<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1996
REGISTRATION NO. 333-2586
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SIBIA NEUROSCIENCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2834 95-3616229
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
505 COAST BOULEVARD SOUTH, SUITE 300
LA JOLLA, CA 92037-4641
(619) 452-5892
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM T. COMER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SIBIA NEUROSCIENCES, INC.
505 COAST BOULEVARD SOUTH, SUITE 300
LA JOLLA, CA 92037-4641
(619) 452-5892
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
FREDERICK T. MUTO, ESQ. GEORGE W. BILICIC, JR., ESQ.
THOMAS A. COLL, ESQ. CRAVATH, SWAINE & MOORE
COOLEY GODWARD CASTRO WORLDWIDE PLAZA
HUDDLESON & TATUM 825 EIGHTH AVENUE
4365 EXECUTIVE DRIVE, SUITE 1100 NEW YORK, NY 10019-7475
SAN DIEGO, CA 92121 (212) 474-1000
(619) 550-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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- ------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value............ 2,415,000 shares $13.00 $31,395,000 $10,826(3)
- ------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes 315,000 shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
(3) Previously paid upon the initial filing of this Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE> 2
SIBIA NEUROSCIENCES, INC.
------------------------
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- --------------------------------------------- ---------------------------------------------
<S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................... Facing Page of Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages;
Additional Information
3. Summary Information, Risk Factors, and
Ratio of Earnings to Fixed Charges....... Prospectus Summary; Risk Factors
4. Use of Proceeds.......................... Prospectus Summary; Use of Proceeds;
Capitalization
5. Determination of Offering Price.......... Underwriting
6. Dilution................................. Dilution
7. Selling Security Holders................. Inapplicable
8. Plan of Distribution..................... Outside Front and Inside Front Cover Pages;
Underwriting
9. Description of Securities to be
Registered............................... Outside Front Cover Page; Prospectus Summary;
Description of Capital Stock
10. Interests of Named Experts and Counsel... Inapplicable
11. Information with Respect to the
Registrant............................... Outside Front and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Dividend
Policy; Capitalization; Selected Financial
Data; Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal Stockholders;
Description of Capital Stock; Shares Eligible
for Future Sale; Financial Statements; Inside
Back Cover Page
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Inapplicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
MAY 7, 1996
PROSPECTUS
2,100,000 SHARES [SIBIA LOGO]
SIBIA NEUROSCIENCES, INC.
COMMON STOCK
($.001 PAR VALUE)
All of the 2,100,000 shares of Common Stock, $.001 par value (the "Common
Stock"), being offered hereby (the "Shares") are being sold by SIBIA
Neurosciences, Inc. ("SIBIA" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
anticipated that the initial public offering price will be between $11.00 and
$13.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price.
CIBA-GEIGY Limited ("Ciba"), one of the Company's collaborative partners and an
existing stockholder, has committed to purchase an aggregate of $5,000,000 of
shares of Common Stock in a private placement at the initial public offering
price (416,666 shares assuming an initial public offering price of $12.00 per
share) (the "Ciba Shares"). The sale of the Ciba Shares by the Company will not
be registered in this offering, and such shares will be purchased upon the
closing of this offering. See "Business -- Strategic Alliances -- CIBA-GEIGY
Limited" and "Underwriting."
The Company's Common Stock has been approved for listing on the Nasdaq National
Market under the trading symbol "SIBI."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC DISCOUNT COMPANY(1)
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total(2)........................................ $ $ $
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</TABLE>
(1) Before deducting expenses of this offering payable by the Company estimated
at $580,000.
(2) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 315,000 additional shares of Common Stock at the Price to
Public, less the Underwriting Discount, solely to cover over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
The Shares are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Shares will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about ,1996.
SALOMON BROTHERS INC
NEEDHAM & COMPANY, INC.
VECTOR SECURITIES INTERNATIONAL, INC.
The date of this Prospectus is , 1996.
<PAGE> 4
[PICTURES]
The above diagram illustrates an example of communication between two nerve
cells, or neurons, and certain roles of calcium in this process. Calcium ions
enter neurons through specific receptor/ion channels, e.g., certain NAChRs and
EAARs, and VGCCs. This process regulates many essential functions in neurons,
such as the release of neurotransmitters, electrical activity, activation of
enzymes and transcription of genes. SIBIA has identified the control of calcium
levels within neurons as a key strategy for potential therapeutic intervention
in many central nervous system disorders. See "Business -- Human Receptor/Ion
Channel Subtype Technology."
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE OVER-THE-COUNTER MARKET
(INCLUDING THE NASDAQ NATIONAL MARKET) OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements including the notes thereto contained
elsewhere in this Prospectus. Investors should carefully consider the
information set forth under "Risk Factors." Except as otherwise noted, all
information in this Prospectus (i) assumes no exercise of the Underwriters'
over-allotment option; (ii) assumes the automatic conversion of all outstanding
shares of the Company's convertible preferred stock, $.001 par value (the
"Convertible Preferred Stock"), into Common Stock; and (iii) reflects a
2.35-for-1 split of the outstanding Common Stock effected in March 1996. See
"Capitalization," "Description of Capital Stock," "Underwriting" and Notes 1, 9
and 12 of Notes to Financial Statements.
THE COMPANY
SIBIA Neurosciences, Inc. ("SIBIA" or the "Company") is engaged in the
discovery and development of novel, small molecule therapeutics for disorders of
the central nervous system ("CNS") based on the Company's unique approach to
characterizing the molecular processes involved in such disorders. SIBIA is
focusing its efforts on developing compounds for the treatment of Parkinson's
disease, Alzheimer's disease, stroke, head trauma, epilepsy, chronic pain,
schizophrenia and other neurological, psychiatric and neurodegenerative
disorders, many of which have large patient populations and represent critical
unmet medical needs. SIBIA's drug discovery platforms are based on two primary
technologies in which the Company has established a leading scientific and
proprietary position -- human receptor/ion channel subtype technology and human
protease technology. SIBIA holds nine issued U.S. patents and has one allowed
patent and 57 pending U.S. patent applications relating to these technologies.
The Company's strategy is to utilize its technologies to discover and develop
proprietary CNS drug candidates and collaborate with corporate partners for the
advanced development and commercialization of such candidates. SIBIA currently
has corporate collaborations with Eli Lilly and Company ("Lilly"), Ciba and
Bristol-Myers Squibb Company ("Bristol-Myers Squibb").
SIBIA believes that its human receptor/ion channel subtype technology will
enable the discovery and development of new classes of drugs for the treatment
of CNS disorders. The Company's technology permits the targeted identification
of compounds that are selective for specific receptor/ion channel subtypes.
Receptors and ion channels and the neurotransmitters that modulate them are key
components in the communication between neurons, or nerve cells. Such
communication is fundamental to many CNS functions, including cognition, memory,
sensory perception and motor control. These functions are mediated by cellular
processes dependent on calcium ions, which enter neurons through specific
receptor/ion channels. SIBIA has identified the control of calcium levels within
neurons as a key strategy for potential therapeutic intervention in many CNS
disorders. Compounds which selectively modulate cellular calcium levels, such as
calcium channel blockers used for the treatment of cardiovascular diseases, have
been developed into effective and well-tolerated drugs. However, these drugs
either have been ineffective or have significant side effects when evaluated for
CNS disorders, which is likely due to their lack of selectivity or activity on
specific neuronal subtypes. The Company believes that drugs developed with its
technology could be more effective and have fewer side effects than existing
drugs for the treatment of CNS disorders.
SIBIA has established a leading proprietary position in human receptor/ion
channel subtype technology. The Company has made significant scientific and
technological advances by cloning key human neuronal receptor/ion channels,
expressing them in stable cell lines and developing the resulting recombinant
cell lines into functional assays for drug screening. SIBIA is currently
focusing on three major receptor/ion channel classes involved in regulating
neuronal calcium levels -- nicotinic acetylcholine receptors ("NAChRs"),
excitatory amino acid receptors ("EAARs") and voltage-gated calcium channels
("VGCCs"). SIBIA has discovered, isolated and developed an extensive library of
more than 50 complete genes cloned from human brain tissue coding for multiple,
distinct subtypes of these three receptor/ion channel classes. Most of these
subtypes are multimeric (i.e., molecular complexes of two or more proteins). By
expressing the multiple complex genes necessary to form functional subtypes,
SIBIA has overcome a significant technical challenge which it believes provides
an important competitive advantage. To date, SIBIA has expressed more than 20
receptor/ion channel subtypes in the NAChR, EAAR and VGCC classes in stable cell
lines which have been shown to be physiologically functional. Each subtype
potentially represents a novel molecular target for developing therapeutic
compounds for
3
<PAGE> 6
CNS disorders. SIBIA has developed unique and proprietary functional cell-based
assays encompassing these molecular targets and uses these assays with its
proprietary high throughput screening technology to rapidly identify and select
compounds for further development. The Company believes that the integration of
its large proprietary collection of molecular targets with its proprietary assay
and screening technologies provides a powerful and original drug discovery
platform. SIBIA has established strategic alliances with Ciba in the area of
EAAR drug discovery and with Lilly in the area of VGCC drug discovery. SIBIA
recently extended its strategic alliance with Ciba and has entered into
discussions with Lilly to amend its collaboration agreement with Lilly.
Within SIBIA's NAChR program the Company has selected and characterized
SIB-1508Y as a compound for the treatment of Parkinson's disease based on its
receptor subtype selectivity and behavioral profile. In contrast to current
therapies which treat only motor dysfunction, the Company believes that
SIB-1508Y may be effective for the treatment of motor, affective and cognitive
dysfunctions of Parkinson's disease. If proven to be safe and effective,
SIB-1508Y would represent a new therapeutic approach for the treatment of
Parkinson's disease and may be useful as a stand-alone therapeutic agent as well
as in combination with L-dopa, the current standard therapy. The Company intends
to file an Investigational New Drug application ("IND") with respect to
SIB-1508Y by the end of 1996 or early in 1997. In addition, SIBIA plans to
establish corporate collaborations for advanced clinical trials and
commercialization of SIB-1508Y. However, there can be no assurance that the
indicated IND filing date will be achieved, if at all, or that SIB-1508Y will be
successfully developed and commercialized.
SIBIA's human protease technology is directed at the discovery and
development of therapeutic compounds for Alzheimer's and other neurodegenerative
diseases. Specifically, the Company's technology focuses on compounds that
control the degradative proteases which generate amyloid beta-protein
("A-beta"). A-beta is the neurotoxic fragment of the amyloid precursor protein
("APP") and is generally understood to be the major molecular key to Alzheimer's
disease. A-beta is found at autopsy in senile plaques and in deposits
surrounding the small blood vessels in brain tissue, both of which are
diagnostic for Alzheimer's disease. SIBIA believes the inhibition of A-beta
formation may be broadly applicable to early- and late-onset Alzheimer's
disease. SIBIA has established assays which identify the neurotoxic A-beta
fragment as well as a second critical APP processing fragment, neuroprotective
APP (s-alpha). SIBIA has identified several series of small molecules which
inhibit A-beta production and enhance APP(s-alpha) levels in vitro. These
proprietary compounds currently are being studied in vivo. In August 1995, SIBIA
entered into a four-year collaboration agreement with Bristol-Myers Squibb to
discover and develop compounds that are able to selectively modulate the
processing of APP for the treatment of Alzheimer's disease.
The Company's strategy is to utilize its two proprietary drug discovery
platforms to discover novel therapeutics for the treatment of CNS disorders. Key
elements of the Company's strategy include: (i) leveraging its leadership
position in its proprietary human receptor/ion channel subtype and human
protease technologies to discover and develop small molecule therapeutics; (ii)
utilizing its broad portfolio of proprietary molecular targets to develop
compounds that address the complete spectrum of CNS disorders; (iii)
establishing strategic alliances to advance compounds through clinical trials
and commercialization; and (iv) expanding its drug discovery platforms to
enhance its CNS drug discovery capabilities.
The Company had an accumulated deficit of approximately $16.1 million as of
December 31, 1995. The Company has not yet received any revenues from product
sales, and it expects to incur substantial additional operating losses over the
next several years. Approximately $7.9 million of the Company's $14.1 million of
revenue and other income in fiscal 1995 were derived from non-recurring,
one-time payments which do not represent an increasing earnings trend.
The Company was incorporated in Delaware on April 15, 1981. The Company's
principal executive offices are located at 505 Coast Boulevard South, Suite 300,
La Jolla, CA 92037-4641, and its telephone number is (619) 452-5892.
This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results or experience could differ significantly from those discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors,"
as well as those discussed elsewhere in this Prospectus.
4
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered.................................. 2,100,000 shares
Ciba Shares to be purchased........................... 416,666 shares(1)
Common Stock outstanding after this offering.......... 8,835,259 shares(2)
Use of proceeds....................................... For research and development activities,
working capital and general corporate
purposes, which may include capital
expenditures and acquisitions.
Nasdaq National Market symbol......................... SIBI
</TABLE>
- ---------------
(1) Reflects Ciba's purchase of an aggregate of $5,000,000 of shares of Common
Stock in a private placement at the initial public offering price (assuming
an initial public offering price of $12.00 per share) upon the closing of
this offering. The sale of the Ciba Shares by the Company will not be
registered in this offering.
(2) Based on the number of shares outstanding as of March 19, 1996 as if the
conversion of the outstanding shares of Convertible Preferred Stock into
shares of Common Stock had occurred on that date and giving effect to the
2.35-for-1 split of the outstanding shares of Common Stock effected in March
1996. Also assumes no exercise of the Underwriters' over-allotment option
and includes the sale of the Ciba Shares by the Company. Excludes 3,085,000
shares of Common Stock reserved for issuance pursuant to the Company's stock
option plans, under which options to purchase 836,859 shares of Common Stock
were outstanding as of March 19, 1996 at a weighted average exercise price
of approximately $1.36 per share. Also excludes outstanding options to
purchase 387,750 shares of Common Stock as of March 19, 1996 under the
Company's Management Change of Control Plan (the "Change of Control Plan")
at an exercise price of $.85 per share. See "Management -- Change of Control
Arrangements," "-- Stock Plans" and Notes 10 and 12 of Notes to Financial
Statements.
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue........................... $ 4,685 $ 3,196 $ 5,077 $4,852 $10,448(1)
Research and development expenses....... 6,418 5,446 7,713 8,663 8,949
General and administrative expenses..... 2,188 2,114 2,202 1,917 2,178
Other income............................ 318 366 288 5,701(2) 3,680(3)
Net (loss) income....................... (3,603) (3,998) (4,550) (27) 2,926
======== ======== ======== ====== ========
Net income per share(4)................. $ .41
========
Shares used in computing net income per
share(4)............................. 7,068
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------
ACTUAL AS ADJUSTED(5)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investment securities............... $ 16,488 $ 44,344
Working capital................................................ 14,338 42,194
Total assets................................................... 18,251 46,107
Long-term capital lease obligations............................ 721 721
Accumulated deficit............................................ (16,129) (16,129)
Total stockholders' equity..................................... 15,107 42,963
</TABLE>
- ---------------
(1) Includes a one-time payment of $1,750,000 made by Cephalon, Inc.
("Cephalon") to the Company relating to Cephalon's exercise of its option to
buy-down its royalty percentage with respect to IGF-1. Also includes a
one-time license fee payment of $3,000,000 made by Bristol-Myers Squibb to
the Company in connection with the grant of a license to certain technology
to Bristol-Myers Squibb. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Notes 4 and 5 of Notes to
Financial Statements.
(2) Includes a gain of $5,296,000 on the sale of the Company's interest in the
SISKA Diagnostics, Inc. joint venture. See Note 6 of Notes to Financial
Statements.
(3) Includes income (net of legal expenses) of $3,146,000 received by the
Company under settlement agreements with two law firms for failure to
properly file a foreign patent application. See Note 7 of Notes to Financial
Statements.
(4) See Note 1 of Notes to Financial Statements for information concerning the
computation of net income per share.
(5) As adjusted to give effect to the sale of the Shares by the Company pursuant
to this offering (assuming an initial public offering price of $12.00 per
share), after deducting estimated underwriting discounts and offering
expenses payable by the Company, and the sale of the Ciba Shares by the
Company at the initial public offering price (assuming an initial public
offering price of $12.00 per share) and the use of the estimated net
proceeds therefrom. See "Use of Proceeds" and "Capitalization."
5
<PAGE> 8
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing any shares
of Common Stock being offered hereby.
ABSENCE OF DEVELOPED PRODUCTS; EARLY STAGE OF DEVELOPMENT
SIBIA is an early-stage biotechnology company. The Company has no products
available for sale and does not expect to have any products resulting from its
research efforts, including its collaborations with others, commercially
available for at least several years, if at all. In addition, SIBIA has not yet
filed an Investigational New Drug ("IND") application with the U.S. Food and
Drug Administration ("FDA") on any of its compounds currently under research or
development, nor has an IND been filed by the Company's collaborative partners
on any compound in connection with their collaborations with the Company.
Although the Company plans to file an IND in the United States with respect to
SIB-1508Y for the treatment of Parkinson's disease by the end of 1996 or early
in 1997, there can be no assurance that the Company will be successful in
achieving the IND filing by this date, if at all. Moreover, SIB-1508Y is the
only compound for which the Company expects to file an IND in the foreseeable
future. Even if the Company files an IND with respect to SIB-1508Y or any other
compound, there can be no assurance that the Company will be permitted to
undertake clinical testing with respect to SIB-1508Y or any such other compound.
Failure to file or timely file an IND in respect of SIB-1508Y or any such other
compound or the inability to conduct clinical testing in respect of SIB-1508Y or
any such other compound could have a material adverse effect on the Company's
business. In addition, even if clinical trials in respect of SIB-1508Y are
commenced, SIB-1508Y may prove to be ineffective in the treatment of Parkinson's
disease, or have undesirable or unintended side effects or other characteristics
that prevent or limit its commercial use, either of which could have a material
adverse effect on the Company's business. Furthermore, there can be no assurance
that any products will be successfully discovered or developed by the Company or
its collaborative partners, be approved for clinical trials, prove to be safe
and efficacious in clinical trials, meet applicable regulatory standards, be
capable of being produced in commercial quantities at acceptable costs or be
marketed successfully. The failure of the Company or its collaborative partners
to discover or develop commercially viable products or successfully market such
products would have a material adverse effect on the Company's business. See
"Business -- Drug Discovery Platforms and Development Programs."
The Company's area of therapeutic focus, disorders of the central nervous
system ("CNS"), is not thoroughly understood and there can be no assurance that
the compounds the Company is seeking to develop will prove to be safe and
effective in treating CNS disorders. The development of such compounds will
require the commitment of substantial resources to continue research and to
conduct the preclinical development and clinical trials necessary to bring such
compounds to market and to establish production and marketing capabilities. Drug
research, discovery and development by its nature is uncertain. There is a risk
of delay or failure at any stage, and the time required and cost involved in
successfully accomplishing the Company's objectives cannot be predicted. Actual
drug research, discovery and development costs could exceed budgeted amounts,
which could have a material adverse effect on the Company's business.
The use of the Company's or its collaborative partners' compounds as
potential therapeutic compounds for CNS disorders, particularly those affecting
the brain or spinal cord, is hindered by, among other things, the inability of
such compounds to pass readily from the blood to the brain or spinal cord
through the blood-brain barrier. The Company believes that developing small
molecule therapeutics may allow passage through the blood-brain barrier;
however, to date the Company has not demonstrated in any clinical studies that
its small molecule therapeutics will pass through the blood-brain barrier. The
inability of a compound to pass readily through the blood-brain barrier would
require the development of a different drug delivery mechanism, which itself may
entail considerable cost and risks and would be time-consuming. Furthermore,
there can be no assurance that an effective drug delivery mechanism would be
developed. Failure to solve any such drug delivery problems or any other
problems that may develop would have a material adverse effect on the Company's
business.
6
<PAGE> 9
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The Company's strategy for the development, clinical testing, manufacturing
and commercialization of certain of its compounds includes entering into various
collaborations with corporate partners, licensors, licensees and others. The
Company has entered into collaborative arrangements with Lilly, Ciba and
Bristol-Myers Squibb and intends to enter into additional collaborations.
The Company's current collaborators have received from SIBIA certain
exclusive rights to commercialize any products developed under their respective
agreements. These collaborators have agreed to fund the research and development
of compounds discovered under their respective agreements, conduct clinical
testing of lead compounds, prepare and file submissions for regulatory approval,
make milestone payments to SIBIA upon the achievement of certain goals and pay
royalties on any resulting products. Under its agreements with these
collaborators, the Company is restricted in its ability to conduct research with
third parties with respect to the technology subject to the respective
agreement. Under their respective agreements, Lilly has rights of first
negotiation with respect to certain compounds discovered by the Company during
the term of its agreement with SIBIA, Ciba has exclusive rights to compounds
discovered by the Company during the term of its agreement with SIBIA and rights
of first negotiation to compounds discovered by the Company during the
three-year period following the term of such agreement and Bristol-Myers Squibb
has exclusive rights to compounds discovered by the Company during the term of
its agreement with SIBIA. There can be no assurance that these collaborations
will continue or be successful or that any products will be developed. Moreover,
Ciba and Bristol-Myers Squibb, under their respective agreements, have the sole
and exclusive right to select compounds for further development and halt or
delay the testing of any compounds selected for development. The amount and
timing of resources dedicated by these collaborators under their respective
agreements also is not within the control of the Company. There can be no
assurance that the Company will ever receive any milestone or royalty payments
under these agreements. In addition, if products that may be developed under
such agreements are approved for marketing, any revenues to the Company from
such products will be dependent on the marketing and sales efforts of these
collaborators.
Each of the collaborative parties has the right to terminate its respective
collaboration under certain circumstances, including upon the occurrence of a
material breach and, in certain cases, upon a change in control. Furthermore,
Lilly can terminate its collaboration with the Company upon six months' prior
written notice, which may be given at anytime after May 1, 1996, and Ciba can
terminate its collaboration with the Company upon six months' prior written
notice, which may be given at anytime beginning March 1997. There can be no
assurance that collaborators will not terminate their respective collaborations.
In addition, there can be no assurance that collaborators will not pursue
alternative technologies to develop treatments for the diseases targeted by the
respective collaborative programs. If any of the Company's collaborative
partners terminates or breaches its agreement with the Company or fails to
devote adequate resources to or to conduct in a timely manner its collaborative
activities, the research program under the applicable collaborative agreement or
the development and commercialization of drug candidates subject to such
collaboration would be materially adversely affected, which would have a
material adverse effect on the Company's business. In addition, because the
Company's collaborative agreements have accounted for 78%, 89% and 81% of total
revenues for the years ended December 31, 1993, 1994 and 1995, respectively,
such a termination or breach could materially adversely affect the Company's
results of operations and financial condition. Also, there can be no assurance
that a research program covered by a particular collaborative agreement does not
or will not conflict with any research programs covered by the Company's other
collaborations. The occurrence of any such conflict could have a material
adverse effect on the Company's business.
The Company has recently entered into discussions with Lilly regarding a
proposed amendment of its agreement with Lilly. As currently in effect, the
Company's agreement with Lilly expires pursuant to its terms in May 1997. The
Company anticipates that an amendment to the current agreement will be made that
would reduce the level of funding effective in November 1996, but may extend the
term of support one or more years. There can be no assurance that the Company
and Lilly will amend their current agreement or that they will amend it as
indicated above. Furthermore, until its current agreement with the Company is
amended, Lilly can terminate such agreement and its collaboration with the
Company upon six months' prior written notice, which may be given at any time
after May 1, 1996.
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SIB-1508Y is currently at the preclinical development stage. The Company
intends to rely on corporate partners for advanced development, clinical
testing, if permitted, and for the manufacturing, marketing and
commercialization of SIB-1508Y, if such stages are reached. To date, the Company
has not reached any agreement relating to the further development or
commercialization of SIB-1508Y and there can be no assurance that the Company
will reach such an agreement, that it will do so on acceptable terms or that the
Company's corporate partner under such agreement will be successful in its
efforts with respect to SIB-1508Y. Failure to reach such an agreement could
severely limit the Company's ability to further develop and commercialize
SIB-1508Y, which could have a material adverse effect on the Company's business.
In addition, failure of such corporate partner to successfully develop and
commercialize SIB-1508Y could have a material adverse effect on the Company's
business. See "Business -- Strategic Alliances."
The Company intends to enter into additional collaborative arrangements
with pharmaceutical and biotechnology companies to develop and commercialize
certain of its compounds in the future. There can be no assurance that the
Company will be able to negotiate collaborative arrangements in the future on
acceptable terms, if at all, or that such collaborative arrangements will be
successful. Most of the Company's competitors similarly are seeking to develop
or expand their collaborative relationships with pharmaceutical and
biotechnology companies. To the extent that the Company is not able to establish
such arrangements or any of its existing arrangements are terminated, it would
require significant capital to undertake development, regulatory, manufacturing
and marketing activities at its own expense and may be required to curtail
significantly or eliminate one or more of its research, discovery or development
programs, either of which could have a material adverse effect on the Company's
business. In addition, the Company may encounter significant delays in
introducing into certain markets products that it may develop or find that the
development, manufacture or sale of such products in such markets is adversely
affected by the absence of such collaborative arrangements. See
"Business -- Strategic Alliances," "-- Research Collaborations and Licenses,"
"-- Manufacturing" and "-- Sales and Marketing."
On March 7, 1996, Ciba and Sandoz Ltd. announced that they had reached an
agreement to merge. The Company cannot predict the impact such merger will have
on the Company's collaboration with Ciba, and there can be no assurance that the
new combined entity will continue its collaboration with the Company or that it
will continue its current level of commitment to such collaboration. The new
combined entity's termination of, or a reduction in the level of commitment to,
its collaboration with the Company could have a material adverse effect on the
Company's business.
NEW AND UNCERTAIN TECHNOLOGY
The Company's proprietary CNS technologies, which comprise the human
receptor/ion channel subtype technology and human protease technology, are
unproven and relatively new compared to traditional methods of drug discovery.
The Company uses its technologies to isolate and identify molecular targets that
it believes play an important role in CNS function and CNS disorders. The
ability of the Company to screen potential compounds, select product candidates
and develop products is dependent in large part upon the number of such targets
available for screening and whether the expected functionality of such targets
plays an important role in CNS function and CNS disorders. To date, no drug
based on the Company's technologies has been subject to clinical tests or
approved by the FDA as an effective treatment for any CNS disorder. There can be
no assurance that the use of such technologies will lead to the discovery or
development of commercial pharmaceutical products that are safe and efficacious
in treating any CNS disorder. Failure to develop any such product would have a
material adverse effect on the Company's business. See "Business -- Drug
Discovery Platforms and Development Programs."
HISTORY OF OPERATING LOSSES
The Company is at an early stage of development with respect to its CNS
technologies and its compounds. Except for 1995, the Company has incurred net
losses every year since it shifted its area of therapeutic focus to the central
nervous system in 1991. As of December 31, 1995, the Company had accumulated net
losses of approximately $16.1 million. The Company is continuing to incur losses
and expects to incur increasing operating losses over the next several years as
the Company's research and development expenditures increase. Approximately $7.9
million of the Company's $14.1 million of
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revenue and other income in fiscal 1995 were derived from non-recurring,
one-time payments which do not represent an income or earnings trend. The
Company's revenue for the short term will be limited to payments under its
existing or future strategic alliance agreements. There can be no assurance that
the Company will ever achieve or sustain significant revenues or profitable
operations. To achieve significant revenues or profitable operations, the
Company, alone or with its collaborators, must successfully develop, manufacture
and market safe and efficacious products and obtain the regulatory approvals
required for their testing, manufacture and sale. Failure to achieve significant
revenues or profitable operations could impair the Company's ability to sustain
operations. There can be no assurance that the Company will be successful in
entering into additional collaborative arrangements or that any such
arrangements will result in revenues or that the Company will receive additional
revenues under existing collaboration arrangements. The Company has not yet
received any revenues from the achievement of milestones from the discovery or
development of, or royalties from the sale of, commercial drugs by Lilly, Ciba
or Bristol-Myers Squibb, and such revenues, if any, are not expected to
represent a material amount of the Company's total revenues for several years,
if at all. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Government Regulation."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial additional funds to conduct the
research and development and preclinical and clinical testing of its compounds
and to manufacture and market any products that may be developed. Although the
Company plans to contract with third parties to manufacture and market any
products that may be developed, to the extent the Company is unsuccessful and is
required to establish its own manufacturing capacity or marketing program, it
will require substantial additional capital. The Company anticipates that the
net proceeds of this offering and from the sale of the Ciba Shares by the
Company, together with its available cash reserves and funds from collaborative
research and development agreements, should be adequate to satisfy its capital
requirements through the end of 1998, although there can be no assurance that
the Company will not require additional funds prior to such date. The Company's
future capital needs will be dependent upon many factors, including progress in
its research and development activities, the magnitude and scope of these
activities, progress with preclinical and clinical trials, the cost of
preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims and other intellectual property rights, competing technological and
market developments, changes in or terminations of existing collaborative
arrangements, the establishment of additional collaborative arrangements, and
the cost of manufacturing scale-up and development of marketing activities, if
undertaken by the Company. The Company expects to expend substantial funds in
connection with research and development and in the area of intellectual
property. Funds generated from payments under existing collaborative agreements,
together with the net proceeds from this offering and from the sale of the Ciba
Shares by the Company, will be insufficient to fund the Company's operations
through the completion of any clinical trials and commercialization of its first
product, if developed. Although the Company will seek to obtain additional funds
through public or private equity or debt financings, collaborative or other
arrangements with corporate partners or from other sources, there can be no
assurance that additional financing will be available or, if available, that it
will be available on acceptable terms. If additional funds are raised by issuing
equity securities, further dilution to then existing stockholders would result.
If adequate funds are not available, the Company may be required to curtail
significantly or eliminate one or more of its research, discovery or development
programs or obtain funds through additional arrangements with corporate partners
or others which may require the Company to relinquish rights to certain of its
technologies or product candidates that the Company would not otherwise
relinquish, which could have a material adverse effect on the Company's
business. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE
The field in which the Company is involved is characterized by extensive
research efforts, rapid technological change and intense competition from
numerous organizations including pharmaceutical companies, biotechnology
companies, universities and other research organizations. Products and therapies
currently exist on the market that will compete directly with the products that
the Company is seeking to develop and market to address CNS disorders. In
addition, new developments occur and are
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expected to continue to occur at a rapid pace. Competition from fully integrated
pharmaceutical companies and biotechnology companies is intense and is expected
to increase. Many of these companies have significantly greater financial
resources and expertise in research and development, manufacturing, preclinical
and clinical testing, obtaining regulatory approvals and marketing than the
Company. Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical
companies. Many of these competitors have significant CNS products approved or
in development and operate large, well-funded CNS research and development
programs. Academic institutions, governmental agencies and other public and
private research organizations also conduct research, seek patent protection and
establish collaborative arrangements for the clinical development of compounds
and marketing of products. The Company's competitors may succeed in discovering
and developing products more rapidly than the Company and its collaborative
partners or products that are more effective or more affordable than any that
may be developed by the Company and its collaborative partners and may also
prove to be more successful than the Company and its collaborative partners in
production and marketing. There can be no assurance that research, discoveries
or commercial developments by others will not render any of the Company's or its
collaborative partners' programs or potential products obsolete or
noncompetitive, any of which would have a material adverse effect on the
Company's business. Moreover, there can be no assurance that the Company's
competitors will not obtain patent protection or other intellectual property
rights that would limit the Company's or its collaborative partners' ability to
use the Company's technology or commercialize products that may be developed.
See "Business -- Competition."
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in part on its ability to obtain patents,
maintain trade secrets and operate without infringing on the proprietary rights
of others, both in the United States and other countries. The patent positions
of biotechnology and pharmaceutical companies can be highly uncertain and
involve complex legal and factual questions, and therefore, the breadth of
claims allowed in biotechnology and pharmaceutical patents cannot be predicted.
There can be no assurance that patents issued to or licensed by the Company will
not be infringed or will not be challenged, invalidated or circumvented, or that
the rights granted thereunder will provide proprietary protection to the
Company's technology or products that the Company may develop or other
competitive advantages to the Company.
Since inception, SIBIA has been granted 25 U.S. and foreign patents and it
has a total of approximately 120 pending U.S. and foreign applications. SIBIA
has 34 pending applications for U.S. patents on its technology relating to drug
discovery for various CNS disorders. To date, the Company has licensed three
U.S. patents from The Salk Institute for Biological Studies ("The Salk
Institute") related to SIBIA's human receptor/ion channel subtype technology, as
well as continuations-in-part and foreign counterparts of these patents. The
Company intends to file additional applications as appropriate for patents
covering its technologies, compounds and processes. There can be no assurance
that the Company will develop additional technologies, compounds or processes
that are patentable, that patents will issue from any patent application or that
claims allowed will be sufficient to protect the Company's technologies,
compounds or processes. Competitors may have filed applications, may have been
issued patents or may obtain additional patents and proprietary rights relating
to technologies, compounds or processes competitive with those of the Company.
The failure by the Company to adequately protect its technologies, compounds or
processes covered by issued patents or to obtain patents based on the
applications referred to herein or any future applications could have a material
adverse effect on the Company's business.
The success of the Company will also depend in part on SIBIA not infringing
patents issued to competitors and not breaching the technology licenses upon
which any Company compounds or processes are based. It is uncertain whether any
third-party patents will require the Company to alter its technologies,
compounds or processes, obtain licenses or cease certain activities. A number of
pharmaceutical companies, biotechnology companies, universities and research
institutions have filed patent applications or received patents in the field in
which the Company is involved. Some of these applications or patents may be
competitive with the Company's applications or conflict in certain respects with
claims made under the Company's applications. Such conflict could result in a
significant reduction of the coverage of the Company's patents, if issued. In
addition, if patents issued to other
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companies contain competitive or conflicting claims and such claims are
ultimately determined to be valid, the Company may be required to obtain
licenses to these patents or to develop or obtain alternative technology. If any
licenses are required, there can be no assurance that the Company will be able
to obtain any such license on commercially favorable or acceptable terms, if at
all. The Company's breach of an existing license or failure to obtain a license
to any technology that it may require to develop and commercialize its compounds
would have a material adverse effect on the Company's business.
Litigation, which could result in substantial costs to the Company, may
also be necessary to enforce any patents issued to the Company or to determine
the scope and validity of third-party proprietary rights. Moreover, if
competitors of the Company prepare and file patent applications in the United
States that claim technology also claimed by the Company, the Company may have
to participate in interference proceedings declared by the United States Patent
and Trademark Office ("PTO") to determine priority of invention, which could
result in substantial cost to the Company, even if the eventual outcome is
favorable to the Company. Similarly, the Company may have to participate in
opposition proceedings with respect to granted European patents. The Company is
aware of a third-party patent application that may elicit an interference
proceeding with one of the Company's patent applications in the PTO. In
addition, the Company believes that certain claims in three of its other patent
applications may elicit such proceedings. Further, the Company currently is
opposing an issued patent of a third party in Europe. There can be no assurance
that the Company will prevail in these proceedings. Also, there can be no
assurance that the validity of the Company's patents, if issued, would be upheld
by a court of competent jurisdiction. An adverse outcome in patent prosecution
or in litigation with respect to the validity of any of the Company's patents
could subject the Company to significant liabilities to third parties, require
disputed rights to be licensed from third parties or require the Company to
cease using such technology, any of which could have a material adverse effect
on the Company's business.
In addition to patents, the Company relies on trade secret laws to protect
its technology, especially where patent protection is not believed to be
appropriate or obtainable. Thus, SIBIA relies on protecting its proprietary
technology and processes in part by confidentiality agreements with its
employees, consultants and certain contractors. There can be no assurance that
these agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
become known or be independently discovered by competitors. See
"Business -- Patents and Proprietary Rights."
NO ASSURANCE OF REGULATORY APPROVAL; GOVERNMENT REGULATION
The production and marketing of products that the Company may develop and
its ongoing research and development activities are subject to extensive
regulation by numerous governmental authorities in the United States and other
countries. Prior to marketing in the United States, any drug developed by the
Company must undergo rigorous preclinical and clinical testing and an extensive
regulatory approval process implemented by the FDA under the federal Food, Drug
and Cosmetic Act. To market products abroad, the Company also would be subject
to foreign regulatory requirements, implemented by foreign health authorities,
governing clinical trials and marketing approval for drugs. Satisfaction of such
regulatory requirements, which includes demonstrating to the satisfaction of the
FDA that the product is both safe and effective, typically takes several years
or more depending upon the type, complexity and novelty of the product and
requires the expenditure of substantial resources. Preclinical studies must be
conducted, as appropriate, in conformance with the FDA's good laboratory
practice regulations. Clinical trials will be vigorously regulated and must meet
requirements for institutional review board oversight and informed consent as
well as FDA review and oversight and under good clinical practice regulations.
The Company has no experience in developing a product through the clinical trial
process, which is necessary to obtain regulatory approval. The Company intends
to establish collaborative relationships to conduct clinical trials and seek
regulatory approvals to market products that it may develop, although there can
be no assurance that such approvals will be received on a timely basis, if at
all. Clinical trials require the recruitment of large numbers of test subjects,
particularly for products that are intended to treat CNS disorders. There can be
no assurance that those conducting clinical trials for the Company will be able
to initiate such trials at preferred clinical test sites or recruit sufficient
test subjects, or that such trials will be started or completed successfully
within any specified time period, if at all, with respect to any of the products
that the Company may develop. Furthermore, the Company or the FDA may suspend
clinical
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trials at any time if it is determined that the subjects participating in such
trials are being exposed to unacceptable health risks. There can be no assurance
that the Company will not encounter problems in clinical trials (including with
respect to SIB-1508Y, if development reaches this stage) which would cause the
Company or the FDA to delay or suspend clinical trials. Any such delay or
suspension could have a material adverse effect on the Company's business. There
can be no assurance that any compound (including SIB-1508Y) that may be
developed by the Company alone or in conjunction with others will prove to be
safe and efficacious in clinical trials and meet all of the applicable
regulatory requirements needed to receive marketing approval. If regulatory
approval of a product is granted, such approval will be limited to those disease
states and conditions for which the product is useful, as demonstrated through
clinical studies.
There can be no assurance that delays or rejections will not be encountered
based upon additional government regulation from future legislation or
administrative action or that changes will not be made in FDA policy during the
period of product development and FDA regulatory review of each submitted new
drug application. Similar delays may also be encountered in foreign countries.
Furthermore, product approval may entail ongoing requirements for post-marketing
studies. Even if such regulatory approval is obtained, a marketed product and
its manufacturer and its manufacturing facilities are subject to continual
review and periodic inspections, and the regulatory standards for manufacturing
are currently being applied stringently by the FDA. Later discovery of
previously unknown problems with a product or a manufacturer or its facility may
result in restrictions on such product or manufacturer, including withdrawal of
the product from the market, which would have a material adverse effect on the
Company's business. See "Business -- Government Regulation."
NO MANUFACTURING OR MARKETING CAPABILITY; RELIANCE ON THIRD-PARTY MANUFACTURERS
AND MARKETERS; ABSENCE OF SALES AND MARKETING EXPERIENCE
The Company currently has no manufacturing facilities for clinical or
commercial production of any compounds currently under development or marketing
capability for the distribution of any products that may be developed. The
Company is currently relying on third-party manufacturers to produce its
compounds for preclinical and clinical purposes. The compounds under development
by the Company have never been manufactured on a commercial scale and there can
be no assurance that such compounds can be manufactured at a cost or in
quantities to make commercially viable products.
The Company intends to establish arrangements with third-party
manufacturers to supply compounds for preclinical and clinical trials and
commercial sales of products that may be developed, as well as for the
packaging, labeling and distribution of such products. If the Company is unable
to contract for a sufficient supply of its compounds on acceptable terms, the
Company's preclinical and clinical testing schedule would be delayed, resulting
in the delay of submission of compounds for regulatory approval and initiation
of new development programs, which would have a material adverse effect on the
Company's business. If the Company should encounter delays or difficulties in
establishing relationships with manufacturers to produce, package and distribute
products that the Company may develop, market introduction or penetration of
such products would be adversely affected. Moreover, third-party manufacturers
that the Company may use must adhere to good manufacturing practice ("GMP")
regulations enforced by the FDA through its facilities inspection program. If
facilities of third-party manufacturers cannot pass a pre-approval plant
inspection, the FDA approval of products that may be developed by the Company
will be adversely affected. See "Business -- Manufacturing."
The Company has no experience in sales, marketing or distribution. In order
to market directly any products that it may develop, the Company must develop or
obtain access to a substantial marketing staff and sales force with technical
expertise and supporting distribution capability. Alternatively, the Company may
seek to obtain the assistance of a pharmaceutical or biotechnology company with
a large distribution system and a large direct sales force. There can be no
assurance that the Company will be able to establish such a marketing staff or
sales force, that the Company's sales and marketing efforts will be successful,
or that the Company will be able to obtain the assistance of another
pharmaceutical or biotechnology company in these efforts. To the extent the
Company enters into arrangements with third parties for the marketing and sale
of products it may develop, any revenues received by the Company will be
dependent on the efforts of such third parties, and there can be no assurance
that such efforts will be successful. Failure to establish adequate sales,
marketing and distribution capabilities independently or
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with others would have a material adverse effect on the Company's business. See
"Business -- Sales and Marketing."
MANAGEMENT OF GROWTH; DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND
RETAIN KEY EMPLOYEES AND CONSULTANTS
To expand its research and development programs and pursue its product
development plans, the Company will be required to hire additional qualified
scientific personnel to perform research and development, as well as personnel
with expertise in clinical testing and government regulation. These requirements
are also expected to necessitate the addition of management personnel and the
development of additional expertise by existing management personnel. The
failure to attract such personnel or to develop or acquire such expertise would
have a material adverse effect on the Company's business. As part of this
growth, the Company will be required to enter into additional collaborative
arrangements and successfully manage these, along with its current,
collaborative arrangements. To the extent the Company does not enter into
collaborative agreements with third parties, it will also be required to hire
manufacturing and marketing personnel. If the Company is unable to manage its
growth effectively, the Company's business would be materially adversely
affected.
The Company is highly dependent on the principal members of its scientific
and management staff, and the loss of any of these members might significantly
delay the achievement of the Company's development objectives. The Company does
not maintain "key man" insurance on any of its employees, nor does the Company
intend to secure such insurance. In addition, the Company relies on consultants
and advisors, including its scientific advisors, to assist the Company in
formulating its research and development strategy. Retaining and attracting
qualified personnel, consultants and advisors will be critical to the Company's
success. The Company faces competition for qualified individuals from numerous
pharmaceutical and biotechnology companies, universities and other research
institutions. There can be no assurance that the Company will be able to attract
and retain such individuals on acceptable terms or at all. The failure to
attract or retain such personnel would have a material adverse effect on the
Company's business. See "Business -- Competition," "-- Employees" and
"Management."
CONTROL BY PRINCIPAL STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS
Based upon the number of shares outstanding after the completion of this
offering and the sale of the Ciba Shares by the Company, The Salk Institute and
its affiliates will beneficially own approximately 22.4% of the outstanding
shares of Common Stock (21.7% if the Underwriters exercise their over-allotment
option in full). In addition, the present directors and executive officers of
the Company will beneficially own 8.5% of the outstanding shares of Common Stock
(8.2% if the Underwriters exercise their over-allotment option in full).
Accordingly, together with The Salk Institute, the present directors and
executive officers of the Company will have the ability to exercise substantial
influence over the outcome of most stockholders' actions. Moreover, the
Company's Certificate of Incorporation does not provide for cumulative voting
with respect to the election of directors. Consequently, the present directors
and executive officers, together with The Salk Institute, will be able to
exercise substantial influence over the election of the members of the Board of
Directors. Such concentration of ownership could have an adverse effect on the
price of the Common Stock. In addition, the Company's Certificate of
Incorporation provides that any action required or permitted to be taken by
stockholders of the Company must be effected at a duly called annual or special
meeting of stockholders and may not be effected by any consent in writing.
Special meetings of the stockholders of the Company may be called only by the
Chairman of the Board of Directors, the President of the Company, by the Board
of Directors pursuant to a resolution adopted by a majority of the total number
of authorized directors, or by the holders of 10% of the outstanding voting
stock of the Company. These and other charter provisions, as well as certain
provisions of Delaware law, may discourage certain types of transactions
involving an actual or potential change in control of the Company or its
management (including transactions in which stockholders might otherwise receive
a premium for their shares over then current prices) and may limit the ability
of stockholders to remove current management of the Company or approve
transactions that stockholders may deem to be in their best interests. In
addition, the Board of Directors has the authority, without action by
stockholders, to issue additional shares of Common Stock and to fix the rights
and preferences of and
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issue shares of Preferred Stock, either of which may have the effect of delaying
or preventing a change in control of the Company. In addition, certain of the
Company's collaborative partners have the right to terminate their respective
agreements with the Company upon certain changes in control of the Company,
which may discourage acquisitions or other changes in control (including those
in which stockholders of the Company might otherwise receive a premium for their
shares over then current market prices). See "Business -- Strategic Alliances,"
"Management," "Principal Stockholders," "Description of Capital
Stock -- Preferred Stock" and "-- Certain Anti-takeover Effects of Provisions of
the Certificate of Incorporation, Bylaws and Delaware Law."
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT
There has been and the Company believes that there will continue to be a
number of federal and state proposals to implement government controls over the
pricing of and/or the profit margin attributable to prescription
pharmaceuticals. There can be no assurance that such legislation, if adopted,
will not materially adversely affect the Company's business. In addition,
third-party payors are increasingly challenging the price and cost-effectiveness
of medical products and services and they continue their efforts to contain or
reduce the costs of health care through various means. In both domestic and
foreign markets, sales of the Company's products, if any are developed, will be
dependent in part on the availability of reimbursement from third-party payors,
such as government health administration authorities, private health insurers
and other organizations. Significant uncertainty exists as to whether any
products that the Company may develop will be eligible for reimbursement by
third-party payors, or if eligible in part, whether the levels of reimbursement
will be sufficient to render the Company profitable. There can be no assurance
that the products that the Company may develop will be considered cost-effective
or that adequate third-party coverage will be available to enable SIBIA to
maintain price levels sufficient to realize an appropriate return on its
investment in product research and development.
PRODUCT LIABILITY EXPOSURE AND UNINSURED RISKS
The testing of compounds and the marketing and sale of commercial
pharmaceutical products involves unavoidable risks. The use of any of the
Company's compounds or its collaborative partners' compounds in clinical trials
and the sale of any products that may be developed may expose the Company to
potential liability resulting from the use of such compounds or products. Such
liability might result from claims made directly by consumers or by regulatory
agencies, pharmaceutical companies or others using or selling such compounds or
products. The Company is seeking to obtain insurance coverage for clinical
trials. The Company does not currently have product liability insurance
coverage. Although the Company intends to seek to obtain such insurance coverage
if and when the Company develops products that are ready to be commercialized,
there can be no assurance that the Company will be able to obtain or maintain
product liability insurance in the future on acceptable terms or that, if
obtained, the insurance coverage will be sufficient to cover any potential
claims or liabilities.
HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of
hazardous materials, chemicals and various radioactive compounds. Although the
Company believes that its safety procedures for storing, handling and disposing
of such materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
exceed the resources of the Company.
ABSENCE OF PRIOR TRADING MARKET; VOLATILITY OF STOCK PRICE
Prior to this initial public offering, there has been no public market for
the Company's Common Stock. There can be no assurance that an active trading
market will develop or, if one does develop, that it will be maintained. The
public offering price of the Common Stock will be established by negotiation
between the Company and the representatives of the Underwriters and is not
necessarily indicative of the market price at which the Common Stock will trade
after this offering. See "Underwriting." The market price of the shares of
Common Stock, like that of the common stock of many other early-stage
biotechnology companies, is likely to be highly volatile. Factors such as
fluctuations in the Company's operating results, announcements of technological
innovations or new commercial therapeutic products
14
<PAGE> 17
by the Company or its competitors, progress with clinical trials, governmental
regulation, developments in patent or other proprietary rights (including
litigation matters), developments in the Company's relationships with current or
future collaborative partners, if any, public concern as to the safety and
efficacy of products that may be developed by the Company (including SIB-1508Y)
and general market conditions may have a significant effect on the market price
of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market following
the offering made hereby could have an adverse effect on the price of the
Company's Common Stock. Upon completion of this offering and the sale of the
Ciba Shares by the Company, the Company will have outstanding 8,835,259 shares
of Common Stock (which amount does not include shares of Common Stock issuable
upon the exercise of outstanding options). The 2,100,000 shares being offered
hereby (except for shares that may be acquired by affiliates of the Company)
will be freely tradable in the public market without restriction or limitation
under the Securities Act of 1933, as amended (the "Securities Act"). In addition
to the 2,100,000 shares offered hereby, approximately 523,780 shares of Common
Stock will be eligible for sale in the public market from the effective date of
the Registration Statement (the "Effective Date") in reliance on Rule 144(k)
under the Securities Act. Beginning 90 days following the Effective Date, an
additional approximately 45,990 shares of Common Stock will be eligible for sale
in the public market in reliance on Rule 144 or Rule 701 of the Securities Act.
Beginning 180 days after the Effective Date upon the expiration of certain
agreements not to sell such shares, an additional approximately 5,068,735 shares
of Common Stock will become eligible for sale subject to compliance with Rule
144(k), Rule 144 or Rule 701 of the Securities Act. In addition, the holders of
approximately 4,544,965 shares of Common Stock are entitled to certain
piggy-back registration rights with respect to such shares. If the Company is
required to include in a Company-initiated registration shares held by such
holders pursuant to the exercise of their piggy-back registration rights, sales
made by such holders may have an adverse effect on the Company's ability to
raise needed capital and on the price of the Common Stock. In addition, Ciba and
Bristol-Myers Squibb hold demand registration rights which permit them to
request the Company to register the shares of Common Stock held by Ciba and
Bristol-Myers Squibb, except that Ciba may not demand registration of the Ciba
Shares within one year following the closing of this offering. If Ciba or
Bristol-Myers Squibb, by exercising its demand registration rights, causes a
large number of shares to be registered and sold in the public market, such
sales may have an adverse effect on the market price for the Common Stock. In
addition, shares of Common Stock that are issued by the Company to fund its
operations or in connection with an acquisition could also have an adverse
effect on the market price for the Common Stock. See "Description of Capital
Stock -- Registration Rights" and "Shares Eligible for Future Sale."
SUBSTANTIAL DILUTION
The initial public offering price will be substantially higher than the net
tangible book value per share of Common Stock. Investors purchasing shares of
Common Stock in this offering will therefore incur immediate, substantial
dilution. In addition, investors purchasing shares of Common Stock in this
offering will incur additional dilution to the extent outstanding options are
exercised. Also, the Company may issue shares of Common Stock in connection with
a corporate collaboration, strategic alliance or technology licensing
transaction, which could result in dilution to investors purchasing shares of
Common Stock in this offering. See "Dilution."
15
<PAGE> 18
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,100,000 shares of
Common Stock offered hereby are estimated to be approximately $22,856,000
($26,371,000 if the Underwriters' over-allotment option is exercised in full),
based on an assumed initial public offering price of $12.00 per share (the
mid-point of the price range filed upon), and after deducting estimated
underwriting discounts and the estimated expenses of this offering payable by
the Company. In addition, the net proceeds to the Company from the sale of the
Ciba Shares by the Company will be $5,000,000.
The Company expects to use a majority of the net proceeds of this offering
and from the sale of the Ciba Shares by the Company to fund its research and
development activities, including expansion of its drug discovery capacities
(such as high throughput screening and combinatorial chemistry), for the
identification of lead compounds, and for preclinical and early clinical trials,
assuming necessary regulatory approvals are obtained. The amount and timing of
the net proceeds allocated to specific research and development activities will
depend upon numerous factors, such as the progress of the Company's drug
discovery and development programs, the receipt of necessary regulatory
approvals, the cost of preparing, filing, prosecuting, maintaining, defending
and enforcing patent claims and other intellectual property rights, the status
of competitive products and technologies and the timing and availability of
alternative methods of financing for the Company, including existing or future
strategic alliances and joint ventures with third parties. The Company's
research and development expenditures will vary as product candidates, if any,
are added or abandoned or as additional collaborations are established. In
addition, the Company intends to use some of the proceeds of this offering and
from the sale of the Ciba Shares by the Company for working capital and general
corporate purposes, which may include capital expenditures for improvements to
the Company's facilities. The Company has not determined the amount it plans to
spend for each purpose or the timing of such expenditures. Pending such uses,
the Company intends to invest the net proceeds from this offering and from the
sale of the Ciba Shares by the Company in United States government securities
and investment grade, interest-bearing instruments. The Company expects to
continue to be able to avoid the registration requirements of the Investment
Company Act of 1940 (the "1940 Act"). If the Company were required to register
as an investment company under the 1940 Act, it would become subject to
substantial regulations with respect to its capital structure, management,
operations, transactions with affiliates (as defined in the 1940 Act), and other
matters. Application of the provisions of the 1940 Act would have a material
adverse effect on the Company.
In the ordinary course of business the Company investigates, evaluates and
discusses with others the potential acquisition of businesses, technologies and
products which complement the Company's business. Although the Company currently
has no understandings or agreements with respect to any such acquisition, net
proceeds from this offering and from the sale of the Ciba Shares by the Company
may be used for such purpose.
The Company believes that the net proceeds of this offering and from the
sale of the Ciba Shares by the Company, together with the Company's available
cash reserves and funds from collaborative research and development agreements,
should be adequate to satisfy its capital requirements through 1998, although
there can be no assurance that the Company will not require additional funds
prior to such date. The Company's future capital needs will be dependent upon
many factors, including progress in its research and development activities, the
magnitude and scope of these activities, progress with preclinical and clinical
trials, the cost of preparing, filing, prosecuting, maintaining, defending and
enforcing patent claims and other intellectual property rights, competing
technological and market developments, changes in or terminations of existing
collaborative arrangements, the establishment of additional collaborative
arrangements, and the cost of manufacturing scale-up and development of
marketing activities, if undertaken by the Company.
DIVIDEND POLICY
The Company has not paid any dividends on its capital stock since its
inception and does not anticipate paying any dividends in the foreseeable
future.
16
<PAGE> 19
CAPITALIZATION
The following table sets forth the actual and as adjusted capitalization of
the Company as of December 31, 1995. The as adjusted capitalization of the
Company gives effect to the sale of the 2,100,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $12.00 per share (after
deducting estimated underwriting discounts and offering expenses payable by the
Company) and the sale of the Ciba Shares by the Company at the initial public
offering price (assuming an initial public offering price of $12.00 per share)
and the application of the estimated net proceeds therefrom. The financial data
presented below should be read in conjunction with the Company's financial
statements and related notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and other information included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------
ACTUAL(1) AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term capital lease obligations................................. $ 721 $ 721
-------- --------
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000 shares authorized,
none issued and outstanding....................................
Common Stock, $.001 par value, 25,000,000 shares authorized;
6,018,980 shares issued and outstanding; 8,535,646 shares
issued and outstanding, as adjusted(2)......................... 6 9
Additional paid-in capital........................................ 31,868 59,721
Deferred compensation............................................. (635) (635)
Notes receivable from stockholders................................ (82) (82)
Net unrealized gains on investment securities
available-for-sale............................................. 79 79
Accumulated deficit............................................... (16,129) (16,129)
-------- --------
Total stockholders' equity..................................... $ 15,107 $ 42,963
-------- --------
Total capitalization...................................... $ 15,828 $ 43,684
======== ========
</TABLE>
- ---------------
(1) Gives effect to the conversion of all outstanding shares of Convertible
Preferred Stock into Common Stock and the 2.35-for-1 split of each
outstanding share of Common Stock effected in March 1996.
(2) Excludes 1,551,000 shares of Common Stock reserved for issuance under the
Company's stock option plans, pursuant to which options to purchase 981,266
shares of Common Stock were outstanding as of December 31, 1995 at a
weighted average exercise price of approximately $1.49 per share. Also
excludes outstanding options to purchase 387,750 shares of Common Stock at
an exercise price of $.85 per share granted under the Company's Change of
Control Plan. See "Management -- Change of Control Arrangements," "-- Stock
Plans," and Notes 10 and 12 of Notes to Financial Statements.
