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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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
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(Exact name of registrant as specified in its charter)
Delaware 33-0669859
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11010 Torreyana Road, San Diego, CA 92121
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(Address of principal executive offices) (Zip code)
(858) 404-6600
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001
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(Title of class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of Common Stock held by non-affiliates, based on the
last sale price as reported on the Nasdaq National Market on February 29, 2000,
was approximately $1.98 billion*.
The number of shares of registrant's Common Stock outstanding as of February 29,
2000 was 19,677,894.
DOCUMENTS INCORPORATED BY REFERENCE:
Registrant's proxy statement filed in connection with the solicitation of
proxies for its 2000 Annual Meeting of Stockholders is incorporated by reference
into Part III of this Form 10-K. Certain Exhibits filed with the Registrant's
Registration Statement Form S-1 (333-23407), Form 10-Q for the quarter ended
September 30, 1997, Form 10-K for the year ended December 31, 1997, Forms 10-Q
for the quarters ended June 30, 1998 and September 30, 1998, Form 10-K for the
year ended December 31, 1998 and Forms 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999 are incorporated by reference into
Part IV of this Form 10-K.
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*Excludes 1,209,174 shares of Common Stock held by directors, executive
officers and stockholders whose ownership exceeds ten percent of the shares
outstanding on February 29, 2000. Exclusion of shares held by any person
should not be construed to indicate that such person possesses the power,
directly or indirectly, to direct or cause the direction of the management or
policies of the registrant or that such person is controlled by or under common
control with the registrant.
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PART I
THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 INCLUDING, WITHOUT LIMITATION, STATEMENTS
REGARDING THE COMPLETION OF OUR ULTRA-HIGH THROUGHPUT SCREENING SYSTEM, OR
UHTSS-TM- PLATFORM, UTILIZATION AND CAPABILITIES OF OUR TECHNOLOGIES AND OUR
ABILITY TO INCREASE REVENUE AND ACHIEVE PROFITABILITY. THESE STATEMENTS,
WHICH SOMETIMES INCLUDE WORDS SUCH AS "EXPECT", "GOAL" OR "WILL", REFLECT OUR
EXPECTATIONS AND ASSUMPTIONS AS OF THE DATE OF THIS ANNUAL REPORT BASED ON
CURRENTLY AVAILABLE OPERATING, FINANCIAL AND COMPETITIVE INFORMATION. OUR
ACTUAL RESULTS AND FINANCIAL PERFORMANCE MAY DIFFER MATERIALLY. FACTORS THAT
COULD CONTRIBUTE TO DIFFERENCES INCLUDE RISKS INVOLVED WITH OUR NEW AND
UNCERTAIN TECHNOLOGY, RISKS ASSOCIATED WITH THE DEPENDENCE ON PATENTS AND
PROPRIETARY RIGHTS, THE ABILITY TO ATTRACT ADDITIONAL COLLABORATIVE PARTNERS,
DEPENDENCE ON EXISTING PHARMACEUTICAL AND BIOTECHNOLOGY COLLABORATIONS AND
THE DEVELOPMENT OR AVAILABILITY OF COMPETING SYSTEMS. THESE FACTORS AND
OTHERS ARE MORE FULLY DESCRIBED IN "RISK FACTORS" AND ELSEWHERE IN THIS FORM
10-K. WE ASSUME NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS.
ITEM 1. BUSINESS
OVERVIEW
Aurora Biosciences Corporation designs, develops and commercializes proprietary
drug discovery systems and technologies to accelerate and enhance discovery of
new medicines by the pharmaceutical and biopharmaceutical industries. We are
developing a proprietary biology and high technology platform comprised of a
portfolio of proprietary functional genomics technologies, and a highly
automated ultra-high throughput screening system, known as our UHTSS Platform.
We believe that this platform will enable us and our collaborators to take
advantage of the opportunities afforded by recent advances in both genomics and
combinatorial chemistry that have generated many important new therapeutic
proteins and drug targets and an abundance of new small molecule compounds. Our
strategy is to use our diverse portfolio of proprietary technologies to enable
rapid validation of the function of novel targets identified through genomics
efforts, shorten the time required to identify high quality lead compounds and
biologics and accelerate the development of those leads into drug development
candidates.
Aurora is a leader in the innovation and commercialization of technologies that
accelerate and enhance the discovery of new medicines. Our goal is to diversify
business risk by generating revenue from functional genomics collaborations,
screening collaborations, provision of the UHTSS Platform and other proprietary
instrumentation to customers and licensing of technologies. Our agreements with
customers also provide that we may ultimately realize royalty and milestone
payments from the development and commercialization of drug candidates
identified by our customers using our technologies. However, we do not believe
that our profitability is dependent upon receipt of royalty and milestone
payments from customers.
We have collaborative agreements with Bristol-Myers Squibb Pharmaceutical
Research Institute, Eli Lilly and Company, Warner-Lambert Company, Merck & Co.,
Inc. and Pfizer, Inc. to license our fluorescence assay technologies for our
collaborators' internal discovery research, to collaborate on screen development
and as members of a syndicate formed for the co-development and installation of
the UHTSS Platform in their own facilities. In addition, we have developed
screens for and/or implemented screening programs for Pharmacia & Upjohn, Inc.,
F.Hoffmann-LaRoche Ltd., American Home Products, Glaxo Wellcome, Roche
Bioscience, Becton-Dickinson, Allelix Biopharmaceuticals, Inc., Cystic Fibrosis
Foundation, and Cytovia, Inc.
INDUSTRY BACKGROUND
The discovery and development of new medicines can be expensive, time-consuming
and highly inefficient. Although many pharmaceutical, biotechnology and clinical
research organizations have significantly improved the efficiency of the drug
development process, only about ten percent of candidate compounds entering
development are ultimately approved for marketing. The riskiest and least
efficient phase of the drug development process, termed "discovery", is the
early stage prior to clinical development of a drug lead. Candidate compounds
that are identified in the discovery phase of drug development frequently fail
in the later phase due to insufficient therapeutic benefit or unexpected side
effects.
Drug discovery methods generally involve the synthesis and testing of large
libraries of different compounds in relatively simple assays, or tests,
containing molecular or cellular targets designed to mimic aspects of a disease
process. Assays are employed to determine the effect of a compound upon a
particular target protein. When applied methodically, assays can be
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used as screens to identify active chemicals, referred to as "hits," that may
produce a desired effect upon a target's function. "Leads" are modified hit
compounds which have been optimized for side effect profile and efficacy using
techniques of combinatorial and medicinal chemistry. Lead compounds can be
identified by additional screening and profiling of hits and may then be further
optimized to generate candidate compounds for development as potential
medicines. Secondary testing is typically performed to identify potential side
effects or undesirable pharmaceutical properties of the compounds.
We believe that recent advances in the understanding of gene structure,
resulting from the Human Genome Project and other private initiatives, has
created an unprecedented opportunity for pharmaceutical development. These
advances have led to a range of novel protein receptors and enzymes being
discovered with unknown function. These potential drug targets arise from
pharmaceutical companies' internal and external efforts to "mine" the human
genome for DNA sequences that encode these novel proteins. Understanding the
function and biological context of these proteins is critical to validating them
as true drug targets. However, the increasing numbers of targets and compounds
resulting from this breakthrough have created severe bottlenecks in the drug
discovery process. These bottlenecks result from the difficulty of quickly
analyzing the functional significance and disease relevance of newly discovered
genes and protein targets, the complexity of incorporating the many different
types of targets into screens, and the inability to screen extensive compound
libraries quickly and cost-effectively.
We believe that our suite of proprietary functional genomics products and
screening and assay technologies can bring significant efficiencies to the drug
discovery process. We believe that the application of our automated
technologies, assay development, knowledge management techniques, and
manufacturing process techniques has the potential to transform drug discovery
into a mass production process more familiar to a manufacturing setting. Once
implemented, this would enable pharmaceutical and biotechnology companies to
more efficiently discover larger numbers of higher quality candidate compounds
with greatly improved success rates.
BUSINESS STRATEGY
Aurora is a leader in the development and commercialization of enabling
technologies, systems and information products to accelerate and enhance the
discovery of new medicines. We intend to continue to diversify business risk by
exploiting our functional genomics and assay technologies, UHTSS Platform and
other instrumentation, software and data in many different drug discovery
programs with multiple collaborators. To implement this strategy, we intend to:
DEVELOP FUNCTIONAL GENOMICS AND DRUG DISCOVERY COLLABORATIONS. We are
establishing target validation and drug discovery collaborations utilizing our
proprietary human cell-based functional genomics platform. This program is based
primarily on our beta-lactamase, or (beta)-lactamase, reporter system,
proprietary assay technologies and novel fluorescent chemistries. Our platform
allows for a panel of protein targets of unknown function to be placed in a
biological context and prioritized for compound screening programs to discover
potential clinical candidates. The prioritized validated targets can be screened
for hits using our UHTSS platform. These collaborations include milestone
payments to us for target validation, assay development and lead identification
in multiple therapeutic areas. Collaborations based on this technology were
established with Warner-Lambert in January 1999, Pharmacia & Upjohn in February
1999, Becton-Dickinson in March 1999 and Merck in November 1999. We plan to
expand our capability in this area, offering gene-to-lead discovery programs in
a range of different therapeutic areas. We also have been awarded two Small
Business Innovation Research grants and a separate contract from the National
Cancer Institute for research using this technology.
DEVELOP BIOLOGICS DISCOVERY COLLABORATIONS. Genomics efforts by a range of
pharmaceutical, genomics and biotechnology companies have identified a large
number of secreted proteins which may serve as either protein drugs themselves,
or targets for monoclonal antibody-based therapeutics. These protein-based
therapeutics are referred to as biologics. Advances in protein process
technology and antibody production have led to a number of biologics being
commercialized during recent years. We intend to develop collaborations with
pharmaceutical and biotechnology companies who require functional information
concerning secreted proteins or other protein therapeutics. Our goal is to
structure these collaborations to include milestone payments to us for lead
prioritization, assay development and lead identification in multiple
therapeutic areas.
DEVELOP SCREEN DEVELOPMENT PARTNERSHIPS. We have agreements with multiple
collaborators to develop screens for diverse targets, primarily on a
non-exclusive basis, and implement proprietary screens for specific collaborator
discovery programs. We develop screens for specific biochemical targets with
relevance to a range of clinical conditions. Currently, we use our high
throughput screening system to screen compounds for and provide potential lead
candidates to its collaborators. We currently have approximately 400,000
individual compounds for screening against therapeutically relevant targets and
expect to reach 900,000 individual compounds in 2001. We also expect to provide
additional screening services depending on the
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effectiveness of our UHTSS Platform and the availability of superior screening
libraries for use in screening customers' targets. Additionally, our screening
agreements with third parties provide for future revenue, such as milestone and
royalty payments to us for therapeutics discovered using our proprietary
screens.
SUPPORT AND ENHANCE THE UHTSS PLATFORM SYNDICATE. We established a
pharmaceutical syndicate to co-develop our UHTSS Platform, which automates the
biologies discussed above. Under our agreements with our syndicate partners,
each member is entitled to receive its own UHTSS Platform over a specified time
period for use in its internal drug discovery programs. All of the
instrumentation for two systems have been delivered and validated by the
syndicate participants. Through the syndicate, we have been able to fund the
development of the UHTSS Platform and offer to our syndicate members
co-exclusive access to the system. Our existing syndicate agreements provide
that certain collaborators may purchase additional systems or components. We
believe that these agreements represent a customer base that may provide an
opportunity for further collaboration opportunities as we expand the UHTSS
technology platform or develop enhancements to the system.
LICENSE INTELLECTUAL PROPERTY. We intend to leverage our broad portfolio of
intellectual property by licensing our technologies to third parties where
appropriate. For example, in 1999 we entered into sublicensing agreements with
Genentech, Clontech Laboratories, Inc., ZymoGenetics, Inc. and Rigel, Inc.
DEVELOP INFORMATION TOOLS AND DATABASES. Utilizing novel fluorescence assay
technologies and the UHTSS Platform, we expect to have the ability to generate
large amounts of complex information on molecular and genomic targets and
diverse chemical structures. The analysis of these datasets will require the use
of innovative database and data analysis tools. We intend to develop these
information technology applications either directly or in collaborations with
leaders in the areas of molecular imaging software development, datamining
applications, bioinformatics, and database architecture.
MAINTAIN TECHNOLOGY LEADERSHIP. We have assembled a unique multi-disciplinary
team of scientists from leading companies in the pharmaceutical, chemistry,
instrumentation, automation and computer science industries. We intend to
continue investing significantly in research and development in order to make
advances in our core technologies and expand our technology leadership position.
We will also continue to form strategic technology alliances with leading
companies from these industries and with leading academic institutions to
provide us with access to those parties' technologies and expertise.
OUR TECHNOLOGY
The principal components of our integrated technology platform are our
proprietary fluorescence assay technologies, our human cell functional genomics
and GenomeScreen-TM- technology and our highly automated UHTSS Platform that is
being developed for screening miniaturized assays. This unique platform results
frOM our innovative integration of many different disciplines, including
fluorescence chemistry, biophysics, molecular biology, protein engineering,
automation, process control, optics, microfluidics, informatics and software
development.
FUNCTIONAL GENOMICS
Our functional genomics platform, GenomeScreen-TM-, allows generation of
information that can be used to elucidate signaling pathway(s) used by a
specifIC target or gene of interest with unknown function. By integrating our
proprietary automation expertise with our suite of fluorescence assay
technologies, we have developed an approach which enables ultra-high throughput
identification of protein targets for development of small molecule or biologic
therapeutics.
The basis of our GenomeScreen-TM- technology is the use of the proprietary
(beta)-lactamase technology to individually trap genes in a wide range of cell
lineS, and to then use the very high sensitivity and flexibility of
(beta)-lactamase to determine the specific responses of each of the genes to
therapeutically-relevant stimuli. The system is able to detect genes which are
expressed at very low levels, to allow discovery of novel genes. We believe that
this technology has the potential to identify new therapeutic targets and genes,
to map signaling pathways within cells, to elucidate mechanism of action of
compounds, and to significantly reduce the time taken to configure assays for
high throughput screening.
OUR PROPRIETARY FLUORESCENCE ASSAY TECHNOLOGIES
We have a broad portfolio of proprietary fluorescence assay technologies that we
believe exhibit significant advantages over existing screening assays. Our
fluorescence assay technologies utilize light signals emitting from fluorescent
molecules to reveal molecular and cellular activity with precision and
sensitivity. These technologies allow monitoring of the function of very small
amounts of biomolecules in single living cells. In contrast to purely
biochemical assays, these cell-based assays provide information about compounds
acting within the biologically relevant environment within living cells.
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Our fluorescence assay technologies are designed to enable screening of
compounds against nearly all major classes of human drug targets, including
receptors, ion channels, proteases, kinases and other enzymes, in most
therapeutic areas. We have developed numerous assays in several target classes
utilizing our fluorescence assay technologies. The following chart summarizes
our key fluorescence assay technologies, together with examples of the classes
of targets and therapeutic areas to which they may be applicable:
<TABLE>
<CAPTION>
ASSAY TECHNOLOGY TARGET CLASS POTENTIAL THERAPEUTIC AREA
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<S> <C> <C>
(BETA)-LACTAMASE REPORTER GENE cell surface receptors cancer
SYSTEM intra-cellular receptors cardiovascular disease
(cell-based assays) signaling proteins pain and inflammation
proteases neurological disorders
metabolic disorders
infectious viral disease
MEMBRANE VOLTAGE REPORTERS ion channels cardiovascular disease
(cell-based assays) pain and inflammation
gastro-intestinal disease
GREEN FLUORESCENT PROTEIN, OR GFP, proteases cancer
REPORTERS kinases cardiovascular disease
(cell-based assays) pain and inflammation
(biochemical assays) central nervous system disorders
PROMISCUOUS G-PROTEINS G-protein coupled receptors cancer
(cell-based assays) cardiovascular disease
pain and inflammation
central nervous system disorders
metabolic disorders
FRET KINASE/PHOSPHATASE TECHNOLOGY protein kinases cancer
protein phosphatases central nervous system disorders
pain and inflammation
metabolic disorders
</TABLE>
(BETA)-LACTAMASE REPORTER GENE SYSTEM
We have successfully utilized an engineered bacterial enzyme, (beta)-lactamase,
as a reporter gene in mammalian cells in assays suitable for high and ultra-high
throughput screening. The (beta)-lactamase reporter system is an important
advance in reporter gene technology that can be used to design drug screens for
a number of major classes of drug targets. Functional cell-based assays have a
number of advantages over the commonly used binding assays that detect
interaction of test compounds with targets isolated from their natural cellular
environment. Our (beta)-lactamase reporter system allows drug screens to be
constructed in the more physiological environment of mammalian cells, does not
require the use of radioactivity and can readily distinguish between agonists
and antagonists. In addition, the (beta)-lactamase reporter system can
facilitate the search for compounds acting on newly discovered target receptors
where no natural ligands have been identified, also known as orphan receptors.
Aspects of the (beta)-lactamase reporter system were exclusively licensed from
the Regents of the University of California.
The (beta)-lactamase reporter system has demonstrated the potential to greatly
reduce both the time and cost of developing cell-based screens because of its
ability to measure activation responses in single living cells. Even with modern
techniques for making genetically engineered cells, cell line development is an
unpredictable process. Making cell lines for reporter gene assays with current
methods usually takes many months and involves testing hundreds or even
thousands of individual cell "clones" to generate a usable screening assay. In
contrast, the (beta)-lactamase reporter system employs the power of
fluorescence-activated cell sorting, which can rapidly isolate the living cells
in which the reporter gene is connected to the right signaling elements. Thus,
with our (beta)-lactamase reporter system, development time for a target into a
cell-based assay can be reduced to weeks instead of months. We have developed
over fifty assays using (beta)-lactamase.
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VOLTAGE-SENSITIVE REPORTERS
Unregulated membrane voltage can cause serious medical conditions. Thus,
membrane proteins, particularly ion channels, help regulate membrane voltage and
can be targets for drug discovery in major disease areas such as neurology and
cardiology. Important medicines acting on ion channels include certain
anti-epileptic and anti-arrhythmic medicines. However, screening in this area is
typically limited to testing compounds with an electrical measuring apparatus,
which requires skilled scientists and has a low throughput of only tens of
compounds per day.
We have adapted assays incorporating our membrane voltage reporters to a range
of ion channels, several of which are currently the targets of screening
programs in pharmaceutical company research departments and in certain
specialized biotechnology companies. We have developed twenty-five assays using
our membrane voltage reporters. We have also developed a proprietary instrument,
the VIPR-TM- voltage ion probe reader, that works in conjunction with this assAY
technology. We are using the VIPR for high throughput screening of ion channel
targets in 96-well plates at our facilities for customers and have provided the
VIPR to eight customers.
PROPRIETARY ENHANCED GREEN FLUORESCENT PROTEIN VARIANTS
Green fluorescent protein, or GFP, is a naturally fluorescent protein which
requires no additional chemicals or cofactors to make it fluoresce. This feature
of GFP allows it to be expressed within mammalian cells and to act as an
intracellular reporter. Using various techniques of protein engineering, we have
created several mutants which provide much brighter fluorescence than that of
the naturally occurring protein. We have also engineered variants that fluoresce
with different colors. Both these categories of variants have enabled us to
greatly expand the utility of the GFP assay platform. We believe that the main
application for GFP in drug discovery requires the further engineering of GFP
variants to produce reporters of important biologic changes to proteins, such as
cleavage by proteases and protein phosphorylation by protein kinases. We have
developed tandem GFP protease assays that can be used to monitor protease
activity in intact cells. Aspects of our technology related to GFP reporters are
exclusively licensed from the Regents of the University of California and from
the University of Oregon. We have a co-exclusive licensing agreement with
Clontech Laboratories to commercialize certain technology related to GFP
reporters for the non-commercial academic research markets.
G-PROTEIN TECHNOLOGY PLATFORM
We have an exclusive license from the California Institute of Technology to the
use of specified G-proteins, which are well suited to certain applications of
our fluorescence assays. Our proprietary G-protein methods have expanded our
functional genomics suite of products through the development of novel screens
containing G-protein coupled receptors previously difficult to incorporate into
mammalian cell-based assays. These G-proteins are also useful in constructing
screens for orphan receptors with heretofore unknown ligands. We have
established a strong G-protein coupled receptor, or GPCR, platform by developing
a number of assays for itself and others in several target classes by expanding
on the original G-protein technology. We announced a collaboration in February
1999 with Pharmacia & Upjohn involving the development of assays for a number of
orphan GPCRs.
FRET PROTEIN KINASE AND PHOSPHATASE TECHNOLOGY
We have developed and patented a novel technology for assays for kinase and
phosphatase activity. Kinases and phosphatases are of major importance in the
control of almost all cell processes, and are significant therapeutic targets
for a wide range of diseases including cancer, inflammation, central nervous
system disorders and metabolic disorders. Our fluorescence resonance energy
transfer, or FRET, kinase/phosphatase technology permits the rapid development
and operation of ultra-miniaturized screens for these enzymes. We believe that
this technology considerably expands the range of assays which can be run in the
UHTSS Platform against an important class of therapeutic targets.
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CHEMICAL COMPOUND LIBRARY
We currently have a library over 400,000 chemical compounds with drug-like
qualities for screening against our and our customers' targets. We will continue
to build our compound library. The library is composed of individually stored
and accessed compounds. Approximately 100,000 of our existing compounds are
conventionally synthesized compounds, while the remaining 300,000 compounds are
produced by combinatorial chemistry methodologies through an exclusive agreement
between us and SIDDCO, Inc. All compounds in our library have been selected
based on their drug-like properties in order to maximize the expected yield of
chemically-tractable therapeutic leads from high throughput screening. Our
compound library is offered to our customers for screening against therapeutic
targets derived by us or our customers. We believe that this compound library
adds considerable value to the range of screen development and screening
services offered and will be attractive to a wide range of customers.
COMPOUND SCREENING: AURORA'S UHTSS PLATFORM
Automated technologies are transforming drug discovery into a mass production
process. However, because current high throughput screening systems have been
developed without an adequately integrated design concept, it can be challenging
to improve screening performance without creating critical bottlenecks elsewhere
in the process. To overcome these limitations and to exploit the power of our
fluorescence assay technologies, our UHTSS Platform is designed using an
integrated approach that combines a wide array of robotics, manufacturing
process systems and information technologies.
COMPOUND STORAGE AND RETRIEVAL: UHTSS COMPOUND STORE AND AMCS
The UHTSS Compound Store is an automated storage and retrieval system designed
to house compounds in solution for rapid access for massively parallel
screening. The robotic systems for storage and retrieval of compounds have been
adapted from other industrial settings where automated, rapid access to very
large stores of small items has been reliably deployed. Our own proprietary
innovations have been added to adapt these advanced technologies to the UHTSS
Platform. The system is designed to deliver and return over 100,000 selected
compounds per day for primary screening and over 2,000 hits for re-test and
potency determination.
We are also developing an automated master compound store, or AMCS. The AMCS is
a modular storage assembly designed for long-term frozen and solid storage of
chemical libraries under environmental control. The design provides for
monitoring systems to track compound utilization, expiration and availability of
individual compounds. Other features of the AMCS include a semi-automated
weighing subsystem to handle compounds in solid, powder and frozen form, and
automated subsystems for handling liquid samples, as well as an automated
storage and retrieval system.
MICROFLUIDICS: COMPOUND AND ASSAY COMPONENT DISPENSING
We have developed proprietary novel microfluidics technologies to accurately
transfer microscopic volumes of test compounds, reagents and living cells at
rates of up to 10,000 wells per hour. While current screening systems can
dispense volumes down to a microliter (one millionth of a liter), our
miniaturized screening dispensers are capable of volumes less than a nanoliter
(one billionth of a liter). These dispensers are designed to remove compounds
and reagents from the storage plates and containers and dispense precise
sub-nanoliter volumes at high speed. We are incorporating these devices into
proprietary robotic systems superior to currently available compound and reagent
dispensing platforms.
INFORMATICS AND SYSTEM INTEGRATION
The UHTSS Platform is being designed to link the automated storage and retrieval
system to existing chemistry information databases and master compound store
inventories through a user-friendly computer control system. The integrated
UHTSS Platform is designed to efficiently capture, process and deposit in a
centralized database the large amount of screening data from the UHTSS Platform
using advanced software tools and systems from leading providers. The data
analysis tools and overall system architecture and database structure for the
UHTSS Platform have been developed by our in-house control systems software
team.
CORPORATE COLLABORATIONS
We have entered into a number of corporate collaborations for the co-development
of our UHTSS Platform and for screen development and proprietary screens. Our
material collaborations and their major features are summarized below:
SERVICES AND PLATFORM SYSTEM AGREEMENTS
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BRISTOL-MYERS SQUIBB. In November 1996, we entered into a Collaborative Research
and License Agreement with Bristol-Myers Squibb regarding the development of the
UHTSS Platform and the installation of the UHTSS Platform at Bristol-Myers.
Under the terms of the agreement, we are required to develop and separately
install three modules to be integrated into one complete UHTSS Platform. In
return, Bristol-Myers is obligated to make specified payments to us in the form
of non-refundable fees, installation payments and ongoing research and
co-development funding. We are obligated to service and support the UHTSS
Platform for twelve months following acceptance of the operational UHTSS
Platform. In November 1997, Bristol-Myers accepted Module 1 of the UHTSS
Platform, comprised of the storage and retrieval unit, transport system, and
certain plate replication components. In October 1999, Bristol-Myers validated
and accepted Module 2 of the UHTSS Platform, comprised of individual
microfluidics and miniaturization components and the plate reading subsystem.
We and Bristol-Myers also co-develop high throughput screening assays for use
by Bristol-Myers in exchange for specified fees from Bristol-Myers. Certain
target screens under development for Bristol-Myers will be exclusive for a
limited period of time. In exchange for additional payments to us,
Bristol-Myers also has the right to use our fluorescence assay technologies
for internal research and drug development, including the development of
screening assays. Bristol-Myers will also make specified milestone and
royalty payments to us principally for compounds developed and commercialized
by Bristol-Myers which are identified using a screen developed by us. In July
1999, we and Bristol-Myers amended our agreement to extend the screen
development portion of the collaboration for an additional two years.
Under the terms of our agreement with Bristol-Myers, subject to certain
conditions, our UHTSS syndicate is restricted to six members for a limited
period. Bristol-Myers may withdraw from the development of the UHTSS Platform
at any time without cause. Our agreement with Bristol-Myers provides for
penalty payments, up to a maximum of $1 million, payable by us if we fail to
deliver the completed UHTSS Platform by a specified time. The complexity of
the UHTSS Platform software has led to unexpected delays in the delivery of
integration software to Bristol-Myers. We currently believe that we will not
be required to pay penalties related to the completion of the UHTSS Platform.
ELI LILLY AND COMPANY. In December 1996, we entered into a Collaborative
Research and License Agreement with Eli Lilly and Company regarding the
development of the UHTSS Platform and the installation of the UHTSS Platform at
Lilly. In November 1999, we and Lilly agreed to amend the agreement to refocus
the collaboration on our bioassay technology and subsystems and discontinue
further development and delivery of Lilly's customized UHTSS Platform. We and
Lilly will continue with our collaborative screen development, and Lilly will
extend its current access to our fluorescence assay technology for its internal
research for an additional three years. Under the terms of our amended agreement
with Lilly, we will receive payments for collaborative screen development,
annual licensing fees, as well as supplies of our assay reagents.
We and Lilly also co-develop high throughput screening assays for use by Lilly
in exchange for specified fees from Lilly. In exchange for additional payments
to us, Lilly also has the right to use our fluorescence assay technologies for
internal research and drug development, including the development of screening
assays. Lilly will also make specified milestone and royalty payments to us
principally for compounds developed and commercialized by Lilly which were
identified using a screen developed by us, subject to certain limitations on the
royalties.
WARNER-LAMBERT COMPANY. In September 1997, we entered into a Collaborative
Research and License Agreement with Warner-Lambert regarding the development of
the UHTSS Platform and the installation of the UHTSS Platform at Warner-Lambert.
Under the terms of our agreement with Warner-Lambert, we are required to develop
and separately install three modules to be integrated into one complete UHTSS
Platform. In return, Warner-Lambert is obligated to make specified payments to
us in the form of non-refundable upfront fees, milestone payments, delivery
payments and ongoing co-development funding. We are obligated to service and
support the UHTSS Platform in accordance with the agreement for twelve months
following acceptance of the operational UHTSS Platform. In September 1998,
Warner-Lambert accepted Module 1 of the UHTSS Platform, comprised of the storage
and retrieval unit, transport system, and certain plate replication components.
In November 1999, Warner-Lambert validated and accepted Module 2 of the UHTSS
Platform, comprised of individual microfluidics and miniaturization subsystems
and the plate reading subsystem.
We and Warner-Lambert also co-develop high throughput screening assays for use
by Warner-Lambert on its current high throughput screening system in exchange
for specified fees from Warner-Lambert. In addition, we are performing screening
for Warner-Lambert. In exchange for additional payments to us, Warner-Lambert
also has the right to use our fluorescence assay technologies for internal
research and drug development, including the development of screening assays.
Warner-Lambert will also make specified milestone and royalty payments to us for
selected compounds developed and commercialized by Warner-Lambert which were
identified using a screen developed by us.
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Under the terms of the agreement with Warner-Lambert, subject to certain
conditions, the UHTSS syndicate is restricted to six members for a limited
period. Warner-Lambert may terminate the agreement at any time without cause
upon 45 days written notice to us, provided that Warner-Lambert makes specified
withdrawal payments. Each party has the right to terminate the agreement upon
the material breach by the other party of its obligations under the agreement.
