<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1996
REGISTRATION NO. 333-11297
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INTROGEN THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 2834 74-2704230
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
301 CONGRESS AVENUE
SUITE 1850
AUSTIN, TEXAS 78701
(512) 320-5010
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
DAVID G. NANCE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
INTROGEN THERAPEUTICS, INC.
301 CONGRESS AVENUE
SUITE 1850
AUSTIN, TEXAS 78701
(512) 320-5010
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT D. BROWNELL, ESQ. JI HOON HONG, ESQ.
MARNIA NICHOLS, ESQ. SHEARMAN & STERLING
WILSON SONSINI GOODRICH & ROSATI 599 LEXINGTON AVENUE
PROFESSIONAL CORPORATION NEW YORK, NEW YORK 10022
650 PAGE MILL ROAD (212) 848-4000
PALO ALTO, CALIFORNIA 94304
(415) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act of 1933 registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act of
1933 registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE (1) REGISTRATION FEE
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Common Stock, $0.001 par value...................... $37,260,000 $14,000(2)
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
(2) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 28, 1996
2,700,000 SHARES
LOGO
COMMON STOCK
------------------------
All of the shares of Common Stock offered hereby are being sold by Introgen
Therapeutics, Inc. Prior to this offering, there has been no public market for
the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $10.00 and $12.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.
The Common Stock has been approved for quotation on the Nasdaq National
Market System under the symbol "INGN" subject to official notice of issuance.
Rhone-Poulenc Rorer Pharmaceuticals Inc., a party to a collaborative
arrangement with the Company, has agreed to purchase $6.0 million of Common
Stock concurrent with this offering in a private placement at a price per share
equal to the price to public. See "Business of Introgen -- Collaborative
Arrangements and Licensing Agreements."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
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Underwriting
Price to Discount and Proceeds to
Public Commissions(1) Company(2)
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Per Share............................ $ $ $
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Total................................ $ $ $
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Total Assuming Full Exercise of Over-
Allotment Option(3)................ $ $ $
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</TABLE>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $750,000, which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to the
Underwriters to purchase up to 405,000 additional shares, on the same terms,
solely to cover over-allotments. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in New York City on or about
1996.
------------------------
PAINEWEBBER INCORPORATED GENESIS MERCHANT GROUP
SECURITIES
------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities
in any State in which such offer, solicitation, or sale would be unlawful
prior to registration or qualification under the securities laws of any
such State.
<PAGE> 3
[ARTWORK]
Introgen's product development programs are at an early stage. Products, if
any, resulting from such programs cannot be made available for commercial sale
unless and until regulatory approval is obtained. The Company will be required
to complete additional clinical trials to demonstrate the safety and efficacy of
any potential products prior to filing for regulatory approval.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET SYSTEM
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Except as set forth in the financial statements or as otherwise indicated, all
information in this Prospectus assumes (i) the filing of the Company's restated
Certificate of Incorporation authorizing a class of undesignated Preferred
Stock, (ii) the conversion of all outstanding shares of Convertible Preferred
Stock into Common Stock, (iii) the adoption of the Director Option Plan and the
Employee Stock Purchase Plan, (iv) the increase of shares of Common Stock
authorized under the Incentive Stock Plan from 1,250,000 to 1,750,000, each of
which will be effective as of the closing of this offering, (v) the purchase by
RPR of $6.0 million of Common Stock concurrent with this offering in a private
placement at a price per share equal to the price to public, and (vi) no
exercise of the Underwriters' over-allotment option. See "Description of Capital
Stock" and "Underwriting." Rhone-Poulenc Rorer Inc. and its wholly-owned
subsidiaries are referred to in this Prospectus as "RPR." A glossary of defined
terms and acronyms used herein is located on page 58. In addition, all
information related to the Company's clinical data is reported as of September
27, 1996.
Introgen, Introgen Therapeutics, Inc. and the Introgen logo are claimed as
trademarks and service marks for the goods and services for which they are used.
This Prospectus may also include names and marks of companies other than
Introgen.
THE COMPANY
Introgen Therapeutics, Inc. ("Introgen" or the "Company") is a leader in
the development of gene therapy products to treat cancer by direct introduction
of the therapeutic gene inside the body ("in vivo"). Introgen was the first
company to treat a human patient with a cancer gene replacement therapy in vivo,
and it is one of the few companies to have advanced to the clinic with more than
one delivery system (vector). Gene therapy is a new technology that is being
developed using genetic materials as therapeutic agents to treat genetic defects
causing cancer and other diseases. For treating cancer, gene therapy seeks to
restore or correct missing or aberrant gene functions either by the addition of
normal genes ("gene replacement") or by neutralizing the activity of defective
genes ("gene blocking"). Gene therapy in volves two significant components: the
therapeutic genetic material and the system to deliver this material to the
desired site. Introgen is developing two categories of gene cancer therapy
products: (1) "gene replacement" products based on the p53 tumor suppressor gene
and (2) "gene blocking" products designed to neutralize the activity of a mutant
K-ras oncogene. Missing or dysfunctional p53 tumor suppressor genes are the
single most common genetic alteration in cancer discovered to date and occur in
over 50% of human cancers. Mutated K-ras oncogenes have been found in a variety
of human cancers.
The Company is currently conducting Phase I/II clinical trials in the
United States of its lead products for the treatment of non-small cell ("NSC")
lung cancer and head and neck cancer. Additional clinical trials are expected to
commence in the United States, Europe and Asia over the next 12 to 18 months.
These clinical trials would include multi-center, Phase II/III trials of
Introgen's p53 "gene replacement" products. In addition, the Company is
currently conducting preclinical studies, and expects to initiate Phase I and
Phase I/II clinical trials, for products to treat cancers of the liver, bladder,
ovaries, brain, breast and prostate, as well as malignant ascites from
gastrointestinal cancers. The Company's current and expected clinical trials
test the Company's products both alone and in combination with standard cancer
treatments.
Preliminary results from Introgen's Phase I/II human clinical trials
indicate that its p53 "gene replacement" products demonstrate promise with
respect to both lack of toxicity and tumor response. These trials have involved
361 doses of p53 injected into the tumors of 48 patients. Thirty-nine of these
patients have been treated with p53 delivered by an adenoviral vector
("Ad-p53"), and nine patients have been treated with p53 delivered by a
retroviral vector ("RV-p53"). There has been no clinically significant
vector-related toxicity noted. Data from seven of the nine patients in
Introgen's RV-p53 trial for lung cancer could be clinically evaluated with
respect to tumor response. Two patients could not be evaluated in this study due
to complications unrelated to the therapy. Of the seven patients evaluated,
three showed tumor regression at the
3
<PAGE> 5
treatment site, and three showed tumor stabilization. All nine patients died
subsequently from progression of untreated sites of disease, or other
complications of cancer, unrelated to the efficacy or safety of the gene
therapy. Preliminary data from Introgen's clinical trials of Ad-p53 for the
treatment of head and neck cancer and lung cancer indicate that Ad-p53 injected
into tumors produces an increase in p53 expression, programmed cell death
("apoptosis") and tumor necrosis. The results of the RV-p53 trial for lung
cancer have been published in the September 1996 issue of the journal Nature
Medicine.
Development and commercialization of Introgen's p53 and K-ras products are
being pursued in conjunction with RPR pursuant to a collaboration arrangement
with potential aggregate payments to the Company of approximately $50.0 million
prior to product commercialization (including approximately $24.7 million
received to date for research and development payments and equity investments).
The collaboration arrangement provides that Introgen is primarily responsible
for completing the early stage research and development of products, which RPR
is obligated to fund. If RPR elects, it shall be primarily responsible for the
later stage development of the products. In North America, Introgen retains
exclusive manufacturing rights and may elect to form a marketing collaboration
with RPR with respect to collaboration products. Under such marketing
collaboration, RPR and Introgen would share the costs and profits of marketing
the collaboration products in North America. Introgen is entitled to royalties
on product sales arising from RPR's exclusive marketing and manufacturing rights
in Europe. Both parties may, at their own expense, develop and market products
in Japan, Korea, China, Taiwan and India. Introgen and RPR have agreed that they
will not market or license, and RPR will not develop, any p53 or K-ras gene
therapy products prior to October 2004, except under the terms of the
collaboration arrangement. Pursuant to the terms of a stock purchase agreement
between the Company and RPR, RPR has agreed to purchase $6.0 million of Common
Stock in a private placement concurrent with this offering at the price to
public in this offering, as well as to make an additional equity investment of
$2.5 million in 1997 and a potential future milestone payment of approximately
$2.5 million (provided that the collaboration agreements remain in effect).
Introgen has exclusively licensed 21 United States and 25 foreign patent
applications from the University of Texas M.D. Anderson Cancer Center
("UTMDACC"). These licensed patent applications relate to the use of tumor
suppressor genes in combination with DNA-altering treatments such as
chemotherapy and radiation, as well as genes, viral and non-viral delivery
systems, tissue-specific promoters and diagnostics. In January 1996, Introgen
received a notice of allowance of a licensed patent application of UTMDACC
covering certain recombinant p53 adenovirus compositions. Introgen is also
funding research at UTMDACC and the Sidney Kimmel Cancer Center ("SKCC") and has
the right to include certain patentable inventions that arise from the research
under its exclusive license with the corresponding institution.
The Company's objective is to remain a leading developer of gene therapy
products for the treatment of cancer. To accomplish its objective, Introgen's
strategy is to pursue rapid clinical development and regulatory approval of
products that address severe life-threatening cancers; focus on key therapeutic
genes; leverage collaborative arrangements; pursue and expand its patent
portfolio; and, in the longer term, enhance the breadth of its existing product
platform.
The Company was incorporated in Delaware on June 17, 1993. The Company's
principal executive offices are located at 301 Congress Avenue, Suite 1850,
Austin, Texas 78701, and its telephone number is (512) 320-5010.
------------------------------
For a discussion of certain risk factors, including discussions regarding
the Company's early stage of development, lack of commercially available
products and uncertainties related to clinical trials, to be carefully
considered when evaluating an investment in the shares of Common Stock offered
hereby, see "Risk Factors."
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company......... 2,700,000 shares(1)
Common Stock to be Outstanding after the
Offering.................................. 10,909,224 shares(2)
Use of Proceeds............................. To fund product research and development,
product clinical trials, manufacturing scale-up
and capacity expansion, support of sponsored
research programs, marketing and sales
organization development, and other general
corporate purposes.
Proposed Nasdaq National Market System
Symbol.................................... INGN
</TABLE>
- ---------------
(1) Does not include $6.0 million of Common Stock that RPR has agreed to
purchase concurrent with this offering in a private placement at a price per
share equal to the price to public.
(2) Includes 545,455 shares of Common Stock to be purchased by RPR concurrent
with this offering in a private placement at an assumed price to the public
of $11.00 per share. Excludes, as of September 30, 1996, 746,354 shares of
Common Stock reserved for issuance upon the exercise of outstanding options
granted pursuant to the Company's Incentive Stock Plan at a weighted average
exercise price of $0.65 per share and 114,251 shares of Common Stock
issuable upon the exercise of outstanding warrants at a weighted average
exercise price of $7.17 per share. See "Management -- Stock Plans," "Certain
Transactions" and Notes 3 and 8 of Notes to Financial Statements included
herein.
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------
1996 1995 1994(1)
------- ------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Collaborative research and development revenues from
affiliate.............................................. $10,449 $ 2,664 $ --
------ ------- -------
Operating expenses:
Research and development............................... 11,020 3,372 571
General and administrative............................. 972 624 115
------ ------- -------
Total operating expenses............................ 11,992 3,996 686
------ ------- -------
Loss from operations..................................... (1,543) (1,332) (686)
Interest income.......................................... 240 107 --
Interest expense......................................... (29) -- --
------ ------- -------
Net loss................................................. $(1,332) $(1,225) $ (686)
====== ======= =======
Pro forma net loss per share(2).......................... $ (0.18)
======
Shares used in per share calculation..................... 7,478
======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
----------------------------------------------
1995 1994
------- -------
1996
----------------------
PRO FORMA AS
ADJUSTED(3)
ACTUAL ------------
-------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash............................................ $ 7,024 $ 39,895 $ 2,799 $ 501
Working capital................................. 5,613 38,484 2,060 341
Total assets.................................... 8,965 41,836 3,478 521
Total liabilities............................... 2,045 2,045 903 180
Accumulated deficit............................. (3,244) (3,244) (1,911) (686)
Stockholders' equity............................ 6,920 39,791 2,575 341
</TABLE>
- ---------------
(1) From the Company's inception on June 17, 1993 through June 30, 1994.
(2) See Note 2 of Notes to Financial Statements included herein for a
description of the computation of pro forma net loss per share.
(3) Adjusted to reflect the sale of 2,700,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $11.00 per
share and the sale of 545,455 shares of Common Stock to RPR concurrent with
this offering in a private placement at a price equal to the intial offering
price and the receipt of the estimated net proceeds therefrom.
5
<PAGE> 7
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information contained in this Prospectus,
in evaluating an investment in the shares offered hereby.
EARLY STAGE OF DEVELOPMENT; NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT
The Company is engaged in the development of gene therapy products and
related delivery systems for the treatment of cancer. No gene therapy products
are currently being marketed. The Company does not expect to have any products
commercially available for a number of years, if at all. Because the Company's
research and clinical development programs are at an early stage, substantial
additional research will be necessary in order for the Company to fully develop
products based on the Company's licensed technology. No assurance can be given
that any of the Company's development programs will be successfully completed,
that clinical trials will commence as planned, that required regulatory
approvals will be obtained on a timely basis, if at all, or that any products
for which approval may be obtained will be commercially successful. As products
are identified, they will require significant additional research, development,
preclinical and clinical testing, regulatory approval and substantial additional
investment prior to commercialization. There can be no assurance that any such
potential products will be successfully developed, proven to be safe and
efficacious in clinical trials, meet applicable regulatory standards, be capable
of being produced in commercial quantities at acceptable costs, be eligible for
third party reimbursement from governmental or private insurers, be successfully
marketed or achieve market acceptance. Further, these potential products may
prove to have undesirable or unintended side effects and require complex
delivery systems that may prevent or limit their commercial use. The Company has
not completed any Phase I or Phase I/II clinical trials of its potential
products. To date, no gene therapy products for cancer have been approved for
sale in the United States or internationally. If any of the Company's
development programs are not successfully completed, required regulatory
approvals are not obtained, or products for which approvals are obtained are not
commercially successful, the Company's business, financial condition and results
of operations would be materially adversely affected.
The Company's business is subject to the risks inherent in the development
of new products using new technologies and approaches. There can be no assurance
that unforeseen problems will not develop with these technologies or
applications, that the Company will be able to successfully address
technological challenges it encounters in its research and development programs
or that commercially feasible products will ultimately be developed by the
Company. See "Business of Introgen -- Product Development Programs."
LIMITED OPERATING HISTORY; UNCERTAINTY OF FUTURE PROFITABILITY
The Company is at a very early stage of development and has a limited
operating history which investors may use to evaluate its prospects or future
performance. Since its inception in June 1993, the Company has been engaged in
organizational and start-up activities, including the negotiation of the
collaborative agreements with UTMDACC and RPR, and early stage development of
potential gene therapy products for cancer. At June 30, 1996, the Company had an
accumulated deficit since inception of approximately $3.2 million. The Company's
only revenues to date have been payments from RPR under collaborative research
agreements and interest income. The Company anticipates that it will incur
losses in the future, which are likely to be greater than losses incurred in
prior years. Introgen also expects to incur substantial additional operating
expenses over the next several years as its research, development, preclinical
testing and clinical trial activities increase. To the extent that the Company
is unable to extend RPR's obligation to fund early stage research and
development beyond October 1997, the Company would incur even greater increases
in expenses and losses from operations. There can be no assurance that the
Company's products under development will be successfully developed or that its
products, if successfully developed, will generate revenues sufficient to enable
the Company to earn a profit. Introgen does not expect to generate revenues from
the sale of products, if any, for the foreseeable future. The Company's ability
to achieve profitability depends in part on its ability to enter into agreements
for product development, obtain regulatory approval for its products and develop
the capacity, or enter into agreements, for the manufacture, marketing and sale
of products. There can be no
6
<PAGE> 8
assurance that Introgen will obtain required regulatory approvals, or
successfully develop, manufacture, commercialize and market product candidates
or that the Company will ever achieve product revenues or profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business of Introgen -- Collaborative Arrangements and
Licensing Agreements."
NEED FOR ADDITIONAL FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL; DISCRETION AS TO
USE OF PROCEEDS
The Company will require substantial additional funding in order to
continue its research and product development programs (including preclinical
testing and clinical trials of its product candidates), for operating expenses
and, for the pursuit of regulatory approvals for its product candidates.
Introgen may also require additional funding to establish manufacturing and
marketing capabilities in the future. The Company believes that its existing
capital resources, the net proceeds of this offering and the concurrent private
placement, and future payments under collaborative agreements will be sufficient
to satisfy its funding requirements through fiscal year 1998 but may not be
sufficient to fund the Company's operations to the point of commercial
introduction of any of its potential products. However, no assurance can be
given that such resources will be sufficient to conduct its research and
development programs as planned, or that changes in the Company's research and
development plans or other changes affecting the Company's operating expenses
will not result in the expenditure of such resources before such time. The
Company's future capital requirements will depend on many factors, including
continued scientific progress in its research and development programs, the
magnitude of these programs, progress with preclinical testing and clinical
trials, the time and expense involved in obtaining regulatory approvals, if any,
competing technological and market developments, the establishment of additional
collaborative arrangements, the costs involved in filing and prosecuting patent
applications and enforcing patent claims, establishing manufacturing facilities,
conducting commercialization activities and arrangements, product in-licensing
and any possible acquisitions. There can be no assurance that the Company's cash
reserves and other liquid assets, including the net proceeds of this offering,
together with funding that may be received under the Company's collaborative
agreements will be adequate to satisfy its capital and operating requirements.
The Company intends to seek additional funding through collaborative
agreements and may seek additional funding through public or private sales of
the Company's securities, including equity securities, or from other sources. In
addition, the Company may pursue opportunities to obtain debt financing in the
future. There can be no assurance, however, that additional equity or debt
financing will be available on reasonable terms, if at all. Any future equity
financings may be dilutive to the Company's stockholders. If adequate funds are
not available, the Company may be required to curtail significantly one or more
of its research and development programs and/or obtain funds through
arrangements with corporate partners or others that may require the Company to
relinquish rights to certain of its technologies or product candidates. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company expects to use the net proceeds of this offering to pay costs
and expenses related to product research and development, product clinical
trials, manufacturing scale-up and capacity expansion, support of sponsored
research programs, marketing and sales organization development, and other
general corporate purposes. As of the date of this Prospectus, other than as set
forth above, the Company's management has no specific plans as to the use of the
net proceeds from this offering, and will have broad discretion in the
application of the proceeds. Pending any such uses, the net proceeds will be
invested in investment-grade, interest-bearing securities. See "Use of
Proceeds."
DEPENDENCE ON COLLABORATIVE ARRANGEMENTS
The Company's business strategy for the development, clinical trials,
manufacturing and commercialization of its products includes maintaining and
entering into various collaborations with corporate partners, academic
institutions and others to help it carry out research, clinical testing,
manufacturing and commercialization of its products. To date, the Company has
entered into collaborative arrangements with several partners, including UTMDACC
and RPR. There can be no assurance that the Company will be able to maintain
existing collaborative arrangements, negotiate collaborative arrangements in the
future on acceptable terms, if at all, or that any such collaborative
arrangements will be successful. In addition, the Company's
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<PAGE> 9
leading product candidates are being developed in collaboration with RPR. Other
potential products of the Company are at a very early stage of preclinical
development, and there can be no assurance that the Company will be able to
enter into collaborative arrangements with established pharmaceutical companies
to develop and commercialize such potential products or that such arrangements
could be entered into within a reasonable period of time or on terms acceptable
to the Company.
To the extent that the Company is not able to maintain or establish such
arrangements, the Company would be required to undertake such activities at its
own expense, which would significantly increase the Company's capital
requirements and limit the programs the Company would be able to pursue. In
addition, the Company may encounter significant delays in introducing its
products into certain markets or find that the development, manufacture or sale
of its products in such markets is adversely affected by the absence of such
collaborative agreements. RPR's obligation to continue funding of early stage
research and development pursuant to the collaborative arrangement with Introgen
expires in October 1997. There can be no assurance that the funding under the
collaborative arrangement will be extended under the existing or acceptable
terms, if at all. If RPR does not elect to continue the funding, Introgen would
have to fund such research on its own. Moreover, under the collaboration
arrangement, Introgen is precluded from marketing or licensing to third parties
any p53 or K-ras products prior to October 2004. If the Company is successful in
developing such products on its own, this could delay marketing efforts.
The Company cannot control the amount and timing of resources that its
collaborative partners devote to the Company's programs or potential products,
which can vary because of factors unrelated to such programs or potential
products. In particular, RPR may be largely responsible for the later stage
clinical development of the Company's p53 and K-ras products being developed in
collaboration with RPR, and no assurance can be given as to the resources that
RPR will devote to such development. In addition, these relationships may in
some cases be terminated at the discretion of the Company or the Company's
collaborative partners with only limited notice to the Company and for reasons
outside the Company's control, including failure by the Company to meet certain
technical milestones or satisfy other contractual obligations, some of which may
require significant clinical progress.
If any of the Company's collaborative partners breaches or terminates its
agreements with the Company or fails to conduct its collaborative activities in
a timely manner, the preclinical or clinical development or commercialization of
product candidates or research programs will be delayed, and the Company will be
required to devote additional resources to product development and
commercialization or terminate certain development programs. There can also be
no assurance that disputes will not arise in the future with respect to the
ownership of rights to any technology developed with collaborators or otherwise.
Possible disagreements between collaborators and the Company could lead to
delays in the collaborative research, development or commercialization of
certain product candidates or could require or result in litigation or
arbitration, which may be time consuming and expensive, and would have a
material adverse effect on the Company's business, financial condition and
results of operations.
In addition, the Company's collaborative partners may develop outside of
the scope of the collaboration agreements, either alone or with others, products
that compete with the development and marketing of the Company's products.
Competing products, either developed by the collaborative partners or to which
the collaborative partners have rights, may result in their withdrawal of
support with respect to all or a portion of the Company's technology, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business of Introgen -- Collaborative
Arrangements and Licensing Agreements."
PATENT APPLICATIONS AND PROPRIETARY TECHNOLOGY
The Company's patent position, like that of other biotechnology and
pharmaceutical companies, is highly uncertain and involves complex legal and
factual questions. Claims made under patent applications may be denied or
significantly narrowed. There can be no assurance that any patents which may be
issued as a result of the Company's licensed United States and international
patent applications will provide any competitive advantage to the Company or
that they will not be successfully challenged, invalidated or circumvented in
the
8
<PAGE> 10
future. In addition, there can be no assurance that competitors, many of which
have substantial resources and have made significant investments in competing
technologies, will not seek to apply for and obtain patents that will prevent,
limit or interfere with the Company's ability to make, use and sell its
potential products either in the United States or in international markets.
Patent applications in the United States are, in most cases, maintained in
secrecy until patents issue, and publication of discoveries in the scientific or
patent literature frequently occurs substantially later than the date on which
the underlying discoveries were made. Consequently, the Company cannot be
certain that its licensed patent applications lay claim to the first made
inventions or that they were the first filed patent applications for such
inventions.
The biotechnology and pharmaceutical industry has been characterized by
extensive litigation regarding patents and other intellectual property rights,
and companies have employed intellectual property litigation to gain a
competitive advantage. There are a number of filed and issued patents related to
gene therapy and the treatment of cancer by gene therapy. A series of patents
controlled by Enzo Biochem, Inc. ("Enzo Biochem") relating to antisense
technology has recently been found invalid by the United States District Court
for the District of Delaware. Introgen anticipates that Enzo Biochem will appeal
this ruling. If the ruling is overturned and this series of patents is held to
be valid, Introgen's RV-AS-K-ras product could be subject to an infringement
claim.
Canji, Inc. ("Canji"), a wholly-owned subsidiary of Schering-Plough
Corporation ("Schering-Plough"), controls a pending United States patent
application and its European counterpart which involve p53 related therapeutic
applications. The Company's knowledge about the status of this United States
patent application is limited because this United States application has been
maintained in secrecy. The claims of the European counterpart to this
application have been rejected but could later be allowed based upon further
prosecution. Another pending United States patent application and its European
counterpart involve a method of supplying normal p53 function to a cell which
has lost such function and associated delivery systems. These patent
applications are controlled by Pharmagenics, Inc. ("Pharmagenics"). Accordingly,
since neither application has issued, the Company is unable to assess the
potential breadth and validity of these pending applications.
In addition, Canji controls an issued United States patent and its European
counterpart involving a method of treating mammalian cancer cells lacking normal
p53 protein by introducing into the cancer cell a normal p53 protein. While the
Company believes, after consultation with its patent counsel, that its potential
products do not infringe any valid claim of the Canji patent, there can be no
assurance that Canji will not assert a claim against the Company. Furthermore,
there can be no assurance that the Company will not become subject to any other
patent infringement claims or litigation arising out of pending applications,
should they issue, including the Canji and Pharmagenics applications described
above, or interference proceedings declared by the United States Patent and
Trademark Office ("USPTO") to determine the priority of inventions.
The defense and prosecution of intellectual property suits, USPTO
interference proceedings and related legal and administrative proceedings
involve complex legal and factual questions. As a result such proceedings are
costly and time-consuming to pursue and their outcome is uncertain. Litigation
may be necessary to enforce patents issued or licensed to the Company, to
protect trade secrets or know-how owned by the Company or to determine the
enforceability, scope and validity of the proprietary rights of others. Any
litigation or interference proceedings will result in substantial expense to the
Company and significant diversion of effort by the Company's technical and
management personnel. An adverse determination in litigation or interference
proceedings to which the Company may become a party could subject the Company to
significant liabilities to third parties or require the Company to seek licenses
from third parties or prevent the Company from selling its products in certain
markets, or at all. Although patent and intellectual property disputes are often
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial and could include ongoing royalties.
Furthermore, there can be no assurance that the necessary licenses would be
available to the Company on satisfactory terms, if at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could restrict or prevent the
9
<PAGE> 11
Company from manufacturing and selling its products, which would have a material
adverse effect on the Company's business, financial condition and results of
operations.
In addition to patents, the Company relies on trade secrets and proprietary
know-how, which it seeks to protect, in part, through confidentiality and
proprietary information agreements. There can be no assurance that such
confidentiality or proprietary information agreements will not be breached, that
the Company would have adequate remedies for any breach, or that the Company's
trade secrets will not otherwise become known to or be independently developed
by competitors.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
Before obtaining regulatory approvals for the commercial sale of any of its
potential products, the Company must demonstrate through preclinical testing and
clinical trials that the product is safe and effective for use in the target
indication. The Company's products have only been administered to a total of 48
patients. The results from preclinical testing and early clinical trials may not
be predictive of results obtained in later clinical trials, and there can be no
assurance that clinical trials conducted by the Company will demonstrate
sufficient safety and efficacy to obtain the requisite regulatory approvals or
will result in marketable products. In addition, the Company's clinical trials
are conducted with patients who have failed conventional treatments and they are
often in the most advanced stages of the disease. During the course of
treatment, these patients can die or suffer adverse medical effects for reasons
that may not be related to the pharmaceutical agent being tested but which can
nevertheless adversely affect clinical trial results. A number of companies in
the biotechnology and pharmaceutical industries have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier
trials. If the Company's product candidates are not shown to be safe and
effective in clinical trials, the resulting delays in developing other products
and conducting related preclinical testing and clinical trials, as well as the
potential need for additional financing, would have a material adverse effect on
the Company's business, financial condition and results of operations.
The commencement and rate of completion of clinical trials conducted by the
Company may be delayed by many factors, including slower than expected patient
recruitment or unforeseen safety issues. In addition, the results of ongoing
clinical trials could cause the Company to terminate, modify or delay currently
scheduled clinical trials. Any delays in, or termination of, the Company's
clinical trials would have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
Introgen will be permitted by regulatory authorities to undertake any additional
clinical trials for its potential products or, if such additional trials are
conducted, that any of the Company's product candidates will prove to be safe
and efficacious or will receive regulatory approvals. See "Business of
Introgen -- Product Development Programs" and "-- Government Regulation."
GOVERNMENT REGULATIONS; NO ASSURANCE OF REGULATORY APPROVALS
The Company's research, preclinical testing and clinical trials of its
potential products are, and the manufacturing and marketing of its products will
be, subject to extensive and rigorous regulation by numerous government
authorities in the United States, including the United States Food and Drug
Administration (the "FDA"), and in other countries where the Company intends to
test and market its product candidates. Prior to marketing, any product
developed by the Company must undergo an extensive regulatory approval process.
