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 JUNE 30, 1998.
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 be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for 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 June 30, 1998:
Class Number of Shares
--------------------------- ----------------
Common Stock $.01 par value 8,585,329
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<TABLE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1997 and June 30, 1998
<CAPTION>
December 31, June 30,
1997 1998
----------- -----------
(unaudited)
(in thousands except
share amounts)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents ............................................ $ 16,379 $ 14,620
Short-term investments ............................................... 6,392 3,496
Interest receivable .................................................. 88 66
Prepaid expenses ..................................................... 190 453
-------- --------
Total current assets ........................................... 23,049 18,635
Equipment, net ............................................................ 103 98
Other assets .............................................................. 13 13
-------- --------
Total assets ................................................... $ 23,165 $ 18,746
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable ..................................................... $ 551 $ 793
Accrued expenses ..................................................... 1,906 1,794
-------- --------
Total current liabilities ...................................... 2,457 2,587
-------- --------
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; none issued and outstanding ............................ -- --
Common stock, $0.01 par value; 25,000,000 shares
authorized; 8,567,579 and 8,585,329 shares issued
and outstanding in 1997 and 1998, respectively ..................... 86 86
Additional paid-in capital ........................................... 47,298 47,313
Deferred compensation ................................................ (313) (252)
Deficit accumulated during the development stage ..................... (26,363) (30,988)
-------- --------
Stockholders' equity ........................................... 20,708 16,159
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity ..................... $ 23,165 $ 18,746
======== ========
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
2
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<TABLE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 1997 and 1998
and for the period from January 10, 1992 (inception) to June 30, 1998
(Unaudited)
<CAPTION>
For the Period
from 1/10/92
Three Months Ended June 30, Six Months Ended June 30, (inception) to
1997 1998 1997 1998 6/30/98
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
License revenues ......................... $ 300 $ -- $ 300 $ -- $ 725
Contract revenues ........................ -- 4 -- 7 16
--------- --------- --------- ---------- -------
Total revenues ........................ 300 4 300 7 741
--------- --------- --------- ---------- -------
Operating expenses incurred in the
development stage:
Research and development ............... 1,379 1,397 2,072 2,396 19,759
General and administrative ............. 1,385 1,397 2,353 2,811 14,602
--------- --------- --------- ---------- -------
Total operating expenses .......... 2,764 2,794 4,425 5,207 34,361
--------- --------- --------- ---------- -------
Loss from operations ......... 2,464 2,790 4,125 5,200 33,620
Other income (expense):
Interest income ........................ 382 271 618 574 2,776
Interest expense ....................... -- -- -- -- (144)
--------- --------- --------- ---------- -------
Net loss ......................... (2,082) (2,519) (3,507) (4,626) (30,988)
========= ========= ========= ========== =======
Accretion of undeclared dividends
attributable to mandatorily redeem-
able convertible preferred stock ........ -- -- -- -- 2,597
========= ========= ========= ========== =======
Net loss allocable to common
stockholders ............................ $ (2,082) $ (2,519) $ (3,507) $ (4,626) $(33,585)
========= ========= ========= ========== =======
Net loss per share allocable to common
stockholders:
Basic .................................. $ (0.24) $ (0.29) $ (0.44) $ (0.54)
Diluted ................................ (0.24) (0.29) (0.44) (0.54)
========= ========= ========= ==========
Shares used in computing net loss per share
allocable to common stockholders:
Basic .................................. 8,521,601 8,574,115 8,030,087 8,571,139
Diluted ................................ 8,521,601 8,574,115 8,030,087 8,571,139
========= ========= ========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1998
and for the period from January 10, 1992 (inception) to June 30, 1998
(Unaudited)
<CAPTION>
For the Period from
Six Months Ended from 1/10/92
June 30, (inception) to
------------------------------- 6/30/98
1997 1998 -------------------
----------- -----------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ...................................................... $ (3,507) $ (4,626) $ (30,988)
Adjustments to reconcile net loss to net cash used in operating
activities:
Non-cash research and development expense ................. -- -- 514
Non-cash compensation expense ............................. 49 61 358
Non-cash consulting expense ............................... -- -- 15
Depreciation and amortization expense ..................... 16 18 73
Change in assets and liabilities:
(Increase) decrease in interest receivable ............ (97) 22 (66)
Increase in prepaid expenses .......................... (24) (263) (453)
Increase in other assets .............................. -- -- (13)