17
<PAGE> 20
DILUTION
The net tangible book value of the Company as of December 31, 1995, was
approximately $15,097,000, or $2.51 per share of Common Stock. Net tangible book
value per share is determined by dividing the amount of the Company's total
tangible assets less total liabilities by the number of shares of Common Stock
outstanding, and assumes the conversion of all outstanding shares of Convertible
Preferred Stock into Common Stock and the 2.35-for-1 split of the outstanding
shares of Common Stock. After giving effect to the sale by the Company of the
2,100,000 shares of Common Stock offered hereby (at an assumed initial public
offering price of $12.00 per share) and the sale of the Ciba Shares by the
Company at the initial public offering price (assuming an initial public
offering price of $12.00 per share), and the application of the estimated net
proceeds therefrom, the pro forma net tangible book value of the Company as of
December 31, 1995 would have been approximately $42,953,000, or $5.03 per share.
This represents an immediate dilution of $6.97 per share to new investors
purchasing shares of Common Stock in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $12.00
Net tangible book value per share as of December 31, 1995................. $2.51
Increase per share attributable to new investors.......................... 2.52
------
Pro forma net tangible book value per share after this offering and the sale
of the Ciba Shares by the Company......................................... 5.03
------
Dilution per share to new investors......................................... $ 6.97
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1995, the differences between existing stockholders and new investors with
respect to the number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 6,018,980 70.5% $30,502,000 50.2% $ 5.07
New investors..................... 2,516,666 29.5% $30,199,992 49.8% $ 12.00
--------- ----- ----------- -----
Total........................ 8,535,646 100.0% $60,701,992 100.0%
========= ===== =========== =====
</TABLE>
The number of shares being purchased by "new investors" reflected in the
above tables includes the Ciba Shares, which are being purchased from the
Company upon the closing of this offering at the initial public offering price
pursuant to a private placement. Ciba also is an existing stockholder of the
Company. See "Principal Stockholders." The above tables and calculations assume
no exercise of options outstanding as of December 31, 1995. As of December 31,
1995, there were outstanding options to purchase 1,369,016 shares of Common
Stock (which amount includes outstanding options to purchase 387,750 shares of
Common Stock granted pursuant to the Company's Change of Control Plan at an
exercise price of $.85 per share) at a weighted average exercise price of
approximately $1.31 per share. Assuming the exercise of all outstanding options,
the total dilution in net tangible book value per share to new investors would
be $7.48. As of December 31, 1995, there were 357,412 shares reserved for future
grants under the Company's stock option plans. To the extent that any of these
shares are issued, there will be further dilution to new investors. See
"Management -- Stock Plans" and Notes 10 and 12 of Notes to Financial
Statements.
18
<PAGE> 21
SELECTED FINANCIAL DATA
The selected financial data presented below has been derived from the
Company's financial statements which have been audited by Price Waterhouse LLP,
independent accountants. The balance sheet as of December 31, 1994 and 1995 and
the related statements of operations, stockholders' equity and cash flows for
the three years ended December 31, 1995 and notes thereto appear elsewhere in
this Prospectus. The selected financial data presented below should be read in
conjunction with the Company's financial statements and related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Contract.................... $ 4,570 $ 2,314 $ 4,072 $ 4,454 $ 5,563
License and royalty......... 115 882 1,005 398 4,885(1)
-------- -------- -------- -------- --------
4,685 3,196 5,077 4,852 10,448
-------- -------- -------- -------- --------
Expenses:
Research and development.... 6,418 5,446 7,713 8,663 8,949
General and
administrative............ 2,188 2,114 2,202 1,917 2,178
-------- -------- -------- -------- --------
8,606 7,560 9,915 10,580 11,127
-------- -------- -------- -------- --------
(3,921) (4,364) (4,838) (5,728) (679)
Other income................... 318 366 288 5,701(2) 3,680(3)
-------- -------- -------- -------- --------
(Loss) income before provision
for income taxes............ (3,603) (3,998) (4,550) (27) 3,001
Provision for income taxes..... 75
-------- -------- -------- -------- --------
Net (loss) income.............. $ (3,603) $ (3,998) $ (4,550) $ (27) $ 2,926
======== ======== ======== ======== ========
Net income per share(4)........ $ .41
Shares used in computing net
income per share(4)......... 7,068
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
investment securities....... $ 3,553 $ 7,820 $ 4,584 $ 5,944 $ 16,488
Working capital................ 3,539 6,614 2,016 4,523 14,338
Total assets................... 5,163 8,873 6,451 8,005 18,251
Long-term capital lease
obligations................. 151 761 860 721
Accumulated deficit............ (10,480) (14,478) (19,028) (19,055) (16,129)
Total stockholders' equity..... 4,247 6,986 2,588 5,166 15,107
</TABLE>
- ---------------
(1) Includes a one-time payment of $1,750,000 made by Cephalon to the Company
relating to Cephalon's exercise of its option to buy-down its royalty
percentage relating to IGF-1. Also includes a one-time license fee payment
of $3,000,000 made by Bristol-Myers Squibb to the Company in connection with
the grant of a license to certain technology to Bristol-Myers Squibb. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Notes 4 and 5 of Notes to Financial Statements.
(2) Includes a gain of $5,296,000 on the sale of the Company's interest in the
SISKA Diagnostics, Inc. joint venture. See Note 6 of Notes to Financial
Statements.
(3) Includes income (net of legal expenses) of $3,146,000 received by the
Company under settlement agreements with two law firms for failure to
properly file a foreign patent application. See Note 7 of Notes to Financial
Statements.
(4) See Note 1 of Notes to Financial Statements for information concerning the
computation of net income per share.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
SIBIA, incorporated in Delaware in 1981, was established by The Salk
Institute for Biological Studies. Through 1990, SIBIA successfully developed
several proprietary life-sciences technologies in collaboration with corporate
partners. In 1987, SIBIA initiated research in the neuroscience field and in
1991 shifted its focus completely to the development of novel therapeutics to
treat CNS disorders.
SIBIA is engaged in the discovery and development of novel, small molecule
therapeutics for CNS disorders based on the Company's unique approach to
characterizing the molecular processes involved in such disorders. SIBIA is
focusing its efforts on developing compounds for the treatment of Parkinson's
disease, Alzheimer's disease, stroke, head trauma, epilepsy, chronic pain,
schizophrenia and other neurological, psychiatric and neurodegenerative
disorders, many of which have large patient populations and represent critical
unmet medical needs. SIBIA has financed its operations primarily through the
sale of Convertible Preferred Stock and Common Stock and through funds provided
by its collaborative partners under its collaborative agreements. In addition,
SIBIA has received funds from the sale of its interest in a corporate joint
venture and from the settlement of certain litigation, with which it has
purchased investment securities and which it expects to use to finance its
operations. See "Business -- Strategic Alliances" and Notes 6 and 7 of Notes to
Financial Statements.
The Company receives contract revenue and license and royalty revenue.
Contract revenue includes payments for research to support a specified number of
the Company's scientists and payments upon the achievement of specified research
and drug development milestones. Research contracts are generally conducted on a
best efforts basis. Contract revenue is recognized as the research is performed
using the percentage-of-completion method of accounting, primarily based on
contract costs incurred to date compared with total estimated costs at
completion. Revenues related to milestones are recognized upon the achievement
of the related milestone and when collection is probable. License revenue is
recognized when there is no material continuing performance obligation under the
agreement and collection is probable. Royalty revenue is recognized when earned
and collection is probable.
Research and development costs are expensed as incurred and include costs
associated with collaborative agreements. These costs consist of direct and
indirect costs related to specific projects as well as fees paid to other
entities which conduct certain research activities on behalf of the Company.
The Company has no products available for sale and does not expect to have
any products resulting from its research efforts, including its collaborations
with others, commercially available for at least several years, if at all.
Except for 1995, the Company has incurred net losses every year since shifting
its area of therapeutic focus to the central nervous system in 1991. The Company
is continuing to incur losses and expects to incur increasing operating losses
over the next several years as the Company's research and development
expenditures increase. The Company's revenue for the next several years will be
limited to payments under its collaborative relationships, license fees,
interest income and other miscellaneous income.
During the years ended December 31, 1993, 1994 and 1995, the Company had
two, two and three collaborative research agreements that accounted for 78%, 89%
and 81%, respectively, of total revenue.
20
<PAGE> 23
RESULTS OF OPERATIONS
The Company expects that results of operations in the future will fluctuate
significantly from period to period. Such fluctuations may result from numerous
factors, including the amount and timing of future license agreements, the
timing of revenues earned under existing or future corporate collaborations or
joint ventures, if any, technological advances and determinations as to the
commercial potential of proposed compounds, the progress of the Company's drug
discovery and development programs, the receipt of necessary regulatory
approvals, the cost of preparing, filing, prosecuting, maintaining, defending
and enforcing patent claims and other intellectual property rights, the status
of competitive products and technologies and the timing and availability of
financing for the Company, including existing or future strategic alliances and
joint ventures with third parties. In addition, because the Company is in the
early stage of development with respect to its CNS technologies and due to the
one-time nature of certain payments the Company has received, comparisons of its
historical results may not be meaningful.
To date, the majority of the Company's expenditures have been for research
and development activities. SIBIA expects to receive royalties on sales of
Myotrophin, a product based on the insulin-like growth factor-1 ("IGF-1")
molecule being developed by Cephalon, Inc. ("Cephalon"), if it receives FDA
approval, although there can be no assurances that Myotrophin will receive such
approval. With the exception of Myotrophin, the Company does not expect to
receive royalties based upon net sales of drugs that may be developed for a
significant number of years, if at all. SIBIA expects research and development
expenses to increase significantly over the next several years as its discovery
and development programs progress. In addition, general and administrative
expenses necessary to support such expanded programs are also expected to
increase over the next several years.
COMPARISON OF YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
The Company recognized contract revenue of $4,072,000, $4,454,000 and
$5,563,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
The increases in the year-to-year contract revenue primarily reflect increases
in contract revenues recognized in the form of research payments received
pursuant to the Company's existing collaborative agreements as well as, from
1994 to 1995, the commencement of the Company's collaborative arrangement with
Bristol-Myers Squibb. The Company recognized license and royalty revenue of
$1,005,000, $398,000 and $4,885,000 for the years ended December 31, 1993, 1994
and 1995, respectively. In 1993, the Company recognized license revenue of
$500,000 related to a license agreement with Affymax Technologies, N.V. for
certain technology. Also in 1993, the Company recognized license revenue of
$250,000 and royalty revenue of $40,000 from Cephalon related to IGF-1
technology. In 1994, the Company recognized license revenue of $300,000 from
Zeneca, Limited for certain plant genetic engineering technology. In 1995, the
Company recognized license revenue of $3,000,000 related to the Company's grant
of an exclusive license of certain technology to Bristol-Myers Squibb. Also in
1995, the Company recognized license and royalty revenue of $1,750,000 from
Cephalon pursuant to its option to buy-down the royalty percentage relating to
IGF-1.
The Company's research and development expenses were $7,713,000, $8,663,000
and $8,949,000 for the years ended December 31, 1993, 1994 and 1995,
respectively. The approximate 12%, or $950,000, increase from 1993 to 1994 was
primarily due to an increase in research and development personnel and related
supply costs as a result of expanded programs in drug discovery and outside
preclinical and clinical expenses. The Company's research and development
expenses increased approximately 3%, or $286,000, from 1994 to 1995 due
primarily to an increase in preclinical development expenses.
The Company's general and administrative expenses were $2,202,000,
$1,917,000 and $2,178,000 for the years ended December 31, 1993, 1994 and 1995,
respectively. Expenses declined in 1994 by 13%, or $285,000, primarily as a
result of a reduction in personnel and outside legal expenses. General and
administrative expenses increased approximately 14%, or $261,000, for the year
ended December 31, 1995 primarily due to higher outside patent legal expenses.
21
<PAGE> 24
The Company's other income includes interest income, interest expense and,
in 1994 and 1995, gain from the sale of its interest in a joint venture and
income from the settlement of certain litigation, respectively. Other income
increased by $5,413,000 from 1993 to 1994, primarily due to the gain on the sale
of the Company's interest in the SISKA Diagnostics, Inc. joint venture in 1994.
Other income decreased by 35%, or $2,021,000, from 1994 to 1995. The decrease
from 1994 to 1995 was primarily the result of a gain in 1994 (from the sale of
the Company's interest in the SISKA Diagnostics, Inc. joint venture) which
exceeded income in 1995 (from the settlement of certain litigation).
The Company's net loss was $4,550,000 and $27,000 for the years ended
December 31, 1993 and 1994, respectively, and its net income was $2,926,000 for
the year ended December 31, 1995. Net income for 1995 is primarily attributable
to the increase in revenue resulting from non-refundable license fees of
$3,000,000 received for certain SIBIA technology pursuant to SIBIA's
collaboration with Bristol-Myers Squibb, $3,146,000 from the settlement of
litigation and $1,750,000 from the license/royalty payment from Cephalon. As of
December 31, 1995, the Company had tax loss carryforwards of approximately
$14,600,000 for federal income tax purposes. As specified in the Internal
Revenue Code, a significant change in ownership of the Company may affect the
Company's ability to utilize its tax loss carryforwards. The completion of this
offering and the sale of the Ciba Shares by the Company is not expected to
affect the Company's ability to utilize its existing net operating loss
carryforwards for federal income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
SIBIA has financed its operations primarily through the sale of Convertible
Preferred Stock and Common Stock and through funds provided by its collaborative
partners under collaborative agreements. The Company has also received funds
from the sale of its interest in the SISKA Diagnostics, Inc. joint venture and
the settlement of certain litigation, with which it has invested in investment
securities and which it expects to use to finance its operations. Since 1991,
the Company has received approximately $16,000,000 in net proceeds from the sale
of Convertible Preferred Stock and Common Stock to investors and collaborative
partners and approximately $28,000,000 in contract, license and royalty revenue.
The Company is entitled to receive additional payments under the collaborative
agreements in the form of contract revenue, milestone payments, if milestones
are achieved, and royalties, if products are commercialized. As of December 31,
1995, the Company had an accumulated deficit of $16,129,000.
The Company anticipates that the cash, cash equivalents and investment
securities balance of $16,488,000 as of December 31, 1995 will be used to
support continued research and development of its technologies. The Company
leases laboratory and office facilities under an agreement expiring on December
31, 1997. The minimum annual payment under the lease is approximately
$1,290,000, before consideration of sublease income. The Company believes that
its present facility will be adequate to conduct its research activities through
December 1997. Management believes that it should be able to secure additional
space at commercially reasonable rates if necessary. The Company has an option
to extend its lease for an additional five years. Since 1991, the Company has
invested $2,374,000 in property and equipment. Included within this amount is
$1,976,000 of equipment under capital leases. The net present value of
obligations under such capital leases as of December 31, 1995 was $1,152,000. In
addition, the Company recently contracted for a fully automated functional high
throughput screening system and related equipment with an expected cost of
approximately $750,000, of which $500,000 will be provided by Ciba (which may be
credited against future milestone payments).
The Company expects to incur substantial research and development expenses
including continued increases in personnel costs and costs related to
preclinical testing and clinical trials, if any. The Company's future capital
needs will be dependent upon many factors, including progress in its research
and development activities, the magnitude and scope of these activities,
progress with preclinical and clinical trials, the cost of preparing, filing,
prosecuting, maintaining, defending and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
changes in or terminations of existing collaborative arrangements, the
establishment of additional collaborative arrangements, and the cost of
manufacturing scale-up and development of marketing
22
<PAGE> 25
activities, if undertaken by the Company. The Company intends to seek additional
funding through research and development relationships with suitable corporate
collaborators or through public or private financing. There can be no assurance
that the Company will be successful in its efforts to collaborate with
additional partners or that additional financing from other sources will be
available on favorable terms, if at all.
The Company believes that its existing capital resources, together with the
net proceeds from this offering and from the sale of the Ciba Shares by the
Company, interest income and payments under the collaborative agreements, should
be adequate to satisfy its capital requirements through the end of 1998,
although there can be no assurance that the Company will not require additional
funds prior to such date. These funding requirements include continued
expenditures for research and development activities and in the area of
intellectual property, as well as expenditures relating to leasehold
improvements to the Company's facilities and the purchase of additional
laboratory equipment. See "Risk Factors -- Future Capital Needs; Uncertainty of
Additional Funding."
23
<PAGE> 26
BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
OVERVIEW
SIBIA Neurosciences, Inc. ("SIBIA" or the "Company") is engaged in the
discovery and development of novel, small molecule therapeutics for disorders of
the central nervous system ("CNS") based on the Company's unique approach to
characterizing the molecular processes involved in such disorders. SIBIA is
focusing its efforts on developing compounds for the treatment of Parkinson's
disease, Alzheimer's disease, stroke, head trauma, epilepsy, chronic pain,
schizophrenia and other neurological, psychiatric and neurodegenerative
disorders, many of which have large patient populations and represent critical
unmet medical needs. SIBIA's drug discovery platforms are based on two primary
technologies in which the Company has established a leading scientific and
proprietary position -- human receptor/ion channel subtype technology and human
protease technology. SIBIA holds nine issued U.S. patents and has one allowed
patent and 57 pending U.S. patent applications relating to these technologies.
The Company's strategy is to utilize its technologies to discover and develop
proprietary CNS drug candidates and collaborate with corporate partners for the
advanced development and commercialization of such candidates. SIBIA currently
has corporate collaborations with Eli Lilly and Company ("Lilly"), Ciba and
Bristol-Myers Squibb Company ("Bristol-Myers Squibb").
SIBIA believes that its human receptor/ion channel subtype technology will
enable the discovery and development of new classes of drugs for the treatment
of CNS disorders. The Company's technology permits the targeted identification
of compounds that are selective for specific receptor/ion channel subtypes.
Receptors and ion channels and the neurotransmitters that modulate them are key
components in the communication between neurons, or nerve cells. Such
communication is fundamental to many CNS functions, including cognition, memory,
sensory perception and motor control. These functions are mediated by cellular
processes dependent on calcium ions, which enter neurons through specific
receptor/ion channels. SIBIA has identified the control of calcium levels within
neurons as a key strategy for potential therapeutic intervention in many CNS
disorders. Compounds which selectively modulate cellular calcium levels, such as
calcium channel blockers used for the treatment of cardiovascular diseases, have
been developed into effective and well-tolerated drugs. However, these drugs
either have been ineffective or have significant side effects when evaluated for
CNS disorders, which is likely due to their lack of selectivity or activity on
specific neuronal subtypes. The Company believes that drugs developed with its
technology could be more effective and have fewer side effects than existing
drugs for the treatment of CNS disorders.
SIBIA has established a leading proprietary position in human receptor/ion
channel subtype technology. The Company has made significant scientific and
technological advances by cloning key human neuronal receptor/ion channels,
expressing them in stable cell lines and developing the resulting recombinant
cell lines into functional assays for drug screening. SIBIA is currently
focusing on three major receptor/ion channel classes involved in regulating
neuronal calcium levels -- nicotinic acetylcholine receptors ("NAChRs"),
excitatory amino acid receptors ("EAARs") and voltage-gated calcium channels
("VGCCs"). SIBIA has discovered, isolated and developed an extensive library of
more than 50 complete genes cloned from human brain tissue coding for multiple,
distinct subtypes of these three receptor/ion channel classes. Most of these
subtypes are multimeric (i.e., molecular complexes of two or more proteins). By
expressing the multiple complex genes necessary to form functional subtypes,
SIBIA has overcome a significant technical challenge which it believes provides
an important competitive advantage. To date, SIBIA has expressed more than 20
receptor/ion channel subtypes in the NAChR, EAAR and VGCC classes in stable cell
lines which have been shown to be physiologically functional. Each subtype
potentially represents a novel molecular target for developing therapeutic
compounds for CNS disorders. SIBIA has developed unique and proprietary
functional cell-based assays encompassing
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these molecular targets and uses these assays with its proprietary high
throughput screening technology to rapidly identify and select compounds for
further development. The Company believes that the integration of its large
proprietary collection of molecular targets with its proprietary assay and
screening technologies provides a powerful and original drug discovery platform.
SIBIA has established strategic alliances with Ciba in the area of EAAR drug
discovery and with Lilly in the area of VGCC drug discovery. SIBIA recently
extended its strategic alliance with CIBA and has entered into discussions with
Lilly to amend its collaboration agreement with Lilly.
Within SIBIA's NAChR program the Company has selected and characterized
SIB-1508Y as a compound for the treatment of Parkinson's disease based on its
receptor subtype selectivity and behavioral profile. In contrast to current
therapies which treat only motor dysfunction, the Company believes that
SIB-1508Y may be effective for the treatment of motor, affective and cognitive
dysfunctions of Parkinson's disease. If proven to be safe and effective,
SIB-1508Y would represent a new therapeutic approach for the treatment of
Parkinson's disease and may be useful as a stand-alone therapeutic agent as well
as in combination with L-dopa, the current standard therapy. The Company intends
to file an Investigational New Drug application ("IND") with respect to
SIB-1508Y by the end of 1996 or early in 1997. In addition, SIBIA plans to
establish corporate collaborations for advanced clinical trials and
commercialization of SIB-1508Y. However, there can be no assurance that the
indicated IND filing date will be achieved, if at all, or that SIB-1508Y will be
successfully developed and commercialized.
SIBIA's human protease technology is directed at the discovery and
development of therapeutic compounds for Alzheimer's and other neurodegenerative
diseases. Specifically, the Company's technology focuses on the compounds that
control the degradative proteases which generate amyloid -protein ("A"). A is
the neurotoxic fragment of the amyloid precursor protein ("APP") and is
generally understood to be the major molecular key to Alzheimer's disease. A is
found at autopsy in senile plaques and in deposits surrounding the small blood
vessels in brain tissue, both of which are diagnostic for Alzheimer's disease.
SIBIA believes the inhibition of A formation may be broadly applicable to early-
and late-onset Alzheimer's disease. SIBIA has established assays which identify
the neurotoxic A fragment as well as a second critical APP processing fragment,
neuroprotective APP (s). SIBIA has identified several series of small molecules
which inhibit A production and enhance APP(s) levels in vitro. These proprietary
compounds currently are being studied in vivo. In August 1995, SIBIA entered
into a four-year collaboration agreement with Bristol-Myers Squibb to discover
and develop compounds that are able to selectively modulate the processing of
APP for the treatment of Alzheimer's disease.
COMPANY STRATEGY
The Company's strategy is to utilize its two proprietary drug discovery
platforms -- the human receptor/ion channel subtype technology and the human
protease technology -- to discover novel, small molecule therapeutics for the
treatment of CNS disorders. Key elements of the Company's strategy include:
- Leveraging its leadership position in its proprietary human receptor/ion
channel subtype and human protease technologies to discover and develop
small molecule therapeutics. SIBIA pioneered the development of molecular
and cellular approaches to drug discovery based on human neuronal
receptor/ion channels and human proteases and has established a leadership
position in these areas. SIBIA uses its advanced drug discovery
technologies, including its proprietary functional assays, high throughput
screening systems and combinatorial chemistry, to identify compounds for
preclinical development and provide new opportunities for strategic
alliances. For example, SIBIA has designed and selected SIB-1508Y for
development for the treatment of Parkinson's disease.
- Utilizing its broad portfolio of proprietary molecular targets to develop
compounds that address the complete spectrum of CNS disorders. To date,
SIBIA has identified over 20 human receptor/ion channel subtypes and
several neuronal proteases as molecular targets and has developed
corresponding cell-based functional assays for high throughput drug
screening. SIBIA believes that compounds acting on these targets may have
application to the treatment of a broad range of neurological, psychiatric
and neurodegenerative disorders, many of which represent
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critical unmet medical needs. By targeting a broad range of disorders
having significant market potential, the Company seeks to reduce reliance
on any single program and increase its potential for successful
development efforts.
- Establishing strategic alliances to advance compounds through clinical
trials and commercialization. The Company focuses on drug discovery and
development and establishes collaborations with pharmaceutical or
biotechnology companies for advanced development and commercialization of
its drug candidates to gain access to its partners' development,
regulatory and marketing expertise and resources. Currently, the Company
has strategic alliances with Lilly, Ciba and Bristol-Myers Squibb.
- Expanding its drug discovery platforms to enhance its CNS drug discovery
capabilities. The Company continues to expand its portfolio of molecular
targets through internal research, collaborations and, if appropriate,
licensing. The Company is acquiring additional instrumentation that will
increase its high throughput screening capacity several fold and is
increasing its combinatorial chemistry effort for rapidly generating
analogs of compounds identified in its high throughput screening program.
DRUG DISCOVERY PLATFORMS AND DEVELOPMENT PROGRAMS
SIBIA's drug discovery platforms are based on two primary technologies in
which SIBIA has established a leading scientific and proprietary position: human
receptor/ion channel subtype technology and human protease technology.
HUMAN RECEPTOR/ION CHANNEL SUBTYPE TECHNOLOGY
The Role of Calcium in CNS Function and Disease
The human central nervous system is a complex network of interconnected
nerve cells, known as neurons, that are responsible for coordination of
virtually all bodily functions, including movement and sensory perception,
learning, memory and decision making. Neurons receive, conduct and transmit
signals. Communication between neurons is essential to the function of the
central nervous system. Dysfunction of neurons and/or communications between
neurons can result in neurological disorders (e.g., epilepsy), psychiatric
disorders (e.g., schizophrenia and depression) and neurodegenerative disorders
(e.g., Alzheimer's and Parkinson's diseases).
Communication between neurons occurs through complex electrical and
chemical processes. Neurons communicate with each other and with target cells
through the transmission and reception of molecules known as neurotransmitters.
Nerve impulses in the form of voltage changes cause the release of
neurotransmitters from one neuron, which then activate specific receptors on the
surface of an adjacent neuron or target cell and cause a response in the
receiving cell. Each different neurotransmitter interacts with a specific
corresponding receptor or family of receptors and transmits primary messages
between neurons that control important processes within those neurons. These
processes include the regulation of secondary messenger systems that, in turn,
modulate a wide array of signal transduction pathways involved in neuronal
communication and survival.
Calcium ions are one of the most important primary and secondary messengers
in the nervous system. Calcium ions enter neurons through ion channels
("receptor/ion channels") which open and close (i.e., are gated) either through
ligand/receptor interactions or voltage changes such as nerve impulses. These
receptor/ion channels regulate many essential functions in neurons, such as the
release of neurotransmitters, electrical activity, activation of enzymes and
transcription of genes. The diagram below illustrates the fundamental mechanism
of communication between adjacent neurons and the role of calcium ions in that
process.
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CALCIUM AND RECEPTOR/ION CHANNELS
IN THE NERVOUS SYSTEM
[DIAGRAM]
The diagram illustrates an example of communication between two neurons at a
synapse and certain roles of calcium in this process. A synapse is the point at
which a nerve impulse is transmitted from one neuron to another. A nerve
impulse, in the form of a voltage change, is shown passing through the
presynaptic neuron terminal (from the left). As the nerve impulse reaches the
presynaptic neuron terminal, the voltage change causes the opening of a pore in
a specific subtype of neuronal VGCC, allowing calcium ions (Ca2+) to enter (1).
This, in turn, causes the release of neurotransmitters (2) from the presynaptic
neuron terminal. In this example, the released neurotransmitter glutamate
traverses the interneuronal space and binds to and activates an EAAR subtype, a
kind of ligand-gated ion channel, located on the postsynaptic target cell (3).
The activation of the EAAR opens its channel pore allowing entry of calcium
ions into the postsynaptic target cell resulting in a voltage change and
propagation of the nerve impulse through this second cell. Calcium ions entering
neurons through the ion channels of specific subtypes of EAARs (3) and VGCCs
(4) can also act as intracellular second messengers that regulate enzyme
pathways and gene transcription. In certain presynaptic neurons, the
neurotransmitter acetylcholine can activate specific NAChR subtypes (5) also
resulting in entry of calcium ions and/or a voltage change leading to the
opening of VGCCs (1) and subsequent release of neurotransmitters. Furthermore,
a buildup of excess calcium ions in neurons can result in cell death.
Because calcium is central to so many critical neuronal functions, the
Company has identified the control of calcium levels within neurons as a key
strategy for potential therapeutic intervention in many CNS disorders, including
stroke, epilepsy, pain, Parkinson's disease and Alzheimer's disease and other
dementias. For example, the lack of blood flow and oxygen deprivation caused by
a stroke results in abnormally high concentrations of the neurotransmitter
glutamate, triggering a subsequent influx of excessive calcium ions through
specific receptor/ion channels into neurons. This leads to neuronal cell death
and brain damage. Drugs that block the abnormal release or action of glutamate
and/or the excessive calcium buildup in the neurons could represent effective
stroke therapies. Another example of the role of calcium in CNS disorders can be
seen in Parkinson's disease. The motor deficits associated with Parkinson's
disease are the result of abnormally reduced levels of the neurotransmitter
dopamine, the release of which is calcium-mediated. Drugs that activate specific
receptor/ion channels to enhance the calcium-mediated release of dopamine from
neurons could ameliorate the motor dysfunction in Parkinson's disease patients.
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Over approximately the past 20 years, drugs blocking calcium influx through
certain receptor/ion channels have been successfully developed and
commercialized for the treatment of cardiovascular diseases such as angina and
hypertension. However, these existing calcium channel blockers have been either
ineffective or have significant side effects when evaluated for CNS disorders.
This is likely due to their lack of selectivity or activity on specific neuronal
subtypes, which is typical of compounds identified by traditional drug discovery
approaches. The Company believes that its technologies will permit the targeted
identification of compounds that are selective for specific receptor/ion channel
subtypes, enabling the discovery and development of new classes of drugs that
could be more effective and have fewer side effects than existing drugs for the
treatment of CNS disorders.
Receptor/Ion Channel Subtype Technology
Calcium ions enter neurons primarily through: (i) two receptor classes that
function as ligand-gated ion channels -- NAChRs and EAARs; and (ii) VGCCs. These
three classes are the major receptor/ion channel classes involved in regulating
neuronal calcium. Each class is comprised of numerous structurally, anatomically
and pharmacologically distinct subtypes.
The large number and diversity of NAChR, EAAR and VGCC subtypes have only
recently been established by gene cloning techniques and were unknown and
virtually unmeasurable by traditional drug discovery approaches. SIBIA has
pioneered the discovery and functional expression of cloned genes encoding a
number of important human subtypes in these three receptor/ion channel classes.
This has enabled SIBIA to characterize a large number of previously unrecognized
receptor/ion channel subtypes and establish them as targets for drug discovery.
SIBIA has further incorporated these molecular targets into functional
cell-based assays for drug screening. The Company believes this should enable
the development of novel, safe and effective therapies for CNS disorders through
the identification of compounds acting only on specific neuronal subtypes to
selectively control precise calcium-mediated neuronal processes.
SIBIA's human receptor/ion channel subtype technology is based on the
identification and cloning of the genes encoding for NAChRs, EAARs and VGCCs
from human brain tissue, the expression of these genes in mammalian cells to
afford fully functional receptor/ion channels of defined subtype and the use of
these cells in in vitro functional drug screening assays. Each cell line or
assay contains only a single human receptor/ion channel subtype. In contrast to
traditional binding assays, these proprietary assays can quantify the functional
effect of test compounds and such compounds can be identified as acting as
agonists, antagonists or modulators at any functional site, known or unknown, on
a specific receptor/ion channel subtype.
SIBIA has established a leading proprietary position in drug discovery
based on human receptor/ion channel subtypes. Each of the following scientific
and technological developments by SIBIA was critical in building this position
and has represented a significant advance:
- SIBIA has determined that most of the functional receptor/ion channel
subtypes in the three classes it has targeted are multimeric (i.e.,
molecular complexes of two or more proteins), and are coded for by
multiple genes of considerable complexity. SIBIA has discovered, isolated
and developed an extensive library of more than 50 complete genes cloned
from human brain tissue coding for multiple, distinct subtypes of NAChRs,
EAARs and VGCCs controlling neuronal calcium levels.
- Because most of the receptor/ion channel subtypes are multimeric, the
expression of the multiple complex genes necessary to form the functional
subtypes has been a difficult technical challenge. SIBIA believes its
expertise in expressing multiple genes provides an important competitive
advantage. To date, SIBIA has expressed more than 20 receptor/ion channel
subtypes in the NAChR, EAAR and VGCC classes in stable cell lines which
have been shown to be physiologically functional. Each subtype
potentially represents a novel molecular target for developing
therapeutic compounds for CNS disorders. SIBIA is aggressively continuing
this program and expects to express a significant number of additional
subtypes in stable cell lines during 1996.
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- SIBIA has developed unique and proprietary functional cell-based assays
encompassing these molecular targets and uses these assays with its
proprietary high throughput screening technology to rapidly identify and
select compounds for further development. SIBIA's high throughput
screening technology includes proprietary technology and an automated
system for the discovery and optimization of drug leads which
specifically modulate the function of specific receptor/ion channel
subtypes.
SIBIA's drug discovery efforts are supported by its patent portfolio, which
includes issued patents relating to all three classes of receptor/ion channels
and functional screening technology. See "-- Patents and Proprietary Rights."
The Company believes that the integration of its large proprietary collection of
molecular targets with its proprietary assay and screening technologies provides
a powerful and original drug discovery platform. See "Risk Factors -- New and
Uncertain Technology."
High Throughput Functional Screening Technology
High throughput functional screening is a key component in SIBIA's drug
discovery program. SIBIA utilizes its human receptor/ion channel subtype
technology with high throughput screening in two modes: first, for the testing
of large compound libraries to discover new, selective and potent series of
compounds for further drug discovery efforts; and second, for the rapid
characterization and profiling of selected series of compounds in order to
choose lead candidates for further in vitro and in vivo study.
SIBIA's proprietary high throughput functional cell-based assays are
applicable to all of SIBIA's receptor/ion channel drug discovery
programs -- NAChRs, EAARs and VGCCs. SIBIA's proprietary assays are based on the
receptor/ion channel-induced changes in cellular calcium levels. In contrast to
traditional binding assays, these assays also allow for simultaneous analysis of
the selectivity, potency, efficacy and pharmacological nature (e.g., agonist,
antagonist or modulator) of the interaction of test compounds with a specific
receptor/ion channel subtype.
Fluorescence-based Ion Assay. SIBIA's fluorescence-based ion assay
technology measures changes in intracellular events (e.g., calcium
concentrations) through the use of ion-sensitive fluorescent dyes. SIBIA, in
collaboration with a third party, has developed a 96-well microtiter
plate-imaging fluorimeter to perform functional high throughput screening. The
equipment is fully automated with robotics and analyzes the fluorescent signals
of all 96 wells simultaneously, rather than sequentially in a time-delayed
manner. This equipment incorporates a sophisticated computer control and data
capture system which allows SIBIA to perform more than 5,000 functional
receptor/ion channel assays per day, as compared to less than 100 per day using
traditional methods. SIBIA has contracted for a second, fully automated system
that is expected to allow analysis of up to 30,000 functional receptor/ion
channel assays per day.
Transcription-based Assay. SIBIA's proprietary transcription-based assay
technology measures the functional activity of test compounds on cell-surface
proteins using a wide array of specifically responsive promoter-reporter gene
constructs and products. SIBIA believes its proprietary transcription-based
assay technology is broadly applicable to virtually any cell-surface proteins,
such as receptors, that control signal transduction processes affecting gene
transcription. See "-- Patents and Proprietary Rights." In addition, the Company
believes that transcription-based assays have application beyond SIBIA's current
receptor/ion channel subtype targets and should support the expansion of SIBIA's
drug discovery efforts to other human molecular targets involved in CNS
disorders. Furthermore, the Company believes this technology can also be applied
to the discovery of drug candidates for the treatment of diseases outside the
CNS area. See "Risk Factors -- Uncertainty Regarding Patents and Proprietary
Rights."
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SUBTYPE-SELECTIVE DRUG DEVELOPMENT PROGRAM
SIBIA is applying its human receptor/ion channel technology and utilizing
its broad portfolio of proprietary molecular targets in efforts to rapidly
discover small molecule therapeutics for CNS disorders. The Company believes
that small molecule therapeutics may pass from the blood to the brain or spinal
cord through the blood-brain barrier and thereby serve as effective agents for
the treatment of certain CNS disorders. In addition, small molecules offer
advantages with respect to manufacturing and compound stability. The Company
focuses on the discovery and development of drug candidates and establishes
collaborations with pharmaceutical companies for advanced development and
commercialization of such candidates. The chart below summarizes SIBIA's current
receptor/ion channel drug development programs.
<TABLE>
<CAPTION>
DEVELOPMENT
PROGRAM THERAPEUTIC AREA STATUS(1) COMMERCIAL RIGHTS(2)
- ---------------------- ---------------------- ------------------ --------------------
<S> <C> <C> <C>
NACHR AGONISTS
SIB-1508Y Parkinson's Disease, Preclinical SIBIA
Attention Deficit
Disorders
SIB-1553A series Dementia Lead identified SIBIA
(Alzheimer's and
Parkinson's Diseases)
NAChR Subtype- Schizophrenia, Discovery SIBIA
Selective Agonists Attention Deficit
Disorders, Chronic
Pain, Eating Disorders
EAAR ANTAGONISTS
SIB-1757 series Epilepsy Lead identified Ciba/SIBIA(3)
NMDA, Non-NMDA Stroke, Epilepsy, Discovery Ciba/SIBIA(3)
Ionotropic and Head Trauma
Metabotropic
Antagonists
VGCC ANTAGONISTS
VGCC Subtype- Stroke, Epilepsy, Discovery Lilly/SIBIA(4)
Selective Antagonists Chronic Pain
</TABLE>
- ---------------
(1) "Preclinical" indicates that SIBIA is conducting pharmacology testing,
toxicology testing, formulation, process development and/or manufacturing
scale-up prior to possible submission of an IND.
"Lead identified" indicates that lead compounds have been discovered that
meet certain criteria of the Company. Lead compounds may undergo structural
modification and more extensive evaluation prior to selection of candidates
for preclinical development.
"Discovery" activities include initial research related to specific
molecular targets and assay development for the identification of new lead
compounds.
(2) Collaborative partners may participate in the preclinical and clinical
testing phases of the drug development process and generally will assume
principal responsibility for commercialization.
(3) Ciba has been granted exclusive worldwide rights to manufacture and market
products discovered during the term of its agreement with SIBIA in the EAAR
area and will pay certain milestones, if and when milestones are achieved,
and royalties, if and when products are commercialized, to SIBIA. Upon
expiration of the term of the agreement, Ciba has a right of first
negotiation for a three year period with respect to compounds identified by
SIBIA. See "-- Strategic Alliances."
(4) SIBIA and Lilly each have the right to independently utilize SIBIA's
receptor/ion channel technology in the VGCC area. Lilly has a right of first
negotiation with respect to compounds identified by SIBIA during the term of
the agreement. Lilly has exclusive, worldwide rights to manufacture and
market products which it discovers using SIBIA technology and will pay
certain milestones, if and when milestones are achieved, and royalties, if
and when products are commercialized, to SIBIA. See "-- Strategic
Alliances."
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Overview of Selected CNS Disorders
The Company is seeking to discover, design and develop receptor/ion channel
subtype-specific compounds that may be used for the treatment of Parkinson's
disease, Alzheimer's disease, stroke, head trauma, epilepsy, chronic pain,
schizophrenia and other neurological, psychiatric and neurodegenerative
disorders, many of which have large patient populations and represent critical
unmet medical needs.
Parkinson's Disease. Parkinson's disease is a progressive
neurodegenerative disorder displaying motor symptoms of rigidity, akinesia and
tremor and is frequently accompanied by depression and dementia. It affects an
estimated 500,000 people in the United States, with about 100,000 new cases
reported each year. About two-thirds of patients diagnosed with the disease are
disabled within five years of diagnosis. There currently is no cure for
Parkinson's disease and no treatment which stops its degenerative course. Many
of the symptoms of early-stage Parkinson's disease can be treated with various
drugs that mimic the action of dopamine, which is reduced in these patients.
Current therapy is primarily the oral administration of L-dopa, a precursor
molecule that neurons are able to convert into dopamine.
Alzheimer's Disease. Alzheimer's disease is a neurodegenerative disorder
exhibiting symptoms of memory loss, loss of language function, disorientation,
inability to think abstractly, inability to care for oneself, personality
change, emotional instability and behavior problems. Dementia of the Alzheimer's
type currently constitutes a large and growing health problem among the elderly,
and its prevalence is increasing as this segment of the population grows.
Alzheimer's disease accounts for about 70% of all cases of dementia,
representing about four million cases in the United States. Conservative
estimates indicate that by the year 2000, there will be five to eight million
cases of Alzheimer's disease in the United States. At present, there is no
effective therapy that will prevent the onset of Alzheimer's disease or slow or
reverse the degenerative process, and there are only a few products available
for treating symptoms for Alzheimer's dementia.
Stroke. In the United States, there are about 400,000 to 500,000 strokes
suffered each year, resulting in approximately 150,000 fatalities. This makes
stroke the third-leading cause of death in the United States. Almost two-thirds
of the survivors of strokes are handicapped, with more than two million people
in the United States now living with disabilities caused by stroke. Current
therapies for stroke have limited ability to reduce the neuronal cell damage
that results. Presently no effective means exist for treating or reducing the
areas of the brain damaged by stroke.
Head Trauma. About one million people in the United States suffer from the
effects of head injuries, and more than 400,000 hospital admissions each year
are attributed to such injuries. The economic cost of head trauma is high
because of the costs of long-term rehabilitation, support services and lost
income.
Epilepsy. Over two million people in the United States suffer from
epilepsy with approximately 100,000 new cases reported each year. At present,
there is no cure for this disorder, and no broad-spectrum anti-epileptic is
currently available. Existing symptomatic therapies produce significant adverse
effects and are ineffective for approximately 15% of the epilepsy patient
population.
Chronic Pain. Pain is a complex response and is classified into two broad
categories: acute and chronic. If acute pain problems are not effectively
treated, they may progress to chronic states. Chronic pain is recognized as
being the most frequent cause of disability in the United States and many
industrialized nations. Incidence of pain in the United States exceeds 97
million cases. Major causes of chronic pain include arthritis, cancer pain, back
injuries and migraine, with such causes affecting almost 60 million people in
the United States.
Schizophrenia. Schizophrenia is a group of serious mental disorders that
can be classed, in terms of symptoms, into four major stereotypes: paranoid,
catatonic, disorganized and undifferentiated. The patient often appears to be
mentally impaired, manifesting behavior that is bizarre and inappropriate. About
one percent of the world's population is affected by schizophrenia and it is
estimated that about two million people in the United States suffer from the
disease.
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NAChR Program
The NAChR system is a major excitatory neurotransmitter system comprised of
many different receptor subtypes, each activated by the neurotransmitter
acetylcholine. Mapping and pharmacological studies have revealed that NAChR
subtypes are widely but discretely distributed in the brain and appear to be
associated with specific neuronal structures and functions. SIBIA focuses
certain of its drug discovery and development efforts on NAChR subtypes as drug
targets.
There is strong evidence that receptors within the NAChR system are
important in Parkinson's disease, Alzheimer's disease and other CNS disorders.
In particular, a deficit of such receptors has been demonstrated in Alzheimer's
disease and Parkinson's disease patients. Studies by the Company indicate that
specific NAChR subtypes modulate the release of both dopamine and acetylcholine,
each an important neurotransmitter, in specific and different brain regions. The
Company believes that it is possible to develop subtype-specific NAChR drugs to
ameliorate the effects of reduced concentrations of dopamine in Parkinson's
patients and acetylcholine in Alzheimer's patients.
SIBIA has identified and selected SIB-1508Y for development toward clinical
studies in Parkinson's disease. In contrast to current therapies which treat
only motor dysfunction, the Company believes SIB-1508Y may be effective for the
treatment of motor, affective and cognitive dysfunctions of Parkinson's disease.
SIB-1508Y exhibits subtype-selective NAChR agonist activity, releases dopamine,
acetylcholine and norepinephrine from selected brain regions and shows activity
in rodent and primate models of Parkinson's disease and in rodent models of
depression and cognitive function. Preclinical data to date suggests that
SIB-1508Y may be useful as a stand-alone therapeutic agent, as well as in
combination with L-dopa. The Company intends to file an IND with respect to
SIB-1508Y by the end of 1996 or early in 1997. SIB-1508Y may be studied in
disorders other than Parkinson's disease involving cognitive dysfunction of
attention and/or vigilance. SIBIA expects to establish corporate collaborations
for the advanced clinical study and commercialization of SIB-1508Y, if such
stages of development are reached. See "Risk Factors -- Absence of Developed
Products; Early Stage of Development" and "-- Dependence on Collaborative
Relationships."
SIBIA also is seeking to develop NAChR subtype-selective compounds for
other CNS disorders. In particular, it has identified the SIB-1553A series of
compounds. The Company's studies indicate that these compounds, like SIB-1508Y,
stimulate dopamine and acetylcholine release in specific brain regions but have
a different pharmacological profile. SIBIA believes these types of compounds may
have application in the symptomatic treatment of Alzheimer's and Parkinson's
diseases. Furthermore, SIBIA believes that subtype-specific NAChR compounds may
be useful for the treatment of other CNS disorders such as schizophrenia,
attention deficit disorder, chronic pain and eating disorders. The Company has
established criteria for the selection of preclinical development candidates for
Alzheimer's disease derived from SIBIA's NAChR drug discovery technology and
expects to identify such a candidate by the end of 1996.
EAAR Program
EAARs are divided into three categories: NMDA-type receptor/ion channels,
non-NMDA-type receptor/ion channels and metabotropic receptors, a category of G
protein-coupled receptors which do not directly flux calcium but rather function
via other cellular messenger molecules. Each category is comprised of multiple
subtypes that are activated by excitatory amino acid neurotransmitters such as
glutamate and which have unique anatomical distributions.
The NMDA-type and non-NMDA-type receptor/ion channel categories belong to
the class of ligand-gated ion channels, and a significant number of the
receptor/ion channel subtypes in these categories directly flux calcium into
neurons. These receptor/ion channel subtypes are important for diverse brain
functions, including memory and learning and are also implicated in
neurodegenerative processes. For example, the scientific community generally
agrees that glutamate is released by nerve cells subjected to ischemic
conditions, as occurs during and after a stroke. Normally, excess glutamate is
removed by nearby cells, but cells subjected to ischemia do not function
properly and are unable to dispose of this
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excess glutamate. This excess glutamate binds to EAARs on adjacent nerve cells,
leading to the influx of excess calcium and subsequent cell damage or cell
death. The newly injured nerve cells release more glutamate, and the process
repeats itself, spreading neuronal damage from cell to cell. For this reason,
there is significant interest in developing subtype-selective EAAR antagonists
as a potential treatment for stroke. The Company believes compounds that
modulate EAARs would selectively control calcium entry into nerve cells.
Metabotropic receptors have been less well-studied but also appear to be
involved in certain CNS disorders. Clones for genes encoding a number of
different and novel metabotropic EAARs have been isolated by SIBIA from human
brain tissue and have been demonstrated to be functional in several types of
assays. Stable cell lines containing certain of such receptors have been
prepared and are being used in SIBIA's functional high throughput screening
assays.
The Company believes drugs acting at specific EAAR subtypes may have
application to various CNS disorders, including stroke, epilepsy and head trauma
and certain neurodegenerative diseases such as Alzheimer's, Parkinson's and
Huntington's diseases. To date, developing therapeutically useful EAAR drugs has
been difficult. Traditional drug discovery approaches have produced molecules
with non-specific EAAR antagonist activity which generally produce many side
effects. SIBIA has discovered a number of different EAAR subtypes, each with
different pharmacological properties. By identifying receptor subtype-specific
EAAR antagonists, the Company believes it may be possible to effectively treat
certain CNS disorders without the side effects caused by non-selectively
blocking multiple EAAR subtypes.
The first EAAR gene was cloned at The Salk Institute, and SIBIA has an
exclusive license to the patents relating to this landmark research. SIBIA has
established a corporate collaboration with Ciba in the area of EAAR subtypes.
SIBIA and Ciba are screening compounds from the Ciba library in functional EAAR
subtype assays. In addition, SIBIA has identified the SIB-1757 series of
subtype-specific human metabotropic receptor antagonists. Under the terms of
their collaborative agreement, SIBIA and Ciba will work together to design and
optimize compounds based on this series, and such compounds would then be
further developed by Ciba. Based on preliminary studies, SIBIA believes that
subtype-specific metabotropic receptor antagonists may provide a novel approach
to the treatment of epilepsy. See "-- Strategic Alliances."
VGCC Program
The VGCC system is a major receptor/ion channel system involved in
regulating neuronal calcium flux and excitability. VGCCs have traditionally been
classified as L-, T-, N- and P-type calcium channels based on their biophysical
and pharmacological properties. SIBIA's pioneering research in the
characterization of VGCCs by molecular structure has led to the identification
of other classes of calcium channels as well as channel subtypes within these
classes, resulting in a new classification scheme. The critical role of VGCC
subtypes in the function and potential dysfunction of nerve cells indicates that
they may be targets for therapeutic intervention in a number of CNS disorders.
Calcium flux through distinct VGCC subtypes at presynaptic neuron terminals
controls the release of different neurotransmitters, including dopamine,
acetylcholine, serotonin and glutamate. The Company believes that the ability to
selectively control neurotransmitter release with subtype-selective VGCC drugs
could impact many CNS disorders as follows: (i) control of dopamine release may
have application in the treatment of Parkinson's disease, schizophrenia and
manic-depressive disorders; (ii) control of acetylcholine release may have
application in Alzheimer's disease; (iii) control of serotonin release may have
application in the treatment of migraine and depression; and (iv) control of
glutamate release may have application in the treatment of stroke, epilepsy and
pain. Furthermore, the Company believes modulation of synaptic activity by
controlling neurotransmitter release with VGCC subtype-selective drugs may prove
to be a more effective approach with broader applicability than current drug
therapy for CNS disorders.
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The Company currently has a collaborative agreement with Lilly related to
drug discovery for VGCC subtypes. The early focus of SIBIA's collaboration with
Lilly involved the subtypes of neuronal N-type VGCCs. The Lilly collaboration
has been expanded to include additional VGCC subtypes. SIBIA was the first to
clone and functionally express a human neuronal N-type VGCC, and the Company has
filed patent applications on this and subsequent discoveries. SIBIA has
generated stable mammalian cell lines which express functional VGCC subtypes and
has developed these cell lines into assays that currently are being employed by
both Lilly and SIBIA in efforts to discover selective drugs using high
throughput screening technology. Under the terms of the collaborative agreement,
Lilly and SIBIA will each seek to optimize and develop lead compounds discovered
from its own screening efforts. See "-- Strategic Alliances."
HUMAN PROTEASE TECHNOLOGY
SIBIA has developed technology concerning the role of degradative proteases
in neurodegenerative diseases and methods for controlling the activity of these
proteases. Neuronal protease activity leading to degenerative processes is most
notable during progressive diseases such as Alzheimer's disease and in phases of
neuronal cell death which accompany acute situations such as stroke and head
trauma. These proteases are generally believed to break down the neuronal
cytoskeleton leading to nerve cell death and play a fundamental role in the
degeneration of the nervous system. The Company believes that modulating the
activity of these proteases may have a therapeutic benefit by reducing neuronal
cell loss.
AMYLOID PRECURSOR PROTEIN
PROCESSING PATHWAYS
[DIAGRAM]
Processing of amyloid precursor protein (APP) by specific neuronal proteases
leads to the production of either the neuroprotective secreted APP(s-alpha)
molecule or the neurotoxic amyloid beta-protein (A-beta) molecule. Neurotoxic
A-beta is formed through the action of two successive protease cleavages on APP,
the first by beta-secretase and the second by gamma-secretase. Alternatively,
A-beta formation is precluded through a single protease cleavage of APP by
alpha-secretase which generates neuroprotective APP(s-alpha).
Inhibitors of the Formation of Amyloid Beta-Protein
SIBIA's major effort within its human protease technology is currently
focused on controlling degradative proteases which generate A-beta, the
neurotoxic fragment of APP. A-beta, which is derived from
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APP by the actions of specific proteases known as the beta- and
gamma-secretases, respectively, is generally understood to be the major
molecular key to Alzheimer's disease. A-beta is found at autopsy in senile
plaques and in deposits surrounding the small blood vessels in brain tissue,
both of which are diagnostic for Alzheimer's disease. A number of studies
indicate that mutations in the APP gene are associated with early-onset familial
Alzheimer's disease. The clinical presentation and histopathology of early-onset
Alzheimer's disease is indistinguishable from that seen in the more prevalent
late-onset Alzheimer's disease. The Company therefore believes the inhibition of
A-beta formation may be broadly applicable to early- and late-onset Alzheimer's
disease.
SIBIA has conducted extensive research concerning the role of APP in
Alzheimer's disease. It has developed technology related to the metabolism of
APP in Alzheimer's disease and methods for controlling the formation of A-beta.
The other important APP metabolic product, secreted APP(s-alpha), has been shown
in in vitro and in vivo studies to have neuroprotective properties and has been
shown by SIBIA to be significantly decreased in the cerebrospinal fluid of
Alzheimer's disease patients. SIBIA is seeking to develop compounds which
selectively modulate the enzymatic processing of APP, such that the formation of
A-beta is inhibited and that of APP(s-alpha) is enhanced, which SIBIA believes
could slow disease progression or possibly modify the underlying disease
process. The Company believes that, to date, research in other laboratories has
focused on either inhibiting the formation of A-beta or enhancing the formation
of APP(s-alpha), rather than modifying both processes simultaneously.
Other Applications
The Company believes that the protease inhibitor technology developed as
part of the A inhibitor program has applicability to other broad families of
proteases which are believed to play key roles in the neuronal cell death that
accompanies a variety of neurodegenerative disorders. SIBIA has established
screening assays which measure the ability of selected compounds to enhance,
modulate or inhibit the activity of some of these enzymes in vitro. Furthermore,
SIBIA has established, through a collaborative research effort with scientists
at McGill University, human neuronal cell-based assays for monitoring the
effects of selected protease inhibitors on apoptosis (programmed cell death).
See "-- Research Collaborations and Licenses."
HUMAN PROTEASE DRUG DEVELOPMENT PROGRAM
SIBIA has built an integrated drug discovery program for A-beta protein
technology incorporating molecular biology, cell biology, biochemistry,
pharmacology, combinatorial chemistry and medicinal chemistry. SIBIA has
developed neuronal-type cell lines able to process human APP and produce
APP(s-alpha) and A-beta, which are used as functional assays for compound
screening and drug development. Some cell lines express APP genes which contain
the mutations that give rise to familial Alzheimer's disease mentioned above.
A-beta, APP(s-alpha) and other processing fragments can be detected with the use
of various antibodies, and assays for these and other fragments have been
developed as part of SIBIA's drug discovery program. SIBIA's sophisticated
biochemical assays allow quantification of A-beta and APP(s-alpha) in biological
fluids derived from cultured cells, animals (normal and transgenic mice) and
sporadic and familial Alzheimer's patients. The Company believes the assays, and
the ability to biochemically evaluate the effect of test compounds on APP
processing in biological systems, and potentially in patients in clinical
trials, provide it a significant competitive advantage.
SIBIA has identified several series of small molecules which inhibit A-beta
production in vitro. The assay technology, together with the lead compounds
SIB-1281, SIB-1323 and SIB-1405 (beta-secretase and gamma-secretase inhibitors)
formed the basis for the SIBIA/Bristol-Myers Squibb collaboration. See "--
Strategic Alliances." The most advanced inhibitor, SIB-1281, is now being
evaluated in a battery of functional assays, including assays which test the
ability of drug candidates to block A-beta production in transgenic mice which
are able to process human APP to A-beta.
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STRATEGIC ALLIANCES
Strategic alliances with major pharmaceutical and biotechnology companies
are an integral part of SIBIA's business strategy. To date, SIBIA has
established collaborative agreements with Lilly, Ciba and Bristol-Myers Squibb.
There can be no assurance that the Company will maintain its existing
collaborative arrangements or establish any additional collaborative
arrangements or that such future relationships, if established, or its current
relationships will result in marketable pharmaceutical products. See "Risk
Factors -- Dependence on Collaborative Relationships."
