<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996.
Commission File Number
0-28308
COLLAGENEX PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1758016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 South State Street, Newtown, PA 18940
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 579-7388
Indicate by check mark whether the registrant: (1) has filed all
reports required to filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of September 30, 1996:
Common Stock $0.01 par value 7,516,783
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COLLAGENEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
12/31/95 9/30/96
-------- -------
(unaudited)
(in thousands except
share amounts)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,807 $ 18,949
Accounts and interest receivable - 389
Prepaid expenses 7 37
----- -------
Total current assets 5,814 19,375
Equipment, net 15 42
Other assets 11 10
----- --
Total assets $ 5,840 $ 19,427
===== ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 18 $ 164
Accrued expenses 495 319
----- ------
Total current liabilities 513 483
----- ------
Mandatorily redeemable convertible preferred
stock (at redemption value which includes
accreted dividends of $1,877 in 1995; $0 in 1996) 18,908 -
Common stockholders' equity (deficit):
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; none issued and outstanding - -
Common stock, $0.01 par value; in 1995, 6,725,000
shares authorized and 312,659 shares issued and
outstanding; in 1996, 25,000,000 shares
authorized and 7,516,783 issued and outstanding 3 75
Additional paid-in capital (deficit) ( 1,743) 35,530
Deferred compensation ( 20) ( 321)
Deficit accumulated during the development stage (11,821) (16,340)
-------- --------
Common stockholders' equity (deficit) (13,581) 18,944
-------- --------
Commitments
Total liabilities and stockholders' equity $ 5,840 $ 19,427
======= ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
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COLLAGENEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
AND FOR THE PERIOD FROM JANUARY 10, 1992 (INCEPTION)
TO SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED FOR THE PERIOD FROM
SEPTEMBER 30 SEPTEMBER 30 1/10/92 (INCEPTION)
------------------------ ----------------------- TO 9/30/96
1995 1996 1995 1996 --------------------
---- ---- ---- ----
(in thousands, except share amounts)
<S> <C> <C> <C> <C> <C>
Revenues
Licensing Fees $ - $ 400 $ - $ 400 $ 400
Operating expenses incurred in the
development stage:
Research and development 1,029 1,287 2,802 3,564 12,171
General and administrative 403 748 961 1,701 4,988
------ ------ ------ ------ ------
Total operating expenses 1,432 2,035 3,763 5,265 17,159
Other income (expense)
Other income 2 277 21 386 603
Other expense (71) (40) (141) (40) (144)
------- ------- ------- -------- --------
Net loss $ (1,501) $ (1,398) $ (3,883) $ (4,519) $ (16,340)
======= ======= ======= ======= ========
Accretion of undeclared dividends
attributable to mandatorily re-
deemable convertible preferred stock $ 144 $ - $ 431 $ 720 $ 2,597
======= ======= ======= ======= ========
Net loss allocable to common
stockholders $ (1,645) $ (1,398) $ (4,314) $ (5,239) $ (18,937)
======= ======= ======= ======= ========
Proforma net loss per share $ (0.32) $ (0.19) $ (0.84) $ (0.71)
====== ====== ====== ======
Shares used in computing
proforma net loss per share 4,651,239 7,515,560 4,636,640 6,376,056
========= ========== ========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
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COLLAGENEX PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
AND FOR THE PERIOD FROM JANUARY 10, 1992 (INCEPTION)
TO SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
SEPTEMBER 30 ENDED FOR THE PERIOD
--------------------------- FROM 1/10/92
1995 1996 (INCEPTION)TO 9/30/96
---- ---- ----------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss allocable to common stockholders $(4,314) $ (5,239) $ (18,937)
Adjustments to reconcile net loss to net
cash used in operating activities:
Accretion of undeclared dividends
attributable to mandatorily redeemable
convertible preferred stock 431 720 2,597
Non-cash research and development expense - - 514
Non-cash compensation expense - 125 148
Non-cash consulting expense - - 15
Accrued interest converted to preferred stock - - 121
Depreciation and amortization expense 1 3 9
Change in assets and liabilities:
Increase in accounts and interest receivable - (389) (389)
Increase in prepaid expenses - (30) (37)
Increase (decrease) in other assets (9) 1 (11)
Increase (decrease) in accounts payable (400) 146 164
Increase (decrease) in accrued expenses 452 (176) 319
------ ------- ------
Net cash used in operating activities (3,839) (4,840) (15,487)
Cash flows from investing activities:
Organizational costs - - (5)
Capital expenditures (3) (29) (46)
------ ------- -------
Net cash used in investing activities (3) (29) (51)
------ ------- -------
Cash flows from financing activities:
Proceeds from issuance of preferred stock 6,138 - 13,509
Proceeds from issuance of common stock - 18,011 18,075
Proceeds from issuance of promissory notes - - 3,028
Repayment of promissory note - - (125)
- - -------
Net cash provided by financing activities 6,138 18,011 34,487
----- ------ -------
Net increase (decrease) in cash and cash
equivalents 2,296 13,142 18,949
Cash and cash equivalents at beginning of period 617 5,807 -
----- ------ ------
Cash and cash equivalents at end of period $ 2,913 $ 18,949 $ 18,949
===== ====== ======
</TABLE>
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(Continued from preceding page)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 FOR THE PERIOD
---------------- FROM 1/10/92
1995 1996 (INCEPTION) TO 9/30/96
---- ---- ----------------------
(in thousands)
<S> <C> <C> <C>
Supplemental disclosure of cash flows information:
Cash paid for interest - - $ 23
===== ====== ======
Supplemental schedule of non-cash financing
activities:
Conversion of mandatorily redeemable
convertible preferred stock to common stock $ $ 19,628 $ 19,628
======= ====== ======
Conversion of promissory notes plus accrued
interest to preferred stock $ - $ - $ 2,903
===== ===== ======
Deferred compensation $ - $ 426 $ 446
===== ===== ======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
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COLLAGENEX PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and in accordance with
generally accepted accounting principles. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These unaudited financial statements
should be read in conjunction with the Company's 1995 audited financial
statements and notes thereto included in the Company's initial public offering
prospectus dated June 20, 1996.