In September 1998, we entered into an agreement with Warner-Lambert for the
development of an AMCS for long-term storage of Warner-Lambert's company-wide
sample inventory under environmental control and in various formats. The
agreement provides that we may be liable for penalty payments if we have not
completed the AMCS according to a development schedule in the agreement. We are
currently negotiating with Warner-Lambert to modify the development schedule to
reflect engineering changes to the AMCS. If our negotiations are unsuccessful,
we may be subject to penalty payments of a maximum of $888,300.
In January 1999, we entered into an agreement with Warner-Lambert whereby
Warner-Lambert will utilize aspects of our functional genomics GenomeScreen
program to characterize and profile effects of a number of compounds on gene
expression in a human cell line. We will receive research funding, payment upon
isolation and delivery of cell clones with identified genes, and, potentially,
milestones and royalty payments if compounds for development are discovered as a
result of this work.
MERCK & CO., INC. In December 1997, we entered into a Collaborative Research and
License Agreement with Merck regarding the development of the UHTSS Platform and
the installation of the UHTSS Platform at Merck. Under the terms of our
agreement with Merck, we are required to develop and separately install three
modules to be integrated into one complete UHTSS Platform. In return, Merck is
obligated to make specified payments to us in the form of non-refundable upfront
fees, delivery payments and ongoing co-development funding. We are obligated to
service and support the UHTSS Platform in accordance with the agreement for
twelve months following acceptance of the operational UHTSS Platform. In June
1999, Merck accepted Module 1 of the UHTSS Platform, comprised of the storage
and retrieval unit, transport system, and certain plate replication components.
We and Merck also co-develop high throughput screening assays for use by Merck
in exchange for specified fees from Merck. In exchange for additional payments
to us, Merck also has the right to use our fluorescence assay technologies for
internal research and drug development, including the development of screening
assays. Merck will also make specified milestone and royalty payments to us for
selected compounds developed and commercialized by Merck using a screen
developed by us.
Under the terms of our agreement with Merck, subject to certain conditions, the
UHTSS syndicate is restricted to six members for a limited period. Merck may
terminate the agreement at any time without cause upon 90 days written notice to
us, provided that Merck makes specified withdrawal payments. Each party has the
right to terminate the agreement upon the material breach by the other party of
its obligations under the agreement.
In November 1999, we entered into two additional collaborations with Merck in
the area of functional genomics. Under each collaboration agreement, we will
utilize aspects of our GenomeScreen-TM- technology to investigate cell signaling
pathways and gene function related to selected Merck therapeutic programS. Merck
will receive a license to use the data and materials resulting from the program
in basic research and drug discovery. We will receive an upfront payment from
Merck for the new collaborations, with the potential for additional research
support fees, as well as certain provisions for additional revenues in the event
that drugs developed are commercialized as a result of the collaboration.
PFIZER, INC. In June 1999, we entered into a Collaborative Research and License
Agreement with Pfizer regarding the development of the UHTSS Platform and the
installation of the UHTSS Platform at Pfizer. Under the terms of our agreement
with Pfizer, we are required to develop and separately install three modules to
be integrated into one complete UHTSS Platform. In return, Pfizer is obligated
to make specified payments to us in the form of non-refundable upfront fees,
delivery payments and ongoing co-development funding. We are obligated to
service and support the UHTSS Platform in accordance with the agreement for
twelve months following acceptance of the operational UHTSS Platform. The
agreement also calls for the development and installation of an AMCS for
long-term storage of Pfizer's company-wide sample inventory under environmental
control and in various formats.
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We and Pfizer also co-develop high throughput screening assays for use by Pfizer
in exchange for specified fees from Pfizer. In exchange for additional payments
to us, Pfizer also has the right to use our fluorescence assay technologies for
internal research and drug development, including the development of screening
assays. Pfizer will also make specified milestone and royalty payments to us for
selected compounds developed and commercialized by Pfizer using a screen
developed by us.
SERVICES AND FOCUSED DISCOVERY SYSTEMS AGREEMENTS
GLAXO WELLCOME. In December 1999, we entered into a three-year agreement with
Glaxo Wellcome in the area of ion channel drug discovery. We will provide Glaxo
Wellcome access to our ion channel technology, including our VIPR voltage ion
probe reader, our proprietary voltage sensor dyes and related assay technology.
We will develop assays, deliver instrumentation and provide ongoing scientific
and technical support to Glaxo Wellcome in exchange for specified payments.
AMERICAN HOME PRODUCTS. In December 1999, we announced a five-year agreement
with Wyeth-Ayerst Laboratories, the Pharmaceutical Division of American Home
Products Corporation, in the area of ion channel drug discovery. We will provide
Wyeth-Ayerst access to our ion channel technology, including our VIPR voltage
ion probe reader, our proprietary voltage sensor dyes and related assay
technology. We will develop assays, deliver instrumentation and provide ongoing
scientific and technical support to Wyeth-Ayerst in exchange for specified
payments.
PHARMACIA & UPJOHN, INC. In February 1999, we entered into an agreement with
Pharmacia & Upjohn to provide assay development and proprietary screens to
Pharmacia & Upjohn. Pharmacia & Upjohn funds a dedicated assay development team
at our facilities that utilizes our high sensitivity fluorescence assay
technology to develop assays for a number of orphan G-protein coupled receptors
identified by Pharmacia & Upjohn's genomics program. We also screen compound
libraries provided by Pharmacia & Upjohn to identify "hit" molecules, using our
proprietary screening systems, at a predetermined minimum level and for a
separate fee. We could receive research and development milestones, as well as
royalties, on compounds identified by screens generated through the
collaboration.
F.HOFFMAN-LAROCHE. In February 1999, we entered into an agreement with Roche to
provide a dedicated screen development and technology transfer resource to Roche
which develops screens for up to 12 Roche targets in the first year. We provide
screen development and technology transfer support for a team at our facilities
and at Roche's research facilities globally. In addition to the payments for
screen development, technology transfer services and licenses, Roche makes
research and development payments to us for compounds identified through screens
generated under the collaboration, and royalties if compounds are
commercialized.
BECTON DICKINSON. In March 1999, we entered into an agreement with Becton
Dickinson to utilize our GenomeScreen technology for the identification of genes
useful as drug screening targets. We receive research funding in support of the
collaborative effort, and the parties will evaluate opportunities for future
commercialization.
CYTOVIA, INC. In July 1998, we entered into a collaboration with Cytovia under
which we will provide our high throughput proprietary screens, compound library
and informatics capabilities and Cytovia will provide its proprietary
fluorogenic protease substrates and live-cell screening technology. The two
companies will conduct screening programs to identify new drug leads for cancer
and degenerative diseases. Cytovia will receive rights to develop and
commercialize any new drug leads identified as a result of the collaboration. We
receive fees from Cytovia for compound access and proprietary screens, and could
receive development milestones as well as royalties if compounds identified
under the collaboration are developed and commercialized.
TECHNOLOGY LICENSING
In 1999, we entered into five technology licensing agreements for use under
our GFP patents, including one patent infringement settlement agreement with
AntiCancer, Inc. that we instituted. We granted such licenses to Clontech
Laboratories, for the right to sell certain GFP products as a research
reagent, Exelixis Pharmaceuticals, for the right to use GFP technology in
certain pharmaceutical, animal health and non-plant agricultural
applications, Genentech, Inc., for certain research applications and the
right to use GFP technology for the manufacture of therapeutic proteins, and
ZymoGenetics, Inc., for the right to use GFP technology for certain internal
applications.
PATENTS AND PROPRIETARY RIGHTS
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Our patent portfolio includes over 120 patent applications filed in the United
States and foreign patent jurisdictions. We are either the assignee or exclusive
licensee of these patent rights, including sixteen issued patents on our
instrumentation and plate technology, GFP technology, ion-channel technology and
(beta)-lactamase technology, as well as fifteen allowed applications on these
and other technologies. We are the exclusive licensee of four issued U.S.
patents. Aspects of our technology related to GFP reporters, (beta)-lactamase
based reporters, protease reporters, kinase reporters, and membrane voltage
reporters are exclusively licensed from The Regents of the University of
California. Pursuant to the terms of the Exclusive License Agreement between us
and The Regents of the University of California, we are obligated to pay
expenses associated with patent prosecution and maintenance, specified license
issue fees and royalties to The Regents. Aspects of our technology related to
GFP reporters are exclusively licensed from the University of Oregon. Pursuant
to the terms of the License Agreement between us and the University of Oregon,
we are obligated to pay to the University expenses associated with patent
prosecution and maintenance, specified annual payments and, upon the issuance of
a patent related to the subject technology, to issue shares of our common stock
to the University of Oregon. Aspects of our technology related to G-protein
coupled receptor reporters are exclusively licensed from the California
Institute of Technology, commonly referred to as Cal Tech. In connection with
the execution of the License Agreement between us and Cal Tech, we became
obligated to pay certain expenses associated with patent prosecution and
maintenance, and we issued shares of our Common Stock to Cal Tech.
In March 1999, we filed an action against AntiCancer, Inc. alleging that
AntiCancer infringed specific patents by employing our patented GFP technology
in their business. The suit was settled in September 1999. Under the terms of
the settlement agreement, we received an upfront payment and will receive annual
payments, as well as specified royalty payments, from AntiCancer in exchange for
granting AntiCancer specified rights to use our GFP technology.
We have a non-exclusive license from SIBIA Neurosciences, Inc., with specified
rights to sublicense, under patent rights covering transcription-based assay
technology for screening. Pursuant to the terms of the Non-Exclusive
Cross-License Agreement between us and SIBIA, we granted SIBIA a non-exclusive
license to certain of our technologies, and we issued shares of our common stock
to SIBIA. We and SIBIA are also obligated to pay each other specified royalties.
In September 1999, SIBIA was acquired by Merck.
We have a non-exclusive license and certain sub-licensing rights to OSI
Pharmaceuticals, Inc.'s issued reporter gene patent and options to OSI's Methods
of Modulation patent, for which the U.S. Patent Office has allowed claims. Under
the agreement, OSI received shares of our common stock and a cash payment and
OSI will also receive revenues from any sub-licenses granted by us to our
pharmaceutical partners, plus annual fees and milestone and royalty payments
under pre-agreed terms from any option taken by us or our partners to develop
small molecule gene transcription modulators encompassed by the Methods of
Modulation claims.
We have a non-exclusive license to Xenometrix, Inc.'s gene expression profiling
patents, giving us license to an issued European patent and a pending U.S.
patent, and certain rights of sub-license. The license covers gene expression
profiling utilizing methods other than high-density oligonucleotide microarrays.
We are dependent on the rights licensed from these parties. Any challenge to,
invalidation or loss of our licensed rights could have a material adverse effect
on our business, financial condition or results of operations.
EMPLOYEES
As of February 29, 2000, we had 197 full-time employees, 42 of whom hold Ph.D.
degrees and 35 of whom hold other advanced degrees. Our future success depends
in significant part upon the continued service of our key scientific, technical
and senior management personnel and our continuing ability to attract and retain
highly qualified technical and managerial personnel. None of our employees is
represented by a labor union or covered by a collective bargaining agreement. We
have not experienced any work stoppages and we consider our relations with
employees to be good. In addition to full-time employees, we use the services of
contractors, part-time and temporary staff. As of February 29, 2000, we had a
total of 69 contractors, part-time and temporary staff.
EXECUTIVE OFFICERS OF THE REGISTRANT
Our executive officers are as follows:
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<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Stuart J.M. Collinson 40 President and Chief Executive Officer
Paul J. England 56 Senior Vice President, Research
Thomas G. Klopack 48 Senior Vice President and Chief Operating Officer
John D. Mendlein 40 Senior Vice President, Intellectual Property, General Counsel and Chief
Knowledge Officer
John R. Pashkowsky 43 Vice President, Finance
Harry Stylli 38 Senior Vice President, Commercial Development
</TABLE>
STUART J.M. COLLINSON joined us in May 1999 and currently serves as our
President and Chief Executive Officer. Prior to joining Aurora, he served as
Chief Executive Officer of Andaris, Ltd., a privately held biopharmaceutical
company. Dr. Collinson previously held several positions with Glaxo Wellcome
Plc., Baxter International, Inc. and the Boston Consulting Group. Dr. Collinson
received his Ph.D. in physical chemistry from the University of Oxford, England
and his M.B.A. from Harvard University.
PAUL J. ENGLAND joined us in February 1998 and currently serves as our Senior
Vice President, Research. From 1984 to 1997, he served in various capacities
at SmithKline Beecham in the U.K., most recently serving as Vice President,
Molecular Screening Technologies, with worldwide responsibility for high
throughput screening. Dr. England received his B.S., Ph.D. and D.Sc. degrees
in biochemistry from the University of Bristol. After postdoctoral work at
the University of California, he held a lectureship in biochemistry at the
University of Bristol from 1973 to 1984. We expect Dr. England to transition
to part-time employment with us in the near future.
THOMAS G. KLOPACK joined us in July 1998 and currently serves as our Senior Vice
President and Chief Operating Officer. He served the past 18 years as an
executive with Raychem Corporation in various capacities involving new product
commercialization, strategic planning, operations and logistics, most recently
as Director, Strategic Planning, in the Electronics Division. Prior to joining
Raychem, Mr. Klopack worked at Exxon Corporation in engineering operations. Mr.
Klopack obtained his B.S. in chemical engineering at Carnegie-Mellon University
and his M.B.A. at Harvard University.
JOHN D. MENDLEIN joined us in August 1996 and currently serves as our Senior
Vice President, Intellectual Property, General Counsel and Chief Knowledge
Officer. Dr. Mendlein worked with the law firm of Cooley Godward LLP in Palo
Alto from 1990 to 1996, focusing on patent prosecution and litigation, and
technology licensing for a variety of biotechnology, medical device and
diagnostic companies. He received his Ph.D. from the University of California,
Los Angeles and his J.D. from the University of California, Hastings College of
the Law.
JOHN R. PASHKOWSKY joined us in December 1997 and currently serves as our
Vice President, Finance. He served from 1981 to 1997 in various positions at
Senior Flexonics, Ketema, Inc. and Ametek, Inc., most recently as Controller
of the Ketema Division of Senior Flexonics, and was employed by Rohr
Industries Inc. from 1979 to 1981. Mr. Pashkowsky received his B.S. in
Business Administration from the State University of New York and his M.B.A.
in Finance from San Diego State University.
HARRY STYLLI joined us in November 1995 and currently serves as our Senior Vice
President, Commercial Development. From 1989 to 1995, Dr. Stylli held several
positions at Glaxo Wellcome plc, where he was integrally involved in the
International Screening and Technology program. He obtained a Ph.D. in
Pharmaceutical Chemistry from Kings College, London University, an M.B.A. from
Open University, Milton Keynes, U.K. and a B.Sc. in Biochemical Pharmacology,
with honors, from the University of East London.
SCIENTIFIC ADVISORS
Our scientific advisors, who have demonstrated expertise in various fields,
advise us from time to time concerning long-term scientific planning, research
and development. The scientific advisors also evaluate our research programs,
recommend personnel to us, and advise us on specific scientific and technical
issues. The scientific advisors are compensated by retainer and on a time and
expenses basis and have received shares and options to purchase shares of our
common stock. We have consulting agreements with a number of the scientific
advisors.
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We do not employ any of the scientific advisors, and they may have other
commitments to or consulting or advisory contracts with their employers or other
entities that may conflict or compete with their obligations to us. Accordingly,
such persons are expected to devote only a small portion of their time to us.
Our scientific advisors are:
MICHAEL GEOFFREY ROSENFELD, M.D. -- Investigator, Howard Hughes Medical
Institute; Professor of Medicine, University of California, San Diego
LUBERT STRYER, M.D. -- Winzer Professor in the School of Medicine and Professor
of Neurobiology, Stanford University
ROGER Y. TSIEN, PH.D. -- Investigator, Howard Hughes Medical Institute;
Professor, Department of Pharmacology, School of Medicine, University of
California, San Diego; Professor, Department of Chemistry and Biochemistry,
University of California, San Diego
CHARLES S. ZUKER, PH.D. -- Investigator, Howard Hughes Medical Institute;
Professor, Departments of Biology and Neurosciences, School of Medicine,
University of California, San Diego
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RISK FACTORS
THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE EVENTS OR
OUR FUTURE FINANCIAL PERFORMANCE. YOU ARE CAUTIONED THAT SUCH STATEMENTS ARE
ONLY PREDICTIONS AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN
EVALUATING SUCH STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS
IDENTIFIED IN THIS FORM 10-K, INCLUDING THOSE DISCUSSED BELOW, WHICH COULD CAUSE
ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE
FORWARD-LOOKING STATEMENTS.
BECAUSE WE DEVELOP AND DEPLOY NEW TECHNOLOGIES, WE MAY NOT SUCCESSFULLY
COMMERCIALIZE OUR TECHNOLOGIES OR PRODUCTS, WHICH COULD CAUSE US TO BE
UNPROFITABLE OR LEAD TO LOSS OF BUSINESS OR CONTRACTUAL DISPUTES.
You must evaluate our business in light of the uncertainties and complexities
affecting a growing technology company. Our existing proprietary technologies
and products are new and in development. In particular, our ultra high
throughput screening system, known as UHTSS, and automated master compound
store, known as AMCS, technology and our methods of screening molecular
targets incorporate new and unproven approaches to the identification of drug
product candidates, commonly referred to as lead compounds, with therapeutic
potential. Our fluorescence assay technologies and instruments have only
recently begun to be used in the drug discovery process and have never been
utilized in the discovery of any compound that has been commercialized. A
fluorescence assay is a biochemical or cellular reaction which provides
information about a compound under consideration via the emission of light.
Our UHTSS and AMCS technologies may never be implemented as fully operational
systems. In addition, our UHTSS Platform and AMCS will require significant
additional investment and development prior to commencement of full-scale
commercial operation, including integration of complex instrumentation and
software and testing to validate performance and cost effectiveness. The
UHTSS Platform and AMCS are not expected to be operational until the second
half of 2000, which is nine to twelve months later than originally
anticipated. If we are unable to successfully complete the UHTSS Platform and
AMCS, we may not be able to achieve our business objectives or build a
sustainable or profitable business.
IF WE DO NOT SUCCESSFULLY COMPLETE THE DEVELOPMENT OF OUR UHTSS PLATFORM AND
AMCS ON TIME, OUR RELATIONSHIPS WITH OUR CUSTOMERS COULD BE HARMED.
Complex instrumentation systems that appear to be promising at early stages of
development may not become fully operational for a number of reasons. These
systems may:
- be found ineffective,
- be impossible or uneconomical to produce,
- fail to achieve expected performance levels or industry
acceptance, or
- be precluded from commercialization by the proprietary rights of
third parties.
Some of the instrumentation and software expected to comprise our UHTSS Platform
and AMCS are not now and have not previously been used in commercial
applications. Many of these technologies have not been validated or developed at
levels necessary to screen miniaturized assays, and there can be no assurance
that UHTSS and AMCS technologies will achieve expected performance levels at
these scales. The complexity of both the UHTSS Platform and AMCS has led to
unexpected delays in developing these platforms that may lead to financial
penalties and contractual disputes regarding the delivery and acceptance of
these platforms by our customers. Contractual disputes with our customers may
not be resolved in our favor and may harm our reputation. The successful
implementation and operation of the UHTSS Platform and AMCS will be a complex
process requiring integration and coordination of a number of factors, including
integration of and successful interface between complex advanced robotics,
microfluidics, automated storage and retrieval systems and software and
information systems. We may not be able to successfully integrate or implement
all of the instrumentation needed for the UHTSS Platform and AMCS.
As the UHTSS Platform and AMCS are individually developed, integrated and used,
it is possible that previously unanticipated limitations or defects may emerge.
In addition, operators using the system may require substantial new technical
skills and training. Unforeseen complications may arise in the development,
delivery and operation of the UHTSS Platform and AMCS that could materially
delay or limit their use by us and our customers, substantially increase the
anticipated cost of development of the systems, result in our breach of
contractual obligations to our customers and others, or render the systems
unable to perform at the quality and capacity levels required for success. We
may not be able to successfully complete the development of the UHTSS Platform
and AMCS under current delivery timelines, achieve anticipated throughputs, gain
industry acceptance of our approach to the identification of lead compounds or
develop a
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sustainable profitable business. Any complications or delays could subject us to
litigation and have other material adverse effects on our business, financial
condition or results of operations.
WE DEPEND ON STRATEGIC PARTNERS, AND OUR FAILURE TO SUCCESSFULLY MANAGE OUR
EXISTING AND FUTURE CUSTOMERS COULD PREVENT US FROM COMMERCIALIZING MANY OF OUR
PRODUCTS AND SUSTAINING PROFITABILITY OR REVENUE GROWTH.
Our strategy for the development of the UHTSS Platform includes the
establishment of a syndicate of collaborators to provide us with development
funding, technology and personnel resources and system validation. We have
collaborative agreements with Bristol-Myers Squibb Pharmaceutical Research
Institute, Eli Lilly and Company, Warner-Lambert Company, Merck & Co., Inc. and
Pfizer, Inc. to license our fluorescence assay technologies for their internal
discovery research, to collaborate on screen development and four of these
companies continue to participate in the co-development of the UHTSS Platform
for installation in their own facilities. In addition, we have developed screens
for and/or implemented screening programs for Pharmacia & Upjohn, Inc.,
F.Hoffmann-LaRoche Ltd., American Home Products, Glaxo Wellcome, Roche
Bioscience, Becton-Dickinson, Allelix Biopharmaceuticals, Inc., Cystic Fibrosis
Foundation, and Cytovia, Inc. We have limited or no control over the resources
that any strategic partner may devote to our products or programs. Our
agreements generally may be terminated by the collaborator without cause upon
short notice, which would result in our loss of anticipated revenue. Our
collaborators may not perform their obligations as expected and we may not
derive any additional revenue from these agreements. Termination of our existing
or future collaboration agreements, or the failure to enter into a sufficient
number of additional collaborative agreements on favorable terms, could have a
material adverse effect on our business, financial condition or results of
operations. Our present or future collaborative relationships could be harmed
if:
- We do not deliver our services or systems when contractually
specified;
- We do not achieve our research and development objectives under
our collaborative agreements;
- We develop products and processes or enter into additional
collaborative agreements that could conflict with the business
objectives of our existing collaborative partners;
- We disagree with our collaborative partners as to rights to
intellectual property we develop;
- We are unable to manage multiple simultaneous collaborative
relationships;
- Our collaborative partners become competitors of ours or enter
into agreements with our competitors;
- Consolidation in our target markets limits the number of
potential collaborative partners; or
- We are unable to negotiate additional agreements having terms
satisfactory to us.
WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY IN THE FUTURE.
We were profitable in 1997 and 1999 but had an accumulated deficit of $21.6
million as of December 31, 1999. Our ability to sustain profitability will
depend in part on our ability to successfully complete our UHTSS Platform and
AMCS, successfully sell drug discovery services to pharmaceutical and
biotechnology companies and gain industry acceptance of our systems, services
and technologies. We have derived substantially all of our revenue from sales of
services and technologies, license fees, payments from collaborators and
interest income, and we expect to derive substantially all of our revenue from
these sources. We do not expect to receive royalties or other revenues from
commercial sales of products based upon any compound identified using our
technologies for at least several years, if at all.
We expect to spend significant amounts to fund our expansion of operations and
continued development of products, systems and fluorescence assay and genomics
technologies. As a result, we expect that our operating expenses will increase
in the near term and, consequently, we will need to generate additional revenue
to sustain profitability. Future revenue is uncertain because our ability to
generate revenue will depend upon our ability to enter into new collaborative,
service and license agreements, and to meet research, development and
commercialization objectives under new and existing agreements. Even if we do
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis.
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OUR BUSINESS MODEL IS NOVEL, WHICH MAY DISCOURAGE THIRD PARTIES FROM USING OUR
TECHNOLOGIES AND SERVICES.
We intend to use our UHTSS Platform and fluorescence assay technologies to
rapidly identify for ourselves and our collaborators as many compounds with
commercial potential as possible. Historically, because of the highly
proprietary nature of these discovery activities, the importance of these
activities to drug discovery and development efforts and the desire to obtain
maximum patent and other proprietary protection on the results of their
programs, pharmaceutical and biotechnology companies have conducted molecular
target screening and lead compound identification within their own internal
research departments. Our ability to succeed will be dependent, in part, upon
the willingness of multiple collaborators to accept our business model and to
use our systems, services and technologies as a tool in the discovery and
development of compounds with commercial potential. Because of the potential
overlap of compounds and targets provided to us by our collaborators, conflicts
may arise among collaborators as to rights to particular products developed as a
result of being identified through the use of our technologies. Our failure to
successfully manage existing and future collaborator relationships, maintain
confidentiality among such relationships or prevent the occurrence of such
conflicts could lead to disputes that result in, among other things, a
significant strain on management resources, legal claims involving significant
time and expense and loss of reputation, a loss of capital or a loss of
collaborators, any of which could have a material adverse effect on our
business, financial condition or results of operations.
WE MAY USE SUBSTANTIAL FUNDS AND MANAGEMENT EFFORT TO PURSUE ADDITIONAL
COLLABORATIVE ARRANGEMENTS WITH NO ASSURANCE OF SUCCESSFULLY SELLING OUR
PRODUCTS OR SERVICES OR ENTERING INTO A COLLABORATIVE AGREEMENT.
Our ability to enter into agreements with additional collaborators or to expand
our agreements with existing collaborators depends in part upon potential
collaborators being convinced that our technologies can help accelerate drug
discovery efforts. This may require substantial time and effort on our part to
educate potential collaborators and other users of our services and technologies
on the efficiencies and potential benefits presented by our services and
technologies. In addition, many of the collaborations involve the negotiation of
customized terms regarding licensing, scope of agreement and types of services
required. We may expend substantial funds and management effort to pursue
collaborative opportunities with no assurance that a collaboration will result.
COMPETITION IN THE BIOTECHNOLOGY AND PHARMACEUTICAL INDUSTRIES MAY RESULT IN
COMPETING PRODUCTS AND TECHNOLOGIES THAT MAKE OURS OBSOLETE.
The biotechnology industry is characterized by rapid technological change.
Competition is intense among pharmaceutical and biotechnology companies that
attempt to identify compounds for development or support drug discovery efforts.
Because the UHTSS instrumentation is designed to integrate a number of different
technologies, we compete in many areas, including instrumentation, assay
development, high throughput screening and functional genomics. We compete with
instrumentation companies, the research departments of pharmaceutical and
biotechnology companies and other commercial enterprises, as well as numerous
academic and research institutions. Another technology provider may develop a
product to compete with the UHTSS Platform or AMCS. Pharmaceutical,
biotechnology and instrumentation companies that currently compete with us may
merge or enter into alliances with other companies and become substantial
multi-point competitors. Our collaborators may assemble their own ultra-high
throughput screening systems by purchasing components or contracting for
services from competitors. Genomics and combinatorial chemistry companies may
also expand their business to include compound screening or screen development.
Many of these pharmaceutical and biotechnology companies, which represent the
greatest potential market for our systems, services and technologies, have
developed or are developing internal programs and other methodologies to improve
productivity, including major investments in robotics technology to permit the
automated screening of compounds. Our technological approaches, in particular
the UHTSS Platform and AMCS, may be rendered obsolete or uneconomical by
advances in existing technological approaches or the development of different
approaches by our current or future competitors.
WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS OR OTHER
PROPRIETARY RIGHTS, WHICH WOULD BE EXPENSIVE AND, IF WE LOSE, MAY CAUSE US TO
LOSE SOME OF OUR INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO
COMPETE IN THE MARKET AND MAY CAUSE OUR STOCK PRICE TO DECLINE.
We rely on patents to protect a large part of our intellectual property and our
competitive position. Our patents, which have been or may be issued, may not
afford meaningful protection for our technology and products. In addition, our
current and future patent applications may not result in the issue of patents in
the United States or foreign countries. Competitors of ours may develop products
and technologies similar to ours that do not conflict with our patents. In order
to protect or enforce our
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<PAGE>
patent rights, we may initiate patent litigation against third parties, such as
infringement suits or interference proceedings. These lawsuits could be
expensive, take significant time, and could divert management's attention from
other business concerns. They would put our patents at risk of being invalidated
or interpreted narrowly and our patent applications at risk of not issuing. We
may also provoke these third parties to assert claims against us. The patent
position of biotechnology firms generally is highly uncertain, involves complex
legal and factual questions, and has recently been the subject of much
litigation. We cannot assure you that we will prevail in any of these suits or
that the damages or other remedies awarded to us, if any, will be commercially
valuable. During the course of these suits, there may be public announcements of
the results of hearings, motions and other interim proceedings or developments
in the litigation. If securities analysts or others perceive any of these
results to be negative, it could cause our stock price to decline.
BECAUSE OUR PRODUCTS AND SERVICES CURRENTLY DEPEND ON COMPONENTS AND
TECHNOLOGIES LICENSED FROM THIRD PARTIES, A BREACH BY US OF ANY OF THE TERMS OF
THESE LICENSES COULD RESULT IN THE LOSS OF ACCESS TO THESE COMPONENTS AND
TECHNOLOGIES AND COULD DELAY OR SUSPEND OUR RESEARCH AND DEVELOPMENT PLANS.
Some aspects of our technology and products have been licensed from third
parties. A failure by us to maintain the right to use these components could
seriously harm our business, financial condition and results of operation. In
particular, we are dependent, in part, on the patent rights licensed from third
parties with respect to our fluorescence assay and screening technologies.
Patent applications filed by us or our licensors may not result in patents being
issued with respect to intellectual property we have licensed, claims of those
patents may not offer sufficient protection, and any patents licensed by us may
be challenged, narrowed, invalidated, or circumvented. We may also be subject to
legal proceedings that result in the revocation of patent rights previously
licensed to us, as a result of which we may be required to obtain licenses from
others to continue to develop, test or commercialize our systems, services or
technologies. We may not be able to obtain such licenses on acceptable terms, if
at all, which would result in delays or a suspension of our research and
development plans.