Eli Lilly and Company
In May 1992, SIBIA entered into a collaborative agreement with Lilly under
which Lilly agreed to fund research for three years to develop and utilize
SIBIA's receptor/ion channel technology in the area of neuronal VGCCs for the
discovery of drugs that interact with such molecular targets. Coincident with
the original collaborative agreement, Lilly made a $4,000,000 equity investment
in SIBIA. In May 1995, the scope of this collaborative agreement was expanded to
include additional neuronal VGCC subtypes and to increase the Lilly milestone
payment obligations to SIBIA, and the term of the collaboration agreement was
extended for an additional two years. Under the agreement, both parties jointly
conduct research to develop the receptor/ion channel technology to identify
therapeutics based on VGCCs and can utilize this technology for this purpose
independently. During the extended term of the collaboration agreement, SIBIA
will continue to work exclusively with Lilly in the area of neuronal VGCCs and
Lilly will provide funding to support research at SIBIA. SIBIA retains the
rights to use the program technology for its own drug discovery efforts and may
screen molecules from other sources against VGCC subtypes and pursue development
of these molecules, subject to Lilly's right of first negotiation with respect
to such molecules discovered during the extended term of the collaboration
agreement. Upon expiration of the term of the collaboration, Lilly retains
non-exclusive rights to utilize certain of SIBIA's VGCC technology. Lilly has
been granted exclusive worldwide rights to manufacture and market products Lilly
discovers using SIBIA's VGCC technology, and SIBIA is entitled to receive
milestone payments at certain stages of the development of product candidates,
if any are identified, and royalties on sales of products that are developed, if
any are ever developed. Either party may terminate the collaboration agreement
upon six months' prior written notice, which may be provided at any time after
May 1996, or at any time pursuant to standard early termination provisions (such
as material breaches).
The Company has recently entered into discussions with Lilly regarding a
proposed amendment of its agreement with Lilly. As currently in effect, the
Company's agreement with Lilly expires pursuant to its terms in May 1997. The
Company anticipates that an amendment to the current agreement will be made that
would reduce the level of funding effective in November 1996, but may extend the
term of support one or more years. The Company also anticipates that under an
amendment to the current agreement Lilly may increase its utilization of the
Company's drug discovery technology for high-volume compound screening. However,
until its current agreement with the Company is amended, Lilly can terminate
such agreement and its collaboration with the Company upon six months' prior
written notice, which may be given at any time after May 1, 1996.
CIBA-GEIGY Limited
In October 1992, SIBIA entered into a three-year collaborative agreement
with Ciba which has been extended through September 1998 to develop and utilize
SIBIA's receptor/ion channel technology in the area of EAARs for the discovery
of drugs that interact with such molecular targets. Ciba has been granted
exclusive worldwide rights to manufacture and market products it or SIBIA
discovers using the program technology during the collaboration and SIBIA is
entitled to receive milestone payments at certain stages of the development of
product candidates, if any are identified, and royalties on sales of products
that are developed, if any are ever developed. During the term of the
collaboration agreement, SIBIA will work exclusively with Ciba in the area of
EAARs, and Ciba has an exclusive license during the term of the collaboration
agreement to use SIBIA's receptor assay technology. Upon expiration of the
collaboration agreement, SIBIA retains the rights to use the program technology
for its own drug discovery efforts and
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may screen molecules from other sources against EAARs and pursue development of
these molecules, subject to Ciba's right of first negotiation with respect to
such molecules discovered during the three years following expiration of the
collaboration agreement. The collaboration agreement may be terminated by either
party upon six months' prior written notice, which may be provided at any time
beginning March 1997, or at any time pursuant to standard early termination
provisions (such as material breaches and certain changes in control). Pursuant
to the extended agreement, Ciba will provide $500,000 to fund certain capital
expenditures (which may be credited against future milestone payments) and has
agreed to purchase $7,500,000 of equity from SIBIA, $5,000,000 of which will be
purchased at the closing of this offering.
On March 7, 1996, Ciba and Sandoz Ltd. announced that they had reached an
agreement to merge. The Company cannot predict the impact such merger will have
on the Company's collaboration with Ciba, and there can be no assurance that the
new combined entity will continue its collaboration with the Company or that it
will continue its current level of commitment to such collaboration.
Bristol-Myers Squibb Company
In August 1995, SIBIA entered into a collaborative agreement with
Bristol-Myers Squibb under which Bristol-Myers Squibb agreed to fund research
for a minimum of four years to discover and develop compounds able to
selectively modulate the processing of APP for the treatment of Alzheimer's
disease and related neurodegenerative disorders. During the joint research
effort, neither SIBIA nor Bristol-Myers Squibb may enter into any other
third-party agreements directed toward the discovery and development of products
for use in the area of APP metabolism. In addition, Bristol-Myers Squibb has the
sole discretion to determine which compounds, if any, it will pursue to develop.
Under the terms of the agreement, all preclinical and clinical development of
lead compounds will be undertaken by Bristol-Myers Squibb. SIBIA shall have the
right of first negotiation to obtain a license to certain compounds discovered
during the collaboration in the event Bristol-Myers Squibb elects not to pursue
the development of such compounds. Pursuant to the collaborative agreement,
except with regard to SIBIA's assay technology, SIBIA has granted to
Bristol-Myers Squibb an exclusive, worldwide, royalty-bearing license to
commercialize products arising out of the collaboration. Furthermore, upon the
termination of the collaboration, SIBIA and Bristol-Myers Squibb have granted to
one another non-exclusive licenses to the other's assay technology for the
discovery and development of new compounds. The agreement may not be terminated
prior to August 1999 without the parties' mutual consent, except pursuant to
standard early termination provisions (such as material breaches and certain
changes in control).
Coincident with the collaborative agreement, Bristol-Myers Squibb made an
equity investment in the amount of $7,000,000 and paid a license fee of
$3,000,000. Bristol-Myers Squibb is also obligated to make a further equity
investment of $6,000,000 upon the initiation of clinical trials relating to any
product developed from the collaboration, but not before January 1, 1997. In
addition to research funding, SIBIA is entitled to receive certain milestone
payments at certain stages during the development of product candidates, if any
are identified. Bristol-Myers Squibb will also pay SIBIA royalties on net sales
of products resulting from the joint research, if any are ever developed.
RESEARCH COLLABORATIONS AND LICENSES
Research collaborations with academic groups are also an integral part of
SIBIA's strategy because the Company believes that they enhance its leadership
position. Selected collaborations are described below.
The Salk Institute for Biological Studies
In 1988, SIBIA entered into a license agreement with The Salk Institute on
a number of NAChR subunit clones on which two U.S. patents have recently issued.
This agreement was amended in March 1996 such that the license to the issued
U.S. patents and related patent applications became an exclusive worldwide
license. Pursuant to the agreement, as amended, SIBIA is obligated to pay
royalties
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to The Salk Institute on sales of products resulting from The Salk Institute's
NAChR technology. In addition, the Company is required to make minimum annual
royalty payments to The Salk Institute beginning in 2002. Failure to pay such
royalties will result in the related license becoming non-exclusive.
In 1990, SIBIA entered into a three-year agreement with The Salk Institute
in the area of EAARs. This agreement provided for the support of research at The
Salk Institute by SIBIA and the transfer of research materials and research
results in the EAAR area from The Salk Institute to SIBIA. SIBIA also received
an exclusive worldwide license to certain EAAR-related patents and patent
applications held by The Salk Institute. The agreement was amended in March
1996. Pursuant to the agreement, as amended, the Company is required to make
certain annual minimum royalty payments to The Salk Institute beginning in 2002.
Failure to pay such royalties will result in the related license becoming
non-exclusive.
McGill University
SIBIA is collaborating with Dr. Andrea LeBlanc, Department of Neurology and
Neurosurgery at the Bloomfield Center for Research in Aging at McGill
University, to characterize the activities of certain of SIBIA's proprietary APP
processing modulators in human neuronal and astrocytic cultures by determining
their effects on the generation of APP processing products.
The Rockefeller University
SIBIA is collaborating with Dr. Rong Wang, a researcher in the Mass
Spectrometry Laboratory at Rockefeller, on the detection and quantitation of A
and related APP processing fragments in tissue culture, cerebrospinal fluid and
plasma samples.
Mt. Sinai School of Medicine
SIBIA is collaborating with Dr. John Morrison, Professor and Co-Director,
Dr. Arthur M. Fishberg Research Center for Neurobiology, the Mt. Sinai School of
Medicine, on the preparation of antibodies against EAAR subtypes and the use of
these antibodies to map the receptor subtype distribution in the human brain.
University of Chicago
SIBIA is collaborating with Dr. Richard J. Miller, Professor, Department of
Pharmacology and Physiological Sciences, University of Chicago, on the
biophysical and pharmacological characterization of certain VGCC subtypes.
University of Bristol, England
SIBIA is collaborating with Professor Timothy Gallagher, School of
Chemistry, University of Bristol, on the design and synthesis of novel
derivatives of a naturally occurring nicotinic acetylcholine agonist. Professor
Gallagher's work complements and expands SIBIA's internal drug discovery program
in this area.
PATENTS AND PROPRIETARY RIGHTS
The Company's policy is to file patent applications to protect technology,
inventions and improvements that are important to the development of its
business. The Company also relies upon trade secrets, know-how, continuing
technological innovations and licensing opportunities to develop and maintain
its competitive position. Since its inception, SIBIA has been granted 25 U.S.
and foreign patents and it has a total of approximately 120 pending U.S. and
foreign applications.
SIBIA has 34 pending applications for U.S. patents on its technology
relating to drug discovery for various CNS diseases and disorders. Fifteen of
the currently pending U.S. patent applications cover the composition or use of
VGCC genes and the encoded subtypes. SIBIA has two issued patents which include
claims to DNAs encoding key structural components of VGCCs which can be utilized
in assays to
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identify compounds that modulate VGCC function. SIBIA also has a U.S. patent
which covers an assay method for the identification of modulators of VGCCs
containing an (1C), (1D) and/or (2) subunit, singly or in combination. SIBIA has
recently been notified of the intent to grant a European patent covering DNA
encoding VGCC (2) subunits and cells expressing the same.
Seven of SIBIA's pending U.S. patent applications cover the composition or
use of human NAChR genes and encoded subtypes. SIBIA also holds an issued patent
with claims to DNAs encoding key structural components of NAChRs. In addition,
SIBIA has an exclusive license from The Salk Institute to DNAs encoding various
NAChR subunits.
Within the EAAR class, SIBIA is actively pursuing three U.S. patent
applications covering human NMDA receptor genes and encoded subtypes and three
U.S. patent applications covering human metabotropic EAAR genes and encoded
subtypes that were filed in connection with ongoing research. Recently, SIBIA
received a Notice of Allowance from the United States Patent and Trademark
Office ("PTO") to claims covering DNAs encoding human metabotropic receptors
mGluR1b, mGluR2, mGluR3 and mGluR5a-c and cells containing the same. SIBIA also
has an exclusive license from The Salk Institute to DNAs encoding various NMDA-
and non-NMDA-type ligand-gated EAA receptor/ion channel subtypes.
Several of SIBIA's U.S. patent applications relate to functional screening
techniques that can be utilized in conjunction with receptor/ion channel
compositions for identifying potential drugs for the treatment of CNS disorders.
Two issued patents cover methods and compositions for identifying
receptor-modulating compounds based on detection of reporter gene transcription
in recombinant cell systems. In addition, six patent applications cover
fluorescence-based automated systems for high throughput functional screening of
receptor-modulating compounds.
Additionally, SIBIA has eleven U.S. patent applications covering the
composition or use of compounds which modulate the activity of NAChRs for the
treatment of diseases involving these receptors. Twelve applications have been
filed to cover the composition or use of compounds that modulate the processing
of proteins implicated in Alzheimer's disease.
Applications for foreign patents corresponding to the majority of the above
described U.S. applications covering receptor compositions and uses and
screening technologies have also been filed.
The patent positions of pharmaceutical and biotechnology firms, including
SIBIA, are uncertain and involve complex legal and factual questions. In
addition, the coverage claimed in a patent application can be significantly
reduced before the patent is issued. Consequently, the Company does not know
whether any more of its applications will result in the issuance of patents or,
if any patents are issued, whether they will provide significant proprietary
protection or will be circumvented or invalidated. Since patent applications in
the United States are maintained in secrecy until a patent issues, and since
publication of discoveries in the scientific or patent literature often lag
behind actual discoveries, the Company cannot be certain that it was the first
creator of inventions covered by its pending patent applications or that it was
the first to file patent applications for such inventions. Moreover, the Company
may have to participate in interference proceedings declared by the PTO to
determine priority of invention, which could result in substantial cost to the
Company, even if the eventual outcome is favorable to the Company. Similarly,
the Company may have to participate in opposition proceedings with respect to
granted European patents. The Company is aware of a third-party patent
application that may elicit an interference proceeding with one of the Company's
patent applications in the PTO. In addition, the Company believes that certain
claims in three of its other patent applications may elicit such proceedings as
well. Further, the Company currently is opposing an issued patent of a third
party in Europe. There can be no assurance that the Company will prevail in
these proceedings. Also, there can be no assurance that the validity of the
Company's patents, if issued, would be upheld by a court of competent
jurisdiction. An adverse outcome in patent prosecution or in litigation with
respect to the validity of any of the Company's patents could subject the
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties or require the Company to cease using such
technology.
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In addition, the recombinant Pichia pastoris yeast expression system
developed at SIBIA is protected by several patents that have issued to Phillips
Petroleum. These patents include claims to key Pichia gene regulatory elements,
marker genes and transformation methods that form the basis of the recombinant
expression system. SIBIA retains full rights to the general expression system
protected by these patents but does not have the right to sublicense this
technology. SIBIA has filed numerous applications and has been granted five U.S.
patents pertaining to Pichia-based recombinant systems for the production of
certain proteins including human epidermal growth factor, human IGF-1 and
aprotinin. SIBIA also has patents and patent applications in other areas such as
therapeutic peptides, bioagriculture and vaccine-related technology. See "Risk
Factors -- Uncertainty Regarding Patents and Proprietary Rights."
COMPETITION
Competition to develop drugs to treat CNS disorders is intense and expected
to increase as knowledge and interest in the disorders addressed by the products
the Company is seeking to develop increases. The Company's most significant
competitors are fully integrated pharmaceutical companies and established
biotechnology companies. Smaller companies may also prove to be significant
competitors, particularly through collaborative arrangements with large
pharmaceutical companies. In addition, the Company faces competition from
academic institutions, governmental agencies and other public and private
research organizations which conduct research, seek patent protection, and
establish collaborative arrangements for product and clinical development and
marketing. Furthermore, these companies and institutions compete with the
Company in recruiting and retaining highly qualified scientific and management
personnel.
Many of the Company's competitors have substantially greater financial,
technical and human resources than the Company and have significant products
approved or in development. In addition, many of these competitors have
significantly greater experience than the Company in undertaking preclinical
testing and clinical trials of new pharmaceutical products and in obtaining FDA
approval for products more rapidly than the Company. The Company has not
conducted clinical trials with respect to any of its compounds under development
and has not sought the approval of the FDA for any product based on such
compounds. Furthermore, if the Company is permitted to commence commercial sales
of products that it may develop, it will also be competing with respect to
manufacturing efficiency and marketing capabilities, areas in which it has no
experience.
Any product that the Company may succeed in developing, and for which it
gains regulatory approval, must then compete for market acceptance and market
share. For certain of the Company's potential products, an important competitive
factor will be the timing of market introduction. Accordingly, the Company
expects that the relative speed with which companies can develop products,
complete the clinical testing and approval processes and supply commercial
quantities of the product to the market will be important competitive factors.
With respect to clinical testing, competition may delay progress by limiting the
number of clinical investigators and patients available to test the Company's
potential products.
In addition to the above factors, competition is based on product efficacy
and safety, the timing and scope of regulatory approvals, availability of
supply, marketing and sales capability, price, patent position and reimbursement
coverage. See "Risk Factors -- Intense Competition; Rapid Technological Change."
MANUFACTURING
The Company currently has no manufacturing facilities for clinical or
commercial production of any compounds currently under development or the
manufacture and distribution of products that may be developed. The Company is
currently relying on third-party manufacturers to produce its compounds for
preclinical and clinical purposes. Furthermore, the compounds under development
by the Company have never been manufactured on a commercial scale and may not be
able to be manufactured at a cost or in quantities to make commercially viable
products.
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The Company intends to establish arrangements with third-party
manufacturers to supply compounds for preclinical and clinical trials and
commercial sales of products that may be developed, as well as for the
packaging, labeling and distribution of such products. If the Company is unable
to contract for a sufficient supply of its compounds on acceptable terms, the
Company's preclinical and clinical testing schedule would be delayed, resulting
in the delay of submission of products for regulatory approval and initiation of
new development programs, which would have a material adverse effect on the
Company's business. If the Company should encounter delays or difficulties in
establishing relationships with manufacturers to produce, package and distribute
products that it may develop, market introduction or penetration of such
products would be adversely affected. See "Risk Factors -- No Manufacturing or
Marketing Capability; Reliance on Third-Party Manufacturers and Marketers;
Absence of Sales and Marketing Experience."
SALES AND MARKETING
The commercialization of products, such as those that may be developed by
the Company, is an expensive and time-consuming process. The Company has no
experience in sales, marketing or distribution. In order to market directly any
products that the Company may develop, the Company must develop a marketing and
sales force with technical expertise and supporting distribution capability.
Alternatively, the Company may seek to obtain the assistance of a pharmaceutical
or biotechnology company with a large distribution system and a large direct
sales force. See "Risk Factors -- No Manufacturing or Marketing Capability;
Reliance on Third-Party Manufacturers and Marketers; Absence of Sales and
Marketing Experience."
GOVERNMENT REGULATION
The manufacturing and marketing of pharmaceutical products in the United
States requires the approval of the FDA under the federal Food, Drug and
Cosmetic Act. Similar approvals by the comparable agencies are required in most
foreign countries. The FDA has established mandatory procedures and safety
standards that apply to the preclinical and clinical testing, manufacture and
marketing of pharmaceutical products. Obtaining FDA approval for a new
therapeutic takes several years and involves substantial expenditures.
Pharmaceutical manufacturing facilities are also regulated by state, local and
other authorities.
As an initial step in the FDA regulatory approval process, preclinical
studies are typically conducted in animal models to assess a drug's efficacy and
to identify potential safety problems. The results of these studies are
submitted to the FDA as part of an IND, which is filed to comply with FDA
regulations prior to beginning clinical trials.
Clinical trials are typically conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into
healthy human subjects, the drug is tested for safety (adverse effects), dosage
tolerance, metabolism, distribution, excretion and pharmacodynamics (clinical
pharmacology). Phase II involves studies in a limited patient population to (i)
assess the potential of the drug for specific, targeted indications; (ii)
evaluate dosage tolerance and optimal dosage; and (iii) identify possible
adverse effects and safety risks. When a compound is found to be effective and
to have an acceptable safety profile in Phase II evaluations, Phase III trials
are undertaken to further evaluate clinical efficacy and to further test for
safety within an expanded patient population at geographically dispersed
clinical study sites. Data from clinical trials are submitted to the FDA in a
New Drug Application ("NDA") or Product License Application ("PLA"). Preparing
an NDA or PLA involves considerable data collection, verification, analysis and
expense.
The testing and approval process requires substantial time and effort and
there can be no assurance that any approval will be granted on a timely basis,
if at all. The time period required for NDA review and approval may be affected
by a number of factors, including the severity of the disease, the availability
of alternative treatments and the risks and benefits demonstrated in clinical
trials. Additional animal studies or clinical trials may be requested during the
FDA review period. The FDA may ask one of its advisory
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committees to aid in its assessment of the drug. All of these factors may delay
marketing approval. The FDA may also require post-marketing testing to monitor
for adverse effects, which can involve significant expense. FDA approval is
limited to specified indications. Moreover, the product label and promotional
labeling and prescription drug advertising are highly regulated by the FDA under
the federal Food, Drug and Cosmetic Act. In order to permit promotion of the
approved product for indications not included in the scope of the original
approval, further clinical trials and FDA approval may be necessary.
NDA approval requires, among other things, that the prospective
manufacturer's quality control and manufacturing procedures conform to GMP
regulations. All manufacturing facilities, whether foreign or domestic, may be
subjected to a pre-NDA approval inspection. Additionally, domestic manufacturing
facilities are subject to biennial FDA inspections and foreign manufacturing
facilities are subject to periodic inspection by foreign regulatory authorities
as well as by the FDA where the FDA has a reciprocal inspection agreement with
the foreign regulatory authorities.
For clinical investigation and marketing outside the United States, the
Company also is subject to foreign regulatory requirements governing clinical
trials and marketing approval for drugs. The requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary widely
from country to country. The Company's approach to the European regulatory
process involves the identification of respected clinical investigators in the
member states of the European Economic Community ("EEC") to conduct clinical
studies. The Company intends to design these studies to meet both FDA and EEC
standards. Provided regulatory harmonization is finalized in the EEC, these
studies are designed to develop a regulatory package sufficient for
multi-country approval in the Company's European target markets without the need
to duplicate studies for individual country approvals. This approach also takes
advantage of regulatory requirements in some countries, such as in the United
Kingdom, which allow Phase I studies to commence after appropriate toxicology
and preclinical pharmacology studies but prior to formal regulatory approval.
By the end of 1996 or early in 1997, the Company intends to file an IND
with respect to SIB-1508Y for the treatment of Parkinson's disease. However,
there can be no assurance that the Company will meet this intended filing date,
if at all. See "Risk Factors -- Absence of Developed Products; Early Stage of
Development."
EMPLOYEES
As of December 31, 1995, the Company employed 89 full-time employees, 28 of
whom hold Ph.D. degrees. Eighty employees are engaged in research and
development activities and nine are employed in finance and general
administrative activities. As the Company expands its operations after this
offering, the Company will hire additional personnel. The Company believes that
it maintains good relations with its employees.
FACILITIES
The Company's facilities are located in La Jolla, California. The Company
leases approximately 47,417 square feet of space used for laboratory and
administrative purposes of which approximately 13,609 square feet is sublet.
SIBIA believes that its present facility will be adequate to conduct its
research activities through December 1997, when its current lease expires. The
Company has an option to extend its lease for an additional five years.
Management believes that it will be able to secure additional space at
commercially reasonable rates during the terms of such lease, if necessary.
LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
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<PAGE> 45
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company and
their ages as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- ------------------------------------------------
<S> <C> <C>
William T. Comer, Ph.D.(1)................. 59 President, Chief Executive Officer and Director
Michael M. Harpold, Ph.D. ................. 46 Vice President, Research
G. Kenneth Lloyd, Ph.D. ................... 51 Vice President, Pharmaceuticals -- Biology
Ian A. McDonald, Ph.D. .................... 48 Vice President, Pharmaceuticals -- Chemistry
Michael J. Dunn............................ 40 Vice President, Business Development
Thomas A. Reed............................. 39 Vice President, Finance/Administration and Chief
Financial Officer
William R. Miller(2)....................... 67 Chairman of the Board of Directors
Francis H.C. Crick, Ph.D. ................. 79 Director
Stanley T. Crooke, M.D., Ph.D.(3).......... 50 Director
Gunnar Ekdahl(2)........................... 53 Director
Frederick B. Rentschler(3)................. 57 Director
James D. Watson, Ph.D.(2).................. 67 Director
</TABLE>
- ---------------
(1) Member of the Non-Officer Stock Option Committee.
(2) Member of the Compensation and Stock Option Committee.
(3) Member of the Audit Committee.
Dr. Comer has been President, Chief Executive Officer and a Director of
SIBIA since April 1991. Prior to joining SIBIA, Dr. Comer worked for
Bristol-Myers Squibb for nearly 30 years in various scientific and management
positions. He served as Executive Vice President, Science & Technology, and then
President, Pharmaceutical Research & Licensing, at Bristol-Myers Squibb from
April 1989 until April 1990. Thereafter, he served as Senior Vice President,
Strategic Management -- Pharmaceuticals and Nutritionals at Bristol-Myers Squibb
until March 1991. Dr. Comer received a B.A. degree from Carleton College and a
Ph.D. in Organic Chemistry and Pharmacology from the University of Iowa. Dr.
Comer is currently a director of Houghten Pharmaceuticals, Inc., Cytel
Corporation and the University of California, San Diego ("UCSD") Cancer Center
Foundation. He is also a member of the Governor's Council on Biotechnology, the
University of California Breast Cancer Research Council and the UCSD Industrial
Advisory Committee for the Department of Chemistry.
Dr. Harpold has been Vice President, Research since 1986 and was a founding
member of SIBIA's scientific staff and Research Director from 1981 to 1986. From
1979 to 1981, he was Assistant Professor of Biochemistry at the University of
Southern California School of Medicine and Member of the Kenneth Norris, Jr.
Comprehensive Cancer Center. Dr. Harpold received a B.S. degree from Texas
Christian University and a Ph.D. in Developmental and Molecular Cell Biology
from Tulane University and was a Helen Hay Whitney Research Fellow at The
Rockefeller University from 1976 to 1979.
Dr. Lloyd has been Vice President, Pharmaceuticals -- Biology since 1994.
He joined SIBIA in October 1992. He received his B.S. and M.S. degrees from
McGill University and a Ph.D. from the University of Toronto. He then held a
postdoctoral position at F. Hoffman La Roche & Co. Ltd. in Basel, Switzerland.
In 1977, Dr. Lloyd moved to Synthelabo S.A. where he held various management
positions culminating with six years as Associate Director, Biology with
responsibility for CNS, cerebrovascular, bronchopulmonary, gastrointestinal and
inflammation research. From 1990-1992, Dr. Lloyd was Assistant Vice President of
Research and Director of Research (U.K.) for Wyeth-Ayerst Research.
Dr. McDonald has been Vice President, Pharmaceuticals -- Chemistry since
1994. He joined SIBIA as Director of Chemistry in February 1993. He received his
B.S. degree and Ph.D. from the School of
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<PAGE> 46
Chemistry, the University of Western Australia. He completed his postdoctoral
studies at the Organic Chemistry Institute of the University of Zurich,
Switzerland. He has held senior scientist positions at the State Health
Laboratory Service in Perth, Australia, at the Australian National University;
the Centre de Recherche Merrell International, Strasbourg, France; and he was a
Group Leader and Senior Research Scientist, Marion Merrell Dow Research
Institute (formerly Merrell Dow), Cincinnati, Ohio during the period July 1985
to February 1993.
Mr. Dunn has been with SIBIA since the Company's inception. He has been
Vice President, Business Development since August 1995. From 1992 to 1995, he
was Director, Business Development and was Manager of Business Development from
September 1991 to April 1992. He received a B.A. degree from the University of
Chicago and an M.B.A. degree from the University of San Diego.
Mr. Reed has been with SIBIA since the Company's inception. He has been
Vice President, Finance/Administration and Chief Financial Officer since August
1995. From 1991 to 1995, he was Director, Finance and was Manager of Business
and Market Evaluation from January 1989 to April 1991. He received a B.A. degree
from the University of California, Berkeley and an M.B.A. degree from the
University of San Diego.
Mr. Miller has been a Director since August 1991 and Chairman of the Board
of Directors since August 1992. In January 1991, he retired as Vice Chairman of
the Board of Directors of Bristol-Myers Squibb; he had been a director of
Bristol-Myers Squibb since 1985. Mr. Miller served as Chairman of the Board of
the Pharmaceutical Manufacturers Association from 1986 until 1987 and was Vice
President and a member of the council of the International Federation of
Pharmaceutical Manufacturers Associations from 1988 until 1990. Mr. Miller is a
member of the Board of Trustees of the Cold Spring Harbor Laboratory and is a
director of Isis Pharmaceuticals, Inc., St. Jude Medical, Inc., Westvaco
Corporation and several private companies. In addition, Mr. Miller serves as
Chairman of the Board of Directors of Vion Pharmaceuticals, Inc. (formerly
OncoRx).
Dr. Crick has been a Director since November 1994. Dr. Crick is President
Emeritus of The Salk Institute. Dr. Crick is also the J.W. Kieckhefer
Distinguished Research Professor at The Salk Institute and Adjunct Professor of
Psychology at UCSD. Dr. Crick majored in physics at University College, London.
In 1949, he joined the Medical Research Council Unit in the Cavendish Laboratory
at Cambridge University as a Laboratory Scientist. He received a Ph.D. from
Cambridge University in 1954. In 1961 he became a founding member of the Medical
Research Council's Laboratory of Molecular Biology at Cambridge. With three
other scientists (Dr. Maurice Wilkins, the late Dr. Rosalind Franklin at King's
College, London, and Dr. James Watson), Dr. Crick was responsible in 1953 for
the discovery of the molecular structure of deoxyribonucleic acid ("DNA") -- the
biological structure which makes possible the transmission of inherited
characteristics. Dr. Crick was elected a Fellow of The Royal Society in 1959. He
is a foreign member of several national academies including the U.S. National
Academy of Sciences. In 1960, he was a recipient of an Albert Lasker Award of
the American Public Health Association for work in medical research. The
following year he was awarded the Prix Charles Leopold Mayer of the French
Academy of Sciences and the Research Corporation Award. In 1962, he received the
Gairdner Award of Merit for outstanding medical research from the Gairdner
Foundation in Toronto, which was followed by the Nobel Prize for Physiology or
Medicine, shared with Professors Watson and Wilkins. In 1992, he received the
Order of Merit from the Queen of England.
Dr. Crooke has been a Director since April 1992. He is the founder of Isis
Pharmaceuticals, Inc. and has been its Chief Executive Officer since its
inception in January 1989 and its Chairman of the Board of Directors since
February 1991. From 1980 until January 1989, Dr. Crooke was employed by
SmithKline Beckman Corporation, most recently as President of Research and
Development of SmithKline & French Laboratories. Dr. Crooke received a Ph.D. and
an M.D. degree from Baylor College of Medicine. He is a director of
GeneMedicine, Inc. and the Biotechnology Industry Organization and is Adjunct
Professor of Pharmacology at the Baylor College of Medicine and UCSD.
Mr. Ekdahl has been a Director since 1995. He was appointed Chairman of the
Board of Skandigen AB in 1995. Mr. Ekdahl has extensive experience with Swedish
finance and investment companies and
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<PAGE> 47
was President and Chief Executive Officer of Latour AB from 1985 to 1992, which
has controlling holdings in large Swedish industrial companies. Since 1992, Mr.
Ekdahl has been active as a non-executive board member of several Swedish
companies, including Chairman of Arcona AB, G&L Beijer AB, Lofbergs Lila AB,
Philipson Bil AB and Skandigen AB. Mr. Ekdahl received his B.A. degree from the
Stockholm School of Economics.
Mr. Rentschler has been a Director since January 1993. Since 1990, he has
been a director of several U.S. companies, including The Salk Institute. In
addition, he was President and Chief Executive Officer of Northwest Airlines
during 1990. From 1986 to 1987 Mr. Rentschler held several positions at Beatrice
Company, the most recent being President and Chief Executive Officer. From 1980
to 1984, Mr. Rentschler was President and Chief Executive Officer of Hunt-Wesson
Foods, Inc. Prior to joining Hunt-Wesson Foods, Inc., Mr. Rentschler was
President and a Board member of Armour International from 1976 to 1977 and
President of Armour-Dial from 1977 to 1979. Mr. Rentschler received his B.A.
degree from Vanderbilt University and his M.B.A. degree from Harvard Business
School. He joined The Salk Institute Board of Trustees in 1988 and has been
Chairman of the Board of Trustees since November 1995.
Dr. Watson has been a Director since July 1992. Dr. Watson was a founder of
the Cold Spring Harbor Laboratory and since its inception in 1968 served as a
director until his appointment as President in 1994. Prior to moving to the Cold
Spring Harbor Laboratory, Dr. Watson was a member of the Department of Biology
(then Molecular Biology) at Harvard University. Between 1988 and 1992, he
directed the National Center for Human Genome Research at the National
Institutes of Health. In 1962, Dr. Watson, along with Dr. Crick and Dr. Wilkins,
was awarded the Nobel Prize in Physiology or Medicine for discovering the
structure of DNA. Dr. Watson has won numerous awards in addition to the Nobel
Prize and is a member of the U.S. National Academy of Sciences, the Royal
Society in London, the Danish Academy of Arts and Sciences and the Academy of
Sciences of Russia. Dr. Watson holds a B.S. degree from the University of
Chicago and a Ph.D. from Indiana University and he has also received honorary
degrees from 15 colleges and universities. He is a director of the Pall
Corporation and a director of Diagnostics Products Corporation.
All members of the Board of Directors hold office until the next annual
meeting of stockholders or the election and qualification of their successors.
The Company's Certificate of Incorporation provides that the authorized number
of directors may only be changed by resolution of the Board of Directors. The
authorized number of directors is currently set at seven. The Company's
Certificate of Incorporation provides that directors may be removed for cause by
the affirmative vote of the holders of a majority of the Common Stock and
without cause by the affirmative vote of the holders of at least 66 2/3% of the
Common Stock.
The directors are eligible to be granted stock options under the Company's
stock option plans. See "-- Stock Plans." In 1995, Stanley T. Crooke, Francis
H.C. Crick, Frederick B. Rentschler, and James D. Watson were each granted
options to purchase 11,750 shares of Common Stock and William R. Miller was
granted options to purchase 17,625 shares of Common Stock. These options were
non-qualified stock options having an exercise price of $1.23 per share and
expire in December 2000.
Non-employee directors of the Company receive an annual retainer of
$15,000, with the Chairman of the Board receiving $25,000, and are reimbursed
for certain expenses for each Board and committee meeting attended. Non-employee
directors are also entitled to receive options under the Company's Non-Employee
Director Stock Option Plan. See "-- Stock Plans."
Each officer serves at the discretion of the Board of Directors. There are
no family relationships among any of the Directors, officers or key employees of
the Company.
COMMITTEES
The Board's Audit Committee consists of Dr. Stanley T. Crooke and Mr.
Frederick B. Rentschler. The functions of the Audit Committee are to recommend
the selection of independent accountants to the Board of Directors, to review
the scope and results of the year-end audit with management and the
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<PAGE> 48
independent accountants and to review the Company' s accounting practices and
its systems of internal accounting controls.
The Board's Compensation and Stock Option Committee consists of Mr. Miller,
Mr. Ekdahl and Dr. Watson. The functions of the Compensation and Stock Option
Committee are to review and approve the salaries, bonuses and other benefits
payable to the Company's executive officers and to administer the Company's
stock option and employee stock purchase plans.
The Board's Non-Officer Stock Option Committee consists of William T. Comer
as the sole member of such committee. The function of the Non-Officer Stock
Option Committee is to review and approve stock option grants under the
Company's 1996 Equity Incentive Plan in accordance with guidelines approved by
the Board to eligible persons under the plan that are not subject to Section 16
of the Securities Exchange Act of 1934, as amended, by reason of their status as
an officer, director or stockholder of the Company.
SCIENTIFIC ADVISORY BOARD
SIBIA has a Scientific Advisory Board that provides consulting services to
SIBIA. The Scientific Advisory Board meets as a group at least twice each year,
and on an individual basis with management when so requested, to discuss
research priorities and new developments. The Scientific Advisory Board consists
of independent professionals with recognized expertise in relevant sciences or
clinical medicine who advise the Company about present and long-term scientific
planning, research and development. SIBIA's Scientific Advisory Board consists
of the following persons:
Dennis W. Choi, M.D., Ph.D., Professor and Head of Neurology at Washington
University Medical School and Neurologist-in-Chief at Barnes-Jewish Hospital.
Dr. Choi is a molecular neuropharmacologist and clinical neurologist, and his
research is directed toward understanding the basic mechanisms which underlie
brain or spinal cord injury in acute or chronic neurological disease states. In
1992 he received the Wakeman Award and in 1994 the Silvio Cone Decade of the
Brain Award for his research.
Francis H.C. Crick, Ph.D. See "-- Directors, Executive Officers and Key
Employees."
Ronald M. Evans, Ph.D., Professor and Director of the Gene Expression
Laboratory and Investigator of the Howard Hughes Medical Institute at The Salk
Institute. Dr. Evans' research focuses on the regulation of gene expression,
with intracellular receptor systems being the primary experimental models. He is
a member of the U.S. National Academy of Sciences.
Stephen F. Heinemann, Ph.D., Professor and Director of the Molecular
Neurobiology Laboratory at The Salk Institute. Dr. Heinemann's research focuses
on the structure and function of brain receptors and their role in neurological
diseases and mental illness. He is a member of the U.S. National Academy of
Sciences.
Lewis L. Judd, M.D., Professor and Chairman of the Department of
Psychiatry, UCSD. Dr. Judd was the Director of the National Institute of Mental
Health and is an acknowledged expert on neuropsychiatric diseases. He is a
member of the U.S. National Academy of Sciences and the National Institute of
Medicine.
Richard J. Miller, Ph.D., Professor in the Department of Pharmacology and
Physiological Sciences and member of the Committee on Neurobiology, University
of Chicago. Dr. Miller is a neuropharmacologist whose current research involves
different neuronal receptor/ion channel systems that flux calcium.
Sangram Sisodia, Ph.D., Associate Professor of Pathology and Neuroscience,
The Johns Hopkins University School of Medicine. Dr. Sisodia is a molecular
neurobiologist who is studying the molecular basis of Alzheimer's disease.
James D. Watson, Ph.D. See "-- Directors, Executive Officers and Key
Employees."
There is no fixed term of service on the Scientific Advisory Board; current
members may resign or be removed at any time, and additional members may be
appointed by SIBIA. Members do not serve on an
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<PAGE> 49
exclusive basis to SIBIA, are not under contract with SIBIA (other than with
respect to confidentiality obligations) and are not obligated to present
corporate opportunities to SIBIA. To the Company's knowledge, none of the
members of the Scientific Advisory Board is working on the development of a
competitive product. Inventions or products developed by members of the
Scientific Advisory Board who are not otherwise affiliated with SIBIA will not
become SIBIA's property but will remain the member's property.
Members of the Scientific Advisory Board generally receive a stock option
grant upon joining such Board as well as $10,000 per year for their services.
All members receive reimbursement for expenses incurred in traveling to and
attending meetings on behalf of SIBIA. Certain members of the Scientific
Advisory Board have previously received stock options under the Company's stock
option plans in amounts determined from time-to-time by the Board of Directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent permitted by Delaware law. The Company is also
empowered under its Bylaws to enter into indemnification contracts with its
directors and officers and to purchase insurance on behalf of any person whom it
is required or permitted to indemnify. Pursuant to this provision, the Company
has entered into indemnity agreements with each of its directors and officers.
In addition, the Company is required, subject to certain exceptions, to advance
all expenses incurred by any director or executive officer in connection with a
completed, pending or threatened action, suit or proceeding upon receipt of an
undertaking by such director or executive officer to repay all amounts advanced
by the Company on such person's behalf if it is ultimately determined that such
person is not entitled to be indemnified under the Bylaws or otherwise.
The Company's Certificate of Incorporation provides that to the fullest
extent permitted by Delaware law, the Company's directors will not be personally
liable to the Company and its stockholders for monetary damages for any breach
of a director's fiduciary duty. The Company's Certificate of Incorporation does
not, however, eliminate the duty of care, and in appropriate circumstances
equitable remedies such as an injunction or other forms of non-monetary relief
would remain available under Delaware law. Each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
Company, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for acts or omissions that the director
believes to be contrary to the best interests of the Company or its
stockholders, for any transaction from which the director derived an improper
personal benefit, for acts or omissions involving a reckless disregard for the
director's duty to the Company or its stockholders when the director was aware
or should have been aware of a risk of serious injury to the Company or its
stockholders, for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the Company
or its stockholders, for improper transactions between the director and the
Company and for improper distributions to stockholders and loans to directors
and officers. This provision also does not affect a director's responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent.
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<PAGE> 50
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered to the Company in all capacities during the year
ended December 31, 1995 by (i) the Company's Chief Executive Officer and (ii)
the Company's five other most highly compensated executive officers who were
serving as executive officers as of December 31, 1995 (together, the "Named
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
-------------------- --------------------- ALL OTHER
NAME AND SALARY BONUS SECURITIES UNDERLYING COMPENSATION
PRINCIPAL POSITION ($)(1) ($) OPTIONS(#)(2) ($)(3)
- ----------------------------------- -------- ------- --------------------- ------------
<S> <C> <C> <C> <C>
William T. Comer, Ph.D. ........... $239,872 $18,000 12,925 $ 936
Chief Executive Officer and
President
Michael M. Harpold, Ph.D. ......... 179,495 9,650 7,050 910
Vice President, Research
G. Kenneth Lloyd, Ph.D............. 174,870 9,000 6,815 10,885(4)
Vice President,
Pharmaceuticals -- Biology
Ian A. McDonald, Ph.D.............. 150,380 9,150 5,875 10,759(4)
Vice President,
Pharmaceuticals -- Chemistry
Michael J. Dunn.................... 88,683 4,700 15,275(5) 445
Vice President, Business
Development
Thomas A. Reed..................... 100,940 5,200 15,745(5) 507
Vice President,
Finance/Administration and
Chief Financial Officer
</TABLE>
- ---------------
(1) Includes base salary and contributions made by the Company to each person's
401(k) plan account.
(2) As adjusted to give effect to the 2.35-for-1 split of the outstanding shares
of Common Stock.
(3) Includes life insurance premiums paid by the Company on behalf of such
person.
(4) Includes $10,000 relating to the forgiveness of certain loans made by the
Company to such persons.
(5) Includes options to purchase 11,750 shares of Common Stock granted pursuant
to the Change of Control Plan. See "-- Change of Control Arrangements."
CHANGE OF CONTROL ARRANGEMENTS
In November 1994, the Company adopted a Management Change of Control Plan
(the "Change of Control Plan") applicable to William T. Comer, Michael J. Dunn,
Michael M. Harpold, G. Kenneth Lloyd, Ian A. McDonald and Thomas A. Reed. The
Change of Control Plan was amended by the Board in December 1995 and March 1996.
The Change of Control Plan, as amended, generally provides for the payment of
benefits to its participants upon the occurrence of certain defined change of
control events. Among the benefits provided are: (i) cash bonuses of up to 25%
of annual base salary, depending on the valuation of the Company at the time of
the change of control; (ii) a stock option grant to each participant; (iii)
severance payments of up to two times annual base salary, depending on the
participant's position with the Company at the time of a change of control; and
(iv) the payment of health insurance premiums and outplacement expenses incurred
upon a change of control.
Stock options granted under the Change of Control Plan, as amended, have an
exercise price of $.85 per share and are subject to vesting, with such options
being 25% vested as of the effective date of the Registration Statement
("Effective Date") and the remaining 75% vesting in three equal installments on
each anniversary of the Effective Date. Such vesting will be accelerated in
whole or in part upon a change of control, depending on the valuation of the
Company at the time of such change of control. Under the Change of Control Plan,
Dr. Comer received an option to purchase 94,000 shares of Common Stock and
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<PAGE> 51
each of Mr. Dunn, Dr. Harpold, Dr. Lloyd, Dr. McDonald and Mr. Reed received an
option to purchase 58,750 shares of Common Stock.
Under the Change of Control Plan, a "change of control" of the Company is
deemed to have occurred upon the consummation of a merger or consolidation in
which the Company is not the surviving entity (other than a transaction the
principal purpose of which is to change the jurisdiction of the Company's
incorporation), the sale, transfer or other disposition of all or substantially
all of the assets of the Company or a reverse merger in which the Company is the
surviving entity, but in which 50% or more of the Company's outstanding voting
stock is transferred to holders different from those who held such stock
immediately prior to such merger.
STOCK PLANS
1996 Equity Incentive Plan. In February 1996, the Board of Directors of
the Company (the "Board") adopted the Company's 1996 Equity Incentive Plan (the
"1996 Plan") under which 1,513,141 shares of Common Stock are reserved for
issuance pursuant to the exercise of stock awards granted to employees,
directors and consultants. The 1996 Plan was adopted by the Board to replace the
Company's 1981 Employee Stock Option Plan (the "1981 Plan") and its 1992 Stock
Option and Restricted Stock Plan (the "1992 Plan," and, together with the 1981
Plan, the "Prior Plans"). The 1981 Plan terminated by its terms in 1991;
provided, however, that options outstanding under the 1981 Plan will be
exercisable according to their terms. The 1992 Plan will be terminated upon the
closing of this offering and no further options will be issued thereunder;
provided, however, that options outstanding under the 1992 Plan will be
exercisable according to their terms. The 1996 Plan will terminate in February
2006, unless sooner terminated by the Board.
The 1996 Plan permits the granting of options intended to qualify as
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code") to employees
(including officers and employee directors) and options that do not so qualify
("Nonstatutory Options," and, together with Incentive Options, the "Options") to
employees (including officers and employee directors) and consultants (including
non-employee directors). In addition, the 1996 Plan permits the granting of
stock appreciation rights (SARs) appurtenant to or independently of Options, as
well as stock bonuses and rights to purchase restricted stock (Options, SARs,
stock bonuses and rights to purchase restricted stock are hereinafter referred
to as "Stock Awards"). No person shall be eligible to be granted Options and
SARs covering more than 500,000 shares of Common Stock in any 12-month period.
As of March 19, 1996, the Company has not granted any Stock Awards under the
1996 Plan.
The 1996 Plan is administered by the Board or a committee appointed by the
Board of Directors. Subject to the limitations set forth in the 1996 Plan, the
Board has the authority to select the persons to whom grants are to be made, to
designate the number of shares to be covered by each Stock Award, to determine
whether an Option is to be an Incentive Option or a Nonstatutory Option, to
establish vesting schedules, to specify the Option exercise price and the type
of consideration to be paid to the Company upon exercise and, subject to certain
restrictions, to specify other terms of Stock Awards. In addition, the Board has
delegated to William T. Comer the authority to grant Options to persons who are
not officers, directors, or holders of more than 10% of the outstanding shares
of Common Stock in accordance with guidelines established by the Board.
The maximum term of Options granted under the 1996 Plan is ten years. The
aggregate fair market value of the Common Stock with respect to which Incentive
Options are first exercisable in any calendar year may not exceed $100,000.
Options granted under the 1996 Plan generally are non-transferable and expire
three months after the termination of an optionee's service to the Company. In
general, if an optionee is permanently disabled or dies during his or her
service to the Company, such person's option may be exercised up to 12 months
following such disability and up to 18 months following such death.
The exercise price of Incentive Options must be equal to at least the fair
market value of the Common Stock on the date of grant. The exercise price of
Nonstatutory Options may be no less than 85% of the fair market value of the
Common Stock on the date of grant. The exercise price of Incentive Options
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<PAGE> 52
granted to any person who at the time of grant owns stock representing more than
10% of the total combined voting power of all classes of capital stock must be
at least 110% of the fair market value of such stock on the date of grant and
the term of such Incentive Options cannot exceed five years.
Any stock bonuses or restricted stock purchase awards granted under the
1996 Plan shall be in such form and shall contain terms and conditions as the
Board shall deem appropriate. The purchase price under any restricted stock
purchase award shall not be less than 85% of the fair market value of the Common
Stock on the date of grant. Stock bonuses and restricted stock purchase awards
granted under the 1996 Plan generally are non-transferable.
As of March 19, 1996, no options or stock awards have been granted under
the 1996 Plan, there are outstanding options to purchase a total of 812,184
shares of Common Stock at a weighted average exercise price of $1.23 per share
pursuant to the 1992 Plan and outstanding options to purchase a total of 24,675
shares of Common Stock at a weighted average exercise price of $5.78 per share
pursuant to the 1981 Plan. The exercise price of options granted under the Prior
Plans has been equal to 85% of the fair market value of the Common Stock for
nonstatutory stock options and 100% of the fair market value of the Common Stock
for incentive stock options, as determined in good faith by the Board of
Directors on the date of grant. Stock options granted under the Prior Plans
generally are subject to vesting ratably over a four-year period. The term of
options granted under the 1992 Plan generally is five years, while the term of
options granted under the 1981 Plan is generally ten years. Stock options
granted under the Prior Plans generally are non-transferable, with exceptions
for the transfer of such options pursuant to a will or the laws of descent and
distribution. Additionally, as of December 31, 1995, options to purchase 387,750
shares of Common Stock at an exercise price of $.85 per share were outstanding
under the Change of Control Plan. See "-- Change of Control Arrangements."
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<PAGE> 53
The following tables set forth information concerning individual grants of
stock options, exercises of stock options, and aggregate stock options held for
each of the Named Officers listed in the Summary Compensation Table above for
the year ended December 31, 1995:
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
PERCENT OF ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE MARKET PRICE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE AT GRANT EXPIRATION ------------------------
NAME GRANTED(1) 1995 PER SHARE DATE DATE 0% 5% 10%
- ----------------- ---------- ------------ --------- ------------ ---------- ----- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William T. Comer,
Ph.D........... 12,925 7.8% $1.45 $ 1.45 5/8/00 $4,700 $10,100
Michael M.
Harpold,
Ph.D........... 7,050 4.3% $1.45 $ 1.45 5/8/00 $2,500 $ 5,500
G. Kenneth Lloyd,
Ph.D........... 6,815 4.1% $1.45 $ 1.45 5/8/00 $2,500 $ 5,300
Ian A. McDonald,
Ph.D........... 5,875 3.6% $1.45 $ 1.45 5/8/00 $2,100 $ 4,600
Michael J. Dunn.. 11,750 7.1% $0.85 $ 1.45 12/5/05 7,000 11,300 16,200
3,525 2.1% $1.45 $ 1.45 5/8/00 3,200 8,100
Thomas A. Reed... 11,750 7.1% $0.85 $ 1.45 12/5/05 7,000 11,200 16,200
3,995 2.4% $1.45 $ 1.45 5/8/00 3,600 9,200
</TABLE>
- ---------------
(1) As adjusted to give effect to the 2.35-for-1 split of the outstanding shares
of Common Stock.
(2) The potential realizable value is calculated based on the term of the option
and is calculated by assuming that the fair market value of Common Stock on
the date of the grant as determined by the Board appreciates at the
indicated annual rate compounded annually for the entire term of the option
and that the option is exercised and the Common Stock received therefor is
sold on the last day of the term of the option for the appreciated price.
The 5% and 10% rates of appreciation are derived from the rules of the
Securities and Exchange Commission. The actual value realized may be greater
than or less than the potential realizable values set forth in the table.
AGGREGATE FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
12/31/95
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END
----------------------------------- -----------------------------
NAME EXERCISABLE(1) UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE
- --------------------------------- -------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
William T. Comer, Ph.D........... 260,850 113,975 $ 500 $ 107,600
Michael M. Harpold, Ph.D......... 155,394 70,206 182,000 66,700
G. Kenneth Lloyd, Ph.D........... 29,669 69,971 19,500 66,600
Ian A. McDonald, Ph.D............ 24,675 68,150 16,300 65,300
Michael J. Dunn.................. 25,556 64,214 36,600 64,600
Thomas A. Reed................... 2,115 64,860 200 64,800
</TABLE>
- ---------------
(1) As adjusted to give effect to the 2.35-for-1 split of the outstanding shares
of Common Stock.
1996 Non-Employee Directors' Stock Option Plan. In February 1996, the
Company adopted the 1996 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") to provide for the automatic grant of options to purchase
shares of Common Stock to non-employee directors of the Company. The Directors'
Plan is administered by the Board, unless the Board delegates administration to
a committee of directors.
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<PAGE> 54
A total of 235,000 shares of Common Stock have been reserved for issuance
pursuant to the exercise of options granted under the Directors' Plan. Under the
terms of the Directors' Plan, each person that is elected for the first time as
a director of the Company and that is not otherwise employed by the Company (a
"Non-Employee Director") automatically will be granted an option to purchase
10,000 shares of Common Stock (subject to adjustment as provided in the
Directors' Plan) upon the date of his or her election to the Board. In addition,
each person who is re-elected as a Non-Employee Director will receive an option
to purchase 3,000 shares of Common Stock upon such re-election, except that (i)
if such Non-Employee Director is the Chairman of the Board of Directors, such
person will instead receive an option to purchase 5,000 shares of Common Stock
upon such re-election and (ii) for the 1996 calendar year, such additional
grants will instead be made automatically to Non-Employee Directors as of June
1, 1996 in lieu of such re-election.
No option granted under the Directors' Plan may be exercised after the
expiration of ten years from the date it was granted. Options granted under the
Directors' Plan are 50% vested on the date of grant and become 100% vested on
the date that is one year from the date of grant (so long as, with respect to
such additional vesting, the optionee has continuously served as a Non-Employee
Director from the date of grant through such vesting date). The exercise price
of options under the Directors' Plan must be equal to the fair market value of
the Common Stock on the date of grant. Options granted under the Directors' Plan
are generally non-transferable. Unless otherwise terminated by the Board of
Directors, the Directors' Plan automatically terminates in February 2006. As of
March 19, 1996, no options have been granted under the Directors' Plan.
Employee Stock Purchase Plan. The Company's Board of Directors adopted the
Employee Stock Purchase Plan (the "Stock Purchase Plan") in February 1996. The
Stock Purchase Plan provides for the issuance of up to 500,000 shares of Common
Stock to employees of the Company. The rights to purchase Common Stock under the
Stock Purchase Plan are intended to qualify as options issued under an "employee
stock purchase plan" within the meaning of Section 423(b) of the Code. The Board
may suspend or terminate the Plan at any time.
The Stock Purchase Plan provides that it shall be administered by the Board
of Directors, unless such authority is delegated to a committee composed of not
fewer than two members of the Board of Directors. The Board has delegated
administration of the Stock Purchase Plan to the Compensation Committee of the
Board. Subject to certain limitations, the Board has the authority to determine
when and how rights to purchase Common Stock will be granted and the terms of
each offering of such rights and to amend or revoke the rules and regulations
governing the administration of the Stock Purchase Plan.
Under the Stock Purchase Plan, all eligible employees are granted identical
rights to purchase Common Stock for each Board-authorized offering under the
Stock Purchase Plan. Subject to limited exceptions, any person who is employed
on the date of commencement of an offering under the Stock Purchase Plan, has
been an employee of the Company for a continuous period of 90 days preceding the
grant and is customarily employed by the Company at least 20 hours per week and
at least five months per calendar year is eligible to participate in an offering
under the Stock Purchase Plan. An eligible employee participates in the Stock
Purchase Plan by authorizing payroll deductions of up to 15% of such employee's
"earnings" as defined in the Stock Purchase Plan. The purchase price per share
at which shares are sold in an offering under the Stock Purchase Plan cannot be
less than the lower of (i) 85% of the fair market value of a share of Common
Stock on the commencement of an offering under the Stock Purchase Plan, or (ii)
85% of the fair market value of a share of Common Stock on the date of purchase.
Rights granted pursuant to any offering under the Stock Purchase Plan terminate
immediately upon cessation of an employee's employment for any reason and the
Company will distribute to such employee all of his or her net accumulated
payroll deductions at such time. In general, an employee may withdraw from
participation in an offering under the Stock Purchase Plan at any time during
the purchase period for such offering. Rights granted under the Stock Purchase
Plan are not transferable and may be exercised only by the person to whom such
rights are granted. The initial offering under the Stock Purchase Plan will
52
<PAGE> 55
commence on the date of this Prospectus and terminate on April 30, 1998, with
exercise dates on each October 31 and April 30 during the term of the Stock
Purchase Plan.
401(K) PLAN
The Company adopted a tax-qualified employee savings and retirement plan
under Section 401(k) of the Code (the "401(k) Plan") covering all of the
Company's employees who have completed one year of employment. Pursuant to the
401(k) Plan, employees may elect to reduce their current compensation by up to
6% of their salaries, but not in excess of the statutory prescribed annual limit
($9,240 in 1995) and have the amount of such reduction contributed to the 401(k)
Plan. The Company currently matches 50% of employee contributions up to 6% of an
employee's salary, limited to the maximum contribution allowable for income tax
purposes. Employer contributions vest proportionally over five years of service.
The 401(k) Plan is intended to qualify under Section 401 of the Code so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn from
the 401(k) Plan, and so that contributions by the Company, if any, will be
deductible by the Company when made. The 401(k) Plan may be amended or
discontinued at any time by the Company.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In October 1994, the following individuals were granted options under the
Change of Control Plan to purchase shares of Common Stock at an exercise price
of $.85 per share: Dr. Comer, 94,000 shares; Mr. Dunn, 47,000 shares; Dr.
Harpold, 58,750 shares; Dr. Lloyd, 58,750 shares; Dr. McDonald 58,750 shares;
and Mr. Reed, 47,000 shares. See "Management -- Change of Control Arrangements."
In December 1995, in connection with their promotions to Vice President,
Mr. Dunn and Mr. Reed each received an additional option under the Change of
Control Plan to purchase 11,750 shares of Common Stock at an exercise price of
$.85 per share. See "Management -- Change of Control Arrangements."
In February 1996, William T. Comer, President, Chief Executive Officer and
a Director of the Company, exercised an option to purchase 258,500 shares of
Common Stock pursuant to the Company's 1981 Employee Stock Option Plan at an
exercise price of $2.13 per share for a total purchase price of $550,000. In
accordance with the terms of the 1981 Employee Stock Option Plan, such purchase
price was paid in cash in the amount of $11,000 and by delivery of a
full-recourse promissory note payable in the principal amount of $539,000 and
bearing interest at 7% per annum. Such note is payable in full after five years
and is secured by the shares of Common Stock issued upon exercise of such
option.
