<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-22669
---------
AURORA BIOSCIENCES CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0669859
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11010 Torreyana Road, San Diego, CA 92121
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
(858) 404-6600
----------------------------------------------------
(Registrant's telephone number, including area code)
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class July 26, 1999
----- --------------
<S> <C>
Common Stock, $.001 par value 17,153,747
</TABLE>
<PAGE>
AURORA BIOSCIENCES CORPORATION
------------------------------
FORM 10-Q
---------
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets - June 30, 1999 (Unaudited) and December 31, 1998....................................3
Statements of Operations (Unaudited) - Six months ended June 30, 1999 and 1998......................4
Statements of Cash Flows (Unaudited) - Six months ended June 30, 1999 and 1998......................5
Notes to Financial Statements (Unaudited)...........................................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................................................7
PART II. OTHER INFORMATION
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..........................................................12
SIGNATURE...................................................................................................13
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AURORA BIOSCIENCES CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,364,769 $ 9,477,916
Investment securities, available-for-sale 14,814,978 18,547,991
Accounts receivable 7,693,460 3,750,291
Notes receivable from officers and employees -- 210,000
Prepaid expenses 1,220,753 475,927
Other current assets 2,073,373 1,104,249
------------ ------------
Total current assets 37,167,333 33,566,374
Equipment, furniture and leaseholds, net 11,512,103 10,863,357
Notes receivable from officers and employees 170,000 210,000
Restricted cash 748,063 1,096,034
Other assets 4,840,357 5,218,951
------------ ------------
Total assets $ 54,437,856 $ 50,954,716
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,639,959 $ 3,216,696
Accrued compensation 754,652 550,770
Other current liabilities 639,610 391,694
Unearned revenue 7,031,000 2,440,833
Capital lease and loan obligations, current portion 2,312,160 2,024,786
------------ ------------
Total current liabilities 16,377,381 8,624,779
Capital lease and loan obligations, less current portion 4,372,681 4,787,667
Stockholders' equity:
Preferred stock, $.001 par value; 7,500,000 shares authorized and no
shares issued and outstanding -- --
Common stock, $.001 par value, 50,000,000 shares authorized,
17,129,264 and 17,024,919 shares issued and outstanding at June 30,
1999 and December 31, 1998, respectively 17,129 17,025
Additional paid-in capital 61,632,816 61,496,842
Unrealized loss from investments (11,803) --
Deferred compensation (1,362,114) (2,240,606)
Accumulated deficit (26,588,234) (21,730,991)
------------ ------------
Total stockholders' equity 33,687,794 37,542,270
------------ ------------
Total liabilities and stockholders' equity $ 54,437,856 $ 50,954,716
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
3
<PAGE>
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 13,041,714 $ 5,398,639 $ 19,560,778 $ 9,046,360
Operating expenses:
Cost of revenue 7,240,471 5,023,534 13,167,139 8,977,247
Research and development 3,213,468 6,210,560 6,064,413 8,952,079
Selling, general and administrative 3,191,187 1,238,537 5,565,378 2,436,354
------------ ------------ ------------ ------------
Total operating expenses 13,645,126 12,472,631 24,796,930 20,365,680
------------ ------------ ------------ ------------
Loss from operations (603,412) (7,073,992) (5,236,152) (11,319,320)
Interest income 338,952 674,671 722,518 1,416,029
Interest expense (169,030) (162,649) (343,609) (313,425)
------------ ------------ ------------ ------------
Net loss $ (433,490) $ (6,561,970) $ (4,857,243) $(10,216,716)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic and diluted loss per share $ (0.03) $ (0.40) $ (0.29) $ (0.63)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Shares used in computing basic and diluted
loss per share - weighted average common
shares outstanding 16,897,201 16,224,464 16,816,924 16,120,264
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
4
<PAGE>
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (4,857,243) $(10,216,716)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,579,669 1,012,313
Amortization of deferred compensation 475,075 521,164
Changes in operating assets and liabilities:
Accounts receivable (3,943,169) 1,355,250
Prepaid expenses and other current assets (1,713,950) (992,264)
Other assets (605,311) (19,223)
Accounts payable and accrued compensation 2,627,146 1,864,004
Other current liabilities 247,916 (156,444)
Unearned revenue 4,590,167 (684,875)
Other noncurrent liabilities -- 1,182
------------ ------------
Net cash used in operating activities (1,599,700) (7,315,609)
INVESTING ACTIVITIES:
Purchases of short-term investments (2,065,645) (18,359,494)
Sales and maturities of short-term investments 5,786,855 13,250,000
Purchases of property and equipment (347,013) (1,560,151)
Notes receivable from officers and employees 250,000 --
Restricted cash 347,971 247,389
Other assets -- (925,144)
------------ ------------
Net cash provided by (used in) investing activities 3,972,168 (7,347,400)
FINANCING ACTIVITIES:
Issuance of common stock, net 539,495 734,664
Principal payments on capital lease and loan obligations (1,025,110) (681,622)
------------ ------------
Net cash provided by (used in) financing activities (485,615) 53,042
------------ ------------
Net increase (decrease) in cash and cash equivalents 1,886,853 (14,609,967)
Cash and cash equivalents at beginning of period 9,477,916 23,168,690
------------ ------------
Cash and cash equivalents at end of period $ 11,364,769 $ 8,558,723
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 343,609 $ 313,425
------------ ------------
------------ ------------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Property and equipment acquired under capital leases and loans $ 897,498 $ 1,926,922
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
5
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Aurora Biosciences
Corporation ("Aurora" or the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they 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
adjustments, considered necessary for a fair presentation have been
included. Interim results are not necessarily indicative of results for
a full year.
The balance sheet at December 31, 1998 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
These financial statements should be read in conjunction with the
audited financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1998, as filed with the Securities and Exchange Commission ("SEC").
2. COMPREHENSIVE LOSS
Total comprehensive loss was $481,670 and $6,561,970 for the three
months ended June 30, 1999 and 1998, respectively and $4,869,046 and
$10,216,716 for the six months ended June 30, 1999 and 1998,
respectively. Total comprehensive loss for the three and six months
ended June 30, 1999 includes unrealized losses from investments
totaling $48,180 and $11,803, respectively.
3. COLLABORATIVE AGREEMENTS
In June 1999, the Company entered into a five-year services, systems
and technology access agreement for pharmaceutical discovery with
Pfizer Inc. ("Pfizer"). In accordance with the agreement, the Company
will manufacture and install its automated master compound storage
system, ultra-high throughput screening and multiple ion channel lead
discovery platforms and development stations at Pfizer's research
facilities worldwide. The Company will also provide a team of Aurora
scientists to pursue new biologies based on targets selected by Pfizer
for drug discovery, compound profiling and genomics. The agreement also
provides Pfizer with access to Aurora's drug discovery technologies and
certain broad, non-exclusive licenses. The contracted payments to
Aurora amount to approximately $50 million during the five-year
agreement.
6
<PAGE>
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS FORM 10-Q CONTAINS CERTAIN STATEMENTS OF A FORWARD-LOOKING NATURE RELATING
TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY. SUCH
STATEMENTS ARE ONLY PREDICTIONS AND ACTUAL EVENTS OR RESULTS MAY DIFFER
MATERIALLY. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE,
WITHOUT LIMITATION, THOSE DISCUSSED IN THIS ITEM 2 AS WELL AS THOSE DISCUSSED IN
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998
AND FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION.