Increase in accounts payable .......................... 421 242 793
Increase (decrease) in accrued expenses ............... 636 (112) 1,794
---------- ---------- ----------
Net cash used in operating activities ............................ (2,506) (4,658) (27,973)
---------- ---------- ----------
Cash flows from investing activities:
Organizational costs .......................................... -- -- (5)
Capital expenditures .......................................... (43) (13) (166)
Purchase of short-term investments (available for
sale) ....................................................... (15,587) (2,493) (38,210)
Proceeds from the sale of short-term investments
(available for sale) ........................................ 11,351 5,389 34,714
---------- ---------- ----------
Net cash provided by (used in) investing activities .............. (4,279) 2,883 (3,667)
---------- ---------- ----------
(Continued)
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1997 and 1998
and for the period from January 10, 1992 (inception) to June 30, 1998
(Unaudited)
(Continued from preceding page)
<CAPTION>
For the Period from
Six Months Ended from 1/10/92
June 30, (inception) to
------------------------------- 6/30/98
1997 1998 -------------------
----------- -----------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of preferred stock.................... -- -- 13,508
Proceeds from issuance of common stock....................... 11,610 16 29,727
Proceeds from issuance of promissory notes................... -- -- 3,150
Repayment of promissory note................................. -- -- (125)
--------- --------- -----------
Net cash provided by financing activities....................... 11,610 16 46,260
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents............ 4,825 (1,759) 14,620
Cash and cash equivalents at beginning of period................ 9,848 16,379 --
--------- --------- -----------
Cash and cash equivalents at end of period...................... $ 14,673 $ 14,620 $ 14,620
========= ========= ===========
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
========= ========= ===========
Accretion of undeclared dividends attributable
to mandatorily redeemable convertible preferred
stock...................................................... $ -- $ -- $ 2,597
========= ========= ===========
Conversion of promissory notes to preferred stock............... $ -- $ -- $ 2,904
========= ========= ===========
Deferred compensation........................................... $ -- $ -- $ 611
========= ========= ===========
Preferred stock issued in connection with technology license
agreements................................................... $ -- $ -- $ 498
========= ========= ===========
See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>
5
<PAGE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1998
(Unaudited)
(1) Basis of Presentation
- --- ---------------------
The unaudited condensed consolidated financial statements included
herein have been prepared by the Company, 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 condensed consolidated financial
statements should be read in conjunction with the Company's 1997 audited
consolidated financial statements and footnotes.
The accompanying unaudited condensed consolidated financial statements
include the results of the Company and its wholly-owned subsidiary (CollaGenex
International, Ltd.). All intercompany accounts and transactions have been
eliminated.
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements have been prepared on a basis
substantially consistent with the audited consolidated financial statements and
contain adjustments, all of which are of a normal recurring nature, necessary to
present fairly the Company's financial position as of June 30, 1998, its results
of operations for the three and six months ended June 30, 1997 and 1998 and for
the period January 10, 1992 (inception) to June 30, 1998, and its cash flows for
the six months ended June 30, 1997 and 1998 and for the period January 10, 1992
(inception) to June 30, 1998. Interim results are not necessarily indicative of
results anticipated for the full fiscal year.
(2) New Accounting Pronouncements
- --- -----------------------------
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"). SFAS
130 requires that all items defined as comprehensive income, including changes
in the amounts of certain items such as foreign currency translation adjustments
and gains and losses on certain securities, be shown as a component of
comprehensive income in a financial statement. The adoption of SFAS 130 had no
effect on the Company's unaudited condensed consolidated financial statements
contained herein, as the Company had no items of comprehensive income during any
period presented therein.
6
<PAGE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1998
(Unaudited)
(Continued)
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"), was adopted by the Company on December 31, 1997. In
accordance with SFAS 128, all earnings per share data for periods prior to
adoption should be restated to conform to the new standard. There was no change
in the previously reported net loss per share for the three months and six
months ended June 30, 1997 as computed under SFAS 128.
7
<PAGE>
COLLAGENEX PHARMACEUTICALS, INC.
AND SUBSIDIARY
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 pathologies. Since its
origin, the Company has had no revenues from sales of its own products and has
funded its operations primarily from the proceeds of public and private
issuances of equity securities. Substantially all of the Company's expenditures
to date have been for pharmaceutical development activities and general and
administrative expenses.