In September 1996, the Company formed a wholly owned subsidiary in the
U.K., CollaGenex International Ltd. ("CIL"), to conduct regulatory and
commercialization activities for the Company in Europe. During the third
quarter of 1996, CIL had no significant activities.
In the opinion of the Company's management, the accompanying unaudited
condensed financial statements have been prepared on a basis substantially
consistent with the audited financial statements and contain adjustments, all of
which are of a normal recurring nature, necessary to present fairly its
financial position as of September 30, 1996, its results of operations for the
three and nine months ended September 30, 1995 and 1996 and for the period
January 10, 1992 (inception) to September 30, 1996, and its cash flows for the
nine months ended September 30, 1995 and 1996 and for the period January 10,
1992 (inception) to September 30, 1996. Interim reports are not necessarily
indicative of results anticipated for the full fiscal year.
(2) COMPLETION OF INITIAL PUBLIC OFFERING/CONVERSION OF PREFERRED STOCK
On June 20, 1996, the Company completed an initial public offering of
2,000,000 shares of its common stock at a price of $10.00 per share. The
Company's net proceeds from the offering were approximately $18.0 million after
underwriting fees and other expenses.
On June 19, 1996, more than 60% of the holders of Series A, Series B and
Series C mandatorily redeemable convertible preferred stock approved an
amendment to the respective Series A, B and C agreements to reduce the price per
share upon which the mandatory conversion of the preferred stock shall occur
upon the closing of an initial public offering for the sale of the Company's
common stock from not less than $12.00 to not less than $8.00 per share. Upon
consummation of the initial public offering, all shares of such convertible
preferred stock outstanding were automatically converted on a one-for-two basis
into 5,199,124 shares of common stock.
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(3) COMMITMENT
In April 1996, the Company entered into a manufacturing agreement for
the manufacture of Periostat. Under the terms of this agreement, the Company is
obligated to make annual minimum purchase commitments with such vendor for three
years following the date of initial product launch, as defined.
(4) LICENSING FEE
During the third quarter of 1996, the Company executed a licensing
agreement with Boehringer Mannheim Italia ("BMI") pursuant to which BMI will
distribute and manufacture Periostat in Italy. The agreement provided for BMI
to pay the Company a $400,000 nonrefundable license fee upon signing, additional
fees upon the achievement of future milestones and royalties upon future sales
of Periostat in Italy, San Marino and The Vatican City. Such fee, net of the
applicable 10% foreign withholding tax, was recorded as an account receivable at
September 30, 1996. Payment was received in early October.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company began operations in January 1992 and is engaged in the
development and commercialization of innovative, proprietary medical therapies
for the treatment of periodontal disease and other dental pathologies. Since
inception, the Company has had no revenues from product sales and has funded
its operations primarily through the issuance of common and preferred stock.
Substantially all of the Company's expenditures to date have been for
pharmaceutical development activities and general and administrative expenses.
The Company has incurred losses each year since inception and had an
accumulated deficit of $16.3 million at September 30, 1996. The Company expects
to continue to incur losses over the next several years from expenditures on
clinical, product development, marketing and administrative activities.
The Company does not expect to generate any revenues from product sales
in 1996 or 1997. No assurance can be given, however, that product sales will be
achieved in the future. Successful future operations will depend on the
Company's ability to develop, obtain regulatory approval for and commercialize
its products.
7
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RESULTS OF OPERATIONS
From inception through September 30, 1996, the Company had no revenues
from product sales. Operating expenses consist of research and development
expenses and general and administrative expenses. Research and development
expenses consist primarily of funds paid to contract research organizations for
the provision of services and materials for clinical trials and, to a lesser
extent, for research grants paid to The State University of New York and other
research institutions. General and administrative expenses consist primarily of
personnel salaries and benefits, professional and consulting fees, facilities
and general office expenses. The Company anticipates that selling, general and
administrative expenses will increase during the next several years due to the
expansion of its corporate infrastructure, primarily in sales, marketing and
finance.
The Company earned $400,000 in licensing fee revenue during the three
and nine month periods ended September 30, 1996, compared to no revenues
during the comparable periods in 1995. This revenue resulted from the signing
of a licensing agreement with Boehringer Mannheim Italia. See Note 4 of Notes
to Condensed Consolidated Financial Statements.
Research and development expenses increased $258,000, or 25%, and
$762,000, or 27%, respectively, during the three and nine month periods ended
September 30, 1996 over the comparable year earlier periods due to higher
contract costs associated with preparing and submitting the New Drug Application
("NDA") for Periostat, including data compilation, statistical analysis and
validation of production processes. General and administrative expenses
increased $345,000, or 86%, and $740,000, or 77%, respectively during these
periods due to the hiring of additional staff (which resulted in a non-cash
compensation charge of approximately $125,000 during the nine months ended
September 30, 1996 from the grant of certain employee stock options) and to
higher consulting and legal fees.
LIQUIDITY AND CAPITAL RESOURCES
On June 20, 1996, the Company completed an initial public offering of
2,000,000 shares of common stock at a price of $10.00 per share, which generated
net proceeds to the Company of approximately $18.0 million after underwriting
fees and related expenses. At September 30, 1996, the Company had cash and cash
equivalents of $18.9 million. In accordance with investment guidelines approved
by the Company's board of directors, cash balances in excess of those required
to fund operations have been invested in short-term U.S. Treasury securities and
commercial paper with a credit rating no lower than A1/P1. The Company's
working capital of $18.9 million at September 30, 1996 reflected an increase of
$13.6 million from December 31, 1995.