OUR SUCCESS WILL DEPEND PARTLY ON OUR ABILITY TO OPERATE WITHOUT INFRINGING ON
OR MISAPPROPRIATING THE PROPRIETARY RIGHTS OF OTHERS.
We may be sued for infringing on the patent rights of others. We may have to pay
substantial damages, including treble damages, for past infringement if it is
ultimately determined that our products infringe a third party's proprietary
rights. The drug discovery industry, including screening technology companies,
has a history of patent litigation and will likely continue to have patent
litigation suits concerning drug discovery technologies. A number of patents
have issued and may issue on certain targets or their use in screening assays
that could prevent us and our collaborators from developing screens using such
targets, or relate to certain other aspects of technology that we utilize or
expect to utilize. From time to time we receive invitations from third parties
to license patents owned or controlled by third parties. We evaluate these
requests and intend to obtain licenses that are compatible with our business
objectives. We may not be able to obtain any licenses on acceptable terms, if at
all. Our inability to obtain or maintain patent protection or necessary licenses
could have a material adverse effect on our business, financial condition or
results of operations.
OTHER METHODS OF PROTECTING OUR TRADE SECRETS AND OTHER INTELLECTUAL PROPERTY,
INCLUDING CONFIDENTIALITY AGREEMENTS WITH EMPLOYEES AND OTHERS, MAY NOT
ADEQUATELY PREVENT DISCLOSURE OF PROPRIETARY INFORMATION.
In addition to patent protection, we rely on a combination of copyright and
trademark laws, trade secrets, know-how, and other contractual provisions and
technical measures to protect our intellectual property rights. In an effort to
maintain the confidentiality and ownership of trade secrets and proprietary
information, we require employees, consultants and collaborators to execute
confidentiality and invention assignment agreements upon commencement of a
relationship with us. These measures may not provide meaningful protection for
our trade secrets or other confidential information and technology. We may not
have adequate remedies in the event of unauthorized use or disclosure of our
confidential and proprietary information. In addition, third parties may
independently discover trade secrets and proprietary information. Costly and
time-consuming litigation could be necessary to enforce and determine the scope
of our proprietary rights, and failure to obtain and maintain trade secret
protection could adversely affect our competitive position.
IF OUR CONTRACTORS AND VENDORS FAIL TO PROVIDE US WITH ESSENTIAL COMPONENTS THAT
WE NEED IN ORDER TO CONTINUE RESEARCH AND DEVELOPMENT, WE WOULD EXPERIENCE
DELAYS AND ADDITIONAL EXPENSES.
We rely on a limited number of contractors, suppliers and vendors for the
development, manufacture and supply of certain components in the areas of
informatics, robotics, automated storage and retrieval, liquid handling systems,
microfluidics and
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<PAGE>
detection devices. Although we believe that alternative sources for these
components are available, any interruption in the development, manufacture or
supply of a single-sourced component could have a material adverse effect on our
ability to develop the UHTSS Platform or other systems until a new source of
supply is qualified, could subject us to penalties for delays in delivery of the
UHTSS Platform and, as a result, could have a material adverse effect on our
business, financial condition or results of operations. In addition, our current
or future technology suppliers may not meet our requirements for quality,
quantity or timeliness. If any of our current or future technology suppliers
fails to deliver components, including mechanical components of the UHTSS
Platform or our automated master compound store, that meet required
specifications in a timely manner, or at all, it could significantly affect our
ability to meet our contractual obligations to the UHTSS syndicate members and
expose us to significant potential liabilities.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL AS NECESSARY, IT COULD HARM OUR RESEARCH AND DEVELOPMENT EFFORTS AND
WOULD IMPAIR OUT ABILITY TO COMPETE.
Our success depends to a significant degree upon the continued contributions of
our executive officers, management and staff. If we lose the services of one or
more of these people, we may be unable to achieve our business objectives, meet
our commitments under existing agreements and our stock price could decline. We
may not be able to attract or retain qualified employees in the future due to
intense competition for qualified personnel among biotechnology and other
technology-based businesses, particularly in the San Diego area. If we are
unable to attract and retain the necessary personnel to accomplish our business
objectives, we may experience resource constraints that will adversely affect
our ability to meet the demands of our strategic partners in a timely fashion or
to support our ability to attract and retain highly skilled scientists,
including individuals with holding doctoral degrees in the basic sciences and
engineers. All of our employees are at-will employees, which means that either
the employee or Aurora may terminate their employment at any time.
WE MAY ENCOUNTER DIFFICULTIES MANAGING OUR GROWTH, WHICH COULD ADVERSELY AFFECT
OUR RESULTS OF OPERATIONS.
Our success will depend on our ability to expand and manage our operations and
facilities. To be cost-effective and timely in the development and installation
of our systems, services and technologies, we must coordinate the integration of
multiple technologies in complex systems, both internally and for our
collaborators. We may not be able to manage our growth, to meet the staffing
requirements of additional collaborative relationships or successfully
assimilate and train new employees. If we continue to grow, our existing
management skills and systems may not be adequate and we may not be able to
manage any additional growth effectively. If we fail to achieve any of these
goals, there could be a material adverse effect on our business, financial
condition or results of operations.
IF WE ENGAGE IN ANY MERGER OR ACQUISITION TRANSACTIONS, WE WILL INCUR A VARIETY
OF COSTS AND MAY POTENTIALLY FACE OTHER RISKS THAT COULD ADVERSELY AFFECT OUR
BUSINESS OPERATIONS.
If appropriate opportunities become available, we may consider acquiring
businesses, technologies or products that we believe are a strategic fit with
our business. We currently have no commitments or agreements with respect to any
material acquisitions. If we do pursue an acquisition strategy, we could:
- - Issue equity securities which could dilute current stockholders'
percentage ownership;
- - Incur substantial debt; or
- - Assume contingent liabilities.
We may not be able to successfully integrate any businesses, products,
technologies or personnel that we might acquire in the future without a
significant expenditure of operating, financial and management resources, if at
all. In addition, future acquisitions might negatively impact our business
relations with our collaborators. Further, recent proposed accounting changes
could result in a negative impact on our results of operations as well as the
resulting cost of the acquisition. Any of these adverse consequences could harm
our business.
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<PAGE>
IF WE REQUIRE ADDITIONAL CAPITAL TO FUND OUR OPERATIONS, WE MAY NEED TO ENTER
INTO FINANCING ARRANGEMENTS WITH UNFAVORABLE TERMS OR WHICH COULD ADVERSELY
AFFECT YOUR OWNERSHIP INTEREST AND RIGHTS AS COMPARED TO OTHER STOCKHOLDERS.
We may be required to raise additional capital over a period of several years in
order to expand our operations or acquire new technology. We may raise this
additional capital through additional public or private equity financings,
borrowings and other available sources. Our business or operations may change in
a manner that would consume available resources more rapidly than anticipated,
or substantial additional funding may be required before we can sustain
profitable operations. If additional financing is required to operate our
business, we cannot assure you that additional financing will be available on
terms favorable to us, or at all. If adequate funds are not available or are not
available on acceptable terms, our ability to fund our operations, take
advantage of opportunities, develop products or technologies or otherwise
respond to competitive pressures could be significantly limited.
If we raise additional funds through the issuance of equity securities, the
percentage ownership of our stockholders will be reduced, stockholders may
experience additional dilution or such equity securities may provide for rights,
preferences or privileges senior to those of the holders of our common stock. If
we raise additional funds through the issuance of debt securities, the debt
securities would have rights, preferences and privileges senior to holders of
common stock and the terms of that debt could impose restrictions on our
operations.
OUR TECHNOLOGIES AND PRODUCTS MAY NOT RESULT IN THE DISCOVERY AND
COMMERCIALIZATION OF DRUG PRODUCTS AND WE MAY NOT GENERATE REVENUES FROM
MILESTONES OR ROYALTIES IN THE FUTURE.
Many of our agreements with collaborators and technology licensees provide that
we may receive milestone payments or royalties based on future sales of drug
products discovered through the use of our services, technologies and products.
Use of our services, technologies or products may not result in the discovery of
[lead compounds] that will be safe or effective. Our screens may result in
developed and commercialized pharmaceutical products that could generate
milestone payments and royalties only after lengthy and costly pre-clinical and
clinical development efforts, the receipt of necessary regulatory approvals,
including approvals by the FDA and equivalent foreign authorities, and the
integration of manufacturing capabilities and successful marketing efforts, all
of which must be performed by our collaborators. We do not currently intend to
perform any of these activities. Our collaborators may decide not to develop or
commercialize lead compounds identified through the use of our technologies.
Development and commercialization of lead compounds depend not only on the
achievement of research objectives by us and our collaborators, but also on each
collaborator's own financial, competitive, marketing and strategic
considerations, all of which are outside our control. Our collaborators may not
successfully perform their development, regulatory, compliance, manufacturing or
marketing functions. Products may not be developed and commercialized as a
result of our collaborations and any development or commercialization may not be
successful. If commercialization of lead compounds is successful, disputes may
arise over payments to us. We do not expect to receive royalties or other
revenues from commercial sales of products based upon any compound identified
using our technologies for at least several years, if at all.
DRUG PRODUCTS DEVELOPED AND COMMERCIALIZED BY OUR COLLABORATIVE PARTNERS WILL
LIKELY REQUIRE REGULATORY APPROVALS, WHICH MAY REDUCE OUR POTENTIAL REVENUES
FROM MILESTONES OR ROYALTIES.
If a collaborator successfully identifies a drug product for development and
commercialization, it will likely be subject to extensive government regulation.
Regulation by the FDA and other governmental entities in the United States and
other countries will be a significant factor in the production and marketing of
any pharmaceutical products that may be developed by a collaborator. We do not
currently plan to develop our own pharmaceutical products. Pharmaceutical
products developed by our collaborators will require lengthy and costly
pre-clinical and clinical trials and regulatory approval by governmental
agencies prior to commercialization. Approvals may not be granted despite
substantial time and resources required to obtain approvals and comply with
appropriate statutes and regulations. Delays in obtaining regulatory approvals
would adversely affect the marketing of any drugs developed by our
collaborators, diminish any competitive advantages that our collaborators may
attain and therefore adversely affect our ability to receive royalties or
milestone payments.
WE MAY BE SUED FOR PRODUCT LIABILITY.
We may be held liable if any product we develop, or any product which is made
with the use of any of our technologies, causes injury or is found otherwise
unsuitable during product testing, manufacturing, marketing or sale. Although we
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currently maintain product liability insurance, we may not have sufficient
insurance coverage against potential liabilities and we may not be able to
obtain sufficient coverage at a reasonable cost. Furthermore, product liability
insurance is becoming increasingly expensive. As a result, we may not be able to
maintain current amounts of insurance coverage, obtain additional insurance, or
obtain insurance at a reasonable cost, which could prevent or inhibit the our
commercialization of products or technologies. If we are sued for any injury
caused by our technology or products, our liability could exceed our total
assets.
OUR ACTIVITIES INVOLVE THE USE OF HAZARDOUS MATERIALS, WHICH SUBJECT US TO
REGULATION, RELATED COSTS AND DELAYS AND POTENTIAL LIABILITIES.
Our business involves the controlled storage, use and disposal of hazardous
materials, including chemical, biological and radioactive materials. We are
subject to federal, state and local regulations governing the use, manufacture,
storage, handling and disposal of materials and waste products. Although we
believe that our safety procedures for handling and disposing of these hazardous
materials comply with the standards prescribed by law and regulation, we cannot
completely eliminate the risk of accidental contamination or injury from those
hazardous materials. In the event of an accident, we could be held liable for
any damages that result, and any liability could exceed the limits or fall
outside the coverage of our insurance. We may not be able to maintain insurance
on acceptable terms, or at all. We could incur significant costs or impairment
of our research, development or production efforts in order to comply with
current or future environmental laws and regulations.
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY AND ANY FAILURE TO MEET FINANCIAL
EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A
DECLINE IN OUR STOCK PRICE.
Our quarterly operating results have fluctuated in the past and are likely to do
so in the future as a result of many factors, many of which are out of our
control. For example, our revenues have varied dramatically as a result of the
timing of fees we obtain under our various collaborative, technology licensing
and services agreements, as these payments are frequently comparatively large
and are recognized unevenly over time. It is possible that in some future
quarter or quarters, our operating results will be below the expectations of
securities analysts or investors. In this event, the market price of our common
stock may fall abruptly and significantly. Because our revenue and operating
results are difficult to predict, we believe that period-to-period comparisons
of our results of operations are not a good indication of our future
performance. Some of the factors that could cause our operating results to
fluctuate include:
- - Termination of collaborative agreements;
- - Our ability to enter into new agreements with collaborative partners or
technology licensees;
- - Our ability to complete delivery requirements under existing
collaborative agreements;
- - Our acquisition of complimentary businesses or technologies; and
- - General and industry specific economic conditions, which may affect
our customers' research and development expenditures.
If revenue declines in a quarter, whether due to a delay in recognizing expected
revenue or otherwise, our earnings will decline because many of our expenses are
relatively fixed.
OUR STOCK PRICE MAY BE PARTICULARLY VOLATILE BECAUSE OF THE INDUSTRY IN WHICH WE
OPERATE.
The market prices for securities of comparable technology companies,
particularly life science companies, have been highly volatile and the market
has experienced significant price and volume fluctuations that are often
unrelated to the operating performance of particular companies. Announcements of
technological innovations or new commercial products by us or its competitors,
disputes or other developments concerning proprietary rights, including patents
and litigation matters, publicity regarding actual or potential results with
respect to systems, services or technologies under development by us, its
collaborative partners or its competitors, regulatory developments in both the
United States and foreign countries, public concern as to the efficacy of new
technologies, general market conditions, as well as quarterly fluctuations in
our revenue and financial results and other factors may have a significant
impact on the market price of our Common Stock. In particular, the realization
of any of the risks described in these "Risk Factors" could have a dramatic and
materially adverse impact on the market price of our Common Stock. In the past,
following periods of volatility in the market price of a company's securities,
securities class-action litigation has often been instituted against those
companies. This type of litigation, if instituted, could
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result in substantial costs and a diversion of management's attention and
resources, which could materially affect our business, financial condition or
results of operations.
WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION,
BYLAWS AND DELAWARE LAW THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR
COMPANY, EVEN IF THE ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.
Provisions of our certificate of incorporation, our bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. These provisions could discourage
potential take-over attempts and could adversely affect the market price for our
common stock. Because of these provisions, you may not be able to receive a
premium on your investment.
FUTURE SALES OF OUR COMMON STOCK BY EXISTING STOCKHOLDERS OR BY US COULD CAUSE
OUR STOCK PRICE TO DECLINE.
Sales by existing stockholders of a large number of shares of our common stock
in the public market or the perception that sales could occur could cause the
market price of our common stock to drop. Likewise, additional equity financings
or other share issuances by us could adversely affect the market price of our
common stock.
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ITEM 2. PROPERTIES
We lease approximately 81,200 square feet of space used for laboratory and
administrative purposes in San Diego, California. These facilities are leased
through September 15, 2008. We believe these facilities are adequate for our
current and near-term projected needs and that additional space at a nearby
location will be available as needed.
ITEM 3. LEGAL PROCEEDINGS
In March 1999, we filed an action against Anticancer, Inc. in the U.S. District
Court for the Southern District of California (99 CV 0387 E (POR)). Our
complaint alleged that Anticancer infringed our U.S. Patent Nos. 5,625,048 and
5,777,079 by employing our GFP patented technology in AntiCancer's business,
including AntiCancer's MetaMouse-Registered Trademark technology. The suit was
settled in September 1999. Under the terms of the settlement agreement, we
granted AntiCancER, Inc. certain rights to use our GFP technology, specifically,
our Aequorea victoria mutant GFP's, for use in AntiCancer's MetaMouse-Registered
Trademark technology, includINg providing services to third parties. The
agreement provides for us to receive upfront and annual payments, as well as
specified royalty payments, from AntiCancer.
We are not a party to any pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Our common stock began trading on the Nasdaq National Market under the
symbol "ABSC" on June 19, 1997. The following table presents high and low
sales prices of our common stock, as reported by Nasdaq, for the periods
indicated:
<TABLE>
<CAPTION>
1997 HIGH LOW
- ---- ---- ---
<S> <C> <C>
Second Quarter (beginning June 19, 1997) $ 12.25 $ 10.00
Third Quarter 15.63 9.38
Fourth Quarter 15.75 11.00
1998
First Quarter 14.38 10.25
Second Quarter 12.38 5.88
Third Quarter 9.25 3.75
Fourth Quarter 8.00 4.00
1999
First Quarter 9.63 6.00
Second Quarter 7.97 4.88
Third Quarter 17.38 6.63
Fourth Quarter 30.06 9.88
</TABLE>
As of February 25, 2000, there were approximately 172 stockholders of
record of our common stock. We have never declared or paid any cash
dividends on our common stock and do not intend to pay any cash dividends
on our common stock in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
On February 10, 2000, we sold 1,800,000 shares of our common stock to
selected institutional and other accredited investors at a price of $42
per share with net proceeds of approximately $71 million after deducting
fees and expenses. B.T. Alex Brown acted as the placement agent in
connection with this transaction. We issued these shares in reliance upon
the exemption from securities regulation afforded by Rule 506 of
Regulation D under the Securities Act.
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ITEM 6. SELECTED FINANCIAL DATA
The data set forth below should be read in conjunction with the financial
statements and accompanying notes included elsewhere in this document.
<TABLE>
<CAPTION>
PERIOD FROM
MAY 8, 1995
YEARS ENDED DECEMBER 31, (INCEPTION) TO
---------------- ----------------- ---------------- ----------------- DECEMBER 31,
1999 1998 1997 1996 1995
---------------- ----------------- ---------------- ----------------- ----------------
STATEMENT OF OPERATIONS DATA: (in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue $ $ $ $ $
50,324 26,538 14,908 2,217 -
Operating expenses:
Cost of revenue 27,779 23,777 6,983 - -
Research and development 11,593 17,146 5,406 4,396 366
Selling, general and administrative 11,535 6,068 3,679 1,275 46
---------------- ----------------- ---------------- ----------------- ----------------
Total operating expenses 50,907 46,991 16,068 5,671 412
---------------- ----------------- ---------------- ----------------- ----------------
Loss from operations (583) (20,453) (1,160) (3,454) (412)
Interest income 1,543 2,445 1,793 580 -
Interest expense (691) (645) (346) (59) -
---------------- ----------------- ---------------- ----------------- ----------------
Income (loss) before income taxes 269 (18,653) 287 (2,933) (412)
Income taxes (117) - (20) - -
---------------- ----------------- ---------------- ----------------- ----------------
Net income (loss) $ 152 $ (18,653) $ 267 $ (2,933) $ (412)
================ ================= ================ ================= ================
Basic income (loss) per share $ 0.01 $ (1.14) $ 0.03 $ (3.86) $ (5,146.59)
================ ================= ================ ================= ================
Diluted income (loss) per share $ 0.01 $ (1.14) $ 0.02 $ (3.86) $ (5,146.59)
================ ================= ================ ================= ================
Shares used in computing:
Basic income (loss) per share 16,967 16,312 8,970 760 < 1
================ ================= ================ ================= ================
Diluted income (loss) per share 18,241 16,312 15,423 760 < 1
================ ================= ================ ================= ================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- ----------------- ---------------- ----------------- ----------------
1999 1998 1997 1996 1995
---------------- ----------------- ---------------- ----------------- ----------------
BALANCE SHEET DATA: (in thousands)
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and investments $ 36,618 $ 28,026 $ 48,906 $ 13,167 $ 11
Total assets 63,862 50,955 63,036 17,515 115
Capital lease obligations, less current
portion 4,343 4,788 3,422 1,111 -
Accumulated deficit (21,579) (21,731) (3,078) (3,345) (412)
Total stockholders' equity 40,314 37,542 54,364 15,184 (412)
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934. ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF A NUMBER OF FACTORS INCLUDING THE ABILITY TO ATTRACT ADDITIONAL COLLABORATIVE
PARTNERS, DEVELOPMENT OR AVAILABILITY OF COMPETING SYSTEMS, AND THE ABILITY TO
MEET EXISTING COLLABORATIVE COMMITMENTS. YOU ARE ENCOURAGED TO REVIEW THE RISK
FACTORS DISCUSSED IN "BUSINESS - RISK FACTORS" AND ELSEWHERE IN THIS FORM 10-K
FOR A MORE COMPLETE DISCUSSION OF THOSE RISKS AND UNCERTAINTIES.
OVERVIEW
Aurora Biosciences Corporation combines innovative biotechnology with its novel,
high-technology automation and software to provide solutions to challenges in
drug discovery for the pharmaceutical and biotechnology industries. Our core
technologies include a broad portfolio of proprietary fluorescence assay
technologies; our functional genomics GenomeScreen-TM- program; and our
ultra-high throughput screening system, or UHTSS-TM- Platform, and subsysteMS to
miniaturize and automate assays derived from those technologies within a
computer-controlled integrated system, capable of searching through expansive
libraries of compounds to identify those that might lead to new medicines. We
seek to become a leader in providing services, technology and information that
enhance and accelerate our customers' ability to discover new therapeutics
through three main strategies:
- - providing customized drug discovery services, allowing the customer
to outsource some part or all of its discovery needs;
- - developing and selling systems, instruments and technologies to
augment the customer's own discovery efforts; and
- - licensing our growing intellectual property portfolio.
We had an accumulated deficit of $21.6 million as of December 31, 1999. Our
objective for 2000 is to continue increasing revenue, with modest expense
increases, and to maintain profitability for the full year. Our ability to
maintain profitability will depend in part on our ability to successfully
complete development, manufacture and delivery of UHTSS Platforms that meet
contractual specifications, continue to provide drug discovery services to
pharmaceutical and biotechnology customers and achieve the required further
growth of sales of our systems, services and technologies.
Revenue is predominately sales to corporate collaborators of services,
technology, instruments and intellectual property licenses. Sales to date have
been generated from a limited number of collaborators in the biotechnology and
pharmaceutical industries in the U.S. and Europe.
Many of our agreements provide for future milestone payments from drug
development achievements and royalties from the sale of products derived from
certain of our technologies. However, collaborators may not ever generate
products from technology provided by us and thus we may not ever receive
milestone payments or royalties. We believe our ability to maintain
profitability is not dependent on receipt of milestone payments or royalties.
We may encounter significant fluctuations in our quarterly financial performance
depending on factors such as revenue from existing and future contracts and
collaborations, timing of the delivery of technologies and systems and the
completion of contracted service commitments to our collaborators. We will also
continue to invest in new technologies to expand our core drug discovery
capabilities. Accordingly, our results of operations for any period may not be
comparable to, or predictive of, the results of operations for any other period.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
REVENUE
Revenue increased 90% to $50.3 million in 1999 from $26.5 million in 1998, which
was an increase of 78% from $14.9 million in 1997. The increase in 1999 resulted
primarily from new agreements executed during the year, including a five-year
services, systems and technology access collaborative agreement with Pfizer,
Inc., drug discovery services agreements with Pharmacia & Upjohn, Inc. and
F.Hoffman-LaRoche, and licensing agreements with Clontech Laboratories, Inc. and
ZymoGenetics, Inc. Increased revenue under a collaborative agreement with
Bristol-Myers Squibb Pharmaceutical Research
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Institute executed in 1996 also contributed to the overall increase in revenue
in 1999. The increase in 1998 resulted primarily from our collaborative
agreements with Warner-Lambert Company and Merck & Co., Inc. executed in 1997,
and an agreement with Warner-Lambert executed in 1998 to develop an automated
master compound storage, or AMCS-TM- system.
EXPENSES
Total operating expenses increased 8% to $50.9 million in 1999 from $47.0
million in 1998, which was an increase of 192% from $16.1 million in 1997. The
increases in operating expenses resulted primarily from our growth, our product
development efforts, drug discovery services offerings and research and
development programs. This growth was reflected by the increase to 187 employees
at December 31, 1999 from 150 at December 31, 1998 and 88 at December 31, 1997,
and by the expansion of facilities in October 1997 to 81,000 square feet from
22,000 square feet.
Cost of revenue increased 17% to $27.8 million in 1999 from $23.8 million in
1998, which was an increase of 241% from $7.0 million in 1997. In addition to
the growth of operations as noted above, the increases in cost of revenue was
primarily a result of increased purchases of materials and increased technology
development expenses related to the development of the UHTSS Platform, the AMCS
and screening subsystems for our collaborators. Also contributing to the
increase in 1999 were costs related to the completion of contracted service
commitments under new drug discovery services agreements.
Research and development decreased 32% to $11.6 million in 1999 from $17.1
million in 1998, which was a 217% increase from $5.4 million in 1997. The
decrease in 1999 reflects a shift in drug discovery services resources from
internal research and development to external customer-funded activities to
support new as well as ongoing drug discovery services agreements in 1999. In
addition, non-recurring items in 1998 such as licensing of technology from OSI
Pharmaceuticals, Inc. and Xenometrix, Inc. and the costs of initiating a
collaboration with SIDDCO, Inc. to produce a large library of compounds for our
UHTSS Platform contributed to the decrease in 1999 and the increase in 1998. The
increase in 1998 was also attributable to ongoing development of a UHTSS
Platform and an AMCS for us, and the expansion of our human cell functional
genomics GenomeScreen-TM- program.
Selling, general and administrative expenses increased 90% to $11.5 million in
1999 from $6.1 million in 1998, which was a 65% increase from $3.7 million in
1997. The increases were primarily attributable to the growth of operations as
noted above, including increases in staffing of the executive, legal and
commercial development functions.
INTEREST AND OTHER INCOME
Net interest income decreased 53% to $0.9 million in 1999 from $1.8 million in
1998, which was a 24% increase from $1.4 million in 1997. The decrease in 1999
primarily reflected interest income from lower average cash and investment
balances during the year. The increase in 1998 resulted from interest income
from higher average cash and investment balances due to receipts under
collaborative agreements and proceeds from our initial public offering in June
1997. Interest income was partially offset by interest expense incurred on
capital lease and loan obligations.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, we held cash, cash equivalents and investment securities
available-for-sale of $36.6 million and working capital of $25.8 million. We
have funded operations through December 31, 1999 primarily through receipts from
corporate collaborations of $99 million, issuance of equity securities with
aggregate net proceeds of $59 million, capital equipment lease financing of $12
million and interest income of $6 million.
In February 2000, we completed a private placement of 1.8 million shares of
newly issued common stock to selected institutional and other accredited
investors. The purchase price was $42.00 per share, resulting in net proceeds of
approximately $71 million.
Our facility lease agreement is secured by a letter of credit, which is secured
by a certificate of deposit recorded as restricted cash. At December 31, 1999,
restricted cash totaled $0.7 million. The letter of credit will be reduced over
the next two years on a predetermined schedule.
We have entered into certain contractual commitments, subject to satisfactory
performance by third parties, which obligate expenditures totaling approximately
$5.7 million over the next four years.
26
<PAGE>
Our strategy for the development of the UHTSS Platform includes the
establishment of a syndicate of collaborators to provide us with funding for
development, technology and personnel resources and payments for system
validation. The UHTSS Platform co-development syndicate currently includes
Bristol-Myers, Warner-Lambert, Merck and Pfizer. We have also entered into
agreements with Warner-Lambert and Pfizer to develop AMCS systems. In addition,
we have entered into collaborations with Cytovia, Inc., Pharmacia & Upjohn,
Inc., F.Hoffman-LaRoche and Cystic Fibrosis Foundation to provide screen
development and/or screening services, and with Warner-Lambert, Merck, Becton
Dickinson and the National Cancer Institute for functional genomics programs. We
have entered into ion channel technology agreements with Bristol-Myers, Eli
Lilly and Company, Glaxo Wellcome, American Home Products and Merck. Other
collaborations include a combinatorial chemistry agreement with SIDDCO to
synthesize large libraries of chemical compounds for us.
Our ability to achieve sustained profitability will be dependent upon our
ability to sell 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. Our
revenue goals may not be met. Although we are actively seeking to enter into
additional collaborations, we may not be able to negotiate additional
collaborative agreements on acceptable terms, if at all. Some of our current
collaborative agreements may be terminated by the collaborator without cause
upon short notice, which would result in loss of anticipated revenue. Although
certain of our collaborators would be required to pay some penalties in the
event they terminate their agreements without cause, any of our collaborators
may elect to terminate their agreements with us. In addition, collaborators may
terminate their agreements for cause if we cannot deliver the technology in
accordance with the agreements. Our collaborators may not perform their
obligations as expected and we may not derive any additional revenue from the
agreements. Current or future collaborative agreements may not be successful and
provide us with expected benefits. Termination of our existing or future
collaborative agreements, or the failure to enter into a sufficient number of
additional collaborative agreements on favorable terms or generate sufficient
revenues from our services and technologies could have a material adverse effect
on our business, financial condition or results of operations.
The complexity of both the UHTSS Platform and AMCS has led to unexpected
delays in developing these platforms that may lead to financial penalties and
contractual disputes regarding the delivery and acceptance of these platforms
by our customers. Because we are also dependent in part on the performance of
our customers and suppliers in order to deliver these platforms, our ability
to timely deliver these platforms may be outside of our control. Some of our
agreements with our customers provide for penalties to be paid by us if we do
not meet development schedules contained in the agreements. Our agreement
with Bristol-Myers provides for penalty payments up to a maximum of
$1,000,000 if we fail to deliver the completed UHTSS Platform by a specified
time. Our agreement with Warner-Lambert provides for penalty payments up to a
maximum of $888,300 if we fail to deliver the completed AMCS according to a
specified development schedule. Although we are currently negotiating with
Warner-Lambert to modify the development schedule contained in that
agreement, we are currently subject to penalty payments. If we are unable to
renegotiate the development schedule in our agreement with Warner-Lambert, or
if we fail to meet the development schedule and become subject to penalties
under our agreement with Bristol-Myers, we may be required to pay substantial
penalties which could have a material adverse effect on our business,
financial condition or results of operations.