Since inception, the Company has operated with a minimal number of
employees. Substantially all pharmaceutical development activities, including
clinical trials, have been contracted to independent contract research and other
organizations. The Company anticipates that it will significantly increase the
number of its employees over the next several years, primarily in general and
administrative areas, following regulatory approval of Periostat(R), the
Company's lead drug for the treatment of periodontal disease. There can be no
assurance, however, that the Company will obtain such regulatory approval on a
timely basis, if at all.
The Company has incurred losses each year since inception and had an
accumulated deficit of $31.0 million at June 30, 1998. The Company expects to
continue to incur losses in the foreseeable future from expenditures on drug
development, marketing, manufacturing and administrative activities.
Statements contained or incorporated by reference in this Quarterly
Report on Form 10-Q that are not based on historical fact are "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "estimate,"
"anticipate," "continue," or similar terms, variations of such terms or the
negative of those terms. This Form 10-Q contains forward-looking statements that
involve risks and uncertainties. The Company's business of developing
pharmaceutical products is subject to a number of significant risks, including
risks inherent in research and development activities and in conducting business
in a highly regulated environment. The success of the Company depends to a large
degree upon obtaining United States Food & Drug Administration (the "FDA") and
foreign regulatory approval to market products currently under development.
There can be no assurance that any of the Company's product candidates will be
approved by any regulatory authority for marketing in any jurisdiction or, if
approved, that any such products will be successfully commercialized by the
Company. The Company's actual results may differ materially from the results
discussed in the forward-looking statements contained herein.
8
<PAGE>
Results of Operations
- ---------------------
From its founding through June 30, 1998, the Company had no revenues
from sales of its own products. 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 drug development
and clinical trials. General and administrative expenses consist primarily of
personnel salaries and benefits, professional and consulting fees, insurance,
facilities and general office expenses. The Company anticipates that general and
administrative expenses will increase during the next several years due to the
expansion of its commercial infrastructure, primarily in sales and marketing.
The Company earned $7,000 and $4,000 in contract revenues for the six
months and the three months ended June 30, 1998, respectively, and did not
recognize contract revenues in either of the comparable year earlier periods.
The Company earned no licensing revenue in either of the six month or three
month periods ending June 30, 1998, respectively, as compared to an aggregate of
$300,000 for the comparable year earlier periods. Licensing revenues achieved in
1997 were attributable to the Company's licensing arrangements with Boehringer
Mannheim Italia.
Research and development expenses increased $324,000, or 15.6%, and
$18,000, or 1.3%, respectively, for the six months and three months ended June
30, 1998, over the comparable year earlier periods. Such increases resulted
primarily from expenses relating to the initiation of certain pre-clinical
studies for Nephrostat(TM), the Company's compound for the treatment of diabetic
complications, additional costs associated with the Company's amendment to its
new drug application (the "NDA") for Periostat submitted to the FDA in March
1998 and a Phase 3b clinical trial initiated during the first quarter of 1998.
The Company anticipates that the results from such clinical trial, if favorable,
will be used to support marketing activities for Periostat following regulatory
approval. There can be no assurance that the Company will obtain such approval
on a timely basis, if at all.
General and administrative expenses increased $458,000, or 19.5%, and
$12,000, or 0.9%, respectively, for the six months and three months ended June
30, 1998, over the comparable year earlier periods. Such increases were
primarily due to the Company's pre-launch marketing activities related to
Periostat and sales and marketing efforts related to certain contractual
marketing arrangements entered into during 1997, offset in part by the reversal
of certain accruals for marketing expenses.
Interest income decreased $44,000, or 7.1%, and $111,000, or 29.1%,
respectively, for the six months and three months ended June 30, 1998, over the
comparable year earlier periods. Such decreases were due to lower balances in
cash and short-term investments as a result of normal operating activities since
the Company's follow-on public offering of Common Stock in April 1997.
9
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Since its origin in January 1992, the Company has financed its
operations through private placements of preferred stock and common stock, an
initial public offering of 2,000,000 shares of common stock, which generated net
proceeds to the Company of approximately $18.0 million after underwriting fees
and related expenses, and a subsequent public offering of 1,000,000 shares of
common stock, which generated net proceeds to the Company of approximately $11.6
million after underwriting fees and related expenses. At June 30, 1998, the
Company had cash, cash equivalents and short-term investments of approximately
$18.1 million, a decrease of $4.7 million from the $22.8 million balance at
December 31, 1997. 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 $16.0 million at June 30, 1998 reflected a decrease of $4.6 million
in working capital from December 31, 1997.