The Company had no debt outstanding (other than accounts payable and
accrued expenses) at September 30, 1996. The Company has no lines of credit,
and no capital leases were outstanding at September 30, 1996.
The Company anticipates that its existing cash resources will be sufficient
to fund the Company's
8
<PAGE> 9
operations through at least 1997. The Company's future capital requirements
and the adequacy of its available funds will depend on many factors, including
the timing of FDA approval, if any, of the Company's NDA for Periostat, such
NDA having been submitted to the FDA in August 1996, the magnitude of the
sales and marketing organization to be established, the terms of agreements
entered into with corporate partners, if any, and the results of research and
development and pre-clinical and clinical studies for other applications of the
Company's core technology.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
During the third quarter, the Company executed a licensing agreement
with Boehringer Mannheim Italia ("BMI") pursuant to which BMI will distribute
and manufacture Periostat in Italy. The agreement provided for BMI to pay the
Company a $400,000 nonrefundable license fee upon signing, additional fees upon
the achievement of future milestones and royalties upon future sales of
Periostat in Italy, San Marino and The Vatican City. Such fee, net of the
applicable 10% foreign withholding tax, was recorded as an account receivable at
September 30, 1996. Payment was received in early October.
In August 1996, the Company entered into a research agreement with
Istituto Gentili, an Italian pharmaceutical company, to evaluate the application
of the Company's technology in the field of osteoarthritis.
In October 1996, the Company and the National Cancer Institute ("NCI")
executed a letter of intent to formalize a collaborative research and
development agreement pursuant to which the NCI agreed to perform pharmacology,
toxicology and Phase I clinical trials using one of the Company's compounds for
the prevention of cancer metastases.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*10.1 License Agreement dated as of July 18, 1996 by and between the
Company and Boehringer Mannheim Italia
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter in which this
report on Form 10-Q is filed.
* Confidential treatment has been requested for a portion of this
Exhibit.
9
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 24, 1996 By:/s/ BRIAN M. GALLAGHER
-----------------------------------
Brian M. Gallagher, Ph.D
President and Chief Executive Officer
Date: October 24, 1996 By:/s/ NANCY C. BROADBENT
-----------------------------------
Nancy C. Broadbent
Chief Financial Officer (Principal
Financial and Accounting Officer)
10
<PAGE> 1
LICENSE AGREEMENT
This LICENSE AGREEMENT dated as of July 18, 1996, by and between
COLLAGENEX PHARMACEUTICALS, INC., a Delaware corporation ("CollaGenex"), and
BOEHRINGER MANNHEIM ITALIA, a company organized under the laws of Italy ("BMI").
W I T N E S S E T H :
WHEREAS, CollaGenex has developed the Products and desires to license BMI
to make and sell Products on the terms set forth herein; and
WHEREAS, BMI desires to license the Products from CollaGenex for purposes
of making the Products and marketing the Products in the Territory;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. DEFINITIONS.
1.1 "Affiliate" shall mean any entity in which the party has a
direct or indirect ownership interest of at least fifty percent (50%), or any
entity which directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the party.
1.2 "BMI Improvements" shall mean all inventions, improvements,
enhancements, modifications, discoveries, claims, formulae, processes,
apparatuses, Technical Information, Patents, trade secrets, technologies and
know-how, whether or not covered by claims of proprietary rights, related to the
Products and created or made by BMI, its agents or its Affiliates during the
manufacture of Products hereunder.
1.3 "CollaGenex Improvements" shall mean all inventions,
improvements, enhancements, modifications, discoveries, claims, formulae,
processes, apparatuses, Technical Information, Patents, trade secrets,
technologies and know-how, whether or not covered by claims of proprietary
rights, related to the Products and created or made by CollaGenex, its agents or
its Affiliates during the term of this Agreement.
1.4 "Commercial Sale" shall mean any sale which transfers title to
any Product to a third party. Transfers of title to an Affiliate of BMI shall
not constitute a Commercial Sale unless such Affiliate is the intended end user
of the Product.
1.5 "Confidential Information" shall mean any and all information or
portion thereof disclosed to or otherwise acquired or observed by either party
or its
<PAGE> 2
employees, agents or Affiliates (each individually referred to as a "recipient")
either directly or indirectly from the other party, including but not limited to
the Products and/or Improvements, as well as any other information regarding
either party's inventions, improvements, enhancements, modifications,
discoveries, claims, formulae, processes, apparatuses, research, development,
Patents, Technical Information, know-how, trade secrets, knowledge, designs,
drawings, specifications, concepts, data, reports, methods, documentation,
methodology, pricing, marketing plans, customer lists, salaries or business
affairs, and any other information or knowledge owned or developed by either
party, except for information which the recipient can demonstrate:
(i) was at the time of disclosure to such recipient part of
the public domain or thereafter becomes part of the public domain through no act
or omission by such recipient; or
(ii) was lawfully in such recipient's possession as shown in
written records prior to disclosure by the disclosing party and without
obligation of confidentiality; or
(iii) was lawfully received by such recipient after disclosure
from a third party without obligation of confidentiality and without violation
by said third party of an obligation of confidentiality to another; or
(iv) was required to be disclosed by law or court order.
1.6 "Net Sales" of Products shall mean the gross invoice price
received and attributable to the Commercial Sale of Products by BMI or an
Affiliate of BMI, less returns, promotional allowances, freight, transportation
insurance, charges for returnable containers, import or export taxes, any tax or
government charge levied on the sale, transportation or delivery of such
Products and borne by the seller thereof, commissions to third parties, and
customary trade discounts actually taken.