OVERVIEW
Aurora Biosciences Corporation ("Aurora" or the "Company") combines
innovative biotechnology with its novel, high technology automation and
software to provide solutions to the challenges in drug discovery for the
pharmaceutical and biotechnology industries. Operating activities in 1996 and
1997 focused on the development of an integrated technology platform
comprised of a portfolio of proprietary fluorescent assay technologies for
drug discovery and its highly automated ultra-high throughput screening
system (the "UHTSS-TM-" Platform) applicable to Aurora's miniaturized
NanoWell-TM- Assay Plate format. Through 1998 and the first half of 1999,
while continuing development and manufacture of other UHTSS components, the
Company delivered Module 1, the automated storage and retrieval system of its
UHTSS Platform, to four of its syndicate customers, began development of its
automated master compound storage ("AMCS-TM-") system, continued to
manufacture and deliver certain subsystems to customers, performed screen
development and screening services for customers, and initiated its
functional genomics GenomeScreen-TM- program.
The Company had an accumulated deficit of $26.6 million as of June 30, 1999. The
Company's objective is to focus on increasing revenue in 1999, while controlling
the growth of expenses, and positioning the Company for profitability in 2000.
The Company's ability to achieve profitability will depend in part on its
ability to successfully complete development, manufacture and delivery of the
UHTSS Platform and other systems that meet contractual specifications, continue
to provide screen development and screening services to pharmaceutical and
biotechnology customers and achieve the required further growth of sales of its
systems, services and technologies.
The Company currently generates revenue by developing screens for discovering
new medicines, providing screening services, providing functional genomics
services, developing and providing the UHTSS Platform and other systems and
instruments, as well as licensing its proprietary assay technologies. In the
future, the Company may realize royalty and milestone payments from the
development and commercialization of drug candidates identified by its customers
using Aurora's technologies. The Company believes that its ability to achieve
profitability is not dependent on receipt of any such milestone payments or
royalties, which are not expected for several years, if at all.
The Company may encounter significant fluctuations in its quarterly financial
performance depending on factors such as the development and delivery of
technologies and systems, the completion of contracted service commitments to
Aurora's collaborators, the timing of expenditures to develop its products and
the timing of revenue recognized from future contracts. Accordingly, the
Company's results of operations for any period may not be comparable to, or
predictive of, the results of operations for any future period. Aurora will also
continue to evaluate various strategic opportunities that expand or enhance its
range of services and products. These strategic opportunities could take the
form of joint ventures, acquisitions,
7
<PAGE>
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1999
business combinations, collaborations or licensing agreements. Transactions
of this nature have the potential for enhancing longer-term equity value, but
could also result in earnings fluctuations.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Total revenue increased 142% from the three months ended June 30, 1998 to the
three months ended June 30, 1999 (the "three-month period") and increased 116%
from the six months ended June 30, 1998 to the six months ended June 30, 1999
(the "six-month period"). The increases in revenue resulted primarily from new
agreements entered into since June 30, 1998. These new agreements include a
services, systems and technology access agreement with Pfizer Inc. ("Pfizer"),
an agreement with Warner-Lambert Company ("Warner-Lambert") to develop an AMCS
system, a licensing agreement with Clontech Laboratories, Inc., and screen
development and/or screening services agreements with Pharmacia & Upjohn, Inc.,
Cytovia, Inc. and F.Hoffmann-LaRoche Ltd. (collectively, the "New Agreements").
Also contributing to the increases in revenue were acceptance by a customer of
six of eight subsystems of Module 2 of the UHTSS Platform, acceptance by Merck &
Co. ("Merck") of Module 1 of the UHTSS Platform and screen development milestone
payments from Merck and Warner-Lambert in the first half of 1999.
Total operating expenses increased 9% for the three-month period and 22% for the
six-month period. The increases in operating expenses resulted primarily from
the growth of the Company, reflected by the increase from 130 employees at June
30, 1998 to 169 at June 30, 1999. Cost of revenue increased 44% and 47% for the
three-month and six-month periods, respectively, related to the development of
the UHTSS Platform, the AMCS system and screening subsystems for the Company's
customers, as well as screen development and screening services performed under
the New Agreements. Research and development expenses decreased 48% and 32% for
the three-month and six-month periods, respectively, with a shift of resources
and expenditures to revenue-generating projects as reflected by the New
Agreements. Selling, general and administrative expenses increased 158% and 128%
for the three-month and six-month periods, respectively, due to the growth of
the sales, marketing and business development functions and headcount increases
in other administrative areas to support the overall growth of the Company. Such
increases during the second quarter included the appointment of Stuart J.M.
Collinson, Ph.D., as president. The Company anticipates that selling, general
and administrative expenses may continue to increase over prior-year periods as
it expands its sales and marketing program.
Net interest income decreased due to decreased cash and investment balances and
an increase in interest expense incurred on capital lease and loan obligations.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, Aurora held cash, cash equivalents and investment securities
available-for-sale of $26.2 million and working capital of $20.8 million. The
Company has funded its operations since inception primarily through the issuance
of equity securities with aggregate net proceeds of $57.6 million, receipts from
corporate collaborations and strategic technology alliances of $62.5 million,
capital equipment lease and loan financing of $10.0 million and interest income
of $5.5 million.
The Company's facility lease agreements are secured by letters of credit, which
are secured by certificates of deposit recorded as restricted cash. At June 30,
1999, such restricted cash totaled $0.7 million. The letters of credit will be
reduced over the next two years on a predetermined schedule.
8
<PAGE>
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1999
The Company has entered into certain technology and license agreements with
commitments totaling approximately $7.2 million payable over the next five
years.
The Company's strategy for the development of the UHTSS Platform includes the
establishment of a syndicate of collaborators to provide the Company with
funding for development, technology and personnel resources and payments for
system validation at collaborator sites. The Company's UHTSS Platform
co-development syndicate currently includes Bristol-Myers Squibb Pharmaceutical
Research Institute ("BMS"), Eli Lilly and Company, Warner-Lambert, Merck and
Pfizer. The Company has also entered into agreements with Warner-Lambert and
Pfizer to develop an AMCS system for long-term company-wide sample inventory
storage. In addition, the Company has entered into collaborations with Cytovia,
Inc., Pharmacia & Upjohn, Inc. and F.Hoffmann-LaRoche Ltd. to provide screen
development and/or screening services and with Warner-Lambert and Becton
Dickinson and Company for functional genomics programs. Other collaborations
include a combinatorial chemistry agreement with SIDDCO, Inc. to synthesize
large libraries of chemical compounds for Aurora.
The Company's ability to achieve profitability will be dependent upon its
ability to deliver and obtain acceptance of equipment by collaborators, perform
contracted screening services, sell or license new products and services, and to
increase market share of existing discovery services and technologies by
agreements with new collaborators and expansion of agreements with existing
collaborators. Although the Company is actively seeking to enter into additional
collaborations, there can be no assurance that the Company will be able to
negotiate additional collaborative agreements on acceptable terms, if at all,
that the Company's revenue goals will be met, or that the Company will be able
to achieve or sustain profitability. Some of the Company's current collaborative
agreements provide that they may be terminated by the collaborator without cause
upon short notice, which would result in loss of anticipated revenue. Although
certain of the Company's collaborators would be required to pay certain
penalties in the event they terminate their agreements without cause, there can
be no assurance that any one or more of the Company's collaborators will not
elect to terminate their agreements with the Company. In addition, collaborators
may terminate their agreements for cause if the Company cannot deliver the
technology in accordance with such agreements. There can be no assurance that
the Company will derive any additional revenue from such agreements or that such
current or future collaborative agreements will be successful and provide the
Company with expected benefits. Termination of the Company's existing or future
collaborative agreements, or the failure to enter into a sufficient number of
additional collaborative agreements on favorable terms, or to generate
sufficient revenues from the Company's services and technologies, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company may be required to raise additional capital over the next several
years in order to conduct or expand its operations or acquire new technology.