This regulatory process includes preclinical testing and clinical trials of each
product candidate to establish its safety and efficacy, can take many years and
require the expenditure of substantial resources, and will involve
post-marketing surveillance. Data obtained from preclinical testing and clinical
trials are susceptible to varying interpretations which could delay, limit or
prevent regulatory approval. In addition, delays or rejections may be
encountered based upon changes in FDA policy for drug approval during the period
of product development and the FDA regulatory review of each submitted new drug
application ("NDA") or product license application ("PLA"). Similar delays may
also be encountered in foreign countries. There can be no assurance that
regulatory approval will be obtained for any products developed by the Company.
Moreover, regulatory approval may entail limitations on the indicated uses of
the product. Further, even if regulatory approval is obtained, a marketed drug
and its manufacturer are subject to continuing review, and discovery of
previously unknown problems with a product or manufacturer can result in the
withdrawal of the product from the
10
<PAGE> 12
market. Violations of regulatory requirements at any stage, including
preclinical testing and clinical trials, the approval process or post-approval,
may result in various adverse consequences including the FDA's delay in
approving or its refusal to approve a product, withdrawal of an approved product
from the market, and the imposition of civil or criminal penalties against the
manufacturer and NDA or PLA holder. The Company has not completed any Phase I or
Phase I/II clinical trials of its potential products or commenced any Phase
II/III trials. To date, no gene therapy products for cancer have been approved
for sale in the United States or internationally. No assurance can be given that
the Company will be able to obtain FDA approval for any products. Failure to
obtain requisite regulatory approvals or failure to obtain approvals of the
scope requested will delay or preclude the Company from marketing its products,
could limit the commercial use of its products and would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business of Introgen -- Government Regulation."
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE
The biotechnology and pharmaceutical industries are subject to rapid and
intense technological change. The Company faces, and will continue to face,
competition in the development and marketing of its product candidates from
academic institutions, government agencies, research institutions and
biotechnology and pharmaceutical companies. Competition may arise from other
drug development technologies, methods of preventing or reducing the incidence
of disease, including vaccines, and new small molecule or other classes of
therapeutic agents. There can be no assurance that developments by others will
not render the Company's product candidates or technologies obsolete or
noncompetitive.
There are many companies, both publicly and privately held, including
well-known pharmaceutical companies, as well as academic and other research
institutions, engaged in developing products for the treatment of cancer. The
Company is aware that Canji, a wholly-owned subsidiary of Schering-Plough, is
currently conducting clinical trials with p53 related gene therapy products.
Various small molecule drug and antisense approaches to cancer treatment are
being investigated by other companies in earlier stages of research and
development. The Company is also aware that Onyx Pharmaceuticals, Inc. has
initiated a clinical study of a virus-based therapy which targets cells that are
mutant for p53. Certain companies, including Merck & Co. and Genentech, Inc.,
are developing small molecule drugs to inhibit targets involving the ras
pathway. Other companies have developed or are developing small molecule drugs,
gene therapy and antisense approaches to treat ras-related cancers. Many of
these companies and institutions have substantially greater financial resources
and larger research and development staffs than the Company. In addition, many
of these competitors have significantly greater experience than the Company in
developing products, in undertaking preclinical testing and human clinical
trials, in obtaining FDA and other regulatory approvals of products and in
manufacturing and marketing products. Accordingly, the Company's competitors may
succeed in obtaining patent protection, receiving FDA approval or
commercializing products more rapidly than the Company. If and when the Company
commences commercial sales of products, it will be competing against companies
with greater marketing and manufacturing capabilities, areas in which it has
limited or no experience. The Company also competes with universities and other
research institutions in the development of products, technologies and
processes. In many instances, the Company competes with other commercial
entities in acquiring products or technologies from universities. See "Business
of Introgen -- Competition."
LIMITED MANUFACTURING EXPERIENCE
The material used in the Company's preclinical testing and clinical trials
was produced by UTMDACC and by a third-party contract manufacturer. The Company
recently completed a pilot-scale manufacturing facility with sufficient capacity
to supply Ad-p53 for currently planned clinical trials. The Company has not
produced RV-p53 or any of its other potential products at its pilot-scale
manufacturing facility. The production of clinical quantities of material
requires advanced manufacturing techniques and rigorous process controls.
Furthermore, the Company is required to register the facility with the FDA and
is subject to inspections confirming compliance with current Good Manufacturing
Practices ("cGMP") regulations established by the FDA. This facility is
currently producing its first batches of Ad-p53 for evaluation. No
11
<PAGE> 13
assurance can be given that the Company will be able to produce clinical
quantities of its potential products in compliance with applicable regulations
or at an acceptable cost.
The Company is considering the establishment of a commercial-scale cGMP
manufacturing facility to further support clinical trials and the possible
commercial sale of its potential products. If the Company decides to proceed
with construction, the Company estimates that it will take a minimum of
approximately 24 to 30 months at a minimum cost of approximately $8 to $12
million to construct and to validate the cGMP manufacturing facility. Companies
often encounter manufacturing difficulties, including problems involving
production yields, quality control and assurance or shortages of qualified
personnel, during the scale-up of manufacturing. There can be no assurance that
the Company will actually construct a commercial-scale cGMP manufacturing
facility, that the Company's estimates of the time and costs involved in
constructing such a facility are accurate or that if it is constructed, the
manufacturing facility will be able to produce commercial quantities of its
potential products in compliance with applicable regulations or at an acceptable
cost.
If the Company is unable to produce its potential products in clinical or,
if necessary, commercial quantities, then it will remain dependent on
third-party contract manufacturers for the production of such materials. There
are only a limited number of contract manufacturers who have the ability and
capacity to produce the Company's potential products. Failure by any such
contract manufacturer or the Company to deliver the Company's required
quantities of potential products on a timely basis and at commercially
reasonable prices would materially adversely affect the Company's business,
financial condition and results of operations.
NO MARKETING AND SALES EXPERIENCE
The Company has no experience in marketing or selling pharmaceutical
products and does not have a marketing and sales staff. In order to achieve
commercial success for any product candidate approved by the FDA, Introgen must
either develop a marketing and sales force or enter into arrangements with third
parties to market and sell its products. There can be no assurance that Introgen
will successfully develop such experience or that it will be able to enter into
marketing and sales agreements with others on acceptable terms, if at all. If
the Company develops its own marketing and sales capabilities as part of a
marketing collaboration with RPR to sell products in North America, it will
compete with other companies that have experienced and well-funded marketing and
sales operations. To the extent that RPR has exclusive marketing and sales
rights in Europe and to the extent that the Company enters into a marketing
collaboration with RPR, any revenues to be received by Introgen will be
dependent on the efforts of others. There can be no assurance that such efforts
will be successful. See "Business of Introgen -- Marketing and Sales."
NEED TO ATTRACT AND RETAIN KEY EMPLOYEES AND CONSULTANTS
The Company is highly dependent on the principal members of its scientific
and management staff. In order to pursue its product development and marketing
plans, the Company will be required to hire additional qualified scientific
personnel to perform research and development, as well as personnel with
expertise in clinical testing, government regulation, manufacturing and
marketing. In addition, the Company will be required to hire additional
qualified scientific personnel in order to meet its obligations to perform
research under its collaborative agreements with RPR. Expansion in product
development also is expected to require the addition of management personnel and
the development of additional expertise by existing management personnel.
Attracting and retaining qualified personnel, consultants and advisors will be
critical to the Company's success. There can be no assurance that the Company
will be able to attract and retain personnel on acceptable terms given the
competition for such personnel among biotechnology, pharmaceutical and health
care companies, universities and non-profit research institutions. In addition,
the Company relies on members of its Scientific Advisory Board and several other
consultants to assist the Company in formulating its research and development
strategy. All of Introgen's consultants and the members of the Company's
Scientific Advisory Board are employed by employers other than the Company, and
may have commitments to, or advisory or consulting agreements with, other
entities that may limit their availability to the Company. The loss of services
of any of these personnel could impede the achievement of the Company's
development objectives. See "Business of Introgen -- Scientific Advisory Board"
and "Management."
12
<PAGE> 14
POTENTIAL PRODUCT LIABILITY EXPOSURE AND LIMITED INSURANCE COVERAGE
The use of any of the Company's potential products in clinical trials, and
the sale of any approved products, may expose the Company to liability claims
resulting from the use of its products. These claims might be made directly by
consumers, health care providers or by pharmaceutical companies or others
selling such products. Introgen has obtained limited product liability insurance
coverage for its clinical trials in the amount of $2.0 million per occurrence
and $2.0 million in the aggregate. The Company intends to expand its insurance
coverage to include the sale of commercial products if marketing approval is
obtained for products in development. However, insurance coverage is becoming
increasingly expensive, and no assurance can be given that the Company will be
able to maintain insurance coverage at a reasonable cost or in sufficient
amounts to protect the Company against losses due to liability. There can also
be no assurance that the Company will be able to obtain commercially reasonable
product liability insurance for any products approved for marketing. A
successful product liability claim or series of claims brought against the
Company could have a material adverse effect on its business, financial
condition and results of operations.
HAZARDOUS AND RADIOACTIVE MATERIALS; ENVIRONMENTAL MATTERS
The Company's research and development processes involve the controlled use
of hazardous and radioactive materials. The Company is subject to federal, state
and local laws and regulations governing the use, manufacture, storage, handling
and disposal of such materials and certain waste products. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by such laws and regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could exceed the resources of
the Company. The Company believes that it is in compliance in all material
respects with applicable environmental laws and regulations. Accordingly, it
does not expect to make material capital expenditures for environmental control
facilities in the near-term. However, there can be no assurance that it will not
be required to incur significant costs to comply with environmental laws and
regulations in the future, or that the operations, business or assets of the
Company will not be materially adversely affected by the costs of compliance
with current or future environmental laws or regulations.
NO PRIOR PUBLIC MARKET FOR COMMON STOCK
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that a regular trading market will develop
and continue after this offering or that the market price of the Common Stock
will not decline below the initial public offering price. The initial public
offering price will be determined through negotiations between the Company and
the representatives of the Underwriters (the "Representatives") and may not be
indicative of the market price of the Common Stock following this offering.
Among the factors considered in such negotiations are prevailing market
conditions, certain financial information of the Company, market valuations of
other companies that the Company and the Representatives believe to be
comparable to the Company, estimates of the business potential of the Company,
the present state of the Company's development and other factors deemed
relevant. See "Underwriting."
VOLATILITY OF COMMON STOCK PRICE
The market prices for securities of biotechnology and pharmaceutical
companies have historically been highly volatile, and the market has from time
to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. Factors such as
fluctuations in the Company's operating results, announcements of technological
innovations or new therapeutic products by the Company or others, clinical trial
results, developments concerning collaborative arrangements, government
regulation, developments in patent or other proprietary rights, public concern
as to the safety of potential products developed by the Company or others,
future sales of substantial amounts of Common Stock by existing stockholders,
comments by securities analysts and general market conditions can have an
adverse effect on the market price of the Common Stock. In addition, the
realization of any of the risks described in
13
<PAGE> 15
these "Risk Factors" could have a dramatic and material adverse impact on market
price of the Company's Common Stock.
POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
As of September 30, 1996, 860,605 shares of Common Stock are issuable upon
the exercise of outstanding stock options, warrants and conversion rights. The
issuance of Common Stock, which will occur upon the exercise of such stock
options, warrants and conversion rights, and as a result of future sales of
Common Stock by the Company or by existing stockholders, or the perception that
such sales could occur, could adversely affect the market price of the Common
Stock. In private placement transactions between August 1994 and June 1996, the
Company sold to RPR and various institutional and individual investors shares of
convertible preferred stock of the Company (the "Convertible Preferred Stock"),
which will convert into 5,220,409 shares of Common Stock at the closing of this
offering. The sale of a significant number of shares by these investors could
have a substantial negative impact on the market price of the Common Stock or
impair the Company's ability to raise capital. In addition, RPR and the Board of
Regents of the University of Texas System (the "Board of Regents"), are
significant stockholders. The sale of shares by either of these entities could
have a substantial negative impact on the market price of the Common Stock. Each
of the Company's officers, directors and certain other stockholders has agreed
with the Representatives for a period of 180 days after the date of this
Prospectus, subject to certain exceptions, not to offer to sell, contract to
sell, grant an option to sell, or otherwise dispose of any shares of Common
Stock, any options or warrants to purchase any shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock owned as
of the date of this Prospectus or thereafter acquired directly by such holders
or with respect to which they have or hereafter acquire the power of
disposition, without the prior written consent of PaineWebber Incorporated.
However, PaineWebber Incorporated may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements. Certain stockholders are also entitled to registration
rights. See "Description of Capital Stock -- Registration Rights of Certain
Holders" and "Shares Eligible for Future Sale."
CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS
Following this offering, the present directors, executive officers and
principal stockholders of the Company and their affiliates will beneficially own
approximately 71% of the Common Stock. Accordingly, such stockholders, if they
act together, will have the ability to control the election of the Company's
directors and most other stockholders' actions. See "Principal Stockholders."
POTENTIAL ADVERSE EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company's restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") does not provide for cumulative voting in the
election of directors. In addition, the Board of Directors has the authority,
without further action by the stockholders, to fix the rights and preferences
of, and issue shares of, Preferred Stock. Further, the Company is subject to
Section 203 of the Delaware General Corporation Law which, subject to certain
exceptions, restricts certain transactions and business combinations between a
corporation and a stockholder owning 15% or more of the corporation's
outstanding voting stock (an "interested stockholder") for a period of three
years from the date the stockholder becomes an interested stockholder. The lack
of cumulative voting, preferred stock provision and other provisions of the
Company's charter and Delaware corporate law may discourage certain types of
transactions involving an actual or potential change in control of the Company.
In addition, in the event of a merger, reorganization or change in the ownership
of the Company, all options outstanding under the Company's Incentive Stock Plan
and Director Option Plan shall be fully vested. See "Description of Capital
Stock -- Certain Charter and Bylaws Provisions and Delaware Anti-Takeover
Statute," "Management -- Compensation of Directors" and "-- Stock Plans."
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<PAGE> 16
IMMEDIATE AND SUBSTANTIAL DILUTION
Upon the purchase of the Common Stock offered hereby, investors will
experience an immediate and substantial dilution of $7.35 per share in the pro
forma net tangible book value of the Common Stock they acquire in this offering
and in the RPR private placement. Additional dilution is likely to occur upon
the exercise of options, warrants and conversion rights granted by the Company.
See "Dilution" and "Shares Eligible for Future Sale."
ABSENCE OF CASH DIVIDENDS
The Company has never paid any cash dividends and does not anticipate
paying cash dividends on the Common Stock in the foreseeable future. See
"Dividend Policy."
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,700,000 shares of
Common Stock offered hereby are estimated to be approximately $26.9 million
($31.0 million if the Underwriters' over-allotment option is exercised in full),
at an assumed initial public offering price of $11.00 per share, after deducting
the estimated underwriting discounts and commissions and offering expenses.
The Company anticipates using the net proceeds from this offering as
follows: approximately $22 million to fund its research and development efforts,
including product clinical trials, manufacturing scale-up and capacity expansion
and support of sponsored research programs, and approximately $4.9 million to
fund marketing and sales organization development and other general corporate
purposes. Although the Company expects to use the proceeds from this offering
for the above mentioned activities no specific allocations of the offering
proceeds have been made by the Company. The actual amount and timing of
expenditures in each of these areas may vary significantly depending upon the
rate of the Company's progress in research and development, the results of
preclinical studies and clinical trials, the timing of regulatory approvals,
receipt of payments, if any, under collaborative agreements entered into by the
Company, the availability of alternative methods of financing, and competitive
developments. Pending such uses, the net proceeds of this offering will be
invested in investment-grade, interest-bearing securities.
The Company believes that its existing capital resources, the net proceeds
of this offering and the concurrent private placement, and future payments due
under collaborative agreements will be sufficient to satisfy its funding
requirements through fiscal year 1998 but may not be sufficient to fund the
Company's operations to the point of commercial introduction of any of its
potential products. There can be no assurance, however, that changes in the
Company's research and development plans or other changes affecting the
Company's operating expenses will not result in the expenditure of such
resources before such time. The Company will need to raise substantial
additional funds to continue to conduct its research and development programs
and to commence or continue the preclinical studies and clinical trials
necessary to obtain regulatory approval for any of its proposed products. There
can be no assurance that such funds will be available on favorable terms, or at
all. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," and "Risk
Factors -- Need for Additional Funding; Uncertainty of Access to Capital;
Discretion as to Use of Proceeds."
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company intends to retain earnings, if any, and will not pay cash dividends
in the foreseeable future. Any future determination to pay cash dividends will
be at the discretion of the Board of Directors and will be dependent upon the
Company's financial condition, results of operations, capital requirements,
general business conditions and such other factors as the Board of Directors may
deem relevant.
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<PAGE> 18
CAPITALIZATION
The following table sets forth as of June 30, 1996, after giving effect to
the 1.2 for 1 split of the Common Stock and the filing of an amendment to the
Company's Certificate of Incorporation authorizing 50,000,000 shares of Common
Stock, $0.001 par value, both effected in August 1996, (i) the pro forma
capitalization of the Company after giving effect to the conversion of all of
the outstanding shares of Convertible Preferred Stock into Common Stock and the
filing of the Restated Certificate of Incorporation authorizing 5,000,000 shares
of Preferred Stock, $0.001 par value (the "Preferred Stock"), at the closing of
this offering and (ii) the pro forma capitalization of the Company as adjusted
to reflect the issuance and sale of 2,700,000 shares of Common Stock offered
hereby at an assumed public offering price of $11.00 per share and the sale of
$6 million of Common Stock to RPR in a concurrent private placement at a price
per share equal to the initial public offering price per share and the receipt
of the estimated net proceeds therefrom. This table should be read in
conjunction with the financial statements, related notes and other financial
information included herein.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligations, net of current portion.......... $ 130 $ 130
------- -------
Stockholders' equity:
Preferred Stock, 5,000,000 shares ($.001 par value)
authorized: none issued and outstanding pro forma or
pro forma as adjusted................................. -- --
Common Stock, 50,000,000 shares ($.001 par value)
authorized; 7,663,769 shares issued and outstanding
pro forma and 10,909,224 shares issued and outstanding
pro forma
as adjusted........................................... 8 11
Additional paid-in capital............................... 10,743 43,611
Deferred compensation.................................... (587) (587)
Accumulated deficit...................................... (3,244) (3,244)
------- -------
Total stockholders' equity....................... 6,920 39,791
------- -------
Total capitalization............................. $ 7,050 $ 39,921
======= =======
</TABLE>
- ---------------
(1) Excludes, as of September 30, 1996, 746,354 shares of Common Stock reserved
for issuance upon exercise of outstanding options granted pursuant to the
Company's Incentive Stock Plan at a weighted average exercise price of $0.65
per share and 114,251 shares of Common Stock issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $7.17 per
share. See "Management -- Stock Plans," "Certain Transactions" and Notes 3
and 8 of Notes to Financial Statements.
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<PAGE> 19
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996
was $6.9 million or $0.90 per share of Common Stock. Pro forma net tangible book
value per share represents the amount of the Company's total tangible assets
less total liabilities, divided by the number of shares of Common Stock
outstanding after giving effect to the conversion of all outstanding shares of
Convertible Preferred Stock into Common Stock upon closing of this offering and
the 1.2 for 1 stock split effected in August 1996. Pro forma net tangible book
value dilution per share represents the difference between the amount per share
paid by purchasers of shares of Common Stock in the offering made hereby and the
adjusted pro forma net tangible book value per share of Common Stock immediately
after completion of this offering. After giving effect to the sale of 2,700,000
shares of Common Stock offered hereby (at an assumed public offering price of
$11.00 per share) and the sale of $6 million of Common Stock to RPR in a
concurrent private placement at a price per share equal to the initial public
offering price per share and the receipt of the estimated net proceeds
therefrom, the adjusted pro forma net tangible book value as of June 30, 1996
would have been $39.8 million or approximately $3.65 per share of Common Stock.
This represents an immediate increase in pro forma net tangible book value of
$2.75 per share to existing stockholders and an immediate dilution in adjusted
pro forma net tangible book value of $7.35 per share to new investors of Common
Stock in this offering and the private placement, as illustrated by the
following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............................... $11.00
Pro forma net tangible book value as of June 30, 1996............. $0.90
Increase attributable to new investors............................ 2.75
-----
Adjusted pro forma net tangible book value after offering........... 3.65
------
Dilution per share to new investors................................. $ 7.35
======
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1996,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid
(assuming a public offering price of $11.00 per share) by the existing holders
of Common Stock and by the new investors, before deducting the underwriting
discounts and commissions and estimated offering expenses payable by the
Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 7,663,769 70.3% $10,457,054 22.7% $ 1.36
New investors(1)......... 3,245,455 29.7 35,700,000 77.3 11.00
---------- ------ ---------- ------
Total.......... 10,909,224 100.0% $46,157,054 100.0%
========== ====== ========== ======
</TABLE>
- ---------------
(1) Includes the sale of $6 million of Common Stock to RPR in a private
placement at a price per share equal to the initial public offering price
per share.
The calculation of net tangible book value and other computations above
assumes no exercise of outstanding options or warrants. As of September 30,
1996, 746,354 shares of Common Stock were subject to outstanding options granted
pursuant to the Company's Incentive Stock Plan at a weighted average exercise
price of $0.65 per share and 114,251 shares of Common Stock were subject to
outstanding warrants at a weighted average exercise price of $7.17 per share.
See "Management -- Stock Plans," "Certain Transactions" and Notes 3 and 8 of
Notes to Financial Statements.
18
<PAGE> 20
SELECTED FINANCIAL DATA
The selected financial data for the period from June 17, 1993 (date of
inception) through June 30, 1994, and for the years ended June 30, 1995 and 1996
and as of June 30, 1994, 1995 and 1996, are derived from the financial
statements of the Company which have been included elsewhere herein and have
been audited by Arthur Andersen LLP, independent public accountants. The data
set forth below is qualified by reference to and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
1996 1995 1994(1)
------- ------- -----
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Collaborative research and development revenues
from affiliate........................................ $10,449 $ 2,664 $ --
------
-
------ -------
Operating expenses:
Research and development.............................. 11,020 3,372 571
General and administrative............................ 972 624 115
------
-
------ -------
Total operating expenses...................... 11,992 3,996 686
------
-
------ -------
Loss from operations.................................... (1,543) (1,332) (686)
Interest income......................................... 240 107 --
Interest expense........................................ (29) -- --
------
-
------ -------
Net loss................................................ $(1,332) $(1,225) $(686)
====== ======= =======
Pro forma net loss per share(2)......................... $ (0.18)
======
Shares used in per share calculation.................... 7,478
======
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------
1996 1995 1994
------- ------- -----
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................................................... $ 7,024 $ 2,799 $ 501
Working capital......................................... 5,613 2,060 341
Total assets............................................ 8,965 3,478 521
Total liabilities....................................... 2,045 903 180
Accumulated deficit..................................... (3,244) (1,911) (686)
Stockholders' equity.................................... 6,920 2,575 341
</TABLE>
- ---------------
(1) From the Company's inception on June 17, 1993 through June 30, 1994.
(2) See Note 2 of Notes to Financial Statements for a description of the
computation of pro forma net loss per share.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Since its inception in June 1993, the Company has devoted its resources
primarily to fund its research and development programs. At June 30, 1996, the
Company had an accumulated deficit since inception of approximately $3.2
million. The Company's only income to date has been payments from RPR under
collaborative research agreements and interest income. Introgen expects its
revenues and income for the next several years to continue to be derived solely
from these sources. RPR's obligation to continue funding Introgen's early stage
research and development activities pursuant to the collaboration arrangement
expires in October 1997. Even if RPR agrees to extend such research and
development funding, the terms of any such extension cannot be predicted. To the
extent that the Company is unable to extend such funding obligations of RPR
beyond October 1997, the Company would incur even greater increases in expenses
and losses from operations unless it is able to secure alternative funding. The
Company anticipates that it will incur losses in the future, which are likely to
be greater than losses incurred in prior years. There can be no assurance that
the Company's products under development will be successfully developed or that
its products, if successfully developed, will generate revenues sufficient to
enable the Company to earn a profit. Introgen does not expect to generate
revenues from the sale of products, if any, for the foreseeable future. See
"Risk Factors -- Limited Operating History; Uncertainty of Future Profitability"
and "-- Dependence on Collaborative Arrangements."
Payments in connection with collaborative research are recognized as
revenue as the Company performs its obligations related to such research
agreements. Deferred revenue is recorded for collaborative research payments
received for which the related expenses have not been incurred and for the
effect of research and development required to be funded by the Company under
the terms of its collaborative research agreements.
RESULTS OF OPERATIONS
Years Ended June 30, 1996 and 1995
Collaborative research and development revenues from affiliate (RPR) for
the year ended June 30, 1996 were $10.4 million, as compared to $2.7 million for
the year ended June 30, 1995, an increase of 292%. This increase was primarily
due to increased reimbursement under collaborative agreements as a result of
increased preclinical research and development, commencement of additional
clinical trials and increased sponsored research program activities.
The Company's research and development expenses for the year ended June 30,
1996 were $11.0 million, as compared to $3.4 million for the year ended June 30,
1995, an increase of 227%. This increase resulted primarily from increased
preclinical research and development, commencement of additional clinical trials
and increased sponsored research program activities. The Company expects these
expenses to increase in the future as these activities continue to expand.
General and administrative expenses increased to $972,000 for the year
ended June 30, 1996, from $624,000 for the year ended June 30, 1995, an increase
of 56%. The increase was due primarily to the expansion of administrative
support activities and increased business development efforts. The Company
expects these expenses to increase in the future as these activities continue to
expand. Additionally, the Company recorded noncash deferred compensation of
$693,000 in connection with certain options to purchase shares of Common Stock
granted during the year ended June 30, 1996, of which $106,000 was recognized as
an expense through June 30, 1996. Subsequent to June 30, 1996, the Company
issued certain additional options and will record deferred compensation of
$1,282,000 in connection therewith during the quarter ending September 30, 1996.
The remaining deferred compensation will be amortized ratably over the vesting
period of the options and will continue to impact the Company's results of
operations. See Notes 3 and 8 of Notes to Financial Statements.
Interest income for the year ended June 30, 1996 increased to $240,000,
from $107,000 for the year ended June 30, 1995, an increase of 124% as a result
of interest earned on higher cash balances derived from private sales of stock
to third parties and from stock sales to and collaborative research payments
from RPR.
20
<PAGE> 22
Interest expense for the year ended June 30, 1996 increased to $29,000 from
zero for the year ended June 30, 1995 as a result of the financing of equipment
acquisitions under capital leases during the year ended June 30, 1996. There
were no borrowings prior to June 30, 1995.
As a result of the foregoing, the Company recognized a net loss of $1.3
million for the year ended June 30, 1996, as compared to a net loss of $1.2
million for the year ended June 30, 1995, an increase of 9%.
Year Ended June 30, 1995 and the Period from Inception (June 17, 1993)
through June 30, 1994
Collaborative research and development revenues from affiliate for the year
ended June 30, 1995 were approximately $2.7 million. There were no revenues for
the period from June 17, 1993 (inception) through June 30, 1994. This increase
was the result of the commencement of preclinical research and development and
clinical trials in fiscal year 1995 and the corresponding receipt of payments
from RPR under the collaboration agreements.
The Company's research and development expenses for the year ended June 30,
1995 were approximately $3.4 million, as compared to $571,000 for the period
from June 17, 1993 (inception) through June 30, 1994, an increase of 491%. This
increase in research and development expenses resulted primarily from costs
related to the commencement of preclinical research and development and payments
for sponsored research and clinical trials.
General and administrative expenses increased to $624,000 for the year
ended June 30, 1995 from $115,000 for the period from June 17, 1993 (inception)
through June 30, 1994, an increase of 443%. This increase was due primarily to
increased business development efforts and the initiation of various
administrative support activities.
Interest income for the year ended June 30, 1995 of $107,000 was a result
of interest earned on cash balances resulting from stock sales and collaborative
research payments from RPR in fiscal 1995.
As a result of the foregoing, the Company recognized a net loss of $1.2
million for the year ended June 30, 1995, as compared to a net loss of $686,000
for the period from June 17, 1993 (inception) through June 30, 1994, an increase
of 79%.
INCOME TAXES
The Company uses the liability method of accounting for income taxes. The
Company has had losses since inception and, therefore, has not been subject to
federal income taxes. As of June 30, 1996, the Company has generated net
operating loss (NOL) carryforwards of approximately $1.6 million and
approximately $12,500 of research and development credits which may be available
to reduce future income taxes. These carryforwards begin to expire in 2008. For
financial reporting purposes, a valuation allowance has been established as of
June 30, 1994, 1995 and 1996, to fully offset the Company's net deferred tax
assets, including those relating to its carryforwards. The Company's ability to
utilize these carryforwards to reduce future taxable income may be limited due
to ownership changes and may be further limited upon the completion of the
offering contemplated by this Prospectus. See Note 4 of Notes to Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private sales of its equity securities to third parties and from proceeds
received under research and development collaboration and stock purchase
agreements with RPR. Since June 17, 1993 (inception) through June 30, 1996, the
Company received approximately $9.9 million in net proceeds from sales of its
equity securities and $13.4 million under collaboration agreements with RPR.