1.7 "Patents" shall mean any current or future patent or patent
application in any country, including any extensions or future extension
mechanisms, including Supplementary Protection Certificates or the equivalent
thereof, renewals, continuations, continuations-in-part, divisions,
patents-of-additions, and/or reissues thereof, which contains one or more claims
covering any part of the Products, Technical Information or Improvements.
1.8 "Products" shall mean Periostat, the doxycycline product
developed by CollaGenex as a therapy for periodontal disease.
1.9 "Technical Information" shall mean unpublished research and
development information, unpatented inventions, know-how, trade secrets,
techniques, practices and technical data in the possession of CollaGenex which
are needed to produce Products and which CollaGenex has the right to provide to
BMI.
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1.10 "Territory" shall mean the country of Italy, San Marino and the
Vatican City.
2. LICENSES AND OTHER RIGHTS.
2.1 Grant of Licenses. Subject to the limitations described below,
CollaGenex hereby grants to BMI (i) an exclusive right and license to use,
distribute and sell Products in the Territory, (ii) a non-exclusive right and
license to make, manufacture and use Technical Information to make Products,
(iii) an exclusive right and license under Patents applicable to the Territory,
if any, to use, distribute and sell Products in the Territory, and iv) a
non-exclusive right and license under Patents applicable to the Territory, if
any, to make and manufacture Products in the Territory. BMI shall have no right
to sublicense its rights hereunder to any third party, other than Affiliates of
BMI, for any purpose, including, without limitation, third party manufacturing
of Products, without the express written permission of CollaGenex, which will
not be unreasonably withheld.
2.2 Exclusivity of License; Title. All exclusive licenses granted to
BMI hereunder will be exclusive as to CollaGenex and all others. CollaGenex
shall retain title to, and be the owner of, any and all (i) Patents, (ii)
Technical Information, (iii) BMI Improvements and (iv) CollaGenex Improvements.
BMI agrees to notify CollaGenex of any BMI improvements. To the extent any BMI
Improvements are covered by Patents and should BMI not be permitted by
applicable law to assign such BMI Improvements to CollaGenex, then BMI agrees to
grant to CollaGenex a perpetual, exclusive (except for BMI's use in the
manufacturing and marketing of Products), irrevocable, royalty free license to
such BMI Improvements. In the event BMI decides not to seek patent protection
for a particular BMI Improvement, CollaGenex shall have the right, but not the
obligation, to seek patent protection for such BMI Improvement. BMI agrees to
execute such documents as reasonably required by CollaGenex to document, record
and otherwise perfect its interests in the Technical Information, Patents and
BMI Improvements. CollaGenex agrees to advise BMI of any CollaGenex Improvements
and, to the extent that it is able, CollaGenex agrees to grant BMI a license to
make, manufacture, use, distribute and sell Products in the Territory using
CollaGenex Improvements. If such CollaGenex Improvements are the subject of a
licensing agreement with a third party, then BMI agrees to abide by the terms of
such licensing agreement, except that it is understood that BMI shall not be
obligated to pay any royalty, licensing fee or other amount to such third party.
BMI understands that the rights granted to them BMI to CollaGenex Improvements
may not be as broad as those rights granted under Section 2.1 hereof.
2.3 Prohibited Transfers. CollaGenex agrees that, without BMI's
prior express written consent, CollaGenex will not assign, sell, convey, lease,
license, transfer, hypothecate, encumber or suffer imposition of any lien on,
grant any right or interest in, or disclose to any third party any Confidential
Information concerning, the Products in the Territory. BMI shall not disclose
any unpublished Technical Information furnished by CollaGenex pursuant to
Section 2.1 hereof to third parties during the term hereof, or at any time
thereafter; provided, however, that disclosure may be made of any such Technical
Information to the extent necessary to market Products to
- 3 -
<PAGE> 4
purchasers, provided that such purchasers agree to be bound by a similar
non-disclosure agreement. BMI shall not use any Technical Information furnished
by CollaGenex other than in the manufacture and marketing of Products and only
during the term of this Agreement.
2.4 Manufacturing Rights. During the term hereof, BMI may either (i)
manufacture Products itself or have Products manufactured by Affiliates or Third
Parties (as set forth in Section 2.1) and/or (ii) purchase Products for resale
by BMI in the Territory from contract manufacturers in the United States
licensed and authorized by CollaGenex to perform such contract manufacturing on
terms and conditions agreed upon by BMI and such third party manufacturers. In
the event BMI or any of its Affiliates develops its own manufacturing capability
for Products, each of BMI and such Affiliate agrees to manufacture such Products
in accordance with (A) any specifications set by any applicable regulatory
authorities and (B) any applicable rules and regulations relating to quality
controls.
2.5 Supply of Other European Licensees. In the event BMI or any of
its Affiliates develops its own manufacturing capability for the Products, BMI
and such Affiliates agree to manufacture and supply Products to any other
licensees of Products in Europe who have not established their own manufacturing
capability of Products. Such agreements to supply Product will be reached on a
case-by-case basis, based on the availability of manufacturing capacity, and, in
the event that sufficient manufacturing capacity does not exist to supply such
licensees, BMI agrees to notify CollaGenex as soon as possible and to facilitate
the establishment of an alternative source of supply. In case BMI supplies
Product to a licensee of CollaGenex, such Products shall be supplied by BMI at a
price which does not exceed BMI's direct costs plus a 50% mark-up. In supplying
Products to such other licensees, BMI and its Affiliates agree to comply with
all applicable laws and regulations relating to the control of exports or the
transfer of pharmaceutical compounds, drugs and/or technologies, including,
without limitation, Products. It is understood that the sale of Products by BMI
or its affiliates to other licensees of CollaGenex does not represent Net Sales.