The Company had no debt or capital leases outstanding (other than
accounts payable and accrued expenses) at June 30, 1998. On June 26, 1997, the
Company entered into a credit arrangement consisting of a $5,000,000 line of
credit (the "LOC") to support the future working capital needs of the Company.
The LOC will be unsecured as long as the Company's cash and investment balances
maintained with the lender or an affiliate of the lender equal or exceed $10.0
million. At the Company's option, the LOC will bear interest at either the prime
rate charged by the lender or LIBOR plus 2.15%. The LOC is terminable by the
lender at any time. No balance was outstanding under the LOC at June 30, 1998.
The Company anticipates that its existing working capital will be
sufficient to fund the Company's operations through at least 1998. 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
size and scope of the Company's sales and marketing effort, 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. Over the long term, the Company's
liquidity is dependent on market acceptance of its products and technology.
10
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
The Annual meeting of Shareholders of the Company (the "Meeting") was
held on May 11, 1998.
There were present at the Meeting in person or by proxy shareholders
holding an aggregate of 7,723,741 shares of Common Stock. The results of the
vote taken at such Meeting with respect to each nominee for director were as
follows:
Common Stock Nominees For Withheld
--------------------- --- --------
Helmer P.K. Agersborg, Ph.D. 6,920,016 Shares 803,725 Shares
Brian M. Gallagher, Ph.D. 6,920,016 Shares 803,725 Shares
Peter R. Barnett, D.M.D. 6,920,016 Shares 803,725 Shares
Robert J. Easton 6,920,016 Shares 803,725 Shares
James E. Daverman 6,920,016 Shares 803,725 Shares
Stephen W. Ritterbush, Ph.D. 6,920,016 Shares 803,725 Shares
Pieter J. Schiller 6,920,016 Shares 803,725 Shares
Terence E. Winters, Ph.D. 6,920,016 Shares 803,725 Shares
In addition, a vote of the shareholders was taken at the Meeting on the
proposal to ratify the appointment of KPMG Peat Marwick LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1998. Of the
shares present at the meeting in person or by proxy, 7,715,441 shares of Common
Stock were voted in favor of such proposal, 4,250 shares of Common Stock were
voted against such proposal and 4,050 shares of Common Stock abstained from
voting.
Item 5. Other Information
- ------- -----------------
New Drug Application
On January 28, 1998, the Company announced that it had received its
second action letter from the FDA regarding the NDA. In such letter, and in
subsequent discussions with the Company, the FDA raised new issues about the
NDA. At a meeting with the FDA in March 1998, the Company addressed these issues
and provided a review of summary clinical results from its recently completed
scaling and root planing (SRP) trial. The FDA and the Company then agreed that
the Company would seek a claim for Periostat based on the submission of a NDA
amendment containing the results from this trial. On March 31, 1998, the Company
announced that it had completed its submission of such amendment to the FDA. The
FDA has committed to review the amendment within six months of such submission
and such review is ongoing. There can be no assurance that the Company's NDA
with respect to Periostat will be approved by the FDA on a timely basis, if at
all. Failure to obtain FDA approval of a NDA for
11
<PAGE>
Periostat would have a material adverse effect on the Company's business,
financial condition and results of operations.
Research and Development Agreement
On April 28, 1998, the Company entered into a Research and Development
Agreement with Quintiles Scotland Ltd. ("Quintiles") pursuant to which Quintiles
will perform certain research and development activities in 1998 with respect to
Nephrostat(TM), the Company's compound for the treatment of diabetic
complications. The Company expects to incur approximately $1.0 million in
research and development expenses in connection with such agreement, which
expenses shall be incurred over the remainder of the 1998 fiscal year.
Evaluation Testing Agreement
On May 1, 1998, the Company entered into an Evaluation Testing
Agreement with the Research Foundation of the State University of New York
("SUNY") pursuant to which SUNY will, over the course of three years, evaluate
certain compounds supplied by the Company.
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits
10.1 - Contract between Quintiles Scotland Ltd. and the Company,
dated April 28, 1998.
27 - Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter to which this
report on Form 10-Q relates.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CollaGenex Pharmaceuticals, Inc.