TRANSACTIONS WITH 5% STOCKHOLDERS
In March 1994, Ciba purchased 173,611 shares of Series A Convertible
Preferred Stock of the Company at a purchase price of $14.40 per share pursuant
to an agreement entered into in October 1992. Such shares will be converted into
an aggregate of 407,986 shares of Common Stock upon the closing of this
offering. In addition, Ciba has committed to purchase from the Company in a
private placement an aggregate of $5,000,000 of shares of Common Stock at the
initial public offering price (approximately 416,666 shares of Common Stock at
an assumed initial public offering price of $12.00 per share) upon the closing
of this offering. Immediately after the closing of this offering and the sale of
the Ciba Shares by the Company, Ciba will own 997,445 shares of Common Stock (or
approximately 11.3% of the total outstanding shares of Common Stock). The sale
of the Ciba Shares by the Company will not be registered in the offering and
will be deemed "restricted" securities within the meaning of Rule 144 under the
Securities Act.
53
<PAGE> 56
In October 1994, Ciba and the Company entered into an agreement for the
sale to Ciba by the Company of certain equipment totaling $400,000, including a
license to the equipment-related software, to be used in conjunction with Ciba's
EAAR technology.
In March 1996, the Company entered into an extension of its collaboration
agreement with Ciba. Under the agreement as extended, Ciba is obligated to
provide to SIBIA $500,000 to fund certain capital expenditures (which may be
credited against future milestone payments).
In August 1995, the Company entered into a collaborative relationship with
Bristol-Myers Squibb. In connection with the collaboration, the Company sold to
Bristol-Myers Squibb in a private placement 280,000 shares of its Series C
Convertible Preferred Stock (the "Bristol-Myers Squibb Shares") at a purchase
price of $25.00 per share, for a total of $7,000,000. The Bristol-Myers Squibb
Shares will be converted into 658,000 shares of Common Stock of the Company upon
the closing of this offering, which shares will represent approximately 7.4% of
the outstanding Common Stock immediately subsequent to the closing of this
offering and the sale of the Ciba Shares by the Company.
In 1988, SIBIA entered into a license agreement with The Salk Institute on
a number of NAChR subunit clones on which two U.S. patents have recently issued.
This agreement was amended in March 1996 such that the license to the issued
U.S. patents and related patent applications became an exclusive worldwide
license. Pursuant to the agreement, as amended, SIBIA is obligated to pay
royalties to The Salk Institute on sales of products resulting from The Salk
Institute's NAChR technology. In addition, the Company is required to make
minimum annual royalty payments to The Salk Institute beginning in 2002. Failure
to pay such royalties will result in the related license becoming non-exclusive.
In 1990, SIBIA entered into a three-year agreement with The Salk Institute
in the area of EAARs. This agreement provided for the support of research at The
Salk Institute by SIBIA and the transfer of research materials and research
results in the EAAR area from The Salk Institute to SIBIA. SIBIA also received
an exclusive worldwide license to certain EAAR-related patents and patent
applications held by The Salk Institute. The agreement was amended in March
1996. Pursuant to the agreement, as amended, the Company is required to make
certain minimum annual royalty payments to The Salk Institute beginning in 2002.
Failure to pay such royalties will result in the related license becoming
non-exclusive.
54
<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of March
19, 1996, as adjusted to reflect the 2.35-for-1 split of the outstanding shares
of Common Stock effected in March 1996 and the automatic conversion of all
outstanding Convertible Preferred Stock into Common Stock upon the closing of
this offering and as adjusted to reflect the sale of the 2,100,000 shares of
Common Stock being offered hereby and the sale of the Ciba Shares by the Company
at the initial public offering price (416,666 shares assuming an initial public
offering price of $12.00 per share) and assuming no exercise of the
Underwriters' over-allotment option, by (i) each stockholder who is known by the
Company to be the beneficial owner of more than 5% of the Company's Common
Stock; (ii) each of the Company's directors; (iii) each Named Officer (see
"Management -- Executive Compensation"); and (iv) all executive officers and
directors as a group. Except as otherwise indicated, the Company believes that
the beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole investment and voting power with respect to
such shares, subject to community property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED(1)
SHARES ----------------------
DIRECTORS, NAMED OFFICERS AND BENEFICIALLY BEFORE AFTER
5% STOCKHOLDERS OWNED(1) OFFERING OFFERING(2)
- -------------------------------------------------------------- ------------ -------- -----------
<S> <C> <C> <C>
The Salk Institute for Biological Studies..................... 1,983,461 31.4% 22.4%
10010 North Torrey Pines Road
La Jolla, CA 92037
Skandigen AB.................................................. 986,697 15.6 11.2
Norrlandsgatan 15
S- 111 43 Stockholm, Sweden
CIBA-GEIGY Limited............................................ 580,779 9.2 11.3
Klybeckstrasse 141
CH-4002 Basel, Switzerland
Bristol-Myers Squibb Company.................................. 658,000 10.4 7.4
Route 206 & Province Line Road
Princeton, NJ 08543
Eli Lilly and Company......................................... 276,470 4.4 3.1
Lilly Corporate Center
Indianapolis, IN 46285
William T. Comer, Ph.D.(3).................................... 289,931 4.6 3.3
Michael M. Harpold, Ph.D.(4).................................. 179,188 2.8 2.0
G. Kenneth Lloyd, Ph.D.(5).................................... 47,529 * *
Ian A. McDonald, Ph.D.(6)..................................... 42,007 * *
Michael J. Dunn(7)............................................ 41,772 * *
Thomas A. Reed(8)............................................. 42,007 * *
William R. Miller(9).......................................... 52,875 * *
Francis H.C. Crick, Ph.D.(10)................................. 11,750 * *
Stanley T. Crooke, M.D., Ph.D.(11)............................ 35,250 * *
Frederick B. Rentschler(12)................................... 11,750 * *
James D. Watson, Ph.D.(13).................................... 35,250 * *
All officers and directors as a group (11 persons)(14)........ 789,309 11.7 8.5
</TABLE>
- ---------------
* Represents beneficial ownership of less than one percent (1%).
55
<PAGE> 58
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Options to purchase shares of Common
Stock that are exercisable within 60 days of March 19, 1996 are deemed to
be beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person. Applicable percentage of beneficial ownership is based on
6,318,593 shares of Common Stock outstanding as of March 19, 1996, plus any
options exercisable within 60 days of March 19, 1996 by such stockholder,
and 8,835,259 shares of Common Stock outstanding after completion of this
offering, plus any options exercisable within 60 days of March 19, 1996 by
such stockholder. Except as set forth above, the address of each person set
forth above is the address of the Company appearing elsewhere in this
Prospectus.
(2) Includes the sale of the Ciba Shares by the Company at the initial public
offering price (416,666 shares assuming an initial public offering price of
$12.00 per share).
(3) Includes 31,431 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(4) Includes (i) 136,888 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996, (ii) 23,030 shares of Series
B Convertible Preferred Stock, and (iii) 15,275 shares of Series B
Convertible Preferred Stock issuable pursuant to options exercisable within
60 days of March 19, 1996.
(5) Includes 47,529 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(6) Includes 42,007 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(7) Includes 40,362 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(8) Includes 17,097 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(9) Includes 17,625 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(10) Includes 11,750 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(11) Includes 35,250 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(12) Includes 11,750 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(13) Includes 35,250 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996.
(14) Includes 442,214 shares of Common Stock issuable pursuant to options
exercisable within 60 days of March 19, 1996, as described in footnotes
(3)-(13).
56
<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and the
provisions of the Company's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by reference to such documents which have been
filed as exhibits to the Company's Registration Statement, of which this
Prospectus is a part.
Upon the closing of this offering and the sale of the Ciba Shares by the
Company, the authorized capital stock of the Company, after giving effect to the
conversion of all outstanding Convertible Preferred Stock into Common Stock and
the amendment and restatement of the Company's Certificate of Incorporation,
will consist of 25,000,000 shares of Common Stock, $.001 par value, and
5,000,000 shares of Preferred Stock, $.001 par value.
COMMON STOCK
As of March 19, 1996, there were 6,318,593 shares of Common Stock
outstanding held of record by 105 stockholders, after giving effect to the
conversion of all outstanding Convertible Preferred Stock into Common Stock and
the 2.35-for-1 split of the outstanding shares of Common Stock.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any outstanding Preferred Stock, holders
of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any outstanding shares of
Preferred Stock. Holders of Common Stock have no preemptive rights and no right
to convert their Common Stock into any other securities. There are no redemption
or sinking fund provisions applicable to the Common Stock. All outstanding
shares of Common Stock are, and all shares of Common Stock to be outstanding
upon completion of this offering and the sale of the Ciba Shares by the Company
will be, fully paid and nonassessable.
Delaware law does not require stockholder approval for any issuance of
authorized shares of Common Stock. These additional shares may be issued for a
variety of corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate acquisitions. One of the effects
of the existence of unissued and unreserved Common Stock may be to enable the
Board of Directors to issue shares to persons friendly to current management,
which issuance could render more difficult or discourage an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of the Company's management and
possibly deprive the stockholders of opportunities to sell their shares of
Common Stock at prices higher than prevailing market prices. See " -- Certain
Anti-takeover Effects of Provisions of the Certificate of Incorporation, Bylaws
and Delaware Law."
PREFERRED STOCK
Upon the closing of this offering and the sale of the Ciba Shares by the
Company, all outstanding shares of Convertible Preferred Stock will be converted
into 1,141,656 shares of Common Stock. See Note 9 of Notes to Financial
Statements for a description of the currently outstanding Convertible Preferred
Stock. Following the conversion, the Company's Certificate of Incorporation will
be amended and restated to delete all references to such series of Convertible
Preferred Stock. Under the Certificate of Incorporation, as amended and restated
upon the closing of this offering and the sale of the Ciba Shares by the
Company, the Board has the authority, without further action by stockholders, to
issue up to 5,000,000 shares of Preferred Stock in one or more series, and to
fix the rights, designations, preferences, privileges, qualifications and
restrictions thereof, including dividend rights, conversion rights, voting
rights, rights and terms of redemption, liquidation preferences and sinking fund
terms, any or all of which may be greater than the rights of the Common Stock.
The issuance of Preferred Stock could adversely affect the voting power of
holders of Common Stock and reduce the likelihood that such
57
<PAGE> 60
holders will receive dividend payments and payments upon liquidation. Such
issuance could have the effect of decreasing the market price of the Common
Stock. The issuance of Preferred Stock may have the effect of delaying,
deterring or preventing a change in control of the Company without any further
action by the stockholders. The Company has no present plans to issue any shares
of Preferred Stock. See " -- Certain Anti-takeover Effects of Provisions of the
Certificate of Incorporation, Bylaws and Delaware Law."
WARRANTS
As of December 31, 1995, the Company had issued warrants to purchase an
aggregate of 258,359 shares of Common Stock (the "Warrants"). All of such
Warrants were issued in connection with the Company's acquisition of Protease
Corporation in September 1991 (the "Protease Acquisition"). The Warrants may not
be exercised until the Company shall have received $50,000,000 in aggregate net
sales of products which incorporate the technology received under a license
agreement entered into in connection with the Protease Acquisition. Such license
agreement has been terminated, and the Company is no longer using such
technology and does not plan to use such technology in the future. Accordingly,
such Warrants are not presently exercisable, and the Company believes that they
will never become exercisable.
REGISTRATION RIGHTS
Bristol-Myers Squibb Company. Upon the closing of this offering and the
sale of the Ciba Shares by the Company, Bristol-Myers Squibb, the holder of
658,000 shares of Common Stock (the "Bristol-Myers Squibb Registration Rights
Shares") will be entitled to certain rights with respect to the registration of
such shares under the Securities Act pursuant to that certain Investment
Agreement dated August 10, 1995 (the "Agreement") among such holder and the
Company. Under the terms of the Agreement, in the event the Company proposes to
register any of its securities under the Securities Act for a public offering
for cash, whether as a primary or secondary offering, Bristol-Myers Squibb is
entitled to notice of such registration and is entitled, subject to certain
limitations, to include shares in such registration. In addition, upon the later
of one year after the Company's initial public offering and the conclusion of
research funding by Bristol-Myers Squibb, Bristol-Myers Squibb is entitled to
demand on two occasions that the Company use its best efforts to register the
shares under the Securities Act pursuant to such registration method deemed most
appropriate. Bristol-Myers Squibb's registration rights are subject to certain
conditions and limitations, including the right of the underwriters of an
offering to limit the number of shares included in any such registration. The
Company is required to bear all expenses of registration, except that
Bristol-Myers Squibb is required to reimburse the Company for all expenses
incurred by the Company in effecting any demand registrations.
The Salk Institute; Skandigen AB. Upon the closing of this offering and
the sale of the Ciba Shares by the Company, The Salk Institute, the holder of
1,983,461 shares of Common Stock (the "Salk Registration Rights Shares"), and
its permitted transferees, and Skandigen AB, the holder of 986,697 shares of
Common Stock (the "Skandigen Registration Rights Shares"), and its permitted
transferees, will be entitled to certain rights with respect to the registration
of such shares under the Securities Act. Pursuant to an agreement between the
Company, The Salk Institute and Skandigen AB, upon the request of The Salk
Institute or Skandigen AB, the Company is required to use its best efforts to
include such shares in any proposed registration statement to be filed by the
Company pursuant to the Securities Act, subject to certain conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares to be included in such registration statement. The Company is
required to bear all expenses in connection with the registration of such
shares, except underwriters' fees and selling discounts.
CIBA-GEIGY Limited. Upon the closing of this offering and the sale of the
Ciba Shares by the Company, Ciba, the holder of 997,445 shares of Common Stock
(the "Ciba Registration Rights Shares"), will be entitled to certain rights with
respect to the registration of such shares under the Securities Act pursuant to
that certain Stock Purchase Agreement dated September 15, 1992 between
58
<PAGE> 61
the Company and Ciba. Whenever the Company proposes to register any shares of
Common Stock under the Securities Act (or pursuant to registration rights
granted to holders of other securities of the Company), the Company shall use
its best efforts, upon the written request of Ciba, to include in the
registration statement the Ciba Registration Rights Shares. In addition,
commencing with the third anniversary of the Company's initial public offering
of its Common Stock or at such earlier time should the Company be obligated to
file a registration statement at the demand of another stockholder, Ciba may
demand that the Company file a registration statement with respect to the Ciba
Registration Rights Shares. The foregoing registration rights are subject to
certain conditions and limitations, including the right of the underwriters in
an offering to limit the number of shares included in such registration
statement. All of the expenses incurred in connection with a registration
statement undertaken by the Company (except demand registration statements and
excluding underwriting commissions and discounts) shall be borne by the Company.
In addition to the foregoing registration rights, Ciba has been granted
certain registration rights in connection with the sale of the Ciba Shares by
the Company at the initial public offering price (416,666 shares assuming an
initial public offering price of $12.00 per share) to Ciba upon the closing of
this offering. The Company has agreed to use its best efforts to qualify to use
Form S-3 under the Securities Act and to promptly file a registration statement
on such Form upon such qualification to register for resale by Ciba, from time
to time, the Ciba Shares.
Eli Lilly and Company. Upon the closing of this offering and the sale of
the Ciba Shares by the Company, under an agreement between Lilly and the
Company, Lilly will be entitled to certain registration rights with respect to
the registration under the Securities Act of 276,470 shares of Common Stock held
by Lilly (the "Lilly Registration Rights Shares"). Whenever the Company proposes
to register any shares of Common Stock under the Securities Act (or pursuant to
registration rights granted to holders of other securities of the Company), the
Company shall use its best efforts, upon the written request of Lilly, to
include in the registration statement the Lilly Registration Rights Shares. The
foregoing registration rights are subject to certain conditions and limitations,
including the right of the underwriters in an offering to limit the number of
shares included in such registration statement. All of the expenses incurred in
connection with a registration statement undertaken by the Company (except
underwriting commissions and discounts) shall be borne by the Company.
Hafslund Nycomed Pharma AG. Upon the closing of this offering and the sale
of the Ciba Shares by the Company, Hafslund Nycomed Pharma AG ("Hafslund
Nycomed"), the holder of 70,500 shares of Common Stock (the "Hafslund Nycomed
Registration Rights Shares"), will be entitled to certain rights with respect to
the registration of such shares under the Securities Act pursuant to that
certain Agreement dated October 1, 1993 between the Company and Hafslund
Nycomed. Under the terms of the Agreement, in the event the Company proposes to
register any shares of Common Stock for a public offering for cash, whether as a
primary or secondary offering, upon the request of Hafslund Nycomed, the Company
is required to use its best efforts to include the Hafslund Nycomed Registration
Rights Shares in such registration statement, subject to certain conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares to be included in such registration statement. All expenses
incurred in connection with a registration statement undertaken by the Company
(except underwriting commissions and discounts) will be borne by the Company.
The foregoing Hafslund Nycomed registration rights terminate on the earlier of
October 1, 2000 and the date on which the Hafslund Nycomed Registration Rights
Shares may be sold in the public market under Rule 144(k).
Others. In addition to the foregoing registration rights, the holders of
559,089 shares of Common Stock are entitled to certain rights with respect to
the registration of such shares under the Securities Act pursuant to an
agreement between the Company and such holders. Under the terms of the
agreement, upon the request of such holders, the Company is required to use its
best efforts to include in any proposed registration statement to be filed by
the Company pursuant to the Securities Act, subject to certain conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares to be included in such registration statement, the shares of
Common Stock held by such
59
<PAGE> 62
holders. The Company is required to bear all expenses in connection with the
registration of such shares, except underwriting commissions and discounts.
CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE
CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
General
Certain provisions of the Delaware General Corporation Law ("DGCL") and the
Company's Certificate of Incorporation and Bylaws could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, control of the Company. Such provisions could limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock. These provisions of Delaware law and provisions of the
Company's Certificate of Incorporation and Bylaws may also have the effect of
discouraging or preventing certain types of transactions involving an actual or
threatened change of control of the Company (including unsolicited takeover
attempts), even though such a transaction may offer the Company's stockholders
the opportunity to sell their stock at a price above the prevailing market
price. Certain of these provisions allow the Company to issue Preferred Stock
with rights senior to those of the Common Stock and other rights that could
adversely affect the interests of holders of Common Stock without any further
vote or action by stockholders. The issuance of Preferred Stock, for example,
could decrease the amount of earnings or assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock, as well as having the anti-takeover effect discussed
above. See "Risk Factors -- Control by Principal Stockholders; Anti-takeover
Provisions."
Delaware Takeover Statute
The Company is subject to the provisions of Section 203 of the DGCL. In
general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the stockholder. Generally, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior to
such transaction, did own) 15% or more of the corporation's voting stock.
Certificate of Incorporation and Bylaws
The Company's Certificate of Incorporation requires that, effective upon
the closing of this offering, any action required or permitted to be taken by
stockholders of the Company must be effected at a duly called annual or special
meeting of stockholders and may not be effected by a consent in writing. In
addition, special meetings of the stockholders of the Company may be called only
by the Chairman of the Board of Directors, the President of the Company, by the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors or by the holders of at least 10% of the
outstanding voting stock of the Company. The Company's Certificate of
Incorporation and Bylaws also require advance notice by a stockholder of a
proposal or director nomination which such stockholder desires to present at the
annual meeting of stockholders. These provisions may delay stockholder approval
and may preclude stockholders from bringing matters before the stockholders at
an annual or special meeting, including making nominations for directors. The
Company's Certificate of Incorporation does not include a provision for
cumulative voting in the election of directors. Under cumulative voting, a
minority stockholder holding a sufficient number of shares may be able to ensure
the election of one or more directors. The absence of cumulative voting may have
the effect of limiting the ability of minority stockholders to effect changes in
the Board of Directors and, as a result, may have the effect of deterring a
hostile takeover or delaying or preventing changes in control or management of
the Company.
60
<PAGE> 63
The Company's Certificate of Incorporation also provides that the
authorized number of directors may be changed only by resolution of the Board of
Directors. In addition, any vacancies on the Board of Directors, including any
newly created directorships resulting from any increase in the number of
directors, shall be filled only by affirmative vote of a majority of the
directors then in office, even though less than a quorum of the Board of
Directors. Accordingly, the Board of Directors may be able to prevent any
stockholder from obtaining majority representation on the Board of Directors by
increasing the size of the Board of Directors and filling newly created
directorships with its own nominees. Such provision may have the effect of
deterring a hostile takeover or delaying or preventing changes in control or
management of the Company.
The Company's Certificate of Incorporation and Bylaws also require that the
holders of at least 66 2/3% of the voting stock of the Company must approve any
amendment to either the Certificate of Incorporation or Bylaws affecting certain
provisions, including the provisions described above. The provisions described
above may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of the Company.
TRANSFER AGENT AND REGISTRAR
First Interstate Bank of California has been appointed as the transfer
agent and registrar for the Company's Common Stock.
LISTING
The Company's Common Stock has been approved for listing on the Nasdaq
National Market under the trading symbol "SIBI".
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock, and any sale of substantial amounts of Common Stock in the open market
may adversely affect the market price of the Common Stock offered hereby.
Upon completion of this offering and the sale of the Ciba Shares by the
Company, there will be an aggregate of 8,835,259 shares of Common Stock
outstanding assuming (i) no exercise of the Underwriters' over-allotment option
and (ii) no exercise of outstanding options to purchase Common Stock. Of these
shares, the 2,100,000 shares of Common Stock sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, unless such shares are held by "affiliates" of the Company, as that term is
defined under the Securities Act and the regulations promulgated thereunder. The
remaining 6,735,259 shares of Common Stock (the "Restricted Shares") are held by
officers, directors, employees and other stockholders of the Company. The
Restricted Shares were sold by the Company in reliance on exemptions from the
registration requirements of the Securities Act and are "restricted" securities
within the meaning of Rule 144 under the Securities Act.
The Company's directors, officers and certain other stockholders, who own
in the aggregate approximately 5,068,735 shares of Common Stock, have agreed not
to sell (without the prior consent of Salomon Brothers Inc) for a period of 180
days after the effective date of the Registration Statement (the "Effective
Date"), any of the shares of Common Stock which they will own after this
offering and the sale of the Ciba Shares by the Company, but may dispose of such
shares as bona fide gifts.
Approximately 523,780 of the Restricted Shares will be eligible for sale in
the public market from the Effective Date in reliance on Rule 144(k). Beginning
90 days after the Effective Date, an additional approximately 45,990 of the
Restricted Shares will become eligible for sale subject to the provisions of
Rule 144 and Rule 701 under the Securities Act. The remainder of the Restricted
Shares held by existing stockholders will become eligible for sale at various
times thereafter, subject to the provisions of Rule 144. In addition, beginning
90 days after the Effective Date, holders of then vested options to purchase
approximately 501,549 shares will be entitled to exercise such options and sell
such shares subject to the provisions of Rule 144 and Rule 701, and beginning
180 days after the Effective Date, an
61
<PAGE> 64
additional approximately 511,950 shares subject to vested options will be
available for sale subject to compliance with Rule 701 upon the expiration of
agreements not to sell such shares.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least two years is entitled to sell, within any three-month period
commencing 90 days after the Effective Date, a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock
(88,352 shares immediately after this offering and the sale of the Ciba Shares
by the Company) or (ii) the average weekly trading volume in the Common Stock
during the four calendar weeks preceding such sale, subject to the filing of a
Form 144 with respect to such sale and certain other limitations and
restrictions. Pursuant to a recent proposal of the Securities and Exchange
Commission (the "Commission") that has not yet been adopted, the two-year
holding period described in the preceding sentence would be reduced to one year.
In addition, a person who is not deemed to have been an affiliate of the Company
at any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least three years, would be entitled to
sell such shares under Rule 144(k) without regard to the requirements described
above. Pursuant to a recent proposal of the Commission that has not yet been
adopted, the three-year holding period described in the preceding sentence would
be reduced to two years.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701, which permits
non-affiliates to sell their Rule 701 shares without having to comply with the
public-information, holding-period, volume-limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding-period restrictions, in each case commencing 90
days after the Effective Date. However, all officers and directors and certain
other stockholders have agreed not to sell or otherwise dispose of Common Stock
of the Company for the 180-day period after the Effective Date without the prior
written consent of Salomon Brothers Inc. See "Underwriting."
Within 90 days of the date of this Prospectus, the Company intends to file
a registration statement under the Securities Act to register shares of Common
Stock reserved for issuance under its equity incentive plans, thus permitting
the resale of such shares by non-affiliates in the public market without
restriction under the Securities Act. Such registration statements will become
effective immediately upon filing. As of December 31, 1995, options to purchase
981,266 shares of Common Stock at a weighted average exercise price of $1.49 per
share were outstanding under the Company's stock option plans. Additionally, as
of December 31, 1995, options to purchase 387,750 shares of the Company's Common
Stock with an exercise price of $.85 per share were outstanding under the
Company's Change of Control Plan.
62
<PAGE> 65
UNDERWRITING
Upon the terms and subject to the conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below (the "Underwriters"), for whom Salomon Brothers Inc, Needham & Company,
Inc. and Vector Securities International, Inc. are acting as representatives
(the "Representatives"), and each of such Underwriters has severally agreed to
purchase from the Company the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ----------
<S> <C>
Salomon Brothers Inc ....................................................
Needham & Company, Inc. .................................................
Vector Securities International, Inc. ...................................
---------
Total.......................................................... 2,100,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock offered hereby (other than those covered by the
Underwriters' over-allotment option described below) if any such shares are
purchased. In the event of a default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may be
terminated. The Company has been advised by the Representatives that the
Underwriters propose initially to offer the shares of Common Stock to the public
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price, less a concession not in excess of $
per share. The Underwriters may allow and such dealers may reallow a concession
not in excess of $ per share to certain other dealers. After the
initial public offering, the price and such concessions may be changed by the
Underwriters.
Ciba, one of the Company's collaborative partners and an existing
stockholder, has committed to purchase an aggregate of $5,000,000 of shares of
Common Stock in a private placement at the initial public offering price
(416,666 shares assuming an initial public offering price of $12.00 per share).
The sale of the Ciba Shares by the Company will not be registered in this
offering or covered by the Underwriting Agreement, and the Underwriters will not
receive any fee in connection with the sale of such shares. Ciba has agreed to
purchase such shares upon the closing of this offering.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the Effective Date, to purchase up to 315,000 additional
shares of Common Stock, at the public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriters may
exercise such option only to cover over-allotments in the sale of shares of
Common Stock that the Underwriters have agreed to purchase. To the extent that
the Underwriters exercise such option, each Underwriter will have a firm
commitment, subject to certain conditions, to purchase the same proportion of
the option shares as the number of shares of Common Stock to be purchased and
offered by such Underwriter in the above table bears to the total number of
shares of Common Stock initially offered by the Underwriters.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.
The Company, its directors and certain officers and other stockholders, who
will own in the aggregate 5,070,792 shares of Common Stock after the closing of
this offering and the sale of the Ciba Shares by the Company, have agreed not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
or announce the offering of shares of Common Stock or any securities convertible
into, or
63
<PAGE> 66
exchangeable for, shares of Common Stock, for a period of 180 days after the
Effective Date without the prior written consent of Salomon Brothers Inc;
provided, however, that the Company may (i) issue and sell Common Stock pursuant
to any stock option plan or stock purchase plan of the Company in effect at the
Effective Date, (ii) issue Common Stock issuable upon the conversion of
securities or the exercise of options outstanding at the Effective Date, and
(iii) issue Common Stock in connection with any corporate collaboration,
strategic alliance, or technology licensing transaction, to the extent such
shares are acquired for investment purposes and appropriate representations to
such effect are given by the person acquiring such shares and to the extent such
shares do not exceed 15% of the outstanding Common Stock as of the Effective
Date.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Shares will be determined by
negotiation among the Company and the Representatives. Among the factors to be
considered in determining the initial public offering price will be the earnings
and certain other financial and operating information of the Company in recent
periods, the future prospects of the Company and its industry in general, the
general condition of the securities market at the time of this offering and the
market prices of securities and certain financial and operating information of
companies engaged in activities similar to those of the Company. There can,
however, be no assurance that the prices at which the Shares will sell in the
public market after this offering will not be lower than the price at which it
is sold by the Underwriters.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
shares of Common Stock offered hereby will be passed upon for the Company by
Cooley Godward Castro Huddleson & Tatum, San Diego, California. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The Financial Statements as of December 31, 1994 and December 31, 1995, and
for each of the three years in the period ended December 31, 1995 appearing in
this Prospectus and the Registration Statement have been audited by Price
Waterhouse LLP, independent accountants, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
auditing and accounting.
The statements in this Prospectus under the captions "Risk
Factors -- Uncertainty Regarding Patents and Proprietary Rights" and
"Business -- Patents and Proprietary Rights" and all other disclosure in this
Prospectus relating to intellectual property matters have been reviewed and
approved by Brown Martin Haller & McClain and Pretty, Schroeder, Brueggemann &
Clark, as experts in such matters, and are included herein in reliance upon such
review and approval.
64
<PAGE> 67
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (which together with all amendments, exhibits and schedules thereto, is
referred to as the "Registration Statement") under the Securities Act, with
respect to the shares of Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and
the exhibits thereto. Statements contained in this Prospectus regarding the
contents of any contract or any other document to which reference is made are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement and the exhibits thereto may be
inspected without charge at the principal office of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 and at its
regional offices located at Seven World Trade Center, New York, NY 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and copies of all or any part of the Registration Statement may be obtained from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street N.W., Washington, D.C. 20549 upon the payment of the fees
prescribed by the Commission.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements examined by an independent public
accounting firm for each fiscal year and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
65
<PAGE> 68
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE> 69
SIBIA NEUROSCIENCES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Balance Sheet as of December 31, 1994 and 1995........................................ F-3
Statement of Operations for the years ended
December 31, 1993, 1994 and 1995.................................................... F-4
Statement of Stockholders' Equity for the years
ended December 31, 1993, 1994 and 1995.............................................. F-5
Statement of Cash Flows for the years ended
December 31, 1993, 1994 and 1995.................................................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 70
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of SIBIA Neurosciences, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of SIBIA Neurosciences, Inc. at
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICE WATERHOUSE
PRICE WATERHOUSE LLP
San Diego, California
March 19, 1996
F-2
<PAGE> 71
SIBIA NEUROSCIENCES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS' EQUITY
DECEMBER 31, UNAUDITED (NOTE 1)
----------------------------- DECEMBER 31,
1994 1995 1995
------------ ------------ --------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 1,948,000 $ 2,274,000
Investment securities......................... 3,996,000 14,214,000
Contract and accounts receivable.............. 236,000 35,000
Prepaid expenses and other current assets..... 254,000 238,000
------------ ------------
Total current assets....................... 6,434,000 16,761,000
Property and equipment, net..................... 1,416,000 1,387,000
Other assets.................................... 155,000 103,000
------------ ------------
$ 8,005,000 $ 18,251,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 838,000 $ 1,006,000
Accrued liabilities........................... 899,000 1,167,000
Deferred revenue.............................. 174,000 250,000
------------ ------------
Total current liabilities.................. 1,911,000 2,423,000
------------ ------------
Capital lease obligations....................... 860,000 721,000
Deferred rent................................... 68,000
------------ ------------
Total long-term liabilities................ 928,000 721,000
------------ ------------
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000
shares authorized (Note 9):
Series A Convertible Preferred Stock..........
Series B Convertible Preferred Stock..........
Series C Convertible Preferred Stock..........
Common Stock -- $.001 par value, 25,000,000
shares authorized; 4,876,384 and 4,899,884
shares issued and outstanding at December
31, 1994 and 1995; 6,018,980 issued and
outstanding at December 31, 1995 -- pro
forma (unaudited).......................... 5,000 5,000 $ 6,000
Additional paid-in capital.................... 24,461,000 31,869,000 31,868,000
Deferred compensation......................... (223,000) (635,000) (635,000)
Notes receivable from stockholders............ (84,000) (82,000) (82,000)
Net unrealized gain on investment securities
available-for-sale......................... 62,000 79,000 79,000
Accumulated deficit........................... (19,055,000) (16,129,000) (16,129,000)
------------ ------------ ------------
Total stockholders' equity................. 5,166,000 15,107,000 $ 15,107,000
------------ ------------ ============
$ 8,005,000 $ 18,251,000
============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 72
SIBIA NEUROSCIENCES, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Contract...................................... $ 4,072,000 $ 4,454,000 $ 5,563,000
License and royalty........................... 1,005,000 398,000 4,885,000
---------- ---------- ----------
Total revenue (including $2,691,000 and
$4,139,000 in related-party revenue for
1994 and 1995, respectively)............. 5,077,000 4,852,000 10,448,000
---------- ---------- ----------
Expenses:
Research and development...................... 7,713,000 8,663,000 8,949,000
General and administrative.................... 2,202,000 1,917,000 2,178,000
---------- ---------- ----------
9,915,000 10,580,000 11,127,000
---------- ---------- ----------
(4,838,000) (5,728,000) (679,000)
---------- ---------- ----------
Other income (expense):
Settlement of litigation...................... 3,146,000
Gain from sale of joint venture............... 5,296,000
Other --
Interest income............................ 358,000 424,000 567,000
Interest expense........................... (33,000) (63,000) (71,000)
Other...................................... (37,000) 44,000 38,000
---------- ---------- ----------
288,000 5,701,000 3,680,000
---------- ---------- ----------
(Loss) income before provision for income
taxes......................................... (4,550,000) (27,000) 3,001,000
Provision for income taxes...................... 75,000
---------- ---------- ----------
Net (loss) income............................... $(4,550,000) $ (27,000) $ 2,926,000
========== ========== ==========
Net income per share:
Primary.................................... $ .42
Fully diluted.............................. .41
Weighted average number of common and common
equivalent shares outstanding:
Primary.................................... 6,928,323
Fully diluted.............................. 7,068,120
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 73
SIBIA NEUROSCIENCES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A, B AND C
CONVERTIBLE
PREFERRED
STOCK (CONVERTIBLE
AT 2.35-FOR-1)
(NOTE 9) COMMON STOCK NOTES
--------------------- --------------------- ADDITIONAL RECEIVABLE
SHARES SHARES PAID-IN DEFERRED FROM
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL COMPENSATION STOCKHOLDERS
----------- ------ ----------- ------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of December
31, 1992............. 32,950 4,707,125 $5,000 $21,586,000 $ (31,000) $ (96,000)
Issuance of Common
Stock................ 94,000 118,000
Stock option
compensation
expense.............. 11,000 9,000
Conversion of Series B
Convertible Preferred
Stock................ (8,500) 19,975
Exercise of stock
options.............. 17,919 18,000 (4,000)
Net loss..............
------- ------ --------- ------ ---------- ---------- ---------
Balance as of December
31, 1993............. 24,450 4,839,019 5,000 21,733,000 (22,000) (100,000)
Net unrealized gain on
investment securities
available-for-sale at
January 1, 1994 (Note
1)...................
Issuance of Common
Stock................ 23,500 10,000
Issuance of Series A
Convertible Preferred
Stock................ 173,611 2,500,000
Stock option
compensation
expense.............. 217,000 (201,000)
Stock cancellations --
Series B Convertible
Preferred Stock...... (1,550) (6,000) 5,000
Payment on notes
receivable........... 11,000
Exercise of stock
options.............. 13,865 7,000
Net decrease in
unrealized gain on
investment securities
available-for-sale...
Net loss..............
------- ------ --------- ------ ----------- ---------- ---------
Balance as of December
31, 1994............. 196,511 4,876,384 5,000 24,461,000 (223,000) (84,000)
Issuance of Series C
Convertible Preferred
Stock................ 280,000 6,930,000
Stock option
compensation
expense.............. 461,000 (412,000)
Stock cancellations --
Series B Convertible
Preferred Stock...... (300) (2,000) 2,000
Exercise of stock
options.............. 23,500 19,000
Net increase in
unrealized gain on
investment securities
available-for-sale...
Net income............
------- ------ --------- ------ ----------- ---------- ---------
Balance as of December
31, 1995............. 476,211 4,899,884 $5,000 $31,869,000 $ (635,000) $ (82,000)
======= ====== ========= ====== =========== ========== =========
<CAPTION>
NET UNREALIZED
GAIN ON
INVESTMENT
SECURITIES TOTAL
AVAILABLE- ACCUMULATED STOCKHOLDERS'
FOR-SALE DEFICIT EQUITY
-------------- ------------ -------------
<S> <C> <C> <C>
Balance as of December
31, 1992............. $(14,478,000) $ 6,986,000
Issuance of Common
Stock................ 118,000
Stock option
compensation
expense.............. 20,000
Conversion of Series B
Convertible Preferred
Stock................
Exercise of stock
options.............. 14,000
Net loss.............. (4,550,000) (4,550,000)
---------- ------------ ------------
Balance as of December
31, 1993............. (19,028,000) 2,588,000
Net unrealized gain on
investment securities
available-for-sale at
January 1, 1994 (Note
1)................... $ 219,000 219,000
Issuance of Common
Stock................ 10,000
Issuance of Series A
Convertible Preferred
Stock................ 2,500,000
Stock option
compensation
expense.............. 16,000
Stock cancellations --
Series B Convertible
Preferred Stock...... (1,000)
Payment on notes
receivable........... 11,000
Exercise of stock
options.............. 7,000
Net decrease in
unrealized gain on
investment securities
available-for-sale... (157,000) (157,000)
Net loss.............. (27,000) (27,000)
--------- ------------ -----------
Balance as of December
31, 1994............. 62,000 (19,055,000) 5,166,000
Issuance of Series C
Convertible Preferred
Stock................ 6,930,000
Stock option
compensation
expense.............. 49,000
Stock cancellations --
Series B Convertible
Preferred Stock......
Exercise of stock
options.............. 19,000
Net increase in
unrealized gain on
investment securities
available-for-sale... 17,000 17,000
Net income............ 2,926,000 2,926,000
---------- ------------ ------------
Balance as of December
31, 1995............. $ 79,000 $(16,129,000) $ 15,107,000
========== ============ ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 74
SIBIA NEUROSCIENCES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income............................... $(4,550,000) $ (27,000) $ 2,926,000
Adjustments to reconcile net (loss) income to
net cash (used) provided by operating
activities:
Gain on sale of corporate joint venture...... (5,296,000)
Depreciation and amortization................ 332,000 449,000 497,000
Compensation from issuance of common stock
options.................................... 22,000 16,000 49,000
Issuance of stock for research and
development................................ 108,000
(Gain) loss on disposal of property.......... 37,000 (44,000) (37,000)
Net amortization of premium and discount on
investment securities...................... (71,000) (261,000) (271,000)
Increase (decrease) in cash resulting from
changes in:
Contract and accounts receivable........... (92,000) (52,000) 201,000
Prepaid expenses and other assets.......... (101,000) (18,000) 47,000
Accounts payable........................... 206,000 138,000 168,000
Accrued liabilities........................ 16,000 (174,000) 171,000
Deferred revenue........................... 1,048,000 (1,038,000) 76,000
Deferred rent.............................. (66,000) (66,000) (68,000)
----------- ------------ ------------
Net cash (used) provided by operating
activities............................ (3,111,000) (6,373,000) 3,759,000
----------- ------------ ------------
Cash flows from investing activities:
Purchases of investment securities
held-to-maturity............................. (2,974,000) (10,685,000) (17,312,000)
Maturities of investment securities
held-to-maturity............................. 7,959,000 7,370,000 7,295,000
Principal payments received on investment
securities available-for-sale................ 741,000 1,167,000 88,000
Proceeds from sale of corporate joint venture... 5,196,000
Proceeds from disposal of property and
equipment.................................... 17,000 52,000 44,000
Acquisition of property and equipment........... (95,000) (79,000) (120,000)
----------- ------------ ------------
Net cash provided (used) by investing
activities............................ 5,648,000 3,021,000 (10,005,000)
----------- ------------ ------------
Cash flows from financing activities:
Proceeds from exercise of stock options......... 14,000 7,000 19,000
Proceeds from payments on notes receivable...... 11,000
Proceeds from issuance of stock................. 2,500,000 6,930,000
Principal payments on capital lease
obligations.................................. (132,000) (276,000) (377,000)
----------- ------------ ------------
Net cash (used) provided by financing
activities............................ (118,000) 2,242,000 6,572,000
----------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents..................................... 2,419,000 (1,110,000) 326,000
Cash and cash equivalents at beginning of year.... 639,000 3,058,000 1,948,000
----------- ------------ ------------
Cash and cash equivalents at end of year.......... $ 3,058,000 $ 1,948,000 $ 2,274,000
=========== ============ ============
Supplemental Information:
Income taxes paid -- Note 8.....................
Interest paid -- Note 11........................
Equipment under capital leases -- Note 11.......
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 75
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
SIBIA Neurosciences, Inc., formerly the Salk Institute
Biotechnology/Industrial Associates Inc. (the "Company" or "SIBIA"), was founded
by The Salk Institute for Biological Studies ("The Salk Institute") and
incorporated in Delaware in 1981. SIBIA is engaged in the discovery and
development of novel, small molecule therapeutics for disorders of the central
nervous system based on the Company's unique approach to characterizing the
molecular processes involved in such disorders. SIBIA is focusing its efforts on
developing compounds for the treatment of Parkinson's disease, Alzheimer's
disease, stroke, head trauma, epilepsy, chronic pain, schizophrenia and other
neurological, psychiatric and neurodegenerative disorders.
The Company has been funded to date principally through research contracts
(generally conducted on a best efforts basis), equity financings, option,
license and royalty revenues. The Company has also received income from the sale
of its interest in a joint venture (Note 6) and from the settlement of certain
litigation (Note 7).
SIGNIFICANT OWNERSHIP
The Salk Institute owned 40%, 37% and 33% of the Company's outstanding
Common Stock as of December 31, 1993, 1994 and 1995, respectively. Skandigen AB
owned 20%, 18% and 16% of the Company's outstanding Common Stock as of December
31, 1993, 1994 and 1995, respectively.
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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
It is management's belief that the carrying amounts shown for the Company's
financial instruments are reasonable estimates of their related fair values.
CONCENTRATION OF RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents and
investment securities. The Company invests in high-grade debt instruments. No
significant losses have been incurred related to these investments.
During the years ended December 31, 1993, 1994 and 1995, the Company had
two, two and three collaborative research agreements that accounted for 78%, 89%
and 81%, respectively, of total revenue.
COLLABORATIVE AGREEMENTS
The Company enters into collaborative agreements from time to time with
third parties. Such agreements may call for an equity investment by the
collaborative partner as well as a commitment for current and future research
funding in exchange for best efforts research to be provided by the Company. The
collaborative agreements may also provide for license fees, milestone payments
and royalties. Such agreements define the rights of each party related to the
results of such research. The amounts
F-7
<PAGE> 76
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
recognized by the Company related to equity investments are recorded at the fair
market value, per share, of the Company's securities. Amounts related to
research funding and license and royalty rights are recognized in accordance
with the specific terms of each collaborative agreement to the extent the
Company determines that such recognition is consistent with the substance of the
agreement. (Note 4).
REVENUE RECOGNITION
Contract revenue is recognized as the research is performed using the
percentage-of-completion method of accounting, primarily based on contract costs
incurred to date compared with total estimated costs at completion. Revenue
related to milestones is recognized upon the achievement of the related
milestone and when collection is probable. License revenue is recognized when
there is no material continuing performance obligation under the agreement and
collection is probable. Royalty revenue is recognized when earned and collection
is probable.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred and include costs
associated with collaborative agreements. These costs consist of direct and
indirect internal costs related to specific projects as well as fees paid to
other entities which conduct certain research activities on behalf of the
Company.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments purchased with an original
maturity of three months or less. Of the $1,948,000 total cash and cash
equivalents as of December 31, 1994, $1,147,000 was invested in interest-bearing
United States government and mortgage-backed securities. As of December 31,
1995, $2,000,000 of the $2,274,000 total cash and cash equivalents was invested
in certificates of deposit that are carried at cost.
INVESTMENT SECURITIES
The Company adopted prospectively in 1994, Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities." Management determines the appropriate classification of its
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. The Company has classified its debt securities as
"available-for-sale" and "held-to-maturity" and has recorded them at fair value
and amortized cost, respectively. Implementation of this accounting treatment
resulted in the Company reflecting in stockholders' equity an unrealized gain on
investments classified as "available-for-sale" of $219,000 as of January 1,
1994. No held-to-maturity securities have been disposed of prior to their
maturity.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated over estimated
useful lives of 4 to 8 years using the straight-line method. Property and
equipment acquired under capital leases is amortized over the shorter of the
useful life or the related lease terms using the straight-line method.
LONG-LIVED ASSETS
The Company assesses potential impairments to its long-lived assets, on an
exception basis, when there is evidence that events or changes in circumstances
have made recovery of the asset's carrying value unlikely. An impairment loss
would be recognized when the sum of the expected future net cash flows is less
than the carrying amount of the asset. No such impairment losses have been
recorded by the Company.
F-8
<PAGE> 77
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Current income tax expense is the amount of income taxes expected to be
payable for the current year. A deferred income tax asset or liability is
established for the expected future consequences resulting from the differences
in the financial reporting and tax bases of assets and liabilities. Deferred
income tax expense is the change during the year in the deferred income tax
asset or liability (Note 8).
STOCK-BASED COMPENSATION ACCOUNTING
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("FAS 123"), "Accounting for Stock-Based
Compensation." The Company has not elected early adoption of FAS 123. Upon
adoption of FAS 123, the Company will continue to measure compensation expense
for its stock-based employee compensation plans using the intrinsic value method
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees" and
will provide pro forma disclosures as if the fair value based method prescribed
by FAS 123 had been utilized. The disclosures under this standard will be
required beginning in 1996.
NET INCOME PER SHARE
Primary and fully diluted net income per share is computed pursuant to the
treasury stock method using the weighted average number of common and common
equivalent shares outstanding during the period. All equity securities issued by
the Company during the twelve months preceding the planned initial public
offering date at prices below the offering price have been included in the
calculation of weighted average shares outstanding. The net income per share
includes the effect of the Company's Convertible Preferred Stock that are
convertible at the option of the holder or automatically in the event of an
initial public offering. Historical earnings per share are not presented because
such amounts are not believed to be meaningful. All Common Stock share and per
share information has been adjusted for the 2.35-for-1 stock split of the
outstanding shares of Common Stock for all periods presented (Notes 9 and 12).
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
Pro forma stockholders' equity of the Company as of December 31, 1995 gives
effect to the automatic conversion of each share of Series A, B and C
Convertible Preferred Stock into 2.35 shares of Common Stock upon the closing of
the Company's planned initial public offering.
NOTE 2 -- INVESTMENT SECURITIES AND CASH EQUIVALENTS
The Company's investment securities and cash equivalents as of December 31,
1994 consist of United States government and mortgage-backed securities. As of
December 31, 1995 the Company's
F-9
<PAGE> 78
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
investment securities consist of mortgage-backed securities and commercial
paper. These investment securities were classified as available-for-sale and
held-to-maturity as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
------------------------------------------------- ---------------------------------------------------
ESTIMATED GROSS GROSS ESTIMATED GROSS GROSS
FAIR UNREALIZED UNREALIZED FAIR UNREALIZED UNREALIZED
COST VALUE GAINS LOSSES COST VALUE GAINS LOSSES
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-sale
Investment
securities...... $ 427,000 $ 489,000 $ 66,000 $ 4,000 $ 343,000 $ 422,000 $ 84,000 $5,000
========== ========== ======== ======== =========== =========== ======= =======
Held-to-maturity
Investment
securities...... $3,507,000 $3,509,000 $ 30,000 $ 28,000 $13,792,000 $13,788,000 $ 1,000 $5,000
Cash
equivalents..... 1,147,000 1,149,000 4,000 2,000
---------- ---------- -------- -------- ----------- ----------- ------- -------
$4,654,000 $4,658,000 $ 34,000 $ 30,000 $13,792,000 $13,788,000 $ 1,000 $5,000
========== ========== ======== ======== =========== =========== ======= =======
</TABLE>
The amortized cost and estimated fair value of the debt securities as of
December 31, 1995, by contractual maturity, are shown below. Actual maturities
may differ from the contractual maturities as the issuers of the securities may
have the right to call the obligation.
<TABLE>
<CAPTION>
ESTIMATED
COST FAIR VALUE
----------- -----------
<S> <C> <C>
Available-for-sale
Due after five years................................. $ 343,000 $ 422,000
=========== ===========
Held-to-maturity
Due in one year or less.............................. $13,792,000 $13,788,000
=========== ===========
</TABLE>
NOTE 3 -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- ----------
<S> <C> <C>
PROPERTY AND EQUIPMENT
Lab equipment......................................... $ 3,643,000 $3,690,000
Computer equipment.................................... 237,000 265,000
Other................................................. 63,000 85,000
----------- ----------
3,943,000 4,040,000
Accumulated depreciation and amortization............. (2,527,000) (2,653,000)
----------- ----------
$ 1,416,000 $1,387,000
=========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- ----------
<S> <C> <C>
ACCRUED LIABILITIES
Capital leases obligations............................ $ 333,000 $ 431,000
Accrued vacation...................................... 232,000 264,000
Accrued bonuses....................................... 129,000 202,000
Other................................................. 205,000 270,000
-------- ----------
$ 899,000 $1,167,000
======== ==========
</TABLE>
F-10
<PAGE> 79
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- SIGNIFICANT COLLABORATIVE AGREEMENTS
ELI LILLY & COMPANY
In May 1992, the Company entered into a three-year agreement with Eli Lilly
& Company ("Lilly") providing for the discovery and development of drugs which
specifically interact with human neuronal calcium channels. In exchange for
providing a certain level of scientific research under the agreement, the
Company will receive payments from Lilly; additional payments may be received by
the Company upon the achievement of certain development milestones. Both Lilly
and the Company have certain licensing and royalty rights under conditions set
forth in the agreement. The Company has granted Lilly an exclusive license to
use certain proprietary technology of the Company during the term of the
agreement, and non-exclusively thereafter. In May 1995, the agreement was
extended to May 1997 and can be extended further by mutual consent or may be
terminated by either party upon six months' advance written notice, which may be
provided anytime after May 1996. As part of the original agreement, Lilly
purchased 276,470 shares of Common Stock. The Company recognized contract
revenue related to this agreement of $1,525,000, $1,621,000 and $1,663,000 for
the years ended December 31, 1993, 1994 and 1995, respectively.
CIBA-GEIGY LIMITED
In October 1992, the Company entered into a three-year agreement with
CIBA-GEIGY Limited ("Ciba") relating to the development and use of mammalian
cell lines expressing excitatory amino acid receptor ("EAAR") subtypes and
chemical agents which react with specific EAAR subtypes. In exchange for
providing a certain level of scientific research under the agreement, the
Company will receive payments from Ciba; additional payments may be received by
the Company upon the achievement of certain development milestones. In March
1996, the agreement was extended through September 1998 (Note 12). Under
conditions set forth in the agreement, the Company has rights to receive
royalties based upon Ciba's sales of products developed, if any, using specified
technology. The Company has granted Ciba an exclusive license to use certain
proprietary technology of the Company during the term of the agreement. Upon
expiration of the agreement, SIBIA retains the right to use the program
technology for its own drug discovery efforts, subject to Ciba's right of first
negotiation with respect to any compounds developed from such technology
discovered during the three years following expiration of the agreement.
During March 1994, pursuant to the agreement, Ciba purchased 173,611 shares
of Series A Convertible Preferred Stock (407,986 shares of Common Stock on an
as-if-converted basis; pro forma unaudited -- Note 12). Ciba owned approximately
4%, 11% and 10% of the Company's outstanding Common Stock on an as-if-converted
basis as of December 31, 1993, 1994 and 1995, respectively. The Company
recognized contract revenue related to this agreement of $2,423,000, $2,691,000
and $2,281,000 for the years ended December 31, 1993, 1994 and 1995,
respectively.
BRISTOL-MYERS SQUIBB COMPANY
In August 1995, the Company entered into a four-year collaborative
agreement with Bristol-Myers Squibb Company ("Bristol-Myers Squibb") relating to
the discovery and development of compounds relating to amyloid precusor protein.
The collaborative effort includes identifying compounds that are suitable for
development into products for commercialization and to conduct preclinical
development and clinical trials for such compounds. In exchange for providing a
certain level of scientific research under the agreement, the Company will
receive payments from Bristol-Myers Squibb; additional payments may be received
by the Company upon the achievement of certain development milestones.
Bristol-Myers Squibb will also pay royalties based on the level of its net sales
of products, if any, developed under the agreement. The Company recognized
contract revenue of $1,169,000 in 1995 related to this agreement.
F-11
<PAGE> 80
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Concurrent with the execution of the agreement, Bristol-Myers Squibb paid a
non-refundable $3,000,000 license fee for an exclusive commercialization license
to use certain related existing proprietary technologies and purchased 280,000
shares of the Company's Series C Convertible Preferred Stock (658,000 shares of
Common Stock on as as-if-converted basis; pro forma unaudited -- Note 12). The
stock purchase resulted in an approximate 11% ownership of the Company's total
outstanding Common Stock on an as-if-converted basis as of December 31, 1995.
Bristol-Myers Squibb also agreed to make an additional equity investment of
$6,000,000 of shares of Common Stock upon the initiation of clinical trials
relating to any product developed from the collaboration but not before January
1, 1997. The number of shares to be purchased by Bristol-Myers Squibb on such
date will be determined by dividing $6,000,000 by the then fair market value per
share of the Company's Common Stock on the date of issuance.
Total costs incurred under the Company's various collaborative agreements
for the years ended December 31, 1993, 1994 and 1995, including certain
administrative costs, aggregated $3,226,000, $3,232,000 and $4,381,000,
respectively.
NOTE 5 -- SIGNIFICANT OPTION AND LICENSE AGREEMENTS
CEPHALON, INC.
In October 1991, the Company entered into a development and
option-to-license agreement with Cephalon, Inc. ("Cephalon") for certain
proprietary technology related to the development and production of recombinant
insulin-like growth factor ("IGF-1"), known as Myotrophin, on a commercial basis
for certain indications. In addition to the reimbursement of certain research
costs, the agreement includes a provision for the payment of option and
licensing fees upon the occurrence of certain development milestones.
In March 1992, Cephalon exercised its option and executed the license
agreement, which provides Cephalon an exclusive worldwide license to produce
IGF-1 for certain neurological applications. Under the agreement, the Company
has rights to receive royalties on Cephalon's sales of products using licensed
technology, which rights generally expire seven years after the first commercial
sale of such products or upon the expiration of patents underlying product
manufacture, whichever is later. Cephalon has the right to terminate the
agreement upon sixty days written notice to the Company.
In September 1995, Cephalon exercised its option to buy-down its royalty
percentage to a reduced rate that would be payable upon Cephalon achieving a
certain level of sales of an IGF-1 product within the neurology field, for a
non-refundable payment of $1,750,000.
AFFYMAX TECHNOLOGIES, N.V.
In June 1993, SIBIA entered into a license agreement with Affymax
Technologies, N.V. ("Affymax") for certain proprietary recombinant phage
technology used in drug and diagnostic reagent discovery. Under this agreement,
Affymax paid SIBIA $500,000 during 1993 and may pay certain license fees in
future years.
ZENECA LIMITED
In August 1994, the Company entered into an agreement with Zeneca Limited
("Zeneca") to sell its technology used to alter the characteristics of tomatoes
or other crop species by genetic engineering. As consideration for this
technology, Zeneca paid the Company $300,000 and may be required to pay
specified royalties and payments equal to the difference, if any, between these
royalties and specified minimum payments. These minimum payments will be made
beginning in 1997. Zeneca can terminate the agreement at any time. During 1994,
the Company recognized $300,000 in revenue related to the agreement.
F-12
<PAGE> 81
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SALE OF JOINT VENTURE
In February 1984, the Company received 1,000,000 shares of Common Stock of
SISKA Diagnostics, Inc. ("SISKA"), a corporation formed in 1984, in exchange for
the assignment of rights to certain inventions in the field of nucleic acid
probe diagnostics. The Company's investment in the SISKA corporate joint
venture, accounted for under the equity method of accounting, was assigned no
value as the intangible assets exchanged had no recorded value. The remaining
1,000,000 shares of SISKA Common Stock outstanding was owned by Skandigen AB, a
corporation of Sweden.
In January 1994, the Company forfeited its right to receive certain
royalties in exchange for an additional 10% interest in the SISKA corporate
joint venture. In March 1994, the Company entered into an agreement with Organon
Teknika Corporation to sell its 60% interest in SISKA for $5,196,000 and
recorded a gain of $5,296,000 which included the reversal of $100,000
representing the Company's share of the SISKA's stockholders' deficit.