2.6 Government Submissions. As soon as reasonably practicable after
delivery by CollaGenex to BMI of all relevant sections of the New Drug
Application (the "NDA") filed with the United States Food and Drug
Administration ("FDA") with respect to the Product, BMI shall prepare and make
all necessary regulatory filings with all applicable regulatory authorities in
the Territory with respect to the Product. CollaGenex shall provide such
relevant sections of the NDA to BMI on a prompt basis. BMI shall use diligent
efforts to obtain the approval of all necessary regulatory authorities in the
Territory with respect to the Product. BMI shall be the owner and party of
record sponsoring all submissions to regulatory authorities in the Territory
with respect to the Product. The labeling will be agreed upon between the
Parties and prepared in accordance with Regulatory requirements in the
Territory. In the event that BMI is unable to obtain the approval of all
necessary regulatory authorities in the Territory with respect to the Product
within two and one-half (2.5) years from the date CollaGenex supplies to BMI all
relevant sections of the NDA, all rights and licenses granted to BMI by
CollaGenex hereunder shall terminate and such termination shall be
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<PAGE> 5
subject to the provisions of Section 8.6 and 8.7 hereof, unless BMI can provide
written evidence that the delays incurred were beyond its control: in such case
the Parties will agree about a new reasonable term for obtaining the approval.
3. LICENSING FEES AND ROYALTY PAYMENTS.
3.1 Royalty Payments. In consideration of the license granted
under this Agreement, BMI agrees to pay to CollaGenex the following licensing
fees:
(i) $ *** upon the execution of this Agreement;
(ii) $ *** upon the *** anniversary of the delivery by
CollaGenex to BMI of all NDA Documentation, unless BMI
can provide written evidence that additional studies are
required for the submission of a regulatory filing to
the Italian authorities, in which case the payment will
be made at the time of submission of the filing;
(iii) $ *** upon the regulatory approval of the Products in
Italy.
In addition, a running royalty will be paid according to the following terms:
(a) *** percent ( *** %) of the applicable Net Sales of
Products for the first *** following first Commercial
Sale in the Territory;
(b) *** percent ( *** %) of the applicable Net Sales of
Products for *** following first Commercial Sale in the
Territory;
(c) *** percent ( *** %) thereafter.
If at any time during the term of this Agreement it can be demonstrated by way
of a recognized market audit (e.g. IMS) that an equivalent competitive Product
has captured at least *** % of the total market for such Products, measured by
volume of sales units, then the royalty rate applicable under (a) and (b) above
will be reduced to *** %.
3.2 Reports and Payments. Payments pursuant to clauses (i-iii) of
Section 3.1 hereof will be paid to CollaGenex within forty five (45) days after
the triggering event. Payments pursuant to clauses (a-c) of Section 3.1 hereof
will be paid to CollaGenex within sixty (60) days after the end of each calendar
quarter during the term hereof with respect to applicable Net Sales paid to BMI
and/or any Affiliate of BMI during such calendar quarter. With each such
quarterly payment, BMI will provide CollaGenex with a written report stating the
respective Net Sales actually paid to BMI
- ----------------------
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
- 5 -
<PAGE> 6
and/or any Affiliate of BMI during such prior calendar quarter and the amount of
royalties earned by CollaGenex thereon pursuant to this Section 3.
3.3 Recording and Inspection. BMI agrees that for a period of three
(3) years after delivery of each report referred to in Section 3.2, it shall
keep at its principal place of business complete records of applicable Net Sales
received by BMI and/or any Affiliate of BMI and other information necessary to
permit BMI to confirm the accuracy of the calculations of Net Sales, and to make
regular entries in such records at its earliest business convenience for the
purpose of determining the Net Sales hereunder. For the sole purpose of
verifying BMI's performance of its obligation to make payments hereunder,
CollaGenex, solely through its independent certified public accountant or other
independent third party designee, will have the right to examine BMI's records
reflecting such Net Sales and other information, provided, that such examination
is made within three (3) years after the close of the calendar year in respect
of which BMI's records are being examined, conducted during BMI's normal
business hours, made after thirty (30) days' advance written notice to BMI and
limited to no more than one examination in any calendar year. The results of
such examination shall be made available to both parties. CollaGenex shall bear
the full cost of the performance of any such examination, unless such
examination discloses a variance of more than *** percent ( *** %) from the
amount of the original report or payment calculation. In such case, BMI shall
bear the full cost of the performance of such examination. BMI shall promptly
pay to CollaGenex any variance disclosed in any such examination.
3.4 Mode of Payment. All payments shall be paid in U.S. dollars.
Payments due on currencies received other than United States Dollars shall be
translated at the rate of exchange at which United States Dollars are listed in
the Wall Street Journal for Italian Lira on the last business day of the
calendar quarter in which such revenues are received by BMI and/or an Affiliate
of BMI.
4. PATENT AND TRADEMARK MATTERS.
4.1 Patents. CollaGenex shall have the sole right, but not the
obligation, to file, prosecute and maintain all Patents that are the property of
CollaGenex. CollaGenex shall have the sole right to determine whether or not,
and where, to file Patents, to abandon the prosecution of any Patents or to
discontinue the maintenance of any Patents. BMI shall execute such documents as
are reasonably necessary to file, prosecute and maintain all Patents.
4.2 Recordation. If either BMI or CollaGenex so requests in writing,
the parties will promptly file and record with any applicable patent office or
authority, a copy or memorandum of this Agreement and any other agreement
granting BMI rights in the Products and Technical Information.