At June 30, 1996, the Company had cash of approximately $7.0 million, and
working capital of approximately $5.6 million as compared to $2.8 million and
$2.1 million, respectively, at June 30, 1995. The increase was primarily due to
receipt of net proceeds of approximately $1.3 million from sales of Series B
21
<PAGE> 23
Preferred Stock to RPR and approximately $4.3 million from private sales of
Series C Preferred Stock, both of which were partially offset by the Company's
operating expenses and capital expenditures.
From June 17, 1993 (inception) through June 30, 1996, the Company has
acquired capital equipment in the aggregate amount of $811,000 through cash
purchases. During the year ended June 30, 1996 an additional $911,000 of capital
equipment has been acquired and financed under capital lease arrangements.
Through June 30, 1996, the Company's collaborative research payments have
primarily been received in advance of each quarter's activity. The Company
expects its cash requirements to increase significantly in future periods. The
Company will require substantial funds to conduct research and development
programs, preclinical studies and clinical trials of its potential products and
to market any pharmaceutical products that are developed. The Company's capital
requirements will depend on numerous factors, including the progress of its
research and development programs, the scope and results of preclinical studies
and clinical trials, the time and costs involved in obtaining regulatory
approvals, the costs of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights, competing technological and
market developments, changes in the Company's existing research relationships,
the ability of the Company to establish and maintain collaborative arrangements
providing for advance payments and the development of commercialization
activities and arrangements. In addition, it is possible the Company will expand
production of certain of its products during the fiscal years ending June 30,
1997 and thereafter for which the Company could expend significant resources
that could result in costs to the Company that have not been previously
incurred.
The Company believes that its existing capital resources, the net proceeds
of this offering and the concurrent private placement and future payments under
collaborative agreements will be sufficient to satisfy its funding requirements
through fiscal year 1998 but may not be sufficient to fund the Company's
operations to the point of commercial introduction of any of its potential
products. There can be no assurance, however, that changes in the Company's
research and development plans or other changes affecting the Company's
operating expenses will not result in the expenditure of such resources before
such time.
The Company intends to seek additional funding through collaborative
agreements and may seek additional funding through public or private sales of
the Company's securities, including equity securities, or from other sources. In
addition, the Company may pursue opportunities to obtain debt financing in the
future. There can be no assurance, however, that additional collaboration
arrangements will be successfully negotiated, or equity or debt financing will
be available on reasonable terms, if at all. See "Risk Factors -- Need for
Additional Funding; Uncertainty of Access to Capital; Discretion as to Use of
Proceeds."
22
<PAGE> 24
GENE THERAPY CANCER TREATMENT
Introgen's business is based upon the technology described in this section.
For a complete discussion of Introgen's business, see "Business of Introgen."
CANCER INCIDENCE AND CURRENT TREATMENT
Cancer remains a major and pressing health problem. In the United States
each year approximately 1.4 million people are newly diagnosed with cancer and
over 500,000 people die from the disease. It is the nation's second leading
cause of death, surpassed only by heart disease. Worldwide, approximately 6.5
million people are newly diagnosed with cancer each year. According to the most
recently available results of the Surveillance, Epidemiology and End Results
("SEER") program of the National Cancer Institute ("NCI"), the incidence rate of
all cancers combined increased between 1973 and 1991 by 31.5% for men and 13.6%
for women. Over the same period cancer mortality for all ages rose by 6.9%
according to the SEER data.
The financial costs of cancer are substantial both for the individual
patient and for health care systems. In 1994, the NCI estimated overall costs
for cancer in the United States at $104 billion: $35 billion for direct medical
costs, $12 billion for morbidity costs (cost of lost productivity), and $57
billion for mortality costs. Nearly half of the direct medical costs are due to
treatment of breast ($6 billion), lung ($5 billion), and prostate ($5 billion)
cancers. The cancer drug market in the United States was an estimated $3 billion
in 1995, and the worldwide cancer drug market is significantly larger.
Despite advancements in cancer research in recent years, better treatments
for cancer are urgently needed. The current therapeutic approaches of surgery,
chemotherapy and/or radiation therapy have proven ineffective or only partially
effective in many cancer types, and the newer approach of immunotherapy has not
yet been shown to be widely applicable. In many cases, cancer is either
inaccessible or impossible to remove completely by surgery. For certain cancers
such as head and neck cancer, surgery can be an effective treatment of the
cancer but may result in severe disfigurement of the patient. Radiation therapy
and chemotherapy patients frequently suffer from the toxicity of those
treatments, which limit their effectiveness. Drug resistance to chemotherapeutic
drugs is also a major problem. According to the American Cancer Society, in the
United States there is an annual incidence of over 500,000 cancer patients with
a variety of solid tumors which often cannot be treated effectively due to
multidrug resistance. The conventional therapies are also marked by debilitating
side effects and frequently the necessity to administer additional and costly
medications to ameliorate such side effects.
GENE THERAPY
Gene therapy is a new technology that is being developed using genetic
materials as therapeutic agents to treat genetic defects causing cancer and
other diseases. Gene therapy seeks to restore or correct missing or aberrant
gene functions either by the addition of normal genes ("gene replacement") or by
neutralizing the activity of defective genes ("gene blocking"). Gene therapy
involves two significant components: the therapeutic genetic material and the
system to deliver this material to the desired site. Gene therapy is a rapidly
developing area of medicine although its effectiveness in treating human disease
still remains to be established. The significant promise of gene therapy was
affirmed in a report on December 7, 1995 by the Advisory Committee to the
Director of the National Institutes of Health ("NIH"). The report also
emphasized the importance of developing improved delivery vehicles (vectors) and
animal models for gene therapy.
Cancer accounts for the majority of current clinical investigations
involving gene therapy. Cancer may be particularly amenable to gene therapy in
part because with today's technology the treatment goal of rapidly eliminating
tumor cells can potentially be more readily accomplished than can the long-term
restoration of lost or missing gene function required in treating certain other
diseases. Moreover, a favorable risk-benefit profile is more likely to exist for
short-term treatment of a life-threatening disease. In fact, to date, clinical
experience with gene therapy for cancer has revealed that patients generally do
not experience clinically significant adverse events due to this treatment, a
finding in contrast to established treatments which are frequently toxic and
debilitating.
To become cancerous, a cell must first undergo mutations to escape the
multiple controls on cell division and then accumulate further changes to become
endowed with the capacity for invasion and metastasis. This evolution from a
normal to a cancerous state usually takes many years. Cells are frequently
exposed to a variety of agents -- from both external and internal
sources -- that damage DNA. Even minor DNA damage can have profound effects,
causing certain genes to become overactive, to undergo partial or complete
inactivation, or to function abnormally. Although cells have a number of
protective and backup mechanisms that allow them to compensate for most DNA
damage, the failure of such systems can lead to the
23
<PAGE> 25
development of cancer. Damage to two classes of genes in particular has been
found to play a crucial role in the evolution and expansion of cancer: tumor
suppressor genes and oncogenes. Tumor suppressor genes block cancerous growth of
cells. Activated oncogenes promote cancerous growth of cells. Gene therapy seeks
to selectively abrogate genetic lesions occurring in cancer cells, thereby
restoring normal control and protective pathways. If successful gene therapies
are developed, the cancer cells could be targeted with little consequence to
surrounding normal tissue.
THE P53 TUMOR SUPPRESSOR GENE
The protein encoded by the p53 tumor suppressor gene is believed to be a
central, vital regulator of cellular activities in that many of the signals that
monitor the state of a cell converge on p53. p53 has been implicated in the
control of the cell cycle, DNA repair and replication, cell differentiation,
genomic plasticity and programmed cell death ("apoptosis"). If the DNA of a cell
undergoes a limited amount of damage, the cell has an array of enzymes to repair
it; if the damage is extensive, the cell undergoes apoptosis, a process thought
to be involved in preventing cancer. p53 is capable of such wide-ranging effects
because it orchestrates the activity of a host of other genes and proteins.
Because of the multiple roles of p53, the cell is extremely vulnerable to the
loss of this gene.
p53 mutations are the single most common genetic alteration observed to
date, appearing in at least 50% of human cancer cases, including approximately
half of all NSC lung cancers and, according to several studies, approximately
60% of all head and neck cancers. Researchers have documented more than 51 types
of human tumors carrying p53 mutations.
Evidence from laboratory and preclinical studies suggests that while
multiple genetic mutations are required for cells to become cancerous, restoring
the function of a tumor suppressor gene may be sufficient to slow, stop or kill
cancer cells (see Figure 1 below, which is a theoretical depiction of p53
inducing apoptosis or growth arrest of cancer cells). The Company believes that
the p53 gene holds promise as an effective cancer therapeutic that would restore
normal tumor suppressor functions. Consequently, the Company has entered into
clinical trials with p53 "gene replacement" therapies. See "Business of
Introgen -- Product Development Programs."
FIGURE 1.
P53 DIAGRAM
24
<PAGE> 26
THE K-RAS ONCOGENE
Activated oncogenes, such as K-ras, promote cancerous growth of cells. In
normal specialized cells, like those found in the lung, breast and other
tissues, oncogenes are inactive. In many cancer cells oncogenes become
overactive. Activated oncogenes give cells inappropriate signals to grow.
Mutations in the K-ras oncogene have been found to lead to continuous abnormal
stimulation of cell proliferation associated with human cancer (see Figure 2
below, which is a theoretical depiction of K-ras antisense gene therapy
inhibiting abnormal growth of cancer cells).
FIGURE 2.
K-RAS DIAGRAM
Mutations in K-ras have been found in 30% to 40% of lung adenocarcinomas,
70% to 90% of pancreatic adenocarcinomas and 30% to 40% of colorectal cancers.
Evidence exists that mutant ras reduces the propensity of certain cells to
undergo apoptosis. Accordingly, the Company intends to initiate clinical trials
of a gene therapy product that delivers into the cell a portion of the normal
K-ras gene which is oriented in an antisense (reverse) direction. It is
anticipated that RNA from the antisense fragment will bind with RNA derived from
the activated K-ras gene and block the production of K-ras protein. If such
binding occurs successfully, the Company believes that this could stop or slow
the progression of the cancer. See "Business of Introgen -- Product Development
Programs."
DELIVERY SYSTEMS
An essential requirement of gene therapy is a suitable delivery system for
introducing therapeutic genes into cancer cells. Two major approaches that have
been employed to deliver genes to tumor cells are viral and non-viral delivery
systems (vectors). Different disease targets and routes of administration
generally require delivery systems with differing performance characteristics.
Thus far most gene therapy clinical trials have relied on retroviral
vectors as the delivery system. The retroviral vector can cause the therapeutic
gene to be incorporated into the cancer cell's chromosomes, which permits the
gene to persist and function for an extended time period. Retroviral vectors are
effective only in dividing cells -- such as cancer cells -- and therefore are
less likely to affect normal cells, and they can also
25
<PAGE> 27
infect nearly all cell types. Retroviral vector systems can result in high
levels of production (expression) of the therapeutic gene product and can be
manufactured in large quantities to meet very stringent safety specifications.
However, since all the cells in a tumor are not dividing at the same time,
repeated treatment may be necessary. Furthermore, since retroviral vectors are
believed to integrate randomly into the host cell's genetic material, this may
disrupt or inappropriately activate the functions of cellular genes near or at
the integration sites.
Adenoviral delivery systems have different characteristics than retroviral
delivery systems. Adenoviral vectors can infect and express genes in
non-dividing as well as dividing cells, thereby potentially reducing the need
for repeated treatments. They can be grown to very high concentration and can
therefore be used to deliver a concentrated therapeutic dose. The DNA of these
vectors does not generally integrate into the cell genome. Instead, it typically
remains as an autonomous genetic unit inside the nucleus and eventually
disintegrates. This feature protects normal cells that might have taken up the
viral vector. Cancer cells may not require the long-term presence of such
therapeutic genes because the treated cells may become endowed with the
capability of either undergoing apoptosis or repairing genetic damage. A major
concern of the adenoviral delivery system is the immune response to viral
proteins that it is capable of inducing in the patient. Such an immune response
may reduce or eliminate the efficacy of repeat doses of adenoviral-based gene
therapeutics. However, a local-regional application of the adenoviral vector,
such as that being utilized by Introgen, may be a means of minimizing an immune
response.
Introgen believes that no single gene therapy delivery system will be
applicable to all clinical needs. Accordingly, the Company is pursuing the
development of both retroviral and adenoviral delivery systems in parallel.
Introgen believes that the performance characteristics of retroviral and
adenoviral delivery systems are complementary, potentially allowing a wide range
of diseases and routes of administration to be successfully addressed. Both
types of viral vectors have been modified to eliminate their ability to
replicate in a human host. In addition, the Company is pursuing the development
of non-viral delivery systems, which it believes could potentially prove useful
as alternatives to viral delivery for certain clinical indications. However,
non-viral technology is at an earlier state of development than viral vector
technology, and improvements are needed in the ability of non-viral systems to
deliver therapeutic genes efficiently. See "Business of Introgen -- Product
Development Programs."
26
<PAGE> 28
BUSINESS OF INTROGEN
OVERVIEW
Introgen is a leader in the development of gene therapy products to treat
cancer by direct introduction of the therapeutic gene inside the body ("in
vivo"). Introgen was the first company to treat a human patient with a cancer
gene replacement therapy in vivo, and it is one of the few companies to have
advanced to the clinic with more than one delivery system (vector). For treating
cancer, gene therapy seeks to restore or correct missing or aberrant gene
functions either by the addition of normal genes ("gene replacement") or by
neutralizing the activity of defective genes ("gene blocking"). Introgen is
developing two categories of gene therapy cancer products: (1) "gene
replacement" products based on the p53 tumor suppressor gene and (2) "gene
blocking" products designed to neutralize the activity of a mutant K-ras
oncogene. The Company is currently conducting Phase I/II clinical trials in the
United States of its lead products for the treatment of NSC lung cancer and head
and neck cancer. Additional clinical trials are expected to commence in the
United States, Europe and Asia over the next 12 to 18 months. These scheduled
clinical trials would include multi-center, Phase II/III trials of Introgen's
p53 "gene replacement" products. In addition, the Company is currently
conducting preclinical studies, and expects to initiate Phase I and Phase I/II
clinical trials, for products to treat cancers of the liver, bladder, ovaries,
brain, breast and prostate, as well as malignant ascites from gastrointestinal
cancers. The Company's current and expected clinical trials test the Company's
products both alone and in combination with standard cancer treatments.
Preliminary results from Introgen's Phase I/II human clinical trials
indicate that its p53 "gene replacement" products demonstrate promise with
respect to both lack of toxicity and tumor response. These trials have involved
361 doses of p53 injected into the tumors of 48 patients. Thirty-nine of these
patients have been treated with p53 delivered by an adenoviral vector
("Ad-p53"), and nine patients have been treated with p53 delivered by a
retroviral vector ("RV-p53"). There has been no clinically significant
vector-related toxicity noted. Data from seven of the nine patients in
Introgen's RV-p53 trial for lung cancer could be clinically evaluated with
respect to tumor response. Two patients could not be evaluated in this study due
to complications unrelated to the therapy. Of the seven patients evaluated,
three showed tumor regression at the treatment site, and three showed tumor
stabilization. All nine patients died subsequently from progression of untreated
sites of disease, or other complications of cancer, unrelated to the efficacy or
safety of the gene therapy. Preliminary data from the Company's clinical trials
of Ad-p53 for the treatment of head and neck cancer and lung cancer indicate
that Ad-p53 injected into tumors produces an increase in p53 expression,
apoptosis, and tumor necrosis. The results of the RV-p53 trial for lung cancer
have been published in the September 1996 issue of the journal Nature Medicine.
Development and commercialization of Introgen's p53 and K-ras products are
being pursued in conjunction with RPR pursuant to a collaboration arrangement
with potential aggregate payments to the Company of approximately $50.0 million
prior to product commercialization (including approximately $24.7 million
received to date for research and development payments and equity investments).
The collaboration arrangement provides that Introgen is primarily responsible
for completing the early stage research and development of products, which RPR
is obligated to fund. If RPR elects, it shall be primarily responsible for the
later stage development of the products. In North America, Introgen retains
exclusive manufacturing rights and may elect to form a marketing collaboration
with RPR to market collaboration products. Introgen is entitled to royalties on
product sales arising from RPR's exclusive marketing and manufacturing rights in
Europe. Both parties may, at their own expense, develop and market products in
Japan, Korea, China, Taiwan and India. Introgen and RPR have agreed that they
will not market or license, and RPR will not develop, any p53 or K-ras gene
therapy products prior to October 2004, except under the terms of the
collaboration arrangement. Pursuant to the terms of a stock purchase agreement
between the Company and RPR, RPR has agreed to purchase $6.0 million of Common
Stock in a private placement concurrent with this offering at the price to
public in this offering, as well as to make an additional equity investment of
$2.5 million in 1997 and a potential future milestone payment of approximately
$2.5 million (provided that the collaboration agreements remain in effect).
Introgen has exclusively licensed 21 United States and 25 foreign patent
applications from UTMDACC. In addition, Introgen has exclusively licensed two
United States applications and one foreign patent application from SKCC. These
licensed patent applications relate to the use of tumor suppressor genes in
27
<PAGE> 29
combination with DNA-altering treatments such as chemotherapy and radiation, as
well as genes, viral and non-viral delivery systems, tissue-specific promoters
and diagnostics. In January 1996, Introgen received a notice of allowance of a
licensed patent application covering certain recombinant p53 adenovirus
compositions. Introgen is also funding research at UTMDACC and SKCC and has the
right to include certain patentable inventions that arise from the research
under its exclusive license with the corresponding institution.
BUSINESS STRATEGY
The Company's objective is to remain a leading developer of gene therapy
products for the treatment of cancer. Introgen's approach is to seek out product
applications that move from the laboratory to human applications in a rapid time
frame. To accomplish its objective, Introgen's strategy is to:
Pursue Rapid Clinical Development and Regulatory Approval. The Company
believes that emphasis on clinical trials of products to treat life-threatening
cancers will allow sufficient toxicity and efficacy data to be acquired
relatively rapidly. The Company seeks to obtain accelerated regulatory approval
and market entry for gene therapy cancer products that address severe,
life-threatening, malignant diseases for which alternative treatments are either
unsatisfactory or non-existent. The FDA recently indicated that it will expand
the use of the accelerated approval process for cancer treatments. Accordingly,
the Company believes that its products are candidates for fast-track approval by
regulatory authorities.
Focus on Key Therapeutic Genes. Introgen endeavors to maximize the
probability of successful product development by carefully selecting appropriate
therapeutic genes for incorporation into its gene therapy cancer products. For
example, the p53 tumor suppressor gene, upon which many of the Company's initial
products are based, is among the most well-established and central genes
involved in preventing cancer, and the ability of the normal p53 gene to
preserve the integrity of the genome and prevent unchecked cellular
proliferation is well documented. Similarly, the role of a mutated K-ras
oncogene in stimulating abnormal cellular proliferation has been well studied,
as has the ability of interventions that neutralize mutant K-ras activity to
inhibit abnormal cell growth. Within the last year the Company has begun
preclinical research with an adenoviral vector for C-CAM, a therapeutic gene
whose expression is missing in prostate cancer.
Leverage Collaborative Arrangements. Introgen intends to continue to
establish collaborative arrangements with leading pharmaceutical companies and
academic institutions, such as RPR and UTMDACC, to develop and commercialize
products. In particular, the Company's collaborative partners are expected to
provide research, manufacturing and marketing expertise. The Company believes
that establishing and maintaining collaborations with corporate and academic
partners will enable the Company to more effectively and economically leverage
its resources to develop and market products. The Company's efforts in
establishing collaborative arrangements have recently resulted in a sponsored
research agreement and exclusive license with SKCC, and a letter of intent for a
Collaborative Research and Development Agreement ("CRADA") with RPR and NCI.
Pursue and Expand Patent Portfolio. The Company will enhance its existing
patent portfolio by pursuing additional patents through collaborative
arrangements, sponsored research and internal research. The Company presently
has the exclusive royalty-bearing license to 23 United States patent
applications and 26 foreign patent applications. In addition, the Company is
currently funding research at UTMDACC and SKCC and has the right to include
certain patentable inventions that arise from this funded research under the
exclusive license with the corresponding institution. The Company is also
pursuing patents on products, applications, and constructs arising from its own
internal research programs. In January 1996, Introgen received a notice of
allowance of a licensed patent application covering certain recombinant p53
adenovirus compositions.
Enhance Product Breadth. Introgen's long term strategy is to provide a
broad portfolio of gene therapy products for cancer and other life-threatening
diseases. The Company believes that several of its products under development
may be effective in the treatment of indications not currently the focus of the
Company's clinical trials. The Company will continue to develop therapeutic
genes and other technologies that show promise as commercial applications
through licensing, collaborative arrangements and internal research.
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PRODUCT DEVELOPMENT PROGRAMS
Introgen is currently conducting clinical development on two categories of
products: (1) "gene replacement" products based on the p53 tumor suppressor gene
and (2) "gene blocking" products designed to neutralize the activity of a mutant
K-ras oncogene. Introgen's p53 products have been developed using two delivery
systems: one employing a retroviral vector ("RV-p53") and the other employing an
adenoviral vector ("Ad-p53"). Introgen's initial K-ras product consists of a
partial antisense K-ras gene delivered by a retroviral vector ("RV-AS-K-ras").
The table below sets forth the clinical status for the Company's products by
indication. For the purposes of this table, a clinical trial is assumed to
commence when the Company has obtained required regulatory approval and begins
enrolling patients.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Indication Technology Development/Clinical Status
<S> <C> <C>
--------------------------------------------------------------------------------------------
NSC Lung Cancer RV-p53 Phase I/II
Ad-p53 Phase I/II (US)
Preclinical, IRB(1) approved
(Japan)
Ad-p53 + Cisplatin Phase I/II
RV-AS-K-ras IND(2) approved
--------------------------------------------------------------------------------------------
Head and Neck Cancer Ad-p53 Phase I/II
Ad-p53 + Surgery Phase I/II
Ad-p53 + Cisplatin Preclinical, IRB approved
(The Netherlands)
--------------------------------------------------------------------------------------------
Liver Cancer (Hepatoma) Ad-p53 Preclinical
(percutaneous delivery)
Ad-p53 Preclinical
(intra-arterial delivery)
--------------------------------------------------------------------------------------------
Bladder Cancer Ad-p53 Preclinical
--------------------------------------------------------------------------------------------
Ovarian Cancer Ad-p53 Preclinical
Ad-p53 + Cisplatin Preclinical
--------------------------------------------------------------------------------------------
Brain Cancer (Glioblastoma) Ad-p53 Preclinical
--------------------------------------------------------------------------------------------
Breast Cancer Ad-p53 Preclinical
--------------------------------------------------------------------------------------------
Malignant Ascites Ad-p53 Preclinical, IRB approved
(United Kingdom)
--------------------------------------------------------------------------------------------
Prostate Cancer Ad-C-CAM Preclinical
--------------------------------------------------------------------------------------------
</TABLE>
(1) Institutional Review Board ("IRB") approval is required for protocols that
involve the use of humans in the study of pharmaceutical products.
(2) Investigational New Drug ("IND") application approval is required before the
Company can commence human clinical trials.
As of September 27, 1996, the Company's trials have involved 361 doses of
p53 injected into tumors of 48 patients. The Company believes that
reintroduction of normal p53 genes into cancer cells may cause the cells either
to undergo a process of programmed cell death (apoptosis) or to repair genetic
damage sufficiently to restore responsiveness to normal cellular controls. With
respect to the K-ras antisense gene therapy, the Company believes that when the
RNA of antisense K-ras combines with that of a mutant K-ras oncogene, it may
block its action and induce the growth arrest or killing of cells receiving the
transferred gene. The primary
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<PAGE> 31
endpoint being measured in the clinical trials is reduced tumor size. However,
additional endpoints are being investigated to verify gene delivery, gene
expression and mechanism of response.
Clinical trials in addition to those listed above are expected to commence
in the United States, Europe and Asia over the next 12 to 18 months. These
clinical trials would include multi-center, Phase II/III trials of Introgen's
p53 "gene replacement" products. In addition, the Company expects to initiate
Phase I and Phase I/II trials for products to treat cancers of the liver,
bladder, ovaries, brain, breast and prostate, as well as malignant ascites from
gastrointestinal cancers. The Company's current and expected trials test the
Company's products both alone and in combination with standard cancer
treatments.
The Company has not yet completed any Phase I or Phase I/II clinical trials
for its potential products. There can be no assurance that future clinical
studies will commence on schedule or that RPR will elect to proceed with later
stage development. The results of ongoing clinical trials could cause the
Company to delay or terminate currently planned clinical trials. In addition,
research on some of the Company's potential products is being performed in
conjunction with NCI pursuant to a letter of intent. The letter of intent
anticipates that the Company will enter into a formal CRADA, however, there can
be no assurance that the CRADA will be finalized. In addition, research relating
to several of the Company's products including the Company's second tumor
suppressor gene, C-CAM, is conducted pursuant to an agreement with UTMDACC,
which is subject to ratification by the Board of Regents. To date, no gene
therapy products for cancer have been approved for sale in the United States or
internationally. See "Risk Factors -- Early Stage of Development; No Assurance
of Successful Product Development," "-- Dependence on Collaborative
Arrangements," "-- Uncertainties Related to Clinical Trials" and "-- Government
Regulations; No Assurance of Regulatory Approvals."
Non-Small Cell Lung Cancer
Lung cancer is the leading cause of cancer death in the United States, with
an estimated 177,000 new cases in 1996. Most lung cancer patients die within a
year of diagnosis. The five year survival rate is approximately 13% for all
stages of lung cancer and approximately 47% for localized disease stages. The
unfavorable prognosis for the disease is due to the poor responsiveness of lung
cancer to the standard therapies of surgery, chemotherapy and radiation, as well
as combinations of these therapies. NSC lung cancers (which include
adenocarcinoma, large-cell lung cancer and squamous cell carcinoma) account for
75% to 80% of all lung cancers. Mutations of p53 are found in approximately half
of NSC lung cancers. According to several studies K-ras mutations appear in
approximately 20% of NSC lung cancers.
In Introgen's sponsored preclinical studies, both "gene replacement" with
p53 and "gene blocking" therapy with antisense K-ras reduced the growth of NSC
lung cancer. Adenoviral introduction of the p53 gene into NSC lung cancer cells
in vitro reduced the growth rate by approximately 75% in cell lines with p53
mutations or deletions. In a nude mouse model of orthotopic human lung cancer,
Ad-p53 treatment reduced tumor formation by an average of 67% and tumors that
did develop following such treatment were significantly smaller. Testing of
RV-AS-K-ras in a mouse model of orthotopic human lung cancer indicated that
tumor formation was inhibited in 80% to 90% of mice in three studies.
Introgen's Phase I/II clinical trials for the treatment of NSC lung cancer
began in 1995 and are being conducted at UTMDACC. These trials are restricted to
patients with advanced metastatic lung cancer who have failed to respond to
conventional cancer treatments and have tumors with missing or mutant p53 genes.
Each trial involves the intralesional injection of the product into one tumor
site. One trial involves RV-p53 delivered alone in up to 14 patients. Nine
patients have been treated with RV-p53 in this trial. The second trial involves
Ad-p53 delivered alone in up to 27 patients. Nine patients have been treated
with Ad-p53 in this trial. The third trial involves the treatment of up to 27
patients with Ad-p53 in conjunction with cisplatin, a chemotherapeutic agent.
Six patients have been treated in this trial.
As reported in the September 1996 issue of Nature Medicine, preliminary
results from the Company's human clinical trials indicate that its RV-p53
product demonstrates promise with respect to both lack of toxicity and tumor
response. The preliminary data from nine patients with NSC lung cancer who were
treated with RV-p53 alone in the Company's Phase I/II trial indicate no
clinically significant vector-related toxicity.
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<PAGE> 32
Data from seven of the nine patients in the Company's RV-p53 trial for NSC lung
cancer could be clinically evaluated with respect to tumor response. Two
patients could not be evaluated in this study due to complications unrelated to
the therapy: one died from an unrelated complication of cancer two weeks after
completing the treatment, and the other was removed from the study after a
single injection because of complications of general anesthesia. Of the seven
patients evaluated, three showed tumor regression at the treatment site, three
showed tumor stabilization and one showed tumor progression. All nine patients
died subsequently from progression of untreated sites of disease, or other
complications of cancer, unrelated to the efficacy or safety of the gene
therapy.
Head and Neck Cancer
Cancers of the head and neck are the fourth most common malignancy
worldwide with an estimated 400,000 new cases each year. These cancers primarily
include squamous cell carcinoma of the oral cavity, pharynx and larynx. The
overall rate of survival of these patients is approximately 50%. A majority of
patients (60%) are diagnosed with locally advanced disease with a cure rate of
only approximately 30%. Conventional treatment for head and neck cancer patients
is surgery and/or radiation. Surgery frequently results in facial disfigurement.
The majority of these patients relapse, and development of a recurrent tumor is
almost always fatal. In a published study, the tumors of 68% of head and neck
cancer patients were found to contain one or more p53 mutations.
