubishi Chemical Corporation in April 1996. Mitsubishi was the original
licensee of relaxin in these Asian territories under a previous agreement with
Genentech, Inc., from whom Connective has licensed relaxin rights throughout the
rest of the world.
- 8 -
<PAGE> 9
In June 1996, results from a Phase I/II clinical trial of TCR vaccines for
multiple sclerosis were presented by Connective collaborator, Arthur A.
Vandenbark, Ph.D. of Neuroimmunology Research, Veterans Affairs Medical Center,
Portland and Oregon Health Sciences Center. Data from the physician sponsored
trial indicated more frequent and stronger regulatory T-cell responses in
multiple sclerosis patients who received TCR vaccines compared to placebo. In
addition, patients who responded immunologically to the vaccines experienced
clinical benefit as assessed by neurologists. The Company plans to confirm these
data in a company sponsored trial which is expected to be initiated by year end
1996.
There can be no assurance that any of the Company's potential products will be
successfully developed, receive the necessary regulatory approvals or be
successfully commercialized.
The Company has financed its operations primarily through the private sale and
issuance of equity securities. Additional cash has been received in connection
with certain credit financing arrangements. To date, substantially all of the
Company's expenditures have been for research and development activities. The
Company has incurred operating losses since its inception and had an accumulated
deficit of $26.5 million at June 30, 1996. The Company will require additional
funds to complete the development of its products and to fund operating losses
which are expected in the next several years. The Company does not expect its
products to be commercialized for the next several years.
RESULTS OF OPERATIONS
Research and development expenses increased to $2.9 million and $5.0 million for
the three and six months ended June 30, 1996, respectively, compared to $2.0
million and $4.7 million for comparable periods in 1995, respectively. This
increase was due primarily to increases in personnel staffing, the expansion of
clinical trials, the production of clinical supplies and increased outside
services required to support operations in 1996. Research and development
expenses are expected to continue to increase due to continued expansion of
development activities, including progression of clinical trials and possible
acquisition of new products and technologies.
General and administrative expenses increased to $1.0 million and $2.3 million
for the three and six months ended June 30, 1996, respectively, compared to $0.3
million and $0.7 million for comparable periods in 1995, respectively. This
increase is due primarily to increased support costs associated with operating
as a public company, including costs related to strengthening the senior
management team. The Company expects to continue to incur general and
administrative costs at approximately the current level over the near term.
Interest income increased to $0.4 million and $0.6 million for the three and six
months ended June 30, 1996, respectively, compared to $0.1 million and $0.2
million for comparable periods in 1995, respectively. This increase in interest
income is due to higher average cash and investment balances held by the Company
during the first two quarters of 1996 than during the comparable periods in
1995. Interest earned in the future will depend on Company funding cycles and
prevailing interest rates. Interest expense increased to $0.2 million and $0.5
million for the three and six months ended June 30, 1996, respectively, compared
to $0.1 million and $0.2 million for comparable periods in 1995, respectively.
This increase in interest expense is due to higher balances outstanding for
obligations under capital leases and loans, and notes payable.
The Company incurred net losses of $3.8 million and $7.2 million for the three
and six months ended June 30, 1996, respectively, compared to $2.3 million and
$5.3 million for comparable periods in 1995, respectively. The Company expects
to incur substantial additional losses over the next several years. The losses
are expected to fluctuate from period to period based on timing of raw material
purchases, manufacturing scale-up activities and clinical activities.
- 9 -
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception through June 30, 1996
primarily through private sale and issuance of equity securities and from the
proceeds of its initial public offering in February 1996.
Working capital increased to $20.7 million at June 30, 1996, compared to working
capital of $5.8 million at December 31, 1995, due to the receipt of
approximately $25.6 million in net proceeds from the initial public offering,
offset by cash used in operations of approximately $6.3 million for the six
months ended June 30, 1996 and the repayment of $2.2 million in notes
outstanding pursuant to certain technology licensing agreements. At June 30,
1996, the Company had cash, cash equivalents and short-term investments totaling
$24.8 million, compared to $9.0 million at December 31, 1995. It is generally
the Company's policy to invest these funds in highly liquid securities, such as
interest-bearing money market funds, corporate debt, commercial paper and
federal agency notes.
For the six months ended June 30, 1996, additions of equipment and leasehold
improvements totaled $0.5 million of which approximately $0.4 million was
financed through capital lease and loan arrangements. Total additions for
equipment and leasehold improvements for the period from inception to December
31, 1995, totaled $1.9 million of which $1.6 million was financed through
capital lease and loan arrangements. At June 30, 1996, the Company had invested
$2.4 million in property and equipment, and had approximately $1.2 million
available for borrowing under its capital loan arrangement.
The Company believes that proceeds from its initial public offering in February
1996, together with available cash and cash equivalents, short-term investments
and amounts available under a capital loan agreement, will be sufficient to meet
the Company's operating expenses and capital requirements into 1997. The Company
expects to incur substantial additional development costs, including costs
related to clinical trials and manufacturing expenses. As a result, the Company
will require substantial additional funds prior to reaching profitability and
may attempt to raise additional funds through equity or debt financings,
collaborative arrangements with corporate partners or from other sources. There
can be no assurance that additional funds will be available for the Company to
finance its ongoing operations on acceptable terms, if at all.
The Company's future capital uses and requirements are expected to increase in
future periods and will depend on numerous factors, including the progress of
its research and development programs, the progress of pre clinical and clinical
testing, the time and costs involved in obtaining regulatory approvals, the cost
of filing, prosecuting, and enforcing patent claims and other intellectual
property rights, competing technological and market developments, the ability of
the Company to establish collaborative arrangements, the acquisitions of new
products and technologies, and the development of commercialization activities.
- 10 -
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Number Exhibit Table
3.1* Restated Certificate of Incorporation of Registrant
and Certificate of Amendment thereto
3.2* Bylaws of Registrant
3.3* Form of Amended and Restated Certificate of
Incorporation filed with the Delaware Secretary of
State to effect the Company's one-for-4.4477
reverse stock split
3.4* Form of Amended and Restated Certificate of
Incorporation filed with the Delaware Secretary of
State upon the closing of the Company's initial
public offering
3.5* Form of Bylaws effective upon the closing of the
Company's initial public offering
4.1* Form of Common Stock Certificate
10.1* Form of Indemnification Agreement
10.2* 1994 Stock Plan and form of Option Agreement and
Stock Purchase Agreement
10.3* 1995 Employee Stock Purchase Plan and form of
Subscription Agreement
10.4* 1995 Directors' Stock Option Plan and form of
Option Agreement
10.5* Third Amended and Restated Registration Rights
Agreement dated February 14, 1995 among the
Registrant and certain security holders of the
Registrant and Amendments Nos. 1 and 2 thereto
dated May 31, 1995 and September 28, 1995
10.6+* License Agreement dated September 27, 1993, between
Genentech, Inc. and the Company, Amendment dated
July 14, 1994, and side letter agreement dated
November 17, 1994
10.7+* Subordinated Promissory Note, dated June 3, 1994,
payable to XOMA Corporation
10.8* Assignment and Assumption Agreement, dated June 3,
1994, by and between the Company and XOMA
Corporation
10.9+* Technical Collaboration and Manufacturing
Agreement, dated May 24, 1994, by and between the
Company and Scios Nova Inc.
10.10+* Technology Acquisition Agreement dated June 3, 1994
by and between the Company and XOMA Corporation,
and License Agreement dated February 27, 1990 by
and between Arthur A. Vandenbark, Ph.D. and XOMA
Corporation
10.11+* Agreement on Interferon Gamma-1B dated December 8,
1995 by and between the Company and Genentech, Inc.
10.12+* Equipment Lease Line, dated May 31, 1994 with Lease
Management Services, Inc.
10.13+* Business Loan Agreement, dated July 19, 1995,
between the Company, Silicon Valley Bank and
MMC/GATX Partnership No. 1
10.14+* Research Collaboration and Assignment Agreement,
dated July 1, 1994, between the Company and Dr.