We may be required to raise additional capital over the next several years in
order to conduct or expand our operations or acquire new technology. This
capital may be raised through additional public or private equity financings,
borrowings and other available sources. Our business or operations may change in
a manner that would consume available resources more rapidly than anticipated
and substantial additional funding may be required before we can sustain
profitable operations. We may not continue to generate sales from and receive
payments under existing collaborative agreements and existing or potential
revenue may not be adequate to fund our operations. If additional funding
becomes necessary, it may not be available on favorable terms, if at all. If
adequate funds are not available, we may be required to curtail operations
significantly or to obtain funds by entering into arrangements with others that
may have a material adverse effect on our business, financial condition or
results of operations.
IMPACT OF YEAR 2000
The nature and progress of our plans to ensure our operations would 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) have been discussed in
prior years. In late 1999, we completed our modifications and conversions of
existing software and certain hardware. As a result of those planning and
implementation efforts, we experienced no significant disruptions in its
computer systems and believe those systems successfully responded to the Year
2000 date change. We expensed less than $50,000 during 1999 in connection with
the Year 2000 issue. We are not aware of any material problems resulting from
the Year 2000 issue, either with our products, our internal systems, or the
products and services of third parties. We will continue to monitor our computer
systems and those of our suppliers to ensure that any latent Year 2000 matters
that may arise are addressed promptly.
27
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We invest our excess cash in interest-bearing investment-grade securities that
we hold for the duration of the term of the respective instrument. We do not
utilize derivative financial instruments, derivative commodity instruments or
other market risk sensitive instruments, positions or transactions in any
material fashion. Accordingly, we believe that, while the investment-grade
securities we hold are subject to changes in the financial standing of the
issuer of such securities, we are not subject to any material risks arising from
changes in interest rates, foreign currency exchange rates, commodity prices,
equity prices or other market changes that affect market risk sensitive
instruments. A hypothetical 1% adverse move in interest rates along the entire
interest rate yield curve would not materially affect the fair value of our
financial instruments that are exposed to changes in interest rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplemental data required by this item are set
forth at the pages indicated in Item 14(a)(1).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable.
28
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to directors is incorporated
by reference from the information under the caption "Election of Directors"
contained in our proxy statement to be filed in connection with the solicitation
of proxies for our 2000 Annual Meeting of Stockholders (the "Proxy Statement").
The required information concerning our executive officers is contained in
Item 1 of Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
information under the caption "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management" contained in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
information contained under the caption "Certain Transactions" in the Proxy
Statement.
29
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) Financial Statements
The financial statements required by this item are submitted
in a separate section beginning on page F-1 of this report.
(2) Financial Statement Schedules
All schedules are omitted because they are not applicable or
the required information is included in the financial
statements or the notes thereto.
(3) Exhibits
See Item 14 (c) below. Each management contract or
compensatory plan or arrangement is identified separately in
Item 14 (c).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
3.4(1) Restated Certificate of Incorporation.
3.5(1) Restated Bylaws.
4.1 Reference is made to Exhibits 3.4 and 3.5.
4.2(1) Form of Common Stock Certificate.
4.3(1) Amended and Restated Investors' Rights Agreement dated as of
December 27, 1996 between the Registrant and the individuals
and entities listed in the signature pages thereto.
10.1(1) Form of Indemnity Agreement entered into between Registrant
and its directors and officers.
10.2(1)# Registrant's 1996 Stock Plan, as amended and restated (the
"1996 Stock Plan").
10.3(1)# Form of Incentive Stock Option Agreement under the 1996
Stock Plan.
10.4(1)# Form of Nonstatutory Stock Option Agreement under the 1996
Stock Plan.
10.5(1)# Form of Restricted Stock Purchase Agreement under the 1996
Stock Plan.
10.6(1)# Registrant's Employee Stock Purchase Plan and related
offering document.
10.7(1)# Registrant's Non-Employee Directors' Stock Option Plan.
10.8(1)# Form of Nonstatutory Stock Option under Registrant's
Non-Employee Directors' Stock Option Plan.
10.9(1)# Employment Agreement dated January 23, 1996 between the
Registrant and Timothy J. Rink, as subsequently amended on
March 8, 1996.
10.10(1)# Employment Agreement dated August 6, 1996 between the
Registrant and J. Gordon Foulkes.
10.11(1) Preferred Stock Purchase Agreement dated as of March 8, 1996
between the Registrant and the individuals and entities
listed in the signature pages thereto.
10.12(1) Series D Preferred Stock Purchase Agreement dated as of
December 27, 1996 between the Registrant and the individual
and entities listed in the signature pages thereto.
10.13(1) Sublease dated May 29, 1996 between the Registrant and
Torrey Pines Science Center Limited Partnership, as
subsequently amended on August 31, 1996.
10.14(1) Master Lease Agreement dated May 17, 1996 between the
Registrant and Lease Management Services Incorporated.
10.15(1) Equipment Financing Agreement dated May 17, 1996 between the
Registrant and Lease Management Services Incorporated.
10.16(1) Security Deposit Pledge Agreement dated May 17, 1996 between
the Registrant and Lease Management Services Incorporated.
10.17(1)* Exclusive License Agreement for Fluorescent Assay
Technologies dated June 17, 1996
30
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
between the Registrant and The Regents of the University
of California.
10.18(1)* License Agreement dated August 2, 1996 between the
Registrant and California Institute of Technology.
10.19(1)* License Agreement dated October 4, 1996 between the
Registrant and the State of Oregon, acting by and through
the State Board of Higher Education on behalf of the
University of Oregon.
10.20(1)* Research Agreement dated April 2, 1996 between the
Registrant and Sequana Therapeutics, Inc.
10.21(1)* Collaboration and License Agreement effective as of April
24, 1996 between the Registrant and Packard Instrument
Company, Inc.
10.22(1)* Collaborative Research and License Agreement dated November
26, 1996 between the Registrant and Bristol-Myers Squibb
Pharmaceutical Research Institute.
10.23(1)* Collaborative Research and License Agreement dated December
18, 1996 between the Registrant and Eli Lilly and Company.
10.24(1)* Collaboration Agreement effective as of February 1, 1997
between the Registrant and Allelix Biopharmaceuticals Inc.
10.25(1) Multi-Tenant Industrial Lease dated April 7, 1997 between
the Registrant and AEW/LBA Acquisition Co. II, LLC., as
subsequently amended on June 12, 1997.
10.26(2) First Amendment dated September 1, 1997, to Multi-Tenant
Industrial Lease between the Registrant and AEW/LBA
Acquisition Co. II, LLC.
10.27(2)* Collaborative Research and License Agreement dated September
22, 1997 between the Registrant and Warner-Lambert Company.
10.28(3)* Collaborative Research and License Agreement dated December
18, 1997 between the Registrant and Merck & Co., Inc.
10.29(3) Negative Covenant Pledge Agreement dated September 29, 1997
between the Registrant and Lease Management Services
Incorporated.
10.30(3) Collateral Security Agreement dated December 16, 1997
between the Registrant and Lease Management Services
Incorporated.
10.31(3)* Packard Aurora Supply Agreement dated February 5, 1998
between the Registrant and Packard Instrument Company, Inc.
10.32(3)* Amendment to Collaboration and License Agreement dated
February 7, 1998, to Collaboration and License Agreement
effective as of April 24, 1996 between the Registrant and
Packard Instrument Company, Inc.
10.33(3)# Amendment dated January 2, 1998, to Employment Agreement
between the Registrant and J. Gordon Foulkes.
10.34(4)* Combinatorial Chemistry Agreement dated April 25, 1998
between the Registrant and SIDDCO, Inc.
10.35(4)* Agreement dated June 11, 1998 between the Registrant and J.
Gordon Foulkes.
10.36(4) Agreement dated July 16, 1998 between the Registrant and
Deborah J. Tower.
10.37(5)* Collaborative Research Agreement dated July 16, 1998 between
the Registrant and Cytovia, Inc.
10.38(5)* AMCS Development Agreement dated August 21, 1998 between the
Registrant and Warner-Lambert Company.
10.39(6)# Promissory Note dated February 18, 1997 between the
Registrant and Harry Stylli.
10.40(6)# Terms of employment dated December 3, 1997 between the
Registrant and Paul J. England.
10.41(6)# Terms of employment dated June 9, 1998 between the
Registrant and Thomas G. Klopack.
10.42(6)* Termination Agreement between the Registrant and Packard
Instrument Company, Inc.
10.43(6)# Loan Agreement and Promissory Note dated December 23, 1998
between the Registrant and Thomas G. Klopack.
10.44(7)* Collaborative Research and License Agreement effective as of
February 5, 1999 between the Registrant and The Pharmacia &
Upjohn Company.
10.45(7)* Collaborative Research and License Agreement effective as of
February 16, 1999 between the Registrant, F.Hoffmann-LaRoche
Ltd. and Hoffmann-LaRoche, Inc.
10.46(7) Loan and Security Agreement dated February 26, 1999 between
the Registrant and General Electric Capital Business Asset
Funding Corporation.
10.47(7)* License Agreement effective as of March 10, 1999 between the
Registrant and Clontech Laboratories, Inc.
31
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
10.48(8)* Collaborative Research and License Agreement effective as of
June 15, 1999 between the Registrant and Pfizer
Incorporated.
10.49(9)* Collaborative Research and License Agreement (Second
Amendment) effective as of July 29, 1999 between the
Registrant and Bristol-Myers Squibb Pharmaceuticals Research
Institute.
10.50(9)# Agreement dated November 2, 1999 between the Registrant and
Timothy J. Rink, M.D., Sc.D.
10.51# Agreement dated December 7, 1999 between the Registrant and
Stuart J.M. Collinson, Ph.D.
10.52** Third Amendment to Collaborative Research and License
Agreement effective as of November 22, 1999 between the
Registrant and Eli Lilly and Company.
10.53** Instrument, Assay Development and License Agreement
effective as of December 15, 1999 between the Registrant and
Glaxo Research and Development Ltd. and Glaxo Group Ltd.
10.54** Instrument, Assay Development and License Agreement
effective as of December 16, 1999 between the Registrant and
Wyeth-Ayerst.
10.55** License Agreement effective as of December 17, 1999 between
the Registrant and ZymoGenetics, Inc.
10.56# Agreement effective as of January 1, 2000 between the
Registrant and Timothy J. Rink, M.D., Sc.D.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
27.1 Financial Data Schedule related to the Financial Statements
for the fiscal year ended December 31, 1999.
- --------------
(1) Previously filed as exhibits of the same number with the
Registrant's Registration Statement on Form S-1 (No.
333-23407) or amendments thereof, and incorporated herein by
reference.
(2) Previously filed as exhibits of the same number with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 (No. 0-22669) and incorporated
herein by reference.
(3) Previously filed as exhibits of the same number with the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (No. 0-22669) and incorporated
herein by reference.
(4) Previously filed as exhibits of the same number with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 (No. 0-22669) and incorporated herein by
reference.
(5) Previously filed as exhibits of the same number with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998 (No. 0-22669) and incorporated
herein by reference.
(6) Previously filed as exhibits of the same number with the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (No. 0-22669) and incorporated
herein by reference.
(7) Previously filed as exhibits of the same number with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 (No. 0-22669) and incorporated herein
by reference.
(8) Previously filed as exhibits of the same number with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 (No. 0-22669) and incorporated herein by
reference.
(9) Previously filed as exhibits of the same number with the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 (No. 0-22669) and incorporated
herein by reference.
* The Company has been granted confidential treatment with
respect to certain portions of this exhibit. Omitted
portions have been filed separately with the Securities and
Exchange Commission.
** 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.
# Indicates management contract or compensatory plan or
arrangement.
(d) Financial Statement Schedules
See Item 14 (a) (2).
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 9, 2000.
By: /S/ STUART J.M. COLLINSON
----------------------------------------------
Stuart J.M. Collinson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ STUART J.M. COLLINSON President, Chief Executive March 9, 2000
- ---------------------------------------- Officer and Director (PRINCIPAL
Stuart J.M. Collinson, Ph.D. EXECUTIVE OFFICER)
/s/ JOHN R. PASHKOWKSY Vice President, Finance March 9, 2000
- ---------------------------------------- (PRINCIPAL FINANCIAL AND
John R. Pashkowsky ACCOUNTING OFFICER)
/s/ TIMOTHY J. RINK Chairman of the Board March 9, 2000
- ----------------------------------------
Timothy J. Rink, M.A., M.D., Sc.D
/s/ JAMES C. BLAIR Director March 9, 2000
- ----------------------------------------
James C. Blair, Ph.D.
/s/ HUGH Y. RIENHOFF, JR. Director March 9, 2000
- ----------------------------------------
Hugh Y. Rienhoff, Jr., M.D.
/s/ ROY A. WHITFIELD Director March 9, 2000
- ----------------------------------------
Roy A. Whitfield
/s/ TIMOTHY J. WOLLAEGER Director March 9, 2000
- ----------------------------------------
Timothy J. Wollaeger
</TABLE>
33
<PAGE>
AURORA BIOSCIENCES CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Ernst & Young LLP, Independent Auditors............................................... F-2
Balance Sheets as of December 31, 1999 and 1998................................................. F-3
Statements of Operations for the years ended December 31, 1999, 1998 and 1997................... F-4
Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997......... F-5
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997................... F-6
Notes to Financial Statements................................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Aurora Biosciences Corporation
We have audited the accompanying balance sheets of Aurora Biosciences
Corporation as of December 31, 1999 and 1998, and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aurora Biosciences Corporation
at December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
San Diego, California
February 10, 2000
F-2
<PAGE>
AURORA BIOSCIENCES CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,934,352 $ 9,477,916
Investment securities, available-for-sale 20,683,696 18,547,991
Accounts receivable 5,282,485 3,750,291
Notes receivable from officers and employees 50,000 210,000
Prepaid expenses 1,443,840 475,927
Other current assets 1,623,301 1,104,249
------------ ------------
Total current assets 45,017,674 33,566,374
Equipment, furniture and leaseholds, net 11,892,398 10,863,357
Notes receivable from officers and employees 115,000 210,000
Restricted cash 669,810 1,096,034
Other assets 6,167,578 5,218,951
------------ ------------
Total assets $ 63,862,460 $ 50,954,716
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,832,428 $ 3,216,696
Accrued compensation 2,219,172 550,770
Other current liabilities 442,200 391,694
Unearned revenue 10,214,848 2,440,833
Capital lease and loan obligations, current portion 2,497,046 2,024,786
------------ ------------
Total current liabilities 19,205,694 8,624,779
Capital lease and loan obligations, less current portion 4,342,726 4,787,667
Commitments
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,
17,442,741 and 17,024,919 shares issued and outstanding at December
31, 1999 and 1998, respectively 17,443 17,025
Additional paid-in capital 62,754,348 61,496,842
Accumulated other comprehensive loss (48,567) --
Deferred compensation (830,112) (2,240,606)
Accumulated deficit (21,579,072) (21,730,991)
------------ ------------
Total stockholders' equity 40,314,040 37,542,270
============ ============
Total liabilities and stockholders' equity $ 63,862,460 $ 50,954,716
============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------- ---------------------- ----------------------
1999 1998 1997
--------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Revenue $ 50,324,301 $ 26,537,888 $ 14,907,749
Operating expenses:
Cost of revenue 27,778,868 23,777,215 6,982,875
Research and development 11,593,538 17,145,787 5,405,731
Selling, general and administrative 11,535,118 6,067,445 3,679,317
--------------------- ---------------------- ----------------------
Total operating expenses 50,907,524 46,990,447 16,067,923
--------------------- ---------------------- ----------------------
Loss from operations (583,223) (20,452,559) (1,160,174)
Interest income 1,543,011 2,444,836 1,793,691
Interest expense (690,869) (645,395) (346,183)
--------------------- ---------------------- ----------------------
Income (loss) before income taxes 268,919 (18,653,118) 287,334
Income taxes (117,000) - (20,000)
--------------------- ---------------------- ----------------------
Net income (loss) $ 151,919 $ (18,653,118) $ 267,334
===================== ====================== ======================
Basic income (loss) per share $ 0.01 $ (1.14) $ 0.03
===================== ====================== ======================
Diluted income (loss) per share $ 0.01 $ (1.14) $ 0.02
===================== ====================== ======================
Shares used in computing:
Basic income (loss) per share 16,967,124 16,312,194 8,970,183
===================== ====================== ======================
Diluted income (loss) per share 18,241,349 16,312,194 15,422,755
===================== ====================== ======================
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------------------- ---------------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 9,915,973 $ 9,916 2,865,156 $ 2,865 $ 18,887,790
Costs incurred in connection with
issuance of Series D preferred -- -- -- -- (37,485)
stock
Conversion of Series A, B, C and D
preferred stock into common stock (9,915,973) (9,916) 9,915,973 9,916 --
Exercise of warrants to purchase
common stock -- -- 45,290 45 (45)
Issuance of common stock, net -- -- 4,206,466 4,207 37,905,268
Deferred compensation related to
stock and stock options -- -- -- -- 3,741,944
Amortization of deferred compensation -- -- -- -- --
Net income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1997 -- -- 17,032,885 17,033 60,497,472
Issuance of common stock, net -- -- 125,369 125 511,510
Issuance of common stock for
acquired technology -- -- 75,000 75 569,456
Repurchases of common stock -- -- (208,335) (208) (24,436)
Deferred compensation related to
stock and stock options -- -- -- -- (57,160)
Amortization of deferred compensation -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 -- -- 17,024,919 17,025 61,496,842
Issuance of common stock, net -- -- 439,515 440 1,836,939
Repurchases of common stock -- -- (21,693) (22) (2,671)
Deferred compensation related to
stock and stock options -- -- -- -- (576,762)
Amortization of deferred compensation -- -- -- -- --
Net income -- -- -- -- --
Unrealized loss from investments -- -- -- -- --
Comprehensive income
------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1999 -- $ -- 17,442,741 $ 17,443 $ 62,754,348
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE DEFERRED ACCUMULATED STOCKHOLDERS'
LOSS COMPENSATION DEFICIT EQUITY (DEFICIT)
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ -- $ (371,573) $ (3,345,207) $ 15,183,791
Costs incurred in connection with
issuance of Series D preferred -- -- -- (37,485)
stock
Conversion of Series A, B, C and D
preferred stock into common stock -- -- -- --
Exercise of warrants to purchase
common stock -- -- -- --
Issuance of common stock, net -- -- -- 37,909,475
Deferred compensation related to
stock and stock options -- (3,513,702) -- 228,242
Amortization of deferred compensation -- 812,715 -- 812,715
Net income -- -- 267,334 267,334
------------ ------------ ------------ ------------
Balance at December 31, 1997 -- (3,072,560) (3,077,873) 54,364,072
Issuance of common stock, net -- -- -- 511,635
Issuance of common stock for
acquired technology -- -- -- 569,531
Repurchases of common stock -- -- -- (24,644)
Deferred compensation related to
stock and stock options -- 57,160 -- --
Amortization of deferred compensation -- 774,794 -- 774,794
Net loss -- -- (18,653,118) (18,653,118)
------------ ------------ ------------ ------------
Balance at December 31, 1998 -- (2,240,606) (21,730,991) 37,542,270
Issuance of common stock, net -- -- -- 1,837,379
Repurchases of common stock -- -- -- (2,693)
Deferred compensation related to
stock and stock options -- 576,762 -- --
Amortization of deferred compensation -- 833,732 -- 833,732
Net income -- -- 151,919 151,919
Unrealized loss from investments (48,567) -- -- (48,567)
------------
Comprehensive income 103,352
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1999 $ (48,567) $ (830,112) $(21,579,072) $ 40,314,040
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
AURORA BIOSCIENCES CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997
----------------- ---------------- -----------------
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ 151,919 $ (18,653,118) $ 267,334
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,234,928 2,421,986 964,323
Amortization of deferred compensation 833,732 774,794 812,715
Other non-cash items, net (184,000) 569,531 -
Changes in operating assets and liabilities:
Accounts receivable (1,532,194) (543,125) (2,090,643)
Prepaid expenses and other current assets (1,186,965) (253,829) (929,143)
Other assets (1,932,531) (1,480,639) (230,376)
Accounts payable and accrued compensation 2,284,134 2,376,668 999,451
Other current liabilities 50,506 163,916 227,778
Unearned revenue 7,774,015 116,832 2,074,001
Other noncurrent liabilities - (154,346) 154,346
----------------- ---------------- -----------------
Net cash provided by (used in) operating activities 9,493,544 (14,661,330) 2,249,786
Investing activities:
Purchases of short-term investments (10,893,919) (23,015,257) (24,459,286)
Sales and maturities of short-term investments 8,709,647 30,205,000 7,974,422
Purchases of property and equipment (1,578,576) (2,837,991) (1,951,776)
Notes receivable from officers and employees 235,000 (130,000) (90,000)
Restricted cash 426,224 215,889 (1,311,923)
Other assets - (2,436,279) (339,283)
----------------- ---------------- -----------------
Net cash provided by (used in) investing activities (3,101,624) 2,001,362 (20,177,846)
Financing activities:
Issuance of convertible preferred stock, net - - (37,485)
Issuance of common stock, net 1,738,686 486,991 37,909,475
Proceeds from capital lease and loan obligations 619,225 - -
Principal payments on capital lease and loan obligations (2,293,395) (1,517,797) (689,278)
----------------- ---------------- -----------------
Net cash provided by (used in) financing activities 64,516 (1,030,806) 37,182,712
----------------- ---------------- -----------------
Net increase (decrease) in cash and cash equivalents 6,456,436 (13,690,774) 19,254,652
Cash and cash equivalents at beginning of year 9,477,916 23,168,690 3,914,038
----------------- ---------------- -----------------
Cash and cash equivalents at end of year $ 15,934,352 $ 9,477,916 $ 23,168,690
================= ================ =================
Supplemental disclosure of cash flow information:
Interest paid $ 690,869 $ 645,395 $ 346,183
================= ================ =================
Supplemental schedule of non-cash investing
and financing activities:
Property and equipment acquired under capital leases and
loans $ 1,701,489 $ 3,755,413 $ 3,802,971
================= ================ =================
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITY
Aurora Biosciences Corporation ("Aurora" or the "Company") was incorporated
in California on May 8, 1995 and subsequently re-incorporated in Delaware on
January 22, 1996. The Company combines innovative biotechnology with its
novel, high technology, automation and software to provide solutions to
challenges in drug discovery for the pharmaceutical and biotechnology
industries. Aurora's core technologies include a broad portfolio of
proprietary fluorescence assay technologies; its functional genomics
GenomeScreen-TM- program; as well as its ultra-high throughput screening
system ("UHTSS-TM- Platform") and subsystems to miniaturize and automate
assays derived from those technologies within a computer-controlled
integrated system, capable of searching through expansive libraries of
compounds to identify those that might lead to new medicines.
To date, the Company's revenue has been generated from a limited number of
customers in the biotechnology and pharmaceutical industries in the U.S. and
Europe. In 1999, greater than 10% of the Company's revenue resulted from
transactions with each of the following customers: Pfizer, Inc. ("Pfizer")
(21%), Warner-Lambert Company ("Warner-Lambert") (19%), Merck & Co., Inc.
("Merck") (16%) and Bristol-Myers Squibb Company ("BMS") (13%). The loss of
such customers could have a material adverse impact on the Company.
CASH, CASH EQUIVALENTS AND INVESTMENT SECURITIES
The Company considers all highly liquid investments with maturities of three
months or less from the date of purchase to be cash equivalents. Management
determines the appropriate classification of its cash equivalents and investment
securities at the time of purchase and reevaluates such determination as of each
balance sheet date. Management has classified the Company's cash equivalents and
investment securities as available-for-sale securities in the accompanying
financial statements. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported in other comprehensive income (loss).
The cost of debt securities classified as available-for-sale is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization and accretion, as well as interest and dividends, are included in
interest income. Realized gains and losses are also included in interest income.
The cost of securities sold is based on the specific identification method.
The Company invests its excess cash in U.S. government and agency securities,
debt instruments of financial institutions and corporations and money market
funds with strong credit ratings. The Company has established guidelines
regarding diversification of its investments and their maturities which are
designed to maintain safety and liquidity.
EQUIPMENT, FURNITURE AND LEASEHOLDS
Equipment, including capitalized leased equipment, furniture and leaseholds, is
stated at cost less accumulated depreciation and amortization. Depreciation and
amortization is calculated using the straight-line method over the shorter of
the estimated useful lives of the respective assets (generally three to five
years) or the term of the applicable lease.
OTHER ASSETS
Equity investments in closely-held companies are carried at cost and reviewed
quarterly for permanent impairment. Patents are carried at cost and amortized
using the straight-line method over the expected useful lives, which are
estimated to be four to eight years. Chemical compounds are carried at cost and
amortized over the expected useful lives, which are estimated to be five years.
LONG-LIVED ASSETS
The Company investigates potential impairments of its long-lived assets when
there is evidence that events or changes in circumstances may have made recovery
of an asset's carrying value unlikely. An impairment loss is recognized when the
sum of the expected undiscounted future cash flows is less than the carrying
amount of the asset. The Company has not identified any such losses.
F-7
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
WARRANTY RESERVE
Estimated expenses for warranty obligations are accrued as revenue is
recognized. Reserve estimates are adjusted periodically to reflect actual
experience.
STOCK OPTIONS
In accordance with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has
elected to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related Interpretations in accounting
for its employee stock options. Under APB 25, if the purchase price of
restricted stock or the exercise price of the Company's employee stock options
equals or exceeds the fair value of the underlying stock on the date of issuance
or grant, no compensation expense is recognized. Option grants to non-employees
are valued in accordance with SFAS 123 and EITF 96-18 and are therefore expensed
at fair value as services are performed.
REVENUE RECOGNITION
Revenue under collaborative agreements with UHTSS syndicate customers typically
consists of non-refundable, non-creditable upfront fees, ongoing research and
co-development payments, and milestone, royalty and other contingent payments.
Revenue from ongoing research and co-development payments is recognized ratably
over the term of the agreement, and the Company believes such payments will
approximate the research and development expense being incurred associated with
the agreement. The Company does not have an obligation to refund, nor does there
exist the presumption of an obligation to refund, ongoing research and
co-development payments. Revenue from milestone or other contingent payments is
recognized upon satisfaction of the contractual terms of the milestone or
contingency. Revenue from equipment sales under short-term production contracts
is recognized using the completed contract method. Revenue from equipment sales
under long-term production contracts is recognized using the percentage of
completion method, measured based on costs incurred to-date compared to
estimated costs at completion. In 1999, the Company entered into its first
long-term production contract. As of December 31, 1999, revenue recognized
exceeded billings on the contract by $1.9 million and such amount is included in
accounts receivable in the accompanying balance sheet. License revenue is
recognized ratably over the term of the licensing agreement. Revenue from
royalty payments will be recognized upon applicable product sales.
Revenue from screen development, screening and other services is recognized as
the services are performed or ratably over the service period if the Company
believes such method will approximate the expense being incurred. Revenue from
upfront fees is deferred and recognized over the service period. Advance
payments received in excess of amounts earned through performance are classified
as unearned revenue. Revenue under cost reimbursement contracts is recognized as
the related costs are incurred.
RESEARCH AND DEVELOPMENT EXPENSE
All research and development costs are expensed in the period incurred.
Customer-sponsored research and development expenses totaled approximately $4.6
million, $5.7 million and $1.8 million in 1999, 1998 and 1997, respectively.
Company-sponsored research and development expenses totaled approximately $7.0
million, $11.4 million and $3.6 million in 1999, 1998 and 1997, respectively.
INCOME (LOSS) PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128, EARNINGS
PER SHARE ("SFAS 128"), basic income (loss) per share is calculated based upon
the weighted average shares of common stock outstanding during the period, and
excludes any dilutive effects of options, warrants and convertible securities.
In 1999 and 1997, diluted income per share also gives effect to all potential
dilutive common shares outstanding during the period. In 1998, all potential
dilutive common shares have been excluded from the calculation of diluted loss
per share as their inclusion would be anti-dilutive.
F-8
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEGMENT INFORMATION
Statement of Financial Accounting Standards No. 131, SEGMENT INFORMATION ("SFAS
131"), requires disclosure of certain financial information about operating
segments, products, services and geographic areas in which they operate. The
Company has not reported segment information because the Company operates in
only one business segment.
EFFECT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES ("SFAS 133"), which will be effective January 1, 2001.
This Statement establishes accounting and reporting standards requiring that
every derivative instrument, including certain derivative instruments imbedded
in other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement also requires that changes
in the derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company has not yet determined what impact SFAS
133 will have on the financial statements.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" (SAB 101)
which provides guidance related to revenue recognition based on interpretations
and practices followed by the SEC. SAB 101 is effective the first fiscal quarter
of fiscal years beginning after December 15, 1999 and requires companies to
report any changes in revenue recognition as a cumulative change in accounting
principle at the time of implementation in accordance with APB Opinion No. 20,
"Accounting Changes." The Company is currently in the process of evaluating the
impact, if any, SAB 101 will have on the financial position or results of
operations of the Company.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
2. CASH EQUIVALENTS AND INVESTMENT SECURITIES
A summary of cash equivalents and available-for-sale investment securities is
shown below:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED FAIR
DECEMBER 31, 1999 COST GAINS LOSSES VALUE
---------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Money market funds $ 4,622,220 $ -- $ -- $ 4,622,220
U.S. government and agency securities 9,934,933 220 3,096 9,932,057
U.S. corporate securities 15,944,345 203 45,894 15,898,654
------------ ------------ ------------ ------------
Total debt securities 30,501,498 423 48,990 30,452,931
Less amounts classified as cash equivalents (9,769,235) -- -- (9,769,235)
------------ ------------ ------------ ------------
Total investment securities, available-for-sale $ 20,732,263 $ 423 $ 48,990 $ 20,683,696
============ ============ ============ ============
DECEMBER 31, 1998
Money market funds $ 1,627,317 $ -- $ -- $ 1,627,317
U.S. government and agency securities 14,134,679 -- -- 14,134,679
U.S. corporate securities 12,263,312 -- -- 12,263,312
------------ ------------ ------------ ------------
Total debt securities 28,025,308 -- -- 28,025,308
Less amounts classified as cash equivalents (9,477,317) -- -- (9,477,317)
------------ ------------ ------------ ------------
Total investment securities, available-for-sale $ 18,547,991 $ -- $ -- $ 18,547,991
============ ============ ============ ============
</TABLE>
F-9
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Realized gains or losses on sales of available-for-sale securities in 1999, 1998
and 1997 were not significant. The net adjustment to unrealized holding gains
(losses) on available-for-sale securities included in comprehensive income
totaled $48,567, net of tax, in 1999. The estimated fair value of
available-for-sale debt securities as of December 31, 1999 by contractual
maturity is as follows: $16.7 million due within one year and $4.0 million due
in one to two years.