In preclinical studies sponsored by Introgen, gene therapy with p53 reduced
the growth of head and neck cancer. Adenoviral introduction of p53 into head and
neck cancer cell lines resulted in growth suppression and cell death regardless
of the endogenous p53 status of the tumor cells. Growth of both p53 normal and
p53 mutant tumor cell lines was inhibited by Ad-p53 in two mouse models of head
and neck cancer. In a microscopic residual model, the incidence of tumor
formation in animals implanted with tumor cell lines containing p53 normal genes
was 14% (2 of 14 animals tested) following Ad-p53 treatment and 79% (11 of 14)
following treatment with a control vector (an 82% reduction in tumor formation).
The incidence of tumor formation in animals implanted with tumor cell lines
containing p53 mutant genes was 0% (0 of 16) following treatment with Ad-p53 and
100% (16 of 16) following treatment with a control vector. In an established
tumor model, Ad-p53 treatment significantly reduced the size of tumors formed by
either p53 normal or p53 mutant head and neck cancer cells.
Introgen's Phase I/II clinical trials for the treatment of head and neck
cancer with Ad-p53 commenced in 1995 at UTMDACC and are ongoing. These trials
are restricted to patients who have extensive incurable local or regional
disease and who have either failed or cannot receive conventional treatment. The
first trial in progress involves the delivery of Ad-p53 alone to a maximum of 27
patients with non-resectable (inoperable) disease. Fourteen patients have been
treated in this trial. The second trial involves delivery of Ad-p53 in
conjunction with surgery for up to 27 patients with resectable disease. Ten
patients have been treated in this trial.
Results of the head and neck trials have been promising. The preliminary
data from 24 patients in both trials showed no clinically significant
vector-related toxicity after treatment. Preliminary data from these trials
indicates that Ad-p53 injected into tumors produces an increase in p53
expression, apoptosis and tumor necrosis.
Liver Cancer (Hepatoma)
There will be an estimated 20,000 new cases of primary liver and biliary
passage cancer in the United States in 1996; further, metastatic liver cancer
occurs at least 20 times more frequently than primary liver cancer. The annual
number of deaths from liver cancer worldwide is estimated to exceed 250,000. No
adequate therapy exists for many patients with liver tumors, and few patients
are viable candidates for surgery. The median survival for patients with
non-resectable liver cancer unresponsive to conventional therapy is less than
six months.
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<PAGE> 33
Introgen and RPR have a letter of intent with the NCI to conduct Phase I/II
clinical trials, using its Ad-p53 product, for this indication under an NCI
CRADA. The protocol being developed will test percutaneous injection of Ad-p53
alone and subsequently Ad-p53 in combination with cisplatin.
Bladder Cancer
There will be an estimated 52,900 new cases of bladder cancer during 1996
in the United States. The annual number of deaths from this indication in the
United States is estimated to be 12,000. Bladder anatomy and ease of access can
allow high concentrations of gene therapeutic agents to be delivered directly to
the bladder cancer. Mutations of the p53 gene occur in approximately 80% of
invasive transitional-cell carcinomas of the bladder. Their frequency appears to
be positively correlated with the grade and stage of bladder cancer, and such
mutations may be important in the multistep progression of the disease.
In preclinical studies sponsored by Introgen, "gene replacement" with p53
reduced in vitro growth of bladder cancer cells that were either mutant for or
missing p53. Since Ad-p53 may be delivered intravesically to treat bladder
cancer, Introgen is currently conducting toxicology studies to support this
route of administration. Introgen and RPR have a letter of intent with the NCI
to conduct Phase I/II clinical trials, using its Ad-p53 product, for this
indication under an NCI CRADA.
Ovarian Cancer
There will be an estimated 26,700 new cases of ovarian cancer in the United
States in 1996 with 14,800 deaths. While approximately 80% of patients present
with advanced, incurable disease the cancer remains accessible to treatment
within the peritoneal cavity. Overexpression of mutant p53 often occurs in
invasive epithelial ovarian cancers, and many mixed mesodermal sarcomas of the
ovary also overexpress p53.
In preclinical studies sponsored by Introgen, "gene replacement" with p53
reduced the in vitro growth of ovarian cancer cells that were either mutant for
or missing p53. In orthotopic models of human ovarian cancer in nude mice,
animals treated intraperitoneally with Ad-p53 showed enhanced survival and
reduced tumor growth relative to control groups. Since Ad-p53 may be delivered
intraperitoneally to treat ovarian cancer, Introgen is currently conducting
toxicology studies to support this alternative route of administration.
Introgen and RPR have a letter of intent with the NCI to conduct Phase I/II
clinical trials, using its Ad-p53 product, for this indication under an NCI
CRADA. These trials are expected to test the use of Ad-p53 alone and in
conjunction with either surgery or cisplatin.
Brain Cancer (Glioblastoma)
An estimated 13,000 people die of cancers of the brain and central nervous
system in the United States each year. Tumors of astrocytic cell origin, the
most common brain tumors, are graded in terms of malignancy, with high grades
carrying an extremely poor prognosis. According to several studies,
approximately 40% of all high-grade astrocytomas (glioblastoma) involve missing
or mutated p53 tumor suppressor genes.
In preclinical studies sponsored by Introgen, "gene replacement" with p53
in vitro induced apoptosis in glioblastoma cells that were mutant for p53, and
reduced the growth of glioblastoma cells that contained a normal p53 gene.
Introgen and RPR have a letter of intent with the NCI to conduct a Phase
I/II clinical trial, using its Ad-p53 product, for this indication under an NCI
CRADA.
Breast Cancer
An estimated 184,000 new cases of breast cancer will occur in women in the
United States during 1996, and more than 44,000 are expected to die of the
disease. According to several studies, alterations in p53 are the most common
changes identified to date in breast cancer, occurring in 25% to 45% of breast
cancer cases. p53 mutations are associated with aggressive tumors and a poor
patient prognosis both for remaining disease-free and for survival.
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<PAGE> 34
Introgen and RPR have a letter of intent with the NCI to conduct a Phase II
clinical trial, using its Ad-p53 product, for this indication under an NCI
CRADA. This trial is designed to administer Ad-p53 to patients with locally
recurrent breast cancer involving the chest wall.
Malignant Ascites
There are an estimated 200,000 new cases of gastrointestinal cancer each
year in the United States, and the Company believes that approximately the same
number of new cases occur in Europe. Malignant ascites (comprised of malignant
cells and fluid in the peritoneal cavity) occurs in up to one-fifth of all
patients suffering from a gastrointestinal cancer, usually late during the
course of the disease. The median survival for patients with newly diagnosed
malignant ascites is approximately two to six months, depending on the tumor
type. Therefore, standard therapy has focused on palliation of symptoms,
maximizing ambulatory out-of-hospital time and minimizing treatment-induced
morbidity.
Currently, Introgen is conducting preclinical toxicity and pharmacokinetic
studies related to malignant ascites.
Prostate Cancer
In the United States, prostate cancer is the most common cancer and the
second leading cause of male cancer death. In 1996, there are projected to be
317,000 new cases of prostate cancer and approximately 41,000 deaths directly
attributable to this disease. The magnitude of the prostate cancer problem in
the United States is expected to increase as the age distribution of American
men shifts to an increased number of older males.
The Company is engaged in the preclinical testing of a second tumor
suppressor gene, C-CAM, delivered by an adenoviral vector ("Ad-C-CAM") for the
treatment of prostate cancer. Mutations or inappropriate regulation of C-CAM may
be involved in cancer of the prostate. Preclinical studies conducted at UTMDACC
identified C-CAM as a tumor suppressor based on its ability to alter the growth
rate and characteristics of prostate cancer cells in both in vitro and in vivo
models of human prostate cancer. Prostate cancer cells treated with Ad-C-CAM
vectors showed significantly slower growth rates and reduced tumorigenicity.
Furthermore, non-tumorigenic prostate cells became tumorigenic when C-CAM levels
were experimentally reduced through an antisense RNA approach. Following
completion of preclinical studies, the Company anticipates filing an IND
application, which, if approved, will permit clinical trials to begin.
Additional Preclinical Development
Anti-proliferative (Bystander) Effector. Data from the Company's
preclinical in vitro and animal studies of Ad-p53 and RV-p53 gene therapies
indicate that functional genetic material is delivered ("transduction") to less
than 100% of the tumor cells. However, transduction of 100% of the tumor cells
does not appear necessary to achieve regression of treated tumors. Instead a
"bystander effect" appears to operate in which transduced cells are able to
induce an anti-proliferative effect on non-transduced, neighboring cells.
Introgen is conducting preclinical research to identify the anti-proliferative
effector molecules involved in this bystander effect. If the Company is
successful in identifying such molecules, it could further elucidate the
mechanisms by which therapeutic genes are able to mediate tumor regression and
could result in additional therapeutic approaches to cancer treatment.
Single Chain Antibody. Intracellular antibody, or intrabody, technology
provides a novel potential avenue for gene therapy cancer treatments. In this
approach, the gene that is introduced into the cancer cells produces an
antibody-like molecule, which is intended to block the action of a particular
disease-mediating protein by binding to it. Introgen is collaborating with RPR
in the development of a single-chain antibody to ras proteins delivered by an
adenoviral vector ("Ad-scFv-ras"). Different possible constructs are in testing
at both Introgen and RPR. The goal will be to produce an intracellular antibody
that interferes with the ability of ras proteins to transmit growth signals,
thereby limiting tumor formation or growth. Certain technology in this area was
developed at a leading cancer center, licensed by RPR, and made available for
use under the Introgen-RPR collaboration arrangement.
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COLLABORATIVE ARRANGEMENTS AND LICENSING AGREEMENTS
Introgen's strategy is to enter into collaboration agreements or licensing
arrangements with third party partners for product development, manufacturing
and marketing. The Company believes that it will be necessary to enter into
collaborative arrangements and licensing arrangements with other companies in
the future to develop, commercialize, manufacture and market additional
products. To varying degrees, the Company is dependent on its collaborative
partners and licensors for the preclinical study, clinical development,
regulatory approval, manufacturing and marketing of products based on the
results of these collaborative research programs. The agreements with these
collaborative partners and licensors allow such third parties significant
discretion in electing whether to pursue any of these activities. See "Risk
Factors -- Dependence on Collaborative Arrangements."
Rhone-Poulenc Rorer
In October 1994, Introgen entered into two collaboration agreements with
RPR to develop and commercialize gene therapy cancer products in two fields, one
to develop products based on the p53 pathway and one to develop products based
on K-ras inhibition. Under the terms of the agreements, Introgen is primarily
responsible for conducting research and development of the products through
completion of Phase I or Phase I/II clinical trials and RPR is obligated to fund
such early stage research and development until October 1997.
Following completion of Phase I or Phase I/II clinical trials of a product
funded by RPR, RPR has the option to proceed with later stage development and
commercialization of such product (a "Later Stage Product"). If it so elects,
RPR will finance and be primarily responsible for conducting later stage
clinical trials, including all further submissions of existing Investigational
New Drug applications ("INDs") as well as preparation of all PLAs and
Establishment License Applications ("ELAs") for the Later Stage Product. Unless
RPR terminates the applicable collaboration agreement, it is obligated to
proceed with later stage development for at least one Later Stage Product in the
applicable field (either products based upon the p53 pathway or products based
upon K-ras inhibition). If RPR terminates the collaboration agreement for a
particular field then RPR may not develop or commercialize any products in such
field for three years and Introgen may pursue the development and
commercialization of such Later Stage Products and other products in such field.
If RPR does not elect to continue funding early stage development in the
applicable field beyond October 1997 or such later date as the parties may
agree, Introgen would have to fund such development. However, RPR would only
have rights under the applicable collaborative agreement to products that are
Later Stage Products when RPR ceases funding early stage development. In any
event, unless the applicable collaboration agreement is terminated, Introgen and
RPR are precluded from marketing or licensing, and RPR is precluded from
developing, any gene therapy cancer products in the applicable field prior to
October 2004, except pursuant to the terms of the applicable collaboration
agreement.
In North America, Introgen has the right to form a marketing collaboration
with RPR for the marketing of the products developed under the collaborative
agreements. Under a marketing collaboration Introgen and RPR would share the
costs and profits of marketing products. In the event Introgen does not elect to
form a marketing collaboration, RPR will retain exclusive marketing rights in
North America, subject to royalties on product sales to Introgen. In addition,
Introgen retains exclusive manufacturing rights in North America, including an
exclusive supply arrangement with RPR in the event a marketing collaboration is
not formed. In Europe, RPR retains exclusive marketing and manufacturing rights,
subject to royalties to Introgen on product sales. In Japan, Korea, India, China
and Taiwan, both companies have the right, at their own expense, to develop,
market and manufacture products.
RPR may terminate the collaboration agreements, in whole or in part with
respect to individual products, at any time upon six months' notice. During the
six month period following the effective date of termination of the agreements,
RPR will reimburse Introgen for noncancellable obligations or commitments
incurred prior to such notice in accordance with certain provisions of the
agreements. In the event of any such termination
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<PAGE> 36
(other than for cause), RPR may not develop or commercialize any of the products
under the purview of the collaboration agreements for a period of three years.
In October 1994, Introgen and RPR entered into a stock purchase agreement
under which RPR agreed to make a series of equity investments in Introgen. Under
the terms of the stock purchase agreement, as amended, RPR has agreed to make
certain investments and a milestone payment in addition to amounts previously
paid. RPR has agreed to purchase $6.0 million of Common Stock in a private
placement concurrent with this offering at the price to public in this offering
as well as to purchase $2.5 million of Common Stock on October 1, 1997, so long
as the collaboration agreements are then in effect, at the higher of the price
to public in this offering or the then current average trading price; and
subject to the terms of the stock purchase agreement, to make a payment of
approximately $2.5 million at the earlier of (1) the completion of Phase III
clinical trials for a collaboration product, (2) a commercial sale of a
collaboration product, or (3) June 1, 1999. The aggregate potential payments to
Introgen under the collaboration agreements and the stock purchase agreement is
approximately $50.0 million prior to product commercialization (including
approximately $24.7 million received to date for research and development
payments and equity investments). Under the terms of the stock purchase
agreement, so long as RPR holds at least 15% of the outstanding stock of the
Company, the Company shall include a nominee of RPR, who is reasonably
acceptable to the Company, in its recommended slate for election to the Board of
Directors.
RPR is a global pharmaceutical company with reported 1995 sales of
approximately $5.3 billion (as adjusted to reflect acquisitions) and research
and development expenditures of over $826 million (as adjusted to reflect
acquisitions). In 1994, RPR formed a division, RPR Gencell, dedicated to the
discovery, development, manufacture and commercialization of cell and gene
therapy products. RPR Gencell is organized as a decentralized, interactive
network linking leading biotechnology companies and research organizations
worldwide with its own internal activities. Members of RPR Gencell's network
include Introgen, AASTROM Biosciences, Inc., the Centre National de Recherche
Scientifique, Darwin Molecular Corporation, Genetix Pharmaceuticals, Genopoietic
Genethon, the Institut Gustave Roussy, the Institut Pasteur Lille, IntraImmune
Therapies, Inc., the Lawrence Berkeley Laboratory/Human Genome Center, Pasteur
Merieux Connaught, St. Elizabeth's Medical Center, the University of British
Columbia and the Universite Louis Pasteur.
The University of Texas M.D. Anderson Cancer Center
Introgen's core technologies were developed by scientists at UTMDACC in
Houston. Introgen sponsors research performed by researchers at UTMDACC to
further the development of technologies being investigated by UTMDACC that could
have potential commercial viability. Through these sponsored research
agreements, Introgen has access to UTMDACC's resources and expertise for the
development of the Company's technology. In addition, the Company has the right
to include certain patentable inventions arising from these sponsored research
agreements under its exclusive license with UTMDACC. Introgen's strategy for
product development, which includes licensing of new technologies, is designed
to take advantage of the significant multidisciplinary resources available at
UTMDACC.
Introgen's research and development laboratories, manufacturing facilities,
and core clinical support laboratory are located in Houston in close proximity
to UTMDACC and the Texas Medical Center. UTMDACC has an annual budget of
approximately $900 million, over 700 basic scientists and clinicians on staff,
and an average of over 2,300 patient visits each day. Through its sponsored
research agreements, Introgen supports a group of approximately 25 clinicians
and researchers at UTMDACC investigating gene therapy products and clinical
applications.
National Cancer Institute
In April 1996, Introgen and its collaborative partner RPR signed a letter
of intent with NCI. The purpose of this letter of intent is to permit joint
research among the parties pending review of a formal CRADA by a CRADA
subcommittee of the NCI and approval of the CRADA by the Director of the NCI.
The goal of the CRADA is to evaluate the potential effectiveness and superiority
to other treatments of Introgen's Ad-p53
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<PAGE> 37
products against a range of designated cancers including breast cancer, ovarian
cancer, bladder cancer, liver cancer (hepatoma) and brain cancer (glioblastoma).
There can be no assurance that the CRADA will receive approval from the CRADA
subcommittee or the director of the NCI. If such approval is not obtained it
would have a material adverse effect on the Company's business, financial
condition and results of operations.
Sidney Kimmel Cancer Center
In March 1996, the Company entered into a licensing and sponsored research
agreement with SKCC, formerly known as the San Diego Regional Cancer Center.
SKCC is active in the field of gene therapy cancer research. Pursuant to the
terms of this agreement, the Company has agreed to advance funds to SKCC for the
performance of certain research by SKCC. In return for the funding of such
research, the Company will obtain the exclusive license rights to certain
inventions made during the course of such research. These activities focus on
combination therapies using p53 and other tumor suppressor genes in combination
with conventional cancer treatments. Introgen has also licensed certain
proprietary technology from SKCC.
MARKETING AND SALES
The Company's marketing strategy is to target well defined markets that can
be penetrated effectively and to pursue those efforts with resources provided by
collaborative arrangements. For example, under the RPR collaboration
arrangement, the Company may elect to form a marketing collaboration to market
collaboration products in North America and will receive a royalty on sales made
by RPR in Europe. The Company believes that pursuing this strategy will allow it
to capture the benefits of more substantial revenues associated with the
marketing function as well as to bring its products to market in a cost
efficient and competitive manner.
The Company has no experience in marketing or selling pharmaceutical
products and does not have a marketing and sales staff. In order to achieve
commercial success for any product candidate approved by the FDA, Introgen must
either develop a marketing and sales force or enter into arrangements with third
parties to market and sell its products. There can be no assurance that Introgen
will successfully develop such experience or that it will be able to enter into
marketing and sales agreements with others on acceptable terms, if at all. If
the Company develops its own marketing and sales capabilities as part of a
marketing collaboration with RPR to sell products in North America, it will
compete with other companies that have experienced and well-funded marketing and
sales operations. To the extent that RPR has exclusive marketing and sales
rights in Europe, and to the extent that the Company enters into a joint venture
with RPR, any revenues to be received by Introgen will be dependent on the
efforts of RPR. There can be no assurance that such efforts will be successful.
MANUFACTURING AND PROCESS DEVELOPMENT
The material used in the Company's preclinical testing and clinical trials
was produced by UTMDACC and by a third-party contract manufacturer. The Company
recently completed construction and validation of a pilot-scale manufacturing
facility with sufficient capacity to supply a portion of Ad-p53 for currently
planned clinical trials. This facility has already produced initial quantities
of Ad-p53 intended to be used in clinical trials.
The Company is considering the establishment of a commercial-scale cGMP
manufacturing facility to further support clinical trials and the possible
commercial sale of its potential products. For this purpose the Company has
retained cGMP facility consultants with experience in designing, overseeing
construction, commissioning equipment and completing validation for cGMP
manufacturing operations. The commercial-scale manufacturing facility is
currently in the design phase and the Company is investigating possible sites.
Commercial-scale manufacturing will require significant improvements in the
Company's current manufacturing techniques, as well as rigorous process
controls. Companies often encounter manufacturing difficulties, including
problems involving production yields, quality control and assurance or shortages
of qualified personnel, during the scale-up of manufacturing. Furthermore, the
Company will be required to register the facility with the FDA and will be
subject to inspections confirming compliance with cGMP regulations
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established by the FDA. No assurance can be given that the Company will be able
to produce clinical or commercial quantities of its potential products in
compliance with applicable regulations or at an acceptable cost. Should the
Company elect to build this facility, the construction and validation of the
facility would take a minimum of approximately 24 to 30 months.
If the Company is unable to produce its potential products in the necessary
clinical or commercial quantities, then it will remain dependent on third-party
contract manufacturers for the production of such materials. There are only a
limited number of contract manufacturers who have the ability and capacity to
produce the Company's potential products. Failure by any such contract
manufacturer or the Company to deliver the Company's required quantities of
potential products on a timely basis and at commercially reasonable prices would
materially adversely affect the Company's business, financial condition and
results of operations.
LICENSED PATENT APPLICATIONS AND PROPRIETARY TECHNOLOGY
The Company's success will depend in part on its ability to develop and
maintain proprietary aspects of its technology. The Company has exclusively
licensed 21 United States and 25 foreign patent applications from UTMDACC. In
addition, the Company has licensed two United States patent applications and one
foreign patent application from SKCC. These licensed patent applications relate
to genes, viral and non-viral delivery systems, tissue-specific promoters and
diagnostics. Certain of these patent applications also pertain to the use of
tumor suppressor genes in combination with DNA-altering treatments such as
chemotherapy and radiation. In January 1996, USPTO granted a notice of allowance
of a licensed patent application covering certain recombinant p53 adenovirus
compositions. The Company has been licensed to make, have made, use and sell
products utilizing the technology described in the licensed patent applications
and is obligated to make royalty payments based on product sales. The Company is
also funding research at UTMDACC and SKCC and has the right to include certain
patentable inventions that arise from the research under an exclusive license
with the corresponding institution. The Company believes this will lead to
additional licensed patent applications in the future.
The Company's patent position like that of other biotechnology and
pharmaceutical companies is highly uncertain and involves complex legal and
factual questions. Claims made under patent applications may be denied or
significantly narrowed. There can be no assurance that any patents which may be
issued as a result of the Company's licensed United States and international
patent applications will provide any competitive advantage to the Company or
that they will not be successfully challenged, invalidated or circumvented in
the future. In addition, there can be no assurance that competitors, many of
which have substantial resources and have made significant investments in
competing technologies, will not seek to apply for and obtain patents that will
prevent, limit or interfere with the Company's ability to make, use and sell its
potential products either in the United States or in international markets.
Patent applications in the United States are, in most cases, maintained in
secrecy until patents issue, and publication of discoveries in the scientific or
patent literature frequently occurs substantially later than the date on which
the underlying discoveries were made. Consequently, the Company cannot be
certain that its licensed patent applications lay claim to the first made
inventions or that they were the first patent filed applications for such
inventions.
The biotechnology and pharmaceutical industry has been characterized by
extensive litigation regarding patents and other intellectual property rights,
and companies have employed intellectual property litigation to gain a
competitive advantage. There are a number of filed and issued patents related to
gene therapy and the treatment of cancer by gene therapy. A series of patents
controlled by Enzo Biochem relating to antisense technology has recently been
found invalid by the United States District Court for the District of Delaware.
Introgen anticipates that Enzo Biochem will appeal this ruling. If the ruling is
overturned and this series of patents is held to be valid, Introgen's
RV-AS-K-ras product could be subject to an infringement claim.
Canji controls a pending United States patent application and its European
counterpart which involve p53 related therapeutic applications. The Company's
knowledge about the status of this United States patent application is limited
because this United States application has been maintained in secrecy. The
claims of the
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<PAGE> 39
European counterpart of this application have been rejected but could later be
allowed based upon further prosecution. Another pending United States patent
application and its European counterpart involve a method of supplying normal
p53 function to a cell which has lost such function and associated delivery
systems. These patent applications are controlled by Pharmagenics. Accordingly,
since neither application has issued, the Company is unable to assess the
potential breadth and validity of these pending applications.
In addition, Canji controls an issued United States patent and its European
counterpart involving a method of treating mammalian cancer cells lacking normal
p53 protein by introducing into the cancer cell a normal p53 protein. While the
Company believes, after consultation with its patent counsel, that its potential
products do not infringe any valid claim of the Canji patent, there can be no
assurance that Canji will not assert a claim against the Company. Furthermore,
there can be no assurance that the Company will not become subject to any other
patent infringement claims or litigation arising out of pending applications,
should they issue, including the Canji and Pharmagenics applications described
above or interference proceedings declared by the USPTO to determine the
priority of inventions.
The defense and prosecution of intellectual property suits, USPTO
interference proceedings and related legal and administrative proceedings
involve complex legal and factual questions. As a result such proceedings are
costly and time-consuming to pursue and their outcome is uncertain. Litigation
may be necessary to enforce patents issued to the Company, to protect trade
secrets or know-how owned by the Company or to determine the enforceability,
scope and validity of the proprietary rights of others. Any litigation or
interference proceedings will result in substantial expense to the Company and
significant diversion of effort by the Company's technical and management
personnel. An adverse determination in litigation or interference proceedings to
which the Company may become a party could subject the Company to significant
liabilities to third parties or require the Company to seek licenses from third
parties or could restrict or prevent the Company from selling its products in
certain markets. Although patent and intellectual property disputes are often
settled through licensing or similar arrangements, costs associated with such
arrangements may be substantial and could include ongoing royalties.
Furthermore, there can be no assurance that the necessary licenses would be
available to the Company on satisfactory terms, if at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could restrict or prevent the Company from manufacturing and
selling its products, which would have a material adverse effect on the
Company's business, financial condition and results of operations.
In addition to patents, the Company relies on trade secrets and proprietary
know-how, which it seeks to protect, in part, through confidentiality and
proprietary information agreements. There can be no assurance that such
confidentiality or proprietary information agreements will not be breached, that
the Company would have adequate remedies for any breach, or that the Company's
trade secrets will not otherwise become known to or be independently developed
by competitors.
GOVERNMENT REGULATION
The production and marketing of the Company's proposed products and its
research and development activities are subject to regulation for safety,
effectiveness and quality by numerous governmental authorities in the United
States and other countries. In the United States, drugs are subject to rigorous
FDA regulations. The Federal Food, Drug, and Cosmetic Act, as amended, the
regulations promulgated thereunder, and other federal and state statutes and
regulations govern, among other things, the testing, manufacture, safety,
effectiveness, labeling, storage, record keeping, advertising and promotion of
the Company's products. Product development and approval within this regulatory
framework take a number of years and involve the expenditure of substantial
resources.
The steps required before the Company's proposed products may be marketed
in the United States include (i) preclinical laboratory tests, in vivo
preclinical studies and formulation studies, (ii) the submission to the FDA of
an IND application for human clinical testing, which must become effective
before human clinical trials commence, (iii) adequate and well-controlled human
clinical trials to establish the safety and effectiveness of the drug, (iv) the
submission to the FDA of a PLA and ELA (for a biologic) or an NDA (for a drug),
and (v) the FDA approval of the PLA/ELA or NDA prior to any commercial sale or
shipment of the
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drug. In addition to obtaining FDA approval for each product and indication,
each domestic manufacturing establishment must be registered with, and approved
by, the FDA. Domestic manufacturing establishments are subject to biennial
inspections by the FDA and must comply with cGMP for both drugs and devices. To
supply products for use in the United States, foreign manufacturing
establishments, including third party facilities, must comply with cGMP and are
subject to periodic inspection by the FDA or by corresponding regulatory
agencies in such countries under reciprocal agreements with the FDA. In addition
to FDA regulation, the Company is also subject to a variety of additional
governmental regulations under the Occupational Safety and Health Act, the
Environmental Protection Act, the Toxic Substances Control Act, the Energy
Reorganization Act of 1974, the Resource Conservation and Recovery Act and other
current and future federal, state and local regulations.
Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the potential safety and
effectiveness of the product. Compounds must be adequately manufactured and
preclinical safety tests must be conducted by laboratories that comply with FDA
Good Laboratory Practices ("GLP") regulations. The results of the preclinical
tests are submitted to the FDA as part of an IND and are reviewed by the FDA
prior to the commencement of human clinical trials. There can be no assurance
that submission of an IND will result in FDA authorization to commence clinical
trials.
Clinical trials involve the administration of the investigational new drug
to healthy volunteers or to patients, under the supervision of qualified
principal investigators. Clinical trials must be conducted in accordance with
Good Clinical Practices under protocols that detail the objectives of the study,
the parameters to be used to monitor safety and the effectiveness criteria to be
evaluated. Each protocol must be submitted to the FDA for clearance as part of
the IND. Further, each clinical trial must be conducted under the auspices of an
independent Institutional Review Board ("IRB") at the institution at which the
trial will be conducted. The IRB will consider, among other things, ethical
factors, the safety of human subjects, informed consent and the possible
liability of the institution.