Such additional capital may be raised through additional public or private
equity financings, borrowings and other available sources. No assurance can be
given that the Company's business or operations will not change in a manner that
would consume available resources more rapidly than anticipated, or that
substantial additional funding will not be required before the Company can
achieve or sustain profitable operations. There can be no assurance that the
Company will continue to generate sales from and receive payments under its
existing collaborative agreements or that the Company's existing or potential
revenue will be adequate to fund the Company's operations. If additional funding
becomes necessary, there can be no assurance that additional funds will be
available on favorable terms, if at all. If adequate funds are not available,
the Company may be required to curtail operations significantly or to obtain
funds by entering into arrangements with others
9
<PAGE>
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1999
that may have a material adverse effect on the Company's business, financial
condition and results of operations.
IMPACT OF YEAR 2000
The Company recognizes the need to ensure its operations will not be adversely
impacted by the inability of computer systems to process data having dates on or
after January 1, 2000 (the "Year 2000" issue). The Company has modified or
replaced portions of its software and certain hardware so that its systems
should function properly, based on third party representations, with respect to
dates in the year 2000 and thereafter. Required modifications and conversions of
existing software and certain hardware are essentially complete. The Company
believes that the Year 2000 issue will not pose significant operational problems
for its systems.
The Company has gathered information about its significant suppliers, financial
institutions and others with whom the Company does business to determine the
extent to which the Company's systems are vulnerable to those third parties'
failure to remediate their own Year 2000 issues. The Company continues to
monitor the Year 2000 compliance status of such third parties, and no
significant issues with third parties' systems have been identified to date.
While the Company has no material systems that interface directly with those of
third parties, there can be no assurance that any failure within systems of
third parties will not have a material adverse impact on the operations of the
Company.
The Company has not incurred significant costs for modifications and conversions
of existing software and certain hardware and has not utilized significant
external resources to assess, test, modify or replace existing software and
hardware for Year 2000 issues. Accordingly, the total Year 2000 issue cost to
the Company is expected to be less than $50,000, most of which has already been
paid and expensed. The Company continues to evaluate the status of the Year 2000
issue and plans to develop appropriate contingency plans by November 1999.
10
<PAGE>
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1999
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May 4, 1999. The
following actions were taken at the Annual Meeting:
(a) The following Directors were elected for a one-year term expiring at the
2000 annual meeting:
<TABLE>
<CAPTION>
Name Shares Voted For Shares Withheld
---- ---------------- ---------------
<S> <C> <C>
Timothy J. Rink, M.D., Sc.D. 13,457,587 449,013
James C. Blair, Ph.D. 13,465,055 441,545
Kevin J. Kinsella 13,457,805 448,795
Hugh Y. Rienhoff, Jr., M.D. 13,457,805 447,645
Lubert Stryer, M.D. 13,459,055 447,545
Roy A. Whitfield 13,460,255 446,345
Timothy J. Wollaeger 13,460,355 446,245
</TABLE>
Subsequent to the Annual Meeting, Lubert Stryer, M.D. resigned as a
Director but remains active with the Company as a member of the
Scientific Advisory Board.
(b) A proposal to amend the Company's 1996 Stock Plan to increase the
aggregate number of shares of Common Stock authorized for issuance under
such plan by 2,000,000 shares was approved.
<TABLE>
<CAPTION>
<S> <C>
Shares Voted For 8,315,867
Shares Voted Against 1,112,115
Shares Abstain 81,157
</TABLE>
(c) A proposal to amend the Company's Employee Stock Purchase Plan to increase
the aggregate number of shares of Common Stock authorized for issuance
under such plan by 300,000 shares was approved.
<TABLE>
<CAPTION>
<S> <C>
Shares Voted For 9,214,299
Shares Voted Against 217,460
Shares Abstain 77,380
</TABLE>
(d) The selection of Ernst & Young LLP as independent auditors for the Company
for the fiscal year ending December 31, 1999 was ratified.
<TABLE>
<CAPTION>
<S> <C>
Shares Voted For 13,883,487
Shares Voted Against 16,505
Shares Withheld 6,608
</TABLE>
ITEM 5. OTHER INFORMATION
Pursuant to the Company's bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 2000 annual meeting of
stockholders must provide specified information to the Company no later than
December 2, 1999 (unless such matters are included in the Company's proxy
statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended).
11
<PAGE>
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1999
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.48* Collaborative Research and License Agreement effective as of
June 15, 1999 between the Registrant and Pfizer Incorporated.
27.1 Financial Data Schedule related to the Financial Statements
for the period ended June 30, 1999.
- ----------------
* The Company has requested confidential treatment with respect
to certain portions of this exhibit. Omitted portions have
been filed separately with the Securities and Exchange
Commission.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended June 30,
1999.
12
<PAGE>
AURORA BIOSCIENCES CORPORATION
JUNE 30, 1999
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Aurora Biosciences Corporation
Date: August 2, 1999 By: /s/ John Pashkowsky
---------------------
John Pashkowsky
Senior Director, Finance and Treasurer
(on behalf of the Registrant and as Registrant's
Principal Financial and Accounting Officer)
13
<PAGE>
TECHNOLOGY ACQUISITION AGREEMENT
This TECHNOLOGY ACQUISITION AGREEMENT ("this Agreement") is entered into as
of June 15, 1999 by and between PFIZER INC, a Delaware corporation, having an
office at 235 East 42nd Street, New York, New York 10017 and its Affiliates
("Pfizer"), and AURORA BIOSCIENCES CORPORATION, a Delaware corporation,
having an office at 11010 Torreyana Road, San Diego, California, 92121 and
its Affiliates ("Aurora").
WHEREAS, Aurora has expertise in the miniaturization of ultrahigh-throughput
robotic compound screening systems ("uHTS"); and
WHEREAS, Pfizer seeks to purchase Aurora's uHTS technology, to collaborate on
assay development and to obtain nonexclusive licenses to *** set forth in
Exhibit A, attached to and made part of this Agreement; and
WHEREAS, Aurora is willing to enter into a technology acquisition agreement
with Pfizer to transfer Aurora uHTS technology, to grant such licenses and to
develop assays and Pfizer seeks to receive the same.
*** Confidential Treatment Requested
<PAGE>
-2-
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
Whenever used in this Agreement, the terms defined in this Section 1 shall
have the meanings specified.
1.1 ***.
1.2 "AFFILIATE" means any corporation or other legal entity
"controlled," "controlling" or "under common control with," another
corporation or legal entity, where "control" means ownership, directly or
indirectly, of *** or more of the voting capital shares or similar voting
securities of the other entity.
1.3 "AREA" means the ***, each as further described in the
Collaboration Plan.
<PAGE>
-3-
1.4 "AUTOMATED MASTER COMPOUND STORE or "AMCS" means the liquid
compound sample storage system and associated software as more fully
specified in the Collaboration Plan and Exhibit B which Aurora will
manufacture for and transfer to Pfizer pursuant to this Agreement.