- -------------------
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
- 6 -
<PAGE> 7
4.3 Patent Enforcement. BMI shall notify CollaGenex of any suspected
infringement of Patents, if any, in the Territory. CollaGenex shall have the
sole right to institute patent infringement actions against third parties based
on any suspected infringement of Patents in the Territory. BMI shall execute all
necessary and proper documents and take such actions as shall be appropriate,
including, without limitation, making available employees of BMI for testimony
and making available any records, papers, information and other materials, to
assist CollaGenex in instituting and prosecuting such infringement actions. Any
award paid by third parties as a result of such an infringement action (whether
by way of settlement or otherwise), shall be retained by CollaGenex. During the
term hereof, BMI shall notify CollaGenex of any prior art or other information
known to BMI which is relevant to the patentability or validity of any of the
Patents or which might cause a court to deem any of the Patents wholly or partly
inoperative or invalid.
4.4 Trademarks. BMI will use the trademarks of CollaGenex, if such
trademarks are registrable, in advertising and selling the Products in the
Territory and only in accordance with approved method of use of such trademarks.
This Agreement does not give BMI any rights to changing the trademark or trade
names of any Product.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES.
5.1 Representations and Warranties of CollaGenex. CollaGenex
hereby represents and warrants to BMI that:
(i) it is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full corporate
power and authority to own its properties and to conduct the businesses in which
it is now engaged;
(ii) it has full corporate power and authority to execute and
deliver this Agreement and to perform all of its obligations hereunder, and no
consent or approval of any other person or governmental authority is required
therefor. The execution and delivery of this Agreement by CollaGenex, the
performance by CollaGenex of its covenants and agreements hereunder and the
consummation by CollaGenex of the transactions contemplated hereby have been
duly authorized by all necessary corporate action. This Agreement constitutes a
valid and legally binding obligation of CollaGenex, enforceable against it in
accordance with its terms;
(iii) neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, violates any
provision of the Certificate of Incorporation or By-Laws of CollaGenex or any
law, statute, ordinance, regulation, order, judgment or decree of any court or
governmental agency, or conflicts with or results in any breach of any of the
terms of or constitutes a default under or results in the termination of or the
creation of any lien pursuant to the terms of any
- 7 -
<PAGE> 8
contract or agreement to which CollaGenex is a party or by which any of the
assets of CollaGenex is bound; and
(iv) CollaGenex has no knowledge of, and has received no
notice of, any claim of ownership or other adverse interest of any third party
with respect to the Products or Technical Information.
5.2 Representations and Warranties of BMI. BMI hereby
represents and warrants to CollaGenex that:
(i) it is a corporation duly organized, validly existing and
in good standing under the laws of Italy and has full corporate power and
authority to own its properties and to conduct the businesses in which it is now
engaged;
(ii) it has full corporate power and authority to execute and
deliver this Agreement and to perform all of its obligations hereunder, and no
consent or approval of any other person or governmental authority is required
therefor. The execution and delivery of this Agreement by BMI, the performance
by BMI of its covenants and agreements hereunder and the consummation by BMI of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action. This Agreement constitutes a valid and legally binding
obligation of BMI, enforceable against it in accordance with its terms; and
(iii) neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, violates any
provision of the organizational or governing documents of BMI or any law,
statute, ordinance, regulation, order, judgment or decree of any court or
governmental agency, or conflicts with or results in any breach of any of the
terms of or constitutes a default under or results in the termination of or the
creation of any lien pursuant to the terms of any contract or agreement to which
BMI is a party or by which any of the assets of BMI is bound.
6. INDEMNIFICATION.
6.1 Indemnification by the Parties. Each of the parties will
indemnify the other party from and against any and all losses, claims, demands,
obligations, liabilities, costs, expenses, or damages of any kind or nature
(collectively "Damages"), including but not limited to reasonable fees of
attorneys, accountants, and other professionals, incurred by the indemnified
party as a result of any claim or proceeding brought against the indemnified
party by any person not a party to this Agreement, to the extent that such claim
or proceeding is based on any of the representations or warranties contained in
this Agreement being untrue or upon the breach of any of the provisions of this
Agreement; provided that the indemnified party promptly notifies the
indemnifying party of any such claim or proceeding in writing and gives the
indemnifying party the opportunity to defend or settle such claim or proceeding.
The indemnified
- 8 -
<PAGE> 9
party agrees to cooperate with the indemnifying party, at the indemnifying
party's expense, in defending or settling any such claim or proceeding.
6.2 Product Indemnification. BMI agrees to defend, indemnify and
hold harmless CollaGenex from any and all Damages arising from injury or damage
to persons or property resulting directly or indirectly from BMI's use,
manufacture, sale or other disposition of any Products in the Territory. BMI
will utilize its best efforts to obtain liability insurance covering the
manufacture and sale of Products on terms and in amounts as are customary for
the pharmaceutical industry.
6.3 Limitation on Damages. In no event shall the liability of
CollaGenex under this Agreement exceed the aggregate amount of the licensing
fees and royalty payments paid by BMI to CollaGenex pursuant to Section 3.1
hereof.
6.4 Limitation on Warranties. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED TO BE A REPRESENTATION OR WARRANTY BY COLLAGENEX OF (A) THE VALIDITY OF
ANY OF THE PATENTS OR (B) THE SAFETY OR USEFULNESS FOR ANY PURPOSE OF ANY OF THE
TECHNICAL INFORMATION AT ANY TIME MADE AVAILABLE BY COLLAGENEX OR (C) THAT THE
PRODUCTS PRODUCED IN ACCORDANCE WITH SUCH TECHNICAL INFORMATION WILL BE FREE
FROM CLAIMS OF INFRINGEMENT OF PATENTS OF ANY THIRD PARTY. COLLAGENEX SHALL HAVE
NO LIABILITY WHATSOEVER TO BMI OR ANY AFFILIATE THEREOF FOR OR ON ACCOUNT OF ANY
DAMAGES ASSESSED OR ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR
IMPOSED UPON BMI OR ANY AFFILIATE THEREOF, ARISING OUT OF OR IN CONNECTION WITH
OR RESULTING FROM (1) THE PRODUCTION, USE OR SALE OF ANY PRODUCTS IN THE
TERRITORY, OR THE PRACTICE OF THE PATENTS EXCEPT FOR THE INFRINGEMENT OF
PROPRIETARY RIGHTS, (2) THE USE OF ANY TECHNICAL INFORMATION DISCLOSED BY
COLLAGENEX OR (3) ANY ADVERTISING OR OTHER PROMOTIONAL ACTIVITIES WITH RESPECT
TO ANY OF THE FOREGOING.