Arthur A. Vandenbark
10.15* Employment and Bonus Agreement between the Company
and Edward Amento, dated
- 11 -
<PAGE> 12
November 17, 1993
10.16* Secured Loan Agreements between the Company and
Edward Amento dated November 1, 1993 and July 11,
1994, respectively
10.17* Consulting Agreement dated November 17, 1993
between the Company and Brian Seed
10.18* Consulting Agreement dated November 17, 1993
between the Company and Eugene Bauer
10.19* Employment Agreement dated June 9, 1994 between the
Company and Thomas Wiggans
10.20* Loan Agreements between the Company and Thomas
Wiggans dated July 15, 1994 and August 1, 1994
10.21* Letter Agreement with G. Kirk Raab dated October 1,
1995
10.22* Sublease Agreement with Systemix dated December 6,
1993
10.23* Facility Master Lease between the Company and
Renault & Handley dated February 9, 1994
10.24* Master Bridge Loan Agreement between the Company
and certain investors dated December 7, 1995
10.25* Agreement with William Albright dated November 17,
1995
10.26* Loan and Security Agreement dated December 21, 1995
by and among the Company, Silicon Valley Bank and
MMC/GATX Partnership No. 1
10.27++ Agreement on Relaxin Rights in Asia dated April 1,
1996 between the Company and Mitsubishi Chemical
Corporation
10.28++ Soltec License Agreement dated June 14, 1996
27.1 Financial Data Schedule
-----------------
* Incorporated by reference to exhibit of the same
number in the Company's Registration Statement on
Form S-1 and Amendments No. 1, 2, 3, and 4 thereto
(Registration No. 33-80261) which became effective
on January 31, 1996.
+ Confidential treatment has been granted as to
certain portions of this Exhibit by the Securities
and Exchange Commission.
++ Confidential treatment has been requested as to
certain portions of this Exhibit
(b) Reports on Form 8-K.
None.
- 12 -
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONNECTIVE THERAPEUTICS, INC.
By: /s/ CYNTHIA M. BUTITTA
--------------------------------
Cynthia M. Butitta
Vice President, Finance and Administration
and Chief Financial Officer
Date: July 18, 1996
- 13 -
<PAGE> 1
EXHIBIT 10.27
AGREEMENT ON RELAXIN RIGHTS IN ASIA
THIS AGREEMENT, is effective April 1, 1996, by and between Connective
Therapeutics, Inc., ("CONNECTIVE"), a corporation of the State of Delaware,
having an address at 3400 West Bayshore Road, Palo Alto, California 94303,
Mitsubishi Chemical Corporation (formerly Mitsubishi Kasei Corporation
"MITSUBISHI"), a corporation organized and existing under the laws of Japan,
having an address at 5-2, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100 Japan, and
Genentech, Inc. ("GENENTECH"), a corporation of the State of Delaware, having an
address at 460 Point San Bruno Boulevard, South San Francisco, California 94080.
WHEREAS, pursuant to an agreement between GENENTECH and MITSUBISHI
dated June 30, 1987 as amended (the "MITSUBISHI Agreement") GENENTECH has
granted to MITSUBISHI an exclusive license for Relaxin in the territory of
Japan, the Republic of Korea and the Republic of China (the "Asia Territory");
and
WHEREAS, pursuant to an agreement dated September 27, 1993 (the
"CONNECTIVE Agreement" a copy of which, redacted for financial terms, is
attached hereto as Exhibit A and incorporated herein by reference), GENENTECH
has granted to CONNECTIVE an exclusive license for Relaxin, worldwide except for
the Asia Territory; and
WHEREAS, pursuant to an amendment to the CONNECTIVE Agreement dated
July 14, 1994 (the "CONNECTIVE Amendment" a copy of which, redacted for
financial terms, is attached hereto as Exhibit B and incorporated herein by
reference) GENENTECH has agreed that upon any re-acquisition by GENENTECH from
MITSUBISHI of rights to Relaxin for the Asia Territory the Territory under the
CONNECTIVE Agreement shall be redefined to include the Asia Territory; and
WHEREAS, for good and valuable consideration as provided herein
MITSUBISHI is willing to relinquish to CONNECTIVE, through GENENTECH, all of its
rights to Relaxin;
NOW, THEREFORE, in consideration of the mutual promises contained
herein CONNECTIVE, MITSUBISHI and GENENTECH agree as follows:
1.0 CERTAIN DEFINITIONS
1.1 Unless otherwise specified, the terms with initial capitalization
in this Agreement shall have the same meanings as those given to them in the
CONNECTIVE Agreement and the MITSUBISHI Agreement.
<PAGE> 2
AGREEMENT ON RELAXIN RIGHTS IN ASIA PAGE 2
2.0 LICENSE GRANT
2.1 MITSUBISHI hereby returns to GENENTECH and relinquishes all of
MITSUBISHI's rights specifically including the rights to make, use and sell
Relaxin under the MITSUBISHI Agreement. By execution of this Agreement,
MITSUBISHI's due diligence obligations pursuant to Section 2.11 of the
MITSUBISHI Agreement, to the extent such obligations pertain to relaxin, shall
be deemed to have been satisfied.
2.2 The Territory under the CONNECTIVE Agreement as amended is hereby
redefined to include the Asia Territory.
2.3 MITSUBISHI hereby grants to CONNECTIVE a worldwide non-exclusive
license under any of MITSUBISHI's intellectual property rights held as of the
effective date of this Agreement, which would be infringed by CONNECTIVE's or
its sub-licensees' manufacture, use or sale of Relaxin ("MITSUBISHI I.P.").
3.0 ROYALTIES
3.1 CONNECTIVE shall pay MITSUBISHI a royalty in the amount of [*] of
CONNECTIVE's Net Sales of each Relaxin Product and Combination Product
containing Relaxin in each country within the Asia Territory where such Relaxin
Product or Combination Product is within the scope of a valid claim of one or
more Patent Rights in such country, to be calculated and paid to MITSUBISHI in
the manner provided for royalties owed to GENENTECH in the CONNECTIVE Agreement
as amended.
3.2 CONNECTIVE shall pay GENENTECH such royalties as are required under
the CONNECTIVE Agreement as amended, including the Asia Territory within the
scope of Territory as defined therein.
3.3 The provisions of Section 4.1.2 through Section 4.1.7 of the
CONNECTIVE Agreement shall apply to the payment to MITSUBISHI pursuant to
Section 3.1 above mutatis mutandis.
4.0 TERM
4.1 Unless otherwise terminated earlier, the licenses from MITSUBISHI
and the royalty obligations to MITSUBISHI under this Agreement will
automatically expire on a country-by-country basis upon the later of either: (i)
12 years from first commercial sale of a Relaxin Product, or (ii) the expiration
(or revocation) of the last to expire (or to be revoked) of the Patent Rights in
each country in the Asia Territory with respect to such Licensed Product. After
the expiration of the license in each such country, CONNECTIVE shall have a
fully paid, non-revocable license under any MITSUBISHI I.P. in that country.
4.2 The provisions of Section 7.2 of the CONNECTIVE Agreement shall
apply to this Agreement mutatis mutandis.
*Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 3
AGREEMENT ON RELAXIN RIGHTS IN ASIA PAGE 3
5.0 GENERAL PROVISIONS
5.1 This Agreement shall be interpreted and enforced in accordance with
the laws of California (regardless of the choice of law principles of California
or any other jurisdiction).
5.2 If any provision of this Agreement is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction: such provision will be
deemed amended to conform to applicable laws of such jurisdiction so as to be
valid and enforceable, or, if it cannot be so amended without materially
altering the intention of the parties, it will be stricken; the validity,
legality and enforceability of such provision will not in any way be affected or
impaired thereby in any other jurisdiction; and the remainder of this Agreement
will remain in full force and effect.
5.3 Any notice, requests, delivery, payment, approval or consent
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been sufficiently given if delivered in person, via
courier, or sent by registered or certified mail at the address first set forth
above.
5.4 This Agreement may be executed in three or more counterparts, each
of which shall be deemed an original for all purposes, but all of which together
shall constitute one and the same instrument.