NOTE 7 -- SETTLEMENT OF LITIGATION
In October 1995, the Company entered into settlements with two law firms
for failure to properly file a foreign patent application. The Company accepted
$4,633,000 in total damages and received $3,146,000 in net proceeds after
payment of $1,487,000 in legal expenses.
NOTE 8 -- INCOME TAXES
The provision for income taxes for the year ended December 31, 1995 is
comprised of $75,000 in current federal alternative minimum tax expense. The
$75,000 provision for income taxes differs from the $1,020,000 income tax
determined by applying the applicable U.S. statutory federal income tax rate of
34% to pretax income primarily as a result of alternative minimum taxes after
consideration of the $1,001,000 benefit of net operating loss carryforwards.
As of December 31, 1995, the Company had a net operating loss carryforward
for federal income tax purposes of approximately $14,600,000, which expires
beginning in 2006. As of December 31, 1995, the Company had federal and state
tax credits for research activities totaling approximately $1,063,000 and
$241,000, respectively, which are available to offset future income taxes and
which expire during the years 2004 to 2010.
The Company's ability to utilize net operating loss carryforwards and tax
credits is subject to limitations as set forth in applicable federal and state
tax laws. As specified in the Internal Revenue Code, an ownership change of more
than 50% by a combination of the Company's significant stockholders during any
three-year period would result in certain limitations on the Company's ability
to utilize its net operating loss and credit carryforwards.
F-13
<PAGE> 82
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax liabilities and assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Depreciation......................................... $ (507,000) $ (447,000)
----------- -----------
Deferred tax assets:
Net operating loss carryforward...................... 6,628,000 5,224,000
Research and development credit...................... 1,173,000 1,304,000
Purchased research and development................... 110,000 76,000
Research and development capitalized for state tax
purposes.......................................... 1,182,000 890,000
Capital lease obligations............................ 531,000 473,000
Other................................................ 227,000 230,000
----------- -----------
Total deferred tax assets.................... 9,851,000 8,197,000
----------- -----------
Net deferred tax assets................................ 9,344,000 7,750,000
Valuation allowance.................................... (9,344,000) (7,750,000)
----------- -----------
Deferred taxes......................................... $ -- $ --
=========== ===========
</TABLE>
As of December 31, 1995, the Company has provided a deferred tax asset
valuation allowance for net deferred tax assets which "more likely than not"
will not be realized based on recent and expected trends in operating results.
The Company paid state franchise taxes of $16,000, $12,000 and $13,000
during 1993, 1994 and 1995, respectively. The Company paid federal income tax of
$32,000 during 1995.
NOTE 9 -- STOCKHOLDERS' EQUITY
STOCK SPLIT
In March 1996, the Board of Directors authorized a 2.35-for-1 stock split
and increased the total authorized shares of Common Stock outstanding to
25,000,000 (Note 12). The Convertible Preferred Stock conversion rate was also
changed to 2.35-for-1. The 1994 and 1995 stockholders' equity accounts have been
restated to give effect to the Common Stock split and increased share
authorization. All earnings per share, option and other data presented have also
been restated to give effect to the stock split.
CONVERTIBLE PREFERRED STOCK
In July 1995, the Company amended and restated its Certificate of
Incorporation to issue up to 280,000 shares of the Company's Series C
Convertible Preferred Stock in conjunction with the Bristol-Myers Squibb stock
purchase agreement (Note 4). In August 1995, Bristol-Myers Squibb purchased
280,000 shares of Series C Convertible Preferred Stock (658,000 shares of Common
Stock on an as-if-converted basis; pro forma unaudited -- Note 12) for an
aggregate amount of $7,000,000 that was recorded net of $70,000 in issuance
costs.
In March 1994, the Company amended and restated its Certificate of
Incorporation to issue up to 173,611 shares of the Company's Series A
Convertible Preferred Stock in conjunction with the Ciba stock purchase
agreement (Note 4). In March 1994, Ciba purchased 173,611 shares of Series A
Convertible Preferred Stock (407,986 shares of Common Stock on an
as-if-converted basis; pro forma unaudited -- Note 12) for an aggregate amount
of $2,500,000.
F-14
<PAGE> 83
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Series A, B and C Convertible Preferred Stock is convertible at the
option of the stockholder into shares of Common Stock on a 2.35-for-1 basis. In
the event of an initial public offering of Common Stock, the Series A, B and C
Convertible Preferred Stock will automatically convert into Common Stock (Note
12).
The Series A and C Convertible Preferred Stock voting rights are on an
as-converted-into-common basis on all matters requiring stockholder approval.
Dividends are non-cumulative when declared by the Board of Directors, prior and
in preference to any dividend on Common Stock or on Series B Convertible
Preferred Stock. The liquidating preference is $14.40 and $25.00 ($6.13 and
$10.64 per share, respectively, on an as-if-converted basis; pro forma
unaudited -- Note 12) per share for Series A and C, respectively, plus declared
but unpaid dividends, in preference to the holders of the Common Stock and the
Series B Convertible Preferred Stock. Any remaining liquidation distribution
will be made on an as-if-converted basis to holders of Common Stock and Series B
Convertible Preferred Stock.
The Series B Convertible Preferred Stock is non-voting and entitled to
receive dividends, out of funds legally available, at the rate of $.01 per annum
per share when declared by the Board of Directors, payable in preference and
priority to any payment of any dividend on Common Stock. The rights to such
dividends are non-cumulative.
Certain holders of the Company's Convertible Preferred Stock are entitled
to certain registration rights with respect to their shares. Should the Company
propose to register shares of its capital stock, certain holders of shares of
Convertible Preferred Stock will be entitled to include their shares in such
registration.
As of December 31, 1995, 407,986, 53,110 and 658,000 shares of Common Stock
were reserved for issuance to Series A, B and C Convertible Preferred
stockholders upon conversion, respectively.
The following shares of Convertible Preferred Stock, $.001 par value, are
issued and outstanding:
<TABLE>
<CAPTION>
PROFORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, (UNAUDITED)
------------- DECEMBER 31,
1994 1995 1995
---- ---- -------------
<S> <C> <C> <C>
Series A -- 173,611 shares designated, issued and
outstanding as of December 31, 1994 and 1995
($2,500,000 total liquidation preference).
Convertible into Common Stock at 2.35-for-1. No
shares issued and outstanding as of December 31,
1995 -- pro forma (unaudited).................... $ -- $ -- $ --
Series B -- 600,000 shares designated; 22,900 and
22,600 shares issued and outstanding as of
December 31, 1994 and 1995. Convertible into
Common Stock at 2.35-for-1. No shares issued and
outstanding as of December 31, 1995 -- pro forma
(unaudited)...................................... -- -- --
Series C -- 280,000 shares designated, issued and
outstanding as of December 31, 1995 ($7,000,000
total liquidation preference). Convertible into
Common Stock at 2.35-for-1. No shares issued and
outstanding as of December 31, 1995 -- pro forma
(unaudited)...................................... -- -- --
</TABLE>
F-15
<PAGE> 84
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMMON STOCK
The Common Stock has voting rights and powers and contains certain
liquidation rights over the Series B Convertible Preferred Stock. Certain
holders of Common Stock are entitled to certain registration rights with respect
to their shares. In the event that the Company proposes to register any of its
Common Stock under the Securities Act of 1933, certain holders of Common Stock
are entitled to include their shares in such a registration. In addition,
pursuant to certain of its collaborative agreements, the Company must use its
best efforts to register for public resale certain shares of Common Stock which
were purchased by such collaborative partners prior to the Company's planned
initial public offering.
WARRANTS
As of December 31, 1994 and 1995, warrants to purchase 258,359 shares of
Common Stock (the "warrants") were outstanding. The warrants were issued in
September 1991 as part of an acquisition. The warrants are exercisable through
October 31, 2001 upon the Company's initial public offering of Common Stock and
the Company's achieving $50,000,000 from net sales of, or royalties from,
products utilizing the related acquired technology. The license agreement to
which the technology relates was cancelled in 1994 and the Company is no longer
utilizing the related technology. The warrants are not presently exercisable and
management believes that the warrants will never be exercisable. No separate
value was assigned to the warrants in 1991 as the Company determined their value
to be de minimis.
NOTE 10 -- EMPLOYEE BENEFIT PLANS
COMMON STOCK OPTION PLANS
During 1992, the Company adopted the SIBIA 1992 Stock Option and Restricted
Stock Plan under which options for a maximum of 1,551,000 shares of Common Stock
may be issued to employees and consultants of the Company. The plan provides for
the granting of options intended to qualify as incentive stock options under the
Internal Revenue Code and nonqualified stock options. The exercise price of the
incentive stock options may not be less than the fair market value of the
underlying shares on the date of grant. The exercise price of the nonqualified
stock options may not be less than 85% of the fair market value of the
underlying shares on the date of grant as determined by the Board of Directors.
Options granted under the plan are generally subject to vesting over four years
(25% per year), as determined by the Board of Directors. Compensation expense,
as appropriate, has been recorded related to option grants and is being
amortized to operations over the related vesting period. The terms of the stock
options are up to ten years. No further stock option grants will be made under
this plan upon the completion of an initial public offering by the Company.
F-16
<PAGE> 85
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the changes in options outstanding under the plan for the
three years ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
OUTSTANDING PER SHARE
----------- --------------
<S> <C> <C>
Balance, December 31, 1992.............................. 338,987 $ .37 - $1.23
Options granted....................................... 110,333 1.23 - 1.30
Options exercised..................................... (13,219) 1.23 - 1.30
Options forfeited..................................... (9,576) 1.23 - 1.30
-----------
Balance, December 31, 1993.............................. 426,525 .37 - 1.30
Options granted....................................... 131,530 1.30 - 1.70
Options exercised..................................... (13,865) .37 - 1.30
Options forfeited..................................... (21,268) .37 - 1.70
-----------
Balance, December 31, 1994.............................. 522,922 .37 - 1.70
Options granted....................................... 215,754 1.23 - 1.45
Options exercised..................................... (23,500) .37 - 1.23
Options forfeited..................................... (41,055) .37 - 1.70
-----------
Balance, December 31, 1995.............................. 674,121 .37 - 1.70
==========
Exercisable, December 31, 1995.......................... 423,212 .37 - 1.70
==========
Available for future grant, December 31, 1995........... 357,412
==========
</TABLE>
Prior to March 1994, employees and consultants who exercised options could
borrow, on a full-recourse basis, at the time of exercise, an amount equal to
the difference between the aggregate exercise price of the shares of Common
Stock acquired and $.04. All borrowings are secured by a pledge of the shares of
Common Stock purchased and bear interest at the applicable federal rate with
principal and interest due and payable in five years. Outstanding borrowings
bear interest at rates of 8% and 9%.
MANAGEMENT CHANGE OF CONTROL PLAN
In November 1994, the Company adopted a plan whereby certain key employees
may be entitled to receive benefits upon the occurrence of a change of control
of the Company, as defined in the plan. Certain of these benefits (bonus and/or
severance) are based on the Company having a minimum valuation upon the change
in control and the key employees' base salary. Also in conjunction with the
plan, certain key employees were granted a total of 364,250 nonqualified stock
options exercisable at $.85 per share. Additionally, during 1995, 23,500
nonqualified stock options were granted at an exercise price of $.85 per share.
Options issued have terms of 10 years and are exercisable seven years from their
date of grant. In the event of a change in control, the exercise period of the
options may accelerate as determined by the value of the Company on the date of
such a change in control. Deferred compensation related to the options granted
is being amortized to operations over the related vesting period. Subsequent to
year end, the Management Change of Control Plan was amended to allow for the
immediate vesting of 25% of the outstanding options in the event of an initial
public offering of the Company's Common Stock. The remaining options outstanding
under such plan would vest over a three-year period (Note 12).
SERIES B CONVERTIBLE PREFERRED STOCK OPTION PLANS
The Company had two stock option plans under which a maximum of 300,000
shares of Series B Convertible Preferred Stock (convertible at 2.35-for-1) could
be issued to employees and consultants of
F-17
<PAGE> 86
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
the Company. These plans expired in 1991; accordingly, no options are available
for grant as of December 31, 1995. Option grant prices approximated the fair
market value of the Series B Convertible Preferred Stock at the date of grant as
determined by the Board of Directors. The stock options have terms of ten years
and are exercisable at such time (generally subject to vesting over 3 to 5 years
from the grant date) and under conditions and at prices as were determined by
the Board of Directors. A summary of the changes in options outstanding under
the Series B Convertible Preferred Stock option plans for the three years ended
December 31, 1995 is as follows:
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
OUTSTANDING PER SHARE
----------- ---------------
<S> <C> <C>
Balance, December 31, 1992............................ 148,100 $ 3.30 - $15.00
Options exercised................................... (2,000) 3.85
Options forfeited................................... (1,600) 3.30 - 4.00
-----------
Balance, December 31, 1993............................ 144,500 5.00 - 15.00
Options forfeited................................... (7,200) 12.00 - 15.00
-----------
Balance, December 31, 1994............................ 137,300 5.00 - 15.00
Options forfeited................................... (6,600) 5.00
-----------
Balance, December 31, 1995............................ 130,700 5.00 - 15.00
==========
Exercisable, December 31, 1995 (Note 12).............. 130,700 5.00 - 15.00
==========
</TABLE>
Employees and consultants who exercise options may borrow at the time of
exercise, on a full-recourse basis, an amount equal to the difference between
the aggregate exercise price of the shares of Common Stock acquired and $.04.
All borrowings are secured by a pledge of Series B Convertible Preferred Stock
purchased, bear interest at the applicable federal rate with principal and
interest due and payable in five years. Outstanding borrowings bear interest of
9%.
RETIREMENT SAVINGS PLAN
The Company has a savings plan under Section 401(k) of the Internal Revenue
Code which covers all employees of the Company who have completed one year of
service. Employees can contribute up to 6% of their salaries, but not in excess
of the amount deductible for income tax purposes. The Company currently matches
50% of employee contributions up to 6% of an employee's salary, limited to the
maximum contribution allowable for income tax purposes. Employer contributions
are vested proportionately over five years of service. The plan may be amended
or discontinued at anytime by the Company. During 1993, 1994 and 1995, the
Company contributed $59,000, $87,000 and $104,000, respectively, to the plan.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES
CAPITAL LEASES
Certain scientific instrumentation, computer equipment and other equipment
acquired under available lease-line credit facilities are subject to leases
which are classified as capital leases. These capital leases mature at various
dates through 1999 and have interest rates between 4.9% and 8.1%. As of December
31, 1995, $1,976,000 ($1,099,000 net of accumulated amortization) of such leased
equipment is included in property and equipment. For the years ended December
31, 1993, 1994 and 1995, $146,000, $297,000 and $392,000 in amortization
expense, respectively, was recorded related to property acquired under capital
leases. As of December 31, 1995 the Company has $400,000 available under a lease
financing line.
F-18
<PAGE> 87
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING LEASES
The Company leases its principal facilities under a long-term operating
lease which includes rent escalations of approximately 5 percent per annum. Rent
expense was $545,000, $559,000 and $563,000, net of sub-lease income of
$541,000, $567,000 and $571,000 for 1993, 1994 and 1995, respectively. The
Company has the option to extend the lease for a period of five years.
Future minimum lease payments for capital and operating leases as of
December 31, 1995 are as follows (operating lease payments are net of
noncancellable sub-lease income of $528,000 and $352,000 in 1996 and 1997).
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------- ----------
<S> <C> <C>
1996...................................................... $ 484,000 $ 760,000
1997...................................................... 435,000 937,000
1998...................................................... 275,000 40,000
1999...................................................... 51,000
---------- ----------
Total minimum lease payments.............................. 1,245,000 $1,737,000
==========
Amount representing interest.............................. (93,000)
----------
Obligations under capital leases.......................... 1,152,000
Less portion due within one year.......................... (431,000)
----------
Long-term capital lease obligations....................... $ 721,000
==========
</TABLE>
During 1993, 1994 and 1995, $33,000, $63,000 and $71,000, respectively, was
paid in imputed interest.
COMMITMENTS
The Company has contracted for a fully automated, functional high
throughput screening system and related equipment with an expected cost of
approximately $750,000, of which $500,000 will be provided by Ciba (Note 12).
The Company is party to various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, the
resolution of all such matters will not have a material adverse effect on the
Company's financial position, results of operations or cash flows.
NOTE 12 -- SUBSEQUENT EVENTS
CIBA COLLABORATIVE AGREEMENT EXTENSION
In March 1996, the Company executed an agreement with Ciba to extend the
term of its collaborative agreement with Ciba to September 1998, unless extended
by mutual consent or terminated by either party upon six months' notice, which
may be provided after March 1997. In exchange for providing a certain level of
scientific research under the agreement, the Company will receive payments from
Ciba; additional payments may be received by the Company upon the achievement of
certain development milestones and the Company may receive royalties in the
event there are sales of products containing a compound developed under the
agreement. As part of the agreement, Ciba has agreed to make a further equity
investment of $7,500,000 of shares of the Company's Common Stock, of which
$5,000,000 would be made in conjunction with an initial public offering of the
Company's Common Stock and the remaining $2,500,000 upon the achievement of
certain research milestones. The initial $5,000,000 of Common Stock will be
issued to Ciba at the public offering price concurrently with the
F-19
<PAGE> 88
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
closing of the Company's planned initial public offering. The number of shares
to be issued upon achievement of such milestones will be determined by dividing
$2,500,000 by the then fair market value per share of the Company's Common Stock
on the date of issuance. Ciba is also agreed to provide $500,000 to fund certain
capital expenditures (which may be credited against future milestone payments).
Each party will continue to have a non-exclusive right to use technology
developed. For a period of three years after the agreement, Ciba will have a
right of first negotiation related to any compounds developed from the
technology related to the agreement.
In March 1996, Ciba and Sandoz Ltd. announced that they agreed to a merger
of their respective companies. The Company cannot predict what impact, if any,
the merger will have on its agreement with Ciba.
THE SALK INSTITUTE LICENSE AGREEMENT EXTENSION
In 1988, SIBIA entered into a license agreement with The Salk Institute
covering a number of NAChR receptor subunit clones. This agreement was amended
in March 1996 such that the license became an exclusive worldwide license.
Pursuant to the agreement, as amended, SIBIA is obligated to pay royalties to
The Salk Institute on sales of products resulting from The Salk Institute's
NAChR technology. In addition, the Company is required to make certain minimum
annual royalty payments to The Salk Institute beginning in 2002. Failure to pay
such royalties will result in the related license becoming non-exclusive.
In 1990, SIBIA entered into a three-year agreement with The Salk Institute
in the area of EAARs. This agreement provided for the support of certain
research in 1992 and 1993 at The Salk Institute by SIBIA and the transfer of
research materials and research results in the EAAR area from The Salk Institute
to SIBIA. SIBIA also received an exclusive worldwide license to certain
EAAR-related patents and patent applications held by The Salk Institute. The
agreement was amended in March 1996. Pursuant to the agreement, as amended,
SIBIA is required to make certain annual minimum royalty payments to The Salk
Institute beginning in 2002. Failure to pay such royalty payments will result in
the related license agreement becoming non-exclusive.
AMENDMENTS TO CERTIFICATE OF INCORPORATION
In March 1996, the Company amended and restated its Certificate of
Incorporation to: (i) change the name of the Company to "SIBIA Neurosciences,
Inc.", (ii) split each outstanding share of Common Stock into 2.35 shares of
Common Stock, (iii) increase the authorized number of shares of Common Stock to
25,000,000, (iv) adjust the conversion rate of Convertible Preferred Stock to
2.35-for-1 and (v) provide for the automatic conversion of the Series B
Preferred Stock into Common Stock upon the closing of an initial public
offering.
EQUITY INCENTIVE PLAN
In February 1996, the Company adopted the 1996 Equity Incentive Plan to
provide selected employees, directors and consultants with incentive stock
options, nonqualified stock options, stock bonuses, rights to purchase
restricted stock and stock appreciation rights. The Company has reserved
1,513,141 shares of Common Stock for issuance under the plan. The options
granted are exercisable for ten years from the date of grant. The exercise price
of the incentive stock options will not be less than the fair market value of
the Common Stock on the date of grant. The exercise price of the nonqualified
stock options will not be less than 85% of the fair market value of the Common
Stock on the date of grant. The vesting provisions may vary but in each case
will provide for the vesting of at least 20% per year of the total number of
shares of Common Stock subject to the option.
F-20
<PAGE> 89
SIBIA NEUROSCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The purchase price for restricted stock will be determined by the Board of
Directors, but in no event will the purchase price be less than 85% of the fair
market value of the Common Stock on the date such an award is granted. Shares of
Common Stock may be subject to a repurchase feature in favor of the Company in
accordance with a vesting schedule to be determined by the Board of Directors,
provided however, that the right to repurchase at the original purchase price
will lapse at a minimum rate of 20% per year over the five-year period following
the date that the award was granted. The repurchase feature can be exercised by
the Company within the 90-day period following the stockholder's termination of
employment or the relationship as a director or consultant.
EMPLOYEE STOCK PURCHASE PLAN
In February 1996, the Company adopted the Employee Stock Purchase Plan
under Section 423 of the Internal Revenue Code in which eligible employees may
use funds from accumulated payroll deductions to purchase shares of Common Stock
at the end of each designated purchase period. Employees may contribute up to
15% of base salary toward such purchases, not to exceed $25,000 per calendar
year. The purchase price is 85% of the fair market value of Common Stock
determined at the beginning or end of each purchase period, whichever is lower.
The Company has reserved 500,000 shares of Common Stock for issuance under the
plan.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In February 1996, the Company adopted the 1996 Non-Employee Directors'
Stock Option Plan, which becomes effective as of the effective date of the
Company's planned initial public offering, to provide non-employee directors
with the opportunity to purchase Common Stock by granting options to
non-employee directors at an exercise price equal to the fair market value of
the underlying shares on the date of grant. Options are granted upon election as
a non-employee director and on the date of each annual meeting of the
stockholders of the Company. The options are exercisable over a ten-year period
from the date of grant and are 50% vested as of the date of grant with the
remainder vesting one year thereafter. The Company has reserved 235,000 shares
of Common Stock for issuance under the plan.
MANAGEMENT CHANGE OF CONTROL PLAN
In March 1996, the Management Change of Control Plan was amended to allow,
in the event of an initial public offering of the Company's Common Stock, for
the immediate vesting of 25% of the outstanding options under such plan. The
remaining options would vest annually over a three-year period. In the event of
a change of control, the vesting of unvested options may accelerate as
determined by the value of the Company on the date of such a change of control.
EXERCISE OF STOCK OPTIONS
In March 1996, options to purchase 120,200 shares of Series B Convertible
Preferred Stock option plans were exercised at $5.00 per share in exchange for
notes receivable that bear interest at 7 % per annum. Of these shares, 110,600
shares were converted into 259,910 shares of Common Stock. Additionally, during
March 1996, options to purchase 17,143 shares of Common Stock with a weighted
average exercise price of $2.93 per share were exercised.
GRANT OF STOCK OPTIONS
In March 1996, the Company issued options to purchase 157,168 shares of
Common Stock with an exercise price of $1.91 per share resulting in deferred
compensation of $910,000, which will be recognized as expense over the related
four-year vesting period.
F-21
<PAGE> 90
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<PAGE> 91
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<PAGE> 92
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<PAGE> 93
[PASTE-UP PHOTOS HERE]
Processing of the amyloid precursor protein (APP) by specific neuronal proteases
leads to the production of either the neuroprotective secreted APP (s-alpha)
molecule or the neurotoxic Amyloid beta-protein (A-beta) molecule. The
neurotoxic A-beta molecule is formed through the action of two successive
protease cleavages on APP, the first by beta-secretase and the second by
gamma-secretase. Alternatively, A-beta formation is precluded through a
single protease cleavage of APP by alpha-secretase which generates the
neuroprotective APP (s-alpha) molecule.
<PAGE> 94
<TABLE>
<CAPTION>
<S> <C>
NO DEALER, SALESPERSON OR ANY OTHER 2,100,000 SHARES
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED SIBIA
UPON AS HAVING BEEN AUTHORIZED BY THE NEUROSCIENCES, INC.
COMPANY OR ANY OF THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT COMMON STOCK
CONSTITUTE AN OFFER OR SOLICITATION BY ($.001 PAR VALUE)
ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH SOLICITATION.
----------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary......................... 3
Risk Factors............................... 6
Use of Proceeds............................ 16
Dividend Policy............................ 16
Capitalization............................. 17
Dilution................................... 18 LOGO
Selected Financial Data.................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 20
Business................................... 24
Management................................. 43
Certain Transactions....................... 53
Principal Stockholders..................... 55
Description of Capital Stock............... 57 SALOMON BROTHERS INC
Shares Eligible for Future Sale............ 61 NEEDHAM & COMPANY, INC.
Underwriting............................... 63 VECTOR SECURITIES INTERNATIONAL, INC.
Legal Matters.............................. 64
Experts.................................... 64
Additional Information..................... 65
Index to Financial Statements.............. F-1
--------------
UNTIL , 1996 (25 DAYS
AFTER THE COMMENCEMENT OF THIS
OFFERING), ALL DEALERS EFFECTING
TRANSACTIONS IN THE COMMON STOCK
OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS PROSPECTUS
DELIVERY REQUIREMENT IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. DATED , 1996
</TABLE>
<PAGE> 95
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses other than the underwriting
discounts payable by the Registrant in connection with the sale of the Common
Stock being registered. All the amounts shown are estimates, except for the
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee......................................................... $ 10,826
NASD filing fee.......................................................... 3,640
Nasdaq Stock Market Listing Application fee.............................. 40,000
Blue sky qualification fees and expenses................................. 10,000
Printing and engraving expenses.......................................... 80,000
Legal fees and expenses.................................................. 225,000
Accounting fees and expenses............................................. 125,000
Transfer agent and registrar fees........................................ 10,000
Miscellaneous............................................................ 75,534
-------
Total.......................................................... $580,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Registrant's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the Delaware General Corporation Law (the "Delaware Law")
and (ii) require the Registrant to indemnify its directors and officers to the
fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are,
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of a corporation, and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate liability for breach of the director's duty of
loyalty to the Registrant or its stockholders, for acts or omissions not in good
faith or involving intentional misconduct or knowing violations of law, for any
transaction from which the director derived an improper personal benefit or for
any willful or negligent payment of any unlawful dividend or any unlawful stock
purchase agreement or redemption.
The Registrant has entered into agreements with its directors and executive
officers that require the Registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or officer of the
Registrant or any of its affiliated enterprises, provided such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
II-1
<PAGE> 96
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") or otherwise.
The Registrant has an insurance policy covering the officers and directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since March 1, 1993, the Registrant has sold and issued the following
securities which were not registered under the Securities Act:
(1) In March 1996, the Registrant effected a 2.35-for-1 split of the
outstanding Common Stock, whereby each share of outstanding Common Stock
was exchanged for 2.35 shares of Common Stock. As a result of the stock
split, each share of outstanding Series A, Series B and Series C
Convertible Preferred Stock became convertible into 2.35 shares of Common
Stock. The Series A, Series B and Series C Convertible Preferred Stock will
convert automatically into shares of Common Stock effective upon the
closing of the offering referred to herein. All numbers of shares of Common
Stock and Series A, Series B and Series C Convertible Preferred Stock set
forth in this Registration Statement have been adjusted to reflect this
stock split and the automatic conversion of the Series A, Series B and
Series C Convertible Preferred Stock into Common Stock.
(2) In August 1995, the Registrant issued and sold an aggregate of
280,000 shares of its Series C Convertible Preferred Stock, $.001 par
value, to Bristol-Myers Squibb for an aggregate purchase price of
$7,000,000 in cash. Such shares were sold pursuant to the investment
agreement filed as Exhibit 10.19 to this Registration Statement.
(3) In November 1994, Registrant granted to six employees options to
purchase an aggregate of 364,250 shares of Common Stock of Registrant at an
exercise price of $.85 per share under its Change of Control Plan. In
December 1995, Registrant granted to two employees additional options to
purchase an aggregate of 23,500 shares of Common Stock of Registrant at an
exercise price of $.85 per share under its Change of Control Plan.
(4) In April 1994, Registrant issued an aggregate of 173,611 shares of
Series A Convertible Preferred Stock (which will automatically convert into
407,986 shares of Common Stock upon the closing of this offering) at a
price of $14.40 per share pursuant to the Subscription Agreement filed as
Exhibit 10.29.
(5) In October 1993, Registrant issued and sold an aggregate of 70,500
shares of its Common Stock, to Hafslund Nycomed Pharma AG as partial
consideration for the purchase by Registrant of certain license rights to
CNS receptor technology from Hafslund Nycomed Pharma AG. Such shares were
issued pursuant to the agreement filed as Exhibit 10.36 to this
Registration Statement.
(6) In December 1993, Registrant issued to The Salk Institute 23,500
shares of Common Stock as partial consideration for certain licenses to
technology owned by The Salk Institute under the agreement between the
parties filed as Exhibit 10.21 to this Registration Statement.
(7) From March 1, 1993 to March 19, 1996, the Registrant granted stock
options to employees, directors and consultants under its 1992 Stock Option
and Restricted Stock Plan (the "Option Plan") covering an aggregate of
171,380 shares of Common Stock at a weighted average exercise price of
$3.40 per share. During that same period, options to purchase an aggregate
of 122,200 shares of Series B Convertible Preferred Stock have been
exercised for an aggregate purchase price of $608,700. Options to purchase
an aggregate of 27,070 shares of Common Stock have been exercised for an
aggregate purchase price of $55,513.
The sales and issuances of securities in the transactions described in
paragraphs (1) and (4) above were deemed to be exempt from registration under
the Securities Act by virtue of Rule 701
II-2
<PAGE> 97
promulgated thereunder in that they were offered and sold either pursuant to
written compensatory benefit plans or pursuant to a written contract relating to
compensation, as provided by Rule 701.
With respect to the grant of stock options described in paragraph (1) above
and shares issued in connection with the stock split referred to in paragraph
(2) above, exemption from registration under the Securities Act was unnecessary
in that none of such transactions involved a "sale" of securities as such term
is used in Section 2(3) of the Securities Act.
The sales and issuances of securities in the transactions described in
paragraphs (3), (5) and (6) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Regulation D
promulgated thereunder.
The recipients represented their intention to acquire the securities for
investment purposes only and not with a view to the distribution thereof.
Appropriate legends are affixed to the stock certificates issued in such
transactions. Similar legends were imposed in connection with any subsequent
sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation of the Registrant.
*3.2 Amended and Restated Bylaws of the Registrant.
*3.3 Form of Amended and Restated Certificate of Incorporation of the Registrant to be
effective upon completion of the offering.
*3.4 Form of Amended and Restated Bylaws of the Registrant to be effective upon
completion of the offering.
*4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
*4.2 Specimen stock certificate.
*5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
*10.1 Form of Indemnification Agreement entered into between Registrant and its
directors and officers.
*10.2 Registrant's 1981 Employee Stock Option Plan.
*10.3 Form of Employee Incentive Stock Option Agreement under the 1981 Employee Stock
Option Plan.
*10.4 Registrant's 1981 Consultant Stock Option Plan.
*10.5 Form of Consultant Nonstatutory Stock Option Agreement.
*10.6 Registrant's 1992 Stock Option and Restricted Stock Plan, as amended (the "1992
Option Plan").
*10.7 Form of Incentive Stock Option Agreement under the 1992 Option Plan.
*10.8 Form of Nonstatutory Stock Option Agreement under the 1992 Option Plan.
*10.9 Registrant's 1996 Equity Incentive Plan (the "1996 Equity Plan").
*10.10 Form of Incentive Stock Option Agreement under the 1996 Equity Plan.
*10.11 Form of Nonstatutory Stock Option Agreement under the 1996 Equity Plan.
*10.12 Registrant's 1996 Non-Employee Directors' Stock Option Plan (the "Non-Employee
Directors' Option Plan").
*10.13 Form of Nonstatutory Stock Option Agreement under the Non-Employee Directors'
Option Plan.
*10.14 Registrant's Employee Stock Purchase Plan and related offering document.
*10.15 Registrant's Management Change of Control Plan, as amended (the "Change of Control
Plan").
*10.16 Form of Nonqualified Stock Option Agreement under the Change of Control Plan.
+*10.17 Lease Agreement dated April 7, 1989 between Registrant and Regency Associates
Limited, as subsequently amended on March 1, 1993, and July 1, 1995.
*10.18 Equipment Lease Line Agreement dated June 30, 1992 between Registrant and GE
Capital, as amended.
</TABLE>
II-3
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------------------------------------------------------------------
<C> <S>
+*10.19 Investment Agreement dated August 10, 1995 between Registrant and Bristol-Myers
Squibb Company.
+10.20 Collaborative Research and License Agreement dated August 10, 1995 between
Registrant and Bristol-Myers Squibb Company.
10.21 Stockholders Agreement dated as of October 1, 1991, by and among Registrant,
Phillips Petroleum Company, The Salk Institute for Biological Studies, Skandigen
AB and the Stockholders of Protease Corporation.
+*10.22 License Agreement dated March 8, 1988 between Registrant and The Salk Institute
for Biological Studies as amended by that certain First Amendment to License
Agreement dated March 10, 1996.
+*10.23 License Agreement dated December 15, 1990 between Registrant and The Salk
Institute for Biological Studies, as amended by that certain First Amendment to
License Agreement dated March 10, 1996.
+*10.24 Stock Purchase and Stockholders Agreement dated April 11, 1988 among Registrant,
Phillips Petroleum Company, The Salk Institute for Biological Studies and
Skandigen AB, as amended by that certain Amendment to Stock Purchase and
Shareholders Agreement dated April 12, 1990.
+*10.25 Agreement dated December 20, 1991 between Registrant, Phillips Petroleum Company,
The Salk Institute for Biological Studies and Skandigen AB.
+*10.26 License Agreement dated December 20, 1991 between Registrant and Phillips
Petroleum Company.
+10.27 Amended and Restated Research and Development and License Agreement dated March
20, 1996 between Registrant and CIBA-GEIGY Limited.
*10.28 Stock Purchase Agreement dated September 15, 1992 between Registrant and CIBA-
GEIGY Limited.
*10.29 Subscription Agreement dated April 11, 1994 between Registrant and CIBA-GEIGY
Limited.
+*10.30 Stock Purchase Agreement dated March 20, 1996 between Registrant and CIBA-GEIGY
Limited.
+*10.31 Agreement dated May 1, 1992 between Registrant and Eli Lilly and Company, as
amended and extended by that certain Extension Agreement dated May 1, 1995.
+10.32 Stock Purchase Agreement dated May 7, 1992 between Registrant and Eli Lilly and
Company.
+*10.33 Option and License Agreement dated April 30, 1995 between Registrant and Eli Lilly
and Company.
+*10.34 License Agreement dated March 5, 1992 between Registrant and Cephalon, Inc., as
amended by that certain Letter dated March 22, 1995.
+*10.35 Patent License Agreement dated June 21, 1993 between Registrant and Affymax
Technologies, N.V., as amended by that certain Letter dated July 15, 1993.
+*10.36 Agreement dated October 1, 1993 between Registrant and Hafslund Nycomed Pharma AG.
*11.1 Computation of net income per share.
23.1 Consent of Price Waterhouse LLP.
*23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to Exhibit
5.1.
*23.3 Consent of Brown Martin Haller & McClain, Patent Counsel.
*23.4 Consent of Pretty, Schroeder, Brueggemann & Clark, Patent Counsel.
*24.1 Power of Attorney. Reference is made to page II-6.
</TABLE>
- ---------------
* Previously filed.
+ Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
(B) SCHEDULES
All other schedules are omitted because they are not required, are not
applicable, or the information is included in the consolidated financial
statements or notes thereto.
II-4
<PAGE> 99
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) It will provide the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 5 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of La
Jolla, County of San Diego, State of California, on the 6th day of May, 1996.
SIBIA Neurosciences, Inc.
By: /s/ THOMAS A. REED
------------------------------------
Thomas A. Reed
Vice President, Finance/
Administration and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 5 to Registration Statement has been signed below by the following persons
on May 6, 1996 in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM T. COMER, PH.D.* President, Chief Executive Officer May 6, 1996
- ---------------------------------------- and Director (Principal Executive
William T. Comer, Ph.D. Officer)
/s/ THOMAS A. REED Vice President, May 6, 1996
- ---------------------------------------- Finance/Administration and Chief
Thomas A. Reed Financial Officer (Principal
Financial and Accounting Officer)
/s/ WILLIAM R. MILLER* Chairman of the Board May 6, 1996
- ----------------------------------------
William R. Miller
/s/ STANLEY T. CROOKE, M.D., PH.D.* Director May 6, 1996
- ----------------------------------------
Stanley T. Crooke, M.D., Ph.D.
/s/ GUNNAR EKDAHL* Director May 6, 1996
- ----------------------------------------
Gunnar Ekdahl
/s/ FRANCIS H.C. CRICK, PH.D.* Director May 6, 1996
- ----------------------------------------
Francis H.C. Crick, Ph.D.
/s/ FREDERICK B. RENTSCHLER* Director May 6, 1996
- ----------------------------------------
Frederick B. Rentschler
/s/ JAMES D. WATSON, PH.D.* Director May 6, 1996
- ----------------------------------------
James D. Watson, Ph.D.
*By: /s/ THOMAS A. REED
----------------------------------
Thomas A. Reed,
Attorney-in-fact
</TABLE>
II-6
<PAGE> 101
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ---------------------------------------------------------------------------- -----
<C> <S> <C>
*1.1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation of the Registrant.
*3.2 Amended and Restated Bylaws of the Registrant.
*3.3 Form of Amended and Restated Certificate of Incorporation of the Registrant
to be effective upon completion of the offering.
*3.4 Form of Amended and Restated Bylaws of the Registrant to be effective upon
completion of the offering.
*4.1 Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
*4.2 Specimen stock certificate.
*5.1 Opinion of Cooley Godward Castro Huddleson & Tatum.
*10.1 Form of Indemnification Agreement entered into between Registrant and its
directors and officers.
*10.2 Registrant's 1981 Employee Stock Option Plan.
*10.3 Form of Employee Incentive Stock Option Agreement under the 1981 Employee
Stock Option Plan.
*10.4 Registrant's 1981 Consultant Stock Option Plan.
*10.5 Form of Consultant Nonstatutory Stock Option Agreement.
*10.6 Registrant's 1992 Stock Option and Restricted Stock Plan, as amended (the
"1992 Option Plan").
*10.7 Form of Incentive Stock Option Agreement under the 1992 Option Plan.
*10.8 Form of Nonstatutory Stock Option Agreement under the 1992 Option Plan.
*10.9 Registrant's 1996 Equity Incentive Plan (the "1996 Equity Plan").
*10.10 Form of Incentive Stock Option Agreement under the 1996 Equity Plan.
*10.11 Form of Nonstatutory Stock Option Agreement under the 1996 Equity Plan.
*10.12 Registrant's 1996 Non-Employee Directors' Stock Option Plan (the
"Non-Employee Directors' Option Plan").
*10.13 Form of Nonstatutory Stock Option Agreement under the Non-Employee
Directors' Option Plan.
*10.14 Registrant's Employee Stock Purchase Plan and related offering document.
*10.15 Registrant's Management Change of Control Plan, as amended (the "Change of
Control Plan").
*10.16 Form of Nonqualified Stock Option Agreement under the Change of Control
Plan.
+*10.17 Lease Agreement dated April 7, 1989 between Registrant and Regency
Associates Limited, as subsequently amended on March 1, 1993, and July 1,
1995.
*10.18 Equipment Lease Line Agreement dated June 30, 1992 between Registrant and GE
Capital, as amended.
+*10.19 Investment Agreement dated August 10, 1995 between Registrant and
Bristol-Myers Squibb Company.
+10.20 Collaborative Research and License Agreement dated August 10, 1995 between
Registrant and Bristol-Myers Squibb Company.
10.21 Stockholders Agreement dated as of October 1, 1991, by and among Registrant,
Phillips Petroleum Company, The Salk Institute for Biological Studies,
Skandigen AB and the Stockholders of Protease Corporation.
+*10.22 License Agreement dated March 8, 1988 between Registrant and The Salk
Institute for Biological Studies as amended by that certain First Amendment
to License Agreement dated March 10, 1996.
+*10.23 License Agreement dated December 15, 1990 between Registrant and The Salk
Institute for Biological Studies, as amended by that certain First Amendment
to License Agreement dated March 10, 1996.
+*10.24 Stock Purchase and Stockholders Agreement dated April 11, 1988 among
Registrant, Phillips Petroleum Company, The Salk Institute for Biological
Studies and Skandigen AB, as amended by that certain Amendment to Stock
Purchase and Shareholders Agreement dated April 12, 1990.
</TABLE>
[/R]
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ---------------------------------------------------------------------------- -----
<C> <S> <C>
+*10.25 Agreement dated December 20, 1991 between Registrant, Phillips Petroleum
Company, The Salk Institute for Biological Studies and Skandigen AB.
+*10.26 License Agreement dated December 20, 1991 between Registrant and Phillips
Petroleum Company.
+10.27 Amended and Restated Research and Development and License Agreement dated
March 20, 1996 between Registrant and CIBA-GEIGY Limited.
*10.28 Stock Purchase Agreement dated September 15, 1992 between Registrant and
CIBA-GEIGY Limited.
*10.29 Subscription Agreement dated April 11, 1994 between Registrant and
CIBA-GEIGY Limited.
+*10.30 Stock Purchase Agreement dated March 20, 1996 between Registrant and CIBA-
GEIGY Limited.
+*10.31 Agreement dated May 1, 1992 between Registrant and Eli Lilly and Company, as
amended and extended by that certain Extension Agreement dated May 1, 1995.
+10.32 Stock Purchase Agreement dated May 7, 1992 between Registrant and Eli Lilly
and Company.
+*10.33 Option and License Agreement dated April 30, 1995 between Registrant and Eli
Lilly and Company.
+*10.34 License Agreement dated March 5, 1992 between Registrant and Cephalon, Inc.,
as amended by that certain Letter dated March 22, 1995.
+*10.35 Patent License Agreement dated June 21, 1993 between Registrant and Affymax
Technologies, N.V., as amended by that certain Letter dated July 15, 1993.
+*10.36 Agreement dated October 1, 1993 between Registrant and Hafslund Nycomed
Pharma AG.
*11.1 Computation of net income per share.
23.1 Consent of Price Waterhouse LLP.
*23.2 Consent of Cooley Godward Castro Huddleson & Tatum. Reference is made to
Exhibit 5.1.
*23.3 Consent of Brown Martin Haller & McClain, Patent Counsel.
*23.4 Consent of Pretty, Schroeder, Brueggemann & Clark, Patent Counsel.
*24.1 Power of Attorney. Reference is made to page II-6.
</TABLE>
- ---------------
* Previously filed.
+ Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
<PAGE> 1
EXHIBIT 10.20
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
BETWEEN
BRISTOL-MYERS SQUIBB COMPANY
AND
THE SALK INSTITUTE BIOTECHNOLOGY/INDUSTRIAL ASSOCIATES, INC.
AUGUST 10, 1995
<PAGE> 2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.
1.1 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . 1.
1.2 "Agreement" . . . . . . . . . . . . . . . . . . . . . . . 1.
1.3 "APP" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.
1.4 "BMS Assay Technology" . . . . . . . . . . . . . . . . . . 2.
1.5 "BMS Compound" . . . . . . . . . . . . . . . . . . . . . . 2.
1.6 "BMS Know-How" . . . . . . . . . . . . . . . . . . . . . . 2.
1.7 "BMS Patent Rights" . . . . . . . . . . . . . . . . . . . 2.
1.8 "Collaboration" . . . . . . . . . . . . . . . . . . . . . 2.
1.9 "Collaboration Compound" . . . . . . . . . . . . . . . . . 2.
1.10 "Collaboration Patent Rights" . . . . . . . . . . . . . . 2.
1.11 "Compound" . . . . . . . . . . . . . . . . . . . . . . . . 2.
1.12 "Confidential Information" . . . . . . . . . . . . . . . . 3.
1.13 "Control" . . . . . . . . . . . . . . . . . . . . . . . . 3.
1.14 "Excluded Compounds" . . . . . . . . . . . . . . . . . . . 3.
1.15 "FDA" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
1.16 "Field" . . . . . . . . . . . . . . . . . . . . . . . . . 3.
1.17 "First Commercial Sale" . . . . . . . . . . . . . . . . . 3.
1.18 "Invention" . . . . . . . . . . . . . . . . . . . . . . . 3.
1.19 "IOC" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.
1.20 "Know-How" . . . . . . . . . . . . . . . . . . . . . . . . 3.
1.21 "Lead Compound" . . . . . . . . . . . . . . . . . . . . . 3.
1.22 "NDA" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
1.23 "Net Sales" . . . . . . . . . . . . . . . . . . . . . . . 4.
1.24 "Patent Rights" . . . . . . . . . . . . . . . . . . . . . 4.
1.25 "PLP" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.
1.26 "Product" . . . . . . . . . . . . . . . . . . . . . . . . 4.
1.27 "Research" . . . . . . . . . . . . . . . . . . . . . . . . 4.
1.28 "Research Term" . . . . . . . . . . . . . . . . . . . . . 4.
1.29 "Royalty Term" . . . . . . . . . . . . . . . . . . . . . . 4.
1.30 "SIBIA Assay Technology" . . . . . . . . . . . . . . . . . 5.
1.31 "SIBIA Compound" . . . . . . . . . . . . . . . . . . . . . 5.
1.32 "SIBIA Know-How" . . . . . . . . . . . . . . . . . . . . . 5.
1.33 "SIBIA Patent Rights" . . . . . . . . . . . . . . . . . . 5.
1.34 "Steering Committee" . . . . . . . . . . . . . . . . . . . 5.
1.35 "Third Party" . . . . . . . . . . . . . . . . . . . . . . 5.
1.36 "Valid Claim" . . . . . . . . . . . . . . . . . . . . . . 5.
</TABLE>
i.
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 2 RESEARCH COLLABORATION . . . . . . . . . . . . . . . . . . . . . . 5.
2.1 Scope of Collaboration . . . . . . . . . . . . . . . . . . 5.
2.2 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . 6.
2.3 New Directions . . . . . . . . . . . . . . . . . . . . . . 6.
2.4 Extension of Research Term . . . . . . . . . . . . . . . . 6.
SECTION 3 STEERING COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . 6.
3.1 Formation of Steering Committee . . . . . . . . . . . . . 6.
3.2 Meetings of Steering Committee . . . . . . . . . . . . . . 7.
3.3 Decision-Making Process . . . . . . . . . . . . . . . . . 7.
SECTION 4 CONDUCT OF RESEARCH . . . . . . . . . . . . . . . . . . . . . . . 7.
4.1 Research . . . . . . . . . . . . . . . . . . . . . . . . . 7.
4.2 Research Efforts . . . . . . . . . . . . . . . . . . . . . 7.
4.3 Availability of Resources . . . . . . . . . . . . . . . . 8.
4.4 Disclosure; Reports . . . . . . . . . . . . . . . . . . . 8.
4.5 Academic Collaborations . . . . . . . . . . . . . . . . . 8.
SECTION 5 DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.
5.1 Development Activities . . . . . . . . . . . . . . . . . . 8.
5.2 Diligence . . . . . . . . . . . . . . . . . . . . . . . . 9.
5.3 Abandoned Compounds . . . . . . . . . . . . . . . . . . . 9.
SECTION 6 GRANT OF LICENSES . . . . . . . . . . . . . . . . . . . . . . . . 10.
6.1 Research Licenses . . . . . . . . . . . . . . . . . . . . 10.
6.2 Commercialization License . . . . . . . . . . . . . . . . 10.
6.3 Licenses to Assay Technology . . . . . . . . . . . . . . . 10.
6.4 Grant of Rights to Abandoned Compounds . . . . . . . . . . 10.
6.5 Sublicenses . . . . . . . . . . . . . . . . . . . . . . . 11.
6.6 Co-Promotion Rights . . . . . . . . . . . . . . . . . . . 11.
6.7 Right of First Negotiation . . . . . . . . . . . . . . . . 12.
6.8 SIBIA Commercialization License . . . . . . . . . . . . . 13.
SECTION 7 PAYMENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . 13.
7.1 Research Funding . . . . . . . . . . . . . . . . . . . . . 13.
7.2 License Fee . . . . . . . . . . . . . . . . . . . . . . . 14.
7.3 Milestone Payments . . . . . . . . . . . . . . . . . . . . 14.
7.4 Royalties . . . . . . . . . . . . . . . . . . . . . . . . 15.
7.5 Credit for Third Party Royalties . . . . . . . . . . . . . 15.
7.6 Equity Investment . . . . . . . . . . . . . . . . . . . . 15.
</TABLE>
ii.
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 8 PAYMENT; RECORDS; AUDITS .. . . . . . . . . . . . . . . . . . . . 16.
8.1 Payment; Reports . . . . . . . . . . . . . . . . . . . . . 16.
8.2 Exchange Rate; Manner and Place of Payment . . . . . . . . 16.
8.3 Late Payments . . . . . . . . . . . . . . . . . . . . . . 16.
8.4 Records and Audit . . . . . . . . . . . . . . . . . . . . 16.
8.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 16.
SECTION 9 PATENT RIGHTS AND INFRINGEMENT . . . . . . . . . . . . . . . . . . 17.
9.1 Patentable Inventions . . . . . . . . . . . . . . . . . . 17.
9.2 Prosecution and Maintenance of Patent Rights . . . . . . . 17.
9.3 Infringement By Third Parties . . . . . . . . . . . . . . 17.
9.4 Infringement Of Third Party Rights . . . . . . . . . . . . 18.
9.5 Infringement Outside the Field . . . . . . . . . . . . . . 18.
SECTION 10 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . 19.
10.1 Nondisclosure . . . . . . . . . . . . . . . . . . . . . . 19.
10.2 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . 19.
10.3 Financial Terms . . . . . . . . . . . . . . . . . . . . . 19.
10.4 Publications . . . . . . . . . . . . . . . . . . . . . . . 19.
SECTION 11 REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . 20.
11.1 Corporate Power . . . . . . . . . . . . . . . . . . . . . 20.
11.2 Due Authorization . . . . . . . . . . . . . . . . . . . . 20.
11.3 Binding Agreement . . . . . . . . . . . . . . . . . . . . 20.
11.4 Disclaimer of Warranties . . . . . . . . . . . . . . . . . 20.
11.5 Mutual Indemnification . . . . . . . . . . . . . . . . . . 21.
SECTION 12 TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 21.
12.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.
12.2 Termination By Mutual Agreement . . . . . . . . . . . . . 21.
12.3 Termination for Cause . . . . . . . . . . . . . . . . . . 21.
12.4 Termination upon Acquisition . . . . . . . . . . . . . . . 21.
12.5 Effect of Expiration or Termination . . . . . . . . . . . 22.
SECTION 13 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.
13.1 Publicity Review . . . . . . . . . . . . . . . . . . . . . 22.
13.2 Standards . . . . . . . . . . . . . . . . . . . . . . . . 22.
SECTION 14 DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . 23.
14.1 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . 23.
14.2 Dispute Resolution Procedures . . . . . . . . . . . . . . 23.
</TABLE>
iii.
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 15 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 24.
15.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 24.
15.2 Force Majeure . . . . . . . . . . . . . . . . . . . . . . 24.
15.3 Payment in U.S. Dollars . . . . . . . . . . . . . . . . . 24.
15.4 Retained Rights . . . . . . . . . . . . . . . . . . . . . 24.
15.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 25.
15.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 25.
15.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 25.
15.8 Severability . . . . . . . . . . . . . . . . . . . . . . . 25.
15.9 Independent Contractors . . . . . . . . . . . . . . . . . 26.
15.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 26.
15.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 26.
EXHIBITS
- --------
A Research Plan
B Stock Purchase Agreement
SCHEDULES
- ---------
I. BMS Compounds
II. SIBIA Compounds
</TABLE>
iv.
<PAGE> 7
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
THIS AGREEMENT is entered into as of August 10, 1995 (the "Effective
Date"), by and between BRISTOL-MYERS SQUIBB COMPANY, a Delaware corporation
having offices at Route 206 & Province Line Road, P.O. Box 4000, Princeton, New
Jersey 08543-4000 ("BMS"), and THE SALK INSTITUTE BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC., a Delaware corporation having offices at 505 Coast Boulevard
South, Suite 300, La Jolla, California 92037-4641 ("SIBIA").
WHEREAS, SIBIA possesses substantial scientific and technical
proprietary technology and resources relating to the discovery of drug
candidates for the treatment of Alzheimer's disease, cerebral amyloidosis and
other neurodegenerative disorders acting through modulation of APP (which term
is defined below) processing; and
WHEREAS, BMS possesses substantial scientific and technical
proprietary technology and resources relating to the discovery, development and
commercialization of drug candidates for the treatment of Alzheimer's disease,
cerebral amyloidosis and other neurodegenerative disorders acting through
modulation of APP processing; and
WHEREAS, the parties desire to establish a broad collaborative
relationship to develop and commercialize novel products for the treatment
Alzheimer's disease, cerebral amyloidosis and other neurodegenerative disorders
related to APP metabolism.
NOW, THEREFORE, the parties agree as follows:
SECTION 1 DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "AFFILIATE" means an individual, trust, business trust, joint
venture, partnership, corporation, association or any other entity which owns,
is owned by or is under common ownership with a party. For the purposes of
this definition, the term "owns" (including, with correlative meanings, the
terms "owned by" and "under common ownership with") as used with respect to any
party, shall mean the possession (directly or indirectly) of at least 51% of
the outstanding voting securities of a corporation or comparable equity
interest in any other type of entity (or such lesser percentage which is the
maximum allowed to be possessed in a particular jurisdiction).
1.2 "AGREEMENT" means the present agreement together with all
appendices and schedules.
1.
<PAGE> 8
1.3 "APP" means amyloid precursor protein and/or fragments thereof
generated by the processing of APP.
1.4 "BMS ASSAY TECHNOLOGY" means the APP assay systems, technology
and reagents included in the BMS Patent Rights and BMS Know-How.
1.5 "BMS COMPOUND" means any Compound identified by BMS prior to
the Effective Date, and including without limitation the Compounds shown on
Schedule I hereto as well as any other Compounds that were conceived by BMS and
its Affiliates prior to the Effective Date in its APP research program as
evidenced by laboratory notebooks.
1.6 "BMS KNOW-HOW" means Know-How which (a) BMS or a BMS Affiliate
discloses to SIBIA under this Agreement and (b) is at the Effective Date or
during the Research Term within the Control of BMS or a BMS Affiliate
(including, without limitation, all Know-How relating to the BMS Assay
Technology).
1.7 "BMS PATENT RIGHTS" means all Patent Rights Controlled by BMS
or an Affiliate of BMS (excluding Collaboration Patent Rights) necessary or
appropriate for the full exploitation of the Field, where such Patent Rights
cover (a) inventions made prior to the Effective Date of this Agreement, (b)
inventions made solely by employees or agents of BMS or an Affiliate of BMS
after the Effective Date and prior to the end of the Research Term, or (c)
inventions which come under the Control of BMS or its Affiliates after the
Effective Date and prior to the end of the Research Term (including, without
limitation, all Patent Rights covering the BMS Assay Technology).
1.8 "COLLABORATION" means the activities, rights and obligations
of SIBIA and BMS encompassed in their relationship in accordance with the terms
and conditions of this Agreement.
1.9 "COLLABORATION COMPOUND" means any Compound that is identified
by either party (separately or jointly), or by a Third Party and acquired by
either or both of the parties at the direction of the Steering Committee,
during the Research Term.
1.10 "COLLABORATION PATENT RIGHTS" means all Patent Rights that
claim or cover inventions (to the extent any such inventions are necessary or
appropriate for the full exploitation of the Field) (a) made jointly (as
determined in accordance with the rules of inventorship under United States
patent law) by employees or agents of SIBIA or BMS or one of their respective
Affiliates in connection with activities conducted pursuant to the Research
Plan or (b) which come under the common Control of SIBIA or one of its
Affiliates, on the one hand, and BMS or one of its Affiliates, on the other
hand, prior to the end of the Research Term.
1.11 "COMPOUND" means any compound or agent that, acting through
modulation of the processing of APP, either:
2.
<PAGE> 9
(a) affects the levels of APP,
(b) replaces or mimics the desirable properties of APP, or
(c) removes or minimizes the detrimental properties of the degradation
products of APP,
but excluding Compounds that employ the use of gene therapy and antisense
methods.