7. CONFIDENTIALITY.
7.1 Confidentiality. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the parties agree that, for the
term of this Agreement and for five (5) years thereafter, the recipient shall
keep completely confidential and shall not publish or otherwise disclose and
shall not use for any purpose any Confidential Information furnished to it by
the other party or developed pursuant to this Agreement; provided, however, that
after the expiration or termination of this Agreement, either party shall be
free to exploit commercially in any manner any proprietary information and
technology which belongs solely or jointly to it.
7.2 Authorized Disclosure. Each party may disclose Confidential
Information of the other party to its employees, agents or Affiliates (i) who
are required to know such information in connection with the permitted use of
such information
- 9 -
<PAGE> 10
hereunder and (ii) who are bound by customary non-use and confidentiality
obligations as set forth in this Section 7.
7.3 Business Terms. The parties acknowledge and agree that the
financial terms contained in Section 3.1 of this Agreement shall be
considered Confidential Information hereunder.
8. TERMINATION AND REVERSION OF TECHNOLOGY.
8.1 Mutual Termination. The parties hereto may terminate this
Agreement by mutual consent. Such termination shall be effective 60 days after
such a determination or upon such other date as the parties may mutually agree.
8.2 Termination of Licenses Without Cause. BMI may terminate and
revert its licenses and all right to make, use or sell under this Agreement at
any time upon *** prior written notice. Such reversion shall be free of any
continuing lien on, or grant of any right or interest in, the Products or
Technical Information. In the event of such termination, no further payments
relating to the Products shall accrue or be due under this Agreement subsequent
to the effective date of such termination; provided, however, that BMI shall pay
to CollaGenex any royalties accrued on sales prior to the effective date of the
termination of the license.
8.3 Breach of Material Obligations. Failure by either party to
comply with any of the material obligations contained in this Agreement shall
entitle the other party to give to the party in default notice specifying the
nature of the default and requiring such party to cure such default. If the
party receiving such notice disagrees with the existence, extent or nature of
the default, the issue shall be referred to arbitration pursuant to Section 9.10
for a decision regarding the existence, extent or nature of the default, cure
and remedy therefor. If such default is not cured within 60 days or after the
determination pursuant to arbitration (or, if such default cannot be cured
within such 60 day period and the party in default does not commence and
diligently continue actions to cure such default), the notifying party shall be
entitled, without prejudice to any of its other rights conferred on it by this
Agreement, to all remedies available to it by law or in equity, including
without limitation, the termination of this Agreement.
8.4 Insolvency or Bankruptcy. Either party may, in addition to any
other remedies available to it by law or in equity, terminate this Agreement by
written notice to the other party in the event the other party shall have become
insolvent or bankrupt, or shall have made an assignment for the benefit of its
creditors, or there shall have been appointed a trustee or receiver of the other
party or for all or a substantial part of its property, or any case or
proceeding shall have been commenced or other action taken by or against the
other party in bankruptcy or seeking
- --------------------
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
- 10 -
<PAGE> 11
reorganization, liquidation, dissolution, winding-up arrangement, composition or
readjustment of its debts or any other relief under any bankruptcy, insolvency,
reorganization or other similar act or law of any jurisdiction now or hereafter
in effect, or there shall have been issued a warrant of attachment, execution,
distraint or similar process against any substantial part of the property of the
other party, and any such event shall have continued for sixty (60) days
undismissed, unbonded and undischarged.
8.5 Right to Sell Stock on Hand. Upon the termination of the
licenses granted hereunder for any reason other than a failure to cure a
material breach of this Agreement by BMI, BMI shall have the right to complete
all work in progress and for one year (or such longer period as the parties may
reasonably agree) to dispose of all Products or substantially completed Products
then on hand, and royalties shall be paid to CollaGenex with respect to such
Products as though such license had not terminated or expired.
8.6 Effect of Termination. In the event of any termination of this
Agreement, except as otherwise provided herein, all rights to the Products and
Technical Information shall revert to CollaGenex who shall be free to develop,
license or otherwise exploit the Products and Technical Information in the
Territory as it deems appropriate and BMI shall (i) take whatever steps are
reasonably necessary and appropriate to effect reversion to CollaGenex of all
rights to the Products and Technical Information, (ii) return to CollaGenex all
information relating to the Products and Technical, (iii) make no further use of
any Technical Information and (iv) take whatever steps are reasonably necessary
and appropriate to transfer to CollaGenex or its designees all submissions to
regulatory authorities (or any part thereof) in the Territory.
Notwithstanding the foregoing paragraph, in the event that, after BMI has
paid to CollaGenex all amounts under sections 3.1(i), (ii), and (iii) hereof,
CollaGenex shall become insolvent or bankrupt under applicable U.S. bankruptcy
laws, or shall make an assignment for the benefit of its creditors, or there
shall be appointed a trustee or receiver of CollaGenex or for all or a
substantial part of its property, or any case or proceeding shall have been
commenced or other action taken by or against CollaGenex in bankruptcy or
seeking reorganization, liquidation, dissolution, winding-up arrangement,
composition or readjustment of its debts or any other relief under bankruptcy,
insolvency, reorganization or other similar act or law of any jurisdiction now
or hereafter in effect, or there shall have been issued a warrant of attachment,
execution, distraint or similar process against any substantial part of the
property of CollaGenex, and any such event shall have continued for sixty (60)
days undismissed, unbonded and undischarged (each such event being a "Bankruptcy
Event"), then all amounts thereafter paid by BMI to CollaGenex pursuant to
Section 3.1(a), (b) or (c) hereof shall be used *** .