5.5 This Agreement sets forth the entire agreement of the parties with
respect to the subject matter hereof. This Agreement may not be modified except
by a writing signed by the parties' authorized representatives.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first written above.
CONNECTIVE MITSUBISHI CHEMICAL GENENTECH, INC.
THERAPEUTICS, INC. CORPORATION
By: /s/Thomas G. Wiggans /s/Yousuke Ariyoshi /s/Cynthia J. Ladd
--------------------- ------------------- ------------------
Name: Thomas G. Wiggans Yousuke Ariyoshi Cynthia J. Ladd
--------------------- ------------------- ------------------
Title: President & CEO Managing Director VP - Corporate Law
--------------------- ------------------- --------------------
President, Pharmaceuticals
and Diagnostics Company
<PAGE> 4
EXHIBIT A
Filed on Form S-1 as Exhibit 10.6 to the
Company's Registration Statement on Form S-1 (Reg. No. 33-80261)
with the Securities and Exchange Commission on December 12, 1995
<PAGE> 1
EXHIBIT 10.28
LICENSE AGREEMENT
THIS AGREEMENT, effective June 14, 1996, is between Soltec Research PTY Limited
("SOLTEC"), an organization organized under the laws of Australia (A.C.N. 006
363 891), having an address at 8 Macro Court, Rowville, Victoria 3178 Australia
and Connective Therapeutics, Inc. ("CONNECTIVE"), a corporation organized under
the laws of Delaware, having an address at 3400 West Bayshore Road, Palo Alto,
California 94303 U.S.A.
WHEREAS, SOLTEC owns or is licensed under all rights of whatsoever nature for
the Territory for a betamethasone mousse product (the "Product"); and
WHEREAS, pursuant to the Exclusive Option Letter Agreement dated March 25, 1996
as amended on even date herewith (copies attached as Exhibit A). CONNECTIVE has
acquired from SOLTEC an exclusive Option for a license to the exclusive rights,
including the right to grant sub-licenses, under SOLTEC's entire rights in and
to such Product for the Territory; and
WHEREAS, CONNECTIVE wishes to exercise its Option for the Product;
NOW, THEREFORE, IT IS HEREBY AGREED as follows:
1. DEFINITIONS
1.1 "Affiliate" shall mean in respect of either party any corporation or
business entity controlled by, controlling, or under common control
with SOLTEC or CONNECTIVE, respectively. For this purpose "control"
shall mean the direct or indirect beneficial ownership of at least
fifty percent (50%) of the voting stock of, or at least fifty percent
(50%) interest in the income of, such corporation or other business
entity, or such other relationship as, in fact, constitutes actual
control.
1.2 "Market Exclusivity" shall mean the absence of sales of a betamethasone
mousse or equivalent quick break foam product by any party other than
CONNECTIVE, its Affiliates or its sub-licensees.
1.3 "MEDEVA" shall mean Medeva PLC, having a registered office at 10 St.
James's Street, London SW1A 1EF England, i.e., the organization that is
SOLTEC's exclusive licensee for the Product outside the Territory.
1.4 "Territory" shall mean the NAFTA countries, i.e., The United States of
America, Canada and Mexico.
1.5 "NDA" shall mean a new drug application filed with the United
States Food and Drug Administration ("FDA").
1.6 "Net Sales" shall mean the proceeds actually received by CONNECTIVE,
its Affiliates and its sub-licensees from the sale of Product to
non-affiliated purchasers less:
(a) trade, quantity and cash discounts actually allowed and taken;
(b) credits actually allowed on account of the rejection or
return or billing error relating to any Product previously
billed and paid;
(c) freight, other transportation and insurance costs; and
(d) taxes imposed on account of such sale (including, without
limitation, sales, value-added and distribution taxes).
<PAGE> 2
SOLTEC/CONNECTIVE
License Agreement
Page 2
1.7 "Patent(s)" shall mean all patents, and patent applications and any
patents issuing therefrom, together with any extensions, reissues,
reexaminations, substitutions, renewals, divisions, continuations,
continuations-in-part and NAFTA counterparts thereof or therefor, in
the possession of, licensed to or otherwise controlled by SOLTEC
presently or hereafter during the term of this Agreement, that directly
claim or relate to the manufacture, use or sale of the Product in the
Territory, including without limitation, PCT application GB96 00490,
filed March 1, 1996 and claiming priority from UK application
9504265.1, filed March 5, 1995 (copy attached as Exhibit B).
1.8 "Product" shall mean the betamethasone mousse product, as described in
the Product Specification (copy attached as Exhibit C), and as further
described in the MCA Marketing Authorisation Application under the
Marketing Authorisation Type and Number PL0039/0488 (copy of Section 1
attached as Exhibit D).
1.9 "Product Information" shall mean the dossier, data and results of
clinical and other trials and investigations relating to the Product,
including the MCA Marketing Authorisation Application under the
Marketing Authorisation Type and Number PL0039/0488 and the right of
cross-reference thereto, together with all other information relating
to the specification of the Product and information relating to the
manufacture (including method, conditions, and process equipment),
testing (including quality control standards, assay methods and
stability studies), storage and use of the Product now or hereafter
during the term of this Agreement in the possession or under the
control of SOLTEC or any Affiliate (including by way of agreement with
MEDEVA).
1.10 "Proprietary Information" shall mean any information of value, not
generally known to the public, including (but not limited to):
(a) the Product Information; the development status of the
Product; Product indications and modes of administration;
technical information, such as clinical, biological,
pharmaceutical and characterizing data; and know-how; and
(b) business information, such as reports; records; customer
lists; supplier lists; marketing and sales plans; financial
information; costs; and pricing information.
1.11 "Quarter" shall mean in respect of each calendar year, a period of
three consecutive calendar months beginning January 1, April 1, July 1
and October 1 and ending March 31, June 30, September 30 and December
31, respectively.
1.12 "Transfer Date" shall mean 20 May 1996.
1.13 "Valid Claim" shall mean a claim of an issued, unexpired Patent in the
Territory that has not been abandoned for any reason, which, but for
the license to CONNECTIVE hereunder would be infringed by CONNECTIVE's
manufacture, use or sale of a Product, which claim has not been held
invalid or unenforceable by a decision of a court of competent
jurisdiction, unappealable or unappealed within the time allowed for
appeal, and which has not been admitted to be invalid through reissue,
reexamination or disclaimer.
2. GRANT/ACQUISITION OF RIGHTS
2.1 With effect from the Transfer Date and for the consideration referred
to in Section 5 below SOLTEC hereby sells and assigns and CONNECTIVE
agrees to purchase the following rights in the Territory free from all
liens, interests or equities, charges and encumbrances, namely: the
Product and the Product Information.
<PAGE> 3
SOLTEC/CONNECTIVE
License Agreement
Page 3
2.2 With effect from the Transfer Date and for the consideration referred
to in Section 5 and, to the extent required to enable CONNECTIVE to
develop, manufacture, use and/or sell the Product directly or
indirectly, SOLTEC hereby grants to CONNECTIVE (or agrees to procure
the grant to CONNECTIVE without additional obligation of CONNECTIVE to
make payments pursuant to Section 5 or otherwise) an irrevocable
exclusive license under the Patents in the Territory with the right to
sub-license.
2.3 SOLTEC undertakes to do all such acts and provide all such formal
assignments, transfers and licenses as may be legally permissible and
appropriate to ensure that CONNECTIVE or its nominees or assigns
acquires all SOLTEC's rights (including sub-contracting and
sub-licensing) to use, manufacture, distribute and market, directly or
indirectly, the Product in the Territory as from the Transfer Date.
2.4 CONNECTIVE is hereby granted the right to communicate, contract
directly with, visit and inspect MEDEVA's manufacturer(s) for the
Product (presently CCL) to obtain a source of supply for the Product as
manufactured for MEDEVA presently and in the future pursuant to any
marketing authorisation resulting from the MCA Marketing Authorisation
Application under the Marketing Authorisation Type and Number
PL0039/0488, and a non-exclusive license under any patent
(substantially as defined above) that would be infringed by the
manufacture of the Product outside the NAFTA Territory for use and/or
sale in the Territory.