Clinical trials are typically conducted in three sequential phases, but the
phases often overlap. In Phase I, the initial introduction of the drug into
healthy subjects, the drug is tested for safety (adverse effects), dosage
tolerance, absorption, distribution, metabolism, excretion and pharmacodynamics
(clinical pharmacology). Phase II involves studies in a limited patient
population to (i) determine the effectiveness of the drug for specific, targeted
indications, (ii) determine dosage tolerance and optional dosage and (iii)
identify possible adverse effects and safety risks. When a compound is found to
be effective and to have an acceptable safety profile in Phase II evaluations,
Phase III trials are undertaken to further evaluate clinical effectiveness and
to further test for safety within an expanded patient population at
geographically dispersed clinical study sites. There can be no assurance that
Phase I, Phase II or Phase III testing will be completed within any specific
time period, if at all, with respect to any of the Company's products subject to
such testing. Furthermore, the Company or the FDA may suspend clinical trials at
any time if it is believed that the patients are being exposed to an
unacceptable health risk.
Among other things, the results of the preclinical and clinical studies,
along with manufacturing information, are submitted to the FDA in the form of a
PLA/ELA or an NDA for approval of the marketing and commercial shipment of the
drug. Upon accepting a Company's marketing approval applications, the FDA
generally convenes an Advisory Committee to review clinical trial results and
make a non-binding recommendation concerning the drug's approval. After
considering the Advisory Committee recommendation and other information, the FDA
may or may not issue an approval letter. This letter sets out the specific terms
and conditions that the Company must satisfy in order to receive final approval
to market. The testing and approval process is likely to require substantial
time and effort and there can be no assurance that any approval will be granted
on a timely basis, if at all. The FDA may deny a PLA/ELA or an NDA if applicable
regulatory criteria are not satisfied, require additional testing or
information, or require postmarketing testing and surveillance to monitor the
safety of the Company's products if they do not view the PLA/ELA or the NDA as
containing adequate evidence of the safety and effectiveness of the drug.
Notwithstanding the submission of such data, the FDA may ultimately decide that
the application does not satisfy regulatory criteria for approval. Moreover, if
regulatory approval is granted, such approval will entail limitations on the
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indicated uses for which it may be marketed. Finally, approvals may be withdrawn
if compliance with regulatory standards is not maintained or if problems occur
following initial marketing.
Under the Orphan Drug Act, the FDA may designate drug products as orphan
drugs if there is no reasonable expectation of recovery of the costs of research
and development from sales in the United States or if such drugs are intended to
treat a rare disease or condition, which is defined as a disease or condition
that affects less than 200,000 persons in the United States. If certain
conditions are met, designation as an orphan drug confers upon the sponsor
marketing exclusivity for seven years following FDA approval of the product,
meaning that the FDA cannot approve another version of the "same" product for
the same use during such seven-year period. The market exclusivity provision
does not, however, prevent the FDA from approving a different orphan drug for
the same use or the same orphan drug for a different use. The Company believes
that certain of its potential products may qualify for orphan drug designation.
There can be no assurance that any of the Company's potential products will
ultimately receive orphan drug designation, or that the benefits currently
provided by such a designation will not hereafter be amended or eliminated. The
Orphan Drug Act has been controversial, and many legislative proposals have from
time to time been introduced in Congress to modify various aspects of the Orphan
Drug Act, particularly the market exclusivity provisions. There can be no
assurance that new legislation will not be introduced in the future that may
adversely impact the availability or attractiveness of orphan drug status for
any of the Company's potential products.
Among the conditions for FDA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
to cGMP. In complying with standards set forth in these regulations,
manufacturers must continue to expend time, money and effort in the area of
production and quality control to ensure full technical compliance. The FDA
stringently applies regulatory standards for manufacturing.
COMPETITION
The biotechnology and pharmaceutical industries are subject to rapid and
intense technological change. The Company faces, and will continue to face,
competition in the development and marketing of its product candidates from
academic institutions, government agencies, research institutions and
biotechnology and pharmaceutical companies. Competition may arise from other
drug development technologies, methods of preventing or reducing the incidence
of disease, including vaccines, and new small molecule or other classes of
therapeutic agents. There can be no assurance that developments by others will
not render the Company's product candidates or technologies obsolete or
noncompetitive.
There are many companies, both publicly and privately held, including
well-known pharmaceutical companies, as well as academic and other research
institutions, engaged in developing products for human therapeutic applications.
The Company is aware that Canji is currently conducting clinical trials with p53
related gene therapy products. Various small molecule drug and antisense
approaches are being investigated by other companies in earlier stages of
research and development. The Company is also aware that Onyx Pharmaceuticals,
Inc. has initiated a clinical study of a virus-based therapy which targets cells
that are mutant for p53. Certain companies, including Merck & Co. and Genentech,
Inc., are developing small molecule drugs to inhibit targets involving the ras
pathway. Other companies have or are developing small molecule drugs, gene
therapy and antisense approaches to treat ras related cancers. Many of these
companies and institutions have substantially greater financial resources and
larger research and development staffs than the Company. In addition, many of
these competitors have significantly greater experience than the Company in
developing products, in undertaking preclinical testing and human clinical
trials, in obtaining FDA and other regulatory approvals of products and in
manufacturing and marketing products. Accordingly, the Company's competitors may
succeed in obtaining patent protection, receiving FDA approval or
commercializing products more rapidly than the Company. If and when the Company
commences commercial sales of products, it will be competing against companies
with greater marketing capabilities and manufacturing experience, areas in which
it has limited or no experience. The Company also competes with universities and
other research institutions in the development of products, technologies and
processes. In many instances, the Company competes with other commercial
entities in acquiring products or technologies from universities.
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The Company expects that competition among products approved for sale will
be based, among other things, on product efficacy, safety, reliability,
availability, price, patent position and sales, marketing and distribution
capabilities. The Company's competitive position also depends upon its ability
to attract and retain qualified personnel, obtain patent protection or otherwise
develop proprietary products or processes and secure sufficient capital
resources for the often substantial period between technological conception and
commercial sales.
HUMAN RESOURCES
As of September 27, 1996, Introgen employs approximately 52 persons engaged
in research and development, regulatory affairs, clinical affairs and
manufacturing activities. The Company's employees include 14 holders of the
Ph.D. or M.D. degree. Many of Introgen's employees have brought extensive prior
experience in the pharmaceutical and biotechnology industries to the Company.
In addition to its full-time staff, Introgen provides financial support
through sponsored research agreements for approximately 25 research scientists
and technicians at UTMDACC who serve as investigators for Introgen on clinical
and preclinical research projects. Introgen also has entered into part-time
consulting arrangements with several UTMDACC scientists and clinicians.
Introgen's sponsored research projects with UTMDACC involve investigators in a
wide range of specialties, including thoracic and cardiovascular surgery,
neurology, gynecology, urology, and gastrointestinal medicine. The human
resources devoted to development of Introgen technology and products is further
augmented by the Company's collaborators at SKCC.
None of the Company's employees is covered by collective bargaining
agreements, and the Company believes it enjoys mutually satisfactory relations
with its employees and consultants. The Company's success will depend in
significant part upon its ability to attract and retain qualified personnel. See
"Risk Factors -- Need to Attract and Retain Key Employees and Consultants."
FACILITIES
Introgen leases facilities in Houston, Texas of approximately 22,000 square
feet devoted to research and development laboratories, the Company's pilot-scale
cGMP manufacturing facility, core clinical support laboratory and administrative
offices. The Company's corporate offices are located in Austin, Texas. The
Company expects its current facilities, as they may be supplemented by the
commercial-scale cGMP manufacturing facility currently in the design phase, to
satisfy its requirements for at least the next two years.
SCIENTIFIC ADVISORY BOARD
Introgen receives guidance on a broad range of scientific, clinical and
technical issues from its Scientific Advisory Board. Members of the Scientific
Advisory Board are recognized experts in their respective fields of research and
clinical medicine related to molecular oncology. The members of the Board are:
Jack A. Roth, M.D., Chairman of the Scientific Advisory Board, is
Chairman, Department of Thoracic and Cardiovascular Surgery at UTMDACC. An
Introgen founder and the Company's Chief Medical Advisor, Dr. Roth has been
a widely recognized pioneer in the application of gene therapy to the
treatment of cancer. He is the primary inventor of the technology upon
which Introgen's gene therapy products are based.
George F. Vande Woude, Ph.D., is the Director of the ABL-Basic
Research Program of the National Cancer Institute and also directs the
Molecular Mechanisms of Carcinogenesis Laboratory and the Molecular
Oncology Section. He is the editor-in-chief of Cell Growth and
Differentiation, a co-editor of Advances in Cancer Research, and serves on
the editorial boards of three other prominent journals. He serves as a
scientific advisor to numerous prominent cancer centers. Dr. Vande Woude
received his Ph.D. in biochemistry/physical chemistry from Rutgers
University.
Carol L. Prives, Ph.D., is a Professor of Biology at Columbia
University. She is the Chair of the NIH Experimental Virology Study Section
and a member of the NCI Intramural Scientific Advisory Board, as well as
the Dana-Farber Cancer Center Advisory Board. She is an editor of the
Journal of Virology and
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serves on the editorial boards of three other prominent journals. She
received her Ph.D. in biochemistry from McGill University.
Daniel Von Hoff, M.D., is the Director of the Institute for Drug
Development, Cancer Therapy and Research in San Antonio, Texas and a
Professor in the Departments of Medicine and Cellular and Structural
Biology at the University of Texas Health Science Center. Dr. Von Hoff is
certified in medical oncology by the American Board of Internal Medicine.
Elizabeth Grimm, Ph.D., is Biologist and Professor of Tumor Biology at
UTMDACC. A recipient of the Ph.D. degree in microbiology from the
University of California, Los Angeles School of Medicine, Dr. Grimm has
served as Cancer Expert, Surgical Branch of the NCI.
Michael J. Imperiale, Ph.D., is the Director of Cancer Biology
Training Programs at the University of Michigan Cancer Center and holds a
concurrent position in the Department of Microbiology and Immunology at the
University of Michigan. Dr. Imperiale earned his Ph.D. degree in biological
sciences from Columbia University and received postdoctoral training at the
Rockefeller University Laboratory of Molecular Cell Biology where he
studied the regulation of early adenovirus gene expression.
J. Carl Barrett, Ph.D., is the Scientific Director, Division of
Intramural Research, National Institute of Environmental Health Sciences.
Dr. Barrett received his doctoral degree in biophysical chemistry from the
Johns Hopkins University. Dr. Barrett has received numerous awards
including the NIH Merit Award in 1994 and the NIH Director's Award in 1995.
Peter Nowell, M.D., of the Department of Pathology and Laboratory
Medicine at the University of Pennsylvania School of Medicine, received his
medical training at the University of Pennsylvania School of Medicine. Dr.
Nowell is a past president of the American Society for Experimental
Pathology and past Director of the American Association for Cancer
Research.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------ --- -------------------------------------------------
<S> <C> <C>
David G. Nance...................... 44 President, Chief Executive Officer and Director
Mahendra G. Shah, Ph.D.(2).......... 51 Vice President, Corporate and Business
Development and Director
James W. Albrecht, Jr............... 42 Chief Financial Officer
James A. Merritt, M.D............... 45 Vice President, Clinical Affairs
Mary E. Harper, Ph.D................ 43 Vice President, Research
J. David Enloe, Jr.................. 33 Vice President, Administration
Shawn L. Gallagher.................. 35 Vice President, Manufacturing
John N. Kapoor, Ph.D................ 53 Chairman of the Board
Thierry Soursac, M.D., Ph.D.(1)..... 39 Director
Austin M. Long, III(2).............. 51 Director
Mark B. Chandler, Ph.D.(1)(2)....... 43 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
DAVID G. NANCE has been the President and Chief Executive Officer of the
Company since its inception in June 1993. From 1992 to 1996, Mr. Nance had been
Managing Partner of Texas Biomedical Development Partners, the investment group
that founded Introgen. From 1991 to 1993, he served as Chairman of LifeScience
Corporation, a private company that develops anticancer technologies. Mr. Nance
is a Director of the Texas Medical Research Foundation. See "Certain
Transactions."
MAHENDRA G. SHAH, PH.D., has been Vice President, Corporate and Business
Development of the Company since its inception in June 1993. From 1991 to the
present, he has been a Vice President of EJ Financial Enterprises, Inc. ("EJ")
and NeoPharm, Inc. From 1987 to 1991, he was the Senior Director of New Business
Development with Fujisawa USA, Inc. Prior to that time, he worked in various
positions with Schering Plough and Bristol Meyers-Squibb Company. Dr. Shah
received a Ph.D. in Industrial Pharmacy from St. John's University. Dr. Shah
serves as Vice President, Corporate and Business Development, pursuant to a
consulting agreement with EJ. See "Certain Transactions."
JAMES W. ALBRECHT, JR. joined the Company in November 1994 as its Vice
President, Operations and Administration and has been the Chief Financial
Officer of the Company since September 1995. From 1994 to 1996, he was also
Chief Financial Officer of Spertus Investments LLC and SDC Properties, Inc.,
real estate development and family asset management businesses. From 1993 to
1994, Mr. Albrecht was Chief Financial Officer of On-Demand Technologies, Inc.,
a software development company. From 1988 to 1995, he was the Controller and
Accounting Manager of CompuAdd Computer Corporation, a personal computer
manufacturing and sales company. Mr. Albrecht is a Certified Public Accountant.
JAMES A. MERRITT, M.D., has been Vice President, Clinical Affairs since
joining the Company in February 1996. From 1994 to 1995, he was Vice President
of Medical Affairs at Viagene, Inc. From 1990 to 1994, he held various positions
with IDEC Pharmaceuticals Corp., most recently as Senior Director, Clinical
Sciences. Dr. Merritt is board certified in internal medicine and medical
oncology and has served on the board of Anti-Cancer Drugs since 1990. He
received his M.D. from the University of Vermont.
MARY E. HARPER, PH.D., has been Vice President, Research since joining the
Company in January 1996. From 1990 to 1996, she held various positions at Genta,
Inc., most recently as Vice President of Biological Research. Dr. Harper
received her Ph.D. in molecular genetics from the University of Minnesota.
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J. DAVID ENLOE, JR. joined the Company in March 1995 as its General
Business Manager and has been Vice President, Administration of the Company
since May, 1996. From 1989 to 1995, he held various positions at Centrilift, an
affiliate of Baker Hughes, Inc., most recently as Region General Manager,
Southeast Asia. Mr. Enloe is a Certified Public Accountant.
SHAWN L. GALLAGHER has been Vice President, Manufacturing, since joining
the Company in August 1996. From 1995 to 1996, he was Director of Operations at
Magenta Corporation. From 1991 to 1995, he held various manufacturing management
positions at ImmunoGen, Inc. Mr. Gallagher received an M.S. in chemical
engineering from the University of California at San Diego.
JOHN N. KAPOOR, PH.D., has been Chairman of the Board of the Company since
its inception in June 1993. In 1990, Dr. Kapoor founded EJ Financial
Enterprises, Inc. and is presently its President. He is also presently Chairman
of OptionCare, Inc., Unimed Pharmaceuticals, Inc. and NeoPharm, Inc., Chairman
and Chief Executive Officer of Akorn, Inc. and is a director of Bone Care, Inc.
Dr. Kapoor received his Ph.D. in medicinal chemistry from the State University
of New York.
THIERRY SOURSAC, M.D., PH.D., has been a director of the Company since
October 1994. Since 1987, he has held various positions at Rhone-Poulenc Rorer
Inc. and is currently a Senior Vice President of RPR and General Manager of RPR
Gencell. Dr. Soursac received his Doctorate in Medicine from Universite
d'Angers, his Ph.D. from Universite de Paris and his M.B.A. from INSEAD.
AUSTIN M. LONG, III has been a director of the Company since October 1994.
From 1987 to the present, he has been Vice President of Private Investments of
the University of Texas Investment Management Company. He is also a director of
Targeted Genetics Corporation. Mr. Long holds an M.P.A. from the University of
Texas, a J.D. from DePaul University Law School and is a Certified Public
Accountant.
MARK B. CHANDLER, PH.D., has been a director of the Company since October
1994. Dr. Chandler co-founded Inland Laboratories, Inc. in 1983 and is currently
its President. Dr. Chandler holds a Ph.D. in Immunology from the University of
Texas, Health Science Center.
All directors hold office until the next annual meeting of stockholders or
until their successors have been elected and qualified. Officers serve at the
discretion of the Board of Directors. There are no family relationships between
any of the directors or executive officers of the Company.
In connection with a personal real estate investment, Mr. Nance filed a
petition for bankruptcy under Chapter 13 of the United States Bankruptcy Code in
August 1992. Mr. Nance voluntarily moved to dismiss the filing later that month,
which motion was granted in October 1992.
On August 16, 1992, a lawsuit was filed against Dr. Kapoor in the United
States District Court for the Northern District of Illinois by Fujisawa
Pharmaceutical Co., Ltd. and Fujisawa USA, Inc. ("Fujisawa"). The complaint
alleged that Dr. Kapoor, while President and Chief Executive Officer of
Lyphomed, Inc., a company acquired by Fujisawa, violated provisions of the
Federal securities laws and the Racketeer Influenced and Corrupt Organizations
Act (RICO), and also asserted certain state law claims. On July 25, 1996, the
complaint was dismissed in part, and Dr. Kapoor was granted summary judgment on
the remaining claims. On August 22, 1996, Fujisawa filed a notice of appeal of
the dismissal and summary judgment decision. Dr. Kapoor vigorously denies the
allegations and filed a complaint against Fujisawa in Illinois state court on
August 27, 1996 claiming breach of contract, defamation of character and other
state law claims.
COMPENSATION OF DIRECTORS
Directors currently receive no cash fees for services provided in that
capacity but are reimbursed for out-of-pocket expenses they incur in connection
with their attendance at meetings of the Board. The Company's Director Option
Plan provides for the grant of options to nonemployee directors ("Outside
Directors") pursuant to a nondiscretionary, automatic grant mechanism, whereby
each Outside Director is granted an option at fair market value to purchase
2,000 shares on the date of each Annual Meeting of Shareholders, provided such
director is reelected. Each new Outside Director that joins the Board will
automatically be granted an initial option at fair market value to purchase
10,000 shares of Common Stock upon the date on
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which such person first becomes an Outside Director. The Company has reserved
200,000 shares of Common Stock for issuance under this plan. The initial options
vest at a rate of 25% per year following the date of grant so long as the
optionee remains a director of the Company. The re-election options vest at a
rate of 12.5% per month following the date of grant so long as the optionee
remains a director of the Company. In the event a director's status as a
director is terminated, the director may exercise any vested option within one
year after the date of such termination after which time all unexercised options
will be canceled. All unvested options will be canceled as of the date of the
director's termination. In the event of a merger, sale of substantially all of
the Company's assets or change in the ownership of the Company, all options
outstanding under the Director Option Plan shall be fully vested. Each such
vested option will remain exercisable in accordance with the terms under which
such option was granted. Prior to the adoption of the Company's Director Option
Plan as of June 30, 1996, Outside Directors held options exercisable for 90,000
shares of Common Stock at a weighted average exercise price of $0.63 under the
Incentive Stock Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of the Company. The Compensation Committee also administers various
incentive compensation and benefit plans. In fiscal year 1996, the Compensation
Committee consisted of Thierry Soursac and Mark B. Chandler.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company during
the fiscal year ended June 30, 1996 to the Chief Executive Officer and its four
other most highly compensated executive officers whose cash compensation
exceeded $100,000 (the Chief Executive Officer and such other executive officers
are hereinafter referred to as the "Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION ($) BONUS ($) ($)(2) OPTIONS (#) ($)
- ------------------------------ -------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
David G. Nance $175,000(1) -- -- 60,000 --
President, Chief Executive
Officer
Mahendra G. Shah, Ph.D. 150,000(3) -- -- 48,000 --
Vice President, Corporate
and Business Development
James W. Albrecht, Jr. 109,500(4) -- -- 12,000 --
Chief Financial Officer
James A. Merritt, M.D. 56,827(5) -- -- 60,000 $ 15,000(6)
Vice President, Clinical
Affairs
Mary E. Harper, Ph.D. 63,077(7) -- -- 48,000 25,000(6)
Vice President, Research
</TABLE>
- ---------------
(1) Mr. Nance's compensation was paid to Domecq Technologies, Inc. ("Domecq") of
which he is the President.
(2) Other annual compensation in the form of perquisite and other personal
benefits, securities or property has been omitted in those cases where the
aggregate amount of such compensation is the lesser of either $50,000 or 10%
of the total of annual salary and bonus reported for the named executive
officer.
(3) Dr. Shah's compensation is paid to EJ by which he is employed.
(4) Includes compensation as a consultant prior to March 1, 1996 and salary
after that date as an employee. Mr. Albrecht's current annual compensation
is $150,000.
(5) Includes salary from February 14, 1996 upon commencement of employment. Dr.
Merritt's current annual compensation is $150,000.
(6) Relocation allowance.
(7) Includes salary from January 31, 1996 upon commencement of employment. Dr.
Harper's current annual compensation is $150,000.
45
<PAGE> 47
STOCK OPTION INFORMATION
The following table sets forth certain information for the year ended June
30, 1996, with respect to each grant of stock options to the Executive Officers:
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL
-------------------------------------------------- RATES OF STOCK
NUMBER OF % OF TOTAL PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ---------------------------------- ---------- ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
David G. Nance.................... 60,000 23% $0.63 9/29/05 $23,584 $59,765
Mahendra G. Shah, Ph.D............ 48,000 18% 0.63 9/29/05 18,867 47,812
James W. Albrecht, Jr............. 12,000 5% 0.63 1/12/06 4,717 11,953
James A. Merritt, M.D............. 60,000 23% 0.63 2/14/06 23,584 59,765
Mary E. Harper, Ph.D.............. 48,000 18% 0.63 1/12/06 18,867 47,812
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the gains or "option spreads" that would exist for
the respective options granted. These gains are based on the assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
option was granted over the full option term. These assumed annual compound
rates of stock price appreciation are mandated by the rules of the
Commission and do not represent the Company's estimate or projection of
future Common Stock prices.
No stock options were exercised by the Executive Officers during the year
ended June 30, 1996. The following table sets forth certain information
concerning the value of unexercised stock options held by the Executive Officers
at the end of fiscal year 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND 1996 YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT IN-THE-MONEY OPTIONS AT
JUNE 30, 1996 JUNE 30, 1996 (1) THE IPO PRICE(2)
--------------------------- --------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David G. Nance............. 78,000 6,000 $ 7,800 $ 600 $ 809,250 $ 62,250
Mahendra G. Shah, Ph.D..... 66,000 6,000 6,600 600 684,750 62,250
James W. Albrecht, Jr...... 12,000 36,000 1,200 3,600 124,500 373,500
James A. Merritt, M.D...... -- 60,000 -- 6,000 -- 622,500
Mary E. Harper, Ph.D....... -- 48,000 -- 4,800 -- 498,000
</TABLE>
- ---------------
(1) Based upon an assumed fair market value of $0.725 per share as of June 30,
1996 less the exercise price per share.
(2) Based upon an assumed initial public offering price of $11.00 per share less
the exercise price per share.
STOCK PLANS
Incentive Stock Plan. A total of 1,750,000 shares of Common Stock have
been reserved for issuance under the Company's Incentive Stock Plan. Under the
Incentive Stock Plan, as of August 28, 1996, options to purchase an aggregate
746,354 shares were outstanding, no shares of Common Stock had been purchased
pursuant to the exercise of stock options and stock purchase rights and
1,003,646 shares were available for future grant.
The Incentive Stock Plan provides for the grant of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), nonqualified stock options and stock purchase rights to
employees and consultants of the Company. Incentive stock options may be granted
only to employees. The Incentive Stock Plan is administered by the Board of
Directors or by a committee appointed by the Board of Directors, which
determines the terms of options granted, including the exercise price and the
number of shares subject to each option. The Board of Directors also determines
the schedule upon which
46
<PAGE> 48
options become exercisable. The exercise price of incentive stock options
granted under the Incentive Stock Plan must be at least equal to the fair market
value of the Company's Common Stock on the date of grant for employees
generally. However, for any employee holding more than 10% of the voting power
of all classes of the Company's stock, the exercise price will be no less than
110% of the fair market value. The exercise price of nonqualified stock options
is set by the administrator of the Incentive Stock Plan. The maximum term of
options granted under the Incentive Stock Plan is ten years. In the event of a
merger, reorganization or change in the ownership of the Company, all options
outstanding under the Plan shall be fully vested.
In the event a consultant or an employee is terminated, such employee or
consultant will have at least 90 days after such termination to exercise any
vested non-qualified option and three months to exercise vested incentive stock
options. After the applicable exercise period, all unexercised options will be
canceled. All unvested options will be canceled as of the date of the employee's
termination. In the event of a merger, sale of substantially all of the
Company's assets or change in the ownership of the Company, all options
outstanding under the Incentive Stock Plan shall be fully vested. Each such
vested option will remain exercisable in accordance with the terms under which
such option was granted.
Employee Stock Purchase Plan. The Company's Employee Stock Purchase Plan
(the "Purchase Plan") was adopted by the Company's Board of Directors and
approved by the Company's stockholders in August 1996. The Purchase Plan is
intended to qualify under Section 423 of the Code. The Company has reserved
100,000 shares of Common Stock for issuance under the Purchase Plan. Under the
Purchase Plan, an eligible employee will be granted an option to purchase shares
of Common Stock from the Company through payroll deductions of up to 10% of his
or her compensation, at a price per share equal to 85% of the lower of (i) the
fair market value of the Company's Common Stock on the first day of an offering
period under the Purchase Plan or (ii) the fair market value of the Common Stock
on the last day of an offering period. Except for the first offering period,
each offering period will last for six months and will commence the first day on
which the national stock exchanges and the Nasdaq National Market System are
open for trading, on or after May 1 and November 1 of each year. The first
offering period will begin upon the effective date of this offering and will end
on October 31, 1997. On the last day of each offering period, the option to
purchase the shares will be exercised automatically, and the maximum number of
full shares subject to the option will be purchased for the employee with the
accumulated payroll deductions in his or her account. Any employee who is
customarily employed for at least 20 hours per week and more than five months
per calendar year and, who has been so employed for at least three consecutive
months on or before the commencement date of an offering period is eligible to
participate in the Purchase Plan. An employee may elect to withdraw from the
Purchase Plan by withdrawing all, but not less than all, payroll deductions from
his account prior to the exercise date, and a termination of employment will be
treated as a withdrawal from the Purchase Plan.
In the event of merger of the Company with or into another corporation, all
outstanding options will either be assumed or an equivalent option will be
substituted by the successor corporation, unless the Board in its discretion
accelerates the exercise date of such options or cancels the options and refunds
all payroll deductions collected from the employees. If the Board accelerates
the exercise date, it must give the employees ten days' notice of the new
exercise date.
EMPLOYMENT AND CONSULTING AGREEMENTS
Until August 1, 1996, the Company had a service agreement with Domecq
pursuant to which David G. Nance provided his services as President and Chief
Executive Officer of Introgen. Mr. Nance is the President of Domecq. Effective
August 1, 1996, the Company entered into an employment agreement with Mr. Nance,
under which he will continue to serve as President and Chief Executive Officer
and will be paid at the annual rate of $225,000. The Company also has a
consulting agreement with EJ pursuant to which Mahendra G. Shah provides his
services as Vice President, Corporate and Business Development. See "Management"
and "Certain Transactions."
47
<PAGE> 49
SECTION 401(K) PLAN
In May 1995, the Company adopted a retirement savings and investment plan
(the "401(k) Plan") covering the Company's employees who are located in the
United States. Pursuant to the 401(k) Plan, employees may elect to reduce their
current compensation by up to the statutorily prescribed annual amount ($9,240
in 1995 and $9,500 in 1996) and to have the amount of such reduction contributed
to the 401(k) Plan. The 401(k) Plan permits, but does not require, additional
matching contributions by the Company on behalf of all participants in the
401(k) Plan. The Company has not made any matching contributions to the 401(k)
Plan. The 401(k) Plan is intended to qualify under Section 401(k) of the Code,
so that (i) contributions to the 401(k) Plan by employees or by the Company, and
the investment earnings thereon, are not taxable to employees until withdrawn
from the 401(k) Plan; and (ii) contributions by the Company, if any, will be
deductible by the Company when made.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Restated Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (i)
breach of their duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit. Such limitation of liability does not
apply to liabilities arising under the federal or state securities laws and does
not affect the availability of equitable remedies such as injunctive relief or
rescission.
The Company's Bylaws provide that the Company shall indemnify its
directors, officers, employees and other agents to the fullest extent permitted
by law. The Company believes that indemnification under its Bylaws covers at
least negligence and gross negligence on the part of indemnified parties. The
Company's Bylaws also permit it to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the Bylaws permit such
indemnification.
The Company has entered into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Bylaws. These agreements, among other things, indemnify the Company's
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of the Company
arising out of such person's services as a director, officer, employee, agent or
fiduciary of the Company, any subsidiary of the Company or any other company or
enterprise to which the person provides services at the request of the Company.
The Company believes that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.