Date: August 14, 1998 By:/s/ Brian M. Gallagher
-----------------------
Brian M. Gallagher, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1998 By:/s/ Nancy C. Broadbent
-----------------------
Nancy C. Broadbent
Chief Financial Officer (Principal
Financial and Accounting Officer)
CONTRACT
--------
Between Quintiles Scotland Ltd and CollaGenex Inc.
--------------------------------------------------
Quintiles Project Number: CPF00700 series
-----------------------------------------
To conduct the following:
A programme of Preclinical safety protocols and support studies with COL-8 as
listed below. The programme of work is defined in the proposal dated 20 March
1998 and amended at the meeting of 16 April 1998.
<TABLE>
<CAPTION>
Price:
- ------
<S> <C> <C>
Analytical Chemistry Transfer and validate HPLC method for 32,000 (pounds)
QC testing and supply for toxcology studies.
Safety Pharmacology Irwin test, Renal and GI function in rodent 14,400 (pounds)
Respiration, haemodynamics and ECG in primate 48,000 (pounds)
Toxicology Acute toxicity (i.v. and oral) in rat and mouse 19,300 (pounds)
14 day rat dose finding study 8,500 (pounds)
90 day rat repeat dose study (with interim 116,000 (pounds)
kill)
Satellite animals for toxicokinetics 18,000 (pounds)
14 day primate MTD 20,000 (pounds)
90 day primate repeat dose study 271,000 (pounds)
(with interim kill)
Bioanalysis/toxicokinetics Transfer and validate hplc bioanalytical method 12,000 (pounds)
(rat and primate plasma)
Bioanalysis rat (216 samples) 6,264 (pounds)
Bioanalysis primate (324 samples) 9,396 (pounds)
PK analysis and toxicokinetic report appendices 9,400 (pounds)
Project Management Management and coordination of Project activities 38,750 (pounds)
Quintiles Total Fee 623,010 (pounds)
</TABLE>
Payment Schedule:
Services will be billed on the basis of an initial payment of direct costs plus
20% of the cost of the services provided with the balance distributed as
milestone payments over the duration of the programme. A payment schedule based
on these criteria will be generated and agreed between CollaGenex and Quintiles
once the schedule for the programme has been finalised. This will be reviewed as
the studies progress and any amendments made if the schedule or scope of the
work changes.
Special conditions:
1) Any meeting, shipping or travel costs incurred outsidethe confines of
Quintiles' facilities in connection with the performance of this project will be
invoiced in addition to the above. 2) Sufficient test article, solubility and
formulation information and material safety data sheets are delivered to
Quintiles seven days prior to the initiation phase of the programme (formulation
sciences and bioanalytical method development).
Work will be performed in accordance with Quintiles Standard Terms and
Conditions as specified overleaf.
SIGNED on BEHALF of SIGNED on BEHALF of
Quintiles Scotland Ltd. CollaGenex
/s/PP WR Rush /s/Christopher Powala
- ----------------------------------------- -------------------------
Dr. DJ Graham, Director of Preclinical Sciences Christopher Powala
Date: 22 April 1998 Date: 28 April 1998
Quintiles Scotland Ltd CollaGenex Pharmaceutical Inc.
Heriot-Watt University Research Park 301 South State Street
Edinburgh EH14 4AP, UK. Newtown, 18940 USA
<PAGE>
TERMS and CONDITIONS
In these Terms and Conditions the term "Contract" shall mean these Terms and
Conditions, the Contract set out overleaf and the attached protocol.
1.0 The Contract shall commence on the date executed by both parties as
specified overleaf and shall continue in effect until such time as
contract services described overleaf have been completed unless
terminated earlier by Sponsor or Quintiles.
2.0 It is understood that during the course of the Contract Quintiles and
its employees may be exposed to material and information which is
confidential to Sponsor. All such material and information, made
available, disclosed or otherwise made known to Quintiles and its
employees as a result of services under this Contract (hereinafter
"Sponsor Confidential Information") is confidential information
belonging to Sponsor. All information regarding Quintiles' operations,
including but not limited to Quintiles Property (as defined in Clause
4.0 below), disclosed to Sponsor in connection with this Agreement is
confidential information belonging to Quintiles (the "Quintiles
Confidential Information", and together with the Sponsor Confidential
Information, the "Confidential Information"). The Confidential
Information shall be used by the receiving party and its employees only
for purposes of performing the receiving party's obligations hereunder.