3. TECHNOLOGY TRANSFER AND ASSISTANCE
3.1 Promptly after the Transfer Date SOLTEC shall transfer and communicate
the Product Information to CONNECTIVE or its nominees or assigns. Until
such transfer is completed, SOLTEC will allow CONNECTIVE or its
representatives or nominees or assigns to inspect and/or to be provided
with copies of all such information.
3.2 At CONNECTIVE's request, SOLTEC shall promptly provide to CONNECTIVE or
its nominees or assigns such technical assistance and the services of
its suitably qualified staff as may reasonably be required to assist
CONNECTIVE or its nominees or assigns to acquire a proper understanding
of the Product Information, whether at CONNECTIVE's premises or at
SOLTEC's premises, at SOLTEC's cost and expense. The obligation to
provide such assistance shall terminate twelve months after the
beginning of manufacture of the Product by CONNECTIVE or its nominee or
assignee as the case may be. Where the provision of assistance requires
the attendance of SOLTEC's staff in the US this shall be limited to two
visits per calendar year at SOLTEC's expense.
3.3 As part of or in addition to the foregoing, SOLTEC shall assist
CONNECTIVE as provided in Exhibit E.
4. PRODUCT DEVELOPMENT
4.1 It shall be CONNECTIVE's responsibility to apply for product licenses
and other marketing authorizations in the Territory. Except in the
event of unforseen complications, CONNECTIVE's application for Canada
shall be filed within three (3) years, and in Mexico five (5) years,
starting from the effective date of this Agreement, failing which
SOLTEC shall have the option, upon notice as provide in Sections 9.3
and
<PAGE> 4
SOLTEC/CONNECTIVE
License Agreement
Page 4
9.4 below, to rescind CONNECTIVE's license hereunder for such
country within the Territory.
4.2 All product licenses and marketing authorizations for the Product in
the Territory shall be and remain the property of CONNECTIVE.
4.3 CONNECTIVE and SOLTEC shall make available to each other during the
term of this Agreement all safety data obtained, including any details
regarding complaints and adverse event reports relating to the use of
the Product.
4.4 Upon SOLTEC's request, CONNECTIVE shall make available to SOLTEC all
Product-related clinical data obtained during the term of this
Agreement, for SOLTEC's use in assisting other licensees product
registration efforts outside the Territory. SOLTEC agrees that such
information will be provided to other licensees only under written
obligation of confidentiality equivalent to the provisions of this
Agreement, and only upon payment to CONNECTIVE of the Clinical Data
Access Fee provided in Section 5.12 below.
5. CONSIDERATION
5.1 CONNECTIVE agrees to pay SOLTEC a "License Fee" of [*] payable as
follows: [*] upon signing this License Agreement, [*] upon filing of
CONNECTIVE's NDA for a Product, and [*] upon approval of CONNECTIVVE's
NDA for a Product.
5.2 SOLTEC hereby acknowledges receipt of CONNECTIVE's Option Fee of
[*], and that such Option Fee is fully creditable against the License
Fee of Section 5.1 as follows: [*] upon signing this License Agreement
and [*] upon approval of CONNECTIVVE's NDA for a Product.
5.3 CONNECTIVE will pay SOLTEC a royalty on Net Sales of Product in the
Territory as follows:
(a) [*] of Net Sales by CONNECTIVE or an Affiliate of Product in
a country in the Territory where such Product is covered by a
Valid Claim of a Patent;
(b) [*] of Net Sales by an unaffiliated third party CONNECTIVE
sub-licensee of Product in a country in the Territory where
such Product is covered by a Valid Claim of a Patent;
(c) [*] of Net Sales by CONNECTIVE or an Affiliate of Product in
a country in the Territory where such Product is not covered
by a Valid Claim of a Patent, but where CONNECTIVE Retains
Market Exclusivity;
(d) [*] of Net Sales by an unaffiliated third party CONNECTIVE
sub-licensee of Product in a country in the Territory where
such Product is not covered by a Valid Claim of a Patent,
but where CONNECTIVE and/or its sub-licensee retains Market
Exclusivity;
(e) [*] of Net Sales by CONNECTIVE or an Affiliate of Product in
a country in the Territory where such Product is not covered
by a Valid Claim of a Patent and where CONNECTIVE does not
retain Market Exclusivity;
*Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 5
SOLTEC/CONNECTIVE
License Agreement
Page 5
(f) [*] of Net Sales by an unaffiliated third party CONNECTIVE
sub-licensee of Product in a country in the Territory where
such Product is not covered by a Valid Claim of a Patent and
where CONNECTIVE and/or its sub-licensee does not retain
Market Exclusivity.
5.4 All royalties payable on Net Sales pursuant to this Agreement shall be
paid within two (2) months after the close of the Quarter during which
the Net Sales were actually made. Each royalty payment shall be
accompanied by a statement that sets forth Net Sales during the Quarter
in question and the royalty payment due thereon.
5.5 Unless the parties agree otherwise in writing, the royalties of Section
5.3 will be paid in U.S. Dollars. Royalties with respect to sales made
for other than U.S. Dollars shall be computed in U.S. Dollars by
converting the Net Sales in the currency of the country in which the
sales are made at the average exchange rate for U.S. Dollars prevailing
over the last calendar month of the Quarter during which the Net Sales
were actually made. The exchange rate shall be the rates published the
by the Wall Street Journal, and if it does not publish any such rate or
if it is no longer published, a comparable publication to be agreed
upon from time to time by the parties.
5.6 If the royalties provided for under this Agreement are greater than the
maximum royalties permitted by the laws or regulations of a particular
country, the royalty payment with respect to sales in such country
shall be equal to such maximum permitted royalty.
5.7 If any taxes, withholding or otherwise, are levied by any taxing
authority in connection with the accrual or payment of royalties under
this Agreement, CONNECTIVE shall have the right to pay such taxes to
the local taxing authorities on behalf of SOLTEC and to remit to SOLTEC
in full satisfaction of its royalty obligations under this Agreement
the net amount due after reduction by the amount of such taxes,
together with evidence of payment of such taxes.
5.8 No royalty payment shall be made with respect to any sale or transfer
of a product between and among CONNECTIVE, its Affiliates, its
sub-licensees and its distributors. No multiple royalties shall be
payable on account of the sale of any Product, regardless of whether or
not more than one patent, or patent and other intellectual property
rights, exist(s) covering such Product in any country. No royalty shall
be payable with respect to samples provided free of charge to
physicians.
5.9 CONNECTIVE shall keep records of all items in accordance with generally
accepted accounting principles in effect in the respective country
where royalties are due and to regularly maintain such records in
sufficient detail to permit calculation of Net Sales. Such records
shall be retained for three (3) years after the end of the relevant
Quarter.
5.10 SOLTEC shall have the right to nominate an independent firm of
certified public accountants reasonably acceptable to CONNECTIVE to
verify records of CONNECTIVE and for one (1) year thereafter, the
calculation of any royalties payable under this Agreement with respect
to the preceding calendar year. Such verification shall not occur more
than once each calendar year during the term of this Agreement and
shall be conducted during normal business hours. The fees and expenses
of the accountants performing such verification shall not be borne by
CONNECTIVE. The accountants appointed hereunder shall not be authorized
to disclose to SOLTEC any information other than the accuracy or
inaccuracy of the item(s) to be verified.
*Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 6
SOLTEC/CONNECTIVE
License Agreement
Page 6
5.11 The royalties payable hereunder shall be reduced by the amount of any
consideration CONNECTIVE pays if required to obtain a patent license
from a third party in order to make, use or sell Product in the
Territory.
5.12 Prior to any use of clinical data provided under Section 4.4 to support
a product registration, SOLTEC shall pay CONNECTIVE a Clinical Data
Access Fee in the amount of [*].
6. PATENTS
6.1 SOLTEC confirms that the Patents represent the only patent protection
it and its Affiliates and related companies (including MEDEVA) has
applied for in relation to its hydroalcoholic mousse delivery system.