3. NOTES RECEIVABLE FROM OFFICERS AND EMPLOYEES
Notes receivable from officers and employees generally consist of relocation and
housing loans to assist in the relocation of new employees. These notes are
generally secured by a deed of trust on the individual's principal residence.
Notes receivable as of December 31, 1999 include separate loans to officers of
the Company of $60,000, $40,000 and $15,000. The $60,000 note is interest-free
and is due in 2003, but will be forgiven in four annual increments provided that
such officer remains an employee of the Company. The $40,000 note bears interest
payable monthly at approximately 6% per annum and is due in 2001, but will be
forgiven in $20,000 increments during 2000 provided that such officer remains an
employee of the Company. The $15,000 note bears interest payable monthly at
approximately 6% per annum and is due in 2002.
4. BALANCE SHEET DETAILS
Equipment, furniture and leaseholds consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
------------------ -----------------
<S> <C> <C>
Scientific equipment $ 6,300,449 $ 5,394,363
Office furniture, computers and equipment 5,135,901 4,109,911
Leasehold improvements 5,335,996 4,887,714
Construction in process 1,636,249 -
------------------ -----------------
18,408,595 14,391,988
Less accumulated depreciation and amortization (6,516,197) (3,528,631)
------------------ -----------------
$ 11,892,398 $ 10,863,357
================== =================
</TABLE>
The cost of equipment, furniture and leaseholds under capital leases and loans
at December 31, 1999 and 1998 was $11,469,708 and $9,148,994, respectively. The
accumulated depreciation and amortization of equipment, furniture and leaseholds
under capital leases and loans at December 31, 1999 and 1998 was $5,283,909 and
$2,693,324, respectively.
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
------------------ -----------------
<S> <C> <C>
Chemical compounds $ 2,862,494 $ 1,148,654
Equity investments 2,400,003 2,400,003
Patents and licenses 905,081 675,426
Deposits, noncurrent - 994,868
------------------ -----------------
$ 6,167,578 $ 5,218,951
================== =================
</TABLE>
The above amounts are net of accumulated amortization of patents, licenses and
compounds of $297,173 and $32,912 at December 31, 1999 and 1998, respectively.
5. COMMITMENTS
CONSULTING AGREEMENTS
The Company has entered into various consulting agreements with its Scientific
Advisors and others for aggregate minimum annual fees of approximately $90,000
over the next four years. The agreements are cancelable by either party upon 60
or 90 days written notice. During the years ended December 31, 1999, 1998 and
1997, the Company expensed approximately $190,000, $250,000 and $440,000,
respectively, of fees and expense reimbursements related to these agreements.
F-10
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS (CONTINUED)
TECHNOLOGY AND LICENSE AGREEMENTS
The Company has entered into various strategic technology and license agreements
with third parties pursuant to the development of its screening systems and the
synthesis of chemical compounds. These agreements contain varying terms and
provisions which require the Company to make payments to the third parties,
subject to satisfactory performance by the third parties. Pursuant to these
agreements, the Company paid approximately $1,700,000, $1,400,000 and $850,000
in 1999, 1998 and 1997, respectively, and is obligated to pay a total of
approximately $4.5 million over the next four years.
The Company has also entered into various license agreements with corporations
and academic institutions regarding rights to certain inventions and
technologies. Most such agreements may be terminated by the Company with 60 days
written notice without significant financial penalty. Pursuant to these
agreements, the Company paid approximately $520,000, $1,070,000 and $140,000 in
1999, 1998 and 1997, respectively, and is obligated to pay a total of
approximately $1.2 million over the next four years.
LEASES AND LOANS
The Company leases its facilities and certain equipment under operating lease
agreements which expire at various dates through September 2008. The facilities
lease agreement is secured by a letter of credit totaling $0.7 million, which is
secured by a certificate of deposit. At December 31, 1999, such restricted cash
totaling $670,000 was included in noncurrent assets. The letter of credit will
be reduced over the next two years on a predetermined schedule. Rent expense
totaled approximately $1,595,000, $1,593,000 and $1,205,000 in 1999, 1998 and
1997, respectively.
In November 1997, the Company subleased certain of its facilities to a third
party under an operating lease which expired in October 1999. Total sublease
income in 1999, 1998 and 1997 included as a credit to rent expense is $763,000,
$935,000 and $79,000, respectively.
The Company leases certain equipment and improvements under capital lease and
loan agreements which expire at various dates through November 2003. Unused
capital loans available at December 31, 1999 totaled $1.7 million.
Annual future minimum lease payments for operating and capital leases and loans
as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES AND
OPERATING LEASES LOANS
---------------------- ---------------------
<S> <C> <C>
Years ended December 31,
2000 $ 1,745,627 $ 3,028,490
2001 1,797,515 2,290,360
2002 1,852,071 2,001,069
2003 1,907,633 509,666
2004 1,963,818 -
Thereafter 7,899,858 -
---------------------- ---------------------
Total minimum lease and loan payments $ 17,166,522 7,829,585
======================
Less amounts representing interest (989,813)
---------------------
Present value of capital lease and loan payments 6,839,772
Less current portion (2,497,046)
---------------------
Capital lease and loan obligations, noncurrent $ 4,342,726
=====================
</TABLE>
F-11
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY
COMMON STOCK
Certain shares of common stock have been issued to founders, directors and
employees of, and consultants to, the Company. In connection with certain stock
purchase agreements, the Company has the option to repurchase, at the original
issue price, any unvested shares in the event of termination of employment or
engagement. Shares issued under these agreements generally vest over four years.
At December 31, 1999, 84,667 shares of common stock were subject to repurchase
by the Company.
DEFERRED COMPENSATION
The Company records and amortizes over the related vesting periods deferred
compensation representing the difference between the price per share of
restricted stock issued or the exercise price of stock options granted and the
fair value of the Company's common stock at the date of issuance or grant.
STOCK OPTION AND PURCHASE PLANS
In 1996, the Company adopted the 1996 Stock Plan (the "Stock Plan"), under
which, as amended, 6,000,000 shares of the Company's common stock were reserved
for future issuance. The Stock Plan provides for the grant of incentive stock
options and stock appreciation rights to employees and nonstatutory stock
options and stock purchase rights to employees, directors and consultants. All
options granted under the Stock Plan expire not later than ten years from the
date of grant and vest and become fully exercisable after not more than five
years of continued employment or engagement. Options generally vest over four
years, with one-fourth of the shares vesting after one year and the remainder
vesting monthly over the next thirty-six months. The exercise price of incentive
stock options must be equal to at least the fair market value of the Company's
common stock on the date of grant, and the exercise price of nonstatutory
options may be no less than 85% of the fair market value of the Company's common
stock on the date of grant.
In 1997, the Company adopted a Non-Employee Directors' Stock Option Plan (the
"Directors' Plan"), under which 240,000 shares of the Company's common stock
were reserved for future issuance. All options granted under the Directors' Plan
expire no later than ten years from the date of grant and vest and become fully
exercisable after not more than four years of continued service. Options issued
to date generally vest monthly over four years. The exercise price of each
option must be equal to the fair market value of the Company's common stock on
the date of grant.
In 1997, the Company adopted an Employee Stock Purchase Plan (the "Purchase
Plan"), under which, as amended, 700,000 shares of the Company's common stock
were reserved for future issuance. The Purchase Plan provides for all eligible
employees to purchase the Company's common stock through payroll deductions at a
price equal to 85% of the lesser of the fair market value per share of the
Company's common stock on the start date of each overlapping two-year offering
period or on the date on which each semi-annual purchase period ends. At
December 31, 1999, 308,218 shares of common stock have been issued pursuant to
the Purchase Plan.
Pro forma information regarding net income (loss) and income (loss) per share is
required by SFAS 123, and has been determined as set forth below as if the
Company had accounted for stock options and shares issued under the Purchase
Plan under the fair value method of SFAS 123. The fair value of stock options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted average assumptions for 1999, 1998 and 1997:
risk-free interest rates of 6.57%, 4.59% and 5.44%, respectively; no annual
dividends; volatility factor of 60%; and an expected option life of five years.
The weighted-average fair value of stock options granted during 1999, 1998 and
1997 was $4.44, $4.15 and $3.33, respectively.
Shares issued under the Purchase Plan were valued based upon the difference, if
any, between the market value of the stock and the purchase price of the shares
on the date of purchase. The weighted-average fair value on the date of purchase
for stock purchased under this plan was $5.32, $5.32 and $5.19 in 1999, 1998 and
1997, respectively.
F-12
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of stock options
is amortized to expense over the options' respective vesting periods and the
estimated fair value of shares issued under the Purchase Plan are amortized to
expense over the respective offering periods. If compensation cost for the
Company's Stock and Purchase plans had been determined based on the fair value
at the grant date as defined by SFAS 123, the Company's pro forma results for
1999, 1998 and 1997 would have been as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Pro forma loss $ (4,031,014) $ (19,587,000) $ (124,000)
Pro forma basic and diluted loss per share $ (0.24) $ (1.20) $ (0.01)
</TABLE>
The following table summarizes stock option activity under the Stock and
Directors' Plans and related information through December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE
OPTIONS EXERCISE PRICE
----------------- ----------------
<S> <C> <C>
Outstanding at December 31, 1996 4,000 $0.09
Granted 1,119,120 $5.90
Exercised (4,000) $1.15
Cancelled (12,700) $5.02
-----------------
Outstanding at December 31, 1997 1,106,420 $5.90
Granted 2,945,830 $7.33
Exercised (30,409) $1.40
Cancelled (1,277,351) $10.78
-----------------
Outstanding at December 31, 1998 2,744,490 $5.23
Granted 1,347,261 $8.20
Exercised (237,994) $3.57
Cancelled (334,754) $6.36
-----------------
Outstanding at December 31, 1999 3,519,003 $6.38
=================
</TABLE>
At December 31, 1999, 2,095,964 shares remain available for grant under the
Stock and Directors' Plans.
In November 1998, the Board of Directors authorized a plan whereby employee
option holders could have exchanged all of his or her current vested and
unvested options on a one-for-one basis for new options priced at the market
value as of November 19, 1998. This plan was not available to members of the
Board of Directors and executive officers were not permitted to exchange options
with an exercise price of $10.00 or below, with the exception of one officer who
did not meet the criteria to be included as a "Named Executive Officer" in the
Company's Proxy Statement. Under this plan, an aggregate of 1,099,430 options
with an average exercise price of $11.04 per share were exchanged for options
with an exercise price of $5.25 per share. The replacement options vest and
expire based on the original grant date. The replacement options were not
exercisable until November 20, 1999. All replacement options are included in
grants and cancellations in the above summary of stock option activity.
F-13
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes information about stock options outstanding under
the Company's Stock and Directors' Plans at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ----------------------------------
WEIGHTED-AVERAGE
REMAINING
RANGE OF EXERCISE NUMBER OF CONTRACTUAL WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE
PRICES OPTIONS LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
- ------------------- ----------------- ---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.09 - $ 5.25 1,399,172 7.91 $ 4.14 661,886 $ 3.72
$ 5.34 - $ 6.72 1,011,176 9.18 $ 6.15 23,207 $ 6.12
$ 7.13 - $15.31 1,108,655 9.13 $ 9.40 172,852 $ 8.48
----------------- -----------------
$ 0.09 - $15.31 3,519,003 8.66 $ 6.38 857,945 $ 4.75
================= =================
</TABLE>
COMMON STOCK RESERVED FOR FUTURE ISSUANCE
At December 31, 1999, the Company has reserved shares of common stock for future
issuance as follows:
<TABLE>
<S> <C>
Common stock and stock options under 1996 Stock Plan 5,386,966
Common stock under Employee Stock Purchase Plan 391,782
Stock options under Directors' Plan 228,001
Other 4,000
--------------------
6,010,749
====================
</TABLE>
7. INCOME TAXES
The provision for income taxes on earnings subject to income taxes differs from
the statutory federal rate due to the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998 1997
---------------- ----------------- ----------------
<S> <C> <C> <C>
Federal income taxes (benefit) $ 94,000 $(6,528,000) $ 101,000
State income tax, net of federal benefit 1,000 - 3,000
Tax effect of permanent differences 330,000 414,000 301,000
Alternative minimum taxes 116,000 - 17,000
Increase (decrease) in valuation allowance and other (424,000) 6,114,000 (402,000)
---------------- ----------------- ----------------
$ 117,000 $ - $ 20,000
================ ================= ================
</TABLE>
The provision for income taxes attributable to continuing operations
consisted of current federal income taxes of $116,000 and $17,000 in 1999 and
1997, respectively, and current state income taxes of $1,000 and $3,000 in
1999 and 1997, respectively.
At December 31, 1999, the Company had federal income tax net operating loss
carryforwards of approximately $13,059,000. The federal tax loss carryforwards
will begin to expire in 2018, unless previously utilized. The Company also had
federal and California research tax credit carryforwards of approximately
$670,000 and $291,000, respectively, which will begin to expire in 2010 and
2012, respectively, unless previously utilized. The Company also had California
manufacturer's investment tax credit carryforwards of approximately $351,000,
which will begin to expire in 2005 unless previously utilized. Aurora has
federal and California alternative minimum tax credit carryforwards of
approximately $158,000 and $7,000, respectively, which may be carried forward
indefinitely.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, use of these net
operating loss and credit carryforwards may be substantially limited because of
cumulative changes in the Company's ownership of more than 50%. However, the
Company does not believe such limitations will have a material impact upon the
utilization of these carryforwards.
F-14
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
Significant components of the Company's net deferred tax assets as of December
31, 1999 and 1998 are shown below. Valuation allowances of $9,039,000 and
$9,148,000 at December 31, 1999 and 1998, respectively, have been recognized to
offset the net deferred tax assets as realization of such assets is uncertain.
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
--------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 4,571,000 $ 7,048,000
Deferred revenue 2,402,000 -
Tax credit carryforwards 1,154,000 1,184,000
Capitalized research and development 779,000 915,000
Other, net 865,000 346,000
----------------- ------------------
Total deferred tax assets 9,771,000 9,493,000
Deferred tax liability:
Depreciation (732,000) (345,000)
----------------- ------------------
Net deferred tax assets 9,039,000 9,148,000
Valuation allowance for net deferred tax assets (9,039,000) (9,148,000)
----------------- ------------------
Net deferred taxes $ - $ -
================= ==================
</TABLE>
8. INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted income
(loss) per share:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998 1997
---------------- ------------------- ------------------
<S> <C> <C> <C>
Numerator:
Net income (loss) $ 151,919 $ (18,653,118) $ 267,334
================ =================== ==================
Denominator:
Shares used in basic income (loss) per share
computations - weighted average common
shares outstanding 16,967,124 16,312,194 8,970,183
Effect of dilutive securities:
Convertible preferred stock - - 4,591,231
Nonvested common stock 184,628 - 1,452,820
Warrants - - 20,970
Common stock options 1,089,597 - 387,551
---------------- ------------------- ------------------
Shares used in diluted income (loss) per share
computations 18,241,349 16,312,194 15,422,755
================ =================== ==================
</TABLE>
For additional disclosures regarding nonvested common stock and common stock
options, see Note 6.
Basic income (loss) per share excludes the weighted average effects of the
Company's nonvested common stock totaling 184,628, 693,861 and 1,452,820 shares
for the years ended December 31, 1999, 1998 and 1997, respectively. Nonvested
common stock is not included in basic income (loss) per share until the
time-based vesting restrictions have lapsed.
Options to purchase 2,744,490 shares of common stock and 349,428 shares of
nonvested common stock were outstanding at December 31, 1998 but were not
included in the computation of diluted earnings per share because the effect
would be anti-dilutive.
In computing income (loss) per share for periods prior to the Company's IPO in
June 1997, the Company excluded the impact of convertible preferred stock to
conform to current interpretations by the Securities and Exchange
F-15
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Commission. For comparative purposes, basic income per share under the
if-converted method would have been $0.02 in 1997 with 13,561,414 weighted
average shares.
9. 401(K) RETIREMENT SAVINGS PLAN
In 1996, the Company adopted a 401(k) Retirement Savings Plan covering
substantially all employees who have completed certain service requirements.
Participants may contribute a portion of their compensation to the Plan through
payroll deductions. The Company paid Plan expenses totaling $7,000, $6,000 and
$3,000 in 1999, 1998 and 1997, respectively. Company matching contributions, if
any, are determined by the Company at its sole discretion. Company contributions
under the Plan totaled $167,000 and $120,000 in 1999 and 1998, respectively. No
Company contributions were made in 1997.
10. COLLABORATIVE AGREEMENTS
The Company has entered into the following collaborative agreements:
ULTRA-HIGH THROUGHPUT SCREENING SYSTEM AND SCREEN DEVELOPMENT AGREEMENTS
The Company entered into collaborative agreements (the "Agreements") with BMS
and Eli Lilly and Company, Inc. ("Lilly") in 1996, Warner-Lambert and Merck in
1997, and Pfizer in 1999 (collectively, the "Collaborators") regarding the
development and installation of the Company's UHTSS Platform at each of the
Collaborators. Under the terms of each of the Agreements, the Company is
required to develop and separately install three modules to be integrated into
one complete UHTSS Platform. In return, the Collaborators are obligated to make
certain payments to the Company in the form of non-refundable upfront fees,
delivery or installation payments and ongoing research and co-development
funding. The Company is obligated to provide service and support for each
installed UHTSS Platform for a limited period of time.
The Company and the Collaborators will also co-develop high throughput screening
assays for use by the Collaborators. In addition to certain payments to be made
by the Collaborators for the use of these assays and assay technologies, the
Collaborators will also make certain milestone and royalty payments to the
Company if the Collaborators develop and commercialize certain compounds
identified using a screen developed by the Company.
The Collaborators may terminate the Agreements at any time without cause upon
written notice, provided that certain withdrawal payments are made. One of the
Agreements provide for penalties, defined at $2,777 per day up to $1 million,
payable by the Company if it fails to deliver the completed UHTSS Platform by a
specified time. As of December 31, 1999, the Company has not accrued for any
penalties.
In November 1999, the Company and Lilly agreed to amend their collaborative
research and license agreement and discontinue further development of Lilly's
UHTSS Platform. The companies continued their collaborative screen development
program and Lilly extended its license to certain Aurora technologies as part of
the amendment.
The Company entered into agreements with Warner-Lambert in 1998 and Pfizer in
1999 to develop an automated master compound storage ("AMCS-TM-") system for
long-term housing of chemical and biological compounds.
SCREENING SERVICES AGREEMENTS
In 1998, the Company entered into a collaboration with Cytovia, Inc., whereby
Aurora will provide screening services and access to its compound library. In
1999, Aurora entered into agreements to develop screening assays and/or
provide screening services with Pharmacia & Upjohn, Inc., F.Hoffman-LaRoche
Ltd. and the Cystic Fibrosis Foundation. The Company also entered into
agreements with Warner-Lambert, Becton Dickinson and Company and Merck to
provide functional genomics services using the Company's GenomeScreen-TM-
technology. In addition, Aurora entered into agreements in the area of ion
channel drug discovery with certain UHTSS Collaborators, Glaxo Wellcome and
Wyeth-Ayerst Laboratories, the Pharmaceutical Division of American Home
Products Corporation. Under these agreements, the Company will develop
assays, deliver instrumentation and provide ongoing scientific and technical
support related to ion channels.
The Company intends to continue to enter into such agreements to provide
services. Such agreements vary in length and size, however, under these
agreements, the Company is required to develop screening assays and to perform
F-16
<PAGE>
AURORA BIOSCIENCES CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
screening services. The customer is obligated to make certain payments to the
Company in the form of upfront fees, development payments and fees for screening
services. Generally, the customer is also required to make certain milestones
and royalty payments to Aurora in the event of development and commercialization
of a compound identified using a screen developed by Aurora.
11. SUBSEQUENT EVENT
In February 2000, the Company completed a private placement of 1.8 million
shares of newly issued Common Stock to selected institutional and other
accredited investors. The purchase price was $42.00 per share, resulting in net
proceeds of approximately $71 million.
F-17
<PAGE>
EXHIBIT 10.51
December 7, 1999
Stuart J.M. Collinson, Ph.D.
11010 Torreyana Rd.
San Diego, CA 92121
RE: EMPLOYMENT TERMS
Dear Stuart:
This letter ("Agreement") sets forth the agreement between you and Aurora
Biosciences Corporation (the "Company") regarding the terms of your employment
as President and Chief Executive Officer of the Company. You and the Company
hereby agree as follows:
You will serve as President and Chief Executive Officer and will be responsible
for such duties as are normally associated with such position or as otherwise
determined by the Company's Board of Directors ("Board"). You will be subject to
the direction and policies from time to time reasonably established by the
Board. You will work out of our principal offices located in San Diego. You will
devote your full business energies, abilities and productive time to the proper
and efficient performance of your duties for the Company.
You shall receive an initial base salary of $350,000 per year, payable in
regular periodic payments in accordance with Company policy, less required
payroll deductions and withholdings. Your base salary will be subject to
increases as determined by the Board.
You will be eligible for an annual performance bonus paid in cash of up to
fifty percent (50%) of your base salary based on your achievement of
specified milestones as mutually agreed upon in good faith by the Board and
you within a reasonable period of time following execution of this Agreement.
Effective as of the date hereof, you will be granted an Incentive Stock Option
to purchase eighty thousand (80,000) shares of the Common Stock of the Company
(the "Option") pursuant to the terms of the Company's 1996 Stock Plan (the
"Plan"). The exercise price per share of the shares subject to the Option will
be at the fair market value of the Company's Common Stock on the date hereof as
determined in accordance with the Plan. Subject to the terms of the Plan and the
provisions of this Agreement set forth below, your Option will vest over four
(4) years so long as you continue to be employed with the Company, according to
the following schedule: twenty thousand (20,000) shares will vest as of the
first anniversary of the date hereof and the remaining sixty thousand (60,000)
shares will vest in equal monthly installments over a period of thirty-six (36)
months beginning after such one year anniversary.
The Company will continue to provide you with a competitive comprehensive
benefits package including medical, dental, life and disability insurance. In
addition to the
<PAGE>
foregoing, you will receive all other benefits the Company may provide from time
to time to other senior executive level employees.
Although the Company's policy provides 17 days of Paid Personal Leave (PPL),
you will accrue vacation, regardless of your length of service, at the rate of
20 days per year. If the Company elects to close operations between Christmas
and New Year's, this time off will be considered paid holiday time and will
not count against the 20 days of paid personal leave.
The Company will continue to reimburse you for your reasonable travel,
entertainment, business and other expenses incurred in the course of your
employment in accordance with Company policy.
Your employment with the Company will continue to be "at-will", meaning that you
may terminate your employment with the Company at any time and for any reason
whatsoever, with or without advance notice and likewise, the Company, may
terminate your employment at any time and for any reason whatsoever, with or
without advance notice. This at-will arrangement may not be changed except by a
writing signed by you and a duly authorized officer of the Company.
Upon termination of your employment with the Company, you will be paid your then
current accrued base salary to and including the date of termination, any
accrued vacation pay and other benefits through the date of termination and all
compensation previously deferred by you, if any (together with accrued interest
and earnings thereon).
Notwithstanding the foregoing, if the Company terminates your employment without
"Cause" (defined below) or you resign for "Good Reason" (defined below), then
upon your (or your representatives) furnishing to the Company an executed
release and waiver of claims in the form attached hereto as Exhibit A (the
"Release") and the occurrence of the Release Effective Date provided for in the
Release (the "Release Effective Date"), the Company shall pay to you the
following: (1) a lump sum equal to one (1) year of your then current base salary
plus an amount equal to your most recent annual bonus, subject to standard
payroll deductions and withholdings; (2) to the extent any Company stock options
then held by you are unvested, the vesting of such options and stock shall be
accelerated and such options shall become fully vested and immediately
exercisable; and (3) the Company will reimburse you for actual and reasonable
expenses incurred by you in connection with relocation of your principal
residence to the United Kingdom. Such reimbursement will be available to you
during the six (6) months following termination of your employment. Items that
are eligible for reimbursement include the actual and reasonable costs of moving
household goods (packing and moving expenses), storage, home sale and home
purchase closing costs; and (4) any outstanding housing loan you have with the
Company will be forgiven by the Company such that the principal and interest due
on such loan will be zero as of the date of termination. You understand that the
Company has not made any representations regarding the tax consequences of the
benefits it has promised to provide you pursuant to this Agreement and
recommends that you seek separate advice from a tax advisor.
If you resign without Good Reason, do not furnish to the Company an executed
release or the Release Effective Date does not occur, or your employment is
terminated for Cause, all compensation and benefits will cease immediately, and
you will receive no severance benefits. You will receive your current accrued
base salary and any accrued benefits through the date of termination, as well as
any reimbursement expenses due to you for which you shall not have been
previously reimbursed.
<PAGE>
For purposes of this Agreement the following definitions shall apply:
(1) "Cause" shall be limited to the occurrence of any of the following
events: (i) your personally engaging in illegal conduct which causes material
harm to the reputation of the Company, (ii) your being convicted or found liable
for a felony, misdemeanor or gross misconduct relating to an act of dishonesty
or fraud against, or a misappropriation of property belonging to the Company,
(iii) your refusal to substantially perform duties set forth in a specific
resolution by the Board, or (iv) your incurable breach of any material element
of the Company's Proprietary Information and Inventions Agreement;
(2) "Good Reason" shall mean (i) a reduction in your base salary or
potential Bonus, or any material reduction in benefits; (ii) the relocation of
your full-time office to a location other than in San Diego County; (iii) a
substantial reduction in your duties inconsistent with your status as President
and Chief Executive Officer; or (iv) any reason or no reason following the
occurrence of a Change in Control (as defined in the Plan) of the Company.
As a Company employee, you will be expected to continue to abide by Company
rules and regulations.
This Agreement supersedes any other agreements or promises made to you by
anyone, whether oral or written, and comprise the final, complete and exclusive
agreement between you and the Company. Without limiting the foregoing, this
Agreement supersedes the letter agreement dated April 29, 1999 between the
Company and you, which is hereby terminated and of no further force or effect.
As required by law, this offer is subject to satisfactory proof of your
continuing right to work in the United States.
Please sign and date this Agreement, and return it to me as soon as possible if
you wish to accept the terms described above.
Sincerely,
AURORA BIOSCIENCES CORPORATION
By: /s/ JOHN D. MENDLEIN
--------------------------------------------------------
John D. Mendlein
Senior Vice President, Intellectual Property, General
Counsel and Chief Knowledge Officer
ACCEPTED BY:
/s/ STUART J.M. COLLINSON
- -----------------------------------------------------
Stuart JM Collinson, Ph.D.
December 7, 1999
- -----------------------
Date
<PAGE>
EXHIBIT A
RELEASE AND WAIVER OF CLAIMS
In consideration of the severance payments and other benefits set forth
in the Agreement dated ___________, 1999, to which this form is attached, I,
STUART JM COLLINSON, hereby furnish AURORA BIOSCIENCES CORPORATION (the
"COMPANY"), with the following release and waiver ("RELEASE AND WAIVER").
I hereby release, and forever discharge the COMPANY, its officers,
directors, agents, employees, stockholders, successors, assigns affiliates and
Benefit Plans, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising at any time prior
to and including my employment TERMINATION DATE with respect to any claims
relating to my employment and the termination of my employment, including but
not limited to, claims pursuant to any federal, state or local law relating to
employment, including, but not limited to, discrimination claims, claims under
the California Fair Employment and Housing Act, and the Federal Age
Discrimination in Employment Act of 1967, as amended ("ADEA"), or claims for
wrongful termination, breach of the covenant of good faith, contract claims,
tort claims, and wage or benefit claims, including but not limited to, claims
for salary, bonuses, commissions, stock, stock options, vacation pay, fringe
benefits, severance pay or any form of compensation.
I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.
I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this RELEASE AND WAIVER is knowing and
voluntary, and that the consideration given for this RELEASE AND WAIVER is in
addition to anything of value to which I was already entitled as an executive of
the COMPANY. I further acknowledge that I have been advised, as required by the
Older Workers Benefit Protection Act, that: (a) the RELEASE AND WAIVER granted
herein does not relate to claims which may arise after this RELEASE AND WAIVER
is executed; (b) I have the right to consult with an attorney prior to executing
this RELEASE AND WAIVER (although I may choose voluntarily not to do so); and if
I am 40 years or older upon execution of this RELEASE AND WAIVER: (c) I have
twenty-one (21) days from the date of termination of my employment with the
COMPANY in which to consider this RELEASE AND WAIVER (although I may choose
voluntarily to execute this RELEASE AND WAIVER earlier); (d) I have seven (7)
days following the execution of this RELEASE AND WAIVER to revoke my consent to
this RELEASE AND WAIVER; and (e) this RELEASE AND WAIVER shall not be effective
until the seven (7) day revocation period has expired (the "Release Effective
Date").