Each party agrees that it will not reveal, publish or otherwise
disclose the Confidential Information of the other party to any third
party without the prior written consent of the disclosing party,
provided that the foregoing obligations shall not apply to Confidential
Information which: (a) is or becomes generally available to the public
other than as a result of a disclosure by the receiving party; (b)
becomes available to the receiving party on a non-confidential basis
from a source which is not prohibited from disclosing such information
by a legal, contractual or fiduciary obligation to the disclosing
party; (c) the receiving party develops independently of any disclosure
by the disclosing party; (d) was in the receiving party's possession or
known to the receiving party prior to its receipt from the disclosing
party; or (e) is required by law to be disclosed. This obligation of
confidentiality and non-disclosure shall remain in effect for a period
of five years after the termination of this Agreement.
3.0 Publication by the Sponsor of any information or document relating to
or arising as a result of the provision of the Contract services (with
the exception of information or reports submitted to a competent
regulatory authority)( shall not without the prior written consent of
Quintiles directly or indirectly identify or otherwise refer to
Quintiles in connection therewith and, in particular, no reference
shall be made to Quintiles in connection with any conclusion or opinion
of Sponsor and no report or extract from such a report or reference to
Quintiles shall be used to endorse or imply approval of any product of
Sponsor or the use or proposed use of any product of Sponsor.
4.0 All data and information necessary for Quintiles to conduct project
assignments will be forwarded by Sponsor to Quintiles. All data and
information generated or derived by Quintiles as the result of services
performed by Quintiles under this agreement shall be the exclusive
property of Sponsor. Any inventions that may evolve from the data and
information described above or as the results of the services performed
by Quintiles under the Contract shall belong to Sponsor and Quintiles
agrees to assign all its rights to such inventions to Sponsor.
Notwithstanding the foregoing, Sponsor acknowledges that Quintiles
possesses certain inventions, processes, know-how, trade secrets,
improvements, other intellectual properties and other assets, including
but not limited to laboratory analyses, analytical methods, procedures
and techniques, computer technical expertise and software, which have
been independently developed by Quintiles (collectively "Quintiles
Property"). The Sponsor and Quintiles agree that any Quintiles Property
or improvements thereto which are used, improved, modified or developed
by Quintiles under or during the term of this Agreement are the product
of Quintiles' technical expertise possessed and developed by Quintiles
prior to or during the performance of this Agreement and are the sole
and exclusive property of Quintiles.
Subject to the provisions of paragraph 14.0., at the completion of the
contract services by Quintiles, all raw data including paper data, wet
tissues, wax blocks, microscope slides, computer tapes and other
materials as appropriate will be retained in the archive of Quintiles
for a period of two (2) years. After this time, Sponsor will be given
the option to (i) accept the return of archive material at their
expense, (ii) pay an annual fee for continued storage, (iii) request
destruction.
5.0 For the purposes of the Contract, the parties hereto are independent
contractors and nothing contained in the Contract shall be construed to
place them in the relationship of partners, principle and agent,
employer/employee or joint venturers. Each party agrees that it shall
have no power or right to bind or obligate the other party, nor shall
either party hold itself out as having such authority.
6.0 Quintiles agrees its services shall be conducted in compliance with the
agreed protocol(s) and specifications and with all applicable laws,
rules and regulations.
7.0 Quintiles represents and warrants to Sponsor that it is not a party to
any agreement which would prevent it from fulfilling its obligations
under the Contract.
8.0 In order for Quintiles to comply with the Health and Safety at Work Act
1974 and any applicable regulation made pursuant thereto it is a
condition of Quintiles providing the contract services that Sponsor
shall provide Quintiles with all information available to it regarding
known or potential hazards associated with the use of any substances
supplied to Quintiles by Sponsor and that Sponsor shall comply with all
current legislation and regulations concerning the shipment of
substances by the land, sea or air.
9.0 Neither Quintiles nor its affiliates nor any of its or their respective
directors, officers, employees or agents shall have any liability
whatsoever under this Agreement or otherwise except with respect to
damages directly attributable solely to Quintiles' gross negligence or
intentional misconduct. Notwithstanding the foregoing, neither
Quintiles nor its affiliates nor any of its or their respective
directors, officers, employees or agents shall have any liability for
any special, incidental, or consequential damages, including, but not
limited to loss of revenue or profit in connection with or arising out
of the Contract, or the existence, furnishing, functioning, or
Sponsor's use of any information documentation or services provided
pursuant to the Contract, even if Quintiles shall have been advised of
the possibility of such damages. In addition, in no event shall the
collective, aggregate liability of Quintiles and its affiliates and
its and their respective directors, officers, employees and agents
under this Agreement exceed the amount of aggregate fees actually
received by Quintiles from Sponsor pursuant to this Agreement for the
assignment or task from which such liability arose.