6.2 SOLTEC shall retain title to the Patents (except to the extent owned by
MEDEVA) and to any patent rights and know-how related to the Product
developed solely by SOLTEC in the future. CONNECTIVE shall retain title
to any patent rights and know-how related to the Product developed
solely by CONNECTIVE in the future. Any patent rights and know-how
related to the Product developed jointly by SOLTEC and CONNECTIVE in
the future shall be owned in equal undivided half interests by SOLTEC
and CONNECTIVE.
6.3 SOLTEC (except to the extent a patent is owned by MEDEVA, and in that
case SOLTEC represents that MEDEVA) shall be responsible for the
prosecution and maintenance of the Patents at SOLTEC's (or MEDEVA's)
expense, in consultation with CONNECTIVE. Soltec (or MEDEVA) shall keep
CONNECTIVE promptly informed of the status of prosecution of the
Patents, including providing copies of all material correspondence with
the U.S. or other Patent Office. CONNECTIVE shall have the right to
comment upon and make suggestions for such prosecution and SOLTEC (or
MEDEVA) agrees to give such comments and suggestions due consideration
and not unreasonably to refuse to implement CONNECTIVE's comments and
suggestions.
6.4 CONNECTIVE shall assist SOLTEC (or MEDEVA) in prosecuting the Patents
as contemplated by Section 6.3 above. If SOLTEC (or MEDEVA) decides to
discontinue prosecution or maintenance of any or all of the Patents, at
its option CONNECTIVE may elect to continue such prosecution and
maintenance at its own expense, upon which election title to such
Patent(s) shall be assigned to CONNECTIVE.
6.5 If either party learns that a third party is infringing the Patents, it
shall promptly notify the other in writing. The parties shall use
reasonable efforts in cooperation with each other to stop such patent
infringement without litigation. If such efforts are unsuccessful,
SOLTEC shall have the responsibility to remove the infringement of the
Patents, including, without limitation, initiating suit. If SOLTEC
decides not to take such steps to remove the infringement within three
(3) months of discovering or being notified of the infringement,
CONNECTIVE may, but shall not be required to do so. Any legal action
taken under this section will be a the expense of the party by whom
suit is filed and will be controlled by the party bringing suit. The
party not bringing suit may choose to be represented in any such action
by counsel of its own choice at its own expense. If CONNECTIVE elects
to bring suit, for the duration of such litigation CONNECTIVE's royalty
payments shall be calculated according to Sections 5.3(e) and 5.3(f).
The party bringing suit shall be reimbursed for its costs associated
with bringing suit with the proceeds of any damages or costs recovered.
Any moneys
*Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 7
SOLTEC/CONNECTIVE
License Agreement
Page 7
remaining shall be split between the parties on an equitable basis
proportional to their respective damage from the infringement. If
both parties bring suit, equitable apportionment of the costs and
damages to be recovered shall be agreed upon before the filing of the
suit.
6.6 If a notice of infringement is received by, or a suit is initiated
against either SOLTEC or CONNECTIVE with respect to the Product as
made, used or sold in the Territory, the parties will in good faith
discuss the best way to respond.
7. COVENANTS, WARRANTIES AND GUARANTEE
7.1 SOLTEC covenants with CONNECTIVE that unless authorized to the contrary
by CONNECTIVE in writing it will not disclose any of the Product
Information to any third party, except MEDEVA, and will keep the same
confidential save as may be required to comply with any regulatory
obligations or Court order and save for information which enters into
the public domain through no fault of SOLTEC, its nominees, licensees
or assigns. For the avoidance of doubt CONNECTIVE acknowledges that
subject to 7.3 below SOLTEC is free to disclose any and all of its
information regarding its hydroalcoholic mousse delivery system to
third parties provided such information is not specific to the use of
such delivery system for betamethasone or any other active agents
and/or uses of the delivery system that are the subject of CONNECTIVE's
remaining Option under the Option Agreement.
7.2 SOLTEC covenants that it is not aware of any outstanding claims
concerning its hydroalcoholic mousse delivery system, the Product, or
its method of manufacture or concerning any of the rights to be
assigned or transferred to CONNECTIVE hereunder.
7.3 SOLTEC shall not use, manufacture, distribute or market the Product or
a hydroalcoholic mousse containing a steroid or a steroid salt which is
used for dermal application, within the Territory, nor shall SOLTEC
authorize or purport to authorize any person firm or company other than
CONNECTIVE, its nominees and assigns to do so.
7.4 To the extent that SOLTEC's grant of rights to CONNECTIVE hereunder
stems from MEDEVA (e.g., providing a right of cross reference to
MEDEVA's MCA Marketing Authorisation Application and licensing MEDEVA's
patent application for the Territory and committing to MEDEVA's
cooperation with CONNECTIVE with regard to the prosecution, maintenance
and enforcement thereof), SOLTEC hereby represents and warrants that it
has the full contractual right and authority of MEDEVA to do so (copies
attached as Exhibit F, Purchase Agreement Amendment substantially as
attached).
7.5 SOLTEC additionally warrants to CONNECTIVE in the terms set out in
Exhibit G.
8. INDEMNIFICATION
8.1 SOLTEC hereby undertakes to indemnify and hold harmless CONNECTIVE from
and against any and all liabilities and obligations to third parties
incurred or arising in connection with
(a) failure of the hydroalcoholic mousse delivery system to
operate satisfactorily in the delivery of the appropriate
quantities of betamethasone when used within
<PAGE> 8
SOLTEC/CONNECTIVE
License Agreement
Page 8
expiry date, stored under appropriate conditions and
manufactured in accordance with the specification in Exhibit
C;
(b) claims for breach of third party intellectual property rights
by the manufacture, use and/or sale of Product or the use or
exercise of the intellectual property rights, technology
and/or information transferred to CONNECTIVE hereunder; and
(c) the negligence or willful default of SOLTEC in the performance
of its obligations hereunder including but not limited to the
provision of services and assistance.
Such indemnification shall not apply in respect of any such liabilities
and obligations as arise out of any negligence or wrongful act of
CONNECTIVE its nominees or assigns.
8.2 CONNECTIVE hereby undertakes to indemnify the SOLTEC from and against
all liabilities and obligations incurred or arising in connection with
or arising out of the negligence or willful default in the manufacture
and/or sale by CONNECTIVE and/or its nominees or assigns of the Product
to the extent that such claims are not related to the Product SAVE THAT
SOLTEC shall remain responsible for its warranties as stated in this
Agreement including Schedule III hereto and CONNECTIVE shall have no
responsibility for any liability or damage where the same arises
directly or indirectly from a breach of warranty.
9. GENERAL TERMS AND CONDITIONS
9.1 In order to facilitate this Agreement it will be necessary for the
parties to exchange certain Proprietary Information, each recipient of
which agrees to retain such Proprietary Information in strict
confidence and not to disclose or transfer to any party or use other
than as authorized by the terms of this Agreement or otherwise in
writing by the discloser. The parties hereby acknowledge that such
Proprietary Information can constitute "inside information" for
securities purposes and the responsibility to refrain from any
unauthorized disclosure, trading or other such use. These obligations
of confidentiality and non-use shall not apply to Proprietary
Information: (a) that was previously known to the recipient as
evidenced by recipient's written records, b) that is lawfully obtained
by recipient from a source independent of the discloser, or c) that is
now or becomes public knowledge other than by breach of this Agreement.
These obligations of confidentiality and non-use shall survive the
expiration or termination of this Agreement.
9.2 Arbitration and Applicable Law
Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach or termination thereof shall be settled by
arbitration in accordance with the rules of the American Arbitration
Association then in effect. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. In
any arbitration pursuant to this section, the award shall be rendered
by a majority of the members of a board of arbitration consisting of
three members, one being appointed by each party and the third being
appointed by mutual agreement of the two arbitrators appointed by the
parties. The place of arbitration shall be Palo Alto, California. The
arbitrators shall apply the law of the State of California (regardless
of that jurisdiction's or any other jurisdiction's choice of law
principles).
9.3 Notices
<PAGE> 9
SOLTEC/CONNECTIVE
License Agreement
Page 9
Any notice required or permitted by the terms of this Agreement shall
be given by registered mail, prepaid and properly addressed, or
delivered by hand to SOLTEC or CONNECTIVE at the respective addresses
first given above or at such other address as either party hereto may
designate by notice pursuant hereto. Any such notice shall be deemed to
have been given when received. All notices to CONNECTIVE shall be sent
to the attention of its President, with a copy to Vice President,
Intellectual Property.