1.5 "AURORA CONFIDENTIAL INFORMATION" means all information about any
element of Aurora Technology which is disclosed by Aurora or its consultants
or agents to Pfizer and designated "Confidential" in writing by Aurora at the
time of disclosure or within *** days following disclosure to the extent
that such information (i) is not known to Pfizer other than by virtue of a
prior confidential disclosure to Pfizer by Aurora; or (ii) is not disclosed
in published literature, or otherwise generally known to the public through
no fault or omission of Pfizer; or (iii) is not obtained by Pfizer from a
Third Party free from any obligation of confidentiality to Aurora.
1.6 "AURORA TECHNOLOGY" means ***.
1.7 " COLLABORATION PLAN" means the written plan describing the
activities in the Area to be carried out by Pfizer and Aurora pursuant to
this Agreement, which is attached to and made part of this Agreement as
Exhibit C.
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1.8 "COLLABORATION PROGRAM" means (a) Aurora Technology ***
development and; (b) Development of *** Aurora and Pfizer pursuant to the
Collaboration Plan.
1.9 "COMPONENTS" means the equipment forming part of the System, VIPRs
and AMCS.
1.10 "CONSTRUCTS" means ***, consisting of (a) those transferred as of
the Effective Date all of which are described, attached to and made part of
this Agreement as Exhibit D, ***.
1.11 "CONTRACT PERIOD" means the period beginning on the Effective Date
and ending on the date on which this Agreement terminates.
1.12 "CONTROLLED" OR "CONTROL" means Aurora Technology which (a) Aurora
*** not in listed in Exhibit A; and (b) *** accordance with the terms and
conditions of this Agreement *** with such ***.
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1.13 "COPYRIGHTS" means all copyrights owned or Controlled by Aurora as
of the Effective Date that ***.
1.14 ***.
1.15 "DEVELOPMENT" means the design, development, *** described in the
Collaboration Plan.
1.16 "EFFECTIVE DATE" means June 15, 1999.
1.17 "EQUIPMENT" means ***.
1.18 "HIT" ***.
1.19 ***.
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1.20 "INSTALLATION PLAN" means the plan written and adopted by the
Steering Committee, describing each parties activities with respect to
delivery and installation of the AMCS, uHTSS and other Equipment. Each plan
shall be appended to the Collaboration Plan and made part of this Agreement.
1.21 "NET SALES" means the gross amount invoiced by Pfizer or any
sublicensee of Pfizer for sales to a Third Party or Parties for Product, ***
and customary trade discounts actually allowed, rebates, returns, credits,
taxes the legal incidence of which is on the purchaser and separately shown
on Pfizer's or any sublicensee of Pfizer's invoices and transportation,
insurance and postage charges, if prepaid by Pfizer or any sublicensee of
Pfizer and billed on Pfizer's or any sublicensee of Pfizer's invoices as a
separate item.
1.22 "PATENT RIGHTS" shall mean all patent rights in and to inventions
within Aurora Technology, Pfizer Technology and ***, including patents and
patent applications, whether domestic or foreign, claiming such patentable
inventions, including all continuations, continuations-in-part, divisions,
and renewals, any letters patent granted thereon, and all reissues,
re-examinations and extensions.
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1.23 "PFIZER ASSAY" ***.
1.24 "PFIZER CONFIDENTIAL INFORMATION" means all information about any
element of Pfizer Technology which is disclosed by Pfizer to Aurora and
designated "Confidential" in writing by Pfizer at the time of disclosure or
within *** following disclosure to the extent that such information as of the
date of disclosure to Aurora (i) is not known to Aurora other than by virtue
of a prior confidential disclosure to Aurora by Pfizer; or (ii) is not
disclosed in published literature, or otherwise generally known to the public
through no fault or omission of Aurora; or (iii) is not obtained by Aurora
from a Third Party free from any obligation of confidentiality to Pfizer.
1.25 "PFIZER TECHNOLOGY" means Technology, ***.
1.26 "PFIZER PATENT RIGHTS" means the Valid Claims issuing on patents
encompassing Pfizer Technology, ***.
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1.27 "PRODUCT" means a pharmaceutical product developed from a ***.
1.28 "PROGRAM CONSTRUCTS" ***.
1.29 ***.
1.30 ***.
1.31 ***.
1.32 ***.
1.33 "SYSTEM" means Aurora's automated uHTS platform for fluorescent,
miniaturized assays comprising robotics for liquid handling, sample storage,
fluorescence detection and associated software and other Components
identified and described in the Collaboration Plan, *** which Aurora will
manufacture for and transfer to Pfizer pursuant to this Agreement in
accordance with specifications set forth in the Collaboration Plan and
Exhibit B and Improvements to it
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1.34 ***.
1.35 "TECHNOLOGY" means all information and materials in the Area,
including, ***.
1.36 "THIRD PARTY" means a party that is not Aurora or an Aurora
Affiliate or Pfizer or a Pfizer Affiliate.
1.37 "TRACKING SYSTEM" means the ***.
1.38 "VALID CLAIM" means a claim within Patent Rights so long as such
claim shall not have been disclaimed by either Pfizer or Aurora or both or a
Third Party, as the case may be, or shall not have been held invalid in a
final decision rendered by a tribunal or competent jurisdiction from which no
appeal has been or can be taken.
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1.39 "VIPR" means the ion channel assay system and associated software
to be manufactured and transferred to Pfizer by Aurora during the Contract
Period and having the specifications set forth the Collaboration Plan and in
Exhibit B.
2. COLLABORATIVE PROGRAM
2.1 PURPOSE. Aurora and Pfizer shall conduct the Collaboration
Program throughout the Contract Period. *** Collaboration Program are ***
Aurora Technology, to transfer Aurora Technology ***.
2.2 COLLABORATION PLAN. The parties shall conduct their respective
activities under the Collaboration Program in accordance with the
Collaboration Plan then in effect. The initial Collaboration Plan attached
as Exhibit C shall be in effect until ***. The Steering Committee shall
prepare an amended Collaboration Plan no later than *** and every ***
thereafter during the Contract Period. Each *** Collaboration Plan shall be
appended to Exhibit B and made part of this Agreement.
2.3 STEERING COMMITTEE
2.3.1 PURPOSE. Pfizer and Aurora shall establish a
Collaboration Committee (the "Steering Committee"):
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(a) to review and evaluate progress under the Collaboration
Plan;
(b) to prepare the Collaboration Plan and any amendments;
(c) ***;
(d) ***.
(e) to prepare and implement Installation Plans for the AMCS,
UHTSS and other Equipment; and
(f) to coordinate and monitor publication of Technology
produced during the Contract Period as specified in Section 4.2 and to
coordinate and monitor the exchange of information and materials that relate
to the Collaboration Program. (This function shall survive termination of
this Agreement.)
2.3.2 MEMBERSHIP. Pfizer and Aurora each shall appoint members
to the Steering Committee. Either party may appoint substitutes at any time
upon written notice to the other party.
The members initially shall be:
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Pfizer Appointees: ***
Aurora Appointees: ***
2.3.3 CHAIR. The Steering Committee shall be chaired by two
co-chairpersons, one appointed by Pfizer and the other appointed by Aurora.
2.3.4 MEETINGS. The Steering Committee shall meet at least ***
times per year, at places and on dates selected by each party in turn. ***.
Representatives of either party, in addition to members of the Steering
Committee, may attend such meetings at the invitation of both parties. Such
representatives may attend the Steering Committee Meeting by
video-conference.