Date: By: /s/ Stuart J.M. Collinson
------------------ --------------------------------
2.
<PAGE>
CONFIDENTIAL
EXECUTION COPY
EXHIBIT 10.52
THIRD AMENDMENT
TO
COLLABORATION RESEARCH AND LICENSE AGREEMENT
This Third Amendment ("Third Amendment") is entered into by and between ELI
LILLY AND COMPANY, an Indiana corporation, having offices at Lilly Corporate
Center, Indianapolis, Indiana 46285 ("Lilly"), and between AURORA BIOSCIENCES
CORPORATION, a Delaware corporation having offices at 11010 Torreyana Road, San
Diego, California 92121 ("Aurora") and is effective as of the last date that
this Third Amendment is executed below.
WHEREAS, effective December 18, 1996, Lilly and Aurora entered into a
Collaborative Research and License Agreement, a First Amendment thereto on July
2, 1997, and a Second Amendment thereto on December 12, 1997 (the "Agreement");
and
WHEREAS, Lilly and Aurora are obligated to develop in collaboration with one
another the LILLYUHTSS under the Agreement;
WHEREAS, Lilly and Aurora desire to amend their obligations and rights under the
Agreement with respect to the LILLYUHTSS;
WHEREAS, Lilly desires to license certain intellectual property rights
Controlled by Aurora; and
NOW, THEREFORE, in consideration of the foregoing premises and of faithful
performance of the covenants herein contained, the parties hereto agree as
follows:
1. All definitions not specifically defined herein are defined in the
Agreement.
2. Within *** days of the effective date of this Third Amendment, Lilly
will pay to Aurora a nonrefundable, noncreditable payment of ***
Dollars ($***), for designing, developing and manufacturing Module ***.
3. Lilly shall have no obligation to make further payments of any kind to
Aurora with respect to the LILLYUHTSS or any portion thereof, except as
provided in Section 2 of this Third Amendment. Lilly shall *** under
Section 5.1.1 (iii) of the Agreement to use *** and *** the LILLYUHTSS
for *** and ***.
4. Aurora shall have no further obligations whatsoever related to design,
development, manufacture, support, validation or completion related to
*** or any portion thereof. Aurora shall not have any obligations under
Section *** of the Agreement to pay any payment related to the
completion of the LILLYUHTSS. Aurora's obligations under Section *** of
the Agreement are abrogated as of the effective date of this Third
Amendment.
1
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
CONFIDENTIAL
EXECUTION COPY
5. Lilly and Aurora may elect, by specific written agreement by both
parties, to re-initiate the LILLYUHTSS development and delivery on
conditions, terms and scheduling to be agreed upon at such time, in
writing.
6. Sections 2.1 (including 2.1.1 (Project Management), 2.1.2 (Development
and Delivery), 2.1.3 (Validation and Completion), 2.1.5 (Penalty),
2.1.4 (Payments), and 2.1.6 (Most Favored Nations and Syndicate
Limitations), 2.1.7 (Supply of Aurora Reporters), 2.1.8 (terms for
Aurora Reporters), 4.1 (Service and Support), 11.3 (Termination Without
Cause by Lilly), 11.4 (Partial Performance) and Exhibits 1.1 and 4.1 of
the Agreement are hereby removed and shall have no force or effect.
7. Aurora will deliver to Lilly the VIPR in accordance with the terms set
forth in Aurora invoice number ***, attached hereto as Exhibit ***.
8. Lilly will pay Aurora the following payments in consideration of the
use of Aurora Reporter System Technology and Aurora Reporter System
Patent Rights from December 18, *** through December 17, ***:
a) *** Dollars ($***) payable by ***;
b) *** Dollars ($***) payable as follows *** (i) *** or
(ii) *** of *** ($***) *** to be paid by *** and ***; and
c) *** Dollars ($***) payable as follows *** (i) *** or
(ii) *** of *** Dollars ($***) *** to be paid by *** and ***.
Lilly *** licenses to Aurora Reporter System Technology and Aurora
Reporter System Patent Rights on *** by providing Aurora with at least
*** written notice of *** its *** for ***, and by payment of ***
payment of *** Dollars ($***) to *** as a *** payment of *** Dollars
($***) and a *** payment of *** Dollars ($***).
2
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
CONFIDENTIAL
EXECUTION COPY
9. So long as Lilly has made payments in accordance with Section 8 of this
Third Amendment hereof, then, at Lilly's request, Aurora will use ***
supply Aurora Reporters *** days after receipt of a written purchase
order therefor, *** pertaining to the Aurora Reporter Systems as Lilly
may require in order to use the Aurora Reporter Systems *** Lilly.
Lilly will be charged for all supplies so delivered ***. Lilly will pay
for all supplies so ordered within *** days after delivery to Lilly.
10. So long as Lilly satisfies its payment obligations under Section 8 of
this Third Amendment for Aurora Reporters, Aurora *** Lilly to ***
Exhibit 1.2 of the Agreement and developed by Aurora, for ***
comparable to those *** by ***.
11. Exhibit 1.2 of the Agreement is replaced with the new Exhibit 1.2
attached *** and ***.
12. Exhibit 5.1 of the Agreement is replaced with new Exhibit 5.1 attached,
***.
13. Each party hereby voluntarily and knowingly releases and forever
discharges the other party, its Affiliates and their respective
shareholders, officers, directors, employees, agents, successors and
assigns, from any and all actions, causes of action, debts, sums of
money, damages, judgments, obligations, claims and demands whatsoever,
whether or not presently known, and whether or not presently capable of
being known, *** of the Agreement.
14. The parties and each of them represent, warrant and agree that they
have been fully advised by their respective attorneys regarding the
contents of Section 1542 of the Civil Code of the State of California.
Such Section 1542 reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known by him must
have materially effected his settlement with the debtor." The parties
*** and any similar *** claim *** herein.
3
*** CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
CONFIDENTIAL
EXECUTION COPY
15. Lilly and its Affiliates and Aurora and its Affiliates shall *** to
ensure that their respective officers, directors, consultants and
employees *** any *** Third Party *** party including, but not limited
to, the *** other party.
16. Lilly and Aurora shall make reasonable efforts to agree promptly to the
text of an Aurora Press Release (together with a "Q&A" document)
announcing the substance of this amendment, subject to the terms in
Section 8 of the Agreement.
17. The obligations of Lilly and Aurora set forth in Section *** of the
Agreement shall no longer apply with respect to Aurora UHTSS
Technology, Aurora UHTSS Patent Rights, Lilly UHTSS Technology, and
Lilly UHTSS Patent Rights, but shall continue in all other respects.
18. The obligations of Lilly set forth in Section *** of the Agreement
shall no longer apply with respect to Aurora UHTSS and Aurora UHTSS
Patent Rights, but shall continue in all other respects.
19. The last sentence of Section 11.7.1 shall be deleted in its entirety
and replaced with the following:
"Except as otherwise expressly provided in this Agreement, the
rights and obligations of the parties under Sections *** and ***
shall *** further *** or *** upon *** except that the licenses
granted under *** and *** of the LILLYUHTSS *** deemed ***."
20. Except as hereby amended, the parties confirm and ratify that the terms
and conditions of the Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties, by duly authorized representatives, execute
this Third Amendment to the Agreement
ELI LILLY AND COMPANY AURORA BIOSCIENCES CORPORATION
By: /s/ August M. Watanabe By: /s/ Stuart Collinson
------------------------------ ---------------------------
Title: Executive Vice President Title: CEO & President
--------------------------- ------------------------
Date: November 22, 1999 Date: 11-17-99
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EXHIBIT 10.53
INSTRUMENT, ASSAY DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN
GLAXO RESEARCH AND DEVELOPMENT LIMITED
AND
GLAXO GROUP LIMITED
AND
AURORA BIOSCIENCES CORPORATION
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This Agreement is made by and between GLAXO RESEARCH AND DEVELOPMENT LIMITED AND
GLAXO GROUP LIMITED both with their principal offices at Glaxo Wellcome House,
Berkeley Avenue, Greenford, Middlesex UB6 ONN, United Kingdom, (together with
any Affiliate company, "GW") and AURORA BIOSCIENCES CORPORATION ("Aurora"), a
Delaware corporation with principal offices at 11010 Torreyana Road, San Diego,
California 92121, U.S.A.
RECITALS
WHEREAS, GW and Aurora wish to enter into an agreement involving the purchase by
GW of a Voltage Ion Probe Reader (VIPR) from Aurora, collaborative research to
develop ***, and licenses of rights from Aurora to GW to use the VIPR as well as
Aurora's Voltage Sensor Probes (VSPs) and the *** to practice the technologies
*** as set forth herein.
Now, therefore, in consideration of the foregoing and the covenants and premises
contained herein the parties agree as follows:
1. DEFINITIONS
1.1 "ACHIEVEMENT OF PROOF OF CONCEPT" means the point at which the
initial human efficacy trial is successfully completed and a
compound approved for further development by GW, such decision
usually being agreed to at a meeting of the GW Therapeutic
Management Team, or its functional equivalent.
1.2 "AFFILIATE" means (1) any corporation or other entity directly
or indirectly owning or controlling, at least *** of the stock
entitled to vote for election of directors with a party to
this Agreement or otherwise having the power to direct the
management and policies of a party to this Agreement, (2) any
corporation or other entity of which a party to this Agreement
directly or indirectly owns or controls at *** of the stock
entitled to vote for election of directors or otherwise has
the power to direct the management and policies, (3) any
corporate or other entity directly or indirectly under common
control with a party to this Agreement; provided, however,
that in the circumstance where the country of incorporation of
such owned or controlled corporation or other entity requires
the maximum ownership by a foreign entity be less ***, the
percentage of ownership required to make such an entity an
affiliate must be equal to the maximum percentage of ownership
permitted by such country provided the operational control is
held by a party to this Agreement.
1.3 "ASSAY" means a ***.
1.4 "ASSAY TRANSFER DATE" means the date that GW receives delivery
***, *** Assay *** Collaborative Research Plan, this date ***
of the Assay by the Steering Committee.
1.5 "AURORA FACTORY CERTIFIED ENGINEERS" means engineers provided
by Aurora to service
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the VIPR ***.
1.6 "AURORA PATENTS" means *** and *** set forth in Exhibit A and
*** issuing therefrom.
1.7 "AURORA TECHNOLOGY" means Materials and Know-How owned or
Controlled by Aurora on or before the Effective Date and
necessary for the Collaborative Research Program.
1.8 "COLLABORATIVE RESEARCH PROGRAM" means the collaboration
between Aurora and GW as set forth in Exhibit B for the
development ***.
1.9 "COLLABORATIVE RESEARCH PLAN" means that project plan attached
as Exhibit B hereto, which may be amended from time to time,
upon written mutual agreement of Aurora and GW.
1.10 "CONFIDENTIAL INFORMATION" means all information, data, and
documentation received by either party from the other party
pursuant to this Agreement and if in writing, designated as
confidential at the time of disclosure, subject to the
exceptions set forth in Section 9.1.
1.11 "CONTROL" OR "CONTROLLED" means, in the context of
intellectual property, possession by a party of the ability to
grant a license or sublicense in accordance with the terms of
this Agreement, and without violating the terms of any
agreement by such party with any Third Party.
1.12 "EFFECTIVE DATE" means the latest date on which the Agreement
is executed by a party hereto.
1.13 "GW COMPOUNDS" means *** compounds and *** that GW shall
provide to Aurora in a format *** and that shall be screened
by Aurora in accordance with Section ***.
1.14 "GW MATERIALS" means Materials provided by GW to Aurora in
furtherance of the Collaborative Research Program.
1.15 "GW TECHNOLOGY" means GW Materials and Know-How owned or
Controlled by GW on or before the Effective Date and necessary
for the Collaborative Research Program.
1.16 "INVENTION" means ***.
1.17 "KNOW-HOW" means information and data owned or Controlled by a
party hereto, which is existing as of the Effective Date or
which a party develops or acquires as part of the
Collaborative Research Program which is not generally known to
the public, comprising: designs, concepts, algorithms,
formulae, techniques, practices, processes,
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methods, knowledge, skill, experience, expertise and technical
information.
1.18 "MATERIALS" means any reagents, cell lines, promoters,
enhancers, vectors, plasmids, genes, proteins and fragments
thereof, peptides, antigens, antibodies, agonists,
antagonists, inhibitors and chemicals.
1.19 "PATENT RIGHTS" means all U.S. or foreign (including regional
authorities such as the European Patent Office) regular or
provisional patent applications, including any continuation,
continuation-in-part, or division thereof or any substitute
application therefor or equivalent thereof, and any patent
issuing thereon, including any reissue, reexamination or
extension thereof and any confirmation patent or registration
patent or patent of additions based on any such patent,
containing one or more claims to an Invention (and in the case
of an issued patent, containing one or more claims), and for
which a party hereto owns or Controls, individually or
jointly, any title thereto or rights thereunder.
1.20 "PRE-CLINICAL CANDIDATE SELECTION" means the point at which
lead optimization is concluded and a candidate for further
development is selected, ***.
1.21 "PRODUCT LAUNCH" means the first commercial sale of a product.
1.22 "***" means *** and ***.
1.23 "TECHNOLOGY" means Materials and Know-How.
1.24 "THIRD PARTY" means any person or entity other than Aurora and
GW or its Affiliates.
1.25 "TRACKING RECORD" means tracking records referred to in
Section 5.8.
1.26 "VIPR" means Aurora's voltage-ion probe reader as described in
Attachment 1 ***.
1.27 "VOLTAGE SENSOR PROBES" OR "VSPS" means *** the Aurora
Patents.
2. EQUIPMENT PURCHASE
2.1. SHIPMENT. Subject to GW's payments in Section 5, Aurora will
ship to GW's *** on or before ***. Aurora will *** support and
technical specifications *** the *** GW's ***. GW will also be
provided *** described in Section 2. *** updates regarding the
***, produced by or on behalf of Aurora.
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2.2. INSTALLATION ***. Subject to GW's payments in Section 5,
Aurora will install *** site within *** days of the Assay
Transfer Date. Reasonable travel and expenses of Aurora
personnel directly related to the installation and validation
shall be billed separately at GW's expense.
2.3. TRAINING. Subject to GW's payments in Section 5, Aurora will
provide a comprehensive consecutive *** training session on
the operation of the VIPR for up to *** GW scientists *** to
be scheduled approximately at the time of the installation
***. Travel and related expenses for Aurora personnel will be
paid by GW. In addition, *** GW engineers will be trained at
Aurora and certified by Aurora for routine servicing of ***
Dollars ($***), such training to take place prior to the
delivery ***.
2.4. WARRANTY. Subject to GW's payments in Section 5, *** with a
*** warranty, entitling GW to *** years of *** support, a
total of *** (*** annually) by an Aurora Factory Certified
Engineer provided by Aurora*** parts, which are *** and ***
service invoice after any *** repair. Travel and related
expenses for Aurora personnel for ***. Travel and related
expenses for service visits other than preventative
maintenance visits shall be paid by GW. No one other than an
Aurora Factory Certified Engineer is authorized to service
***, and any tampering with or modification of the instrument
by any other party will nullify the warranty ***, ***, ***
personnel *** in any month, *** additional *** cost, ***
months of *** and *** to be confirmed in writing by Aurora.
*** as *** support *** day of request *** for ***, if needed,
within *** of request.
3. COLLABORATIVE RESEARCH
3.1. ASSAY DEVELOPMENT AT AURORA. Aurora will use *** to develop,
in collaboration with GW, *** in a *** of the Effective Date
(the "Collaborative Research Program"). Aurora will then
transfer *** with *** and an *** within *** of *** Committee.
Criteria *** defined in the Collaborative Research Plan.
3.1.1. *** DELIVERY OF ***. If Aurora *** to GW *** months
of the Effective Date, GW, *** either: (i) *** and
*** and *** and approval *** is
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contractually precluded from licensing to Third
Parties; or (ii)*** Sections *** and *** and *** .
3.1.2. ***. In the event that all other *** the *** the ***
specified in Exhibit B, the parties ***, or ***
Aurora based upon ***, unless the ***, in which
case ***. In the event *** shall promptly ***
Aurora.
3.2. MATERIALS FROM GW. GW will provide pursuant to this Agreement
the GW Materials and GW Compounds, or a mutually agreed upon
subset thereof, to Aurora within *** days of the Effective
Date, and before ***, respectively. Aurora will not use GW
Materials or GW Compounds for any purpose other than those
described in this Agreement. *** GW.
3.3. SCREENING OF GW COMPOUNDS. Upon validation *** with the
Collaborative Research Plan and payment by GW according to
Section 5.5, Aurora shall undertake to screen the GW Compounds
***. Such screening by Aurora shall be completed within *** of
*** and receipt of the GW Compounds. Upon completion of such
screening and written agreement of the parties, ***, as agreed
upon in the Collaborative Research Plan, GW shall pay Aurora
in accordance with Section 5.5 for performance of such
screening.
3.4. STEERING COMMITTEE. The Collaborative Research Program shall
be managed by a joint steering committee (the "Joint Steering
Committee") of a size and composition to be determined in good
faith by the parties and indicated in writing, with equal
representation from both GW and Aurora. Each member of the
Joint Steering Committee shall have ***. The Joint Steering
Committee shall meet on a schedule and in a venue or format
mutually agreed. Initial meetings shall by teleconference
every ***.
3.5. ***. During the period of the Collaborative Research Program,
***so ***.
4. LICENSES AND OPTION
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4.1. NON-EXCLUSIVE LICENSE. Aurora hereby grants to GW and its
Affiliates a *** license under the Aurora Patents and Aurora
Technology solely to *** Aurora or *** for *** and ***. GW
shall notify Aurora of any *** in writing. The license grant
of this Section 4.1 shall be effective until the date of the
*** anniversary of the ***. The license, at that point, may be
*** described in Section ***. The license grant of this
Section 4.1 may be ***, to allow GW to *** to be proposed by
GW *** other than in the event that Aurora is contractually
precluded from licensing to Third Parties, should GW ***,
during the time period such license grant is in effect, or
should Aurora *** GW *** of the Effective Date, in accordance
with Section ***.
4.2. *** LICENSE. Aurora hereby grants to GW *** license granted in
Section 4.1 above *** on an *** Dollars ($***) to be paid to
Aurora *** (the "***") and each subsequent anniversary of the
*** for up to ***. Such *** the date *** prior to the ***
anniversary of the *** or a later date taking into account any
***. It is understood that the *** under Section ***.
4.3. RETAINED RIGHTS AND LIMITATIONS. The licenses under this
Section 4 are subject to GW's obligations described herein
including payments by GW as set forth in Section 5. For
clarity, the license rights granted to GW in this Section 4
specifically exclude the right 1) ***. Aurora retains the
right to work with other parties on the same or similar
targets, compounds, data and cell lines supplied by a Third
Party or independently developed by Aurora without the use of
GW Confidential Information, GW Compounds, or GW Materials.
Except as expressly licensed herein, GW *** or *** under the
Aurora Patents and Aurora Technology.
5. PAYMENTS
5.1. EQUIPMENT PURCHASE. In consideration for the purchase of the
VIPR, GW shall pay to Aurora a total of *** Dollars ($***)
according to the following schedule of non-refundable,
non-creditable payments:
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5.1.1. A *** Dollar ($***) pre-payment due upon the
Effective Date; and
5.1.2. A *** Dollar ($***) payment due on ***.
Shipping will be prepaid and added FOB San Diego to the
invoice.
5.2. COLLABORATIVE RESEARCH. In consideration for the development
of ***, or in the event that GW *** Assay is ***, GW shall pay
to Aurora in accordance with the following schedule of
non-refundable, non-creditable payments:
5.2.1. *** Dollars ($***) on the Effective Date; and
5.2.2. *** Dollars ($***)*** Assay Transfer Date is *** ;
***
5.2.3. *** Dollars ($***)*** Assay Transfer Date is ***
Effective Date and ***; ***
5.2.4. *** Dollars ($***)*** Assay *** months *** and *** GW
does *** Agreement.
5.3. LICENSE FEES. In consideration for the licenses granted in
Section 4.1, GW shall pay to Aurora a non-refundable,
non-creditable license fee of ***Dollars ($***), first due on
the Assay Transfer Date and then each anniversary of the Assay
Transfer Date for a total *** payments and *** Dollars ($***).
***.
5.4. REAGENT SUPPLY. In consideration for the provision of the VSPs
by Aurora to GW, GW shall pay to Aurora *** Dollars ($***) for
*** of the VSPs. Such *** shall be delivered to GW on the ***.
GW's payment for such VSPs is due upon receipt. For subsequent
orders of VSPs from Aurora during the period from the Assay
Transfer Date to the *** anniversary of the Effective Date, GW
shall pay ***.
5.5. SCREENING PAYMENT. In consideration for the screening services
provided in Section 3.3, GW shall pay to Aurora, the amount
equal to *** Dollars ($***) for such agreed screening program.
Such payment is due within *** after the Assay Transfer Date.
5.6. WARRANTY PAYMENTS. In consideration for the warranty described
in Section 2.4, GW shall pay to Aurora (i) *** Dollars ($***)
on the first anniversary of the Assay Transfer Date ***; and
(ii) *** Dollars ($***) on the *** for the ***.
5.7. ***. In addition to other fees described in this Section 5, GW
shall also pay to Aurora ***, ***:
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<TABLE>
<CAPTION>
Event Milestone Payment
----- -----------------
<S> <C>
*** ***
</TABLE>
5.8. PAYMENT AND TRACKING MILESTONES. The milestones due under this
Section 5 shall be paid within *** days after the end of each
calendar quarter period in which such milestones are earned
and ***. The compounds and target tested using the Assay
developed under this Agreement will be recorded and stored by
GW using its customary means and in a computer searchable
database on a storage device. The information stored will
include the target, screen type, the concentration, structure
and activity of the compound tested, and date of testing.
Records of any hits, derivatives or any compound subject to
additional screening or evaluation will be stored by GW in a
computer searchable file or database that may or may not be
separate from other GW data not related to the Assay. GW shall
keep appropriate records of compounds discovered, identified
or profiled with the Assay subjected to ***. All the records
described in this Section are collectively referred to as
tracking records (the "Tracking Records"). GW *** by Aurora
and agreed to by GW, and *** GW, to inspect the Tracking
Records once per year upon reasonable prior written request by
Aurora for the sole purpose of determining the attainment of a
milestone under this Section 5. The Tracking Records shall be
securely retained *** for no less than *** years from ***.
Until all of the milestones have been paid and upon the
request of Aurora, GW will provide Aurora with a summary of
the status of development compounds and products that may be
used to calculate milestones.
5.9. PATENT DISCLAIMER. The parties acknowledge that Aurora may not
own or Control patent applications or patents covering the
manufacture, sale, use or importation of a particular compound
or pharmaceutical product developed and/or commercialized by
GW as a result of the Assay; provided, however, GW agrees to
pay to Aurora the milestones in Section 5.7 regardless of
whether a compound or pharmaceutical product is covered by a
patent application or patent within the Aurora Patents.
5.10. WITHHOLDING TAXES. All amounts required to be paid to Aurora
by GW pursuant to Sections 5.3, 5.6 and 5.7 of this Agreement
may be paid ***. At Aurora's request, GW shall provide Aurora
*** hereunder and shall reasonably assist Aurora to ***.
Should the benefit of *** not be as favourable as that
applying at the Effective Date then ***.
6. INTELLECTUAL PROPERTY OWNERSHIP
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6.1. PRE-EXISTING INTELLECTUAL PROPERTY. This agreement does not
affect the ownership of Inventions, Technology and Patent
Rights of either party which existed prior to the Effective
Date.
6.2. INTELLECTUAL PROPERTY CREATED UNDER THE COLLABORATIVE RESEARCH
PROGRAM. The Assay developed by Aurora *** Collaborative
Research Program ***.
6.3. INTELLECTUAL PROPERTY CREATED THROUGH GW'S ***. Any
Inventions, Technology and Patent Rights relating to the
activities or properties of compounds discovered, identified
or profiled through GW's *** the Assay or other assays
incorporating Aurora Technology ***, subject to the terms of
the licenses granted by Aurora under Section 4. *** will be
responsible for the filing, prosecution, and enforcement of
all applicable patents and for the expenses thereof. Any
improvements, Know-How, Inventions, Technology and Patent
Rights developed by ***, *** for paying any fees related to
the filing, prosecution, and enforcement of all applicable
patents and for the expenses thereof.
6.4. TRANSFER OF RIGHTS. All rights not expressly licensed or
assigned by Aurora are retained by Aurora and no implied
licenses are conveyed herein or were conveyed before the
Effective Date. Except as otherwise expressly provided in this
Agreement, nothing in this Agreement is intended to convey or
transfer ownership by one party to the other of any rights,
title or interest in any Confidential Information, Technology,
copyrights or Patent Rights owned or Controlled by a party.
Except as expressly provided for in this Agreement, nothing in
this Agreement shall be construed as a license or sublicense
by one party to the other of any rights in any Technology,
copyrights, or Patent Rights owned or Controlled by a party.
6.5. INVENTORSHIP AND ASSIGNMENT. Inventorship of patentable
inventions shall be determined by U.S. patent law. GW and
Aurora *** Inventions, Technology and Patent Rights.
6.6. COPYRIGHTS. The parties agree to treat and handle, to the
maximum extent practical, any copyrights owned or Controlled
by a party in the same manner as Patent Rights owned or
Controlled by such party.
7. PRODUCT DEVELOPMENT, COMMERCIALIZATION AND DILIGENCE
7.1. *** development and commercialization of all compounds
discovered through GW's ***, and such development and
commercialization will be at GW's sole discretion.
8. CONFIDENTIALITY
8.1. CONFIDENTIAL INFORMATION. Except as expressly provided herein,
the parties agree
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that, for the term of this Agreement and *** years
thereafter, the receiving party shall keep completely
confidential and shall not publish or otherwise disclose to
another party and shall not use for any purpose other than
to perform the purposes contemplated by this Agreement any
Confidential Information furnished to it by the disclosing
party hereto pursuant to this Agreement, except that to the
extent that it can be established by the receiving party by
competent proof that such Confidential Information:
- was already known to the receiving party, other than
under an obligation of confidentiality, at the time
of disclosure;
- was generally available to the public or otherwise
part of the public domain at the time of its
disclosure to the receiving party;
- became generally available to the public or otherwise
part of the public domain after its disclosure and
other than through any act or omission of the
receiving party in breach of this Agreement;
- was lawfully disclosed to the receiving party by a
person other than a party hereto, or
- was independently developed by the receiving party
without the use of Confidential Information.
8.2. PERMITTED USE AND DISCLOSURES. Each party hereto may use or
disclose Confidential Information disclosed to it by the other
party to the extent such use or disclosure is (i) reasonably
necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, (ii) complying with
applicable law, governmental regulation or court order, (iii)
submitting information to tax or other governmental
authorities, (iv) making a permitted sublicense or (v)
otherwise exercising its rights hereunder, provided that if a
party is required to make any such disclosure of another
party's Confidential Information, other than pursuant to
subsection (ii) hereof, it will give reasonable advance notice
to the latter party of such disclosure, and shall obtain the
prior written approval of said latter party, which approval
shall not be unreasonably withheld.
8.3 CONFIDENTIAL TERMS. Except as expressly provided herein, each
party agrees not to disclose any material or financial terms
of this Agreement to another party without the consent of the
other party, not to be unreasonably withheld; provided,
however, each party reserves the right to make reasonable
disclosures (including the redaction of material or financial
terms) as required by securities or other applicable laws, or
to actual or prospective investors or corporate partners
(including licensees and acquirers), or to accountants,
attorneys and other professional advisors on a need-to-know
basis under circumstances that reasonably ensure the
confidentiality thereof, or to the extent required by law. If
such Confidential Information is to become public information
by such disclosure the disclosing party must obtain the
written consent of the non-disclosing party in order to obtain
protection of the Confidential Information if necessary.
8.4. PRESS RELEASE. Notwithstanding the foregoing, the parties
agree that Aurora will make a press release to announce the
execution of this Agreement which shall be subject to prior
written approval of GW, such approval not to be unreasonably
withheld. Thereafter, GW and Aurora may each disclose to Third
Parties the information contained in the mutually agreed upon
press release without the need for further approval by the
other.
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9. TERM AND TERMINATION OF THE RESEARCH COLLABORATION
9.1. TERM. This Agreement shall commence on the Effective Date and
shall terminate on the date ***. The Collaborative Research
Program will terminate on *** by Aurora in accordance with
Section 3.3., or *** after the Effective Date, whichever is
first, unless extended by mutual written agreement of both
parties.
9.2. TERMINATION. Either party shall have the right to terminate
this Agreement at any time during the term for a material
breach of this Agreement by the other party, provided that the
non-breaching party shall have first given *** days prior
written notice (***days in the event of non-payment of any
amounts due under this Agreement) to the breaching party
describing such breach and stating the non-breaching party's
intention to terminate this Agreement if such breach remains
uncured, and the breaching party thereafter fails to cure same
within such *** day period (*** day period in the event of
non-payment of any amounts due under this Agreement).
9.3. TERMINATION *** this Agreement pursuant to Sections 3.1.1 or
3.1.2. All amounts paid by GW to Aurora under this Agreement
under Sections 5.1, 5.2 and 5.3 shall be nonrefundable.
9.4. EFFECT OF EXPIRATION OR TERMINATION. Except as otherwise
expressly provided in this Agreement, the rights and
obligations of the parties hereof shall terminate and be of no
further force or effect whatsoever upon any termination of
this Agreement under Section 9 hereof. Sections *** and ***,
hereof shall survive termination or expiration of this
Agreement. Upon expiration or other termination of the
Agreement all licenses granted will thereby terminate and
Materials will be destroyed or returned at the direction of
the parties within *** days.