9.4 Term and Termination
(a) This Agreement shall come into force with effect from the
Transfer Date and shall remain in force for the longer of ten
(10) years from CONNECTIVE's NDA approval or expiration of the
last to expire Patent having a Valid Claim in the Territory.
(b) If either party hereto breaches any of the terms of this
Agreement, and fails to remedy such breach within two (2)
months after written notice thereof from the other party
pursuant to Section 9.3, the other party may at its option
terminate this Agreement immediately upon written notice
pursuant to Section 9.3 to the breaching party, upon which
event all rights of the breaching party shall terminate upon
the effective date of termination specified in such notice.
9.5 Announcements/Publicity
Subject to the requirements of law and/or The Stock Exchange in London
or New York (Nasdaq), any announcements or publicity (whether verbal or
written, including, but not limited to shareholder reports,
prospectuses, communications with stock market analysts, press releases
or other communications with the media) to be made or given in respect
of this Agreement by either party shall be subject to the prior
approval in writing of the other party (such approval not to be
unreasonably withheld or delayed) where such announcement or publicity
refers to such other party.
9.6 Force Majeure
Neither party shall be liable for failure to perform any duty or
obligation that party may have under this Agreement where such failure
has been occasioned by any Force Majeure which shall mean and include
government regulation, fire, strike, inevitable accident, national
emergency, or any other cause outside the reasonable control of the
party having the duty so to perform. Such failure to perform shall only
be excusable under the provisions of this Section for so long as, and
to the extent that, the same is rendered impossible by Force Majeure.
The party claiming that Force Majeure has occurred shall send to the
other party within five working days of the first occurrence of Force
Majeure full particulars thereof including its date of first occurrence
and of the cause or event giving rise to it. Notwithstanding the relief
granted to any party by this Section, the relevant party shall
nevertheless use its reasonable endeavors in any situation where it has
invoked this Section to perform its relevant obligations as soon as
possible after Force Majeure has ceased.
<PAGE> 10
SOLTEC/CONNECTIVE
License Agreement
Page 10
9.7 Assignment
Save as otherwise agreed this Agreement may not be assigned by either
of the parties but CONNECTIVE shall be entitled to assign or delegate
performance of this Agreement to any company which is an Affiliate of
CONNECTIVE provided that CONNECTIVE shall ensure that any such
Affiliate shall perform in accordance with the terms of this agreement.
For the avoidance of doubt the provisions of this sub-section shall not
prevent CONNECTIVE, or any Affiliate to which it has assigned its
rights, from sub-licensing the rights granted to CONNECTIVE hereunder
provided that such sub-licensing shall be effected on terms which are
not inconsistent or in conflict with the terms of this Agreement and
further provided that CONNECTIVE shall remain responsible for royalty
payments in accordance with the terms of this Agreement on Products
sold by such sub-licensee as if such sales had been made by CONNECTIVE.
9.8 Survival
(a) The covenants and agreements set forth in Sections 2.1 and 2.4
shall survive any expiration of this Agreement and remain in
full force and effect.
(b) The covenants and agreements set forth in Sections 4.2, 8 and
9 shall survive any termination or expiration of this
Agreement and remain in full force and effect regardless of
the cause of termination.
9.9 Nonwaiver of Rights
No failure or delay on the part of a party in exercising any right
hereunder will operate as a waiver of, or impair, any such right. No
single or partial exercise of any such right will preclude any other or
further exercise thereof or the exercise of any other right. No waiver
of any such right will be deemed a waiver of any other right hereunder.
9.10 Headings
Section headings contained in this Agreement are included for
convenience only and form no part of the agreement between the parties.
9.11 Validity of Provisions and Severability
If any provision of this Agreement is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction: such provision
will be deemed amended to conform to applicable laws of such
jurisdiction so as to be valid and enforceable, or, if it cannot be so
amended without materially altering the intention of the parties, it
will be stricken; the validity, legality and enforceability of such
provision will not in any way be affected or impaired thereby in any
other jurisdiction; and the remainder of this Agreement will remain in
full force and effect.
9.12 Entire Agreement
This Agreement sets forth the entire agreement of the parties with
respect to the subject matter hereof. This Agreement may not be
modified except by a writing signed by the parties' authorized
representatives.
<PAGE> 11
SOLTEC/CONNECTIVE
License Agreement
Page 11
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as of
the day and year first above written.
CONNECTIVE THERAPEUTICS, INC. SOLTEC RESEARCH PTY LTD.
By /s/Thomas G. Wiggans By /s/Geoff L. Mullen
------------------------------- -------------------------------
Thomas G. Wiggans Geoff L. Mullen
President & CEO Sales and Marketing Director
Date 7/1/96 Date 7/1/96
------------------------------- -------------------------------
<PAGE> 12
EXHIBIT A
[LOGO] C O N N E C T I V E
T H E R A P E U T I C S
March 25, 1996 - VIA FACSIMILE AND FEDEX
Mr. Geoff Mullen
Sales & Marketing Director
SOLTEC RESEARCH PTY LTD.
8 Macro Court
Rowville
Victoria 3178
AUSTRALIA
Re: Pharmaceutical Mousse Delivery System Technology
Exclusive Option Letter Agreement
Dear Mr. Mullen:
This will confirm that Connective Therapeutics, Inc. ("Connective") is
interested in obtaining from Soltec Research Pty Ltd. ("Soltec") an exclusive
option for the Pharmaceutical Mousse Delivery System Technology, exemplified as
employed with betamethasone valerate as the active agent in the Betamousse
product described in the MCA Marketing Authorisation Application under the
Marketing Authorisation Type and Number PL0039/0488 (the "Technology").
Connective agrees to pay Soltec an Option Fee in the amount of [*] in exchange
for an exclusive option (the "Option") effective March 25, 1996, for one or
more licenses (each, the "License") including the following:
Exclusive rights, including the right to grant sub-licenses, under all
intellectual property (including Soltec's know-how and U.S. Patent
Application Serial No. 403,110, filed March 14, 1995) pertaining to the
Technology for the NAFTA territory, each such License covering the
Technology as employed with a particular active agent and/or use (the
"Product").
An up-front payment (the "License Fee") of [*] payable as follows: [*]
upon signing the License agreement, [*] upon filing of Connective's NDA
for a Product covered by the License, and [*] upon approval of
Connective's NDA for a Product covered by the License. Connective's
Option Fee of [*] shall be fully creditable against the first License
Fee arising upon exercise of the Option granted hereunder.
The remaining terms (including a royalty reasonably related to the
value of the Technology for the Product) of each License are to be
negotiated in good faith between the parties upon exercise of
Connective's Option. For purposes of the License contemplated for the
betamethasone valerate Product, it is agreed that Connective's royalty
payments will be no more than [*] of Connective's net sales (to be
defined), nor more than [*] of net sales by an unaffiliated third
party Connective sub-licensee.
CONNECTIVE THERAPEUTICS, INC.
3400 WEST BAYSHORE ROAD
PALO ALTO, CA 94303
TEL: 415-843-2800
FAX: 415-843-2899
*Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 13
Exlusive Option Letter Agreement
Page 2
Connective's Option shall include all active agents and/or uses of the
Technology set forth in Exhibit A hereto. Connective is further granted the
right of first refusal, on a most favored nations basis, for any additional or
subsequently identified uses of the Technology for Products having current
therapeutic application with active ingredients prescribed by physicians and any
over-the counter versions of prescription Products developed by Connective
hereunder (excluding the surgical antiseptic and pediculocide uses previously
licensed by Soltec, and cosmetic, over-the-counter products including those
currently under discussions between Soltec and third parties), pursuant to
which:
Soltec shall first offer a License for any such additional or
subsequently identified use to Connective prior to offering same to any
third party, such License to be on terms no less favorable than those
to be offered to such third party, and
Connective may notify Soltec of any such additional or subsequently
identified use and receive a License thereto upon payment of the
License Fee of [*], payable as set forth above.