1.12 "CONFIDENTIAL INFORMATION" means all information and materials
received by either party from the other party pursuant to this Agreement and
all information and materials developed in the course of the Collaboration,
including, without limitation, Know-How of each party, subject to the
exceptions set forth in Section 10.2.
1.13 "CONTROL" means possession of the ability to grant a license
or sublicense as provided for herein without violating the terms of any
agreement with or other arrangement with any Third Party.
1.14 "FDA" means the United States Food and Drug Administration.
1.15 "FIELD" means the use of any Compound, and the practice of the
BMS Assay Technology and the SIBIA Assay Technology to identify any Compound,
for the prevention or treatment of Alzheimer's disease, cerebral amyloidosis,
and other neurodegenerative disorders related to APP metabolism.
1.16 "FIRST COMMERCIAL SALE" of a Product shall mean the first sale
for use or consumption of such Product in a country after required marketing
and pricing approval has been granted by the governing health regulatory
authority of such country. Sale to an Affiliate or sublicensee shall not
constitute a First Commercial Sale unless the Affiliate or sublicensee is the
end user of the Product.
1.17 "INVENTION" means any discovery or invention made during the
course of the Research.
1.18 "IOC" has the meaning set forth in Section 3.1(b).
1.19 "KNOW-HOW" means techniques, data, materials and chemicals
relating to the Field, including, without limitation, inventions, techniques,
practices, methods, knowledge, know-how, skill, experience, test data,
including pharmacological, toxicological and clinical test data, analytical and
quality control data, patent and legal data or descriptions, and marketing,
sales and manufacturing data.
1.20 "LEAD COMPOUND" means any BMS Compound, SIBIA Compound or
Collaboration Compound showing potential therapeutic activity in a cellular or
animal model relevant to the Field and selected for development by the Steering
Committee in accordance with Section 3.1.
3.
<PAGE> 10
1.21 "NDA" means a New Drug Application or Product License
Application, as appropriate, and all supplements filed pursuant to the
requirements of the FDA, including all documents, data and other information
concerning Products which are necessary for or included in FDA approval to
market a Product, or the equivalent application in any other country.
1.22 "NET SALES" shall mean the gross amounts invoiced for sales of
products subject to royalties under this Agreement by a party, its Affiliates
or sublicensees, as applicable, to unrelated Third Parties, less (a) discounts
and rebates actually granted, (b) credits or allowances actually granted upon
claims, damaged goods, rejections or returns of a product, including recalls,
(c) freight, postage shipping and insurance charges actually allowed or paid
for delivery of product, to the extent billed and (d) taxes, duties or other
governmental charges (other than income taxes) levied on, absorbed or otherwise
imposed on sale of products.
1.23 "PATENT RIGHTS" means all rights existing during or after the
term of this Agreement under (a) patents (including inventor's certificates)
that include one or more Valid Claims, including without limitation any
substitution, extension, registration, confirmation, reissue, re-examination,
renewal or the like and (b) pending applications for patents, including without
limitation any continuation, division or continuation-in-part thereof and any
provisional applications.
1.24 "PLP" means a data package, termed a Preclinical Lead Profile,
that describes a particular Lead Compound and is presented to BMS'
Pharmaceutical Research Institute Operating Committee in accordance with its
procedures, approval of which is necessary for such Lead Compound to be put on
a development track.
1.25 "PRODUCT" means any form or dosage of a Compound for use in
the Field discovered or identified using any method the use or practice of
which is covered by one or more of SIBIA Patent Rights, SIBIA Know-How, BMS
Patent Rights, BMS Know-How or Collaboration Patent Rights, or the manufacture,
use or sale of which is otherwise covered by one or more of SIBIA Patent
Rights, SIBIA Know-How, BMS Patent Rights, BMS Know-How or Collaboration Patent
Rights.
1.26 "RESEARCH" means all work of BMS and SIBIA in the Field during
the Research Term.
1.27 "RESEARCH TERM" means the period commencing on the Effective
Date and ending on the fourth anniversary of the Effective Date, subject to
extension under Section 2.3.
1.28 "ROYALTY TERM" means, in the case of any Product, in any
country, the period of time commencing on the First Commercial Sale and ending
upon the fifth anniversary of the later of (a) 10 years from the date of First
Commercial Sale in such country; or (b) the term of the last to expire covering
patent in that country included in the BMS Patent Rights, the SIBIA Patent
Rights or the Collaboration Patent Rights.
4.
<PAGE> 11
1.29 "SIBIA ASSAY TECHNOLOGY" means the APP assay systems,
technology and reagents included in the SIBIA Patent Rights and SIBIA Know-How,
exclusive of SIBIA's high throughput functional screening technology.
1.30 "SIBIA COMPOUND" means any Compound identified by SIBIA prior
to the Effective Date, and including without limitation the Compounds shown on
Schedule II hereto as well as any other Compounds that were conceived by SIBIA
and its Affiliates prior to the Effective Date in its APP research program as
evidenced by laboratory notebooks.
1.31 "SIBIA KNOW-HOW" means Know-How which (a) SIBIA or a SIBIA
Affiliate discloses to BMS under this Agreement and (b) is at the Effective
Date or during the Research Term within the Control of SIBIA or a SIBIA
Affiliate (including, without limitation, all Know-How relating to the SIBIA
Assay Technology).
1.32 "SIBIA PATENT RIGHTS" means all Patent Rights Controlled by
SIBIA or an Affiliate of SIBIA (excluding Collaboration Patent Rights)
necessary or appropriate for the full exploitation of the Field, where such
Patent Rights cover (a) inventions made prior to the Effective Date of this
Agreement, (b) inventions made solely by employees or agents of SIBIA or an
Affiliate of SIBIA after the Effective Date and prior to the end of the
Research Term, or (c) inventions which come under the Control of SIBIA or its
Affiliates after the Effective Date and prior to the end of the Research Term
(including, without limitation, all Patent Rights covering the SIBIA Assay
Technology).
1.33 "STEERING COMMITTEE" means a committee of SIBIA and BMS
employees as described in Section 3 below.
1.34 "THIRD PARTY" means any entity other than SIBIA or BMS or an
Affiliate or sublicensee of SIBIA or BMS.
1.35 "VALID CLAIM" means a claim of an issued patent which claim
has not lapsed, been canceled or become abandoned and has not been declared
invalid by an unreversed and unappealable decision or judgment of a court or
other appropriate body of competent jurisdiction, and which has not been
admitted to be invalid or unenforceable through reissue or disclaimer.
SECTION 2 RESEARCH COLLABORATION
2.1 SCOPE OF COLLABORATION. BMS and SIBIA will conduct the
Research on a collaborative basis with the goal of further characterization and
development of existing Lead Compounds and identification of additional Lead
Compounds that are suitable for development into Products for commercialization
and to conduct preclinical development and clinical trials for such Lead
Compounds.
5.
<PAGE> 12
2.2 EXCLUSIVITY. During the Research Term, neither SIBIA nor BMS,
nor any of their Affiliates, shall enter into any agreement with any
sublicensee or Third Party which provides for the conduct or funding of
research, development or commercialization of products directed toward the
Field. Nothing herein shall limit the ability of the parties to enter into
agreements with contract research organizations and similar entities for the
performance of Research activities in the ordinary course of their respective
businesses.
2.3 NEW DIRECTIONS. The parties agree that any new direction or
approach not previously contemplated by the Research Plan (see Section 4.1) and
outside the scope of the Field can be brought to the attention of the Steering
Committee by either party for possible inclusion in the Collaboration. The
Steering Committee may desire to change the scope of the Field in response to
such proposals, and the parties will then discuss a mutually acceptable written
amendment to this Agreement to accommodate such change.
2.4 EXTENSION OF RESEARCH TERM. The Research Term shall commence
on the Effective Date and shall continue at least until the fourth anniversary
of the Effective Date. Not fewer than 180 days prior to the fourth anniversary
of the Effective Date, each party shall inform the other whether it wishes to
continue the Research. If both parties wish to continue the Research, the
parties shall negotiate in good faith mutually acceptable terms.
SECTION 3 STEERING COMMITTEE
3.1 FORMATION OF STEERING COMMITTEE.
(a) The Research will be managed by the Steering
Committee comprised of an equal number of members appointed by each of BMS and
SIBIA. Either party may appoint substitute or replacement members of the
Steering Committee to serve as their representatives. The initial members of
the Steering Committee will be appointed by the parties within 30 days
following the Effective Date. The Steering Committee shall have the
responsibility and authority to (a) plan and monitor the Research, (b) assign
tasks and responsibilities under the Research Plan to BMS and SIBIA,
respectively, (c) review and modify the Research Plan, as it shall deem
appropriate to achieve the parties' objectives under this Agreement, and (d)
designate SIBIA Compounds, BMS Compounds and Collaboration Compounds as Lead
Compounds and back-ups to Lead Compounds, and (e) change any Lead Compound in
development in its discretion until such time as any such Lead Compound is
approved, if at all, as a PLP Candidate.
(b) It is understood that BMS has a formal process for
approving a compound for development so that appropriate resources are ensured
to create all information necessary for an Investigational New Drug Application
filing. This process involves the preparation of a PLP, and its presentation
and approval by the BMS Pharmaceutical Research Institute Operating Committee
("IOC"). Designation of a Lead Compound by the Steering Committee shall not
obligate BMS to prepare a PLP for the Lead Compound, or present it to the IOC,
or obligate the
6.
<PAGE> 13
CONFIDENTIAL TREATMENT REQUESTED
IOC to approve it. Such decisions shall be wholly within the discretion and
control of BMS both as to which, if any, Lead Compounds shall become PLP
candidates and as to which, if any, PLPs shall be approved by the IOC.
3.2 MEETINGS OF STEERING COMMITTEE. The Steering Committee will
initially meet at least six times per year at locations and times to be
determined by the Steering Committee, with the intent of meeting at alternating
locations in La Jolla, California and Wallingford, Connecticut or Princeton,
New Jersey, with each party to bear all travel and related costs for its
members.
3.3 DECISION-MAKING PROCESS. Each member of the Steering
Committee shall have one vote, and decisions by the Steering Committee shall be
made by a majority vote. Any disagreement among members of the Steering
Committee will be resolved within the Steering Committee based on the efficient
achievement of the objectives of the Agreement. Any disagreement which cannot
be resolved by a majority vote of the Steering Committee shall be referred to
the appropriate officers of SIBIA and BMS for resolution under Section 14. It
is the intent of the parties to resolve issues through the Steering Committee
whenever possible and to refer issues to the officers of SIBIA and BMS only
when resolution through the Steering Committee cannot be achieved.
SECTION 4 CONDUCT OF RESEARCH
4.1 RESEARCH. The parties agree that the Research shall be
conducted in accordance with the initial Research Plan attached hereto as
Exhibit A, as such Research Plan may be amended from time to time in writing by
the Steering Committee. The parties currently expect that, under the Research
Plan, BMS will have primary responsibility for Research relating to
********************************* and the clinical development of all Lead
Compounds, and that SIBIA will have primary responsibility for Research relating
to **********************.
4.2 RESEARCH EFFORTS. Each party shall use commercially
reasonable and diligent efforts (as defined below) to perform its
responsibilities under the Research Plan. In particular, BMS will provide
Research funding to SIBIA pursuant to Section 7.1 in each year during the
Research Term to support a team of ** appropriately qualified scientists
(measured on a full time equivalent basis) at SIBIA in accordance with the
Research Plan and to enable the purchase of capital equipment and the support
of academic collaborations directly related to the Collaboration. Except as
expressly provided in Section 7.1, or as agreed from time to time by the
parties, each of BMS and SIBIA will bear all of its own expenses incurred in
connection with the Research. As used herein, the term "commercially
reasonable and diligent efforts" will mean, unless the parties agree otherwise,
those efforts consistent with the exercise of prudent scientific and business
judgment, as applied to other products of similar scientific and commercial
potential within the relevant product lines of the parties.
7.
<PAGE> 14
4.3 AVAILABILITY OF RESOURCES. Each party will maintain
laboratories, offices and all other facilities necessary to carry out the
Research. Each party agrees to make its employees and non-employee consultants
reasonably available at their respective places of employment to consult with
the other party on issues arising during the Collaboration and in connection
with any request from any regulatory agency, including, without limitation,
regulatory, scientific, technical and clinical testing issues. Representatives
of SIBIA and BMS may, upon reasonable notice and at times reasonably acceptable
to the other party (a) visit the facilities where the Collaboration is being
conducted; and (b) consult informally, during such visits and by telephone,
with personnel of the other party performing work on the Collaboration.
4.4 DISCLOSURE; REPORTS. During the Research Term, BMS and SIBIA
will make available and, upon request, disclose to each other all Know-How,
including Know-How regarding Compounds discovered or synthesized by BMS or
SIBIA, known by BMS or SIBIA concerning the Field or otherwise in the course of
the Collaboration for use in accordance with this Agreement. All Know-How
which is significant will be disclosed to the other party promptly after it is
learned or its significance is appreciated. The parties will exchange reports
quarterly presenting a meaningful summary of their Research. In addition, each
party will make summary presentations of Research progress at each meeting of
the Steering Committee[, and the parties will conduct a formal Research review
on a semi-annual basis, once at BMS and once at SIBIA during each year]. Each
party will also communicate informally and through the Steering Committee to
inform the other of Research done under this Agreement. Each party will
provide the other with raw data in original form or photocopies thereof for any
and all work carried out under this Agreement as reasonably requested by the
other party hereto.
4.5 ACADEMIC COLLABORATIONS. Each party agrees that, prior to
entering into any collaboration with an academic institution regarding
technology or compounds that would become part of the Collaboration, such party
shall notify the Steering Committee of the principal terms of such
collaboration and shall obtain the written approval of the Steering Committee
prior to entering into such collaboration.
SECTION 5 DEVELOPMENT
5.1 DEVELOPMENT ACTIVITIES. BMS will establish a Project Working
Group for the development of each Lead Compound for which a PLP is approved by
BMS, and SIBIA shall be entitled to appoint one representative to the Project
Working Group for each such Lead Compound. All preclinical and clinical
development necessary or appropriate for the registration of such Lead
Compounds shall be conducted by BMS. BMS will keep SIBIA informed of the
progress of development of each such Lead Compound, and SIBIA may provide input
with respect to development matters, as appropriate. BMS will consider the
recommendations of the Steering Committee in the selection of Lead Compounds as
PLP candidates and in any consideration as to whether to terminate development
of any Lead Compound for which a PLP has previously been approved, but the
ultimate decision with respect thereto will reside with BMS and will be based
8.
<PAGE> 15
on those criteria applied to BMS's internal compounds under consideration for
and/or in development, and blind as to whether such compounds are SIBIA
Compounds, BMS Compounds or Collaboration Compounds. The expenses of all
preclinical and clinical development of any particular compound shall be paid
by BMS.
5.2 DILIGENCE. BMS shall use commercially reasonable and diligent
efforts (as defined in Section 4.2 above) to evaluate each Lead Compound and
develop those for which a PLP is approved and to commercialize each Product,
taking into account the scientific and commercial potential for such Product.
SIBIA may provide 90 days written notice to BMS if, in its opinion, BMS is not
using commercially reasonable and diligent efforts, in order for the parties to
discuss the situation and for BMS to make diligent and continuing efforts to
rectify the situation during such 90 day period. In the event that the parties
are unable to resolve their differences within such 90 day period, such dispute
shall be submitted for resolution in accordance with Section 14.
5.3 ABANDONED COMPOUNDS.
(a) At any time during the term of this Agreement, BMS
may elect not to proceed with the development of any SIBIA Compound or
Collaboration Compound for which a PLP was approved or with the marketing of
any Product incorporating a SIBIA Compound or Collaboration Compound for which
a PLP was approved. If BMS so decides or if BMS has undertaken no significant
development activity for a period of 12 consecutive months on any such
Compound, and any such SIBIA or Collaboration Compound is not otherwise under
development or marketed by BMS for any indication not included within the
Field, BMS shall provide SIBIA notice thereof. SIBIA shall have the first
right of negotiation to obtain a license from BMS to develop and/or market such
Compound or Product, as the case may be.
(b) If, at any time after the Research Term, BMS has
conducted significant research, development, regulatory or marketing activities
with respect to no BMS Compound, SIBIA Compound or Collaboration Compound, or
Product incorporating any of same, for a period of 12 consecutive months, BMS
shall provide SIBIA notice thereof. SIBIA shall have the first right of
negotiation to obtain a license from BMS to develop and/or market any SIBIA
Compound or Collaboration Compound or Product incorporating any of same, as the
case may be.
(c) The first rights of negotiation granted under
subsections (a) and (b) above shall be inoperative if, in the good faith
reasonable judgment of BMS, the subject Compound(s) and/or Product(s) would
compete substantially with any BMS Compound, SIBIA Compound or Collaboration
Compound in development or on the market.
(d) Within 60 days of SIBIA's receipt of a notice under
subsection (a) or (b) above, SIBIA shall notify BMS in writing of its interest
in taking a license to any subject Compound or Product. If SIBIA does not so
notify BMS of its interest, then BMS shall be under no further obligation
toward SIBIA with respect to such Compound(s) or Product(s). If SIBIA does so
notify BMS of its interest, then the parties shall negotiate in good faith for
up to 120 days
9.
<PAGE> 16
from the date of BMS's receipt of SIBIA's notice. If the parties are unable to
reach a mutually acceptable agreement, SIBIA may, prior to the end of the 120
day period, deliver to BMS a binding letter of intent signed by SIBIA.
Thereafter, for a period of 12 months, BMS shall be entitled to consummate a
transaction with any Third Party on terms that, when taken as a whole, are no
less favorable to BMS than those contained in SIBIA's letter of intent. After
such 12 month period, if BMS has not entered into a transaction with a Third
Party, the parties will enter into good faith negotiations for the purpose of
concluding a comprehensive agreement which incorporates the terms set forth in
SIBIA's binding letter of intent.
SECTION 6 GRANT OF LICENSES
6.1 RESEARCH LICENSES.
(a) SIBIA grants to BMS, during the Research Term, the
exclusive, except as to SIBIA, paid-up worldwide license in the Field, with the
right to grant sublicenses to Affiliates only, under the SIBIA Patent Rights,
Collaboration Patent Rights and SIBIA Know-How to make and use methods and
materials to carry out the Research.
(b) BMS grants to SIBIA, during the Research Term, the
exclusive, except as to BMS, paid-up worldwide license in the Field, with the
right to grant sublicenses to Affiliates only, under the BMS Patent Rights,
Collaboration Patent Rights and BMS Know-How to make and use methods and
materials to carry out the Research.
6.2 COMMERCIALIZATION LICENSE. Except with regard to the SIBIA
Assay Technology which is subject to the license set forth in Section 6.3(a)
below, SIBIA hereby grants to BMS an exclusive, worldwide, royalty-bearing
license, with the right to grant sublicenses subject to Section 6.5 below,
under SIBIA Patent Rights, Collaboration Patent Rights and SIBIA Know-How, to
develop, make, have made, use, offer for sale, sell and import Products.
6.3 LICENSES TO ASSAY TECHNOLOGY.
(a) After the Research Term, SIBIA grants to BMS, with
the right to grant sublicenses to Affiliates only, a non-exclusive, paid-up,
worldwide license under the SIBIA Patent Rights and SIBIA Know-How, to use the
SIBIA Assay Technology for the discovery and development of new Compounds.
(b) After the Research Term, BMS grants to SIBIA, with
the right to grant sublicenses to Affiliates only, a non-exclusive, paid-up,
worldwide license under the BMS Patent Rights and BMS Know-How, to use the BMS
Assay Technology for the discovery and development of new Compounds.
6.4 GRANT OF RIGHTS TO ABANDONED COMPOUNDS. In the event that BMS
and SIBIA reach agreement on a license to SIBIA for any Compound or Product
pursuant to Section 5, the
10.
<PAGE> 17
license grant shall, unless otherwise agreed by the parties, be worldwide,
exclusive and royalty-bearing, and shall include the right to grant
sublicenses, under any part of the applicable Patent Rights licensable or
sublicensable by BMS, including BMS's rights in any Collaboration Patent
Rights, to make, have made, use and sell the subject Compound(s) and Product(s)
incorporating such Compound(s).
6.5 SUBLICENSES.
(a) Any sublicenses granted pursuant to the licenses
granted under this Section 6 shall contain confidentiality obligations
comparable to those set forth in Section 10, and no sublicense shall relieve
BMS or SIBIA of any obligation under this Agreement.
(b) In the event that BMS intends to grant any sublicense
to a Third Party under Section 6.2, BMS shall give SIBIA prompt written notice
thereof. BMS hereby grants to SIBIA the right, during the 90-day period after
delivery of such notice, to negotiate with BMS for the sublicense of such
rights under Section 6.2. It shall be a condition precedent to any exercise of
SIBIA's first right of negotiation pursuant to this Section 6.5(b) that SIBIA
shall demonstrate to BMS that it has sufficient capability (i.e., reasonably
adequate and appropriate resources, experience and expertise to exercise the
sublicensed rights for the purpose(s) being contemplated by BMS) to itself
participate in the commercialization of the subject Product and not to do so
merely by further sublicensing with Third Parties to do so in its stead
(although subcontracting with third parties for whom SIBIA shall remain
responsible for performance and as to which BMS is an express third party
beneficiary of such third party's obligations is not precluded). If SIBIA and
BMS are unable to agree upon mutually acceptable terms for any such sublicense
by the end of the applicable 90-day period, BMS may grant such sublicense to a
Third Party as long as the principal economic terms of such sublicense are no
more favorable to such Third Party than those offered to SIBIA.
6.6 CO-PROMOTION RIGHTS.
(a) In the event that BMS proposes to grant rights to any
Third Party to co-promote, to co-market or to engage in similar activities with
regard to any Product, SIBIA shall have the following right of first offer with
respect to the grant of such rights. BMS shall notify SIBIA in writing of the
principal economic and commercial terms that it proposes to offer to a Third
Party or Parties. SIBIA shall have a period of 30 days from the date of such
notice in which to review the terms offered and notify BMS in writing that it
wishes to acquire such rights on such terms. If SIBIA provides such notice
within such 30-day period, then the parties shall endeavor in good faith to
enter into a definitive agreement with regard to such rights within three
months of SIBIA's notice. If SIBIA does not provide notice of its wish to
acquire such rights or provides notice that it is not interested in acquiring
such rights on the terms presented by BMS within such 30-day period, or if the
parties are unable in good faith to conclude an agreement within such
three-month period following SIBIA's notice, then BMS shall be free for 12
months to grant such rights to any Third Party on principal economic terms no
more favorable to the
11.
<PAGE> 18
Third Party than the principal economic terms offered to SIBIA. After such
12-month period, if BMS has not concluded such an agreement, then SIBIA shall
again have a right of first refusal to acquire such rights pursuant to this
Section 6.6(a).
(b) In addition to the right of first refusal set forth
in Section 6.6(a), SIBIA may, at any time on or before the submission of a NDA
for a Product, make a proposal to BMS regarding SIBIA's participation in
co-promotion, co-marketing or similar activities with regard to such Product.
BMS shall give serious consideration to accepting SIBIA's proposal in the event
that SIBIA shows the requisite capability under Section 6.6(c). If BMS accepts
such proposal, then the parties shall endeavor in good faith to enter into a
definitive agreement with regard to such rights on terms mutually acceptable to
the parties within three months of such acceptance.
(c) It shall be a condition precedent to any exercise of
SIBIA's rights under Section 6.6(a) or 6.6(b) with respect to a given Product,
that SIBIA demonstrate to BMS, no later than the date of submission of a NDA
with respect to such Product or such later time as may be mutually agreed by
the parties, that it has sufficient capability (i.e., reasonably adequate and
appropriate resources, experience and expertise for the indication(s) and
market niche(s) being targeted) to itself participate in the co-promotion,
co-marketing or similar activities with regard to such Product contemplated by
Section 6.6(a) or 6.6(b), as applicable, and not to do so merely by further
sublicensing (although subcontracting with third parties for whom SIBIA shall
remain responsible for performance and as to which BMS is an express third
party beneficiary of such third party's obligations is not precluded) with
Third Parties to do so in its stead.
6.7 RIGHT OF FIRST NEGOTIATION. In the event that:
(i) any SIBIA Compound or Collaboration Compound that the Steering
Committee determines does not possess sufficient activity to warrant
further development for use within the Field, or
(ii) any compound or agent identified solely by SIBIA or jointly
with BMS in assays or studies specifically undertaken in furtherance
of the Research
reveals activity suggestive of potential as a therapeutic or prophylactic agent
for diseases or disorders outside the Field (a "Non-APP Compound"), then, should
SIBIA decide to license any of its rights in such Non-APP Compound), BMS shall
have the following right of first negotiation with respect to SIBIA's rights in
such Non-APP Compound. SIBIA shall notify BMS in writing of its intent to
license its rights in any such Non-APP Compound. Within 60 days of BMS'
receipt of such written notice, BMS shall notify SIBIA in writing of BMS'
interest in taking a license to any such rights of SIBIA in such Non-APP
Compound. If BMS does not so notify SIBIA of its interest, then SIBIA shall be
under no further obligation toward BMS with respect to Non-APP Compound. If
BMS does notify SIBIA that it is interested in obtaining a license, then during
the 90-day period following such notice, BMS and SIBIA shall negotiate in good
faith regarding a license to SIBIA's rights in any such Non-APP Compound on
terms mutually acceptable to the parties. If SIBIA and BMS are unable to agree
upon mutually acceptable terms
12.
<PAGE> 19
CONFIDENTIAL TREATMENT REQUESTED
for any such grant of rights by the end of the applicable 90-day period, BMS
may, prior to the end of the 90-day period, deliver to SIBIA a binding letter
of intent signed by BMS. Thereafter, for a period of 12 months, SIBIA shall be
free to grant such rights to a Third Party on terms that, when taken as a
whole, are no less favorable to SIBIA than those contained in BMS's letter of
intent. After such 12-month period, if SIBIA has not entered into a
transaction with a Third Party, the parties will enter into good faith
negotiations for the purpose of concluding a comprehensive agreement which
incorporates the terms set forth in BMS's binding letter of intent.
6.8 SIBIA COMMERCIALIZATION LICENSE. In the event SIBIA
terminates this Agreement under Section 12.3 for a material breach by BMS of
Section 5.2, and such termination is upheld by an arbitration proceeding
conducted in accordance with Section 14, then except with regard to the BMS
Assay Technology which shall be subject to the license set forth in Section
6.3(b) above, SIBIA shall have the right to elect to take and, subject only to
SIBIA's election to do so, BMS shall and hereby does grant to SIBIA an
exclusive, worldwide license, with the right to grant sublicenses, under the
BMS Patent Rights, Collaboration Patent Rights and BMS Know-How to develop,
make, have made, use, offer for sale, sell and import Products. In such event,
BMS shall deliver to SIBIA copies of all Confidential Information and materials
relating to the BMS Patent Rights and BMS Know-How to enable SIBIA to fully
utilize the license rights granted hereunder. In the event that a license is
granted under this Section 6.8, SIBIA shall pay to BMS a royalty of ** on Net
Sales of Products by SIBIA or its Affiliates or sublicensees on the portion of
aggregate annual worldwide Net Sales up to ***********************************,
and *** on the portion of such Net Sales exceeding ************. Any such
license shall also incorporate provisions that shall be similar to those
contained in this Agreement to the maximum practical extent with respect to
credits against royalties, payments, records, audits, infringement, and
indemnification. SIBIA's election to take the commercialization license
provide for in this Section 6.8 shall be conclusively deemed to be an election
of remedies for BMS's breach and shall preclude all claims for money damages in
respect thereof.
SECTION 7 PAYMENT OBLIGATIONS
7.1 RESEARCH FUNDING.
(a) BMS agrees to fund the Research at SIBIA during the
Research Term in the amount of *******************. Such amount shall be
payable in advance in four equal quarterly installments relating to each
calendar quarter occurring during the Research Term. Payments will be made on
or before January 15, April 15, July 15 and October 15 for the first, second,
third and fourth calendar quarters, respectively. Any payment for a portion of
a calendar quarter shall be made on a pro rata basis. The first such payment
shall be made on the Effective Date. Such annual Research funding shall be
increased appropriately in the event that the Steering Committee determines
that the number of scientists conducting Research at SIBIA should be increased.
Such annual Research funding shall also be adjusted annually during the
Research Term in proportion to the percentage increase in the Biotechnology
Compensation Survey Cost Index for the
13.
<PAGE> 20
CONFIDENTIAL TREATMENT REQUESTED
geographic region in which SIBIA is located for companies of comparable size as
performed by Alexander & Alexander Consulting Group and Radford Associates for
BIO.
(b) BMS agrees to fund the purchase by SIBIA of capital
equipment to be used at least a majority of the time for purposes of the
Collaboration and the support by SIBIA of academic collaborations that are
directly related to the Collaboration in an aggregate amount of up to *********
during the Research Term. SIBIA shall notify BMS of any such capital equipment
purchases or supported academic collaborations and provide written back-up or
documentation as appropriate, and BMS will reimburse SIBIA for such
expenditures within 30 days thereafter. SIBIA shall have title to any capital
equipment funded pursuant to this Section 7.1(b). SIBIA shall grant to BMS an
option to license patent rights and related technology obtained by SIBIA under
any academic collaboration funded pursuant to this Section 7.1(b) on terms
mutually acceptable to the parties.
7.2 LICENSE FEE. In consideration of the rights granted by SIBIA
to BMS on the date hereof, BMS shall pay SIBIA a license fee of $3,000,000
concurrently with the execution of this Agreement.
7.3 MILESTONE PAYMENTS. Within 30 days after receipt of notice
that each of the milestones set forth below has been completed for each Lead
Compound which BMS has elected to take into clinical development, BMS shall pay
to SIBIA the nonrefundable milestone payment set forth below:
(a) ********** upon *******************************
**************************************************;
(b) ********** upon ********************************
**************************************************;
(c) ********** upon ********************************
************************************************************; and
(d) ********** upon ********************************
******************************************************, and, in addition,
********** upon *****************************************, ********** upon
****************************************************, and ********** upon
**************************************************************************
**********.
Each milestone payment shall be made only once with respect to each marketed
Product, such that only milestone payments that have not been previously paid
with respect to a particular Lead Compound shall be payable if a back-up
Compound is substituted for that Lead Compound.
7.4 ROYALTIES.
14.
<PAGE> 21
CONFIDENTIAL TREATMENT REQUESTED
(a) BMS shall pay to SIBIA the following royalty on Net
Sales of each Product incorporating any SIBIA Compound or Collaboration
Compound and sold by BMS or its Affiliates or sublicensees:
(i) ** of Net Sales on the portion of aggregate
annual worldwide Net Sales up to ************; and
(ii) *** of Net Sales on the portion of aggregate
annual worldwide Net Sales exceeding ************.
Royalties payable by BMS to SIBIA under this Section 7.4(a) shall be reduced to
******** of the royalties set forth above on a country-by-country basis (A)
during the last five years of the Royalty Term, or (B) if the Product upon
which a royalty is payable under this Section 7.4(a) is marketed by a Third
Party and such Third Party sales represent a market share for such Product in
such country of more than **; provided, however, that in no event will the
royalties payable under clauses (i) and (ii) of this Section 7.4(a) with
respect to a Product be reduced to an amount less than ** and **, respectively.
(b) BMS shall pay to SIBIA a royalty equal to ** of Net
Sales of each Product based on or incorporating any BMS Compound and sold by
BMS or its Affiliates or sublicensees.
(c) Royalties for sales of any Product in any given
country shall be paid for a period equal to the Royalty Term for such Product
in such country.
7.5 CREDIT FOR THIRD PARTY ROYALTIES. In the event that a party
obligated to pay royalties under this Agreement must make royalty payments
under a license from a Third Party in respect of any patents that are necessary
to make, have made, use or sell a Product, then such party may reduce the
royalty otherwise owing on Net Sales of such Product by *** of the amount paid
as a royalty to such Third Party, but in no event shall the royalty payable
hereunder with respect to such Product be reduced by more than *** of the
royalty otherwise payable under the applicable provision of this Agreement
during any quarter; provided, however, where the royalty payable to such Third
Party is not tied specifically to Net Sales of such Product, the allocation of
such royalties payable by such party to such Third Party will be determined in
an equitable manner. If the parties cannot mutually agree upon same within 90
days after either party serves written notice on the other as to same, the
dispute shall be determined by binding arbitration in accordance with this
Agreement.
7.6 EQUITY INVESTMENT. Concurrent with BMS' execution of this
Agreement, BMS shall enter into a Stock Purchase Agreement in the form attached
hereto as Exhibit B.
15.
<PAGE> 22
SECTION 8 PAYMENT; RECORDS; AUDITS
8.1 PAYMENT; REPORTS. All royalty payments due to either party
under this Agreement shall be paid within 60 days of the end of each calendar
quarter, unless otherwise specifically provided herein. Each payment of
royalties shall be accompanied by a report of Net Sales of Products (or of
Abandoned Products) in sufficient detail to permit confirmation of the accuracy
of the royalty payment made.
8.2 EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. Royalty payments
and reports due pursuant to this Agreement shall be calculated and reported for
each calendar quarter. Exchange conversion of foreign payments into U.S.
Dollars shall be made as necessary at the rate of exchange reported in The Wall
Street Journal on the fourth banking day preceding the end of the applicable
royalty period or, for payments other than royalty payments, the fourth banking
day preceding the date of payment. All payments owed under this Agreement
shall be made by wire transfer, unless otherwise specified by the receiving
party.
8.3 LATE PAYMENTS. In the event that any payment, including
royalty, milestone and research payments, due hereunder is not made when due,
the payment shall accrue interest from the date due at the rate of 1.5% per
month; provided that in no event shall such rate exceed the maximum legal
annual interest rate. The payment of such interest shall not limit any party
from exercising any other rights it may have as a consequence of the lateness
of any payment.
8.4 RECORDS AND AUDIT. During the term of this Agreement and for
a period of two years thereafter, the parties shall each keep complete and
accurate records pertaining to the development of Compounds and sale or other
disposition of Products (or abandoned Products) in sufficient detail to permit
the other party to confirm the accuracy of all payments due hereunder. Each
party shall have the right to cause an independent, certified public accountant
to audit such records to confirm the other party's Net Sales and royalty and
other payments for the preceding year. Such audits may be exercised during
normal business hours once a year upon notice to such other party. The party
requesting the audit shall bear the full cost of such audit unless such audit
discloses a variance of more than 5% from the amount of the Net Sales,
royalties or other payments due under this Agreement. In such case, the
audited party shall bear the full cost of such audit. The terms of this
Section 8.4 shall survive any termination or expiration of this Agreement for a
period of two years.
8.5 TAXES. All turnover and other taxes levied on account of the
royalties and other payments accruing to each party under this Agreement shall
be paid by the party receiving such royalty or other payment for its own
account, including taxes levied thereon as income to the receiving party. If
provision is made in law or regulation for withholding, such tax shall be
deducted from the royalty or other payment made by the party making such
payment to the proper taxing authority and a receipt of payment of the tax
secured and promptly delivered to the party entitled to the royalty. Each
party agrees to assist the other party in claiming exemption from
16.
<PAGE> 23
such deductions or withholdings under any double taxation or similar agreement
or treaty from time to time in force.
SECTION 9 PATENT RIGHTS AND INFRINGEMENT
9.1 PATENTABLE INVENTIONS. BMS shall own all Inventions made
solely by its employees and agents, and all patent applications and patents
claiming such Inventions. SIBIA shall own all Inventions made solely by its
employees and agents, and all patent applications and patents claiming such
Inventions. All Inventions made jointly by employees or agents of BMS and
employees or agents of SIBIA shall be owned jointly by BMS and SIBIA.
9.2 PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.
(a) It is the intention of the parties to secure broad
patent protection for Inventions. In the event such an Invention is conceived
by either party, the inventing party shall promptly notify the other party, and
the parties shall discuss such Invention and the desirability of filing patent
applications covering such Invention. The inventing party shall have the first
right to prosecute such patents, at its own expense, but such party shall
consider in good faith the requests and suggestions of the other party with
respect to strategies for filing and prosecuting such patent applications. The
inventing party shall keep the other party informed of progress with regard to
the filing, prosecution, maintenance, enforcement and defense of patents and
patent applications subject to this Section 9.2(a). If the inventing party
decides not to pursue protection for any such Invention in any particular
country, it shall give the other party reasonable notice to this effect. After
that notice, the other party may, at its expense, file, prosecute and maintain
a patent application or patent covering such Invention in such country and
shall own such patent applications or patents, subject to the licenses granted
in Section 6. In such case, the inventing party shall also assign its rights
in such patent applications or patents to the other party as necessary to
convey ownership to the other party.
(b) BMS shall have the first right to prosecute patents
for Inventions owned jointly by BMS and SIBIA, at its own expense, but BMS
shall consider in good faith the requests and suggestions of SIBIA with respect
to strategies for filing and prosecuting such patent applications. BMS shall
keep SIBIA informed of progress with regard to the filing, prosecution,
maintenance, enforcement and defense of patents and patent applications subject
to this Section 9.2(b). If BMS decides not to pursue protection for any such
Invention in any particular country, it shall give SIBIA reasonable notice to
this effect. After that notice, SIBIA may, at its expense, file, prosecute and
maintain a patent application or patent covering such Invention in such country
and shall own such patent applications or patents, subject to the licenses
granted in Section 6.
9.3 INFRINGEMENT BY THIRD PARTIES. BMS and SIBIA shall promptly
notify the other in writing of any alleged or threatened infringement of any
patent included in the BMS Patent Rights, SIBIA Patent Rights or Collaboration
Patent Rights in the Field of which they become
17.
<PAGE> 24
CONFIDENTIAL TREATMENT REQUESTED
aware. Both parties shall use their best efforts in cooperating with each
other to terminate such infringement without litigation. BMS shall have the
first right to bring and control any action or proceeding with respect to such
infringement at its own expense and by counsel of its own choice, and SIBIA
shall have the right, at its own expense, to be represented in any action
involving any SIBIA Patent Rights or Collaboration Patent Rights by counsel of
its own choice. If BMS fails to bring an action or proceeding within (i) 90
days following the notice of alleged infringement or (ii) 10 days before the
time limit, if any, set forth in the appropriate laws and regulations for the
filing of such actions, whichever comes first, SIBIA shall have the right to
bring and control any such action at its own expense and by counsel of its own
choice, and BMS shall have the right, at its own expense, to be represented in
any such action by counsel of its own choice. In the event a party brings an
infringement action, the other party shall cooperate fully, including if
required to bring such action, the furnishing of a power of attorney. Neither
party shall have the right to settle any patent infringement litigation under
this Section 9.3 in a manner that diminishes the rights or interests of the
other party without the consent of such other party. Except as otherwise
agreed to by the parties as part of a cost sharing arrangement, any recovery
realized as a result of such litigation, after reimbursement of any litigation
expenses of BMS and SIBIA, shall belong to the party who brought the action and
shall be treated as Net Sales for purposes of the royalty provisions of this
Agreement.
9.4 INFRINGEMENT OF THIRD PARTY RIGHTS. BMS and SIBIA shall
promptly notify the other in writing of any allegation by a Third Party that
the activity of either of the parties in the Field infringes or may infringe
the intellectual property rights of such Third Party. BMS shall have the first
right to control any defense of such claim at its own expense and by counsel of
its own choice, and SIBIA shall have the right, at its own expense, to be
represented in any such action by counsel of its own choice. In the event that
BMS defends any claim based upon an allegation regarding SIBIA Patent Rights,
BMS will be entitled to offset up to *** of the reasonable costs and expenses
(including professional fees) incurred by it in connection with any such
defense against any royalties it would otherwise owe to SIBIA hereunder, up to
a maximum of *** of the royalties it would otherwise owe to SIBIA during any
quarter. If BMS fails to proceed in a timely fashion with regard to such
defense, SIBIA shall have the right to control any such defense of such claim
at its own expense and by counsel of its own choice, and BMS shall have the
right, at its own expense, to be represented in any such action by counsel of
its own choice. Neither party shall have the right to settle any patent
infringement litigation under this Section 9.4 in a manner that diminishes the
rights or interests of the other party without the consent of such other party.
9.5 INFRINGEMENT OUTSIDE THE FIELD. If either party becomes aware
of any alleged or threatened infringement of any patent included in the BMS
Patent Rights, SIBIA Patent Rights or Collaboration Patent Rights outside the
Field, it shall promptly notify the other in writing, and the parties shall
discuss a strategy for responding to such alleged or threatened infringement.
In the absence of agreement between the parties, each party may take such
action as it deems to be in its best interests.
18.
<PAGE> 25
SECTION 10 CONFIDENTIALITY
10.1 NONDISCLOSURE. During the term of this Agreement and for a
period of five years after termination thereof, each party will maintain all
Confidential Information in trust and confidence and will not disclose any
Confidential Information to any Third Party or use any Confidential Information
for any purpose except as expressly authorized by this Agreement, except as
provided in Section 10.3. Each party may use such Confidential Information
only to the extent required to accomplish the purposes of this Agreement. Each
party will use at least the same standard of care as it uses to protect
proprietary or confidential information of its own to ensure that its
employees, agents, consultants and other representatives do not disclose or
make any unauthorized use of the Confidential Information. Each party will
promptly notify the other upon discovery of any unauthorized use or disclosure
of the Confidential Information.
10.2 EXCEPTIONS. Confidential Information shall not include any
information which the receiving party can prove by competent evidence:
(a) is now, or hereafter becomes, through no act or
failure to act on the part of the receiving party, generally known or
available;
(b) is known by the receiving party at the time of
receiving such information, as evidenced by its records;
(c) is hereafter furnished to the receiving party by a
Third Party, as a matter of right and without restriction on disclosure;
(d) is independently developed by the receiving party
without the aid, application or use of Confidential Information; or
(e) is the subject of a written permission to disclose
provided by the disclosing party.
10.3 FINANCIAL TERMS. The parties agree that the material
financial terms of this Agreement will be considered Confidential Information
of both parties. Notwithstanding the foregoing, either party may disclose such
terms as are required to be disclosed in its financial statements or under
strictures of confidentiality to bona fide potential sublicensees. Either
party shall have the further right to disclose the material financial terms of
this Agreement under strictures of confidentiality to any potential acquiror,
merger partner or other bona fide potential strategic partner.
10.4 PUBLICATIONS. Each party to this Agreement recognizes that
the publication of papers regarding results of Research hereunder and other
information resulting from the Collaboration, including oral presentations and
abstracts, may be beneficial to both parties provided such publications are
subject to reasonable controls to protect Confidential Information.
19.
<PAGE> 26
In particular, it is the intent of the parties to maintain the confidentiality
of any Confidential Information included in any foreign patent application
until such foreign patent application has been published. Accordingly, each
party shall have the right to review and approve any paper proposed for
publication by the other party, including oral presentations and abstracts,
which utilizes data generated from the Collaboration and/or includes
Confidential Information of the other party. Before any such paper is
submitted for publication, the party proposing publication shall deliver a
complete copy to the other party at least 45 days prior to submitting the paper
to a publisher. The receiving party shall review any such paper and give its
comments to the publishing party within 30 days of the delivery of such paper
to the receiving party. With respect to oral presentation materials and
abstracts, the parties shall make reasonable efforts to expedite review of such
materials and abstracts, and shall return such items as soon as practicable to
the publishing party with appropriate comments, if any, but in no event later
than 30 days from the date of delivery to the receiving party. The publishing
party shall comply with the other party's request to delete references to such
other party's Confidential Information in any such paper and agrees to withhold
publication of same for an additional 90 days in order to permit the parties to
obtain patent protection, if either of the parties deem it necessary, in
accordance with the terms of this Agreement.
SECTION 11 REPRESENTATIONS, WARRANTIES AND COVENANTS
11.1 CORPORATE POWER. Each party hereby represents and warrants
that such party is duly organized and validly existing under the laws of the
state of its incorporation and has full corporate power and authority to enter
into this Agreement and to carry out the provisions hereof.
11.2 DUE AUTHORIZATION. Each party hereby represents and warrants
that such party is duly authorized to execute and deliver this Agreement and to
perform its obligations hereunder.
11.3 BINDING AGREEMENT. Each party hereby represents and warrants
that this Agreement is a legal and valid obligation binding upon it and is
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 authority over it.
11.4 DISCLAIMER OF WARRANTIES. The parties understand that the
Research will involve technologies that have not been approved by any
regulatory authority and that neither party guarantees the safety or usefulness
of any SIBIA Compound, BMS Compound, Collaboration Compound, Lead Compound or
Product. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES
ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY NATURE, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF NONINFRINGEMENT,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
20.
<PAGE> 27
11.5 MUTUAL INDEMNIFICATION. Each party hereby agrees to save,
defend and hold the other party and its officers, directors, employees,
consultants and agents harmless from and against any and all suits, claims,
actions, demands, liabilities, expenses and losses, including reasonable legal
expense and attorneys' fees ("Losses") resulting directly or indirectly from
the manufacture, development, use, handling, storage, sale or other disposition
of chemical agents, Compounds or Products by such party, its Affiliates or
sublicensees except to the extent such Losses result from the gross negligence
of the party claiming a right of indemnification under this Section 11.5. In
the event either party seeks indemnification under this Section 11.5, it shall
inform the other party of a claim as soon as reasonably practicable after it
receives notice of the claim, shall permit the other party to assume direction
and control of the defense of the claim (including the right to settle the
claim solely for monetary consideration), and shall cooperate as requested (at
the expense of the other party) in the defense of the claim.
SECTION 12 TERM AND TERMINATION
12.1 TERM. The term of this Agreement will begin on the Effective
Date and terminate at the end of the Royalty Term unless terminated earlier in
accordance with the provisions of Section 12.2 or 12.3.
12.2 TERMINATION BY MUTUAL AGREEMENT. The parties may at any time
terminate this Agreement by written agreement executed by both SIBIA and BMS.
12.3 TERMINATION FOR CAUSE. Either party may terminate this
Agreement upon 60 days' written notice upon the occurrence of any of the
following:
(a) Upon or after the bankruptcy, insolvency, dissolution
or winding up of the other party (other than dissolution or winding up for the
purposes of reconstruction or amalgamation); or
(b) Upon or after the breach of any material provision of
this Agreement by the other party if the breaching party has not cured such
breach within the 60-day period following written notice of termination by the
other party.
12.4 TERMINATION UPON ACQUISITION. Either party may terminate this
Agreement prior to the end of the Research Term upon 30 days written notice in
the event that the other party is acquired (whether through merger, sale of
stock representing 50% or more of the outstanding voting stock of that party,
sale of all or substantially all of that party's assets or otherwise) by any
Third Party (or by an entity that is a party to a collaboration agreement in
the Field with a Third Party), which Third Party is, in the good faith
determination of the party not being acquired, a substantial competitor of that
party in the Field.
21.
<PAGE> 28
12.5 EFFECT OF EXPIRATION OR TERMINATION.
(a) Expiration or termination of this Agreement shall not
relieve the parties of any obligation accruing prior to such expiration or
termination. The obligations and rights of the parties under Sections 6.2 and
6.3(a) (if applicable under Section 12.5(c)), Sections 6.3(b) and 6.8 (if
applicable under Section 12.5(d)) and Sections 6.4, 10, 11.4, 11.5, 12.5, 14
and 15 shall survive termination or expiration of this Agreement.
(b) In the event that the parties terminate this
Agreement under Section 12.2, the document effecting such termination shall
specify the continuation or termination of any license rights granted
hereunder. In the event that BMS terminates this Agreement under Section 12.4,
all licenses granted hereunder (except those granted under Sections 6.3 and
6.4) shall terminate forthwith. In the event that SIBIA terminates this
Agreement under Section 12.4, all licenses granted hereunder (except those
granted under Sections 6.2 and 6.3) shall terminate forthwith.
(c) In the event that BMS terminates this Agreement under
Section 12.3, without limiting any remedies otherwise available to BMS, (i) all
licenses granted by BMS to SIBIA hereunder shall terminate and revert to BMS,
(ii) the licenses set forth in Sections 6.2 and 6.3(a) shall continue, and
(iii) SIBIA shall return to BMS all Confidential Information of BMS. The
royalties owed by BMS to SIBIA shall be as set forth in Section 7.4.
(d) In the event that SIBIA terminates this Agreement
under Section 12.3, without limiting any remedies otherwise available to SIBIA
(except as expressly set forth in Section 6.8), (i) all licenses granted by
SIBIA to BMS hereunder shall terminate and revert to SIBIA, (ii) if BMS's
breach occasioning termination was of Section 5.2, SIBIA shall have the right
to develop and commercialize Products in the Field pursuant to Section 6.8
hereof, and (iii) BMS shall return to SIBIA all Confidential Information of
SIBIA.
SECTION 13 PUBLICITY
13.1 PUBLICITY REVIEW. BMS and SIBIA will jointly discuss and
agree, based on the principles of Section 13.2, on any statement to the public
regarding the execution and the subject matter of this Agreement, the Research
to be conducted by the parties under this Agreement, or any other aspect of
this Agreement, except with respect to disclosures required by law or
regulation. Promptly following the Effective Date, the Parties shall issue a
mutually acceptable press release.
13.2 STANDARDS. In the discussion and agreement referred to in
Section 13.1, the principles observed by BMS and SIBIA will be accuracy, the
requirements for confidentiality under Section 10, the advantage a competitor
of BMS or SIBIA may gain from any public or Third Party statements under
Section 13.1, the requirements of disclosure under any securities
22.
<PAGE> 29
laws or regulations of the United States, including those associated with public
offerings, and the standards and customs in the pharmaceutical industry for
such disclosures by companies comparable to BMS and SIBIA.
SECTION 14 DISPUTE RESOLUTION
14.1 DISPUTES. 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 or thereunder. 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 litigation. To accomplish this
objective, the parties agree to follow the procedures set forth in this Section
14 if and when a dispute arises under this Agreement between the parties or
among the Steering Committee.
14.2 DISPUTE RESOLUTION PROCEDURES. If the parties or the Steering
Committee cannot resolve the dispute within 20 days of 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 below or their
successors, for attempted resolution by good faith negotiations within 30 days
after such notice is received. The designated officer of BMS shall have the
tie-breaking vote with respect to the matters described in Section 3.1,
excluding the matters described in subsection (d) of Section 3.1. Said
designated officers are as follows:
For BMS: President of the Pharmaceutical Research
Institute with regard to scientific and
technical issues; President of the
Pharmaceutical Group with regard to all other
matters
For SIBIA: Chief Executive Officer
Any such dispute arising out of or relating to this Agreement which is
not resolved between the parties or the Steering Committee or the designated
officers of the parties pursuant to the foregoing shall be resolved by final
and binding arbitration conducted in San Diego County, California under the
then current Licensing Agreement Arbitration Rules of the American Arbitration
Association ("AAA"); provided, however, that depositions shall be permitted as
follows: each party may take no more than five depositions with a maximum of
five hours of examination time per deposition, and each such deposition shall
take place in the facilities of the party being deposed, unless otherwise
agreed by the parties. The arbitration shall be conducted by one arbitrator
who is knowledgeable in the subject matter which is at issue in the dispute and
who is selected by mutual agreement of the parties or, failing such agreement,
shall be selected according to the AAA rules. In conducting the arbitration,
the arbitrator shall apply the California Evidence Code, and shall be able to
decree any and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a preliminary injunction, a
permanent injunction, or replevin of property. The arbitrator shall also be
able to award actual, general or
23.
<PAGE> 30
consequential damages, but shall not award any other form of damage (e.g.,
punitive or exemplary damages). The parties shall share equally the
arbitrator's fees and expenses pending the resolution of the arbitration unless
the arbitrator, pursuant to its right but not its obligations, requires the
non-prevailing party to bear all or any portion of the costs of the prevailing
party. The decision of the arbitrator shall be final and may be sued on or
enforced by the party in whose favor it runs in any court of competent
jurisdiction at the option of such party.
SECTION 15 MISCELLANEOUS
15.1 ASSIGNMENT.
(a) Notwithstanding any provision of this Agreement to
the contrary, either party may assign any of its rights or obligations under
this Agreement in any country to any Affiliates; provided, however, that such
assignment shall not relieve the assigning party of its responsibilities for
performance of its obligations under this Agreement.
(b) Either party may also assign its rights or
obligations under this Agreement in connection with the sale of all or
substantially all of its assets subject to Section 12.4, or may otherwise
assign its rights or obligations under this Agreement with the prior written
consent of the other party. Subject to Section 12.4, this Agreement shall
survive any merger of either party with or into another party and no consent
for a merger or similar reorganization shall be required hereunder; provided,
that in the event of such merger or in the event of a sale of all assets, no
intellectual property rights of the acquiring corporation shall be included in
the technology licensed hereunder.
(c) This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the parties. Any assignment
not in accordance with this Agreement shall be void.
15.2 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 government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting party, provided
that the party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure.
15.3 PAYMENT IN U.S. DOLLARS. All payments due to either party
under this Agreement shall be paid in U.S. Dollars.
15.4 RETAINED RIGHTS. Nothing in this Agreement shall limit in any
respect the right of either party to conduct research and development with
respect to and market products outside the Field using such party's technology
including Know-How and Patent Rights.
24.
<PAGE> 31
15.5 NOTICES. Any notices or communications provided for in this
Agreement to be made by either of the parties to the other shall be in writing,
in English, and shall be made by prepaid air mail with return receipt addressed
to the other at its address set forth below. Any such notice or communication
may also be given by hand, or facsimile to the appropriate designation.
Notices shall be sent:
If to BMS, to: Bristol-Myers Squibb Company
P.O. Box 4000
Route 206 & Province Line Road
Princeton, NJ 08543-4000
Attention: Vice President & Senior Counsel,
Pharmaceutical Research Institute
and Worldwide Strategic Business Planning.
If to SIBIA, to: SIBIA, Inc.
505 Coast Blvd. South, Suite 300
La Jolla, CA 92037-4641
Attention: President and CEO
Either party may by like notice specify or change an address to which notices
and communications shall thereafter be sent. Notices sent by mail, facsimile
or cable shall be effective upon receipt and notices given by hand shall be
effective when delivered.
15.6 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of California, as such laws are applied to contracts entered into
and to be performed within such state.
15.7 WAIVER. Except as specifically provided for herein, the
waiver from time to time by either of the parties of any of their rights or
their failure to exercise any remedy shall not operate or be construed as a
continuing waiver of same or of any other of such party's rights or remedies
provided in this Agreement.
15.8 SEVERABILITY. If any term, covenant or condition of this
Agreement or the application thereof to any party or circumstance shall, to any
extent, be held to be invalid or unenforceable, then (a) the remainder of this
Agreement, or the application of such term, covenant or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by
law; and (b) the parties hereto covenant and agree to renegotiate any such
term, covenant or application thereof in good faith in order to provide a
reasonably acceptable alternative to the term, covenant or condition of this
Agreement or the application thereof that is invalid or unenforceable, it being
the intent of the parties that the basic purposes of this Agreement are to be
effectuated.
25.
<PAGE> 32
15.9 INDEPENDENT CONTRACTORS. It is expressly agreed that SIBIA
and BMS shall be independent contractors and that the relationship between the
two parties shall not constitute a partnership or agency of any kind. Neither
SIBIA nor BMS shall have the authority to make any statements, representations
or commitments of any kind, or to take any action, which shall be binding on
the other, without the prior written authorization of the party to do so.
15.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.11 ENTIRE AGREEMENT. This Agreement and the Stock Purchase
Agreement between the parties of even date herewith set forth all of the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the parties hereto and supersede and terminate all prior
agreements and understanding between the parties. There are no covenants,
promises, agreements, warranties, representations conditions or understandings,
either oral or written, between the parties other than as set forth herein and
therein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the parties hereto unless reduced to writing
and signed by the respective authorized officers of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement in
duplicate originals by their proper officers as of the date and year first
above written.
BRISTOL-MYERS SQUIBB COMPANY THE SALK INSTITUTE
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: /s/ MARILYN HARTIG By: /s/ WILLIAM T. COMER
----------------------------- ----------------------------------
Title: Vice President William T. Comer, Ph.D.
--------------------------- President and Chief
Executive Officer
SIGNATURE PAGE
<PAGE> 33
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
JOINT SIBIA-BRISTOL-MYERS SQUIBB
APP PROCESSING MODULATOR RESEARCH PROGRAM
I. SIBIA
A. ***********************************************************
*********
** **************************************************
**********
** ***********************************
B. ***********************************************************
*******
** *******
** ***********************
** ******
C. **********************************************************
** ********************************************
** ************************
** *********************************
** ************************************************
************************
D. **********************************
** **************************************************
**********************************
II. BRISTOL-MYERS SQUIBB
A. **********************************************************
***********
** **************
** ****************
B. ******************************************************
** **************
** ****************
C. ********************
** ************************************************
*****************
** *************************************************
** ************************************
D. *****************************************************
<PAGE> 34
EXHIBIT B
STOCK PURCHASE AGREEMENT
<PAGE> 35
CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE I.