At present, there is no pending litigation or proceeding involving a
director or officer of the Company in which indemnification is required or
permitted, and the Company is not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
48
<PAGE> 50
CERTAIN TRANSACTIONS
CONSULTING AND SERVICE AGREEMENTS
Dr. Jack A. Roth individually and as trustee of Roth 1994 Investment Trust
owns shares of Common Stock of Introgen. He is also Chairman of the Department
of Thoracic and Cardiovascular Surgery at UTMDACC with which Introgen has a
licensing agreement and several research agreements. Introgen entered into a
consulting agreement with Dr. Roth effective as of October 1, 1994. Pursuant to
this agreement, Dr. Roth provides his technical knowledge, expertise and
assistance in the development and commercialization of Introgen's products and
abides by confidentiality and noncompetition provisions. Dr. Roth received
$20,000 at the execution of the agreement. The agreement also provides the
following compensation formula: $30,000 per year starting October 1, 1994,
$75,000 per year starting October 1, 1995, $100,000 per year starting October 1,
1996, with the yearly compensation increasing to $200,000 starting October 1,
2003, subject to adjustment for inflation. While the term of this agreement is
15 years from October 1, 1994, upon one year's notice, the Company may terminate
this agreement effective October 1, 1997.
David G. Nance, President, Chief Executive Officer and director of
Introgen, is also President of Domecq. On July 1, 1994, Introgen entered into a
service agreement with Domecq pursuant to which Domecq provided the services of
Mr. Nance to serve the Company as President and Chief Executive Officer for
compensation of $175,000 per year through August 1, 1996. Effective August 1,
1996, the Company entered into an employment agreement with Mr. Nance, under
which he will serve in the same positions and will be paid at the annual rate of
$225,000. Mr. Nance is also a member of the board of directors of Pinnacle
Management & Trust Co., the current administrator of the Company's 401(k) plan.
See "Management -- Employment and Consulting Agreements."
Mahendra G. Shah, Vice President and director of Introgen, is also an
employee of EJ, a shareholder of the Company. On July 1, 1994, the Company and
EJ entered into a consulting agreement pursuant to which EJ provides the
services of Dr. Shah to Introgen. The agreement provides that Dr. Shah will
serve as Introgen's Vice President and assist with business development, license
negotiation, market analysis and general corporate development. Introgen is
obligated to pay EJ compensation of $150,000 per calendar year. The term of the
agreement is three years commencing July 1, 1994 unless terminated by the
Company on 30 days' notice. After the initial term, the agreement is
automatically renewed for additional one-year terms unless either party gives
notice of termination. Over the course of the term of the agreement and at
present, Dr. Shah devotes a substantial portion of his time to Introgen as Vice
President, Corporate and Business Development of the Company. Dr. Shah has
indicated that it is his intention to remain as Vice President, Corporate and
Business Development of the Company, subject to Introgen's right to terminate
the agreement.
OTHER ARRANGEMENTS
Thierry Soursac is a Senior Vice President of RPR and General Manager of
RPR Gencell. RPR is a stockholder of the Company and has several agreements with
the Company. Pursuant to the terms of a stock purchase agreement between the
Company and RPR, RPR has agreed to purchase $6.0 million of Common Stock
concurrent with this offering in a private placement at the price to public in
this offering, as well as to make an additional equity investment of $2.5
million in 1997 at the higher of the price to public in this offering or the
then current average trading price, and a potential future milestone payment of
approximately $2.5 million (provided that the collaboration agreements remain in
effect). At the assumed offering price of $11.00 per share, the private
placement will result in the issuance of 545,455 shares to RPR. Accordingly, RPR
will own approximately 16.0% of the outstanding capital stock of the Company
after the offering. If the 1997 equity investment occurs at the assumed offering
price of $11.00 per share, RPR will purchase an additional 227,273 shares of
Common Stock at that time. See "Business of Introgen -- Collaborative
Arrangements and Licensing Agreements -- Rhone-Poulenc Rorer."
49
<PAGE> 51
The Board of Regents of the University of Texas System is a stockholder of
the Company. The Board of Regents of the University of Texas System, UTMDACC and
Introgen are parties to the Patent and Technology License Agreement and several
sponsored research agreements. See "Business of Introgen -- Collaborative
Agreements and Licensing Agreements -- The University of Texas M.D. Anderson
Cancer Center."
Genesis Merchant Group Securities ("Genesis"), an underwriter in this
offering, is a stockholder and warrant holder of Introgen. As of the date of
this Prospectus, Genesis and certain related persons beneficially own an
aggregate of 40,863 shares of the Company's Series C Preferred Stock and
outstanding warrants exercisable for 52,328 shares of the Common Stock at an
exercise price of $7.929 per share. The Series C Preferred Stock will
automatically be converted to Common Stock upon the completion of this offering.
50
<PAGE> 52
PRINCIPAL STOCKHOLDERS
The following table sets forth as of September 30, 1996, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby and pursuant to
the private placement, certain information with respect to the beneficial
ownership of the Common Stock as to (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company, (iii) each of the executive officers named in the
Summary Compensation Table, and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF OUTSTANDING
SHARES --------------------------
BENEFICIALLY BEFORE THE AFTER THE
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING(2)
- --------------------------------------------------------- ------------ ---------- -----------
<S> <C> <C> <C>
John N. Kapoor, Ph.D.(3)................................. 2,331,731 30.35% 22.46%
225 Deerpath, #250
Lake Forest, IL 60045
David G. Nance(4)........................................ 2,137,178 27.61 20.47
c/o Introgen Therapeutics, Inc.
301 Congress, Suite 1850
Austin, TX 78701
Rhone-Poulenc Rorer International (Holdings) Inc. ....... 1,111,764 14.51 15.99(5)
Delaware Corporate Center I
Suite 114
1 Righter Parkway
Wilmington, DE 19803
The Board of Regents of the University of Texas 730,749 9.53 7.05
System(6)..............................................
201 West 7th Street
Austin, TX 78701
Jack A. Roth, M.D.(7).................................... 724,749 9.46 6.99
2324 Bolsover
Houston, TX 77005
Thierry Soursac, M.D., Ph.D.(8).......................... 6,000 * *
Mahendra G. Shah, Ph.D.(9)............................... 66,000 * *
James W. Albrecht, Jr.(10)............................... 12,000 * *
Mark B. Chandler, Ph.D.(11).............................. 6,000 * *
Austin M. Long, III(12).................................. -0- * *
James A. Merritt, M.D.(13)............................... -0- * *
Mary E. Harper, Ph.D.(14)................................ -0- * *
All directors and executive officers as a group
(10 persons)(3)(4)(7)(8)(9)(10)(11)(12)................ 4,570,909 58.14 41.32
</TABLE>
- ---------------
(*) Less than 1%.
(1) Applicable percentage ownership is based on 7,663,769 shares of Common
Stock as of September 30, 1996, together with applicable options for such
stockholder. Beneficial ownership is determined in accordance with the
rules of the Commission, based on factors including voting and investment
power with respect to shares. Shares of Common Stock subject to the options
currently exercisable, or exercisable within 60 days after September 30,
1996, are deemed outstanding for computing the percentage ownership of the
person holding such options, but are not deemed outstanding for computing
the percentage ownership of any other person.
(2) After giving effect to the issuance of 2,700,000 shares of Common Stock
offered hereby and the 545,455 to be purchased by RPR concurrent with this
offering in a private placement.
(3) Consists of 1,156,865 shares held by EJ Financial Investments IV, L.P.,
925,492 shares held by EJ Financial Investments VI, L.P., 231,374 shares
held by EJ and 18,000 shares held by Dr. Kapoor subject to stock options
that are exercisable within 60 days of September 30, 1996. EJ Financial
Investments IV, L.P. and EJ Financial Investments, VI, L.P. are
partnerships controlled by their general partner, EJ. Dr. Kapoor, Chairman
of the Board of the Company, is President of EJ. Dr. Kapoor disclaims
beneficial ownership of the shares held by EJ, EJ Financial Investments IV,
L.P. and EJ Financial Investments VI, L.P.
(4) Consists of 621,883 shares held by David G. Nance, trustee, 927,862 shares
held by Developtech Resource Corporation, 9,433 shares held by Domecq,
500,000 shares held by Debouchment, Ltd. and 78,000 shares subject to stock
options that are exercisable
51
<PAGE> 53
within 60 days of September 30, 1996. Mr. Nance is President and Chief
Executive Officer of the Company of Developtech Resource Coporation, Domecq
and Debouchment, Ltd. Mr. Nance holds the right to vote for each entity and
has dispositive control over the shares of Common Stock.
(5) Includes 545,455 shares of Common Stock to be purchased by RPR concurrent
with this offering in a private placement.
(6) Consists of 724,749 shares held by the Board of Regents and 6,000 shares
subject to stock options that are exercisable within 60 days of September
30, 1996.
(7) Consists of 362,374 shares held by Roth 1994 Investment Trusts and 362,375
shares held by Dr. Roth. Dr. Roth holds the right to vote for each entity
and has dispositive control over the shares of Common Stock.
(8) All 6,000 shares subject to stock options that are exercisable within 60
days of September 30, 1996. Dr. Soursac and RPR have agreed that in the
event Dr. Soursac exercises the option he will assign all interest in the
shares to RPR.
(9) All 66,000 shares subject to stock options that are exercisable within 60
days of September 30, 1996.
(10) All 12,000 shares subject to stock options that are exercisable within 60
days of September 30, 1996.
(11) All 6,000 shares subject to stock options that are exercisable within 60
days of September 30, 1996.
(12) All 6,000 shares subject to stock options exercisable within 60 days of
September 30, 1996. These shares are held by the Board of Regents. Mr. Long
holds no right to vote these shares and disclaims beneficial ownership.
(13) Dr. Merritt has been granted options to purchase 60,000 shares of Common
Stock, none of which are exercisable within 60 days of September 30, 1996.
(14) Dr. Harper has been granted options to purchase 48,000 shares of Common
Stock, none of which are exercisable within 60 days of September 30, 1996.
52
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company has 50,000,000 shares of Common Stock, $0.001 par value per
share, authorized. The Restated Certificate of Incorporation, which will become
effective upon the closing of this offering, authorizes the issuance of
5,000,000 shares of Preferred Stock, $0.001 par value per share ("Preferred
Stock"), the rights and preferences of which may be established from time to
time by the Company's Board of Directors. The following summary of certain
provisions of the Company's capital stock describes the material provisions of,
but does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the Restated Certificate of Incorporation and the
Company's Bylaws, which are included as exhibits to the Registration Statement
of which this Prospectus forms a part and by the provisions of applicable law.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock would be
entitled to share in the Company's assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted the
holders of any outstanding shares of Preferred Stock. Holders of Common Stock
have no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and the shares of Common Stock offered
by the Company in this offering, when issued and paid for, will be, fully paid
and nonassessable. The rights, preferences and privileges of the holders of
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate in the future.
PREFERRED STOCK
Effective upon the closing of this offering, the Board of Directors is
authorized, subject to any limitations prescribed by law, without stockholder
approval, from time to time to issue up to an aggregate of 5,000,000 shares of
Preferred Stock, in one or more series, each of such series to have such rights
and preferences, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be determined by the
Board of Directors. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any Preferred
Stock that may be issued in the future. Issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of the outstanding voting stock of the Company. The Company
has no present plans to issue any shares of Preferred Stock.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 2,318,918 shares of Common Stock (the "Registrable
Securities") or their transferees are entitled to certain registration rights
with respect to the registration of such shares under the Securities Act of
1933, as amended (the "Securities Act"). These rights are provided under the
terms of the Series B Preferred Stock Purchase Agreement and the Series C
Preferred Stock Purchase Agreement (collectively, the "Stock Purchase
Agreements") between the Company and the holders of the Registrable Securities.
The holders of at least 50% of the Registrable Securities or RPR may require,
respectively, subject to certain limitations in the Stock Purchase Agreements,
on one or two occasions, after December 31, 1998, that the Company use its best
efforts to register the Registrable Securities for public resale. In addition,
if the Company registers any of its Common Stock either for its own account or
for the account of other security holders, the holders of Registrable Securities
are entitled to include their shares of Common Stock in the registration. These
shares will not form a part of the shares of the Common Stock registered in this
offering. A holder's right to include
53
<PAGE> 55
shares in an underwritten registration statement is subject to the ability of
the underwriters to limit the number of shares included in the offering. The
holders of Registrable Securities may also require the Company to register all
or a portion of their Registrable Securities on Form S-3 when use of such form
becomes available to the Company, provided, among other limitations, that the
proposed aggregate selling price, net of underwriting discounts and commissions,
is at least $1,000,000. All registration expenses must be borne by the Company
and all selling expenses relating to Registrable Securities must be borne by the
holders of the securities being requested. If such holders, by exercising their
demand registration rights, cause a large number of securities to be registered
and sold in the public market, such sales could have an adverse effect on the
market price for the Company's Common Stock. If the Company were to initiate a
registration and include Registrable Securities pursuant to the exercise of
piggyback registration rights, the sale of such Registrable Securities may have
an adverse effect on the Company's ability to raise capital.
CERTAIN CHARTER AND BYLAWS PROVISIONS AND DELAWARE ANTI-TAKEOVER STATUTE
Certain provisions of the Restated Certificate of Incorporation and the
Company's Bylaws may have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the Company. Such provisions could limit the price that certain
investors might be willing to pay in the future for shares of Common Stock.
Certain of these provisions allow the Company to issue Preferred Stock without
any vote or further action by the stockholders and eliminate the right of
stockholders to act by written consent without a meeting. These provisions may
make it more difficult for stockholders to take certain corporate actions and
could have the effect of delaying or preventing a change in control of the
Company. In addition, the Company is subject to Section 203 of the Delaware
General Corporation Law which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (1) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, or (2) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding of those shares owned (i) by
persons who are directors and also officers and (ii) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (3) on or subsequent to such time the business combination is approved
by the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is Norwest
Bank Minnesota, N.A.
54
<PAGE> 56
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
10,909,224 shares of Common Stock, assuming no exercise of options after
September 30, 1996. Of these shares, the 2,700,000 shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 of the Securities Act ("Rule 144"). The remaining 8,209,224
shares outstanding upon completion of this offering will be "restricted
securities" as that term is defined under Rule 144 (the "Restricted Shares").
Each of the Company's officers, directors and certain other stockholders has
agreed with the Underwriters not to sell or otherwise dispose of any shares of
Common Stock for a period of 180 days after the date of this Prospectus (the
"Lock-up Period") without the prior written consent of PaineWebber Incorporated.
PaineWebber Incorporated, in its sole discretion at any time and without notice,
may release any or all shares from the lock-up agreements and permit holders of
the shares to resell all or any portion of their shares at any time prior to the
expiration of the Lock-up Period. See "Underwriting." The number of shares of
Common Stock available for sale in the public market is further limited by
restrictions under the Securities Act.
Because of the restrictions noted above, on the date of this Prospectus, no
shares other than the 2,700,000 shares offered hereby will be eligible for sale.
Beginning 180 days after the date of this Prospectus (or earlier with the prior
written consent of PaineWebber Incorporated), 7,154,788 shares, including
393,600 shares issuable upon exercise of currently outstanding vested options,
will be eligible for sale in the public market subject to Rule 144 and Rule 701
of the Securities Act. The remaining 902,581 shares held by existing
stockholders will become eligible for sales from time to time upon the
expiration of the minimum holding period prescribed by Rule 144.
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
Restricted Shares for at least two years from the later of the date such
Restricted Shares are acquired from the Company and (if applicable) the date
they were acquired from an affiliate, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock or the average weekly trading volume
in the Nasdaq National Market System during the four calendar weeks preceding
the filing of a Form 144 with respect to such sale. Sales under Rule 144 are
also subject to certain requirements as to the manner and notice of sales and
the availability of public information concerning the Company. All shares,
including Restricted Shares, held by affiliates of the Company eligible for sale
in the public market under Rule 144 are subject to the foregoing volume
limitations and other restrictions. In addition, an individual that is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned for at least three years the
shares proposed to be sold, would be entitled to sell such shares under Rule
144(k) without regard to the requirements described above.
The Commission has proposed an amendment to Rule 144 and Rule 144(k) that
would reduce the applicable requisite holding periods to one year and two years,
respectively. If this proposal is adopted, as of the expected closing of this
offering an additional 902,581 shares of Common Stock will become eligible for
sale by the first anniversary of the expected closing of this offering.
In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts commencing 90 days after the issuer
becomes subject to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period requirements,
contained in Rule 144. Prior to the expiration of the Lock-up Period, the
Company intends to register on a registration statement on Form S-8, (i) a total
of 100,000 shares of Common Stock reserved for issuance under the Purchase Plan,
(ii) a total of 200,000 shares of Common Stock reserved for issuance under the
Director Plan and (iii) assuming no exercise of options after June 30, 1996,
746,354 shares of Common Stock subject to outstanding options under the
Incentive Stock Plan and 1,003,646 shares reserved for future issuance pursuant
to such plan. Such registration will permit the resale of shares so registered
by non-affiliates in the public market without restriction under the Securities
Act.
Prior to this offering, there has been no public market for the Common
Stock of the Company, and any sale of substantial amounts of Common Stock in the
open market may adversely affect the market price of the Common Stock offered
hereby. See "Risk Factors -- Potential Adverse Effect of Shares Eligible for
Future Sale."
55
<PAGE> 57
UNDERWRITING
The Underwriters named below, acting through their Representatives, have
severally agreed with the Company, subject to the terms and conditions of the
Underwriting Agreement among the Company and the Representatives (the
"Underwriting Agreement"), to purchase the number of shares of Common Stock set
forth opposite their respective names below. The Underwriters are committed to
purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
PaineWebber Incorporated..................................................
Genesis Merchant Group Securities.........................................
------
Total........................................................... 2,700,000
======
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per share, of which
$ may be reallowed to other dealers. After this offering, the public
offering price, concession and reallowance to dealers may be reduced by the
Representatives. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, under which the
Underwriters may purchase up to an additional 405,000 shares of Common Stock
from the Company at the public offering price set forth on the cover page of
this Prospectus, less underwriting discounts and commissions. The Underwriters
may exercise the option only to cover over-allotments, if any. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as it was obligated to purchase pursuant to the Underwriting
Agreement.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
The Company and each of its officers, directors and certain other
stockholders, have agreed with the Representatives for the Lock-up Period,
subject to certain exceptions, without the prior written consent of PaineWebber
Incorporated, not to offer to sell, contract to sell, grant an option to sell,
or otherwise dispose of or file, or require the Company to file, with the
Commission a registration statement under the Securities Act to register any
shares of Common Stock or securities convertible into or exchangeable for Common
Stock or warrants or other rights to acquire shares of Common Stock. See "Shares
Eligible for Future Sale." Approximately 6,761,188 of such shares will be
eligible for immediate public sale following expiration of the Lock-up Period,
subject to the provisions of Rule 144.
As of the date of this Prospectus, Genesis and certain related persons
beneficially own an aggregate of 40,863 shares of the Company's Series C
Preferred Stock (not including 52,328 shares subject to outstanding warrants
exercisable for the Common Stock). See "Certain Transactions -- Other
Arrangements."
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock
offered hereby will be determined through negotiations among the Company and the
Representatives. The material factors to be considered in such negotiations will
be prevailing market conditions, certain financial information of the Company,
market valuations of other companies that the Company and the Representatives
believe to be comparable to the Company, estimates of the business potential of
the Company, the present state of the Company's development and the current
state of the economy as a whole.
56
<PAGE> 58
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, P.C. Certain legal matters relating
to patents in connection with this offering will be passed on by Arnold, White &
Durkee. Shearman & Sterling is acting as legal counsel for the Underwriters in
connection with certain legal matters relating to the shares of Common Stock
offered hereby. As of the date of this Prospectus, members of Wilson Sonsini
Goodrich & Rosati, P.C., and investment partnerships of which members of such
firm are partners, beneficially own approximately 30,000 shares of Common Stock.
As of the date of this Prospectus, a partner at Arnold, White & Durkee holds a
warrant exercisable for 12,000 shares of the Common Stock.
EXPERTS
The financial statements included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
The statements in this Prospectus under the caption "Risk Factors -- Patent
Applications and Proprietary Technology" and "Business -- Licensed Patent
Applications and Proprietary Technology" have been reviewed and approved by
Arnold, White & Durkee, patent counsel for the Company, as experts in such
matters and are included herein in reliance upon such review and approval.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement, of
which this Prospectus constitutes a part, under the Securities Act with respect
to the shares of Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits thereto for further information with
respect to the Company and the Common Stock offered hereby. Statements contained
herein concerning the provisions of any documents are not necessarily an
exhaustive description of such documents, and reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. The Registration
Statement, including exhibits filed therewith, may be inspected without charge
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and Citicorp Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials may be
obtained from the Public Reference Section of the Commission, Room 1034,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its public
reference facilities in New York, New York and Chicago, Illinois, at prescribed
rates. In addition, the Commission maintains a World Wide Web site that contains
reports, proxy and information statements that are filed electronically with the
Commission. The address of the site is http://www.sec.gov.
57
<PAGE> 59
GLOSSARY OF TERMS AND ACRONYMS
Ad-C-CAM...................... Tumor suppressor gene (C-CAM) carried by an
adenoviral vector.
Adenoviral Vector............. A noninfectious DNA virus that is able to enter
human cells and transmit a recombinant gene
to those cells.
Ad-p53........................ An adenoviral vector containing a functional
copy of the p53 tumor suppressor gene.
Ad-scFv-ras................... Gene for a single chain antibody to ras
proteins carried by an adenoviral vector.
Anti-proliferative (Bystander)
Effector.................... A molecule(s) produced by a cell transduced
with a gene for p53 that has an
anti-proliferative effect on a
non-transduced, neighboring cell.
Antisense..................... The strand of DNA or RNA (Ribonucleic Acid)
that is able to hybridize to its
complementary sense-strand. In the case of
the antisense K-ras vector, it is an RNA
strand that is produced by the vector inside
the infected cell that is complementary
(forms Watson-Crick base pairing) with the
RNA for the K-ras RNA expressed from the
endogenous gene.
Apoptosis..................... Programmed cell death (fragmentation of a cell
into membrane-bound particles that are then
eliminated by phagocytosis).
C-CAM......................... Cell Adhesion Molecule. A transmembrane
protein with both cellular adhesion and tumor
suppressor activities. Mutations or
inappropriate regulation of C-CAM are
postulated to be involved in prostate cancer.
Cell Cycle.................... The period from one cell division to the other.
It includes periods for duplication of the
cell's DNA ("S" phase), and segregation of
the duplicated DNA into the progeny cells
("M" phase).
cGMP.......................... Current Good Manufacturing Practices
(promulgated by the FDA).
Cisplatin..................... A conventional therapeutic agent.
CRADA......................... Cooperative Research and Development Agreement
(with the U.S. Government).
Cytoplasm..................... The protoplasm of a cell exclusive of that of
the nucleus; it consists of a continuous
aqueous solution and the organelles and
inclusions suspended in it, and is the site
of most of the chemical activities of the
cell.
DNA........................... Deoxyribonucleic Acid is the basic molecule
that encodes genetic information, made up of
a double chain of the linked bases
(subunits), adenine, guanine, cytosine, and
thymine).
ELA........................... Establishment License Application (filed with
the FDA).
Expression.................... Referencing gene expression. The quantifiable
process by which a gene's encoded information
creates the structures present and operating
in the cell (i.e., the RNA and resulting
protein).
FDA........................... Food and Drug Administration (U.S.).
58
<PAGE> 60
Gene.......................... The fundamental physical and functional unit of
heredity, which carries information from one
generation to the next. A segment of DNA
involved in producing an RNA product (which
is usually involved in the subsequent
production of a polypeptide or protein
chain), including both coding and non-coding
sequences.
Gene blocking................. A gene therapy that seeks to restore or correct
missing or aberrant gene functions by
neutralizing the activity of defective genes.
Gene replacement.............. A gene therapy strategy that seeks to restore
or correct missing or aberrant gene functions
by addition of normal genes.
Gene Therapy.................. A medical intervention based on the
modification of the genetic material of
living cells. Cells may be modified ex vivo
for subsequent administration or may be
altered in vivo by gene therapy products
given directly to the subject.
Genetic lesions............... Changes in the nucleotide sequence of a gene or
genes that result in functional changes in
the products of those genes.
Genomic plasticity............ The ability of an organism's genome to
accumulate non-harmful or beneficial
mutations or changes.
GLP........................... Good Laboratory Practices (promulgated by the
FDA).
In Vitro/Ex Vivo.............. Phenomena that take place outside the body.
In vivo....................... Within the living body.
IND........................... Investigational New Drug application (filed
with the FDA).
Inoperable.................... Non-resectable or not suitable to be operated
on.
Intra-arterial................ Within an artery or arteries.
IRB........................... Institutional Review Board responsible for
ethical oversight of clinical trials.
K-ras......................... An oncogene of the guanosine triphosphate
binding protein family (originally identified
in the Kirsten murine sarcoma virus).
"Later Stage Product"......... A product being developed under the RPR
collaboration that has entered a Phase II,
Phase II/III or Phase III clinical trial.
Mutation...................... A change in the genetic material of an
organism; a gene or chromosome set that
differs from the standard, or wild-type.
NCI........................... National Cancer Institute.
NDA........................... New Drug Application (filed with the FDA).
NIH........................... National Institutes of Health.
NSC........................... Non Small Cell (general classification for
approximately 75-80% of all lung cancers).
Oncogene...................... A gene capable under certain conditions (i.e.
when "activated") of causing the initial and
continuing conversion of normal cells into
cancer cells.
Orphan Drug................... A drug developed and marketed for a rare
disease or condition. The Orphan Drug Act
(P.L. 97-414) provides for incentives to drug
59
<PAGE> 61
manufacturers to develop products ("orphan
drugs") for these indications.
p53........................... Common reference for the protein encoded by the
p53 tumor suppressor gene, which is believed
to be a central vital regulator of cellular
activities.
Percutaneous.................. Through the skin.
PLA........................... Product License Application (filed with the
FDA).
Ras........................... General term for oncogenes of the guanosine
triphosphate binding protein family including
K-ras, H-ras, and N-ras.
Receptor...................... A molecular structure within or on the surface
of a cell characterized by (1) selective
binding of a specific substance and (2) a
specific physiologic effect that accompanies
the binding (e.g. cell-surface receptors for
peptide hormones, antigens,
neurotransmitters, etc.).
Retroviral Vector............. A noninfectious RNA virus that is able to enter
human cells and transmit a recombinant gene
to those cells.
RPR........................... Rhone-Poulenc Rorer Inc. and its wholly-owned
subsidiaries.
RPR Gencell................... A division of RPR that collaborates with a
number of other companies and academic
institutions to discover, develop, and
commercialize drugs based on gene and cell
therapies.
RV-AS-K-ras................... Partial antisense K-ras gene carried by a
retroviral vector.
RV-p53........................ A retroviral vector containing a functional
copy of the p53 tumor suppressor gene.
SEER.......................... Surveillance, Epidemiology and End Results.
SKCC.......................... Sidney Kimmel Cancer Center.
Transduction.................. The transfer of DNA from one organism to
another by an intermediate agent.
Tumor necrosis................ Cell death within a tumor, marked by the
morphological changes caused by the
progressive degradation action of enzymes.
Tumor progression............. An increase in size of tumor mass.
Tumor regression.............. Reduction in size of tumor mass.
Tumor stabilization........... Halt in growth of tumor mass.
Tumor suppressor genes........ General term for a family of genes that block
cancerous growth of cells.
USPTO......................... United States Patent and Trademark Office.
UTMDACC....................... The University of Texas M.D. Anderson Cancer
Center.
Vector(s)..................... General term for any of the variety of vehicles
used to transfer a gene into a target cell, a
modified virus (viral vector).
Viral......................... Pertaining to, caused by, or of the nature of
virus.
60
<PAGE> 62
INTROGEN THERAPEUTICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants............................................... F-2
Balance Sheets as of June 30, 1996 and 1995............................................ F-3
Statements of Operations for the Years Ended June 30, 1996 and 1995, and the Period
from
Inception (June 17, 1993) through June 30, 1994...................................... F-4
Statements of Stockholders' Equity for the Years Ended June 30, 1996 and 1995, and the
Period
from Inception (June 17, 1993) through June 30, 1994................................. F-5
Statements of Cash Flows for the Years Ended June 30, 1996 and 1995, and the Period
from
Inception (June 17, 1993) through June 30, 1994...................................... F-6
Notes to Financial Statements.......................................................... F-7
</TABLE>
F-1
<PAGE> 63
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Introgen Therapeutics, Inc.:
We have audited the accompanying balance sheets of Introgen Therapeutics,
Inc. (a Delaware corporation), as of June 30, 1996 and 1995, and the related
statements of operations, stockholders' equity and cash flows for the years
ended June 30, 1996 and 1995, and the period from inception (June 17, 1993)
through June 30, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Introgen Therapeutics, Inc.,
as of June 30, 1996 and 1995, and the results of its operations and its cash
flows for the years ended June 30, 1996 and 1995, and the period from inception
(June 17, 1993) through June 30, 1994, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Houston, Texas
July 19, 1996 (except with respect to the
matters discussed in Note 8, as to
which the date is August 26, 1996)
F-2
<PAGE> 64
INTROGEN THERAPEUTICS, INC.