- -------------------
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
- 11 -
<PAGE> 12
Notwithstanding the first paragraph of this Section 8.6, in the event
that, after BMI has paid to CollaGenex all amounts under Sections 3.1(i), (ii)
and (iii) hereof, an arbitrator determines that CollaGenex has breached its
material obligations hereunder (as determined in accordance with Section 8.3
hereof and excluding any Bankruptcy Event), then BMI may, as part of its remedy,
upon sixty (60) days notice to CollaGenex (provided that CollaGenex does not
cure or take reasonable steps to cure such breach) and upon the written consent
of *** , (i) retain the right to manufacture and sell the Products in the
Territory, (ii) retain the right to use in the Territory any trademark licensed
pursuant to Section 4.4 hereof under which the Products were sold or marketed,
(iii) terminate the obligations to pay royalties to CollaGenex pursuant to
Sections 3.1(a), (b) or (c) hereof, and (iv) pay to *** directly amounts equal
to *** that would otherwise be payable *** to *** pursuant to the agreement
between CollaGenex and *** , as amended: provided, however, that such *** will
not exceed *** pursuant to the agreement between CollaGenex and BMI.
9. MISCELLANEOUS.
9.1 Further Assurances. The parties hereto agree to execute and
deliver such other documents, instruments and agreements and to take such other
action as may be necessary, proper or appropriate to carry out the terms of this
Agreement.
9.2 Notices. All notices required or permitted under this Agreement
shall be in writing and delivered by any method providing for proof of delivery.
Any notice shall be deemed to have been given on the date of receipt. Notices
shall be delivered to the parties at the following addresses until a different
address has been designated by notice to the other party:
If to CollaGenex:
CollaGenex, Inc.
301 South State Street
Newtown, Pennsylvania 18940
Attention: Brian M. Gallagher, Ph.D.,
President and Chief Executive Officer
with a copy to:
Buchanan Ingersoll
College Center
500 College Road East
Princeton, New Jersey 08540
Attention: David J. Sorin, Esq.
- ------------------------
*** Confidential information has been omitted and filed separately with the
Securities and Exchange Commission.
- 12 -
<PAGE> 13
If to BMI:
Boehringer Mannheim Italia
Via S. Uguzzone, 5
1-20126
Italy
Attention: Licensing Department
9.3 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
9.4 Entire Agreement; Modifications. This Agreement contains the
entire agreement among the parties hereto with respect to the subject matter
hereof, and no modification, amendment, change or supplement shall be effective
unless in writing and signed by the party against which it is sought to be
enforced. This Agreement supersedes all prior understandings, negotiations and
agreements relating to the subject matter hereof.
9.5 Waiver. The waiver by either party of a breach or default of any
provisions contained herein shall be in writing and shall not be construed as a
waiver of any succeeding breach or default or of the provision itself.
9.6 Expenses. Except as otherwise provided for under this Agreement,
each of the parties hereto shall bear such party's own expenses in connection
with this Agreement and the transaction contemplated hereby.
9.7 Governing Law. This Agreement shall be governed by the construed
in accordance with the laws of Switzerland.
9.8 Headings. The headings in this Agreement are solely for
convenience of reference and shall not affect the interpretation of any of the
provisions hereof.
9.9 Severability. If any provision herein contained shall be held to
be illegal or unenforceable, such holding shall not affect the validity or
enforceability of the other provisions of this Agreement.
9.10 Arbitration. All disputes, other than requests for injunctions
or preliminary relief or patent-related matters, related to this Agreement, or
its formation, interpretation, enforcement or breach, shall be settled by
arbitration in the International Chamber of Commerce in Zurich, Switzerland. The
arbitration award shall be final and binding regardless of whether one of the
parties fails or refuses to participate in the arbitration and shall be
enforceable by any court having jurisdiction there over. The arbitrator is
empowered to hear and determine all such disputes between the parties
- 13 -
<PAGE> 14
concerning the subject matter of this Agreement, and the arbitrator may award
monetary damages, including interest, restitution and costs. The arbitration
shall be subject to an overall time limitation of not more than 120 days.
9.11 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of each of CollaGenex and BMI and each of their
respective successors and assigns. BMI may not assign its rights and obligations
hereunder without the prior written consent of CollaGenex.
9.12 Independent Contractors. Nothing in this Agreement shall create
any association, partnership or joint venture between the parties hereto, it
being understood and agreed that the parties are independent contractors and
neither party shall have the power or authority to obligate the other in any
way. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BOEHRINGER MANNHEIM ITALIA
By /s/ Dr. Giancarlo Bolognesi
__________________________________
Dr. Giancarlo Bolognesi,
Licensing Director
COLLAGENEX PHARMACEUTICALS, INC.
By /s/ Robert A. Ashley
__________________________________
Robert A. Ashley, Vice President
Commercial Development
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS OF CASH
FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE
QUARTER ENDED SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 18,949
<SECURITIES> 0
<RECEIVABLES> 389
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,375
<PP&E> 51
<DEPRECIATION> 9
<TOTAL-ASSETS> 19,427
<CURRENT-LIABILITIES> 483
<BONDS> 0
0
0
<COMMON> 18,944
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 19,427
<SALES> 0
<TOTAL-REVENUES> 400
<CGS> 0
<TOTAL-COSTS> 5,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,519)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,519)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,519)
<EPS-PRIMARY> (0.71)
<EPS-DILUTED> (0.71)
</TABLE>