2.3.5 MINUTES. The Steering Committee shall keep accurate
minutes of its deliberations, which record all proposed decisions and all
actions recommended or taken. Drafts of the minutes shall be delivered to
all Steering Committee members within *** business days after each meeting.
The party hosting the meeting shall be responsible for the preparation and
circulation of the draft minutes. Draft minutes shall be edited by the
co-chairpersons and shall be issued in final form only with their approval
and agreement.
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2.3.6 DECISIONS. All decisions of the Steering Committee shall
be ***.
2.3.7 EXPENSES. Pfizer and Aurora shall each bear all expenses
of their respective members related to their participation on the Steering
Committee.
2.4 REPORTS AND MATERIALS.
2.4.1 REPORTS. During the Contract Period, Pfizer and Aurora
each shall furnish to the Steering Committee:
(a) summary quarterly written reports describing its
respective progress under the Collaboration ***, which reports shall be
delivered electronically no later than ***prior to the next Steering
Committee meeting; and,
(b) comprehensive annual written reports, describing in
detail the work accomplished by each party under the Collaboration Plan
during the year and discussing and evaluating the results of such work as
further described in Section 2.4.1 (a), which shall be delivered within
***after the end of each contract year.
2.4.2 MATERIALS. During the Contract Period, Aurora and Pfizer
shall as a matter of course ***, as described in the Collaboration Plan, or
upon each other's written or oral request, furnish to each *** which are (a)
part of Pfizer Technology or Aurora Technology and (b) necessary for either
party to carry out
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its responsibilities under the Collaboration Plan. To the extent that the
*** requested by either party ***, the requesting party shall reimburse the
other party for the reasonable costs ***furnished. The initial and
subsequent delivery ***.
2.5 LABORATORY FACILITY, NOTEBOOKS AND PERSONNEL. Aurora shall
provide suitable laboratory facilities, equipment and personnel for the work
to be done by Aurora in carrying out the Collaboration Program. All work
performed by Aurora staff under the Collaboration Plan with respect to ***
which Pfizer may review and make extracts or copies thereof at any time on
any reasonable notice, as further described in Section 2.9 below.
2.6 AURORA ACTIVITIES. During the Contract Period as set forth in
the Collaboration Plan, Aurora shall (a) *** ; (b) make and deliver System,
AMCS, VIPRs and Components thereof (collectively, the "Equipment") to the
Sites; (c) ***; and (d) *** the (i) use, maintenance and repair of Equipment
and in the (ii) ***.
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2.6.1 Aurora shall transfer to ***, Equipment and
Improvements as set forth below in Section 2 and in the Collaboration Plan.
2.6.2 Within *** of the Effective Date, Aurora shall ***.
At any time before ***, if Pfizer requests, ***, but without any other charge
to such locations as Pfizer may direct. Each such shipment shall be made to
the attention of Pfizer scientists identified by Pfizer at the time of
shipment. Date of shipment shall be agreed by both parties. *** shall be
notified by Aurora when shipments have been made. Aurora shall insure
shipments and bear risk of *** until Pfizer accepts their delivery at the
Sites. If within *** months after Pfizer receives ***, within ***.
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2.6.3 Aurora shall manufacture Equipment, *** Equipment
and deliver Equipment to Sites, all as further described in the Collaboration
Plan and, in the case of delivery, according to the schedule provided below:
***
2.6.1 Prior ***. Before shipping any Equipment to a Site,
Aurora will certify to Pfizer the Equipment's successful completion ***.
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2.6.2 ***.
2.6.3 IMPROVEMENTS. During the Contract Period and for a
period of *** after the termination of the Agreement, Aurora shall provide
Pfizer ***, including, ***. Any *** shall be made commercially available on
terms to be negotiated by the parties, ***. Aurora shall be free to
distribute *** .
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2.6.4 TRAINING. During the Contract Period, Aurora will
train Pfizer staff on *** repair and maintenance of Equipment, as further
described in the Collaboration Plan. At Pfizer's request, Aurora will provide
training to Pfizer staff as set forth in the Collaboration Plan and Section
2.7.4 (d). The Steering Committee will organize and monitor training which
shall include; (a) visits of *** Pfizer staff *** to Aurora facilities for
training on use of Aurora Technology; and (b) formal training lectures and
demonstrations by Aurora staff at Sites, as needed, during ***.
2.7 SYSTEM DELIVERY, INSTALLATION, MAINTENANCE AND REPAIRS.
2.7.1 DELIVERY. (a) Aurora shall deliver all Equipment to
Sites ***. Pfizer will reimburse Aurora for any cost of shipping and
insurance, against invoice. (b) Within thirty (30) days of delivery of any
item of Equipment to a Site *** so that Aurora can complete its installation.
*** and perform ***. Installation work *** Aurora staff *** subject to an
aggregate charge limit ***. Installation of each item of Equipment shall be
considered completed only when Aurora certifies to Pfizer that the relevant
item is ready for use by Pfizer to begin its ***. Upon delivery of each item
of Equipment to a Site, Aurora shall ***. If (a) Aurora has certified
completion *** for an item of Equipment at Aurora; (b) Aurora has given
Pfizer *** days notice prior to date of delivery of such
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Equipment; and ***.
2.7.2 MAINTENANCE. For each item of Equipment accepted by
Pfizer, Aurora shall provide maintenance at its expense for *** from the
acceptance date. Such maintenance shall include preventive maintenance,
repairs and replacement parts together with a program by which Aurora will
train Pfizer staff on the preventive maintenance, day to day operation and
repair of Equipment. ***. As part of service visits, Aurora will train
Pfizer staff on the preventive maintenance, day to day operation and repair
of the Equipment. After *** maintenance period, ***. If within *** of the
Effective Date, Pfizer orders any additional Equipment item not on the
delivery schedule listed in Section 2.6.3, the terms and conditions for their
maintenance shall be as described in this Section, except that the period of
service and support shall be for *** months after delivery and acceptance by
Pfizer. After Aurora maintains and repairs each item of Equipment for a
period of *** under any condition***. In such case, Aurora will provide
maintenance and repairs ***. THERE ARE NO IMPLIED WARRANTIES OR WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE OR MERCANTABILITY ***.
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2.7.3 SUPPLY OF NANOPLATES. Aurora warrants and covenants
that during the Contract Period and after the term of this Agreement for a
period of ***, Nanoplates with the specifications required for high
performance use of the Equipment that uses Nanoplates shall be *** shown in
Exhibit E and in volumes necessary to run the UHTSS at maximum capacity as
described in the Collaboration Plan and Exhibit B. To fulfill this
obligation to Pfizer***.
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2.7.4 STAFFING SUPPORT FOR THE COLLABORATION PROGRAM.
Subject to Section 2.8 below, during each year of the Contract Period, and as
further described in the Collaboration Plan, Aurora shall dedicate at ***
full time staff years at a rate of a minimum of *** to perform over a *** the
following activities;
(a) ***;
(b) ***;
(c) maintenance and service of Equipment at Pfizer; and
(d) training of Pfizer staff as set forth in Section
2.7 and the Collaboration Plan at either Aurora or Pfizer.
If, at anytime during the Contract Period, Pfizer, upon *** written advance
notice to Aurora elects to;
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(a) ***;
(b) ***; and
(c) ***.
11.2.1 THE WORKING GROUP*** a shall set priorities, monitor
staffing allocations and disciplines and manage day to day *** Development
*** ("the Working Group"). For *** project, ***. Each *** plan shall
constitute an amendment to the Collaboration Plan. Pfizer shall be
responsible for providing Pfizer-specific reagents to Aurora in a timely
manner so that Aurora may fulfill the Collaboration Plan.