BMS COMPOUNDS INCLUDE THE FOLLOWING:
****** ******** ******** ******** ******** **************** ***** *******
****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ******
****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ******
****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ******
****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ******
****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ******
****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ******
****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ******
****** ****** ****** ****** ****** ****** ****** ****** ****** ****** ******
****** ****** ****** ****** *** ************** ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* ******* ******* ******* ******* ******* ******* ******* *******
******* ******* *** ************* ****** *****
<PAGE> 36
CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE II
SIBIA COMPOUNDS
<TABLE>
<S> <C> <C>
********** ********** **********
********** ********** **********
********** ********** **********
********** ********** **********
********** ********** **********
********** ********** **********
********** ********** **********
********** ********** **********
********** ********** ***********
********** ********** **********
********** ********** **********
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</TABLE>
<PAGE> 1
EXHIBIT 10.21
STOCKHOLDERS AGREEMENT
by and among
THE SALK INSTITUTE BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.,
PHILLIPS PETROLEUM COMPANY,
THE SALK INSTITUTE FOR BIOLOGICAL STUDIES,
SKANDIGEN AB
and
THE STOCKHOLDERS OF PROTEASE CORPORATION
Dated as of October 1, 1991
<PAGE> 2
STOCKHOLDERS AGREEMENT
THIS AGREEMENT dated as of October 1, 1991 by and among THE SALK
INSTITUTE BIOTECHNOLOGY/INDUSTRIAL ASSOCIATES, INC., a Delaware corporation
having its principal place of business in La Jolla, California ("SIBIA");
PHILLIPS PETROLEUM COMPANY, a Delaware corporation having its principal place
of business in Bartlesville, Oklahoma ("Phillips"); THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES, a California nonprofit public benefit corporation having
its principal place of business in La Jolla, California ("Salk"); SKANDIGEN AB,
a Swedish corporation having its principal place of business in Stockholm,
Sweden ("Skandigen"-Phillips, Salk and Skandigen are hereinafter collectively
referred to as the "Major Investors") and those stockholders of Protease
Corporation listed on Exhibit A hereto ("Stockholders"), with respect to the
following facts:
A. SIBIA, Protease Corporation and the Stockholders have entered
into an Agreement and Plan of Reorganization, dated as of September 17, 1991
(the "Reorganization Agreement"), providing for the merger of Protease with and
into SIBIA (the "Merger"). Upon consummation of the Merger, each of the issued
and outstanding shares of the common stock of Protease will be canceled and
converted into 2.638088 shares of Series A Common Stock of SIBIA and warrants
to purchase an additional 0.879373 shares of SIBIA Series A Common Stock. The
shares of Series A Common Stock of SIBIA acquired by the Stockholders pursuant
to the Merger are referred to herein as the "Restricted Shares" subject to this
Agreement.
B. The parties hereto acknowledge and agree that it is in their
mutual best interests to restrict the transfer of the Restricted Shares prior
to the time that a public market for SIBIA's Series A Common Stock is
established.
NOW, THEREFORE, in consideration of the covenants and agreements
herein set forth, the parties hereto agree as follows:
1. RIGHT OF FIRST REFUSAL UPON TRANSFER OF SHARES. At all times
prior to the termination of this Agreement as provided in Section 7 below, no
Stockholder shall sell, exchange, assign, transfer, pledge, hypothecate or
otherwise encumber or permit to become encumbered, give or otherwise dispose
of, whether any such disposition shall be voluntary or involuntary or come
about or be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order, rule or regulation of any administrative body
(any of said acts being a "transfer") any of the Restricted Shares, except as
provided below:
(a) Permitted Transfers. Notwithstanding the foregoing, a
Stockholder may transfer all (but not less than all) of its Restricted Shares
to a spouse, child, step-child, grandchild,
<PAGE> 3
parent or sibling, or legal dependent of the Stockholder, or to a trust of
which the beneficiary or beneficiaries of the corpus and the income shall be
either the Stockholder or a person listed above (collectively "Permitted
Transferees). Any Permitted Transferee to whom Restricted Shares are
transferred may thereafter transfer such shares to the Stockholder or to
another Permitted Transferee.
(b) First Refusal Rights. It is hereby agreed among the parties
hereto that, except for a transfer permitted under Section l(a) above, before
there can be a valid sale or transfer for consideration by a Stockholder or
Permitted Transferee (hereinafter an "Offeror") of any of the Restricted Shares
to any other party, the Offeror shall first offer its Restricted Shares to
SIBIA, which (subject to paragraphs (iv) and (v) hereunder) can purchase all or
part of the Restricted Shares, and then to the Major Investors and the other
Stockholders, in the following manner:
(i) Such Offeror shall deliver a notice (the "Transfer
Notice") in writing by mail or otherwise to SIBIA stating the price,
terms and conditions of such proposed transfer, identifying the
proposed transferee, stating the number of Restricted Shares to be
sold or transferred, and its intention so to sell or transfer such
shares. Within 30 days thereafter, SIBIA shall have the prior right
to purchase all or a portion of the shares so offered at the price and
upon the terms and conditions stated in the Transfer Notice. SIBIA
shall notify the Offeror, the Major Investors and the other
Stockholders of the number of shares covered by the Transfer Notice
that it wishes to purchase.
(ii) For a further Period of 15 days following the receipt
of notice from SIBIA regarding its intention to purchase less than all
of the shares covered by the notice from the Offeror (but in no event
more than 45 days from the receipt of the Transfer Notice from the
Offeror), the Major Investors and the other Stockholders shall have
the prior right to purchase on a pro rata basis all (but not less than
all, unless this requirement is waived by the Offeror) of the
remaining Restricted Shares so offered at the price and upon the terms
and conditions stated in the Transfer Notice.
(iii) If all of the shares referred to in the Transfer
Notice are not disposed of under paragraphs (i) and (ii) above, any
Major Investor or Stockholder desiring to purchase shares in a number
in excess of its proportionate share, as provided in paragraph (ii)
above, shall be entitled to purchase such proportion of those shares
which remain thus undisposed of as the total number of shares which it
holds bears to the total number of shares held by
-2-
<PAGE> 4
all of the Major Investors and Stockholders desiring to purchase
shares in excess of those to which they are entitled under such
apportionment. Such apportionment shall be made successively until
all of the shares offered shall have been allocated to purchasing
Major Investors and/or Stockholders and such apportionment shall be
completed within 45 days from the date of delivery of the Transfer
Notice.
(iv) If all of the Restricted Shares offered in the
Transfer Notice are not so purchased by SIBIA, the Major Investors and
the other Stockholders, the Offeror shall have no obligation to sell
such Restricted Shares to SIBIA, the Major Investors and the other
Stockholders and said Offeror may then sell all of such Restricted
Shares to any proposed transferee(s) identified in the Transfer Notice,
but only to such an identified transferee and only within a period of
120 days from the date of its first notice; provided, however, that
said Offeror shall not sell or transfer the Restricted Shares at a
lower price or on terms more favorable to such transferee(s) than those
specified in the Transfer Notice. After said 120-day period, the
foregoing procedure for first offering Restricted Shares to SIBIA, the
other Major Investors and the other Stockholders shall again apply.
(v) Within the limitations herein provided, SIBIA may
purchase the Restricted Shares as described above from any Offeror;
provided, however, that at no time shall SIBIA be permitted to
purchase all of its outstanding voting shares.
(c) Transfer Obligations. (i) At least ten (10) days to the
proposed effective date of any transfer permitted under Sections 1(a) and l(b)
above, the Stockholder making the transfer shall give to SIBIA written notice
thereof accompanied by a written agreement executed by the transferee
shareholder (the "Transferee"), in form and substance satisfactory to SIBIA,
which provides that: (A) from and after the effective date of such transfer,
the Restricted Shares acquired by the Transferee in such transfer shall
continue to be subject to the terms and conditions of this Agreement to the
same extent and in the same manner as if the Restricted Shares were still owned
by the transferring party; (B) the Transferee assumes in writing and agrees to
be bound by all the terms and conditions of this Agreement; and (C) the
transferring party shall continue to be bound by the terms and conditions
hereof, except to the extent released therefrom by SIBIA.
(ii) Any person acquiring Restricted Shares pursuant to this
Section l(c) shall receive and hold the Restricted Shares subject to the terms
and provisions of this Agreement. SIBIA
-3-
<PAGE> 5
shall not transfer the Restricted Shares on its books, and shall not recognize
any purported transfer, unless and until the transfer is made in accordance
with the terms of this Section 1 and the transferee, if not then a party, has
become a party to this Agreement by executing a counterpart hereof.
(iii) If requested by SIBIA, each Stockholder or Transferee desiring
to transfer Restricted Shares shall furnish SIBIA with an opinion of counsel
satisfactory to SIBIA and its counsel, to the effect that appropriate actions
necessary for compliance with the Securities Act of 1933 and any applicable
state laws have been taken or that exemptions from the registration or
qualification requirements thereof are available.
(d) Legends on Shares. SIBIA shall place the following legends on
the certificates for the Restricted shares, referring to this Agreement and
thereby to the restrictions on transfer of such shares set forth in this
Section 1:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
2. REGISTRATION RIGHTS UNDER THE SECURITIES ACT OF 1933
(a) Company Registration. Whenever SIBIA proposes to
register any of its Series A Common Stock (or successor securities) under the
Securities Act of 1933 (the "1933 Act") for a public offering for cash, whether
as a primary or secondary offering pursuant to registration rights granted to
holders of other securities of SIBIA), other than a registration relating to
employee benefit plans, SIBIA shall, each such time, give to the Major
Investors and the Stockholders written notice of its intent to do so. Upon the
written request of a Major Investor or Stockholder given within 20 days after
mailing of any such notice, SIBIA shall use its best efforts to cause to be
included in such registration (and any related qualification under state
securities laws) all of the Series A Common Stock of SIBIA held by any such
Major Investor and all of the Restricted Shares held by any such Stockholder as
to which registration was requested; provided (a) any such major Investor or
Stockholder agrees to sell such shares in the same manner and on the same terms
and conditions as the other Series A Common Stock which SIBIA proposes to
register, and (b) if the registration is to include Series A Common Stock to be
sold for the account of SIBIA, the proposed managing underwriter does not
advise SIBIA that, in its opinion, the inclusion of the Major Investor's and/or
Stockholder's shares is likely to affect adversely the success of
-4-
<PAGE> 6
the offering by SIBIA or the price it would receive, in which case the rights
of the Investor shall be as provided in Section 2(c) hereof.
(b) Obligations of SIBIA. Whenever required under
Section 2(a) to use its best efforts to effect the registration of any of
shares of Series A Common Stock, SIBIA shall, as expeditiously as reasonably
possible:
(i) Prepare and file with the SEC a Registration
Statement with respect to such shares and use its best efforts to cause such
Registration Statement to become and remain effective; provided, however, SIBIA
shall in no event be obligated to cause any such registration to remain
effective for more than 120 days;
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and prospectus (the "Prospectus")
used in connection therewith as may be necessary to comply with the provisions
of the 1933 Act with respect to the disposition of all securities covered by
such Registration Statement;
(iii) Use its best efforts to register and qualify the
securities covered by such Registration Statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for
the distribution of the securities covered by the Registration Statement;
provided, that SIBIA shall not be required in connection therewith or as
condition therewith or thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions;
(iv) Furnish to the Major Investors and Stockholders such
numbers of copies of the Prospectus, including a preliminary prospectus, in
conformity with the requirements of the 1933 Act, and such other documents as
they may reasonably request in order to facilitate the disposition of shares
owned by them;
(v) Notify the Major Investors and Stockholders
participating in such registration, promptly after it shall receive notice
thereof, of the time when such Registration Statement has become effective or a
supplement to any Prospectus forming a part of such Registration Statement has
been filed;
(vi) Notify such Major Investors and Stockholders, or
their attorneys-in-fact, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of such Registration Statement or the initiation or threatening
of any proceeding for such purpose and promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if such stop order
should be issued.
-5-
<PAGE> 7
(c) Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by SIBIA, SIBIA shall not be
required to include any of the Major Investors' securities or Stockholders'
Restricted Shares therein unless the Major Investors and Stockholders accept
and agree to the terms of the underwriters selected by SIBIA, and then only in
such quantity as will not in the opinion of the underwriters jeopardize the
success of the offering by SIBIA. If the total number of shares of stock which
the Major Investors and Stockholders request to be included in any offering
exceeds the number of such shares which the underwriters reasonably believe
compatible with the success of the offering, SIBIA shall only be required to
include in the offering so many of the shares of stock of the Major Investors
and Stockholders as the underwriters believe will not jeopardize the success of
the offering (the shares so included to be apportioned pro rata among the Major
Investors and Stockholders according to the total numbers of shares of Series A
Common Stock and Restricted Shares requested to be included in such offering by
the Major Investors and Stockholders, respectively, or in such other
proportions as they shall mutually agree).
(d) Indemnification. Each of the Major Investors, the
Stockholders and SIBIA shall enter into standard forms of indemnification
agreements with respect to such party indemnifying the other for statements or
omissions with respect to said Registration Statement as attributable to such
party.
(e) Expenses. All expenses incurred in connection with a
registration made in accordance with this Section 2 (excluding underwriting
commissions and discounts relating to the sale of shares owned by the Major
Investors and Stockholders), including, without limitation, all registration
and qualification fees, printing and accounting fees, the fees and
disbursements of counsel for SIBIA and the reasonable fees and disbursements of
one counsel for those Major Investors and Stockholders electing to use said
counsel, shall be borne by SIBIA.
(f) Information. It shall be a condition precedent to the
obligations of SIBIA to take any action pursuant to this Section 2 that the
Major Investors and Stockholders shall furnish to SIBIA such information
regarding them, the shares held by them, and the intended method of disposition
thereof, as SIBIA shall reasonably request and as shall be required in
connection with the actions to be taken by SIBIA.
(g) Transfer of Registration Rights. The registration rights of
the Major Investors and Stockholders under this Section 2 may be transferred to
any transferee of a Major investor or Stockholder who acquires at least that
number of shares which represent not less than one percent (1%) of SIBIA's
-6-
<PAGE> 8
outstanding capital stock (on a fully converted basis for any convertible
Preferred Stock) at the time of transfer; provided that SIBIA has been given
written notice by the Major Investor or Stockholder at the time of such
transfer stating the name of and address of the transferee and identifying the
shares with respect to the rights under this Section 2 are being assigned.
(h) Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Securities and Exchange
Commission which may permit the sale of shares to the public without
registration, SIBIA agrees that, at all times after the effective date of the
first Registration Statement filed by SIBIA for a public offering of its Series
A Common Stock, it will:
(i) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the 1933 Act;
(ii) So long as any Major Investor, Stockholder or
Transferee owns any unregistered Series A Common Stock or Restricted Shares,
furnish to such Major Investor, Stockholder or Transferee upon request: (1) a
written statement by SIBIA as to its compliance with the reporting requirements
of Rule 144 and of the 1933 Act and the Securities Exchange Act of 1934, as
amended; (2) a copy of the most recent annual or quarterly report of SIBIA; and
(3) such other reports and documents so filed by SIBIA as such person may
reasonably request in availing itself of any rule or regulation of the
Securities and Exchange Commission allowing that person to sell any such
securities without registrations.
(i) Except as expressly provided in this Section 2, SIBIA has
not granted to any of the Major Investors, Stockholders or Transferees any
rights relating to the registration of shares of SIBIA's capital stock.
3. INFORMATION RIGHTS. Upon request, SIBIA shall deliver to the
Stockholders regularly prepared quarterly and annual financial statements,
including all audited statements, and any financial and other reports required
under Delaware or California law to be delivered to shareholders of a Delaware
corporation operating in California and such other reports as the parties may
agree upon.
4. NO INDUCEMENTS. Each Stockholder acknowledges and represents
for the benefit of all other parties that, in executing this Agreement, such
Stockholder has not relied upon any inducements, promises, or representations
made by any other party or any affiliates of any party, other than those set
forth in
-7-
<PAGE> 9
this Agreement and the Reorganization Agreement, and that this Agreement has
been freely and voluntarily entered into,
5. NON-ASSIGNABILITY. Except as provided in Sections 1(a), 1(c)
and 2(g) above, this Agreement and the rights and obligations provided for
herein may not be assigned or delegated by any party without the prior written
consent of the other parties hereto. Subject to the foregoing, the provisions
of this Agreement shall be binding upon, and inure to the benefit of, the
respective successors and permitted assigns of the parties hereto.
6. NOTICES. Any notices, requests, consents, or other
communications with respect to this Agreement shall be in writing and shall be
deemed to have been-duly given if delivered personally, sent by telex or
facsimile, or five (5) days after, sent by certified or registered mail, return
receipt requested postage prepaid to the parties at the respective addresses set
forth below:
To Phillips:
Phillips Petroleum Company
260 Research Forum
Bartlesville, Oklahoma 74004
Attention: F. Ben Jones, Vice President of Research
and Development
To Salk:
The Salk Institute for Biological Studies
10010 North Torrey Pines Road
La Jolla, California 92037
Attention: Delbert E. Glanz, Executive Vice President
with a copy to:
Julius Tabin, Esquire
Fitch, Even, Tabin & Flannery
135 South LaSalle Street
Chicago, Illinois 60603-4277
To SIBIA:
The Salk Institute Biotechnology/
Industrial Associates, Inc.
505 Coast Boulevard South
La Jolla, California 92037
Attention: William T. Comer, President and Chief
Executive Officer
-8-
<PAGE> 10
with a copy to:
David J. Grant, Esquire
McKenna & Fitting
444 South Flower Street
Los Angeles, California 90071
To Skandigen:
Skandigen AB
Norrlandsgatan 15
S-111 43 Stockholm,
SWEDEN
Attention: Bertil Aberg, President
with a copy to:
James F. Farrington, Jr., Esquire
Reid & Priest
40 West 57th Street
New York, New York 10019
To the Stockholders:
at their respective addresses as set forth in Exhibit A hereto
with a copy to:
Paul Kreutz, Esquire
Ware & Freidenrich, P.C.
400 Hamilton Avenue
Palo Alto, California 94301-1809
or such other address as shall be furnished in writing by any such party, any
such notice or communication shall be deemed to have been given two business
days after date of such mailing (except that a notice of change of address
shall not be deemed to have been given until received by the addressee).
Notices may also be sent by telegram, telex or hand delivery and in such event
shall be deemed to have been given as of the date received.
7. TERMINATION. The obligations of the parties under this
Agreement, other than the obligations of SIBIA under Section 2 above and those
of the Stockholders and Transferees under Section 1(c)(iii) above, shall
terminate on the later to occur of (i) the effective date of the first
Registration Statement filed by SIBIA for a public offering of its Series A
Common Stock or successor securities or (ii) the expiration of the period of
time (not to exceed 180 days), if any, after such effective date in which SIBIA
and each holder of more than five percent (5%) of the
-9-
<PAGE> 11
outstanding Series A Common Stock agree with the underwriter or underwriters
with respect to such public offering not to issue, sell, sell short, grant an
option to buy, or otherwise dispose of shares of Series A Common Stock of
SIBIA.
B. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the transfer of the
Restricted Shares and the grant of Registration Rights with respect to SIBIA's
Series A Common Stock, and supersedes all prior agreements and understandings
relating to such subject matters. This Agreement shall not, however, supercede
that certain Stock Purchase and Stockholders Agreement dated as of April 11,
1988 by and between SIBIA and the Major Investors, except that portion of said
agreement that grants Registration Rights to the Major Investors.
(b) Amendments and Waivers. This Agreement may be amended only by
an instrument executed by each of the parties hereto. No waivers of or
exceptions to any term, condition or provision of this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
(c) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Headings. The headings of the sections, subsections, and
paragraphs of this Agreement have been added for convenience only and shall not
be deemed to be a part of this Agreement.
(e) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, U.S.A.
-10-
<PAGE> 12
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
<TABLE>
<S> <C> <C>
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: /s/ WILLIAM T. COMER, PRESIDENT By:
---------------------------------------------- --------------------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive Officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
---------------------------------------------- --------------------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
/s/ STEVEN L. WAGNER
- ------------------------------------------------ --------------------------------------------------
Steven L. Wagner William E. Van Nostrant
- ------------------------------------------------ --------------------------------------------------
William D. Rowzee Paul J. Isakson
- ------------------------------------------------ --------------------------------------------------
Richard Pascarelli Ronald Coleman
/s/ JEFFREY FARROW
- ------------------------------------------------ --------------------------------------------------
Jeffrey Farrow Jerry Weisbach
- ------------------------------------------------ --------------------------------------------------
Robert Van Nostrant Charles Broska
- ------------------------------------------------ --------------------------------------------------
Lawrence D. Poster Alice Lau
- ------------------------------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
-------------------------------------------
[Name; Title]
</TABLE>
-11-
<PAGE> 13
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By: /s/ F. BEN JONES
----------------------------- -----------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
---------------------------- -----------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
-------------------------
[Name; Title]
-11-
<PAGE> 14
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By:
----------------------------- -----------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: /s/ BERTIL ABERG By:
----------------------------- -----------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
--------------------------
[Name; Title]
-11-
<PAGE> 15
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By:
----------------------------- -----------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By: /s/ DELBERT E. GLANZ
----------------------------- -----------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 16
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By:_____________________________ By:_____________________________
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By;_____________________________ By:_____________________________
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
/s/ WILLIAM E. VAN NOSTRAND
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 17
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: /s/ WILLIAM T. COMER By:
----------------------------- -------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
/s/ STEVEN L. WAGNER
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
/s/ WILLIAM D. ROWZEE
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
/s/ LAWRENCE D. POSTER
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 18
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By:
----------------------------- -------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
/s/ PAUL J. ISAKSON
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 19
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: /s/ WILLIAM T. COMER By:
----------------------------- -------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
/s/ STEVEN L. WAGNER
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
/s/ RICHARD PASCARELLI
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
/s/ LAWRENCE D. POSTER
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 20
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: /s/ WILLIAM T. COMER By:
----------------------------- -------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
/s/ STEVEN L. WAGNER
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
/s/ RONALD COLEMAN
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
/s/ LAWRENCE D. POSTER
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 21
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: /s/ WILLIAM T. COMER By:
----------------------------- -------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
/s/ STEVEN L. WAGNER
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
/s/ JERRY WEISBACH
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
/s/ LAWRENCE D. POSTER
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 22
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: /s/ WILLIAM T. COMER By:
----------------------------- -------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
/s/ STEVEN L. WAGNER
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
/s/ ROBERT VAN NOSTRAND
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
/s/ LAWRENCE D. POSTER
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 23
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By:
----------------------------- -------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
/s/ CHARLES BROSKA
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 24
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: /s/ WILLIAM T. COMER By:
----------------------------- -------------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -------------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
/s/ STEVEN L. WAGNER
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
/s/ LAWRENCE D. POSTER
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 25
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By:
----------------------------- -----------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -----------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
/s/ ALICE LAU
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 26
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By:
----------------------------- -----------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -----------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
/s/ TIM BLANCHARD
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 27
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By:
----------------------------- -----------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -----------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
/s/ TIM BLANCHARD
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By
---------------------------
[Name; Title]
-11-
<PAGE> 28
IN WITNESS WHEREOF, the undersigned hereto have executed this
Agreement as of the day and year first above written.
THE SALK INSTITUTE PHILLIPS PETROLEUM COMPANY
BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC.
By: By:
----------------------------- -----------------------------
William T. Comer, President F. Ben Jones, Vice President
and Chief Executive officer of Research and Development
SKANDIGEN AB THE SALK INSTITUTE FOR
BIOLOGICAL STUDIES
By: By:
----------------------------- -----------------------------
Bertil Aberg, Managing Delbert E. Glanz, Executive
Director Vice President
THE STOCKHOLDERS:
- ----------------------------- -----------------------------
Steven L. Wagner William E. Van Nostrand
- ----------------------------- -----------------------------
William D. Rowzee Paul J. Isakson
- ----------------------------- -----------------------------
Richard Pascarelli Ronald Coleman
- ----------------------------- -----------------------------
Jeffery Farrow Jerry Weisbach
- ----------------------------- -----------------------------
Robert Van Nostrand Charles Broska
- ----------------------------- -----------------------------
Lawrence D. Poster Alice Lau
- -----------------------------
Tim Blanchard UNIVERSITY OF CALIFORNIA
By /s/ CARL B. WOOTTEN
---------------------------
Carl B. Wootten, Director
Office of Technology Transfer
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<PAGE> 29
Spousal Consent
I acknowledge that I have read the foregoing Agreement and that I know
its contents. I am aware that by its provisions my spouse has agreed to
limitations on his [her] ability to freely transfer his [her] shares in SIBIA,
including my community interest in them. I hereby consent to and approve of
the provisions of the Agreement, and agree that those shares and my interest in
them are subject to the provisions of the Agreement and that I will take no
action at any time to hinder operation of the Agreement on those shares or my
interest in them.
Executed this_______day of______________________1991 at
____________________________________
_________________________________
<PAGE> 30
Exhibit A
Stockholder Address for Notices
Steven L. Wagner 1295 Prospect Street, Unit D
La Jolla, CA 92037
William E. Van Nostrand 60 Havenwood
Irvine, CA 92714
William D. Rowzee 30941 San Clemente
Hayward, CA 94544
University of California Office of Technology Transfer
1320 Harbor Bay Parkway
Suite 150
Alameda, CA 94501
Paul J. Isackson Mayo Clinic Jacksonville
4500 San Pablo Road
Jacksonville, Florida 32224
Richard Pascarelli 913 walnut Street
San Carlos, CA 94070
Ronald Coleman 4 North Second Street Suite 850
San Jose, CA 95113
Jeffrey Farrow 21437 Firwood
Lake Forrest, CA 92630
Jerry Weisbach 1351 Glendalock Circle
Ann Arbor, MI 48014
Robert Van Nostrand 15 Mariners Circle
W. Islip, NY 11795
Charles Broska 26521 Azuer Drive
Mission Viejo, CA 92691
Lawrence D. Poster 4 Park Avenue
Suite 11 J
New York, NY 10016
Alice L. Lau 4621 Ranchgrove
Irvine, CA 92714
Tim Blanchard 90 Brown Street
N. Dartmouth, MA 02747
<PAGE> 1
EXHIBIT 10.27
AMENDED & RESTATED
RESEARCH AND DEVELOPMENT AND LICENSE AGREEMENT
This Agreement, effective as of October 1, 1992, by and between:
CIBA-GEIGY Limited, a corporation having its principal place of business at
Klybeckstrasse 141, CH-4002 Basel, Switzerland, hereinafter referred to as
"CIBA-GEIGY', and SIBIA Neurosciences, Inc., formerly known as the Salk
Institute Biotechnology/Industrial Associates, Inc., a corporation having its
principal place of business at 505 Coast Boulevard South, La Jolla, California,
USA, 92037-4641, hereinafter referred to as "SIBIA".
RECITALS
1. CIBA-GEIGY is actively conducting research directed to
discovering and developing compounds useful for treating disorders based on the
modulation of Excitatory Amino Acid (EAA) receptor subtypes. Such disorders
include diseases of the central nervous system (CNS), for example: stroke.
epilepsy and Alzheimer's disease.
2. SIBIA has expertise in the molecular and cellular biology of
human EAA receptor subtypes. SIBIA is actively engaged in a research program
directed to isolating and characterizing various human EAA receptor subtypes
found in brain tissue, evaluating their pharmacology incorporating cell lines
that express clones of the receptor subtypes into SIBIA's Advanced Receptor
Technology, and using the resulting functional assays to identify and develop
specific EAA receptor drugs.
3. CIBA-GEIGY and SIBIA are interested in collaborating on a
research project, defined below, to develop and utilize functional cellular
assays containing recombinant mammalian cell lines expressing cloned genes
encoding human EAA
<PAGE> 2
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receptor subtypes as high throughput screens. Both groups intend to establish
the screening assays in their respective laboratories.
4. CIBA-GEIGY is willing to fund this research at SIBIA, and
SIBIA is willing to undertake such research. In return for this research
support, SIBIA will grant CIBA-GEIGY the right to use the EAA receptor
subtype-expressing cell lines and assay systems developed in the Project for
the discovery of therapeutic agents,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter recited, the parties agree as follows:
Article I
Definitions
Section 1.00. General. When used in this Agreement, each of the
following terms shall have the meanings set forth in this Article 1.
Section 1.01. "Affiliate" means with respect to each party any
corporation or other entity which directly or indirectly controls, is
controlled by or is under common control with that party, but only as long as
such control exists. For the purposes of the preceding sentence and Section
5.06. the word "control" shall mean ownership of at least fifty-one per cent
(51%) of the voting stock of such corporation or other entity.
Section 1.02. "Assay" means any combination of clones, cells, cell
lines and instrumentation which is developed during the Project Term as part of
the Project which express or contain an EAA Receptor and which can be employed
to screen compounds for their ability to interact with a particular EAA
Receptor.
<PAGE> 3
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"CIBA-GEIGY Assays" means Assays developed by CIBA-GEIGY and "SIBIA
Assays" means Assays developed by SIBIA.
Section 1.03. "EAA Receptor" means any of the membrane receptors
described below and its or their subtypes which are present in the nervous
system and which function as the signal transduction systems for excitatory
acidic amino acid neurotransmitters such as glutamate and aspartate. The
following are the EAA receptor families contemplated by this Agreement: NMDA,
AMPA, kainate, mGluR Class 1, mGluR Class II, mGluR Class III and any
additional EAA Receptor families so designated by the Steering Committee. The
EAA Receptor families include any subtypes and splice variants.
Section 1.04. "ECE Compound" means any Project Compound accepted for
Early Compound Evaluation by CIBA-GEIGY's International Research Management
Committee or equivalent body.
Section 1.05. "FTE" means a researcher or researchers employed by
SIBIA and assigned to work on the Project with time and effort equivalent to
the time and effort which would be expended by one scientist working on the
Project on a full time basis consistent with normal business and scientific
practice (e.g. at least forty (40) hours per week dedicated effort).
Section 1.06. "Net Sales" means gross sales of Product by either
party, its affiliates or sublicensees, less: all trade, quantity and cash
discounts actually allowed; credits or allowances actually granted on account
of rejections, returns, billing errors, or retroactive price reductions; and
sales duties, sales taxes and other governmental charges billed to customers in
respect of sales, but excluding taxes on revenue.
Section 1.07. "Product" means any pharmaceutical form of a Project
Compound made, used or sold for a Project Use.
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CONFIDENTIAL TREATMENT REQUESTED
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Section 1.08. "Project" means a collaborative research project to be
carried out by SIBIA and CIBA-GEIGY during the Project Term directed to the
development and use of mammalian cell lines expressing EAA Receptors in
combination with functional bioassay methodology and automated, high throughput
assay technology, to be utilized jointly by both parties to identify and
develop chemical entities which interact with EAA Receptors.
Section 1.09. "Project Compound" means any chemical entity:
(i) which is identified or further developed for a Project Use using Project
Technology and/or an Assay, by ClBA-GEIGY independently, or jointly by
CIBA-GEIGY and SIBIA, during the Project Term, or by CIBA-GEIGY within the Tail
Period; or
(ii) for which marketing for a Project Use is facilitated or enhanced through
use of information obtained by means of Project Technology and/or an Assay
during the same period,
and which chemical entity interacts with an EAA Receptor. Project Compound shall
also include any derivative or analogue of a Project Compound, as defined
above, which is conceived, identified or reduced to practice for a Project Use
anytime during the Project Term or the Tail Period, and which is specifically
synthesized in an effort to optimize therapeutic utility based upon information
learned from a Project Compound and which interacts with an EAA Receptor, or any
compound which is specifically synthesized in an effort to optimize therapeutic
utility based upon information learned from a Project Compound and which
interacts with an EAA Receptor.
Notwithstanding the above, "Project Compound" shall exclude ***
*****************************************************.
<PAGE> 5
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Section 1.10. "Project Funds" means the financial support provided to
SIBIA by CIBA-GEIGY to support the Project.
Section 1-11. "Project Team" means a committee comprised of three
individuals from each of CIBA-GEIGY and SIBIA, or such greater or smaller
number as the parties shall agree, with equal representation from each of SIBIA
and CIBA-GEIGY, to be formed pursuant to Section 3.02 and which will have
responsibility for planning, coordinating and directing the Project subject to
the provisions of Section 3.03.
Section 1.12, "Project Technology" means any know-how, trade secret,
experimental data, experimental procedure, technology, biological material
and/or other proprietary information which directly relates to the Project or
to an Assay, whether developed as part of the Project during the Project Term
or existing at the date of execution of this Agreement.
"CIBA-GEIGY Project Technology" is such technology created by
CIBA-GEIGY and "SIBIA Project Technology" is such technology created by SIBIA.
Project Technology does not include Project Compounds, nor does it include
Assays.
Section 1.13. "Project Term" means a period of six years commencing on
the 1st October, 1992, and ending on the 30th September, 1998, unless extended
by mutual agreement pursuant to Section 5.01 or terminated earlier pursuant to
Section 3.03 or Sections 5.02 through 5.06.
Section 1.14. "Project Use" means any therapeutic or diagnostic use of
a Project Compound involving pharmacological modification or monitoring of EAA
Receptors.
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CONFIDENTIAL TREATMENT REQUESTED
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Section 1.15. "SIBIA Compound" means any chemical entity which is
identified or developed by SIBIA independently during the Tail Period, subject
to Section 6.07, by use of Project Technology and/or an Assay, that strongly or
primarily interacts with an EAA Receptor, and which in any event does not
strongly or primarily interact with voltage-gated calcium channels, nicotinic
acetylcholine receptors or amyloid precursor protein-processing enzymes.
Section 1.16. "Steering Committee" means a committee comprised of
three individuals from each of CIBA-GEIGY and SIBIA, to be formed pursuant to
Section 3.03 and which will have responsibility for planning, coordinating and
directing the Project.
Section 1.17. "Tail Period" means a period of three (3) years
immediately following the end of the Project Term except in the case of
termination by SIBIA pursuant to Sections 5.03 or 5.04, or in the case of
termination by CIBA-GEIGY pursuant to Sections 3.03, 5.02 or 5.05, in which
case there shall be no Tail Period.
Article II
Funding of Project
Section 2.00. Duration of Funding. Subject to the fulfillment of all
terms and conditions of this Agreement and to continuation of this Agreement,
CIBA-GEIGY shall provide Project Funds to SIBIA for the sole purpose of
conducting the Project for the period from the 1st October, 1992 to the 30th
September, 1998. Project Funds shall be at the rates set out at (a) below for
the periods from the 1st October, 1992 to the 30th September, 1995, at the rate
of ********** for the period from the 1st October, 1995 to the 30th September,
1996 and that same amount increased or decreased by a factor (with a maximum
factor of **** for each year) which reflects changes in the Biotechnology
Compensation Survey Cost Index for the geographic region in which SIBIA is
located for companies of comparable size as performed by Alexander & Alexander
consulting group and Radford Associates for BIO as of July
<PAGE> 7
CONFIDENTIAL TREATMENT REQUESTED
-7-
of each applicable subsequent year when compared to the comparable statistic
for July of the preceding year. Factor A shall be applied to Project Funds for
the period from the 1st October, 1996 to the 30th September, 1997 and factors A
and B shall be applied to Project Funds for the period from the 1st October,
1997 to the 30th September, 1998. Such adjustment shall be made only once in
contract year 1996-1997, and only once in contract year 1997-1998.
Accordingly, Project Funds shall be as follows:
<TABLE>
<S> <C> <C>
(a) October 1, 1992 - September 30, 1993: **********
October 1, 1993 - September 30, 1994: **********
October 1, 1994 - September 30, 1995: **********
(b) October 1, 1995 - September 30, 1996: **********
October 1, 1996 - September 30, 1997: ********** ***** *
October 1, 1997 - September 30, 1998: ********** ***** * ***** *
</TABLE>
Section 2.01. Schedule of Payments. Project Funds shall be paid to
SIBIA by CIBA-GEIGY in substantially equal quarterly payments in advance on or
before January 1, April 1, July 1 and October 1 of each year during the term of
the Project, provided that the first payment for the period from November 1,
1995 to June 30, 1996 (being the balance of the sum of ********** remaining
after deduction of the payment already made in respect of the period from
October 1 to October 31, 1995) shall be made not later than 30 days after the
date of execution of this Agreement by both parties.
Section 2.02. Use of Project Funds. SIBIA shall use Project Funds
solely for work on the Project conducted by or for SIBIA, including applicable
indirect costs or overhead. SIBIA shall have the ability to subcontract
specific tasks as needs and efficiency suggest, upon approval by the Project
Team or Steering Committee and at no additional cost to CIBA-GEIGY.
<PAGE> 8
CONFIDENTIAL TREATMENT REQUESTED
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During the Project Term SIBIA shall, on average, assign at least
****** *** FTEs to work on the Project. While the level of training and
research experience of these FTEs may vary from time to time, SIBIA will
ensure that at least **** *** of the FTEs assigned to the Project will have
educational degrees of Ph.D. or M.D., unless otherwise agreed by the Steering
Committee.
Section 2.03. Audit Rights of CIBA-GEIGY. CIBA-GEIGY shall have the
right to audit SIBIA's books to verify research expenditures and manpower
utilization once a year. Such audit will be performed by an independent
certified public accountant at CIBA-GEIGY's expense.
Article III
Planning and Execution of Project
Section 3.00. Planning and Review. Upon execution of this Agreement
and as often as may be required during the Project Term but not less than twice
per year, the Project Team shall meet to discuss the direction and progress of
the Project, with the location alternating between the premises of SIBIA and
CIBA-GEIGY. The Project shall be conducted substantially in accordance with a
research plan to be prepared by the Project Team and approved by the Steering
Committee. The Research Plan will be modified from time to time by the Project
Team as may be required in order to achieve the goals of the Project. The
Project Team shall endeavor to assign specific tasks to SIBIA or CIBA-GEIGY as
appropriate, so as to maximize progress on the Project and to avoid any
duplication of research efforts. Each party undertakes to carry out those
tasks assigned to it with all due diligence.
Section 3.01. Conduct of Studies. All studies done in connection with
the Project shall be carried out in strict compliance with all applicable laws,
regulations, or guidelines governing the conduct of research at the site where
such studies are
<PAGE> 9
CONFIDENTIAL TREATMENT REQUESTED
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being conducted. SIBIA and CIBA-GEIGY shall both comply with all laws and
regulations applicable to the care and use of experimental animals at the site
where the studies are conducted. In addition, all animals utilized in the
Project shall be provided humane care and treatment in accordance with the most
acceptable current veterinary practices.
Section 3.02. Personnel of Project Team. The Project Team shall
comprise six members or such greater or smaller number as the parties shall
agree. Each party shall be entitled to appoint one half (1/2) of the members
of the Project Team. Both CIBA-GEIGY and SIBIA shall have the ability to
change their representation on the Project Team as appropriate.
Section 3.03. Project Management. The Project Team shall manage the
Project, including developing and revising the annual research plan.
The Project Team shall report to and operate under the overall
direction of the Steering Committee. Each party shall be entitled to appoint
three members of its staff to act as its representatives on the Steering
Committee. Both CIBA-GEIGY and SIBIA shall be entitled to change their
representatives on the Steering Committee as appropriate. The Steering
Committee shall meet no less often than twice per year, the location
alternating between the premises of SIBIA and CIBA-GEIGY.
Any issues which cannot be resolved by consensus of the whole Project
Team shall be referred to the Steering Committee. Any issues which cannot be
resolved by consensus of the whole Steering Committee shall be referred to a
member of CIBA-GEIGY's Pharmaceutical Management Committee and SIBIA's
President (or other designee) for resolution through good faith negotiation and
discussion. ***********************************************************
****************************************************************************
*******************************
<PAGE> 10
CONFIDENTIAL TREATMENT REQUESTED
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****************************************************************************
***************************************************************************
If SIBIA so terminates, *********************************************
******************************************************************************
**********************************************************
Section 3.04. Exclusivity of Research. During the Project Term except
for the purposes of the Project, except for use as negative controls in its
other research programs, and except as mentioned below SIBIA shall carry out no
research on EAA Receptors or permit or enable any third party to carry out such
research unless it obtains written permission from CIBA-GEIGY.
If during the Project Term CIBA-GEIGY notifies SIBIA in writing that
it has no interest in pursuing a particular EAA Receptor, SIBIA would then be
free to seek third party collaborators or corporate partners for that specified
EAA Receptor. If SIBIA and such a third party collaborator or corporate
partner identify or develop compounds during the Project Term or the Tail
Period (or only during the Project Term if this Agreement is terminated by
CIBA-GEIGY in accordance ********************************* or by SIBIA pursuant
************************) utilizing Assays for a particular EAA Receptor, SIBIA
would pay CIBA-GEIGY a royalty ************************************* Net Sales
of such compounds.
During the Tail Period SIBIA may conduct research at its own expense
utilizing Project Technology and Assays to identify and develop SIBIA Compounds
subject to the provisions of Section 6.07. Such research would be outside the
Project. SIBIA Compounds resulting from this research shall be offered to
CIBA-GEIGY in accordance with Section 6.07.
<PAGE> 11
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Should CIBA-GEIGY terminate this Agreement prematurely in accordance
with Sections 3.03, 5.02 or 5.05, or should SIBIA terminate this Agreement
prematurely in accordance with Sections 5.03, 5.04 or 5.06, SIBIA shall be free
to enter into agreements with other companies, or identify other corporate
partners, and the obligation of exclusivity to CIBA-GEIGY described above shall
terminate on the effective termination date.
Article IV
Results of Project
Section 4.00. Reports. The Project Team shall prepare or cause to be
prepared confidential comprehensive written reports at least once every three
(3) months during the Project Term. These reports shall describe in detail the
progress of the Project, the development of Project Technology and Assays,
information on Project Compounds and future direction, and shall be distributed
to the Steering Committee. Additionally in the second and fourth report of
each year, SIBIA shall document manpower utilization to that point in time on a
monthly basis in terms of FTEs.
During the Tail Period the Steering Committee shall meet not less than
once per year to exchange information on Project Compounds and SIBIA Compounds
identified and/or developed during the Project Term or the Tail Period.
Section 4.01. Experimental Techniques. Both SIBIA and CIBA-GEIGY
shall disclose Project Technology to each other. Such disclosure may include
limited visits by CIBA-GEIGY and SIBIA to the facilities of the other to permit
observation of Project Technology and Assays on a frequency and duration to be
mutually agreed by the Project Team. SIBIA shall provide assistance as
reasonably necessary, including sending its technical staff to CIBA-GEIGY's
premises if required, to enable the establishment of high throughput screening
assays based on Project Technology in CIBA-GEIGY's laboratories. Such visits
to CIBA-GEIGY's premises will be scheduled
<PAGE> 12
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to coincide with Project Team meetings, or otherwise will be at CIBA-GEIGY's
expense.
Section 4.02. Samples. Doth SIBIA and CIBA-GEIGY shall provide each
other with samples of materials which embody Project Technology and Assays, and
may provide other samples as well, including Project Compounds and/or SIBIA
Compounds, for use in evaluating Project Technology and/or Assays as reasonably
requested and approved by the Project Team. Such samples shall be cared for by
the receiving party as described in Section 4.07.
Section 4.03. Use of Project Technology and Assays. Subject as
mentioned in this Agreement, each party shall have a non-exclusive right to use
Project Technology, and CIBA-GEIGY shall have an exclusive right to use Assays
during the Project Term and the Tail Period, subject only to SIBIA's right to
use Assays for the purposes of the Project during the Project Term and for any
purpose during the Tail Period, subject to Section 6.07. Each party shall have
the right to use patents owned or controlled by SIBIA and/or CIBA-GEIGY required
to practice or use Project Technology and Assays so far as permitted by this
Agreement, as well as the right to use reports, experimental techniques, and
samples provided for in Sections 4.00, 4.01, and 4.02. SIBIA shall be free to
use SIBIA Project Technology and CIBA-GEIGY Project Technology in work on any
receptor class other than EAA Receptors. CIBA-GEIGY shall be free to use
CIBA-GEIGY Project Technology and Assays in work on any receptor class, and have
a non-exclusive right to use SIBIA Project Technology and Assays on any receptor
class (including EAA Receptors), except voltage-gated calcium channels and/or
nicotinic acetylcholine receptors. Except as otherwise provided in Section
6.00, after the expiry of the Tail Period, CIBA-GEIGY's right to use SIBIA
Project Technology shall be non-exclusive and royalty-free, and SIBIA's right to
use CIBA-GEIGY's Project Technology shall be nonexclusive and royalty-free,
subject to the provisions of Section 4.07.
<PAGE> 13
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Notwithstanding the foregoing, nothing in this Agreement shall preclude
either party from using instrumentation for any projects outside the scope of
the Project.
Section 4.04. Patentable Inventions. In the event that a patentable
invention involving Project Technology is conceived or reduced to practice in
the course of the Project by SIBIA or CIBA-GEIGY, SIBIA and CIBA-GEIGY shall
disclose the invention to each other. The party whose employees are inventors
of patentable technology shall have the right to file or cause to have filed a
patent application covering such invention. In the event SIBIA or CIBA-GEIGY
chooses not to file a patent application on an invention made by its employees
in any country or countries, it will notify the other party of the fact in
sufficient time to enable the other party to file an application in such
country or countries, and the other party will be given the opportunity to
pursue patent protection on that invention at its own expense. In this case,
rights necessary to enable that party to apply for the patent will be assigned
to the party that pursues the patent, the inventing party shall fully cooperate
and provide any assistance reasonably requested by the applying party in the
preparation and prosecution of such patent application(s), and the inventing
party shall be granted a royalty-free, nonexclusive license to practice the
patented invention.
Notwithstanding the above, any Project Compound resulting or
benefitting from the use of such patentable inventions shall be subject to the
terms and conditions of Article VI, including the royalty obligations thereof.
Subject as mentioned above, SIBIA shall own any such patent
application and any patent or patents maturing therefrom on inventions made by
SIBIA employees, and CIBA-GEIGY shall own any such patent application and any
patent or patents maturing therefrom on inventions made by CIBA-GEIGY
employees. Each party shall bear the expenses incurred in the filing,
prosecution, or maintenance of patent applications or patents which are owned
by or assigned to them, in accordance with the foregoing. Notwithstanding the
above, the parties shall closely communicate and
<PAGE> 14
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coordinate with respect to the filing and prosecution of patent applications
and foreign counterparts thereto in respect of such inventions in order to
promote comprehensive, cost efficient patent coverage in their mutual interest,
and to this end shall provide each other with copies of draft specifications in
sufficient time for the recipient to comment thereon. Further, in the event of
an interference with respect to either party's patent applications, the parties
shall work together to develop an appropriate strategy to deal with such
interference.
Section 4.05. Joint Inventions. In the event that during the course
of the Project a patentable invention is made jointly by one or more employees
of SIBIA and one or more employees of CIBA-GEIGY as determined by the U.S. laws
of inventorship, title to any patent application covering such invention and
any patent or patents maturing therefrom shall be owned jointly by SIBIA and
CIBA-GEIGY.
Section 4.06. Filing and Prosecution of Patent Applications on Joint
Inventions. Filing and prosecution of patent applications on joint inventions
shall be carried out by counsel acceptable to the Steering Committee, with
expenses to be borne equally by both SIBIA and CIBA-GEIGY. The parties shall be
kept informed of the countries in which the joint patent is to be filed.
In the event that either SIBIA or CIBA-GEIGY chooses not to
participate in the filing of a patent application on a joint invention, the
other party will be given the opportunity to pursue patent protection on that
invention at its own expense. In this case, ownership of the patent will be
assigned to the party that pursues the patent, and the non-participating party
shall be granted a royalty-free, nonexclusive license to practice the patented
invention, provided that invention is Project Technology. Notwithstanding the
above, any Project Compound resulting or benefitting from the use of such
patentable inventions shall be subject to the terms and conditions of Article
VI, including the royalty obligations provided therein.
<PAGE> 15
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Section 4.07. Confidentiality. Except as otherwise expressly provided
in this Agreement, both SIBIA and CIBA-GEIGY and their employees, agents,
consultants and others having access to Project Technology, Assays, information
and samples, including, but not limited to, the Project Team and Steering
Committee and their individual members, shall use their best efforts to retain
in confidence all Project Technology, Assays, information and samples received
from each other during the course of the Project. A party receiving such
Project Technology, Assays, information and samples shall treat them with the
same care as regards confidentiality as it does its own proprietary technology,
information and samples.
Such information may, however, be disclosed as reasonably necessary to
allow SIBIA or CIBA-GEIGY and their respective affiliated companies, their
employees, agents, consultants and others having access to Project Technology,
including, but not limited, to the Project Team and Steering Committee and
their individual members, to prosecute or defend against litigation, to file
and prosecute patent applications, or to comply with governmental regulations.
Moreover, SIBIA and CIBA-GEIGY may disclose confidential Project
Technology to third parties to the extent needed to fulfill the objectives of
the Project, with the prior written approval of the other party.
Such obligation of confidentiality, as to SIBIA, CIBA-GEIGY and third
parties, shall be waived as to information which: (i) is in the public domain
at the time of disclosure; (ii) comes into the public domain through no fault
of the party claiming waiver; (iii) was known to the party claiming waiver
prior to its disclosure by the other; or (iv) is disclosed to the party
claiming waiver by a third party having a lawful right to make such disclosure.
Notwithstanding the above obligations of confidentiality, SIBIA and
CIBA-GEIGY shall be free to discuss and pursue exploitation of Project
Technology as it
<PAGE> 16
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relates to EAA Receptors with third parties after expiry of the Tail Period.
Should CIBA-GEIGY terminate this Agreement prematurely in accordance with
Sections 3.03, 5.02, 5.05 or 5.06, or should SIBIA terminate this Agreement
prematurely in accordance with Sections 5.03 or 5.04, SIBIA's obligation of
confidentiality as to CIBA-GEIGY Project Technology shall end on the effective
date of termination.
In the event of a breach, or threat of breach, of the obligations of
confidentiality provided herein by either of the parties hereto, the course of
action or remedies available to the other party shall also include injunctive
relief.
Section. 4.08. Publications. While it is understood that both
CIBA-GEIGY and SIBIA shall be free to publish the results of their respective
studies carried out under and during the Project Term, both SIBIA and
CIBA-GEIGY agree to provide the other the opportunity to review any proposed
manuscripts at least sixty (60) days prior to their intended submission for
publication and, at either party's request, shall delay submission for a period
sufficient to permit adequate steps to be taken to secure patent protection for
any patentable subject matter referred to therein. The reviewing party shall
carry out its review with reasonable promptness and approval for publication
shall not be unreasonably withheld. SIBIA and CIBA-GEIGY will delay
publications if both parties agree this to be in the best commercial interest
of the Project.
Article V
Term and Termination
Section 5.00. Term. The Project shall continue throughout the Project
Term.
This Agreement shall come into operation effective as of the 1st
October, 1992 and shall remain in effect for the duration of the Project Term
and Tail Period and
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CONFIDENTIAL TREATMENT REQUESTED
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if applicable, until expiration of all payment and other obligations of Articles
III, IV and VI.
Section 5.01. Extension. By mutual written agreement of both SIBIA
and CIBA-GEIGY, the Project Term may be extended beyond the 30th September,
1998, for additional periods, with such extension contemplating additional
funding by CIBA-GEIGY pursuant to direction by the Project Team and Steering
Committee.
Section 5.02. Voluntary Termination. Either party may terminate the
Agreement upon six (6) months advance written notice provided anytime after
[anniversary of signature]. Should CIBA-GEIGY terminate the Agreement, it shall
be relieved of its obligation to pay any further Project Funds after the
effective date of termination (i.e. six (6) months after written notice of its
intent to terminate has been given).
If SIBIA so terminates, it will not *****************************
******************************************************************************
*********************************************************
Section 5.03. Termination for Breach. If either party shall be in
material default of any of its obligations under this Agreement and shall fail
to remedy such default ********************** after written notice thereof
specifying the nature of such default, the party not in default shall have the
option of terminating this Agreement by giving written notice of termination,
which option, if it is to be exercised, must be provided to the party in
default *********************** of the expiration of the ***************
allowed to correct the default.
Section 5.04. Termination for Bankruptcy. Either CIBA-GEIGY or SIBIA
shall have the right, at its option, to cancel and terminate this Agreement
forthwith in the event that the other party shall become involved in
insolvency, dissolution, bankruptcy
<PAGE> 18
CONFIDENTIAL TREATMENT REQUESTED
-18-
or receivership proceedings affecting the operation of its business or in the
event that the other party shall discontinue its business for any reason,
except that in the event of an involuntary bankruptcy filing against either
party, that party shall have sixty (60) days to remedy the situation before
this Agreement can be terminated.
Section 5.05. Termination for Inability to Practice Project Technology
or Assays. If CIBA-GEIGY is blocked from practicing Project Technology or
Assays by an issued patent owned by a third party, it shall have the option of
terminating this Agreement **************************************************.
Should CIBA-GEIGY or SIBIA become aware of a blocking patent, or be notified
that by practicing Project Technology or Assays it is infringing a third party
patent, it will immediately inform the other party.
Section 5.06. Termination for Change in Control. If all or
substantially all of the assets of either party are acquired by a third party,
or if either party should merge with or into a third party, or if control (as
defined in 1.01) of either party should pass into the hands of a third party,
whether in a single transaction or a series of related transactions ("Change in
Control"), the other party shall be notified in writing forthwith.
In the event of a Change in Control of SIBIA, CIBA-GEIGY shall have
the right to terminate this Agreement in writing *********************** from
receipt of such notice. In the event of a Change in Control of CIBA-GEIGY,
SIBIA shall continue to work with the new entity under this Agreement for a
"try-out" period of ********** and may terminate this Agreement only ******
***************** after the expiration of such try-out period, provided,
however, that the above right of termination is not applicable to a Change in
Control of CIBA-GEIGY pursuant to a merger with Sandoz Limited or an Affiliate
of Sandoz Limited.
Section 5.07. Effect of Termination or Expiration. The expiration of
this Agreement shall not affect the rights and obligations of the parties
accrued under
<PAGE> 19
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Articles III, IV and VI prior to such expiration, and except as provided in
Articles III, IV and VI, termination of this Agreement shall not affect the
rights and obligations of the parties accrued under said Articles, including
without limitation the continuing obligation to pay royalties with respect to
Project Compounds. Any Project Funds paid by CIBA-GEIGY but not committed by
SIBIA at the effective date of termination shall be refunded to CIBA-GEIGY,
and CIBA-GEIGY shall have no further obligation to pay Project Funds.
Article VI
Commercial Rights
Section 6.00. License. SIBIA warrants that it has the right to grant
and hereby grants to CIBA-GEIGY a license to exploit, for the discovery and/or
development, manufacture, use and sale of Project Compounds, all SIBIA Project
Technology and Assays, and any patents covering such technology, throughout the
world. In addition CIBA-GEIGY shall be entitled to exploit SIBIA Project
Technology royalty-free for its own purposes on any other receptor classes
except voltage-gated calcium channels, nicotinic acetylcholine receptors or
amyloid precursor protein-processing enzymes, but it shall not sell or license
SIBIA Project Technology.
The patents and patent applications currently held or licensed to
SIBIA are listed in the attached Appendix A.
Unless otherwise provided in this Agreement, the license hereby
granted shall be non-exclusive as to SIBIA Project Technology, but shall be
exclusive with regard to Assays except as provided in Sections 3.04 and 4.03
during the Project Term and except as to SIBIA during the Tail Period, and
non-exclusive as to Assays thereafter. In the event this Agreement is
terminated by CIBA-GEIGY under Sections 3.03, 5.02, 5.05 or 5.06, or by SIBIA
under Sections 5.03, 5.04 or 5.06 hereof, each party's
<PAGE> 20
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CONFIDENTIAL TREATMENT REQUESTED
license to the other party's Project Technology and Assays will continue and
become non-exclusive on the effective date of termination, subject to the
royalty obligations provided in Article VI.
CIBA-GEIGY shall have the right to grant sublicenses to any CIBA-GEIGY
Affiliate but not to any third party.
CIBA-GEIGY warrants that it has the right to grant and hereby grants
to SIBIA a non-exclusive license to exploit the CIBA-GEIGY Project Technology
and Assays, and any patents or patent applications which relate directly to
CIBA-GEIGY Project Technology, subject to ****************************.