BALANCE SHEETS -- JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash.............................................................. $ 7,024,347 $ 2,799,015
Collaborative research payments receivable from affiliate......... 138,547 128,745
Prepaid sponsored research........................................ 296,000 --
Other current assets.............................................. 69,407 35,527
----------- -----------
Total current assets.................................... 7,528,301 2,963,287
Property and equipment, net of accumulated depreciation of
$333,157 and $46,620, respectively.............................. 1,388,476 465,516
Deposits and other assets......................................... 48,215 49,418
----------- -----------
Total assets............................................ $ 8,964,992 $ 3,478,221
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable................................................ $ 918,492 $ --
Accrued liabilities............................................. 100,822 102,647
Deferred revenue from affiliate................................. 321,668 800,341
Current portion of capital lease obligations.................... 574,252 --
----------- -----------
Total current liabilities............................... 1,915,234 902,988
----------- -----------
Capital lease obligations, net of current portion............... 130,089 --
----------- -----------
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock, $.001 par value;
liquidation preference of $1.00 per share; 3,011,423 shares
authorized; 3,011,423 shares issued and outstanding at June
30, 1996 and 1995, respectively.............................. 3,011 3,011
Series B convertible preferred stock, $.001 par value;
liquidation preference of $5.75 per share; 2,114,100 shares
authorized; 787,500 and 616,875 shares issued and outstanding
at June 30, 1996 and 1995, respectively...................... 788 617
Series C convertible preferred stock, $.001 par value;
liquidation preference of $8.65 per share; 1,183,000 shares
authorized, 551,410 shares and none issued and outstanding at
June 30, 1996 and 1995, respectively......................... 551 --
Common stock, $.001 par value; 50,000,000 shares authorized;
2,443,360 shares issued and outstanding at June 30, 1996 and
1995, respectively........................................... 2,443 2,443
Additional paid-in capital...................................... 10,743,332 4,480,540
Deferred compensation........................................... (586,883) --
Accumulated deficit............................................. (3,243,573) (1,911,378)
----------- -----------
Total stockholders' equity.............................. 6,919,669 2,575,233
----------- -----------
Total liabilities and stockholders' equity.............. $ 8,964,992 $ 3,478,221
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 65
INTROGEN THERAPEUTICS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995, AND THE PERIOD
FROM INCEPTION (JUNE 17, 1993) THROUGH JUNE 30, 1994
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, INCEPTION
1996 (JUNE 17, 1993)
--------------------------- THROUGH JUNE 30,
1996 1995 1994
----------- ----------- ----------------
<S> <C> <C> <C>
Collaborative research and development revenues
from affiliate.................................. $10,449,154 $ 2,664,192 $ --
Operating expenses:
Research and development........................ 11,020,491 3,371,652 571,302
General and administrative...................... 971,770 624,090 115,466
----------- ----------- ---------
Loss from operations......................... (1,543,107) (1,331,550) (686,768)
Interest income................................... 239,571 106,614 326
Interest expense.................................. (28,659) -- --
----------- ----------- ---------
Net loss.......................................... $(1,332,195) $(1,224,936) $ (686,442)
=========== =========== =========
Pro forma net loss per share...................... $ (0.18)
===========
Shares used in computing pro forma net loss per
share........................................... 7,477,556
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 66
INTROGEN THERAPEUTICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995, AND
THE PERIOD FROM INCEPTION (JUNE 17, 1993) THROUGH JUNE 30, 1994
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
------------------ ---------------- ---------------- ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ ------- ------ ------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at Inception (June 17, 1993)..... -- $ -- -- $ -- -- $ -- -- $ --
Capital contributed in payment of Company
obligations............................ -- -- -- -- -- -- -- --
Cash received in June 1994 in connection
with letter of intent.................. -- -- -- -- -- -- -- --
Net loss................................. -- -- -- -- -- -- -- --
--------- ------ ------- ---- ------- ---- -------- ------
Balance, June 30, 1994................... -- -- -- -- -- -- -- --
Issuance of common stock in July 1994 in
consideration for patent and technology
license agreement ($.0625 per share)... -- -- -- -- -- -- 2,413,360 2,413
Issuance of Series A preferred stock in
August 1994 in consideration for
capital contributed in payment of
Company obligations ($.175 per
share)................................. 3,011,423 3,011 -- -- -- -- -- --
Issuance of common stock in September
1994 ($.0417 per share)................ -- -- -- -- -- -- 30,000 30
Issuance of Series B preferred stock in
October 1994 for cash received in
connection with June 1994 letter of
intent ($5.72 per share)............... -- -- 87,422 87 -- -- -- --
Issuance of Series B preferred stock in
October 1994 in accordance with stock
purchase agreement with affiliate
($5.72 per share), net of offering
costs of $19,659....................... -- -- 358,828 359 -- -- -- --
Issuance of Series B preferred stock in
February 1995 in accordance with stock
purchase agreement with affiliate
($7.47 per share)...................... -- -- 170,625 171 -- -- -- --
Net loss................................. -- -- -- -- -- -- -- --
--------- ------ ------- ---- ------- ---- -------- ------
Balance, June 30, 1995................... 3,011,423 3,011 616,875 617 -- -- 2,443,360 2,443
Issuance of Series B preferred stock in
January 1996 in accordance with stock
purchase agreement with affiliate
($7.47 per share)...................... -- -- 170,625 171 -- -- -- --
Issuance of Series C preferred stock in
March and May 1996 in connection with
private placement ($8.65 per share),
net of offering costs of $380,645...... -- -- -- -- 551,410 551 -- --
Deferred compensation relating to
issuance of certain stock options...... -- -- -- -- -- -- -- --
Amortization of deferred compensation.... -- -- -- -- -- -- -- --
Net loss................................. -- -- -- -- -- -- -- --
--------- ------ ------- ---- ------- ---- -------- ------
Balance, June 30, 1996................... 3,011,423 $3,011 787,500 $788 551,410 $551 2,443,360 $2,443
========= ====== ======= ==== ======= ==== ======== ======
<CAPTION>
ADDITIONAL DEFERRED ACCUMULATED
PAID-IN CAPITAL COMPENSATION DEFICIT TOTAL
--------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Balance at Inception (June 17, 1993)..... $ -- $ -- $ -- $ --
Capital contributed in payment of Company
obligations............................ 527,330 -- -- 527,330
Cash received in June 1994 in connection
with letter of intent.................. 500,000 -- -- 500,000
Net loss................................. -- -- (686,442) (686,442)
----------- --------- ----------- ----------
Balance, June 30, 1994................... 1,027,330 -- (686,442) 340,888
Issuance of common stock in July 1994 in
consideration for patent and technology
license agreement ($.0625 per share)... 148,159 -- -- 150,572
Issuance of Series A preferred stock in
August 1994 in consideration for
capital contributed in payment of
Company obligations ($.175 per
share)................................. (3,011) -- -- --
Issuance of common stock in September
1994 ($.0417 per share)................ 1,220 -- -- 1,250
Issuance of Series B preferred stock in
October 1994 for cash received in
connection with June 1994 letter of
intent ($5.72 per share)............... (87) -- -- --
Issuance of Series B preferred stock in
October 1994 in accordance with stock
purchase agreement with affiliate
($5.72 per share), net of offering
costs of $19,659....................... 2,032,533 -- -- 2,032,892
Issuance of Series B preferred stock in
February 1995 in accordance with stock
purchase agreement with affiliate
($7.47 per share)...................... 1,274,396 -- -- 1,274,567
Net loss................................. -- -- (1,224,936) (1,224,936)
----------- --------- ----------- ----------
Balance, June 30, 1995................... 4,480,540 -- (1,911,378) 2,575,233
Issuance of Series B preferred stock in
January 1996 in accordance with stock
purchase agreement with affiliate
($7.47 per share)...................... 1,274,397 -- -- 1,274,568
Issuance of Series C preferred stock in
March and May 1996 in connection with
private placement ($8.65 per share),
net of offering costs of $380,645...... 4,295,020 -- -- 4,295,571
Deferred compensation relating to
issuance of certain stock options...... 693,375 (693,375) -- --
Amortization of deferred compensation.... -- 106,492 -- 106,492
Net loss................................. -- -- (1,332,195) (1,332,195)
----------- --------- ----------- ----------
Balance, June 30, 1996................... $10,743,332 $ (586,883) $(3,243,573) $6,919,669
=========== ========= =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 67
INTROGEN THERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995, AND THE PERIOD
FROM INCEPTION (JUNE 17, 1993) THROUGH JUNE 30, 1994
<TABLE>
<CAPTION>
INCEPTION
YEAR ENDED JUNE 30, (JUNE 17, 1993)
------------------------- THROUGH JUNE 30,
1996 1995 1994
----------- ----------- -----------------
<S> <C> <C> <C>
Cash flows used by operating activities:
Net loss........................................... $(1,332,195) $(1,224,936) $ (686,442)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation.................................... 286,537 46,620 --
Amortization of deferred compensation related to
certain stock options......................... 106,492 -- --
Research and development expense related to
issuance of common stock for patent and
technology license agreement.................. -- 150,572 --
Changes in assets and liabilities:
Increase in receivable from affiliate......... (9,802) (128,745) --
Increase in prepaid sponsored research........ (296,000) -- --
Increase in deposits and other assets......... (32,677) (64,860) (20,085)
Increase in accounts payable.................. 918,492 -- --
Increase (decrease) in accrued liabilities.... (1,825) (77,455) 180,102
Increase (decrease) in deferred revenue
from affiliate............................. (478,673) 800,341 --
------------ ------------ -----------
Net cash used by operating activities...... (839,651) (498,463) (526,425)
------------ ------------ -----------
Cash flows used by investing activities:
Purchases of property and equipment................ (298,904) (512,136) --
------------ ------------ -----------
Net cash used by investing activities...... (298,904) (512,136) --
------------ ------------ -----------
Cash flows from financing activities:
Net proceeds from sale of preferred stock.......... 5,570,139 3,307,459 500,000
Proceeds from sale of common stock................. -- 1,250 --
Capital contributed in payment of Company
obligations..................................... -- -- 527,330
Payments under capital lease obligations........... (206,252) -- --
------------ ------------ -----------
Net cash provided by financing
activities............................... 5,363,887 3,308,709 1,027,330
------------ ------------ -----------
Net increase in cash................................. 4,225,332 2,298,110 500,905
Cash, beginning of period............................ 2,799,015 500,905 --
------------ ------------ -----------
Cash, end of period.................................. $ 7,024,347 $ 2,799,015 $ 500,905
============ ============ ===========
Supplemental disclosure of cash flow information:
Cash paid for interest............................. $ 28,659 $ -- $ --
============ ============ ===========
Supplemental disclosure of noncash financing
activity:
Purchases of equipment under capital lease
obligations..................................... $ 910,593 $ -- $ --
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 68
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. ORGANIZATION AND BUSINESS
Introgen Therapeutics, Inc., a Delaware corporation ("Introgen" or the
"Company"), was incorporated on June 17, 1993, and commenced operations in
September 1993. The Company is developing gene therapy products to deliver genes
that may provide unique clinical benefits in the treatment of cancer. The
Company's initial research and drug discovery programs are based primarily on
inventions by scientists at the University of Texas M.D. Anderson Cancer Center
("UTMDACC"), the rights to which are covered by a patent and technology license
agreement with the Board of Regents of the University of Texas System (see Note
5). Prior to 1996, the Company was in the development stage.
Introgen has not yet generated any revenues from the sale of products, nor
is there any assurance of future product revenues. The Company's research and
development activities involve a high degree of risk and uncertainty. The
ability of the Company to successfully develop, manufacture and market its
products is dependent upon many factors. These factors include, but are not
limited to, the need for additional financings, the reliance on collaborative
research and development arrangements with corporate and academic affiliates and
the ability to develop manufacturing, sales and marketing experience. Additional
factors include uncertainties as to patents and proprietary technologies,
technological change and risk of obsolescence, development of products,
competition, government regulations and regulatory approval, and product
liability exposure. As a result of the aforementioned factors and the related
uncertainties, there can be no assurance of the Company's future success. See
"Risk Factors" elsewhere in the Prospectus.
The Company has stock purchase and research collaboration agreements with
Rhone-Poulenc Rorer Pharmaceuticals Inc. ("RPR"). Under the terms of the stock
purchase agreement, RPR has purchased approximately $6.0 million of preferred
stock through June 30, 1996. RPR has the right to purchase additional preferred
stock upon the occurrence of certain future events, including, but not limited
to, the Company's attainment of certain milestones.
Development and commercialization of certain products are being pursued in
conjunction with RPR pursuant to a collaboration arrangement which provides that
Introgen is primarily responsible for completing the early stage research and
development of products, which RPR is primarily obligated to fund until October
1997. Introgen must pay at least $2,000,000 of the costs for such activities
using its own funds by June 1997, of which $1,000,000 had been paid as of June
30, 1996, and of which $500,000 must be paid by August 1996 and $500,000 must be
paid by June 1997. If RPR elects, it shall be primarily responsible for the
later stage development of the products. In North America, Introgen retains
exclusive manufacturing rights and may elect to form a marketing collaboration
with RPR to market collaboration products. RPR can terminate this agreement upon
six months' notice, subject to certain wind-down provisions. Introgen is
entitled to royalties on product sales arising from RPR's exclusive marketing
and manufacturing rights in Europe. Both parties may, at their own expense,
develop and market products in Japan, Korea, China, Taiwan and India. Introgen
and RPR have agreed that they will not market or license, and RPR will not
develop any of the gene therapy products covered by their collaboration
arrangement prior to October 2004 except under the terms of the collaboration
arrangement. RPR will be allowed to recover certain later stage research and
development costs from proceeds of future product sales, if any.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company receives quarterly advances from RPR for estimated costs
directly related to early stage development under the collaboration agreements.
Such payments are recognized as revenue as the Company performs its obligations
related to such agreements. Deferred revenue is recorded for cash received from
RPR for which the related expenses have not yet been incurred.
F-7
<PAGE> 69
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1996
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation.
Maintenance, repairs and minor replacements are charged to expense as incurred.
Significant renewals and betterments are capitalized. Depreciation is computed
using the straight-line basis over the estimated useful economic lives of the
assets involved (generally two years) or, in the case of leasehold improvements,
over the remaining term of the lease.
Property and equipment consisted of the following as of June 30, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Laboratory equipment......................................... $1,158,472 $233,190
Leasehold improvements....................................... 483,678 278,946
Construction in process...................................... 79,483 --
---------- --------
Total property and equipment....................... 1,721,633 512,136
Less-Accumulated depreciation................................ (333,157) (46,620)
---------- --------
Net property and equipment......................... $1,388,476 $465,516
========== ========
</TABLE>
Approximately $911,000 of the above equipment as of June 30, 1996, is held
under capital leases and is being depreciated over the applicable lease terms
(see Note 6). Construction in process at June 30, 1996, relates to the planning
and design of manufacturing facilities.
Research and Development Costs
Research and development costs include the costs of conducting basic
research, developing product applications, conducting preclinical investigations
and performing clinical trials to obtain data for regulatory filings for product
approvals. Research and development costs are expensed as incurred.
Pro Forma Net Loss Per Share
The Company's pro forma net loss per share is based on the weighted-average
number of shares of common stock outstanding assuming the conversion of
convertible preferred stock into common stock on the respective dates of
original issuance. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletins, all common, preferred and common equivalent shares issued
during the 12 months preceding or in contemplation of the Company's initial
public offering (using the treasury stock method and an assumed initial public
offering price of $11.00 per share) have been included in the calculation of
common and common equivalent shares outstanding as if they were outstanding for
all periods prior to completion of the Company's initial public offering.
Options and warrants granted by the Company prior to June 30, 1995, and not in
contemplation of an offering have been excluded from the calculation of common
and common equivalent shares outstanding because such options and warrants are
antidilutive.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses. Actual results could differ from those estimates.
F-8
<PAGE> 70
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1996
3. CAPITAL STOCK
Series A Convertible Preferred Stock
In August 1994, the Company issued 3,011,423 shares of Series A preferred
stock in consideration for the payment by Texas Biomedical Development Partners
("TBDP") of $527,330 of research and administrative costs incurred during the
period from December 1992 through June 1994, all of which were expensed by the
Company and recorded as a capital contribution.
Holders of Series A preferred stock may receive dividends of $.10 per share
per annum, noncumulative, at the discretion of the Company's board of directors.
The holders of Series A preferred stock have preference in declaration and
payment of any dividend over the holders of Series B preferred stock and Series
C preferred stock and common stock. To date, no dividends have been declared.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series A preferred stock are entitled to receive preference over
any distribution to the holders of Series B and Series C preferred and common
stock in the amount of $1.00 per share. The holders of Series A preferred stock
have registration rights as described in the stock purchase agreement.
Series A preferred stock is convertible at the option of the holder into
common stock on a 1.2 for 1 basis, as adjusted for certain events. Series A
preferred stock shall automatically be converted into common stock upon the
closing of a public offering with total proceeds of at least $10,000,000. The
holders of Series A preferred stock have the right to vote on all stockholder
matters on an as-if-converted basis. In addition, the holders of Series A
preferred stock, voting as a separate class, are entitled to elect one director
of the Company.
Series B Convertible Preferred Stock
In October 1994, the Company entered into a stock purchase agreement with
RPR. This agreement requires that RPR purchase preferred stock of the Company in
multiple closings upon the occurrence of certain milestones and events.
The first closing occurred in October 1994. At that time, RPR purchased
446,250 shares of Series B preferred stock from the Company for $2,552,550 (of
which $500,000 was previously received in June 1994 and recorded as additional
paid-in capital at that time) and 78,750 shares of Series A preferred stock from
TBDP for $450,450.
A second and third closing occurred in February 1995 and January 1996,
respectively. At each of these closings, RPR purchased 170,625 shares of Series
B preferred stock from the Company for $1,274,567 and 30,110 shares of Series A
preferred stock from TBDP for $224,923.
RPR may purchase additional shares of Series B preferred stock pursuant to
the stock purchase agreement. RPR's purchase of certain additional stock is
accelerated in the event of a public offering of common stock by the Company of
at least $10,000,000 and provided there is reasonable evidence of local efficacy
of a Company product in Phase I or later-stage clinical trials. In this event,
the stock purchase agreement provides that the required shares and dollar amount
purchased can range, at RPR's discretion, from all remaining unpurchased shares
under the stock purchase agreement to a lesser amount computed based on RPR
owning an amount of shares after a public offering that does not exceed 19.9% of
total outstanding stock of the Company. However, the dollar amount by which the
shares actually purchased by RPR is less than the dollar amount of RPR's
remaining obligation for the unpurchased shares must subsequently be paid to the
Company at the time there would have otherwise been closings under the stock
purchase agreement. In this later event, no equity securities are required to be
issued to RPR in consideration for these payments.
F-9
<PAGE> 71
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1996
Absent the events described in the preceding paragraph, the remaining
shares of Series B preferred stock will be purchased by RPR in stages provided
the collaboration agreements between Introgen and RPR remain in effect and upon
the occurrence of certain events related to Phase I, II or III clinical trials
for a product and/or products. The purchase price per share set forth in the
agreement will be adjusted upward (but not downward) to equal the price per
share received by the Company in the most recent equity financing of the Company
if such financing raises $2,000,000 or more. In this event, the gross proceeds
received at each issuance will remain the same and the number of shares issued
will be reduced to yield the applicable purchase price per share. Up to 15
percent of all shares purchased by RPR, including those purchased in connection
with a public offering, are subject to purchase directly from the Series A
preferred stock holdings of TBDP or its successors upon the election of such by
TBDP or its successors.
Holders of Series B preferred stock may receive dividends of $0.575 per
share per annum, noncumulative, at the discretion of the Company's board of
directors. The holders of Series B preferred stock have preference in
declaration and payment of any dividend over the holders of Series C preferred
stock and common stock. To date, no dividends have been declared.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of Series B preferred stock are entitled to receive preference over
any distribution to the holders of Series C preferred stock and common stock in
the amount of $5.75 per share. The holders of Series B preferred stock have
registration rights as defined in the stock purchase agreement and as described
in the Prospectus.
Shares of Series B preferred stock are convertible at the option of the
holder into common stock on a 1.2 for 1 basis, as adjusted for certain events.
Series B preferred stock shall automatically be converted into common stock upon
the closing of a public offering with total proceeds of at least $10,000,000.
The holders of Series B preferred stock have the right to vote on all
stockholder matters on an as-if-converted basis. In addition, the holders of
Series B preferred stock, voting as a separate class, are entitled to elect one
director of the Company.
Series C Convertible Preferred Stock
The Series C preferred stock was issued to third parties in connection with
the Company's private placement of securities during the year ended June 30,
1996. Series C preferred stock carries the same rights as the Series B preferred
stock except (a) the dividend rate is $0.865 per share per annum, noncumulative
and the distribution amount in the event of liquidation, dissolution or winding
up of the Company is $8.65 per share, both of which are preferential only to the
holders of common stock, and (b) the holders of Series C preferred stock are not
entitled to elect any directors voting as a separate class. No dividends have
been declared through June 30, 1996.
Incentive Stock Plan
The Incentive Stock Plan (the "Plan") provides for the granting of options,
either incentive or nonstatutory, or Stock purchase rights to employees and
consultants of the Company. As of June 30, 1996, 1,250,000 shares of common
stock have been reserved for issuance upon exercise of stock options or stock
purchase rights under the Plan. The exercise price shall be no less than the
fair value at the date of the grant for incentive stock options and no less than
85% of the fair market value at date of the grant for nonstatutory options.
Options granted generally vest annually over four years from the date of a
recipient's commencement of services to the Company. In the event of a merger,
reorganization or change in controlling ownership of the Company, all options
outstanding under the Plan shall be fully vested.
F-10
<PAGE> 72
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1996
The following is a summary of option activity under the Plan:
<TABLE>
<CAPTION>
EXERCISE
OPTIONS PRICE PER
OUTSTANDING COMMON SHARE
----------- ------------
<S> <C> <C>
Balance, June 30, 1994...................................... -- $ --
Granted................................................... 339,000 0.625
-------
Balance, June 30, 1995...................................... 339,000 0.625
Granted................................................... 261,000 0.625
Canceled.................................................. (24,000) 0.625
-------
Balance, June 30, 1996...................................... 576,000 0.625
=======
Exercisable at June 30, 1996................................ 268,500 0.625
=======
</TABLE>
As of June 30, 1996, there were 674,000 options available for grant under
the Plan.
For options granted during the year ended June 30, 1996, the Company
recognized compensation expense for the excess of the deemed fair market value
of the common stock on the date the options were granted ($6.00 per share) over
the $0.625 exercise price per share of such options. Aggregate deferred
compensation of $693,375 resulted from the issuance of these options, and
compensation expense will be recognized ratably over the vesting period of each
option, generally four years. The Company recognized $106,492 of this amount as
compensation expense during the year ended June 30, 1996.
The Financial Accounting Standards Board has adopted SFAS No. 123,
"Accounting for Stock-Based Compensation," which is effective for the Company's
year ended June 30, 1997. SFAS No. 123 allows the Company to adopt one of two
methods of accounting for stock options. The Company currently intends to adopt
the method that approximates its current accounting treatment. SFAS No. 123 will
require the Company to disclose for the year ended June 30, 1997, the effect of
adoption of the alternative method, which would generally require the Company to
record compensation expense equal to the valuation of a stock option on the
grant date.
Warrants
In connection with the issuance of the Series C preferred stock, the
Company issued warrants, at a nominal fee, to purchase 102,251 shares of common
stock for $7.929 per share, to the investment banking firms that assisted in the
sale of the Series C preferred stock. These warrants expire in 2001. The value
of these warrants on the date issued was not significant.
4. FEDERAL INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been recognized differently in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement carrying amounts and tax bases of liabilities and assets using enacted
tax rates and laws in effect in the years in which the differences are expected
to reverse. Deferred tax assets are evaluated for realization based on a
more-likely-than-not criteria in determining if a valuation should be provided.
F-11
<PAGE> 73
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1996
The reconciliation of the statutory federal income tax rate to the
Company's effective income tax rate for the years ended June 30, 1996 and 1995,
is as follows:
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Statutory rate..................................................... (34.0)% (34.0)%
Increase in deferred tax valuation allowance....................... 30.8 33.4
Stock option compensation not deductible........................... 2.2 --
Disallowance of business meals and entertainment................... 0.6 0.4
Other.............................................................. 0.4 0.2
----- -----
--% --%
===== =====
</TABLE>
The components of the Company's deferred tax assets at June 30, 1996 and
1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Net operating loss carryforwards........................... $ 530,400 $ 391,500
Capitalized start-up costs................................. 115,800 140,400
Research and development tax credits....................... 12,500 20,000
Technology license......................................... 51,200 51,200
Tax basis of property and equipment in excess of book
basis.................................................... 229,300 29,200
Prepaid sponsored research................................. 45,800 --
Capital leases............................................. 55,100 --
Other...................................................... 18,900 25,500
---------- --------
Total deferred tax assets.................................. 1,059,000 657,800
Less valuation allowance................................... (1,059,000) (657,800)
---------- --------
Net deferred tax assets.................................... $ -- $ --
========== ========
</TABLE>
As of June 30, 1996, the Company has generated net operating loss ("NOL")
carryforwards of approximately $1.6 million and research and development credits
of approximately $12,500 available to reduce future income taxes. These
carryforwards begin to expire in 2008. A change in ownership, as defined by
federal income tax regulations, could significantly limit the Company's ability
to utilize its carryforwards. The Company's ability to utilize its current and
future NOLs to reduce future taxable income and tax liabilities may be limited.
Additionally, because Federal tax laws limit the time during which these
carryforwards may be applied against future taxes, the Company may not be able
to take full advantage of these attributes for federal income tax purposes. As
the Company has had cumulative losses and there is no assurance of future
taxable income, a valuation allowance has been established to fully offset the
deferred tax asset at June 30, 1996 and 1995. The valuation allowance increased
$401,200 and $413,300 for the years ended June 30, 1996 and 1995, respectively,
primarily due to the Company's losses.
5. LICENSE AND RESEARCH AGREEMENTS
Patent and Technology License Agreement With the University of Texas System
In July 1994, the Company entered into a patent and technology license
agreement with the Board of Regents of The University of Texas System (the
"System") and UTMDACC, a component institution of the System, whereby the
Company has an exclusive, worldwide license to use certain technology. In
exchange for the grant of this exclusive license, the Company issued 1,449,498
and 963,862 shares of common stock to the System and Technology Capital
Corporation, respectively, pursuant to an agreement with the System. The shares
issued to the System were recorded at their fair value at the date issued as
estimated by the Company's
F-12
<PAGE> 74
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1996
management. The fair value of the license was charged to expense upon issuance
of the shares. Beginning with the first commercial sale of a product
incorporating the licensed technologies, the Company will pay UTMDACC, for the
longer of 15 years or the life of the patent, a royalty based on net sales by
the Company or its affiliates or by sublicense agreement of products
incorporating any of such technologies. The Company is obligated by the
agreement to reimburse any of UTMDACC's costs that may be incurred in connection
with obtaining patents related to the licensed technologies.
Sponsored Research
Under sponsored research agreements, Introgen funds certain research
performed by researchers at UTMDACC and other institutions to further the
development of technologies being investigated that could have potential
commercial viability. By sponsoring and funding this research, Introgen has the
right to include certain patentable inventions arising therefrom under its
patent and technology license agreement with the System. During fiscal year
1996, the Company paid approximately $2,331,000 pursuant to these agreements and
has committed to pay a minimum of approximately $557,000 and $135,000 in fiscal
year 1997 and 1998, respectively, to continue funding research activities.
Amounts due under these agreements are recorded as research and development
expense as the costs are incurred. At June 30, 1996, by mutual agreement with
UTMDACC, the Company prepaid $296,000 pursuant to these agreements which is
included as prepaid sponsored research in the accompanying balance sheet and
which will be expensed as the costs are incurred in fiscal 1997.
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company is obligated under various capital and operating leases for
equipment and facilities which expire at various dates through June 2000. Future
minimum lease payments under noncancelable operating leases and the present
value of future minimum capital lease payments as of June 30, 1996, are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
Year ending June 30,
1997....................................................... $631,812 $ 501,583
1998....................................................... 133,002 91,350
1999....................................................... -- 55,450
2000....................................................... -- 7,592
-------- --------
Total minimum lease payments................................. 764,814 $ 655,975
========
Less-Amount representing interest............................ (60,473)
--------
Present value of net minimum capital lease payments.......... 704,341
Less-Current portion of capital lease obligations............ 574,252
--------
Capital lease obligations, net of current portion............ $130,089
========
</TABLE>
Retirement Plan
The Company has an employee retirement savings and investment plan intended
to qualify under Section 401(k) of the Internal Revenue Code. Employees may
contribute a portion of their compensation to the plan up to a statutorily
prescribed annual amount ($9,500 in 1996). This plan permits matching
contributions by the Company of which none have been made.
F-13
<PAGE> 75
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1996
7. RELATED PARTIES
Introgen's President and Chief Executive Officer and another officer of the
Company are owners in or otherwise associated with other companies that are
stockholders of the Company. The Company paid the companies, with which these
officers are associated, consulting fees of $325,000 during each of the years
ended June 30, 1996 and 1995, and is obligated to pay them $150,000 for the year
ended June 30, 1997, in consideration for their services as officers of
Introgen. See Note 8.