If Connective fails to exercise this Option within One Hundred Twenty (120) days
of the effective date, then the Option shall expire and Connective shall forfeit
one-half of the Option Fee, the other half to be promptly refunded to
Connective. If Connective timely exercises the Option for any Product, then its
option for all other active agents and/or uses of the Technology as set forth in
Exhibit A and right of first refusal shall extend for ten (10) years from the
effective date.
Soltec represents and warrants that it has the full right and authority to
convey the License for the Technology to Connective, and further that there has
been no sale assignment, license or transfer to any person, firm or corporation
which would be inconsistent with these representations and warranties.
If this is acceptable to Soltec, please have this fax executed by Soltec's duly
authorized representative and transmit the signed agreement to me via fax at
415-843-2899 along with payment instructions for the Option Fee, to be paid
within 10 business days of Connective's receipt of the signed fax. We will send
both originals of this Option Letter Agreement, which may be executed in
counterparts, via FedEx for Soltec's execution and the return one fully executed
original to the attention of Mr. David Lowin at Connective.
Very truly yours,
CONNECTIVE THERAPEUTICS, INC. UNDERSTOOD AND ACCEPTED:
SOLTEC RESEARCH PTY LTD.
By /s/Richard J. Hammel By /s/G.L. Mullen
------------------------- --------------------------------
Richard J. Hammel, Ph.D.
Vice President, Name G.L. Mullen
Commercial Development ------------------------------
Title Sales & Marketing Director
-----------------------------
Date March 25, 1996 Date April 1, 1996
----------------------- ------------------------------
c: Mr. Steve Harris
*Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 14
Exclusive Option Letter Agreement
Page 3
EXHIBIT A
ACTIVE AGENTS AND TECHNOLOGY USES
BETAMETHASONE VALERATE, i.e., the active agent in the Betamousse product
described in the MCA Marketing Authorisation Application under the Marketing
Authorisation Type and Number PL0039/0488, and other mid- and high-potency
corticosteroids.
MINOXIDIL and other agents for topical application to the scalp for treatment of
alopecia.
FLUCONAZOLE and other antifungal agents.
HYDROCORTISONE and other antipruretic agents.
BENZOCAINE, LIDOCAINE and other anesthetic agents.
ANALGESIC AGENTS, such as non-steroidal antiinflammatories and capsaicins.
<PAGE> 15
CONFIDENTIAL DISCLOSURE AGREEMENT
THIS AGREEMENT, effective March 13, 1996, by and between Connective
Therapeutics, Inc., ("CONNECTIVE"), a corporation of the State of Delaware,
having an address at 3400 West Bayshore Road, Palo Alto, California 94303, and
Soltec Research Pty Ltd. ("SOLTEC"), having an address at {8 Macro Court,
Rowville, Victoria 3178, AUSTRALIA shall govern the conditions of disclosure to
CONNECTIVE from SOLTEC of certain confidential information relating to the
Banlice Pediculicide patent application (hereinafter referred to as
"INFORMATION").
Written INFORMATION shall be subject to the terms of this Agreement
only if marked "Confidential." Verbally disclosed INFORMATION shall be subject
to the terms of this Agreement only if confirmed as "Confidential" in writing,
within one (1) month of the initial verbal disclosure thereof.
In consideration of SOLTEC's disclosure of said INFORMATION, CONNECTIVE hereby
agrees:
(a) not to use such INFORMATION except for the purpose of
evaluating CONNECTIVE'S interest in the pharmaceutical mousse
delivery system technology; and
(b) not to disclose the INFORMATION to others (except to its
employees, agents, or affiliates who reasonably require same
for the purpose hereof and who are bound by like obligations
as to confidentiality) without SOLTEC's permission, except
that CONNECTIVE shall not be prevented from using or
disclosing information:
(i) which CONNECTIVE can demonstrate by written records was
known to CONNECTIVE before the disclosure hereunder; or
(ii) which is now, or becomes in the future, public knowledge
other than by breach of this Agreement by CONNECTIVE; or
(iii) which is lawfully obtained by CONNECTIVE from a source
independent of SOLTEC; or
(iv) which has been, or is subsequently, disclosed by SOLTEC
to any third party on a non-confidential basis.
<PAGE> 16
CONFIDENTIAL DISCLOSURE AGREEMENT PAGE 2
SOLTEC represents and warrants having the full right and authority to
disclose the INFORMATION to CONNECTIVE.
It is further agreed that the furnishing of INFORMATION to CONNECTIVE
shall not be deemed an admission by CONNECTIVE of the novelty or patentability
of said subject matter.
The obligations of CONNECTIVE under the terms of this Agreement shall
remain in effect for five (5) years from the effective date hereof.
If requested, upon completion of the evaluation, CONNECTIVE shall
return all tangible INFORMATION to SOLTEC, except that CONNECTIVE shall have the
right to retain one (1) record copy of such tangible INFORMATION in its legal
files, to ascertain any continuing obligations to SOLTEC hereunder.
This Agreement shall be interpreted and enforced in accordance with the
laws of California (regardless of the choice of law principles of California and
any other jurisdiction).
CONNECTIVE THERAPEUTICS, INC. SOLTEC RESEARCH PTY LTD.
By /s/Thomas G. Wiggans By /s/Geoffrey L. Mullen
--------------------------- ----------------------------------
Thomas G. Wiggans
President & CEO Print Name Geoffrey L. Mullen
--------------------------
Date 3/13/96 Title Sales and Marketing Director
------------------------- -------------------------------
Date 18th March 1996.
--------------------------------
<PAGE> 17
[LOGO] C O N N E C T I V E
T H E R A P E U T I C S
June 14, 1996
Mr. Geoff Mullen
Sales & Marketing Director
SOLTEC RESEARCH PTY LTD.
8 Macro Court, Rowville
Victoria 3178
AUSTRALIA
Re: Amendment Letter
Dear Mr. Mullen:
This will confirm the understanding reached during our meeting on May 23, 1996
with regard to Connective's Option under the Exclusive Option Letter Agreement
dated March 25, 1996 (the "Letter Agreement").
Having timely exercised the Option with regard to betamethasone valerate,
Connective's option for "all other active agents and/or uses of the Technology
as set forth in Exhibit A" (of the Letter Agreement) and "right of first
refusal, on a most favored nations basis, for any additional or subsequently
identified uses of the Technology" extends until March 25, 2006. Soltec has
requested that the Letter Agreement be amended with regard to the subject matter
encompassed by these continuing rights of Connective. Connective is willing to
accommodate Soltec's request by amending the Letter Agreement to add the
following provisions.
If Soltec is contacted by a third party proposing contract research and
development, or a license under the Pharmaceutical Mousse Delivery
System Technology:
If the proposal entails such third party's own patented active
agent that is not reasonably anticipated to be competitive
with active agent(s) for which Connective's Option has
previously been exercised (e.g., a topical steroid), then
Connective's above-referenced rights shall not preclude Soltec
from accepting the proposal; or
If the proposal entails such third party's own patented active
agent that is reasonably anticipated to be competitive with
active agent(s) for which Connective's Option has previously
been exercised (e.g., a topical steroid), then Connective's
above-referenced rights shall not preclude Soltec from
accepting the proposal under the condition that such
competitive third-party product incorporating the Technology
not be commercialized in Connective's Territory until five (5)
years after the exercise of Connective's Option, and that upon
commercialization Connective's royalty rate for its Product
facing such competition shall be reduced to [*] of Net Sales
by Connective and [*] of Net Sales by a Connective
sub-licensee.
CONNECTIVE THERAPEUTICS
3400 WEST BAYSHORE ROAD
PALO ALTO, CA 94303
TEL: 415-842-2800
FAX: 415-843-2899
*Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 18
Amendment Letter
June 14, 1996
Page 2
Connective's right of first refusal shall be extended to cover any
rights offered to or acquired by Soltec within Connective's Territory
to a Technology Product entailing a third party's patented active
agent.
Otherwise, Connective's Option and right of first refusal shall remain
as set forth in the Letter Agreement.