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11.2.2 ***. During the Contract Period, Aurora will *** for
use as ***. The progress of all *** resulting from Pfizer's use of *** ***
11.2.3 ***. During each year of the collaboration, under the
direction of the Work Group and pursuant to the Collaboration Plans, Aurora
staff shall ***.
11.2.4 ***. During the Contract Period, the Steering
Committee may amend the Collaboration Plan to include projects for design of
***.
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11.2.5 DILIGENT EFFORTS. Aurora and Pfizer each shall use
reasonably diligent efforts to achieve the objectives of the Collaboration
Program.
2.8 ***.
2.8.1 ***:
(a) ***; and,
(b) ***.
11.2.1 ***.
11.2.2 ***.
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11.2.3 ***.
11.2.4 ***.
11.2.5 ***.
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3. PAYMENTS.
3.1 AURORA TECHNOLOGY ACQUISITION. Pfizer shall pay Aurora for
performance of Collaboration Program according to the payment schedules set
forth in this Section.
(a) TECHNOLOGY LICENSE FEE. During the Contract Period, in
consideration of Pfizer's license of and access to Aurora Technology, Aurora
Patent Rights and Aurora Copyrights, ***, Pfizer shall pay Aurora a license
fee of *** per year. Such amount shall be payable in quarterly installments
***, within *** days of Pfizer's receipt of Aurora's invoice. Pfizer shall
pay the first such installment within *** days after the Effective Date,
against Aurora's invoice. ***. During the Contract Period, Pfizer shall
receive a ***.
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(b) ***.
(1) ***.
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***. ***.
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(2) ***. Upon written notification, within thirty (30)
days of the Effective Date, ***, Aurora shall deliver to Pfizer Sites *** and
selected during that time by ***, which are licensed subject to the terms and
conditions of Section 5. During the Contract Period, Pfizer may purchase
pursuant to Pfizer purchase orders and Aurora invoices any other available
*** not listed in Exhibit E and owned, acquired or developed by Aurora upon
payment of *** (i) *** licensed by Aurora; and (ii) ***. If Pfizer wishes
to obtain any available and ***, it shall advise Aurora in writing, whereupon
Aurora will deliver to *** of such *** and shall ***.
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(3) PREPAYMENT EVALUATION OF ***,. Pfizer's
obligation to accept *** to any ***, and to pay any license fee of it, shall
be contingent upon its having had the prior opportunity to test the
performance of any *** at its Sites during a *** period beginning when the
first Site receives such ***. At the end of such *** day period Pfizer will
inform Aurora of its decision to license or not to license such Aurora
Technology and if such Aurora Technology is not licensed Aurora will notify
the Pfizer chair of the Steering Committee***.
(a) POST CONTRACT PERIOD LICENSE FEE *** AND ***. After the
Contract Period, under the terms and conditions set forth in Section 5,
Pfizer shall have the right to obtain from Aurora ***, and ***, including but
not limited to any ***. Such *** Pfizer in exchange for the payment by
Pfizer to Aurora of a *** license fee of *** . If Pfizer *** of the
Agreement, within *** days of invoice by Aurora to Pfizer. ***.
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(b) ***.
(c) *** COSTS. The costs to *** are listed in Exhibit E.
(d) COST *** TO AURORA TECHNOLOGY. If Pfizer seeks to obtain
rights from Aurora ***, Aurora will establish in good faith a cost to Pfizer for
such *** have been ***, the parties ***.
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11.2 SYSTEM PLATFORM FEES. In the consideration of the transfer
to Pfizer of Aurora Technology, for System Platform Fees, Pfizer shall pay to
Aurora a ***. Each payment *** is non-creditable and non-refundable and
shall be made annually, *** days of the anniversary of the Effective Date and
each anniversary of the Effective Date thereafter, against Aurora's invoice
to Pfizer.
11.3 EQUIPMENT PURCHASE PRICE. Aurora will deliver Equipment to
Pfizer on the schedule and in the manner provided in Sections 2, the
Collaboration Plan and in this Section of the Agreement. The total price for
Equipment is as follows:
(i) *** UHTSS***;
(ii) ***;
(iii) *** and
(iv)
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Payments toward the total Equipment price shall be made according to the
following schedule ***
***
(a) UPFRONT EQUIPMENT FEE. Pfizer will pay Aurora an upfront
fee for the purchase of the Equipment by paying Aurora *** within *** days of
execution of the Agreement by both parties and, at the end of each of the
next *** during the Contract Period an additional *** payable against
Aurora's invoice. ***
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(b) ***. After Aurora delivers each item of Equipment to the
Site specified in Section 2.6.1***, Pfizer will pay Aurora the amount shown
below for the item of Equipment so delivered. Payments shall be made within
***, against Aurora's invoice to Pfizer.
(i) *** UHTSS***
(ii) ***
(iii*** and
(iv) ***
***.
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As and when Pfizer makes such payment for each item of Equipment, it shall
acquire full and clear legal and beneficial ownership in such item ***.
Aurora will supply such documentation, including any relevant documents of
title, as Pfizer may require to evidence its ownership.
All payments pursuant to Section 3.2 (b) and (c) ***.
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(d) OPTION TO PURCHASE ***. During the Contract Period,
prior to *** or the first anniversary of the delivery of the UHTSS, whichever
date is later, Pfizer may place orders for *** additional *** price of ***
for ***. Aurora will deliver, at Pfizer's expense, any item of Equipment
ordered under this option to any Pfizer ***.
3.4 FEES TO SUPPORT AURORA STAFF ACTIVITIES: Pfizer will fund
Aurora FTEs for activities under the Collaboration Plan *** , training and
equipment maintenance and repair, according to the following schedule:
***
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The payments for Aurora staff are expected to support the work of a minimum
of *** FTEs during the Contract Period, i.e. ***. If during any year of the
Contract Period, ***, *** FTEs, *** during each of *** consecutive years at a
rate of *** for each FTE. During the Contract Period***, at its sole
discretion, that *** provide up to *** total for the program for Development
***, and Aurora shall provide such FTEs at the rate *** for each FTE. During
the Contract Period Pfizer's total minimum commitment for FTEs assigned by
Aurora to Pfizer work under the Collaboration Plan is ***. The first such
payment shall start on the Effective Date and shall thereafter be made
quarterly in advance for work scheduled to be performed by Aurora during any
*** period, against Aurora's invoice for such *** period. Adjustments as
necessary to reflect the work actually performed by Aurora shall be made at
the end of *** period and shall be reflected in Aurora's invoice for the next
*** period. It is understood that all payments pursuant to this Section 3.4
are ***.
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11.2.1 ***.
11.2.2 ***.
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***
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***.
11.2.1 ACCOUNTING. Pfizer shall compute the Net Sales and
the profit-shares payable to Aurora in US dollars and shall pay any *** by
check or other mutually acceptable means. For purposes of determining the
amount of ***, the amount of Net Sales in any foreign currency shall be
computed by (a) converting such amount into dollars at the prevailing
commercial rate of exchange for purchasing dollars with such foreign currency
as quoted by Citibank in New York on the last business day of the calendar
quarter for which the relevant *** payment is to be made by Pfizer and (b)
deducting the amount of any governmental tax, duty, charge, or other fee
actually paid in respect of such conversion into, and remittance of dollars.