10 MISCELLANEOUS
10.1. BINDING EFFECT; ASSIGNMENT. Except as otherwise provided
herein, neither this Agreement nor any interest hereunder will
be assignable in part or in whole *** may assign this
Agreement ***. This Agreement will be binding upon *** herein
will be deemed to *** to the extent necessary to carry out the
intent of this Agreement. Any assignment which is not in
accordance with this Section is void.
10.2. EFFECT OF WAIVER. No waiver of any default, condition,
provisions or breach of this Agreement shall be deemed to
imply or constitute a waiver of any other like default,
condition, provision or breach of this Agreement.
10.3. REPRESENTATIONS AND WARRANTIES OF AURORA AND GW. Each Party
hereby represents and warrants: Such party is duly organized
and validly existing and in good standing under the laws of
the state of its incorporation and has all requisite corporate
power and authority to enter into this Agreement and to carry
out the provisions hereof. Such party
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is duly authorized to execute and deliver this Agreement and
to perform its obligations hereunder. This Agreement is a
legal and valid obligation binding upon it and enforceable
in accordance with its terms. The execution, delivery and
performance of this Agreement by such party does not
conflict with any agreement, instrument or understanding,
oral or written, to which it is a party or by which it may
be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having
jurisdiction over it.
10.4 ***
10.4.1. LIMITATION OF LIABILITY AND WARRANTY. NEITHER PARTY
SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTIAL, OR INDIRECT DAMAGES
ARISING OUT OF THIS AGREEMENT, HOWEVER CAUSED,
UNDER ANY THEORY OF LIABILITY. Except as expressly
set forth in this Agreement, Aurora MAKES NO
REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED. THERE ARE NO
EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE
USE OF THE LICENSED PRODUCTS OR SERVICES WILL NOT
INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR
OTHER RIGHTS OR ANY OTHER EXPRESS OR IMPLIED
WARRANTIES.
10.4.2. ***
10.4.3. ***
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10.5. FORCE MAJEURE. Neither party shall lose any rights hereunder
or be liable to the other party for damages or losses (except
for payment obligations) on account of failure of performance
by the defaulting party if the failure is occasioned by war,
strike, fire, act of God(s), earthquake, flood (including El
Nino and La Nina), lockout, embargo and governmental acts or
orders or restrictions.
10.6. AMENDMENT. No modification, supplement to or waiver of this
Agreement or any Addendum hereto or any of their provisions
shall be binding upon a party hereto unless made in writing
and duly signed by an authorized representative of both GW and
Aurora. In no event may the terms of this Agreement be
changed, deleted, supplemented or waived by any notice,
purchase order, receipt, acceptance, bill of lading or other
similar form of document. A failure of either party to
exercise any right or remedy hereunder, in whole or in part,
or on one or more occasions, shall not be deemed either a
waiver of such right or remedy to the extent not exercised, or
of any other right or remedy, on such occasion, or a waiver of
any right or remedy on any succeeding occasion.
10.7. ENTIRE AGREEMENT. This Agreement and each supplemental written
agreement contemplated hereunder, sets forth the entire
understanding and agreement of the parties as to the subject
matter thereof, and there are no other understandings,
representations or promises, written or verbal, not set forth
herein or on which either party has relied. If any provisions
of any such Addendum or supplemental written agreement
conflict with any provisions set forth in this Agreement, the
provisions of this Agreement shall take precedence, unless
such Addendum or supplemental written agreement expressly
refers to the specific provision(s) of this Agreement that it
is intended to replace or modify (and which shall be limited
in force and effect to such Addendum or supplemental written
agreement only).
10.8. NOTICES. All Notices under this Agreement shall be given in
writing and shall be addressed to the parties at the following
addresses:
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Glaxo Wellcome House West,
Berkeley Avenue,
Greenford, Middlesex UB6 ONN,
United Kingdom
FOR AURORA:
Harry Stylli, Ph.D.
Senior Vice President Commercial Development
Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, CA. 92121
COPIES TO:
John D. Mendlein, Ph.D., J.D.
Senior Vice President, Intellectual Property
and Chief Knowledge Officer
Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, CA. 92121
Notices shall be in writing and shall be deemed delivered when
received, if delivered by a courier, or on the second business day
following mailing, if sent by first-class certified or registered
mail, postage prepaid.
10.9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as those laws
apply to California residents, without regard or giving effect to its
principles of conflict of laws. Resolution of any disputes will be
decided in California.
10.10. THIRD PARTY BENEFICIARIES. This Agreement and the rights and
obligations created hereunder are for the sole benefit of the parties
hereto and their respective successors or assigns as may be permitted
under the terms of this Agreement. By entering into this Agreement,
the parties agree that they are not creating and do not intend to
create implied or incidental rights inuring to the benefit of Third
Parties.
10.11. SEVERABILITY. This Agreement is intended to be severable. If any
provision(s) of this Agreement are or become invalid, are ruled
illegal by a court of competent jurisdiction or are deemed
unenforceable under the current applicable law from time to time in
effect during the term hereof, it is the intention of the parties that
the remainder of the Agreement shall not be affected thereby and shall
continue to be construed to the maximum extent permitted by law at
such time. It is further the intention of the parties that in lieu of
each such provision which is invalid, illegal, or unenforceable, there
shall be substituted or added as part of this Agreement by such court
of competent jurisdiction a provision which shall be as similar as
possible, in economic and business objectives as intended by the
parties to such invalid, illegal or unenforceable provision, but shall
be valid, legal and enforceable.
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10.12. HEADINGS. Captions and paragraph headings are for convenience only
and shall not form an interpretative part of this Agreement. Unless
otherwise specifically provided, all references to a Section
incorporate all Sections or subsections thereunder. This Agreement
shall not be strictly construed against either party hereto and maybe
executed in two (2) or more counterparts, each of which will be deemed
an original and the same instrument. Counterparts may be signed and
delivered by facsimile, each of which shall be binding when sent, and
in each case an original shall be sent via overnight courier. This
Agreement will not be enforceable and shall have no effect if this
Agreement is not executed ***.
IN WITNESS WHEREOF, the parties have executed, by duly authorized
representatives, this Agreement:
For Glaxo Group Limited For Glaxo Research and
Development Limited
By: /s/ SM Bicknell By: /s/ SM Bicknell
---------------------------- ----------------------------
Date: 15 December 1999 Date: 15 December 1999
-------------------------- -------------------------
Name: SM Bicknell Name: SM Bicknell
-------------------------- ------------------------
Title: Assistant Secretary Title: Assistant Secretary
------------------------- -----------------------
For Aurora Biosciences Corporation
By: /s/ Michael J. Dunn
---------------------------------------
Date: 12/15/99
------------------------------------
Name: Michael J. Dunn
------------------------------------
Title: Vice President Business Development
-----------------------------------
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EXHIBIT A
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EXHIBIT B
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***
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EXHIBIT C
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ATTACHMENT 1
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EXHIBIT 10.54
INSTRUMENT, ASSAY DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN
WYETH-AYERST
AND
AURORA BIOSCIENCES CORPORATION
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This Agreement is made by and between AMERICAN HOME PRODUCTS, acting through its
WYETH-AYERST LABORATORIES DIVISION ("Wyeth"), a Delaware corporation with
principal offices at P.O. Box 8299, Philadelphia, PA 19101 and AURORA
BIOSCIENCES CORPORATION ("Aurora"), a Delaware corporation with principal
offices at 11010 Torreyana Road, San Diego, California 92121.
RECITALS
WHEREAS, Wyeth and Aurora wish to enter into an agreement involving the purcase
by Wyeth of a Voltage-Ion Probe Reader (VIPR) from Aurora, collaborative
research to develop *** assays, and licenses of rights from Aurora to Wyeth to
use the VIPR as well as Aurora's Voltage Sensor Probes (VSPs) and *** assays to
practice the technologies and the assays as set forth herein.
Now, therefore, in consideration of the foregoing and the covenants and premises
contained herein the parties agree as follows:
1. DEFINITIONS
1.1 "AURORA PATENTS" means U.S. patent *** and patent applications ***0
and *** set forth in Exhibit A and ***s and ***, *** with respect
thereto and *** patents issuing therefrom.
1.2 "AURORA TECHNOLOGY" *** the Collaborative Research Program.
1.3 "COLLABORATIVE RESEARCH PROGRAM" means the collaboration between
Aurora and Wyeth as set forth in Exhibit B for the development of ***
which may be amended from time to time, by written agreement of the
parties.
1.4 "CONFIDENTIAL INFORMATION" means all information, data, and
documentation received by either party from the other party pursuant to
this Agreement and if in writing, designated as confidential at the
time of disclosure, subject to the exceptions set forth in Section 9.1.
1.5 "CONTROL" or "CONTROLLED" means, in the context of intellectual
property, possession by a party of the ability to grant a license or
sublicense in accordance with the terms of this Agreement, and without
violating the terms of any agreement by such party with any Third
Party.
1.6 "EFFECTIVE DATE" means the latest date on which the Agreement is
executed by a party hereto.
1.7 "INVENTION" means any new and useful process, machine, manufacture,
or composition of matter, or improvement thereto, whether or not
patentable.
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1.8 "KNOW-HOW" means information and data owned or Controlled by a
party hereto, which is existing as of the Effective Date or which a
party develops or acquires as part of the Collaborative Research
Program which is not generally known to the public, comprising:
designs, concepts, algorithms, formulae, techniques, practices,
processes, methods, knowledge, skill, experience, expertise and
technical information.
1.9 "MATERIALS" means any reagents, cell lines, promoters, enhancers,
vectors, plasmids, genes, proteins and fragments thereof, peptides,
antigens, antibodies, agonists, antagonists, inhibitors and chemicals.
1.10 "TRACKING RECORD" means tracking records referred to in
Section 5(e).
1.11 "PATENT RIGHTS" means all U.S. or foreign (including regional
authorities such as the European Patent Office) regular or provisional
patent applications, including any continuation, continuation-in-part,
or division thereof or any substitute application therefor or
equivalent thereof, and any patent issuing thereon, including any
reissue, reexamination or extension thereof and any confirmation patent
or registration patent or patent of additions based on any such patent,
containing one or more claims to an Invention (and in the case of an
issued patent, containing one or more claims), and for which a party
hereto owns or Controls, individually or jointly, any title thereto or
rights thereunder.
1.12 "REAGENT AGREEMENT" ***.
1.12 "TECHNOLOGY" means Materials and Know-How.
1.13 "THIRD PARTY" means any person or entity other than Aurora and
Wyeth.
1.14 "VIPR" means Aurora's voltage-ion probe reader for use with VSP's
and purchased by Wyeth ***.
1.15 "VOLTAGE SENSOR PROBES OR VSPS" means *** Aurora Patents.
1.16 "WYETH MATERIALS" means *** Collaborative Research Program.
2. EQUIPMENT PURCHASE
Aurora *** VIPR *** pursuant to this Agreement. Subject to Wyeth's payments in
Section 5, Aurora will provide the following:
- Ship *** VIPR *** or within *** of the Effective Date, ***.
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- *** VIPR at Wyeth's facility ***) days of shipment, *** expense.
- Comprehensive *** VIPR for up to *** San Diego site to be scheduled
approximately one week before the ***, with *** to be ***.
- Warranty of the VIPR for *** after the Effective *** Section 5 (a).
3. COLLABORATIVE RESEARCH
Aurora will develop, in collaboration with Wyeth, ***, and *** for the *** (as
defined in the the "Collaborative Research Program"), and will *** of
representative *** and other Technology to Wyeth as described herein.
Wyeth will provide pursuant to this Agreement the following Wyeth Materials and
Confidential Information to Aurora within *** days of the Effective Date:
- *** which ***.
- *** data documenting ***.
- *** for the *** for *** into Aurora- ***, if the *** responses ***
(see Section 5.b).
- Up to ***.
- Up to *** determine *** in a *** format.
Aurora will perform pursuant to this Agreement the following:
- ***l for development of the *** incorporating *** format on the ***
within ***.
- *** development of the *** so that it can be used to *** respect ***.
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- ***, if necessary, to *** for *** development.
- *** determine *** provided by Wyeth.
- *** assays ***.
- Make available *** with these assays *** for each *** for the first
year, *** to be contracted for *** Wyeth and Aurora).
The Collaborative Research Program shall be managed by a joint steering
committee of a size and composition ***, with *** from both Wyeth and Aurora,
minimally to include key representatives of Wyeth's ***. Each party shall have
*** vote in the joint steering committee. The Joint Steering Committee shall be
chaired by a *** representative. The term of the Collaborative Research Program
is *** year from the Effective Date, except for *** as provided in Section 10
below.
4. LICENSES
As of the Effective Date this Agreement, Aurora will grant to Wyeth licenses and
rights as follows:
a) A *** under the *** and *** to *** Wyeth's ***, except *** Aurora
*** b) and c) ***. Such license grant is *** the ***. The license, ***.
b) A *** under the *** to *** developed by Aurora *** Research ***.
Such license grant is ***. The license, ***.
c) A *** under the *** and *** to *** to *** developed *** or ***, and
***
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research, ***, the *** is for *** only. The *** may not *** on ***. The
payments for this license are set forth in Section 5. Such license
grant is ***.
d) If the license in Section 4 (c) *** the license grant of Section 4
(c) will *** as ***. Aurora agrees that it *** including *** and/or ***
for any purpose other *** under this Agreement, and will not *** to any
Third Party without ***.
4.1 Aurora is *** and *** Wyeth that directly arise from ***.
4.2 RETAINED RIGHTS AND LIMITATIONS. The licenses under this Section 4
are subject to Wyeth's obligations described herein including payments
by Wyeth as set forth in Section 5. For clarity, the license rights
granted to Wyeth in this Section 4 specifically exclude the right ***
or ***; or 3) to *** or *** without the use of Wyeth Confidential
Information or Wyeth Materials. As consideration for the rights
received in Section 4, Wyeth *** Wyeth ***. ***.
5. PAYMENTS
a) EQUIPMENT PURCHASE. Wyeth *** Dollars ($***) for purchase ***.
Shipping will be prepaid and added FOB San Diego to the invoice. The
VIPR is provided ***, entitling Wyeth to *** of ***, prepaid and added
***. No one other than an Aurora factory certified engineer is
authorized to service the VIPR, and any tampering with or modification
of the instrument by any other party will nullify the warranty ***
cause the license *** to terminate. *** approved by Aurora, in writing,
which may include such
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repairs described in training ("Authorized Maintenance"). ***.
b) COLLABORATIVE RESEARCH. Wyeth will pay Aurora a *** fee of ***
Dollars ($***) for the development of ***. This amount is payable in
*** of *** Dollars ($***) each, the *** and the *** upon *** to Wyeth.
In the event that the *** ***, as reasonably determined by Aurora,
Aurora will notify the Joint Steering Committee. If the Joint Steering
Committee agrees by *** as determined by Aurora, Aurora will notify the
Joint Steering Committee, as soon as possible and prior to the date of
*** from the Effective date. In the event, Wyeth is *** Aurora with ***
from the Effective Date, (I) *** within *** of such ***; and (ii)
Aurora shall ***. Aurora will provide reasonable telephone support for
these assays as long as the license to them is maintained.
c) LICENSE FEES. Wyeth *** license fee of *** Dollars ($***), *** on
the anniversary of the Effective Date for *** years. After the initial
***, Wyeth may extend this license, ***, *** or *** for terms to be
negotiated, in good faith, by the parties.
d) ***. Upon designation by Wyeth *** on information *** with *** or
*** above by virtue of such *** properties, Wyeth will pay Aurora ***.
On the *** for each *** will pay *** of ***. On *** for each *** will
pay *** Dollars ($***). ***. *** shall be due on *** by Wyeth as *** in
a scientifically acceptable manner *** Wyeth, even if these ***
subsequently *** VIPR or *** assays. *** the *** in either *** or
unknown *** will be due.
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e) PAYMENT AND TRACKING *** shall be paid within *** days after the end
of each calendar quarter period in which *** are earned. The compounds,
screens and targets tested using a screen developed under this
Agreement will be recorded and stored by Wyeth using its customary
means and in a computer searchable database on a storage device. The
information stored *** upon in writing by the parties. Records of any
*** subject to *** or *** by Wyeth in a *** or *** that may or may not
*** related to the ***, or ***. Wyeth shall keep appropriate records of
*** assays and *** including the VSPs ***. All the records described in
this Section are collectively referred to as tracking records (the
"Tracking Records"). Wyeth will *** Aurora and agreed to by Wyeth, and
***, to *** Tracking Records *** year upon reasonable prior *** Aurora
for the *** the attainment of a milestone under this Section 5. The
Tracking Records shall be securely retained according to Wyeth's ***
than *** from *** VSPs. When a *** such as a *** or *** is *** safety
or ***, Wyeth will *** Aurora under ***. On an annual basis, *** Aurora
with a *** products that ***.
f) ***. The parties acknowledge that the principal value contributed by
Aurora under this Agreement is the ***, which the parties reasonably
believe will lessen the time required to develop new products and to
increase the efficiency of drug/target discovery and development
processes and technologies. Wyeth acknowledges and agrees that the
value it receives hereunder is in the access and use of ***;
accordingly, Wyeth *** set forth herein. Additionally, the parties
acknowledge that Aurora may not own or Control patent applications or
patents covering the manufacture, sale, use or importation of a
particular pharmaceutical product; provided, however, Wyeth ***
pharmaceutical product or compound is *** Aurora Patents.
6. OPTIONS
a) LICENSE ***. As described in Section 4 (c), the *** *** Dollars
($***) plus
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milestones ***. The license ***. ***, the license *** basis or for a
*** negotiated in good faith by the parties.
b) EXTENDED WARRANTY FOR THE VIPR. Aurora will provide an extended
warranty package *** to Wyeth that includes *** and ***, prepaid and
added to the service invoice ***. The price for *** Dollars ($***)***,
increased annually by the Consumer Price Index (CPI), *** warranty
within *** of the Effective Date; ***.
c) SCIENTIFIC SUPPORT SERVICES. Aurora will provide Wyeth the
opportunity to utilize a full range of scientific support services on
licensed assays post transfer as mutually agreed in writing by the
parties. A customized program can be designed for additional long-term
support at commercially available rates beyond the scope of this
project should Wyeth desire the same.
d) TRAINING. Aurora will provide on-site training of Wyeth personnel in
the use of the VIPR. Training will be for a maximum of *** people in a
*** training program. Documentation and workbooks will be provided.
***. The price for this training program is *** Dollars ($***)***
conducted in the continental US if requested *** of the Effective Date.
7. INTELLECTUAL PROPERTY OWNERSHIP
PRE-EXISTING INTELLECTUAL PROPERTY. This agreement does not affect the ownership
of Inventions, Technology and Patent Rights of either party which existed prior
to the Effective Date.
INTELLECTUAL PROPERTY CREATED UNDER THE COLLABORATIVE RESEARCH PROGRAM. ***
developed by *** during the Collaborative Research Program will be owned by ***,
with *** as ***. ***, at its sole discretion, shall be responsible for the
filing and prosecution of all applicable patents and the expenses thereof. ***.
INTELLECTUAL PROPERTY ***. Any Inventions, Technology and Patent Rights relating
to the activities or properties of *** or other ***, *** of the licenses granted
by Aurora under Section 4. *** will be responsible for the filing and
prosecution of all applicable patents and for the expenses thereof. Any
improvements, Know-How, Inventions, Technology and Patent Rights
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developed *** VIPR or VSPs or their use will *** to Sections ***. ***.
TRANSFER OF RIGHTS. All rights not expressly licensed or assigned by Aurora are
retained by Aurora and no implied licenses are conveyed herein or were conveyed
before the Effective Date. Except as otherwise expressly provided in this
Agreement, nothing in this Agreement is intended to convey or transfer ownership
by one party to the other of any rights, title or interest in any Confidential
Information, Technology, copyrights or Patent Rights owned or Controlled by a
party. Except as expressly provided for in this Agreement, nothing in this
Agreement shall be construed as a license or sublicense by one party to the
other of any rights in any Technology, copyrights, or Patent Rights owned or
Controlled by a party.
INVENTORSHIP AND ASSIGNMENT. Inventorship of patentable inventions shall be
determined by U.S. patent law. Wyeth and Aurora ***.
COPYRIGHTS. The parties agree to treat and handle, to the maximum extent
practical, any copyrights owned or Controlled by a party in the same manner as
Patent Rights owned or Controlled by such party.
8. PRODUCT DEVELOPMENT, COMMERCIALIZATION AND DILIGENCE
Wyeth will *** and such development and commercialization ***.
*** the Effective Date, and will *** Wyeth within ***of the Effective Date. The
*** will be made available to Wyeth in accordance with the *** between *** as
indicated in Section 3.
9. CONFIDENTIALITY
9.1 CONFIDENTIAL INFORMATION. Except as expressly provided herein, the
parties agree that, for the term of this Agreement and five (5) years
thereafter, the receiving party shall keep completely confidential and
shall not publish or otherwise disclose to another party and shall not use
for any purpose other than to perform the purposes contemplated by this
Agreement any Confidential Information furnished to it by the disclosing
party hereto pursuant to this Agreement, except that to the extent that it
can be established by the receiving party by competent proof that such
Confidential Information:
was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure;
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was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving
party;
became generally available to the public or otherwise part
of the public domain after its disclosure and other than
through any act or omission of the receiving party in breach
of this Agreement;
was lawfully disclosed to the receiving party by a person
other than a party hereto,
or was independently developed by the receiving party
without the use of Confidential Information.
9.2. PERMITTED USE AND DISCLOSURES. Each party hereto may use or disclose
Confidential Information disclosed to it by the other party to the extent
such use or disclosure is (i) reasonably necessary in filing or prosecuting
patent applications, prosecuting or defending litigation, (ii) complying
with applicable law, governmental regulation or court order, (iii)
submitting information to tax or other governmental authorities, (iv)
making a permitted sublicense or (v) otherwise exercising its rights
hereunder, provided that if a party is required to make any such disclosure
of another party's Confidential Information, other than pursuant to
subsection (ii) hereof, it will give reasonable advance notice to the
latter party of such disclosure and, shall obtain the prior written
approval of said latter party, which approval shall not be unreasonably
withheld.
9.3 CONFIDENTIAL TERMS. Except as expressly provided herein, each party
agrees not to disclose any material or financial terms of this Agreement to
another party without the consent of the other party, not to be
unreasonably withheld; provided, however, each party reserves the right to
make reasonable disclosures (including the redaction of material or
financial terms) as required by securities or other applicable laws, or to
actual or prospective investors or corporate partners (including licensees
and acquirers), or to accountants, attorneys and other professional
advisors on a need-to-know basis under circumstances that reasonably ensure
the confidentiality thereof, or to the extent required by law. If such
Confidential Information is to become public information by such disclosure
the disclosing party must obtain the written consent of the non-disclosing
party in order to obtain protection of the Confidential Information if
necessary.
9.4 PRESS RELEASE. Notwithstanding the foregoing, the parties agree that
Aurora will make a press release to announce the execution of this
Agreement which shall be subject to prior written approval of Wyeth, such
approval not to be unreasonably withheld. Thereafter, Wyeth and Aurora may
each disclose to Third Parties the information contained in the mutually
agreed upon press release without the need for further approval by the
other.
10. TERM AND TERMINATION OF THE RESEARCH COLLABORATION
a) TERM. The Collaborative Research Program will terminate *** Wyeth,
or after ***, unless extended by mutual written agreement of both
parties through the Joint
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Steering Committee. If the Collaborative Research Program *** Wyeth's
***, Wyeth will *** payment of *** Dollars ($***) described in Section
*** above. In this case, the license described under Section *** and
*** would *** Wyeth would *** for *** and to *** these assays under the
terms of *** and pursuant to this Agreement, with *** or *** to Aurora,
*** the VSPs, in which case it *** described in Section *** and ***.
b) TERMINATION. Either party shall have the right to terminate this
Agreement at any time during the term for a material breach of this
Agreement by the other party, provided that the non-breaching party
shall have first given *** days prior written notice (*** days in the
event of non-payment of any amounts due under this Agreement) to the
breaching party describing such breach and stating the non-breaching
party's intention to terminate this Agreement if such breach remains
uncured, and the breaching party thereafter fails to cure same within
such *** day (***) period (*** day period in the event of non-payment
of any amounts due under this Agreement).
c) EFFECT OF EXPIRATION OR TERMINATION. Except as otherwise expressly
provided in this Agreement, the rights and obligations of the parties
hereof shall terminate and be of no further force or effect whatsoever
upon any termination of this Agreement under Section 10 hereof.
Sections *** shall survive termination or expiration of this Agreement.
Upon expiration or other termination of the Agreement all licenses
granted will thereby terminate and Materials will be destroyed or
returned at the direction of the parties within *** days.
11. MISCELLANEOUS
11.1.BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon the
parties' permitted successors and permitted assigns. Wyeth may not assign
or otherwise transfer this Agreement or any of its rights or obligations
hereunder without the prior written consent of Aurora *** such attempted
assignment or transfer shall be void. Aurora may assign or otherwise
transfer this Agreement without the consent of Wyeth.
11.2. EFFECT OF WAIVER. No waiver of any default, condition, provisions or
breach of this Agreement shall be deemed to imply or constitute a waiver of
any other like default, condition, provision or breach of this Agreement.
11.3. REPRESENTATIONS AND WARRANTIES OF AURORA AND WYETH. Each Party hereby
represents and warrants: Such party is duly organized and validly existing
and in good standing under the laws of the state of its incorporation and
has all requisite corporate power and authority to enter into this
Agreement and to carry out the provisions hereof. Such party is duly
authorized to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement is a legal and valid obligation
binding upon it and enforceable in accordance
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with its terms. The execution, delivery and performance of this Agreement
by such party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by which it may
be bound, nor violate any law or regulation of any court, governmental body
or administrative or other agency having jurisdiction over it.
11.3.1 Aurora hereby represents and warrants to Wyeth that, to the best
of its knowledge:
(a) ***
(b) as of the Effective Date, it has the full right, power and
authority to grant the licenses granted to Wyeth hereunder;
(c) ***;
(d) it is the exclusive licensee of the Aurora Patents and Aurora
Technology existing as of the Effective Date, ***.
(e) ***
11.4. ***
11.4.1. ***
11.4.2. ***
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11.4.3. ***
11.5. FORCE MAJEURE. Neither party shall lose any rights hereunder or be
liable to the other party for damages or losses (except for payment
obligations) on account of failure of performance by the defaulting party
if the failure is occasioned by war, strike, fire, act of God(s),
earthquake, flood (including El Nino and La Nina), lockout, embargo and
governmental acts or orders or restrictions.
11.6. AMENDMENT. No modification, supplement to or waiver of this Agreement
or any Addendum hereto or any of their provisions shall be binding upon a
party hereto unless made in writing and duly signed by an authorized
representative of both Wyeth and Aurora. In no event may the terms of this
Agreement be changed, deleted, supplemented or waived by any notice,
purchase order, receipt, acceptance, bill of lading or other similar form
of document. A failure of either party to exercise any right or remedy
hereunder, in whole or in part, or on one or more occasions, shall not be
deemed either a waiver of such right or remedy to the extent not exercised,
or of any other right or remedy, on such occasion, or a waiver of any right
or remedy on any succeeding occasion.
11.7. ENTIRE AGREEMENT. This Agreement and each supplemental written
agreement contemplated hereunder, sets forth the entire understanding and
agreement of the parties as to the subject matter thereof, and there are no
other understandings, representations or promises, written or verbal, not
set forth herein or on which either party has relied. If any provisions of
any such Addendum or supplemental written agreement conflict with any
provisions set forth in this Agreement, the provisions of this Agreement
shall take precedence, unless such Addendum or supplemental written
agreement expressly refers to the specific provision(s) of this Agreement
that it is intended to replace or modify (and which shall be limited in
force and effect to such Addendum or supplemental written agreement only).
11.8. NOTICES. All Notices under this Agreement shall be given in writing
and shall be addressed to the parties at the following addresses:
FOR WYETH:
Wyeth-Ayerst Laboratories
P.O. Box 8299
Philadelphia, PA 19101
Attn: SVP, Global Business Development
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Copy to: American Home Products Corporation
5 Giralda Farms
Madison, NJ 07940
Attn: SVP and General Counsel
FOR AURORA:
Timothy J. Rink, M.D., D.Sc.
CEO and Chairman
Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, CA. 92121
COPIES TO:
John D. Mendlein, Ph.D., J.D.
Senior Vice President, Intellectual Property
and Chief Knowledge Officer
Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, CA. 92121
Notices shall be in writing and shall be deemed delivered when received, if
delivered by a courier, or on the second business day following mailing, if
sent by first-class certified or registered mail, postage prepaid.
11.9. RESOLUTION. The parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement which relate
to either party's rights and/or obligations hereunder. It is the objective
of the parties to establish procedures to facilitate the resolution of
disputes arising under this Agreement in an expedient manner by mutual
cooperation and without resort to resolution by other means. The parties
agree that prior to any resolution concerning this Agreement, *** will meet
in person or by video-conferencing in a good faith effort to resolve any
disputes concerning this Agreement. Within *** days of a formal request by
either party to the other, any party may, by written notice to the other,
have such dispute referred to their respective officers designated or their
successors, for attempted resolution by good faith negotiations, such good
faith negotiations to begin within *** after such notice is ***.
11.10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws ***, without regard or giving effect to its
principles of conflict of laws.
11.11. THIRD PARTY BENEFICIARIES. This Agreement and the rights and
obligations created hereunder are for the sole benefit of the parties
hereto and their respective successors or assigns as may be permitted under
the terms of this Agreement. By entering into this Agreement, the parties
agree that they are not creating and do not intend to create implied or
incidental rights inuring to the benefit of Third Parties.