This Amendment Letter shall also serve to correct the erroneous reference to
U.S. Patent Application Serial No. 403,110, filed March 14, 1995, which
reference should have been PCT application GB96 00490, filed March 1, 1996 and
claiming priority from UK application 9504265.1, filed March 5, 1995.
Please indicate your agreement to the foregoing amendment by executing one of
the duplicate originals of this Amendment Letter.
CONNECTIVE THERAPEUTICS, INC.
By /s/Richard J. Hammel
-----------------------------
Richard J. Hammel, Ph.D.
Vice President
Commercial Development
Date 7-1-96
---------------------------
UNDERSTOOD AND ACCEPTED:
SOLTEC RESEARCH PTY LTD.
By /s/Geoff L. Mullen
-----------------------------
Geoff L. Mullen
Sales and Marketing Director
Date 7-1-96
---------------------------
c: Mr. Steve Harris
Mr. Tom Wiggans
Soltec Option File
<PAGE> 19
EXHIBIT B
CORTICOSTEROID-CONTAINING PHARMACEUTICAL COMPOSITION
[*]
* Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 20
EXHIBIT C
PRODUCT
NAME OF PRODUCT
BETAMETHASONE VALERATE MOUSSE
SPECIFICATION
Betamethasone Valerate Mousse - F37/37/2
<TABLE>
<CAPTION>
Item Approved Name Commercial Name %W/W
<S> <C> <C> <C>
[*]
</TABLE>
* Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 21
EXHIBIT D
MCA MARKETING AUTHORIZATION
APPLICATION
[*]
* Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 22
EXHIBIT E
SOLTEC's ASSISTANCE
1. Provision of formula, manufacturing methods, test specifications,
packaging specification and raw material specifications.
2. Prompt responses to CONNECTIVE or manufacturer's queries with regard to
the technology.
3. Provision of qualified chemist to supervise pre-production or
manufacturing trials. Limited to no more than 2 visits per annum where
the trials do not fit in with a regular visit.
4. Technical improvements to the Products as and when they become
available.
5. Validation of Production Methodology, analysis of Product and
validation of Product assay.
6. Provision of information with regard to any application for patent
protection.
<PAGE> 23
EXHIBIT F
DATED 26th April 1994
SOLTEC RESEARCH PTY LIMITED
- and-
MEDEVA PLC
---------------------------------
PURCHASE AGREEMENT
---------------------------------
[*]
* Confidential treatment has been requested for the omitted language.
All such omitted material has been filed separately with the SEC.
<PAGE> 24
EXHIBIT G
WARRANTIES
For the purpose of the following warranties, where any statement is qualified by
the expression "to the best of SOLTEC's knowledge and belief" or any similar
expression, that statement shall be deemed to include an additional statement
that it has been made after due and careful inquiry. The term 'Delivery System'
where used below shall mean SOLTEC's hydroalcoholic mousse delivery system
itself and when used in conjunction with any active ingredient.
SOLTEC warrants as follows:
1. CAPACITY
SOLTEC has all requisite power and authority to enter into and perform
this Agreement.
2. ACCURACY OF INFORMATION.
2.1 The information given in Exhibit C to this Agreement is true and
accurate in all material respects and is not misleading because of any
omission or ambiguity or for any other reason.
2.2 To the best of SOLTEC's knowledge and belief the Product Information is
at the date hereof complete and accurate in all material respects in
relation to the matters it is expressed to relate to and will be kept
complete and accurate until the same is handed over to CONNECTIVE.
2.3 To the best of SOLTEC's knowledge and belief the information provided
to CONNECTIVE regarding the Product and the Delivery System is not
misleading and is complete and accurate in all material respects and
where SOLTEC has provided data or information which has been extracted
from any other source that information has been correctly extracted is
not misleading and accurately reflects the source material. To the best
of SOLTEC's knowledge information and belief there are no other facts
or matters which render any such information misleading in any material
respects. SOLTEC is not aware of any other fact or matter which has not
been disclosed to CONNECTIVE and which in the reasonable opinion of
SOLTEC may have a material adverse affect on the business of using,
manufacturing, marketing and/or distributing the Product.
3. INVESTIGATIONS
To the best of SOLTEC's knowledge and belief there are not pending or
in existence and SOLTEC is not aware of any event or circumstance which
might give rise to any investigations or inquiries by or on behalf of
any government or other body with respect to or affecting the Product
and or the Delivery System.
<PAGE> 25
EXHIBIT G
Page 2
4. COMPETITIVE PRODUCTS
4.1 There is no product due to be launched (or licensed to a third party)
by SOLTEC or any of its Affiliates following the date hereof which
would compete with the Product.
4.2 SOLTEC has no agreements or arrangements for the manufacture,
distribution or sale of the Product with any other party except MEDEVA.
5. LITIGATION
5.1 Neither SOLTEC nor any Affiliate is engaged in any litigation,
arbitration, administration or criminal proceedings whether as
Plaintiff, Defendant or otherwise with respect to the Product, the
Delivery System or the Patents. No litigation, arbitration,
administrative or criminal proceedings by or against SOLTEC in relation
to the same is threatened and there is no fact or circumstances known
to SOLTEC which SOLTEC reasonably believes is likely to give rise to
any such litigation or arbitration, administrative or criminal
proceedings.
5.2 SOLTEC is not and has never been a party to any undertaking or
assurance given to any court or governmental body, agency or department
with respect to the Product or the Delivery System that could affect
the ability of CONNECTIVE to sell the Product.
5.3 SOLTEC has not received any claim for damages or compensation in the
five years prior to the date hereof arising out of any injury to any
person caused or alleged to have been caused by the Product, the
Delivery System the Product Information or any ingredients of the
Product.
5.4 SOLTEC has not received and is not aware of any complaint or
investigation concerning or relating to the Product and/or the Delivery
System and so far as SOLTEC is aware no regulatory authority or any
other governmental authority is carrying out any investigation into the
efficacy or safety of the Product and/or the Delivery System that.
could affect the ability of CONNECTIVE to sell the Product.
6. COMPLIANCE WITH LEGISLATION
6.1 SOLTEC has at all relevant times tested and developed the Product in
accordance with all relevant legislation to the best of its ability
within the major markets.
7. INTELLECTUAL PROPERTY
7.1 No claim has been made or threatened against SOLTEC alleging any
infringement by the Product and/or the Delivery System of any
trademark, patent or other intellectual property rights of any third
party.
7.2 No claim is outstanding or threatened by SOLTEC alleging any
infringement of the Patents and SOLTEC is not aware of any
circumstances which might give rise to such a claim.
<PAGE> 26
EXHIBIT G
Page 3
7.3 SOLTEC has not granted any license under the Product Information or the
Patents in respect of the Product or a hydroalcoholic mousse containing
a steroid salt and CONNECTIVE will not require any other license of
intellectual property rights in respect of its manufacture, use or sale
of a product containing or using the Delivery System.
7.4 SOLTEC has no interest in or rights to or over any trademarks or
patents or other intellectual property rights relating specifically to
the Product and/or the Delivery System other than the Patents and the
other rights referred to herein.
7.5 None of the processes or materials used in the Delivery System, the
Product or the testing, manufacture or processing thereof infringes any
right of any other person relating to intellectual property or
otherwise or involves the unlicensed use of know-how or confidential
information in circumstances which might entitle that person to make a
claim against SOLTEC or CONNECTIVE or to acquire the use of such
know-how or confidential information to cease.
7.6 The Product Information comprises all information necessary to enable
the Product to be manufactured to the specification (as set out in
Exhibit C) and to be manufactured to the same quality as the Product is
(or other equivalent products are) currently manufactured by or with
the assistance of SOLTEC.
7.7 To the best of SOLTEC's knowledge and belief the Patents will when
granted be valid patents granting effective and enforceable protection
to CONNECTIVE in respect of the Product, its use, manufacture and sale.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 9821
<SECURITIES> 14993
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25053
<PP&E> 2382
<DEPRECIATION> 778
<TOTAL-ASSETS> 27239
<CURRENT-LIABILITIES> 4344
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 44294
<TOTAL-LIABILITY-AND-EQUITY> 27239
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3770
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3770)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3770)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