Section 6.01. Royalties. In further consideration of the
collaboration with SIBIA and grant of license to CIBA-GEIGY to use Project
Technology and Assays, and to make, have made, use and sell Products for
Project Uses, CIBA-GEIGY shall pay SIBIA a royalty on its Net Sales of Products
as follows:
CIBA-GEIGY shall pay SIBIA a royalty *********************** worldwide
annual Net Sales of Products containing a Project Compound.
CIBA-GEIGY's obligation to pay royalties on sales of Products shall
commence upon the first commercial launch of a Product for a Project Use
anywhere in the world, and applies only to Products which are or contain
Project Compounds as defined in Section 1.09.
Section 6.02. Milestone Payments. CIBA-GEIGY shall make a pre-paid
milestone payment to SIBIA of five hundred thousand dollars ($500'000) ******
**************** of the date of execution of this Agreement to enable SIBIA **
***************************************************************************
************************************************************************
****************************
<PAGE> 21
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CONFIDENTIAL TREATMENT REQUESTED
*************************************************************************
**************************************************************************
**********************************************************************
******************. This payment shall be considered a pre-paid milestone to
be applied against the following milestones until fully credited.
SIBIA will use its best efforts to achieve milestone (a) below. If
this is successfully accomplished, or if CIBA-GEIGY identifies a Project
Compound for which it undertakes development of a Product for a Project Use,
each party shall promptly notify the other of such event and CIBA-GEIGY shall
pay SIBIA the following sums upon the occurrence of the specified actions:
(a) CIBA-GEIGY shall pay SIBIA **************************************
***************************************************************
*********************************************************************
*********************************************************************
*******************************************************************
**********************************************************************,
such payments to be credited against the prepaid milestone payment
described above. Should this milestone not be achieved, the prepaid
milestone payment can be credited against milestones (b) or (c) below.
(b) CIBA-GEIGY shall pay SIBIA **************************************
************************************ the first Project Compound for each
EAA Receptor *********************************.
(c) CIBA-GEIGY shall pay SIBIA ***************************************
************************************************************** for each
and every Project Compound which reaches such stage of development.
<PAGE> 22
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CONFIDENTIAL TREATMENT REQUESTED
(d) CIBA-GEIGY shall pay SIBIA **************************************
********************************************************************
****** for each and every Project Compound which reaches such stage of
development. Of this amount ******************************** shall be
creditable against future royalties.
(e) CIBA-GEIGY shall pay SIBIA *****************************************
***************************************************************
*********************************************************************
***********************************************************************
*********************************************************************
********************. Of this amount, ************** ************
shall be credited against future royalties.
The above mentioned provisions shall be subject to the following
limitations:
(i) The amount of milestones (d) and (e) to be credited against royalties in
any one year shall not exceed ************** of the royalties which
SIBIA would otherwise be entitled to receive from CIBA-GEIGY during that
year. Any surplus credits shall be carried forward to future years
until the credits have been discharged in full.
(ii) Only one set of the milestones mentioned at (b), (c), (d) and (e) above
shall be paid for any one compound regardless of the number of
indications for which it is developed.
(iii) If development of a compound for a particular EAA Receptor is abandoned
before the compound is launched commercially, none of the milestone
payments mentioned at (b), (c), (d) and (e) already made in respect of
that
<PAGE> 23
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CONFIDENTIAL TREATMENT REQUESTED
compound shall have to be paid again in respect of any compound
replacing the abandoned compound (i.e. a back-up compound).
(iv) Where CIBA-GEIGY is ******** * ****** ** ******* ********* *** *
********** *** ******** **** *********** ** ********* it shall notify
SIBIA ***** ** ***** ************ ** ** ******** *** ***** ** *********
** ** ****** ********** ********* Subject to ******* ******* ** ** ***
************** ***** ******* *** ** ** ************ ********* **********
***** *** ** ******** ** **** *** ********* ******** ** ******* ** *****
******* ********* ********** ** ******* ********* ****** *** ***** ****
******* *** **** ******** ******** ** ***** **** *** ******** *********
*** ** ***** ** ******** ** **** ******** ** ******* ** ******
********** *********.
Section 6.03. Duration of Royalty. CIBA-GEIGY's obligation to pay SIBIA
royalties under this Agreement shall continue, for any Product the making,
using or selling of which can be prevented by the claims of a valid issued
patent owned or controlled by CIBA-GEIGY or SIBIA, until expiration of the
last-to-expire of any such patent, on a country-by-country basis, or *** ****
years from the date of commercial launch of the Product on a country-by-country
basis, whichever is longer. Only one royalty will be due even when the
unauthorized making, using or selling of a Product can be prevented by more
than one such patent.
For any Product for which there is no valid issued patent owned or
controlled by SIBIA or CIBA-GEIGY that could prevent the unauthorized making,
using or selling of such Product, CIBA-GEIGY shall nevertheless pay SIBIA a
royalty in consideration of CIBA-GEIGY's use of Project Technology. Such
royalty shall be at *** **** ***** the rates specified above, and shall
continue for *** **** years from the date of first commercial launch, on a
country-by-country basis.
<PAGE> 24
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CONFIDENTIAL TREATMENT REQUESTED
SIBIA's obligation to pay CIBA-GEIGY royalties pursuant to Section 3.04
of this Agreement shall continue, for those products the making, using or
selling of which can be prevented by the claims of a valid issued patent owned
or controlled by CIBA-GEIGY or SIBIA, until expiration of the last-to-expire of
any such patent, on a country-by-country basis, or *** **** years from the date
of commercial launch of a Product on a country-by-country basis, whichever is
longer. Only one royalty will be due even when the unauthorized making, using
or selling of such product can be prevented by more than one such patent.
For those products for which SIBIA is obligated to pay CIBA-GEIGY a
royalty pursuant to Section 3.04, and for which there is no valid issued patent
owned or controlled by SIBIA or CIBA-GEIGY that could prevent the unauthorized
making, using or selling of such product, SIBIA shall nevertheless pay
CIBA-GEIGY a royalty in consideration of SIBIA's use of Project Technology.
Such royalty shall be at *** **** ***** the rates specified in Section 3.04,
and shall continue for *** **** years from the date of first commercial launch
of a Product, on a country-by-country basis.
Section 6.04. Payment. Royalty payments shall be made semi-annually an
a calendar year basis, within ninety (90) days of the end of each half-year.
The party paying the royalty shall provide a statement and accounting with each
payment, including a breakdown of Net Sales and the calculation of the royalty.
It shall be the duty of each party hereto to notify the other party, in
writing, when that party's obligation to pay royalties to such other party
pursuant to this Agreement commences, which notice shall be given to such other
party no later than ninety (90) days after the first commercial launch of a
Product.
Section 6.05. Blocked Currency. In each country in which the local
currency is blocked and cannot be removed from the country, at the election of
the party paying
<PAGE> 25
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CONFIDENTIAL TREATMENT REQUESTED
the royalty, royalty accrued in each such country shall be paid to the other
party in local currency by deposit in a local bank designated by such other
party.
Section 6.06. Royalty Reduction. In the event that it appears
CIBA-GEIGY must obtain a separate license from a third party in order to
practice Project Technology or use an Assay, SIBIA will be given the
opportunity to reasonably demonstrate that it has a dominant intellectual
property position with regard to that technology. If this is unsuccessful,
SIBIA may attempt to obtain a license from such third party and pay the
negotiated royalty. Failing this, CIBA-GEIGY has the right to negotiate such
license, in which event the royalty of Section 6.01 or Section 6.03 shall be
reduced by that paid to the third party, but in no case shall this reduction be
to less than ******************* of the nominal rate specified in Section 6.01
or Section 6.03.
Section 6.07. Rights to SIBIA Compounds. Unless this Agreement is
terminated by SIBIA pursuant to Sections 5.03, 5.04 or 5.06, or by CIBA-GEIGY
pursuant to Sections 3.03, 5.02 or 5.05 hereof, if a SIBIA Compound is
identified and/or developed during the Tail Period, SIBIA shall disclose it and
its properties (including information demonstrating the therapeutic
applicability of the SIBIA Compound in in vitro and, if available, in vivo
models) to CIBA-GEIGY at such time as the SIBIA Compound has been taken through
preclinical and clinical development by SIBIA, as far as SIBIA wishes or is
able to do so, or at the end of the Tail Period, whichever is earlier. If
there is insufficient information available for CIBA-GEIGY to judge the
therapeutic potential of the SIBIA Compound in question, at CIBA-GEIGY's
request *********************** after disclosure of such compound by SIBIA
hereunder, SIBIA shall supply, without cost, a sample of the Compound to
CIBA-GEIGY. Notwithstanding the above, until the expiration of the Tail Period
SIBIA shall keep CIBA-GEIGY informed on a regular basis and as early as
possible of any SIBIA Compounds which era showing therapeutic potential. For
this purpose the Steering Committee shall meet not less that once per year
during the Tail Period, the agenda for such meetings to be determined by the
Steering Committee. CIBA-GEIGY may,
<PAGE> 26
CONFIDENTIAL TREATMENT REQUESTED
-26-
but shall not be obliged to, offer SIBIA assistance with the evaluation of
SIBIA Compounds brought to its notice.
If CIBA-GEIGY desires to negotiate with SIBIA for commercial rights to
the SIBIA Compound, it shall notify SIBIA of its wish ***********************
from the date of disclosure or the date of supply to CIBA-GEIGY of a sample of
the Compound, whichever is later. If CIBA-GEIGY fails to notify SIBIA of its
wish to negotiate for the SIBIA Compound within that period or advises SIBIA
that it does not wish to negotiate for it (but not otherwise), SIBIA shall be
free to offer the SIBIA Compound to a third party with no further obligation to
CIBA-GEIGY unless the SIBIA Compound acts at the same site on an EAA Receptor
as a Project Compound in active and diligent development by CIBA-GEIGY and on
which the milestone payment described in Section 6.02(b) has been paid. In
that case, SIBIA shall be precluded from offering the SIBIA Compound to third
parties until ***********************************************************
*********
If CIBA-GEIGY notifies SIBIA ***************** period that it wishes to
negotiate with SIBIA for commercial rights to the SIBIA Compound, the parties
shall negotiate in good faith the terms of a license to exploit such rights.
However, should the parties fail to reach agreement on the principal terms of
such a license **************************************** of the date of
disclosure, or such longer period as the parties shall agree, SIBIA shall be
free to offer the SIBIA Compound to a third party, provided, however, that
SIBIA will not license the SIBIA Compound to the third party on terms more
favorable than those offered to CIBA-GEIGY, without first offering a license to
CIBA-GEIGY on the same terms.
In addition to the rights granted to CIBA-GEIGY under this Section 6.07,
SIBIA agrees to negotiate in good faith with CIBA-GEIGY at any time upon the
request of CIBA-GEIGY made prior to the expiration of the Tail Period with
regard to the terms of a license from SIBIA to CIBA-GEIGY to use biological
materials encompassed by
<PAGE> 27
-27-
CONFIDENTIAL TREATMENT REQUESTED
SIBIA Project Technology for **************************************** It is
understood that all the terms of such a license are to be negotiated,
including, but not limited to, exclusivity/non-exclusivity, royalty rates and
other provisions. However, should the parties fail to reach agreement on the
principal terms of such a license **************************************** of
the date of disclosure, or such longer period as the parties shall agree, SIBIA
shall be free to offer the biological materials encompassed by SIBIA Project
Technology for gene therapy and/or diagnostic purposes to a third party,
provided, however, that SIBIA will not license the biological materials
encompassed by SIBIA Project Technology for gene therapy and/or diagnostic
purposes to the third party on terms more favorable than those offered to
CIBA-GEIGY, without first offer a license to CIBA-GEIGY on the same terms.
Section 6.07. Due Diligence. In consideration of the rights granted to
it by SIBIA, CIBA-GEIGY agrees to employ no less diligence in the development,
manufacture, marketing and sale of the Products than it employs in relation to
other products of comparable commercial value developed by it outside the
Project. If CIBA-GEIGY fails to perform its obligations under this Section
with respect to any Project Compound, such failure shall be deemed a material
breach by CIBA-GEIGY and SIBIA shall be entitled to terminate this Agreement
subject ***************.
Section 6.08. Audit Rights. Either party shall have the right to audit
the books of the other to verify the accuracy of the royalty payments, on
reasonable notice, during normal business hours and not more often than once a
year. Such audit will be performed by a reputable independent certified public
accountant chosen and paid by the party conducting the audit. If, however, the
audit reveals a greater than ***************** discrepancy in the royalty
amount that should have been paid in comparison to that actually paid, the
expense of the audit will be borne by the party audited.
<PAGE> 28
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CONFIDENTIAL TREATMENT REQUESTED
Both SIBIA and CIBA-GEIGY shall keep fair and accurate records on the
use of Project Technology and Assays in drug discovery and compound research.
In the event that a question should arise as to whether a compound being
developed by SIBIA or CIBA-GEIGY is in fact a SIBIA Compound or Project
Compound or neither, the parties shall each select an independent third party
expert, who shall jointly select a third, to review such records. Such experts
shall be acceptable to both parties, will be paid by the party selecting such
expert with the parties sharing the cost of the third expert, and shall be
under an obligation of confidentiality in regard to all matters concerning the
compound under discussion except whether it should be classified as a SIBIA
Compound or Project Compound as defined in Sections 1.15 and 1.09, respectively.
The parties will then meet jointly with the third party experts who shall, by
majority decision, resolve the question.
Section 6.09. Equity Investment. CIBA-GEIGY shall make an equity
investment of five million dollars, ($5,000,000) in SIBIA shares at the time of
SIBIA's Initial Public Offering ("IPO") at the public offering price. The
terms on which such shares shall be issued to CIBA-GEIGY are set out in a Stock
Purchase Agreement to be executed by the parties on the same date as the
execution of this Agreement.
CIBA-GEIGY shall make a further equity investment of ****************
************************************* in SIBIA shares **********************
*************************************************************************
***************** provided always that CIBA-GEIGY may at its discretion take up
the whole or any part of such further investment earlier (e.g. at an initial
public offering of SIBIA shares or other SIBIA financing event) in which case
only the balance of such further investment shall be made at the time of filing
the IND or foreign equivalent. Such investment shall be at market price if, at
that time SIBIA shares are publicly traded (the public offering price in the
case of shares bought on the occasion of an initial public offering or other
SIBIA financing event), or at a price reflecting fair market value to be
negotiated in good faith by the parties if at that time SIBIA shares are not
publicly traded.
<PAGE> 29
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Article VII
Disclosure of Agreement
Section 7.00. Disclosure of Agreement. Except as required by law,
neither SIBIA nor CIBA-GEIGY shall release any information to any third person
with respect to the existence or terms of this Agreement without the prior
written consent of the other on the content and timing of such release, which
consent will not be unreasonably withheld.
The agreed texts of press releases to be issued by SIBIA and/or
CIBA-GEIGY upon the execution of this Agreement are attached as Appendix B, and
are made part of this Agreement.
Article VIII
Miscellaneous Provisions
Section 8.00. No Agency. It is understood and agreed that SIBIA and
CIBA-GEIGY shall each have the status of an independent contractor under this
Agreement and that nothing in this Agreement shall be construed as
authorization for either party to act as agent for the other. SIBIA members of
the Project Team and Steering Committee shall be and shall remain employees of
SIBIA, and CIBA-GEIGY members of the Project Team and Steering Committee shall
be and shall remain employees of CIBA-GEIGY, and neither party shall incur any
liability for any act or failure to act by employees of the other party.
Section 8.01. Force Majeure. Subject as mentioned below, neither party
shall be liable to the other for any failure or delay in the performance of its
obligations hereunder if and to the extent that such failure or delay is
attributable to any
<PAGE> 30
-30-
circumstance beyond its control which it could not have avoided by the exercise
of reasonable diligence (hereinafter referred to as "force majeure").
The party affected by force majeure shall give full particulars thereof
to the other party as soon as it becomes aware of the same, including its best
estimate of the likely duration and extent of the interference with its
activities and will use its best endeavors to overcome the difficulties created
thereby and to resume performance of its obligations as soon as practicable.
If force majeure prevails or is expected to prevail for a period of
three months or more, the parties will meet to discuss means of overcoming any
difficulties, including an amendment to this Agreement, to meet the new
situation.
Section 8.02. Amendment. This Agreement may not be amended,
supplemented, or otherwise modified except by an instrument in writing signed
by both parties.
Section 8.03. Applicable Law. This Agreement shall be construed and the
rights of the parties determined in accordance with the laws of the State of
New York.
Section 8.04. Titles. The titles of the Articles and Sections of this
Agreement are for general information and reference only, and this Agreement
shall not be construed by reference to such titles.
Section 8.05. Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their successors in title, but
shall not otherwise be assigned by either party without it prior written
approval by the other party being first obtained in writing.
<PAGE> 31
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Section 8.06. Product Liability Indemnification. In recognition of the
fact that neither party will have the control of the testing, manufacture and
sale of Products by the other party, or by licensees or affiliated companies of
that party, each party agrees to indemnify and hold harmless the other party,
its directors, officers, employees and consultants, and parent, subsidiary or
affiliated companies, from and against any and all claims, demands, actions,
liabilities, fines, penalties, judgments, costs and expenses of whatever kind,
whether based on contract, negligence, strict liability or statutory liability,
and without regard to contributory negligence on the part of the other party,
including, without limitation, attorney's fees and cost of defense, arising out
of or related in any way to the testing, manufacture and sale of Product by the
other party.
The indemnity obligation hereinbefore set out is subject to the
following conditions:
(a) That the party from whom the indemnity is sought ("the
Indemnifying Party") is notified by the party seeking the
indemnity ("the Indemnified Party") of any claim or potential
claim as soon as practicable.
(b) That the Indemnifying Party may deal with any claim, and shall, if
it so requests, have the conduct, at its own expense. of any
subsequent legal proceedings in respect thereof.
(c) That the Indemnified Party, its employees, servants or agents will
afford the Indemnifying Party reasonable assistance in connection
with any such claim or proceedings.
(d) That no admission of liability or offer of settlement is made
without the consent of the Indemnifying Party, such consent not to
be unreasonably withheld.
<PAGE> 32
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Section 8.07. Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been
sufficiently given for all purposes hereof if mailed by first class certified
or registered mail, postage prepaid, addressed to the party to be notified at
its address shown below or such other address as may have been furnished in
writing to the notifying party.
To CIBA-GEIGY:
CIBA-GEIGY Limited
Pharma Licensing
Klybeckstrasse 141
CH-4002 Basel
Switzerland
To SIBIA:
SIBIA, Inc.
505 Coast Boulevard South, Suite 300
La Jolla, California 92037-4641
U.S.A.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
in duplicate originals, by their respective officers thereunto duly authorized,
the day and year herein written.
CIBA-GEIGY Limited
/s/ M. SUNDMAN /s/ MATTHIAS ALDER
- ----------------------------------- -------------------------------
(Name) M. Sundman (Name) Matthias Alder
(Title) Head, Business Development (Title) Division Counsel
SIBIA NEUROSCIENCES. INC.
William T. Comer
President and CEO
<PAGE> 33
-33-
APPENDIX A
PATENTS & PATENT APPLICATIONS
U.S. Serial No. 428,116, filed October 27, 1989,
U.S. Serial No. 563,751, filed August 7, 1990;
PCT US90/06153, filed October 25, 1990 (CIP to 428,116);
Designated States:
Austria, Australia, Belgium, Canada, France, Germany, Great Britain, Greece,
Holland, Italy, Japan, Luxembourg, Spain, Sweden, Switzerland (U.S. app did not
go national in view of USSN 718,575)
U.S. Serial No. 718,575, filed June 21, 1991;
PCT US91/05625, filed August 7, 1991 (CIP to 563,751);
Designated States:
Austria, Belgium, Canada, Denmark, France, Germany, Great Britain, Greece,
Holland, Italy, Japan, Luxembourg, Spain, Sweden, Switzerland, United States
U.S. Serial No. 812,254, filed December 20, 1991;
and all non-U.S. counterparts to the foregoing.
<PAGE> 1
Exhibit 10.32
S T 0 C K P U R C H A S E A G R E E M E N T
This Stock Purchase Agreement ("Agreement") effective as of
May 7, 1992, is entered into by and between ELI LILLY AND COMPANY, an Indiana
corporation, ("LILLY"), and THE SALK INSTITUTE BIOTECHNOLOGY/INDUSTRIAL
ASSOCIATES, INC., a Delaware corporation ("SIBIA").
WHEREAS, LILLY desires to make an equity investment in SIBIA
by means of the purchase of SIBIA Series A Common Stock from SIBIA; and
WHEREAS, SIBIA is willing to sell SIBIA Series A Common Stock
to LILLY for investment purposes.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and conditions hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I - SALE OF SHARES
1.1 Subject to the terms and conditions hereof, on the
Closing Date, SIBIA will issue and sell to LILLY, and LILLY will acquire from
SIBIA, One Hundred Seventeen Thousand Six Hundred Forty Seven (117,647) shares
of SIBIA Series A Common Stock at a purchase price of approximately Thirty Four
Dollars ($34.000017) per share, for a total acquisition cost of Four Million
Dollars ($4,000,000).
1.2 All of the shares of Series A Common Stock acquired
by LILLY are herein sometimes referred to as the "Shares."
1.3 It is acknowledged that LILLY may desire to effect
this purchase and sale transaction through a wholly owned U.S. subsidiary to
be named by LILLY. In such event, the term "LILLY", as used herein, shall also
refer to the appointed U.S. subsidiary of LILLY.
ARTICLE II - CLOSING
2.1 Closing. The closing of the acquisition of the
shares hereunder (the "Closing") shall be held at the office of SIBIA, located
at 505 Coast Boulevard, South, La Jolla, California at 11:00 a.m. on May 7
1992, or at such other
- 1 -
<PAGE> 2
time and place to which LILLY and SIBIA may agree (the "Closing Date").
2.2 Delivery of Shares and Payment. At the Closing,
SIBIA shall deliver to LILLY a certificate registered in the name of LILLY
representing 117,647 shares of SIBIA Series A Common Stock in exchange for the
payment of the purchase price to SIBIA by LILLY in the amount of Four Million
Dollars ($4,000,000) by check drawn on a U.S. bank, or by wire transfer.
ARTICLE III - DISCLOSURE OF AGREEMENT
Except as required by law, neither SIBIA nor LILLY shall
release any information to any third person with respect to the existence or
terms of this Agreement without the prior written consent of the other.
Consent for the release of information pertaining to the existence and general
nature of this Agreement will not be unreasonably withheld.
If either party determines a release of such information is
required by law, it shall notify the other in writing at least thirty (30) days
before the time of release. The notice shall include the exact text of the
release and time and manner of the release. If requested, the party required
to release information shall furnish to the other an opinion of counsel that
the release of said information is required by law. At the other party's
request and before release, the party required to release information shall
consult with the other party on the text of the proposed release.
The text of a press release to be issued by SIBIA upon the
execution of this Agreement is attached as Exhibit B, and is made part of this
Agreement.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of LILLY. LILLY
represents and warrants as follows:
(a) LILLY is a corporation duly organized and
existing under and by virtue of the laws of the State of Indiana and is in good
standing under such laws. LILLY has all requisite corporate power to own and
operate its properties and assets, to carry on its business as it is presently
conducted, and to enter into and carry out the provisions of this Agreement and
the transactions contemplated hereby.
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<PAGE> 3
(b) All corporate action on the part of LILLY,
its officers, directors and shareholders necessary for the acquisition of the
Shares pursuant hereto and the performance of LILLY's obligations hereunder has
been taken or will be taken prior to the Closing. This Agreement is a valid
and binding obligation of LILLY enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application referring to or affecting
enforcement of creditors' rights.
(c) There are no actions, proceedings or
investigations pending or, to the best of LILLY's knowledge and belief, any
basis therefor or threat thereof, against or affecting LILLY which, either
singularly or in the aggregate, might result in any material impairment of the
right or ability of LILLY to carry on its business as now conducted or as
proposed to be conducted, and none which questions the validity of this
Agreement or any action taken or to be taken in connection herewith.
(d) All consents, approvals, orders,
authorizations, registrations, qualifications, designations, declarations or
filings of or with any federal or state governmental authority on the part of
LILLY required in connection with the consummation of the transactions
contemplated herein shall have been obtained prior to and be effective as of
the Closing.
4.2 Representations and Warranties of SIBIA. SIBIA
represents and warrants as follows:
(a) SIBIA is a corporation duly organized and
existing under and by virtue of the laws of the State of Delaware and is in
good standing under such laws. SIBIA has all requisite corporate power to own
and operate its properties and assets, to carry on its business as it is
presently conducted, and to enter into and carry out the provisions of this
Agreement and the transactions contemplated hereby.
(b) All corporate action on the part of SIBIA,
its officers, directors and shareholders necessary for the sale and issuance of
the Shares pursuant hereto and the performance of SIBIA's obligations hereunder
has been taken or will be taken prior to the Closing. This Agreement is a
valid and binding obligation of SIBIA enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application referring to or affecting
enforcement of creditors' rights.
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<PAGE> 4
(c) The authorized capital stock of SIBIA is
3,600,000 shares of Series A Common Stock, of which 1,563,731 shares are issued
and outstanding, 814,026 shares held by The Salk Institute for Biological
Studies, 419,871 shares held by Skandigen AB, and 329,834 shares held by former
shareholders of Protease Corporation. Of the authorized Series A Common Stock,
330,000 shares are currently reserved for issuance from time to time to
directors, officers, employees and consultants of SIBIA under SIBIA's 1992
Stock Option and Restricted Stock Plan, of which 299,850 shares are subject to
unexercised options which have been granted, And 238,400 Series A Common shares
are also reserved for issuance in the event of conversion of Series B Preferred
shares by the holders thereof. Also authorized are 600,000 shares of Series B
Common Stock, of which no shares are issued and outstanding; 2,500,000 shares
of Series A Preferred Stock, of which no shares are issued and outstanding; and
600,000 shares of Series B Preferred Stock, 300,000 shares of which were
reserved for issuance from time to time to directors, officers, employees and
consultants of SIBIA under SIBIA's 1981 Employee and Consultant Stock Option
Plans, of which 238,400 shares have been issued or are subject to unexercised
options which have been granted.
SIBIA has not entered and will not enter into
any agreements and has not made nor will it make any commitments, relating to
the issuance of any of said stock, prior to the Closing, other than that Stock
Purchase and Stockholders Agreement among Phillips Petroleum Company, The Salk
Institute for Biological Studies, Skandigen AB and SIBIA, dated as of April 11,
1988, and that Stockholders Agreement among SIBIA, Phillips Petroleum Company,
The Salk Institute for Biological Studies, Skandigen AB and the stockholders of
Protease Corporation, dated as of October 1, 1991.
(d) Except as may be disclosed in Exhibit A,
there are no actions, proceedings or investigations pending or, to the best of
SIBIA's knowledge and belief, any basis therefor or threat thereof, against or
affecting SIBIA which, either singularly or in the aggregate, might result in
any material adverse change in the business, prospects, condition, affairs or
operations of SIBIA or in any of its properties or assets, or in any material
impairment of the right or ability of SIBIA to carry on its business as now
conducted or as proposed to be conducted, and none which questions the validity
of this Agreement or any action taken or to be taken in connection herewith.
The foregoing includes, without limitation, actions pending or threatened (or
any basis therefor known to SIBIA) involving the prior employment of any of
SIBIA's employees, use in connection with SIBIA's business of any information
or techniques allegedly
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<PAGE> 5
proprietary to any former employers of SIBIA's employees, or obligations of
SIBIA's employees under any agreements with their prior employers.
(e) The Shares to be acquired pursuant to this
Agreement by LILLY, when issued, sold and delivered in accordance with the
terms and for the consideration expressed herein, shall be duly and validly
issued, fully paid and nonassessable, and will be free and clear of any liens
or encumbrances; provided, however, that the Shares may be subject to
restrictions on transfer under state and/or federal securities laws, or under
the terms of this Agreement, or as otherwise imposed at the time a transfer is
proposed.
(f) All consents, approvals, orders,
authorizations, registrations, qualifications, designations, declarations, or
filings of or with any federal or state governmental authority on the part of
SIBIA required in connection with the consummation of the transactions
contemplated herein shall have been obtained prior to and be effective as of
the Closing.
(g) The execution, delivery and performance of
this Agreement will not result in any violation of, be in conflict with, or
constitute a default under, with or without the passage of time or the giving
of notice: (i) any provision of SIBIA's Articles of Incorporation or By-laws;
(ii) any provision of any judgment, decree or order to which SIBIA is a party
or by which it is bound; (iii) any material contract, obligation or commitment
to which SIBIA is a party or by which it is bound; or (iv) to SIBIA's
knowledge, any statute, rule or governmental regulation applicable to SIBIA.
In addition, to SIBIA's knowledge, it is not currently in violation of any of
the foregoing.
(h) SIBIA has provided to LILLY audited financial
statements (balance sheet, statement of operations and statement of cash flows)
of SIBIA as of and for the year ending December 31, 1991, together with the
accompanying notes and reports of Deloitte and Touche ("Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied and fairly represent the
financial position of SIBIA as of the date thereof. Except as may be disclosed
in Exhibit A, since the date of the Financial Statements there has not been:
(i) any change in the assets,
liabilities, financial condition, operating results
or business of SIBIA (as such business is presently
conducted
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<PAGE> 6
and as it is proposed to be conducted) from that
reflected in the Financial Statements, except changes
in the ordinary course of business which have not
been, in the aggregate, materially adverse; or
(ii) to SIBIA's knowledge, any other
event or condition of any character which might
materially and adversely affect the assets, financial
condition, operating results or business of SIBIA (as
such business is presently conducted and as it is
proposed to be conducted) from that reflected in the
Financial Statements.
(i) SIBIA has sufficient title and ownership of
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, proprietary rights and processes necessary for its
business ("Proprietary Rights") as now conducted and as proposed to be
conducted without any known conflict with or infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to SIBIA's Proprietary Rights, nor is SIBIA bound by or a party to any
options, licenses or agreements of any kind with respect to proprietary rights
of any other person or entity, which prevent SIBIA from carrying out its
business as it is now conducted and as it is proposed to be conducted. Except
as may be disclosed in Exhibit A, SIBIA has not received any communication
alleging that SIBIA has violated or, by conducting its business as proposed,
would violate the proprietary rights of others.
(j) SIBIA believes it has provided LILLY with all
information that LILLY has requested for deciding whether to purchase the
Shares and all information reasonably necessary to enable LILLY to make such
decision. Neither this Agreement nor any other statements or certificates made
or delivered in connection herewith contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements not
misleading.
ARTICLE V - RIGHTS OF FIRST REFUSAL
5.1 Right of First Refusal Upon New Issues. SIBIA hereby
grants to LILLY the right of first refusal to purchase, pro rata together with
the other two major shareholders of SIBIA, The Salk Institute for Biological
Studies ("SALK") and Skandigen AB ("SKANDIGEN"), (hereinafter, Lilly, Salk and
Skandigen shall be collectively referred to as the "Major Shareholders"), all
(or
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<PAGE> 7
any part) of the New Securities (as defined in this Section 5.1) that SIBIA
may, from time to time, propose to sell and issue. However, the parties
recognize that SIBIA is an independent entity and that its Board of Directors
may recommend to the Major Shareholders that it is in the best interest of
SIBIA to permit other corporations to become shareholders of SIBIA in order to
facilitate arrangements which would make available the technical and/or
marketing expertise of such corporations. In such a situation, LILLY shall,
for the benefit of SIBIA and for its own benefit as a shareholder of SIBIA,
refrain from exercising its right of first refusal to the extent reasonable and
appropriate; provided, however, Lilly shall not be required to refrain from
exercising such right unless Salk and Skandigen are also required to refrain
from exercising their rights of first refusal to the same extent as Lilly.
Each Major Shareholder's pro rata share, for purposes of this right of first
refusal, is the ratio of the number of shares of Series A Common Stock held by
each of them (exclusive of any unexercised option(s) to purchase Series A
Common Stock) to the total number of shares of Series A Common Stock issued and
outstanding. This right of first refusal shall be subject to the following
provisions:
(a) "New Securities" shall mean any Common Stock
or Preferred Stock of SIBIA, or any series thereof, whether now authorized or
not, and rights, options or warrants to purchase said Common Stock or Preferred
Stock, and securities of any type whatsoever that are, or may become,
convertible into said Common Stock or Preferred Stock; provided, however, that
"New Securities" does not include (i) Series B Preferred Stock issued to key
employees or consultants of SIBIA under SIBIA's 1981 Employee and Consultant
Stock Option Plans; (ii) securities offered to the public pursuant to a
Registration Statement filed under the Securities Act of 1933 ("the 1933 Act");
(iii) securities issued pursuant to the acquisition of another corporation by
SIBIA by merger, purchase of substantially all of the assets, or other
reorganization whereby SIBIA owns not less than 51% of the voting power of such
corporation; (iv) shares of SIBIA's Common Stock or Preferred Stock (or related
options) issued to directors, officers, employees and/or consultants of SIBIA
pursuant to any stock offering, plan or arrangement adopted for such
individuals and approved by the Board of Directors of SIBIA; (v) shares of
SIBIA Common Stock or Preferred Stock issued in connection with any stock
split, stock dividend, or recapitalization by SIBIA.
(b) In the event that SIBIA proposes to undertake
an issuance of New Securities, it shall give the Major Shareholders written
notice of its intention, describing the type of New Securities, the price, and
the general terms upon which
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<PAGE> 8
SIBIA proposes to issue the same. LILLY shall have 30 days from the date of
receipt of any such notice to agree to purchase its pro rata share of such New
Securities for the price and upon the general terms specified in the notice by
giving written notice to SIBIA and stating therein the quantity of New
Securities to be purchased. Each of the Major Shareholders shall have a right
of overallotment such that if any of the Major Shareholders should fail to
exercise or fail to exercise in full its right hereunder to purchase its pro
rata portion of New Securities, the others may purchase the portion not
purchased on a pro rata basis, within 30 days from the date such nonpurchaser
fails to exercise its right to purchase its pro rata share of New Securities.
(c) In the event that the Major Shareholders fail
to exercise in full the right of first refusal within said 30 plus 30 day
period, SIBIA shall have 120 days thereafter to sell to other parties (or enter
into an agreement pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within 120 days from the date of said agreement)
the New Securities respecting which the rights of any of the Major Shareholders
were not exercised, at a price and upon general terms no more favorable to the
purchasers thereof than specified in SIBIA's prior notice to the Major
Shareholders. In the event SIBIA has not sold the New Securities within said
120 day period (or sold and issued New Securities in accordance with the
foregoing within 120 days from the date of said agreement), SIBIA shall not
thereafter issue or sell any New Securities without again offering such
securities to the Major Shareholders in the manner provided above.
(d) The right of first refusal granted under this
Agreement shall expire upon the first sale of Common Stock of SIBIA to the
public that is effective pursuant to a Registration Statement filed with, and
declared effective by, the Securities and Exchange Commission under the 1933
Act, covering the offer and sale of Common Stock with an aggregate offering
price to the public of not less than US $5,000,000.
(e) This right of first refusal is nonassignable
except to any parent or subsidiary of LILLY or to any successor to the business
of LILLY.
5.2 Right of First Refusal Upon Transfer of Shares. It
is hereby agreed among the parties hereto that, except as otherwise provided
herein, before there can be a valid sale or transfer for consideration of any
of the Shares to any other party (the term "Shares" as used in this Section 5.2
shall include all shares, of whatever class, of SIBIA) by LILLY, LILLY shall
first offer the Shares to SIBIA, which (subject to
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<PAGE> 9
subsection (d) below) can purchase all or part of the Shares, and then to the
other Major Shareholders, in the following manner:
(a) LILLY shall deliver a notice in writing by
mail or otherwise to SIBIA and the other Major Shareholders stating the price,
terms and conditions of such proposed sale or transfer and the identity of the
proposed buyer, the number of shares to be sold or transferred, and its
intention so to sell or transfer such Shares. Within 10 days thereafter, SIBIA
shall have the prior right to purchase all or a portion of such Shares so
offered at the price and upon the terms and conditions stated in such notice.
(b) If all of the Shares referred to in said
notice are not purchased by SIBIA, the other Major Shareholders shall have the
prior right to purchase on a pro rata basis all (but not less than all unless
this requirement is waived by Lilly) of such Shares so offered at the price and
upon the terms and conditions stated in such notice within thirty (30) days
from the date of delivery of the original notice by Lilly. The pro rata
portion which each Major Shareholder shall have the right to purchase shall be
determined based on the proportion of shares such Major Shareholder holds in
relation to the total number of Shares held by all Major Shareholders desiring
to purchase Shares.
(c) If none or only a part of the Shares referred
to in said notice is bid for purchase, as aforesaid, within said 30-day period
from the date of delivery of notice by LILLY, LILLY may dispose of all Shares
of stock referred to in said notice not so purchased by SIBIA or the other
Major Shareholders to any proposed buyer or buyers, but only within a period of
120 days from the date of its first notice; provided, however, that LILLY shall
not sell or transfer such Shares at a lower price or on terms more favorable to
such buyer than those specified in the original notice. After said 120-day
period, the foregoing procedure for first offering Shares to SIBIA and the
other Major Shareholders shall again apply.
(d) SIBIA may purchase the Shares as provided in
this Section 5.2; provided, however, that at no time shall SIBIA be permitted
to purchase all of its outstanding voting shares. Any sale or transfer or
purported sale or transfer of the Shares shall be null and void unless the
terms, conditions and provisions of this Section 5 are strictly observed and
followed.
(e) Notwithstanding the foregoing, however, SALK
shall have the right, free and clear of the restrictions provided in this
Section 5.2, to sell to any person or entity making an
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<PAGE> 10
equity investment in SIBIA (other than the sale of equity to employees or
consultants or pursuant to a public offering registered under the 1933 Act)
shares of SIBIA held by SALK for up to one-fifth (1/5) of the amount of such
investment being so made in SIBIA.
5.3 Legend on Shares. SIBIA shall place a legend on the
certificates for its Shares, in the form set forth at subsection 6.2(b) herein,
referring to this Agreement and thereby to the restrictions on transfer of such
Shares set forth in this Article V.
5.4 Consents from Salk and Skandigen. SIBIA agrees to
obtain consents from Salk and Skandigen to the provisions of this Article and
agrees to execute, along with Salk and Skandigen, any required amendments to
the agreements between such parties so as to make such agreements consistent
with the provisions of this Article.
ARTICLE VI - INVESTMENT REPRESENTATIONS
The parties hereto acknowledge that the Shares which are the
subject of this Agreement have not been registered under the 1933 Act on the
grounds that the sale and issuance of the securities is exempt from
registration pursuant to the provisions of Sections 4(1) and 4(2) of the 1933
Act and that the Shares being issued and sold by SIBIA under this Agreement
have not been qualified under the California Corporate Securities Act of 1968
(the "1968 Act") on the grounds that the sale and issuance of the Shares
hereunder by SIBIA is exempt from qualification pursuant to the provisions of
Section 25102(f) of the 1968 Act. The parties further acknowledge that
availability of the foregoing exemption is dependent upon the continuing
accuracy of LILLY's representation as set forth hereinafter.
6.1 Investment Representations of LILLY.
(a) LILLY represents that the Shares to be
received under this Agreement will be acquired for investment for its own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that it has no present intention of
selling, granting participation in or otherwise distributing the same, but
subject nevertheless to any requirement of the law that the disposition of its
property shall at all times be within its control. By executing this
Agreement, LILLY further represents that it does not have any contract or
arrangement with any person to sell or transfer to such person any of the
Shares acquired hereunder.
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<PAGE> 11
(b) LILLY agrees that in no event will it make a
disposition of any of the Shares which are the subject of this Agreement,
unless and until (i) it has complied in all respects with the provisions of
Article V herein, and (ii) if requested by SIBIA, it shall have furnished SIBIA
with an opinion of counsel reasonably satisfactory to SIBIA and its counsel to
the effect that appropriate actions necessary for compliance with the 1933 Act
have been taken or that an exemption from the registration requirements of the
1933 Act is available.
6.2 Legends. All certificates representing the Shares
shall bear the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE CORPORATION AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE CORPORATION.
(c) IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
ARTICLE VII - REGISTRATION RIGHTS UNDER THE SECURITIES ACT OF 1933
SIBIA covenants and agrees as follows:
7.1 Company Registration. Whenever SIBIA proposes to
register any of its Common Stock under the 1933 Act for a public offering for
cash, whether as a primary or secondary offering (or pursuant to registration
rights granted to holders of other securities of SIBIA), other than a
registration relating to employee benefit plans, SIBIA shall, each such time,
give LILLY written notice of its intent to do so. Upon the written request of
LILLY given within 20 days after mailing of any such notice, SIBIA shall use
its best efforts to cause to be included in such registration (and any related
qualification under state securities laws) all of the Common Stock of SIBIA
held by LILLY
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<PAGE> 12
and which it requested to be registered; provided (i) LILLY agrees to sell such
shares in the same manner and on the same terms and conditions as the other
Common Stock which SIBIA proposes to register, and (ii) if the registration is
to include Common Stock to be sold for the account of SIBIA, the proposed
managing underwriter does not advise SIBIA that in its opinion the inclusion of
LILLY's shares is likely to affect adversely the success of the offering by
SIBIA or the price it would receive, in which case the rights of LILLY shall be
as provided in Section 7.3 hereof.
7.2 Obligations of SIBIA. Whenever required under
Section 7.1 to use its best efforts to effect the registration of any of the
shares, SIBIA shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Registration
Statement with respect to such shares and use its best efforts to cause such
Registration Statement to become and remain effective; provided, however, SIBIA
shall in no event be obligated to cause any such registration to remain
effective for more than 90 days;
(b) Prepare and file with the SEC such amendments
and supplements to such Registration Statement and Prospectus used in
connection therewith as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
Registration Statement;
(c) Use its best efforts to register and qualify
the securities covered by such Registration Statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
appropriate for the distribution of the securities covered by the Registration
Statement, provided that SIBIA shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a General Consent
to Service of Process in any such states or jurisdictions;
(d) Furnish to LILLY such numbers of copies of a
Prospectus, including a Preliminary Prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as LILLY may reasonably
request in order to facilitate the disposition of shares owned by it;
(e) Notify LILLY, promptly after it shall receive
notice thereof, of the time when such Registration Statement has become
effective or a supplement to any Prospectus forming a part of such Registration
Statement has been filed;
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<PAGE> 13
(f) Notify LILLY or its attorney-in-fact promptly
of any request by the SEC for the amending or supplementing of such
Registration Statement or Prospectus or for additional information; and
(g) Advise LILLY or its attorney-in-fact,
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of such
Registration Statement or the initiation or threatening of any proceeding for
the purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.
7.3 Underwriting Requirements. In connection with any
offering involving an underwriting of shares being issued by SIBIA, SIBIA shall
not be required to include any of LILLY's securities therein unless LILLY
accepts and agrees to the terms of the underwriters selected by SIBIA, and then
only in such quantity as will not in the opinion of the underwriters jeopardize
the success of the offering by SIBIA. If the total number of shares of stock
which LILLY requests to be included in any offering exceeds the number of such
shares which the underwriters reasonably believe compatible with the success of
the offering, SIBIA shall only be required to include in the offering so many
of the shares of stock of LILLY as the underwriters believe will not jeopardize
the success of the offering; provided, however, the number of shares of stock
of Lilly excluded shall not exceed a pro rata portion based on the proportion
of the number of shares of stock of Lilly requested to be included to the total
number of shares requested to be included by all shareholders in the offering.
7.4 Indemnification. LILLY and SIBIA shall enter into
standard form of indemnification agreements with respect to each party
indemnifying the other for statements or omissions with respect to said
Registration Statement and attributable to such party.
7.5 Expenses. All expenses incurred in connection with a
registration made in accordance with this Article VII (excluding underwriting
commissions and discounts), including without limitation all registration and
qualification fees, printing and accounting fees, and fees and disbursements of
counsel for SIBIA, shall be borne by SIBIA.
7.6 Information. It shall be a condition precedent to
the obligations of SIBIA to take any action pursuant to this Article VII, that
LILLY shall furnish to SIBIA such information
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<PAGE> 14
regarding it, the shares held by it, and the intended method of disposition
thereof, as SIBIA shall reasonably request and as shall be required in
connection with the action to be taken by SIBIA.
7.7 Transfer of Registration Rights. The registration
rights of LILLY under this Article VII may be transferred to any transferee of
LILLY who acquires at least that number of the shares which represents not less
than one percent (1%) of SIBIA's outstanding capital stock (on a fully
converted basis for any Preferred Stock) at the time of transfer; provided that
SIBIA has been given written notice by LILLY at the time of such transfer
stating the name and address of the transferee and identifying the shares with
respect to which the rights under this Article VII are being assigned.
7.8 Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the SEC which may permit the
sale of shares to the public without registration, SIBIA agrees that, at all
times after ninety (90) days after the effective date of the first registration
statement filed by SIBIA for a public offering of its securities, SIBIA will:
(a) Make and keep public information available,
as those terms are understood and defined in Rule 144 under the 1933 Act; and
(b) So long as Lilly owns any unregistered
shares, furnish to Lilly upon request:
(i) A written statement by SIBIA that
it has complied with the reporting
requirements of Rule 144, the 1933 Act and
the Securities Exchange Act of 1934, as
amended;
(ii) A copy of the most recent annual
or quarterly report of SIBIA; and
(iii) Such reports and documents so filed by
SIBIA as Lilly may reasonably request in
availing itself of any rule or regulation of
the SEC allowing Lilly to sell any such
securities without registration.
ARTICLE VIII - CONDITIONS TO CLOSING
8.1 Conditions to LILLY's Obligations. LILLY's
obligation to acquire the Shares at the Closing is subject to the
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fulfillment to its satisfaction on or prior to the Closing Date of the
following conditions, any of which may be waived in whole or in part by LILLY:
(a) The representations and warranties made by
SIBIA in Article IV hereof shall be true and correct when made, and shall be
true and correct on the Closing Date with the same force and effect as if they
had been made on and as of the Closing Date; and SIBIA shall have performed all
obligations and conditions herein required to be performed or observed on or
prior to the Closing Date and all documents incident thereto shall be
reasonably satisfactory in form and content to LILLY and its counsel. SIBIA
shall have delivered to LILLY a certificate dated as of the Closing, signed by
SIBIA's President and in a form reasonably acceptable to LILLY, certifying that
the conditions set forth in this Subsection 8.1(a) have been satisfied and that
there has been no material adverse change in the business, affairs, prospects,
operations, properties, assets or conditions of SIBIA since December 31, 1991.
(b) SIBIA shall have obtained all consents,
permits and waivers necessary or appropriate for consummation of the
transaction contemplated by this Agreement.
(c) At the Closing, the acquisition of the Shares
being issued to LILLY hereunder shall be legally permitted by all laws and
regulations to which LILLY and SIBIA are subject, including, but not limited
to, federal or state securities or Blue Sky laws applicable to the purchase and
sale of the Shares to LILLY.
(d) LILLY shall have received from James E.
Turner, counsel for SIBIA, an opinion, dated as of the Closing, in form and
substance reasonably acceptable to LILLY, to the effect that:
(i) SIBIA is a corporation duly organized,
validly existing and in good standing under the laws
of the State of Delaware, and SIBIA has the requisite
corporate power and authority to own its properties
and to conduct its business;
(ii) SIBIA is qualified to do business in
California as a foreign corporation and in all other
states or jurisdictions of the United States where
its failure to do so would have a mate-
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<PAGE> 16
rial adverse effect on its business or properties;
(iii) SIBIA has the requisite corporate
power and authority to execute, deliver and perform
this Agreement. The Agreement has been duly and
validly authorized by SIBIA, duly executed and
delivered by an authorized officer of SIBIA and
constitutes a legal, valid and binding obligation of
SIBIA;
(iv) the capitalization of SIBIA is as set
forth in Subsection 4.2(c);
(v) the certificates representing the Shares
are in due and proper form and have been duly and
validly executed by the officers of SIBIA named
thereon;
(vi) the execution, delivery, performance
and compliance with the terms of this Agreement do
not violate any provision under applicable federal,
state or local law, rule or regulation or any
provision of SIBIA's Articles of Incorporation or
By-laws and, to the best of such counsel's knowledge,
do no conflict with or constitute a default under the
provision of any judgment, writ, decree, order or
agreement to which SIBIA is a party or by which it is
bound, which conflict or default would be materially
adverse to SIBIA, and further, to the best of such
counsel's knowledge, SIBIA has not in any way
encumbered or mortgaged its property or assets or
created or allowed the creation of any material lien
thereon;
(vii) all consents, approvals, orders or
authorizations of, and all qualifications,
registrations, designations, declarations, or filings
with, any federal or state governmental authority
required to be made prior to the Closing in
connection with the consummation of the transactions
contemplated by
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<PAGE> 17
this Agreement have been obtained, and are effective,
as of the Closing and such counsel is not aware of
any proceedings, or threat thereof, which question
the validity thereof;
(viii) based in part upon the
representations of LILLY, the offer and sale of the
Shares pursuant to the terms of this Agreement are
exempt from the registration requirements of Section
5 of the 1933 Act by virtue of Section 4(2) thereof
and from the qualification requirements of the 1968
Act by virtue of Section 25102(f) thereof;
(ix) except as may be disclosed in Exhibit
A, such counsel is not aware of any action,
proceeding or investigation pending against SIBIA or
any of its officers, directors, or employees, or that
any of the foregoing has received any threat thereof,
which questions the validity of this Agreement, or
the right of SIBIA or its officers or directors to
enter into this Agreement or which might result,
either individually or in the aggregate, in any
material adverse change in the assets, condition,
prospects, or affairs of SIBIA, nor is such counsel
aware of any litigation pending against SIBIA or any
of its officers or directors, or that any of the
foregoing has received any threat thereof, by reason
of the proposed activities of SIBIA, the past
employment relationships of its officers or
directors, or negotiations by SIBIA or any of its
officers or directors with possible investors in
SIBIA or its business; and
(x) SIBIA's Articles of Incorporation or
By-laws are not in violation of any provision of the
General Corporation Law of the State of Delaware and,
to the best of such counsel's knowledge, SIBIA is not
in violation of any provision of such documents.
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<PAGE> 18
(e) The obligations imposed pursuant to Section
5.4 shall have been fulfilled.
8.2 Conditions to SIBIA's Obligations. The obligation of
SIBIA to issue and transfer shares to LILLY at the Closing is subject to the
fulfillment to its satisfaction on or prior to the Closing Date of the
following conditions, any of which may be waived in whole or in part by SIBIA:
(a) The representations and warranties made by
LILLY in Article IV hereof shall be true and correct when made, and shall be
true and correct on the Closing Date with the same force and effect as if they
had been made on and as of the Closing Date; and LILLY shall have performed all
obligations and conditions herein required to be performed or observed by them
on or prior to the Closing Date and all documents incidental thereto shall be
reasonably satisfactory in form and content to SIBIA and its counsel.
(b) At the Closing, the acquisition of the Shares
by LILLY hereunder shall be legally permitted by laws and regulations to which
LILLY and SIBIA are subject.
ARTICLE IX - INFORMATION RIGHTS
9.1 Financial Statements.
(a) SIBIA shall deliver to LILLY any financial
and other reports required under Delaware and/or California law to be delivered
to shareholders of a Delaware corporation operating in California and such
other reports as the parties may agree upon. SIBIA shall also deliver to LILLY
(i) as soon as practicable, but in any event within one hundred twenty (120)
days after the end of each fiscal year of SIBIA, an income statement for such
fiscal year, a balance sheet as of the end of such year, and a schedule as to
the sources and applications of funds for such year, such year end financial
reports to be in reasonable detail, prepared in accordance with generally
accepted accounting principles, and audited and certified by independent public
accountants of nationally recognized standing selected by SIBIA; and (ii)
within sixty (60) days of the end of each quarter, an unaudited statement of
operations, cash flow analysis and balance sheet for and as of the end of such
quarter, such quarterly statements shall also contain the foregoing information
on a year to date basis.
(b) SIBIA shall permit LILLY at its expense, to
visit and inspect SIBIA's properties, to examine its books of
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<PAGE> 19
account and records and to discuss SIBIA's affairs, finances and accounts with
its officers, all at such reasonable times as may be requested by them;
provided, however, that SIBIA shall not be obligated pursuant to this Section
9.1 to provide any information which it reasonably considers to be a trade
secret or similar confidential information, unless LILLY enters into an
acceptable confidentiality agreement.
ARTICLE X - MISCELLANEOUS PROVISIONS
10.1 Agreement is Entire Contract. This Agreement
constitutes the entire agreement by and between the parties hereto relating to
the subject matter hereof, and no party shall be liable or bound to the other
in any manner by any warranties, representations or covenants except as
specifically set forth herein. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
10.2 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of California, U.S.A.
10.3 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.4 Titles and Subtitles. The titles of the sections and
paragraphs of this Agreement are for convenience, and are not to be considered
in construing this Agreement.
10.5 Notices. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States mail, by registered or certified
mail, addressed to the following addresses, or at such other address as such
party may designate by ten (10) days written notice to the other:
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<PAGE> 20
If to LILLY:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attn: Mr. Ron Henriksen
(with a copy to: Mr. J. B. King, General Counsel)
If to SIBIA:
The Salk Institute Biotechnology/Industrial
Associates, Inc.
505 Coast Boulevard, South
La Jolla, CA 92037
Attn: W. T. Comer, Ph.D., President & CEO
If to SALK:
The Salk Institute for Biological Studies
10010 North Torrey Pines Road
La Jolla, CA 92037
Attn: Mr. D. E. Glanz, Executive Vice President
If to SKANDIGEN:
Skandigen AB
Norrlandsgatan 15
S-111 43 Stockholm
SWEDEN
Attn: Dr. Bertil Aberg, President
10.6 Finder's Fees. LILLY hereby agrees to indemnify and
hold harmless SIBIA from any liability for any commission or compensation in
the nature of investment banking or finder's fees in connection with the
transactions contemplated by this Agreement (and the costs and expenses of
defending against such liability or asserted liability) for which LILLY or any
of its officers, employees or representatives is responsible.
SIBIA agrees to indemnify and hold harmless LILLY
from any liability for any commission or compensation in the nature of
investment banking or finder's fees in connection with the transactions
contemplated by this Agreement (and the costs and expenses of defending against
such liability or asserted liability) for which SIBIA or any of its officers,
employees or representatives is responsible.
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<PAGE> 21
10.7 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be severed from this Agreement as if such provision were not included,
and the balance of this Agreement shall be enforceable in accordance with its
terms.
10.8 Amendment of Agreement. Any provision of this
Agreement may be amended only by a written instrument signed by the parties
hereto and/or other subsequent holders of a majority of the Series A Common
Stock purchased hereunder.
10.9 Survival of Warranties. The warranties,
representations, and covenants of the parties contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation of the subject
thereof made by or on behalf of LILLY; provided, however, that such warranties,
representations and covenants need only be accurate as of the date of such
execution and delivery and as of the Closing.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date first set forth above.
ELI LILLY AND COMPANY
ATTEST: /s/ By: /s/ JAMES M. CORNELIUS
---------------------------- -----------------------------
James M. Cornelius
Title: V.P. of Finance and
Chief Financial Officer
THE SALK INSTITUTE BIOTECHNOLOGY/
INDUSTRIAL ASSOCIATES, INC.
By: /s/ WILLIAM T. COMER
-----------------------------
Title: President and CEO
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<PAGE> 22
EXHIBIT A
SIBIA has an existing agreement with CL Pharma dated March 20,
1989 (and since assigned to Hafslund Nycomed Pharma). Information on the
SIBIA-CL Pharma agreement, and its relation to an interaction between Lilly and
SIBIA on neuronal N-type voltage-dependent calcium channels, has been provided
to Lilly and includes:
- A copy of the SIBIA-CL Pharma agreement
- A letter to Mr. Ronald D. Henrieksen, Director of Business
Development at Lilly, from Mr. Michael J. Dunn, Director of
Business Development at SIBIA, dated March 26, 1992.
- A letter to Dr. William T. Comer, President and CEO of
SIBIA, from Mr. David Grant of the law firm McKenna and
Fitting, dated April 7, 1992.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 19, 1996, relating
to the financial statements of SIBIA Neurosciences, Inc., which appears in such
Prospectus. We also consent to the references to us under the headings "Experts"
and "Selected Financial Data" in such Prospectus. However, it should be noted
that Price Waterhouse LLP has not prepared or certified such "Selected Financial
Data."
/s/ PRICE WATERHOUSE
- -------------------------
PRICE WATERHOUSE LLP
San Diego, California
May 6, 1996