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11.2.2 PAYMENT DATES. Pfizer shall pay milestone payments
within *** days of an Event as set forth in Section 3.5.2. Pfizer shall pay
*** on Net Sales within *** after the end of each calendar quarter in which
such Net Sales are made. Such payments shall be accompanied by a statement
showing; (a) the Net Sales of each Product by Pfizer or any sublicensee of
Pfizer in each country; (b) applicable *** rate for such Product; and (c)
calculation of the amount of profit-share due.
11.3 ANIMAL HEALTH. The *** set forth above shall apply to Products
for the treatment ***. ***, the parties will negotiate ***.
11.4 RECORDS. For *** from the conclusion of each year of the
Agreement, Aurora shall keep complete and accurate records of its
expenditures pursuant to the Collaboration Program. For *** years from the
date of each payment of profit-shares, Pfizer shall keep complete and
accurate records of sales of each Product in sufficient detail to allow the
accruing *** to be determined accurately. The
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records shall conform to good accounting principles as applied to a similar
company similarly situated. Either party shall have the right at its own
expense during the term of this Agreement and during the subsequent ***
period to appoint an independent certified public accountant, reasonably
acceptable to the other party, to verify the accuracy of either the
expenditures or statements with respect to *** due, as the case may be. Upon
reasonable notice by either party, the other party shall make its records
available for inspection by the auditing company or the independent certified
public accountant during regular business hours at the place or places where
such records are customarily kept. This right of inspection shall not be
exercised more than *** in any calendar year and not more than *** with
respect to records covering any specific period of time. All information
concerning such expenditures and such *** payments, and all information
learned in the course of any audit or inspection, shall be deemed to be
Aurora Confidential Information or Pfizer Confidential Information or both,
except to the extent that it is necessary for either party to reveal the
information in order to enforce any rights it may have pursuant to this
Agreement or if disclosure is required by law. The failure of either party
to request verification of any expenditures before or during the *** period
shall be considered acceptance by the other party of the accuracy of such
expenditures, and the parties shall have no obligation to maintain any
records
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pertaining to such report or statement beyond such *** period. The results
of such inspection, if any, shall be binding on the parties.
4. TREATMENT OF CONFIDENTIAL INFORMATION
4.1 CONFIDENTIALITY
4.1.1 Pfizer and Aurora each recognize that the other's
Confidential Information constitutes highly valuable, confidential
information. Subject to the terms and conditions of this Agreement, the
obligations set forth in Section 4.3, the publication rights set forth in
Section 4.2 and the licenses granted in Section 5.2, Pfizer and Aurora each
agree that during the term of this Agreement and for *** thereafter, it will
keep confidential, and will cause its Affiliates to keep confidential, all
Aurora Confidential Information or Pfizer Confidential Information, as the
case may be, that is disclosed to it, or to any of its Affiliates pursuant to
this Agreement. Neither Pfizer nor Aurora nor any of their respective
Affiliates shall use such Confidential Information except as expressly
permitted in this Agreement.
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4.1.2 Pfizer and Aurora each agree that any disclosure of the
other's Confidential Information to any officer, employee or agent of the
other party or of any of its Affiliates shall be made only if and to the
extent necessary to carry out its responsibilities under this Agreement and
shall be limited to the maximum extent possible consistent with such
responsibilities. Pfizer and Aurora each agree not to disclose the other's
Confidential Information to any Third Parties under any circumstance without
written permission from the other party. Each party shall take such action,
and shall cause its Affiliates to take such action, to preserve the
confidentiality of each other's Confidential Information as it would take to
preserve the confidentiality of its own Confidential Information. Upon the
termination of this Agreement by either party by its breach, the breaching
party, upon the other's request, will return all the Confidential Information
disclosed to the other party pursuant to this Agreement, including all copies
and extracts of documents, within *** days of the request upon the
termination of this Agreement except for one (1) copy which may be kept for
the purpose of complying with continuing obligations under this Agreement.
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4.1.3 Aurora and Pfizer represents that all of its
employees, and any subcontractors or consultants to it party who (a)
participate in the Collaboration Program and (b) who have access to Pfizer
Technology and Aurora Technology and Pfizer Confidential Information and
Aurora Confidential Information are bound by agreement to maintain such
information in confidence consistent with the terms and conditions of this
Agreement.
4.2 PUBLICATION. Notwithstanding any matter set forth with
particularity in this Agreement to the contrary, results obtained in the
course of the Collaboration Program may be submitted for publication
following scientific review by the Steering Committee and subsequent approval
by Aurora's and Pfizer's managements. After receipt of the proposed
publication by both Pfizer's and Aurora's managements written approval or
disapproval shall be provided within *** days for a manuscript, within ***
days for an abstract for presentation
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at, or inclusion in the proceedings of a scientific meeting and for a
transcript of an oral presentation to be given at a scientific meeting. The
parties agree to credit each other's contribution, as appropriate.
4.3 PUBLICITY. Except as required by law, neither party may disclose
the terms of this Agreement, nor the Collaboration Program described in it,
without the written consent of the other party, which consent shall not be
unreasonably withheld. Either party shall have the right to issue a press
release or other public statement concerning this Agreement provided that the
content of such release or statement has first been agreed by the other
party, such agreement not to be unreasonably withheld or delayed.
4.4 ***. During the Contract Period, *** in the Area that are
conceived, made or developed in the course of carrying out the Collaboration
Plan by employees of, or consultants to, either of them solely, or jointly
with employees of, or consultants to the other.
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4.5 RESTRICTIONS ON TRANSFERRING ***. Subject to the grant of license
to Pfizer in Section 5.2, Pfizer and Aurora recognize ***, including, but not
limited to ***, which are part of Aurora Technology or Pfizer Technology,
represent valuable commercial assets. Therefore, throughout the Contract
Period and for *** thereafter, Aurora and Pfizer agree not to transfer *** to
any Third Party, unless prior written consent for any such transfer is
obtained from the other party.
(a) ***.
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5. INTELLECTUAL PROPERTY RIGHTS. The following provisions relate to rights
in the intellectual property developed by Aurora or Pfizer, or both, during
the course of carrying out the Collaboration Program.
5.1 OWNERSHIP. All Aurora Confidential Information, Aurora Technology
and Aurora Patent Rights shall be owned by Aurora. All Pfizer Confidential
Information, Pfizer Technology and Pfizer Patent Rights shall be owned by
Pfizer. ***. If and to the extent that the Steering Committee determines
that Pfizer Confidential Information ***.
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5.2 Aurora hereby grants to Pfizer a ***. Pfizer's rights under
this license to Equipment and Improvements, including but not limited to the
System, *** the AMCS *** subject to the completion of the payment schedule in
Section 3.3. After the Contract Period the *** shall continue from ***
provided only that *** shall be ***.
<PAGE>
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5.3 During the Contract Period, ***. If Pfizer seeks to obtain a
license for any Third Party Technology Controlled by Aurora or if Pfizer
requests ***. Aurora will also notify Pfizer about Improvements to Aurora
Technology made by Aurora or its Affiliates, and, if Pfizer seeks to obtain
rights to such Improvements, Aurora ***.
6. PROVISIONS CONCERNING THE FILING, PROSECUTION AND MAINTENANCE OF PATENTS.
6.1 PATENT FILING AND PATENT RIGHT ASSIGNMENTS. Each party
agrees to complete at its own expense, but without further compensation to
the other party, any documents necessary for either party to file patent
applications and to prosecute patents with respect to its own Patent Rights.