10.0 Sponsor shall defend, indemnify and hold harmless Quintiles, its
affiliates and its and their respective directors, officers, employees
and agents (each, an "Indemnified Party") from and against any and all
losses, claims, actions, damages, liabilities, costs and expenses,
(including reasonable legal costs) (collectively, "Losses"), relating
to or arising from or in connection with this Agreement (including,
without limitation, any Losses arising from or in connection with any
study, test, product or potential product to which this Agreement
relates) or any litigation, investigation or other proceeding relating
to any of the foregoing, except to the extent such Losses are
determined to have resulted solely from gross negligence or
intentional misconduct of the Indemnified Party seeking indemnity
hereunder.
11.0 Where Quintiles advises on the construction of a protocol for a study
involving human volunteers, the Sponsor agrees any advice relating to
the clinical phase of the study is given on the basis that under no
circumstances whatsoever will Quintiles be under any liability
whatsoever to Sponsor or to any third party for such advice or for any
loss or damage howsoever caused consequential upon the giving of such
advice and it is at all times Sponsor's responsibility to obtain all
appropriate and necessary verifications of the safety and suitability
of such a protocol.
12.0 The Contract may be terminated by Sponsor or Quintiles at any time on
thirty (30) days written notice to the other party. On receipt or
delivery of such notification by Quintiles work will be terminated in
accordance with Sponsor's instructions and Sponsor will then be charged
a final instalment to include all costs associated with the
termination, such instalment to be paid on presentation of the
account.
13.0 In the event that the Contract is terminated, Quintiles reserves the
right to retain copies of all material provided to Sponsor as the
result of services performed by Quintiles under the contract for a
period of five (5) years.
14.0 In the event Quintiles shall be delayed or hindered in or prevented
from the performance of any act required hereunder by reasons of
strike, lockouts, labour troubles, inability to procure materials,
failure of power or restrictive government or judicial orders, or
decrees, riots, insurrection, war, Acts of God, inclement weather or
any other reason or cause beyond Quintiles' control performance of such
act shall be excused for the period of the delay.
15.0 Quintiles agrees to furnish and Sponsor agrees to purchase the services
as described overleaf at the prices stated. All payments will be made
in accordance with the schedule referred to overleaf. The final payment
may be adjusted to reflect any budget re-evaluations.
All payments shall be made to Quintiles within thirty (30) days of
receipt of invoice by Sponsor. Sponsor shall pay Quintiles interest in
an amount equal to four percent (4%) above the base interest rate
established by Hambros Bank Limited per month of all amounts owing
hereunder and not paid when due (or the maximum lesser amount permitted
by applicable law).
16.0 Quintiles shall be reimbursed for all reasonable and necessary travel
and lodging expenses incurred in the performance of services provided
herein which have been expressly requested or approved by Sponsor.
Payment for such services shall be made by Sponsor within thirty (30)
days of receipt by Sponsor of invoices or other evidence of such
expenditure.
17.0 Any times quoted for the commencement of the contract services or
delivery of a report are intended to be estimates only and shall not
involve any contractual obligation on Quintiles' part.
18.0 Any notice given by either party hereunder shall be in writing and
delivered personally or by registered or certified mail to the address
shown on the overleaf.
19.0 All provisions of these Terms and Conditions and the Contract are
subject to English law.
20.0 If any one or more provisions of these Terms and Conditions shall be
found to be illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
21.0 These Terms and Conditions shall govern the provision of the contract
services by Quintiles to the exclusion of any other terms and
conditions subject to which the offer to provide the contract services
is accepted or purported to be accepted or subject to which the
provision of the contract services is requested by Sponsor.
22.0 The Contract contains the entire understanding of the parties with
respect to the subject matter herein, and supersedes all previous
agreement (oral or written), negotiations and discussions. The parties
may, from time to time during the continuance of the Contract, modify
any of the provisions hereof by an instrument in writing duly executed
by the parties.
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE
REGISTRANT'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
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