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11.12. SEVERABILITY. This Agreement is intended to be severable. If any
provision(s) of this Agreement are or become invalid, are ruled illegal by
a court of competent jurisdiction or are deemed unenforceable under the
current applicable law from time to time in effect during the term hereof,
it is the intention of the parties that the remainder of the Agreement
shall not be affected thereby and shall continue to be construed to the
maximum extent permitted by law at such time. It is further the intention
of the parties that in lieu of each such provision which is invalid,
illegal, or unenforceable, there shall be substituted or added as part of
this Agreement by such court of competent jurisdiction a provision which
shall be as similar as possible, in economic and business objectives as
intended by the parties to such invalid, illegal or unenforceable
provision, but shall be valid, legal and enforceable.
11.13. HEADINGS. Captions and paragraph headings are for convenience only
and shall not form an interpretative part of this Agreement. Unless
otherwise specifically provided, all references to a Section incorporate
all Sections or subsections thereunder. This Agreement shall not be
strictly construed against either party hereto and maybe executed in two
(2) or more counterparts, each of which will be deemed an original and the
same instrument. Counterparts may be signed and delivered by facsimile,
each of which shall be binding when sent, and in each case an original
shall be sent via overnight courier. This Agreement will not be enforceable
and shall have no effect if this Agreement is not executed by Wyeth and
Aurora ***.
IN WITNESS WHEREOF, the parties have executed, by duly authorized
representatives, this Agreement:
By: /s/ Egan E. Berg By: /s/ Michael J. Dunn
---------------------------- ------------------------------
Date: 12/16/99 Date: November 18, 1999
-------------------------- ----------------------------
Name: Egan E. Berg Name: Michael J. Dunn
--------------------------- ----------------------------
Title: Vice President Title: V.P. Business Development
-------------------------- ---------------------------
For American Home Products For Aurora Biosciences Corporation
Acting through its Wyeth-Ayerst
Laboratories Division
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EXHIBIT A
AURORA PATENTS
***
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EXHIBIT B
DESCRIPTION OF COLLABORATIVE RESEARCH PROGRAM
[GRAPHIC]
***
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EXHIBIT C
***
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EXHIBIT 1.1
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EXHIBIT 10.55
LICENSE AGREEMENT
BETWEEN
ZYMOGENETICS, INC.
AND
AURORA BIOSCIENCES CORPORATION
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LICENSE AGREEMENT
This License Agreement (the "Agreement") is made this 17th day of December 1999
(the "Effective Date"), by and between ZYMOGENETICS, INC. ("ZymoGenetics"), a
Washington corporation with principal offices at 1201 Eastlake Avenue East,
Seattle, WA 98102 and AURORA BIOSCIENCES CORPORATION ("Aurora"), a Delaware
corporation with principal offices at 11010 Torreyana Road, San Diego,
California 92121 to license certain technology.
RECITALS
WHEREAS, Aurora has the right to sublicense the Aurora Patents and Stanford
Patents (both defined herein) relating to fluorescent proteins further described
herein, and desires to license the same to ZymoGenetics;
WHEREAS, ZymoGenetics seeks to obtain certain Materials, license rights under
the Aurora Patents and Stanford Patents *** according to the terms contained
herein (the "Agreement");
Now, therefore, in consideration of the foregoing and the covenants and premises
contained herein the parties agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "AURORA MUTANT GFP" means ***.
1.2 "AURORA PATENTS" means U.S. Patent Nos. 5,625,048, 5,777,079 and
the patent applications listed on Exhibit A and *** U.S. patents
issuing therefrom.
1.3 "AURORA TECHNOLOGY" means the *** listed in Exhibit C and Aurora's
proprietary technical manual for the same.
1.4 "CONFIDENTIAL INFORMATION" means all information, data, and
documentation received by either party from the other party
pursuant to this Agreement, subject to the exceptions set forth in
Section 8.
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1.5 "CONTROL" or "CONTROLLED" means, in the context of intellectual
property, right of a party to grant a license or sublicense in
accordance with the terms of this Agreement, and without violating
the terms of any agreement by such party with any Third Party.
1.6 "EXCLUDED FIELDS" means ***.
1.7 "FIELD" means:
(1) ***;
(2) ***
(3) ***;
(4) use of Aurora Mutant GFP for ***; and
(5) use of Aurora Mutant GFP ***.
Items (1)-(5) are ***.
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1.8 "MATERIALS" means any reagents, promoters, enhancers, vectors,
plasmids, genes, polynucleotides, cells, proteins and fragments
thereof, peptides, antigens, antibodies, antagonists, agonists,
inhibitors and chemicals.
1.9 ***.
1.10 "SCREENING" means ***.
1.11 "STANFORD AGREEMENT" means that certain exclusive license agreement
between Aurora and The Board of Trustees of the Leland Stanford
Junior University ("Stanford"), dated as ***.
1.12 "STANFORD LICENSED PRODUCT(S)" means any product or process, or
part thereof, in the Field, the manufacture, use or sale of which
is covered by a valid claim of an issued, unexpired Stanford
Patent and shall be presumed to be valid unless and until it has
been held to be invalid by a final judgment of a court of
competent jurisdiction from which no appeal can be or is taken.
1.13 "STANFORD PATENTS" means U.S. Patent No. 5,807,387, 5,968,738 and
the patent applications listed on Exhibit B and *** U.S. patents
issuing therefrom.
1.14 "TARGET" means ***.
1.15 "TERRITORY" means the United States.
1.16 "THIRD PARTY" means any entity other than (i) Aurora and (ii)
ZymoGenetics.
1.17 "TERM" has the meaning set forth in Section 9.1.
1.18 "ZYMOGENETICS PRODUCT" means ***.
2. LICENSES AND SUPPLY
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2.1 GRANT UNDER THE AURORA PATENTS, STANFORD PATENTS AND AURORA
TECHNOLOGY
2.1.1 NON-EXCLUSIVE LICENSE TO AURORA PATENTS. Aurora hereby
grants to ZymoGenetics, ***.
2.1.2 NON-EXCLUSIVE LICENSE TO STANFORD PATENTS. Aurora hereby
grants to ZymoGenetics, ***.
2.1.3 NON-EXCLUSIVE LICENSE TO AURORA TECHNOLOGY. Aurora hereby
grants to ZymoGenetics, ***.
2.1.4 LIMITATIONS. Except as otherwise expressly provided in this
Agreement, nothing in this Agreement is intended to convey
or transfer ownership by one party to the other of any
rights, title or interest in any Confidential Information,
technology (e.g. ***), copyrights or patent rights owned or
Controlled by a party. Except as expressly provided for in
this Agreement, nothing in this Agreement shall be
construed as a license or sublicense by one party to the
other of any rights in any technology, copyrights, or
patent rights owned or Controlled by a party. All rights
not expressly licensed by Aurora are retained by Aurora.
The Aurora Mutant GFP *** are *** within the scope *** (i)
***; (ii) ***; or (iii) ***. The license rights granted to
ZymoGenetics in Section *** do not include: (a) ***
2.2 SUPPLY. Aurora shall deliver the Aurora Technology to ZymoGenetics
within *** business days after the Effective Date in the
quantities described on Exhibit C.
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3. COMPENSATION
3.1 TECHNOLOGY ACCESS FEE. As consideration for the Aurora Technology
provided to ZymoGenetics pursuant to ***, ZymoGenetics shall pay
to Aurora within *** after the Effective Date, a *** Dollars
($***).
3.2 ***. As consideration for the *** provided to ZymoGenetics
pursuant to ***, ZymoGenetics shall pay to Aurora within *** after
the Effective Date, *** fee of *** Dollars ($***). ***.
3.3 ANNUAL MAINTENANCE FEE. As consideration for the rights granted in
Section ***, ZymoGenetics will pay to Aurora a *** fee as payment
for the upcoming year *** Dollars ($***) on the first anniversary
of the Effective Date and then each anniversary of the Effective
Date thereafter.
4. PAYMENTS AND MILESTONES
4.1 CURRENCY OF PAYMENT. All payments to be made under this Agreement
shall be paid in U.S. dollars by wire transfer or other mutually
acceptable means to a bank account designated by Aurora. Wiring
instructions for payments are as follows:
***
4.2 MILESTONES. When any ZymoGenetics Product reaches any of the
following milestones, ZymoGenetics shall pay to Aurora the
corresponding non-creditable, non-refundable milestone payment; ***
<TABLE>
<CAPTION>
Milestone Payment
---------- -------
<S> <C> <C>
1. *** $ ***
2. *** $ ***
3. *** $ ***
4. ***
</TABLE>
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4.2.1 PAYMENT AND REPORTING. The milestones due under this
Section 4 shall be paid within *** days after the end of
each calendar quarter period in which such milestones are
reached for each ZymoGenetics Product or for a ZymoGenetics
Product earned and not previously reported.
4.2.2 TRACKING. ZymoGenetics Products will be recorded and stored
by ZymoGenetics using its customary means and in a computer
searchable database on a storage device. Records of any ***
(including, ***) that would *** subject to additional ***
will be *** file or database that ***. ZymoGenetics shall
keep appropriate records of ZymoGenetics Products
discovered, identified or profiled under the rights granted
herein ***. All the records described in this Section are
collectively referred to as tracking records (the "Tracking
Records"). *** ZymoGenetics, and subject to a confidential
relationship with ZymoGenetics *** Tracking Records ***
year upon reasonable prior written request *** milestone
under ***. The Tracking Records shall be securely retained
according to ZymoGenetics' *** for no less than *** from
the date a ***. Until all of the milestones have been paid,
*** that may be used to calculate milestones. Such reports
shall be sent to the attention of SVP, Intellectual
Property via first class mail, overnight courier or
facsimile.
4.2.3 TRADE SECRET MILESTONES. The parties acknowledge that a
significant value contributed by Aurora under this
Agreement is the ***. Additionally, the parties acknowledge
that Aurora may not own or Control patent applications or
patents covering the manufacture, offer for sale, sale, use
or importation of a particular product. ZymoGenetics
acknowledges and agrees that the value it receives
hereunder is in ***. ***
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*** patent application or patent within the Aurora Patents
or Stanford Patents.
4.3 ***. If ZymoGenetics makes a payment to *** under such Third Party
patent rights, biological materials or know-how, *** ZymoGenetics,
*** payments in annual maintenance fees or milestones, described
in Sections *** respectively, to Aurora totaling *** dollars
($***), ZymoGenetics *** made to *** amount payable under Section
*** dollars ($***) ***.
5. COVENANTS
5.1 AURORA'S COVENANT. Subject to ZymoGenetics' obligations in
accordance with Section ***
5.2 COVENANTS OF ZYMOGENETICS:
5.2.1 ***
5.2.2 ***
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5.2.3 Except as expressly licensed herein, ZymoGenetics covenants
not to make or use Aurora Technology or polynucleotides or
proteins under the Aurora Patents or Stanford Patents. ***
6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF AURORA AND ZYMOGENETICS
Each Party hereby represents and warrants:
CORPORATE POWER. Such party is duly organized and validly
existing and in good standing under the laws of the state of its
incorporation and has all requisite corporate power and authority
to enter into this Agreement and to carry out the provisions
hereof.
DUE AUTHORIZATION. Such party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
BINDING AGREEMENT. This Agreement is a legal and valid obligation
binding upon it and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such
party does not conflict with any agreement, instrument or
understanding, oral or written, to which it is a party or by
which it may be bound, nor violate any law or regulation of any
court, governmental body or administrative or other agency having
jurisdiction over it.
6.2 REPRESENTATIONS AND WARRANTIES OF AURORA. To the best knowledge of
Aurora, as of the Effective Date, Aurora represents and warrants
to ZymoGenetics, except as otherwise provided or disclosed herein:
(i) it Controls under valid licenses or by virtue of ownership all
right, title and interest in and to the Aurora Patents and
Stanford Patents and Aurora Technology licensed hereunder; (ii)
*** (iii) ***; and (iv) ***.
7. NEGATION OF WARRANTIES
7.1 Except as expressly set forth in this Agreement, Aurora MAKES NO
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REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE
USE OF THE AURORA TECHNOLOGY WILL NOT INFRINGE ANY PATENT,
COPYRIGHT, TRADEMARK, OR OTHER RIGHTS OR ANY OTHER EXPRESS OR
IMPLIED WARRANTIES.
8. CONFIDENTIALITY
8.1 CONFIDENTIAL INFORMATION. Except as expressly provided herein, the
parties agree that, for the Term and five (5) years thereafter,
the receiving party shall keep completely confidential and shall
not publish or otherwise disclose to another party and shall not
use for any purpose other than to perform the purposes
contemplated by this Agreement any Confidential Information
furnished to it by the disclosing party hereto pursuant to this
Agreement, except that to the extent that it can be established by
the receiving party by written evidence that such Confidential
Information:
was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure;
was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving party;
became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act
or omission of the receiving party in breach of this Agreement;
or was lawfully disclosed to the receiving party by a person other
than a party hereto, or was independently developed by the
receiving party.
8.2 PERMITTED USE AND DISCLOSURES. Each party hereto may use or
disclose Confidential Information disclosed to it by the other
party to the extent such use or disclosure is reasonably necessary
in filing or prosecuting patent applications, prosecuting or
defending litigation, complying with applicable law, governmental
regulation or court order, submitting information to tax or other
governmental authorities, making a permitted sublicense or
otherwise exercising its rights hereunder, provided that if a
party is required to make any such disclosure of another party's
Confidential Information, other than pursuant to a confidentiality
agreement, it will give reasonable advance notice to the latter
party of such disclosure and, save to the extent inappropriate in
the case of patent applications, will use reasonable efforts to
secure confidential treatment of such information prior to its
disclosure (whether through protective orders or otherwise).
8.3 CONFIDENTIAL TERMS. Except as expressly provided herein, each
party agrees not to disclose
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*** to another party without the consent of the other party, not
to be unreasonably withheld; provided, however, each party
reserves the right to make reasonable disclosures (including the
mutually agreed redaction of material or financial terms) as
required by securities or other applicable laws, or to actual or
prospective investors or corporate partners, or to accountants,
attorneys and other professional advisors on a need-to-know basis
under circumstances that reasonably ensure the confidentiality
thereof, or to the extent required by law. A party shall have the
further right to disclose the material financial terms of this
Agreement under strictures of confidentiality to any potential
acquirer, bona fide potential strategic partner or collaborator,
merger partner, bank, venture capital firm, or other financial
institution to obtain financing. If any Confidential Information
is to become public information by disclosure of the disclosing
party (except by way of issuance of a patent), the disclosing
party must obtain the written consent of the non-disclosing party
in order to disclose the information or allow the non-disclosing
party to obtain protection of the Confidential Information, if
necessary.
9. TERMINATION
9.1 TERM. This Agreement shall continue until the date the last patent
of the Aurora Patents or Stanford Patents expires ("Term").
9.2 TERMINATION FOR MATERIAL BREACH. Either party shall have the right
to terminate this Agreement at any time for a material breach of
this Agreement by the other party, provided that the non-breaching
party shall have first given thirty (30) days prior written notice
(ten (10) days in the event of non-payment of any amounts due
under this Agreement) to the breaching party describing such
breach and stating the non-breaching party's intention to
terminate this Agreement if such breach remains uncured, and the
breaching party thereafter fails to cure same within a reasonable
time. In no case will a party be liable for punitive or
consequential damages.
9.3 TERMINATION BY ZYMOGENETICS. ZymoGenetics may, at anytime after
the date of the *** anniversary of the Effective Date, terminate
the license rights granted in Section *** upon *** days written
notice to Aurora and ***.
9.4 Any termination pursuant to Section 9.2 or 9.3 shall not relieve
ZymoGenetics of any obligation or liability accrued hereunder
prior to such termination, including the obligation to pay
applicable license fees and milestones. The licenses granted to
ZymoGenetics under this Agreement shall terminate in the event the
Agreement is terminated or otherwise
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expired. Upon termination of the Agreement all licenses granted
will thereby terminate and Materials with an Aurora Mutant GFP
will be destroyed or returned to Aurora at the direction of Aurora
within sixty (60) days.
10. MISCELLANEOUS
10.1 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
the parties' respective successors and permitted assigns.
ZymoGenetics may not assign or otherwise transfer this Agreement
or any of its rights or obligations hereunder without the prior
written consent of Aurora *** and any such attempted assignment or
other transfer shall be void. Aurora may assign this Agreement,
upon notice to ZymoGenetics.
10.2 EFFECT OF WAIVER. No waiver of any default, condition, provisions
or breach of this Agreement shall be deemed to imply or constitute
a waiver of any other like default, condition, provision or breach
of this Agreement.
10.3 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTIAL, OR INDIRECT
DAMAGES ARISING OUT OF THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY
THEORY OF LIABILITY.
10.4 INDEMNIFICATION. ZymoGenetics shall indemnify, hold harmless and
defend Aurora, its officers, employees, and agents (collectively,
the "Indemnities") against any and all ***
10.5 FORCE MAJEURE. Neither party shall lose any rights hereunder or be
liable to the other party for damages or losses on account of
failure of performance by the defaulting party if the failure is
occasioned by war, strike, fire, act of God(s), el nino, la nina,
earthquake, flood, lockout, embargo, governmental acts or orders
or restrictions, failure of suppliers, or any other reason where
failure to perform is beyond the reasonable control and not caused
by the gross negligence or intentional conduct or misconduct of
the nonperforming party, and
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such party has exerted all reasonable efforts to avoid or remedy
such force majeure; provided, however, that in no event shall a
party be required to settle any labor dispute or disturbance.
10.6 AMENDMENT. No modification, supplement to or waiver of this
Agreement or any Addendum hereto or any of their provisions shall
be binding upon a party hereto unless made in writing and duly
signed by an authorized representative of both ZymoGenetics and
Aurora. In no event may the terms of this Agreement be changed,
deleted, supplemented or waived by any notice, purchase order,
receipt, acceptance, bill of lading or other similar form of
document. A failure of either party to exercise any right or
remedy hereunder, in whole or in part, or on one or more
occasions, shall not be deemed either a waiver of such right or
remedy to the extent not exercised, or of any other right or
remedy, on such occasion or a waiver of any right or remedy on any
succeeding occasion.
10.7 ENTIRE AGREEMENT. This Agreement, and each Exhibit attached
hereto, and each supplemental written agreement contemplated
hereunder, sets forth the entire understanding and agreement of
the parties as to the subject matter thereof, and there are no
other understandings, representations or promises, written or
verbal, not set forth herein or on which either party has relied.
If any provisions of any such addendum or supplemental written
agreement conflict with any provisions set forth in this
Agreement, the provisions of this Agreement shall take precedence,
unless such addendum or supplemental written agreement expressly
refers to the specific provision(s) of this Agreement that it is
intended to replace or modify (and which shall be limited in force
and effect to such addendum or supplemental written agreement
only).
10.8 NOTICES. All Notices under this Agreement shall be given in
writing and shall be addressed to the parties at the following
addresses:
FOR ZYMOGENETICS:
-----------------
Senior Director, Legal Affairs
ZymoGenetics, Inc.
1201 Eastlake Avenue East
Seattle, WA 98102
***
COPIES TO:
Bruce Carter, Ph.D.
CEO and President
ZymoGenetics, Inc.
1201 Eastlake Avenue East
Seattle, WA 98102
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***
FOR AURORA:
-----------
Stuart J. M. Collinson, Ph.D., M.B.A.
CEO and President
Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, CA. 92121
COPIES TO:
John D. Mendlein
Chief Knowledge Officer
Aurora Biosciences Corporation
11010 Torreyana Road
San Diego, CA. 92121
Notices shall be in writing and shall be deemed delivered when
received, if delivered by a courier, or if by facsimile, with
confirmation copy or on the second business day following mailing,
if sent by first-class certified or registered mail, postage
prepaid. Notice delivered upon receipt of fax (confirmation copy
follows to support date of notice).
10.9 ARBITRATION. The parties recognize that disputes as to certain
matters may from time to time arise during the term of this
Agreement which relate to either party's rights and/or obligations
hereunder, including, but not limited to attempted termination of
the Agreement. It is the objective of the parties to establish
procedures to facilitate the resolution of disputes arising under
this Agreement in an expedient manner by mutual cooperation and
without resort to arbitration. The parties agree that prior to any
arbitration concerning this Agreement, *** in a good faith effort
to resolve any disputes concerning this Agreement. Within *** days
of a formal request by either party to the other, any party may,
by written notice to the other, have such dispute referred to
their respective officers designated or their successors, for
attempted resolution by good faith negotiations, such good faith
negotiations to begin within *** days after such notice is
received and not to be continued for more than *** days after
initiation of such negotiations unless the parties mutually agree
to an extension thereto. Except as otherwise provided specifically
herein, any controversy or claim under this Agreement shall be
solely settled by arbitration by one arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration
Association (the "Association"); provided that the parties shall
first use their best efforts to resolve such dispute by
negotiation. Arbitration shall be initiated by a written request
for arbitration proceedings by one party to the other after such
*** day good faith negotiation
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period. The arbitration shall be conducted ***. The arbitrator
shall be selected by the joint agreement of the parties, but if
they do not so agree within *** days of the date of a request for
arbitration, the selection shall be made pursuant to the rules of
the Association. The decision reached by the arbitrator shall be
conclusive and binding upon the parties hereto and may be filed
with the clerk of any court of competent jurisdiction, and a
judgment confirming such decision may, if desired by any party to
the arbitration, be entered in such court. Each of the parties
shall pay its own expenses of arbitration and the expenses of the
arbitrator(s) shall be equally shared; provided, however, that if
in the opinion of the arbitrator(s) any claim hereunder or any
defense or objection thereto was unreasonable, the arbitrator(s)
may assess, as part of the award, all or any part of the
arbitration expenses (including reasonable attorneys' fees)
against the party raising such unreasonable claim, defense or
objection. Nothing herein set forth shall prevent the parties from
settling any dispute by mutual agreement at any time.
Notwithstanding anything to the contrary in this Section 10,
either party may seek immediate injunctive or other interim relief
from any court of competent jurisdiction with respect to
enforcement and protection of the patent rights, copyrights,
trademarks, or other intellectual property rights owned or
Controlled by such party. For clarity, this arbitration provision,
Section ***, shall not apply to any claim of infringement or a
lawsuit to determine the enforceability or validity of
intellectual property, including patents. In no event shall a
demand for arbitration be made after the date when the institution
of a legal or equitable proceeding based on such claim, dispute or
other matter in question would be barred by the applicable statute
of limitations.
10.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of ***.
10.11 SEVERABILITY AND SURVIVAL. This Agreement is intended to be
severable. If any provision(s) of this Agreement are or become
invalid, are ruled illegal by a court of competent jurisdiction or
are deemed unenforceable under the current applicable law from
time to time in effect during the term hereof, it is the intention
of the parties that the remainder of the Agreement shall not be
affected thereby and shall continue to be construed to the maximum
extent permitted by law at such time. It is further the intention
of the parties that in lieu of each such provision which is
invalid, illegal, or unenforceable, there shall be substituted or
added as part of this Agreement by mutual agreement of the parties
or arbitration, a provision which shall be as similar as possible,
in economic and business objectives as intended by the parties to
such invalid, illegal or unenforceable provision, but shall be
valid, legal and enforceable. Unless expressly stated otherwise,
the provision of Sections *** and any other provision intended by
its meaning to survive, will survive the expiration or any other
termination of this Agreement.
10.12 HEADINGS. Captions and paragraph headings are for convenience
only and shall not form
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an interpretative part of this Agreement. Unless otherwise
specifically provided, all references to a Section incorporate all
Sections or subsections thereunder. This Agreement shall be
construed without regard to the drafting or non-drafting party
hereto and may be executed in two or more counterparts, each of
which will be deemed an original and the same instrument.
Counterparts may be signed and delivered by facsimile, each of
which shall be binding when sent, and in each case an original
shall be sent via overnight courier. ***.
IN WITNESS WHEREOF, Aurora and ZymoGenetics have executed, by duly authorized
representatives, this Agreement.
For ZymoGenetics, Inc.
By:/s/ Bruce Carter Date: 12/17/99
-------------------------- -------------------------
Name: Bruce Carter
------------------------
Title: President
-----------------------
For Aurora Biosciences Corporation
By: /s/ John Mendlein Date: 12/16/99
--------------------------- -------------------------
Name: John Mendlein
-------------------------
Title: CKO
------------------------
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EXHIBIT A
AURORA PATENTS
***
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<PAGE>
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EXHIBIT B
STANFORD PATENTS
***
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<PAGE>
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***
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<PAGE>
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EXHIBIT C
***
***
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<PAGE>
EXHIBIT 10.56
January 21, 2000
Timothy J. Rink, M.D., Sc.D.
Chairman
Aurora Biosciences Corp.
Les Ligures Apt. 612
2, Rue Honore Labande
MC 98000 Monaco
Dear Tim:
This letter agreement ("Agreement") sets forth certain terms relating to your
service as Chairman of the Company's Board of Directors (the "Board"). This
Agreement will be deemed effective January 1, 2000.
- - CHAIRMANSHIP OF BOARD OF DIRECTORS. Beginning January 1, 2000 and as long
as you serve as Chairman of the Board, you will receive fees for meetings
comparable to the fees received by other non-executive directors, currently
$2,500.00 per Board meeting attended by you in person, $500.00 per
telephone or committee meeting in which you participate.
You will also receive a quarterly Chairman's fee of $2,500.00, payable in
advance on the first day of each quarter for as long as you remain Chairman
of the Board.
- - You may provide consulting services from time to time to the Company, as
follows. You will receive a fee of $2,500.00 per day of service on behalf
of the Company, additional to the days of Board meetings.
- Areas of service may include: recruitment; customer relations;
business development; strategic alliances; investor relations;
organization development; scientific and technical review and any
other areas in which the Board requests your services.
- You will not be requested to make more than three visits to the
USA in any quarter.
- Expenses: The Company will pay reasonable and documented travel
and incidental business expenses including: business-class air
travel for intercontinental flights for business performed in the
USA at the Company's request, car rental and hotel-suite
accommodations for work periods in San Diego.
- Secretarial assistance and other facilities: You will receive
reasonable secretarial assistance and office facilities at the
Company's San Diego headquarters.
- COBRA: The Company will reimburse you for the costs of your COBRA
coverage or the premiums for medical coverage similar to your
Company sponsored medical coverage (excluding family members)
during your service as a consultant.
- You agree that, through June 30th, 2000, so far as reasonably
practicable the Company's business will take precedence over any
other professional work.
<PAGE>
- Other professional activities: You agree that during the term of
your consultancy any third party work shall not conflict with the
Company's business interests. You further agree to notify the CEO
of the Company of the identity and nature of work involved in any
third party affiliations during the term of your consultancy.
- Stock Options: All of the stock options to purchase Company
Common Stock which have been granted to you and dated February
18, 1997 and July 23, 1998 will continue to vest in accordance
with their terms and the Company's 1996 Stock Plan as long as you
continue to serve as a member of the Board of Directors of, or as
a consultant to, the Company.
- Employee Proprietary Information and Inventions Agreement: The
conditions of the Employee Proprietary Information & Inventions
Agreement you executed on February 20, 1996, and attached hereto
as Attachment A, will remain in effect as provided therein.
- This Agreement is subject to satisfactory proof of your right to
work in the USA.
- Your service as a consultant may be terminated by you or the
Company at any time upon written notice to the other party.
- - You will receive a fee of $5,000.00 whenever the company requests you to
travel to the USA on behalf of the company.
Aurora may be required to withhold applicable U.S. federal and state taxes from
payments made to you for services provided in the U.S. At the end of each year,
the Company will send you the appropriate U.S. federal and state forms reporting
the amount of payments for services provided in the U.S. You are responsible for
all tax filings and tax payments.
This Agreement is made in San Diego, California. This Agreement shall be
construed and interpreted in accordance with the laws of the State of
California. Once signed by you, this Agreement will constitute the complete,
final and exclusive agreement between you and the Company relating to the terms
and conditions of your employment, and supersedes all prior and contemporaneous
oral and written employment agreements or arrangements between the company and
you.
Yours sincerely,
/s/ JAMES BLAIR /s/ HUGH RIENHOFF, JR.
- ---------------------------- -----------------------------
James Blair, Ph.D. Hugh Rienhoff, Jr., M.D.
Compensation Committee of the Board of Directors
cc: S. Collinson, President
P. Fritz, Senior Director, Human Resources
J. Pashkowsky, Senior Director, Finance and Treasurer
I accept the terms and conditions outlined in this Agreement.
/s/ TIMOTHY J. RINK
- -----------------------------
Timothy J. Rink, M.D., Sc.D.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST& YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-79133) pertaining to the 1996 Stock Plan, Employee Stock
Purchase Plan and Non-Employee Directors' Stock Option of Aurora Biosciences
Corporation of our report dated February 10, 2000, with respect to the
financial statements of Aurora Biosciences Corporation included in this
Annual Report (Form 10-K) for the year ended December 31, 1999, filed with
the Securities and Exchange Commission.
/s/ Ernest & Young LLP
----------------------
ERNST & YOUNG LLP
San Diego, California
March 8, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT DECEMBER 31, 1999 AND THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 15,934,352
<SECURITIES> 20,683,696
<RECEIVABLES> 5,282,485
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,017,674
<PP&E> 18,408,595
<DEPRECIATION> 6,516,197
<TOTAL-ASSETS> 63,862,460
<CURRENT-LIABILITIES> 19,205,694
<BONDS> 0
0
0
<COMMON> 17,443
<OTHER-SE> 40,296,597
<TOTAL-LIABILITY-AND-EQUITY> 63,862,460
<SALES> 0
<TOTAL-REVENUES> 50,324,301
<CGS> 0
<TOTAL-COSTS> 27,778,868
<OTHER-EXPENSES> 23,128,656
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 690,869
<INCOME-PRETAX> 268,919
<INCOME-TAX> 117,000
<INCOME-CONTINUING> 151,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 151,919
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