6.2 Aurora shall be responsible for the filing, prosecution and
maintenance of all Aurora Patent Rights and Pfizer shall each be responsible
for the filing, prosecuting and maintenance of all Pfizer Patent Rights.
<PAGE>
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7. OTHER AGREEMENTS. This Agreement together with its Exhibits sets forth
the entire agreement between the parties with respect to the subject matter
and supersedes all other agreements and understandings between the parties
with respect to same.
8. TERM, TERMINATION AND DISENGAGEMENT.
8.1 TERM. Unless sooner terminated or extended, this Agreement shall
expire *** from the Effective Date.
8.2 EVENTS OF TERMINATION. The following events shall constitute
events of termination ("Events of Termination"):
(a) ***; and
(b) Aurora or Pfizer shall fail in any material respect to
perform or observe any material term, convenant or understanding contained in
this Agreement or in any of the other documents or instruments delivered
pursuant to, or concurrently with, this Agreement, and if any such failure
shall remain unremedied for *** after written notice to the failing party.
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8.3 TERMINATION.
8.3.1 Upon the occurrence of any Event of Termination, the
party not responsible may, by notice to the other party, terminate this
Agreement.
8.3.2 If Pfizer terminates this Agreement pursuant to
Section 8.3.1, Pfizer's rights to Aurora Technology ***. If Aurora
terminates this Agreement pursuant to Section 8.3.1, Pfizer's rights to
Aurora ***.
8.4 Termination of this Agreement for any reason shall be
without prejudice to:
(a) the rights and obligations of the parties provided in
those Sections of the Agreement which by virtue of their term and condition
extend beyond any termination of this Agreement;
(b) ***; or
(c) any other remedies which either party may otherwise have.
9. REPRESENTATIONS AND WARRANTIES. As of the Effective Date, Aurora and
Pfizer each represents and warrants as follows:
9.1 It is a corporation duly organized, validly existing and is in
good standing under the laws of the State of Delaware, is qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification and
<PAGE>
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has all requisite power and authority, corporate or otherwise, to conduct its
business as now being conducted, to own, lease and operate its properties and
to execute, deliver and perform this Agreement.
9.2 The execution, delivery and performance by it of this Agreement
have been duly authorized by all necessary corporate action and do not and
will not (a) require any consent or approval of its stockholders, (b)
violate any provision of any law, rule, regulations, order, writ, judgment,
injunctions, decree, determination or award presently in effect having
applicability to it or any provision of its certificate of incorporation or
by-laws or (c) result in a breach of or constitute a default under any
material agreement, mortgage, lease, license, permit or other instrument or
obligation to which it is a party or by which it or its properties may be
bound or affected.
9.3 This Agreement is a legal, valid and binding obligation of it
enforceable in accordance with its terms and conditions, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws, from time to time in effect,
affecting creditor's rights generally.
<PAGE>
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9.4 It is not under any obligation to any person, or entity,
contractual or otherwise, that is conflicting or inconsistent in any respect
with the terms of this Agreement or that would impede the diligent and
complete fulfillment of its obligations.
9.5 It has good and marketable title to or valid leases, copyrights,
sublicenses or licenses for, all of its properties, rights and assets
necessary for the fulfillment of its responsibilities under the Collaboration
Program, subject to no claim of any Third Party other than the relevant
lessors, sublicensors or licensors.
10. COVENANTS OF AURORA AND PFIZER OTHER THAN REPORTING REQUIREMENTS.
Throughout the Contract Period, Aurora and Pfizer each shall:
10.1 maintain and preserve its corporate existence, rights, franchises
and privileges in the jurisdiction of its incorporation, and qualify and
remain qualified as a foreign corporation in good standing in each
jurisdiction in which such qualification is from time to time necessary or
desirable in view of their business and operations or the ownership of their
properties.
10.2 comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any government authority to
the extent necessary to conduct the Collaboration Program, except for those
laws, rules, regulations, and orders it may be contesting in good faith.
<PAGE>
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11. ***.
12. NOTICES. All notices shall be in writing mailed via certified mail,
return receipt requested, courier, or confirmed facsimile transmission
addressed as follows, or to such other address as may be designated from time
to time:
If to Pfizer: To Pfizer at its address as set forth at the beginning of
this Agreement.
Attention: President, Central Research
with copy to: Office of the General Counsel.
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If to Aurora : To Aurora at its address as set forth at the beginning of
this Agreement.
Attention: ***
Notices shall be deemed given as of the date received.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws ***.
14. MISCELLANEOUS.
14.1 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective legal representatives,
successors and permitted assigns.
14.2 HEADINGS. Paragraph headings are inserted for convenience of
reference only and do not form a part of this Agreement.
14.3 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original.
14.4 AMENDMENT, WAIVER. This Agreement may be amended, modified,
superseded or canceled, and any of the terms may be waived, only by a written
instrument executed by each party or, in the case of waiver, by the party or
parties waiving compliance. The delay or failure of any party at any time or
times to require performance of any provisions shall in no manner affect the
rights at a later time to enforce the same. No waiver by any party of any
condition or of the
<PAGE>
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breach of any term contained in this Agreement, whether by conduct, or
otherwise, in any one or more instances, shall be deemed to be, or considered
as, a further or continuing waiver of any such condition or of the breach of
such term or any other term of this Agreement.
14.5 NO THIRD PARTY BENEFICIARIES. No Third Party including any
employee of any party to this Agreement shall have or acquire any rights by
reason of this Agreement. Nothing contained in this Agreement shall be
deemed to constitute the parties partners with each other or any Third Party.
14.6 ASSIGNMENT AND SUCCESSORS. This Agreement may not be assigned by
either party, except that each party may assign this Agreement and the rights
and interests of such party, in whole or in part, to any of its Affiliates,
any acquirer or purchaser of all or substantially all of its assets or to any
successor corporation resulting from any merger or consolidation of such
party with or into such corporations.
14.7 ***.
<PAGE>
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14.8 FORCE MAJEURE. Neither Pfizer nor Aurora shall be liable for
failure of or delay in performing obligations set forth in this Agreement,
and neither shall be deemed in breach of its obligations, if such failure or
delay is due to natural disasters or any causes reasonably beyond the control
of Pfizer or Aurora.
14.9 SEVERABILITY. If any provision of this Agreement is or becomes
invalid or is ruled invalid by any court of competent jurisdiction or is
deemed unenforceable, it is the intention of the parties that the remainder
of the Agreement shall not be affected.
<PAGE>
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
PFIZER INC AURORA BIOSCIENCES CORPORATION
By: By:
------------------------------ ------------------------------
Title: Title:
--------------------------- ---------------------------
Date: Date:
---------------------------- ----------------------------
cc: Pfizer Inc, Legal Division, Groton, CT
<PAGE>
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***
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***
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***
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***
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***
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1999 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1999 (UNAUDITED).
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 11,364,769
<SECURITIES> 14,814,978
<RECEIVABLES> 7,693,460
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,167,333
<PP&E> 16,373,042
<DEPRECIATION> 4,860,939
<TOTAL-ASSETS> 54,437,856
<CURRENT-LIABILITIES> 16,377,381
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0
0
<COMMON> 17,129
<OTHER-SE> 33,670,665
<TOTAL-LIABILITY-AND-EQUITY> 54,437,856
<SALES> 0
<TOTAL-REVENUES> 19,560,778
<CGS> 0
<TOTAL-COSTS> 13,167,139
<OTHER-EXPENSES> 11,629,791
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 343,609
<INCOME-PRETAX> (4,857,243)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,857,243)
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