The Company has a consulting agreement with the physician primarily
responsible for the creation of its technology who is also a stockholder of
Introgen. Under this consulting agreement, Introgen paid him fees of $63,750 and
$42,500 during the fiscal years ended June 30, 1996 and 1995, respectively, and
is obligated to pay him fees in the amounts of $93,750 and $118,750 during the
fiscal years ending June 30, 1997 and 1998, respectively. While this agreement
provides for continued payment of fees through 2009, the Company can, upon one
year's notice, cancel this agreement effective September 1997 or later. In
addition, the Company has consulting agreements with various other individuals
under which the Company is obligated to pay fees in the amount of $37,750 during
the year ended June 30, 1997.
8. SUBSEQUENT EVENTS
Public Offering of Common Stock
Subsequent to June 30, 1996, the Board of Directors authorized the filing
of a Registration Statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public. If the
offering is consummated under terms presently anticipated, all of the preferred
stock outstanding will automatically convert upon closing into 5,220,409 shares
of common stock and the Company will file a restated Certificate of
Incorporation authorizing 5,000,000 shares of undesignated preferred stock. The
pro forma balances of the stockholders' equity accounts at June 30, 1996
assuming this conversion are as follows:
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------
ACTUAL PRO FORMA
----------- -----------
(UNAUDITED)
<S> <C> <C>
Preferred Stock......................................... $ 4,350 $ --
Common Stock............................................ 2,443 7,663
Additional paid-in capital.............................. 10,743,332 10,742,462
Deferred compensation................................... (586,883) (586,883)
Accumulated deficit..................................... (3,243,573) (3,243,573)
----------- -----------
Stockholders' equity.................................... $ 6,919,669 $ 6,919,669
=========== ===========
</TABLE>
Stock Option and Purchase Plans
Subsequent to June 30, 1996, the Company issued options under its Incentive
Stock Plan to purchase 170,354 shares of common stock at an exercise price of
$0.73. In conjunction therewith, the Company will record deferred compensation
of approximately $1,282,000 during the three months ending September 30, 1996.
Compensation expense will be recognized ratably over the vesting period of each
option which is generally four years. In addition, the Board of Directors
approved an increase of the shares reserved for issuance under this plan to a
total of 1,750,000 subject to the closing of the public offering of common
stock.
In August 1996, the Board of Directors approved a Director Option Plan
subject to the closing of the public offering of common stock. The Plan provides
for the grant of options to purchase common stock to nonemployee members of the
Company's Board of Directors as compensation for their services. Upon initial
F-14
<PAGE> 76
INTROGEN THERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1996
election to the Board of Directors, a director will be issued options to
purchase 10,000 shares of common stock with such options vesting annually at the
rate of 25% per year. At each reelection to the Board of Directors, a director
will be issued options to purchase an additional 2,000 shares of common stock
with such options vesting at the rate of 12.5% per month. In the event of a
merger, sale of substantially all of the Company's assets or change in the
ownership of the Company, all options outstanding under the Plan shall be fully
vested. These options allow the holder to purchase common stock at a price equal
to its fair market value at the date the option is granted. The Company has
reserved 200,000 shares of common stock for issuance under this plan. No options
have been issued under this plan.
In August 1996, the Company approved an Employee Stock Purchase Plan
subject to the closing of the public offering of common stock. Under this plan,
an eligible employee may designate up to 10% of their compensation for the
purchase of common stock directly from the Company at a price equal to 85% of
the fair market value of common stock determined as defined in the plan. The
Company has reserved 100,000 shares for issuance under this plan. No common
stock has been sold by the Company under this plan.
Warrants
In August 1996, the Company issued to an individual, for a nominal fee, a
warrant to purchase 12,000 shares of common stock for an exercise price of $0.73
per share. In conjunction with this warrant issuance, the Company will recognize
approximately $90,000 in expenses for the services provided by the individual
during the year ended June 30, 1997. The warrant expires in 2001.
Employment Agreement
In August 1996, the Company entered into an employment agreement with its
President and Chief Executive Officer under which the Company is obligated to
pay him $225,000 annually through July 31, 1998.
Stock Split
In August 1996, the Board of Directors approved a 1.2 for 1 stock split. An
amount equal to the increased par value of the common shares has been reflected
as a transfer from additional paid-in capital to common stock. Retroactive
effect has been given to the stock split in stockholders' equity and in all
share and per share data in the accompanying financial statements.
F-15
<PAGE> 77
APPENDIX -- DESCRIPTION OF GRAPHICS
INSIDE FRONT COVER:
HEADER: "Introgen seeks to treat cancer by delivering its p53 in vivo gene
therapy products directly to the tumor.
SUBHEADER: "p53 gene therapy for non-small cell lung cancer."
(LEFT SIDE): This diagram depicts the progression of cancer cells when
treated with the p53 therapeutic gene. There are three phases of this process,
each described vertically along the left half of the diagram.
The three phases are:
1. A group of cancerous cells being delivered the p53 therapeutic gene,
with the text "Vectors deliver p53 gene to cells" next to sketch;
2. The same group of cells with the gene depicted to be inside the cell,
with the text "p53 protein produced in cell;" and,
3. The cells are shown going through stages of destruction or arrest, with
the text "p53 protein induces programmed cell death (apoptosis) or
growth arrest."
(RIGHT SIDE): This illustration is a silhouette of a man, with the lungs
and air passageway visible, with a tumor visible in the left lung. A syringe is
shown with a needle being injected into the tumor.
PAGE 24 -- FIGURE 1
TITLE: "Theoretical Depiction of Tumor Suppressor p53 Inducing Cancer Cells
To Undergo Apoptosis or Growth Arrest"
This illustration shows a standard cell cycle circular diagram on the lower
left portion of the illustration, with the following phrases describing the
steps of the cycle; these include
1. G1 -- Preparation For DNA Synthesis
2. S -- DNA Synthesis
3. G2 -- Preparation For Cell Division
4. M -- Cell Division
An arrow is shown leaving the "M" portion of the cycle, showing cancer
cells forming as a function of mutated cell growth. A hexagon depicting p53 is
shown entering the "G1" portion of the cycle, with two arrows leaving the cell
cycle, indicating the effect of the p53 therapeutic material injected.
One arrow points to a depiction of cell destruction, with the description,
"Apoptosis (Programmed Cell Death)." The second arrow points to a depiction of a
cell in growth arrest, with the description "Growth Arrest."
<PAGE> 78
PAGE 25 -- FIGURE 2
TITLE: "Theoretical Depiction of K-ras Antisense Gene Therapy Inhibiting
Abnormal Growth of Cancer Cells"
This diagram illustrates a semi-circularly shaped cell broken into three
layers: the cell surface, cytoplasm and nucleus. the cell is further separated,
through the middle, into two parts to illustrate (1) cancer and (2) the
inhibition of cell growth.
The right half of the cell shows an oval with the phrase "Growth Signals,"
with an arrow pointing to an oval on the cell surface which is titled,
"Receptor." A hexagon with a double-helix symbol is shown by an arrow as
entering the cytoplasm portion of the cell, with the words, "K-ras Antisense
Gene Therapy" next to the hexagon. An arrowhead line is drawn from the
"Receptor" oval to a circle titled, "ras off," and another arrowhead line is
drawn to a triangle titled "ras on," with a reverse direction arrowhead line
pointed back to the "ras off" circle symbolizing the "on-off" regulation the ras
pathway controls. Arrows are drawn to a rectangle inside the cell nucleus with
the words, "Cell growth genes regulated normally," and a subtitle at the bottom
of this half of the diagram saying, "Inhibition of cancer cell growth."
The left half of the cell is identical to the right half, except the
"K-ras" antisense gene therapy" hexagon is not shown. The "ras on" triangle is
larger than in the right half illustration, and the arrow from "ras off" to "ras
on" is thicker and darker than the other direction, implying a propensity for
the ras signal to remain activated ("on"). The "ras on" triangle has arrows
entering the cell nucleus where a rectangle indicates "Cell growth genes
activated." A subtitle at the bottom of this half of the diagram says "Cancer."
<PAGE> 79
- ---------------------------------------------------------
- ---------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION AND REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 6
Use of Proceeds............................... 16
Dividend Policy............................... 16
Capitalization................................ 17
Dilution...................................... 18
Selected Financial Data....................... 19
Management's Discussion and Analysis of
Financial Condition and
Results of Operations....................... 20
Gene Therapy Cancer Treatment................. 23
Business of Introgen.......................... 27
Management.................................... 43
Certain Transactions.......................... 49
Principal Stockholders........................ 51
Description of Capital Stock.................. 53
Shares Eligible for Future Sale............... 55
Underwriting.................................. 56
Legal Matters................................. 57
Experts....................................... 57
Available Information......................... 57
Glossary of Terms and Acronyms................ 58
Financial Statements.......................... F-1
</TABLE>
------------------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS
IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
2,700,000 SHARES
LOGO
COMMON STOCK
------------------------
PROSPECTUS
------------------------
PAINEWEBBER INCORPORATED
GENESIS MERCHANT GROUP
SECURITIES
------------------------
, 1996
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 80
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the registration fee, the NASD filing fee and the Nasdaq National Market System
listing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration Fee.......................................................... $ 14,000
NASD Filing Fee........................................................... 4,548
The Nasdaq National Market System Listing Fee............................. 23,400
Printing.................................................................. 100,000
Legal Fees and Expenses................................................... 400,000
Accounting Fees and Expenses.............................................. 150,000
Blue Sky Fees and Expenses................................................ 25,000
Registrar and Transfer Agent Fees......................................... 10,000
Miscellaneous............................................................. 23,052
--------
Total........................................................... $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VII of the Registrant's Certificate of Incorporation provides for
the indemnification of directors to the fullest extent permissible under
Delaware law.
Article VI of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the corporation if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) From inception through June 30, 1996, the Registrant has issued and
sold the following unregistered securities:
(1) From August 23, 1994 to September 28, 1994, the Registrant sold
2,443,360 shares of Common Stock to eight investors at an average price of
$0.06 per share.
(2) On August 23, 1994, the Registrant sold 3,011,423 shares of Series
A Preferred Stock to one investor at a price of $0.18 per share.
(3) On October 7, 1994 the Registrant sold 446,250 shares of Series B
Preferred Stock to RPR at $5.72 per share for $2,552,550. In February 1995,
the Registrant sold 170,625 shares of Series B Preferred Stock to RPR at
$7.47 per share for $1,274,567. In January 1996, the Registrant sold
170,625 shares of Series B Preferred Stock to RPR at $7.47 per share for
$1,274,567.
II-1
<PAGE> 81
(4) From March 29, 1996 to June 28, 1996 the Registrant sold 551,410
shares of Series C Preferred Stock to 26 Investors at $8.65 per share.
(b) The Registrant was assisted in the issuance and sale of the Series C
Preferred Stock by Genesis Merchant Group Securities and Harris, Webb &
Garrison, Inc.
(c) The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under such Rule 701.
The recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the instruments representing such securities issued in such
transactions. All recipients had adequate access, through their relationships
with the Company, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
3.1* Certificate of Incorporation of the Company, as amended, as currently in
effect.
3.2* Form of Restated Certificate of Incorporation of the Company, to be filed
immediately following the closing of the offering made under this
Registration Statement.
3.3* Bylaws of the Company.
4.1* Specimen Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement between the Company and each of its
directors and officers.
10.2* Incentive Stock Plan and form of Stock Option Agreement thereunder.
10.3* Director Option Plan and form of Director Stock Option Agreement
thereunder.
10.4* Employee Stock Purchase Plan and forms of agreements thereunder.
10.5* Series A Preferred Stock Purchase Agreement, dated August 23, 1994,
between the Company and Texas Biomedical Development Partners.
10.6**+ Series B Preferred Stock Purchase Agreement, dated October 7, 1994,
between the Company and RPR, as amended.
10.7* Form of Series C Preferred Stock Purchase Agreement between the Company
and certain investors.
10.8* Lease Agreement, dated February 9, 1996, between the Company and Aetna
Life Insurance Company for the Company's facility located at 301 Congress
Avenue, Suite 1850, Austin, Texas, 78701.
10.9A* Sublease Agreement, dated February 1, 1995 between the Company and Bee-Mac
Reference Laboratories, Inc. for the Company's facility located at 8080
North Stadium Drive, #1200, Houston, Texas, 77059.
10.9B* Addendum to Sublease Agreement by and between the Company and Bee-Mac
Reference Laboratories, Inc., dated November 1, 1995.
10.10* Lease Agreement, dated June 7, 1996, between the Company and Plaza del Oro
Business Center for the Company's facility located at 8012 El Rio,
Houston, Texas 77054.
</TABLE>
II-2
<PAGE> 82
<TABLE>
<S> <C>
10.11**+ Patent and Technology License Agreement, effective as of July 20, 1994, by
and between the Board of Regents of the University of Texas System,
UTMDACC and the Company, as amended.
10.12*+ Sponsored Research Agreement for Clinical Study, No. CS 93-27, dated
February 11, 1993, between the Company and UTMDACC, as amended.
10.13*+ Sponsored Research Agreement No. SR95-012, dated September 21, 1995
between the Company and UTMDACC, as amended.
10.14**+ Sponsored Research Agreement No. SR 93-04, dated February 11, 1993 between
UTMDACC and the Company, as amended.
10.15*+ Sponsored Laboratory Study Agreement No. LS95-035 between UTMDACC and the
Company, dated September 21, 1995.
10.16*+ Sponsored Research Agreement No. SR 96-004 between the Company and
UTMDACC, dated January 17, 1996.
10.17**+ Sponsored Research Agreement, dated March 29, 1996, between the Company
and SKCC.
10.18**+ License Agreement, dated March 29, 1996 between the Company and SKCC.
10.19* Consulting Agreement between the Company and Jack A. Roth, M.D., effective
as of October 1, 1994.
10.20* Consulting Agreement between EJ Financial Enterprises, Inc. and Introgen,
effective as of July 1, 1994.
10.21* Service Agreement between Introgen and Domecq Technologies, Inc. effective
as of July 1, 1994.
10.22**+ Collaboration Agreement (p53 Products), effective as of October 7, 1994,
between the Company and RPR, as amended.
10.23**+ Collaboration Agreement (K-ras Products), effective as of October 7, 1994,
between the Company and RPR, as amended.
10.24*+ Letter of Intent dated March 26, 1996 between NCI, the Company and RPR
regarding a CRADA.
10.25* Employment Agreement dated August 1, 1996 between the Company and David G.
Nance.
11.1* Calculation of earnings per share.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
23.3 Consent of Arnold, White & Durkee, patent counsel for the Company.
24.1 Power of Attorney (see page II-5).
</TABLE>
- ---------------
+ Confidential treatment requested for portions of these agreements.
* Previously filed.
** Supersedes agreement previously filed.
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or
II-3
<PAGE> 83
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 2 to Registration Statement on
Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Austin, State of Texas, on the 28th day of October,
1996.
INTROGEN THERAPEUTICS, INC.
By: /s/ DAVID G. NANCE
------------------------------------
David G. Nance
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to Registration Statement on Form S-1 has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------- ------------------
<S> <C> <C>
/s/ DAVID G. NANCE President, Chief Executive October 28, 1996
- ------------------------------------- Officer (Principal Executive
David G. Nance Officer) and Director
*/s/ MAHENDRA G. SHAH, PH.D. Vice President, Corporate and October 28, 1996
- ------------------------------------- Business Development and Director
Mahendra G. Shah, Ph.D.
/s/ JAMES W. ALBRECHT, JR. Chief Financial Officer October 28, 1996
- ------------------------------------- (Principal Financial and
James W. Albrecht, Jr. Accounting Officer)
*/s/ JOHN N. KAPOOR, PH.D. Chairman of the Board October 28, 1996
- -------------------------------------
John N. Kapoor, Ph.D.
*/s/ THIERRY SOURSAC, M.D., PH.D. Director October 28, 1996
- -------------------------------------
Thierry Soursac, M.D., Ph.D.
*/s/ AUSTIN M. LONG, III Director October 28, 1996
- -------------------------------------
Austin M. Long, III
*/s/ MARK B. CHANDLER, PH.D. Director October 28, 1996
- -------------------------------------
Mark B. Chandler, Ph.D.
*By /s/ DAVID G. NANCE
---------------------------------
David G. Nance, Attorney-in-Fact
</TABLE>
II-5
<PAGE> 85
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE NUMBER
- ----------- -------------------------------------------------------------------
<C> <S> <C>
1.1* Form of Underwriting Agreement.....................................
3.1* Certificate of Incorporation of the Company, as amended, as
currently in effect................................................
3.2* Form of Restated Certificate of Incorporation of the Company, to be
filed immediately following the closing of the offering made under
this Registration Statement........................................
</TABLE>
<TABLE>
<C> <S> <C>
3.3* Bylaws of the Company..............................................
4.1* Specimen Common Stock Certificate..................................
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation........................................................
10.1* Form of Indemnification Agreement between the Company and each of
its directors and officers.........................................
10.2* Incentive Stock Plan and form of Stock Option Agreement
thereunder.........................................................
10.3* Director Option Plan and form of Director Stock Option Agreement
thereunder.........................................................
10.4* Employee Stock Purchase Plan and forms of agreements thereunder....
10.5* Series A Preferred Stock Purchase Agreement, dated August 23, 1994,
between the Company and Texas Biomedical Development Partners......
10.6**+ Series B Preferred Stock Purchase Agreement, dated October 7, 1994,
between the Company and RPR, as amended............................
10.7* Form of Series C Preferred Stock Purchase Agreement between the
Company and certain investors......................................
10.8* Lease Agreement, dated February 9, 1996, between the Company and
Aetna Life Insurance Company for the Company's facility located at
301 Congress Avenue, Suite 1850, Austin, Texas, 78701..............
10.9A* Sublease Agreement, dated February 1, 1995 between the Company and
Bee-Mac Reference Laboratories, Inc. for the Company's facility
located at 8080 North Stadium Drive, #1200, Houston, Texas,
77059..............................................................
10.9B* Addendum to Sublease Agreement by and between the Company and
Bee-Mac Reference Laboratories, Inc., dated November 1, 1995.......
10.10* Lease Agreement, dated June 7, 1996, between the Company and Plaza
del Oro Business Center for the Company's facility located at 8012
El Rio, Houston, Texas 77054.......................................
10.11**+ Patent and Technology License Agreement, effective as of July 20,
1994, by and between the Board of Regents of the University of
Texas System, UTMDACC and the Company, as amended..................
10.12*+ Sponsored Research Agreement for Clinical Study, No. CS 93-27,
dated February 11, 1993, between the Company and UTMDACC, as
amended............................................................
10.13*+ Sponsored Research Agreement No. SR95-012, dated September 21, 1995
between the Company and UTMDACC, as amended........................
10.14**+ Sponsored Research Agreement No. SR 93-04, dated February 11, 1993
between UTMDACC and the Company, as amended........................
10.15*+ Sponsored Laboratory Study Agreement No. LS95-035 between UTMDACC
and the Company, dated September 21, 1995..........................
10.16*+ Sponsored Research Agreement No. SR 96-004 between the Company and
UTMDACC, dated January 17, 1996....................................
</TABLE>
<PAGE> 86
INDEX TO EXHIBITS--(CONTINUED)
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE NUMBER
- ----------- -------------------------------------------------------------------
<C> <S> <C>
10.17**+ Sponsored Research Agreement, dated March 29, 1996, between the
Company and SKCC...................................................
10.18**+ License Agreement, dated March 29, 1996 between the Company and
SKCC...............................................................
10.19* Consulting Agreement between the Company and Jack A. Roth, M.D.,
effective as of October 1, 1994....................................
10.20* Consulting Agreement between EJ Financial Enterprises, Inc. and
Introgen, effective as of July 1, 1994.............................
10.21* Service Agreement between Introgen and Domecq Technologies, Inc.
effective as of July 1, 1994.......................................
10.22**+ Collaboration Agreement (p53 Products), effective as of October 7,
1994, between the Company and RPR, as amended......................
10.23**+ Collaboration Agreement (K-ras Products), effective as of October
7, 1994, between the Company and RPR, as amended...................
10.24*+ Letter of Intent dated March 26, 1996 between NCI, the Company and
RPR regarding a CRADA..............................................
10.25* Employment Agreement dated August 1, 1996 between the Company and
David G. Nance.....................................................
11.1* Calculation of earnings per share..................................
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.....
23.2* Consent of Counsel (included in Exhibit 5.1).......................
23.3 Consent of Arnold, White & Durkee, patent counsel for the
Company............................................................
24.1 Power of Attorney (see page II-5)..................................
</TABLE>
- ---------------
+ Confidential treatment requested for portions of these agreements.
* Previously filed.
** Supersedes agreement previously filed.
<PAGE> 1
EXHIBIT 10.6
INTROGEN THERAPEUTICS, INC.
SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
301 Congress Avenue
Suite 2025
Austin, Texas 78701
October 7, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Stock..................................................................................1
1.1 Authorization...................................................................................1
1.2 Sales of Preferred..............................................................................1
1.3 Seven Closings..................................................................................1
2. Closing Dates; Delivery.....................................................................................2
2.1 First Closing Date..............................................................................2
2.2 Second Closing Date.............................................................................2
2.3 Third Closing Date..............................................................................2
2.4 Fourth Closing Date.............................................................................2
2.5 Fifth Closing Date..............................................................................3
2.6 Sixth Closing Date..............................................................................3
2.7 Seventh Closing Date............................................................................3
2.8 Delivery........................................................................................4
3. Representations and Warranties of the Company...............................................................4
3.1 Organization, Good Standing and Qualification...................................................4
3.2 Capitalization..................................................................................4
3.3 Subsidiaries....................................................................................5
3.4 Authorization...................................................................................5
3.5 Valid Issuance of Preferred and Common Stock....................................................5
3.6 Liabilities.....................................................................................6
3.7 Governmental Consents...........................................................................6
3.8 Litigation......................................................................................6
3.9 Employees.......................................................................................6
3.10 Patents and Trademarks..........................................................................7
3.11 Compliance with Other Instruments...............................................................7
3.12 Agreements; Action..............................................................................8
3.13 Disclosure......................................................................................8
3.14 Registration Rights.............................................................................8
3.15 Title to Property and Assets....................................................................9
3.16 Financial Statements............................................................................9
3.17 Employee Benefit Plans..........................................................................9
3.18 Tax Returns, Payments and Elections.............................................................9
3.19 Insurance......................................................................................10
3.20 Labor Agreements and Actions...................................................................10
3.21 Real Property Holding Corporation..............................................................10
3.22 Offering.......................................................................................10
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4. Representations and Warranties of the Investor.............................................................11
4.1 Authorization..................................................................................11
4.2 Purchase Entirely for Own Account..............................................................11
4.3 Disclosure of Information......................................................................11
4.4 Investment Experience..........................................................................11
4.5 Restricted Securities..........................................................................11
4.6 Further Limitations on Disposition.............................................................12
4.7 Legends........................................................................................12
5. Conditions to First Closing of Investor....................................................................13
5.1 Representations and Warranties Correct.........................................................13
5.2 Covenants......................................................................................13
5.3 Compliance Certificate.........................................................................13
5.4 Blue Sky.......................................................................................13
5.5 Restated Certificate...........................................................................13
5.6 Directors......................................................................................13
5.7 Collaboration Agreements.......................................................................13
6. Conditions to First Closing of Company.....................................................................13
6.1 Representations................................................................................14
6.2 Blue Sky.......................................................................................14
6.3 Restated Certificate...........................................................................14
7. Conditions to Second Closing of Investor...................................................................14
7.1 [*]............................................................................................14
7.2 Representations and Warranties.................................................................14
7.3 Covenants......................................................................................14
7.4 Compliance Certificate.........................................................................14
7.5 Collaboration Agreements.......................................................................14
7.6 Blue Sky.......................................................................................14
8. Conditions to Second Closing of Company....................................................................15
8.1 Representations................................................................................15
8.2 Blue Sky.......................................................................................15
8.3 Collaboration Agreements.......................................................................15
9. Conditions to Third Closing of Investors...................................................................15
9.1 [*]............................................................................................15
9.2 Representations and Warranties.................................................................15
9.3 Covenants......................................................................................15
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9.4 Compliance Certificate.........................................................................15
9.5 Blue Sky.......................................................................................16
9.6 Collaboration Agreements.......................................................................16
10. Conditions to Third Closing of Company.....................................................................16
10.1 Representations................................................................................16
10.2 Blue Sky.......................................................................................16
10.3 Collaboration Agreements.......................................................................16
11. Conditions to Fourth Closing of Investor...................................................................16
11.1 [*]............................................................................................16
11.2 Representations and Warranties.................................................................16
11.3 Covenants......................................................................................16
11.4 Compliance Certificate.........................................................................17
11.5 Blue Sky.......................................................................................17
11.6 Collaboration Agreements.......................................................................17
12. Conditions to Fourth Closing of Company....................................................................17
12.1 Representations................................................................................17
12.2 Blue Sky.......................................................................................17
12.3 Collaboration Agreements.......................................................................17
13. Conditions to Fifth Closing of Investor....................................................................17
13.1 [*]............................................................................................17
13.2 Representations and Warranties.................................................................17
13.3 Covenants......................................................................................18
13.4 Compliance Certificate.........................................................................18
13.5 Blue Sky.......................................................................................18
13.6 Collaboration Agreements.......................................................................18
14. Conditions to Fifth Closing of Company.....................................................................18
14.1 Representations................................................................................18
14.2 Blue Sky.......................................................................................18
14.3 Collaboration Agreements.......................................................................18
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15. Conditions to Sixth Closing of Investor....................................................................18
15.1 [*]............................................................................................18
15.2 Representations and Warranties.................................................................19
15.3 Covenants......................................................................................19
15.4 Compliance Certificate.........................................................................19
15.5 Blue Sky.......................................................................................19
15.6 Collaboration Agreements.......................................................................19
16. Conditions to Sixth Closing of Company.....................................................................19
16.1 Representations................................................................................19
16.2 Blue Sky.......................................................................................19
16.3 Collaboration Agreements.......................................................................19
17. Conditions to Seventh Closing of Investor..................................................................20
17.1 [*]............................................................................................20
17.2 Representations and Warranties.................................................................20
17.3 Covenants......................................................................................20
17.4 Compliance Certificate.........................................................................20
17.5 Blue Sky.......................................................................................20
17.6 Collaboration Agreements.......................................................................20
18. Conditions to Seventh Closing of Company...................................................................20
18.1 Representations................................................................................20
18.2 Blue Sky.......................................................................................20
18.3 Collaboration Agreements.......................................................................21
19. Additional Covenants and Restrictions Regarding
the Purchase of Series B Preferred.........................................................................21
19.1 Purchase Price Adjustment......................................................................21
19.2 Acceleration of Purchases Upon a Public Offering...............................................21
19.3 [*]............................................................................................22
19.4 Purchase of Common Stock.......................................................................22
19.5 Standstill Agreement...........................................................................22
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20. Registration Rights........................................................................................22
20.1 Definitions....................................................................................22
20.2 Request for Registration.......................................................................23
20.3 Company Registration...........................................................................25
20.4 Obligations of the Company.....................................................................26
20.5 Furnish Information............................................................................27
20.6 Expenses of Demand Registration................................................................27
20.7 Expenses of Company Registration...............................................................28
20.8 Underwriting Requirements......................................................................28
20.9 Delay of Registration..........................................................................29
20.10 Indemnification................................................................................29
20.11 Reports Under Securities Exchange Act of 1934..................................................31
20.12 Form S-3 Registration..........................................................................32
20.13 Assignment of Registration Rights..............................................................33
20.14 Limitations on Subsequent Registration Rights..................................................33
20.15 "Market Stand-Off" Agreement...................................................................34
20.16 Amendment of Registration Rights
and Information Rights.........................................................................34
20.17 Termination of Registration Rights.............................................................35
21. Covenants of the Company...................................................................................35
21.1 Delivery of Financial Statements...............................................................35
21.2 Assignment of Rights to Financial Information..................................................35
21.3 Termination of Covenants.......................................................................36
22. Investor's Right of First Refusal..........................................................................36
22.1 Right of First Refusal.........................................................................36
23. Investor's Board Representation............................................................................37
23.1 Amendment to Certificate of Incorporation......................................................37
23.2 Scientific Advisory Board......................................................................38
23.3 Post Conversion................................................................................38
24. Miscellaneous..............................................................................................38
24.1 Survival of Warranties.........................................................................38
24.2 Successors and Assigns.........................................................................38
24.3 Governing Law..................................................................................38
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24.4 Counterparts...................................................................................38
24.5 Titles and Subtitles...........................................................................38
24.6 Notices........................................................................................39
24.7 Finder's Fee...................................................................................39
24.8 Expenses.......................................................................................39
24.9 Amendments and Waivers.........................................................................39
24.10 Severability...................................................................................39
24.11 Aggregation of Stock...........................................................................40
EXHIBITS
A Restated Certificate of Incorporation
B Schedule of Purchases
C Schedule of Exceptions
D-1 Compliance Certificate for the First Closing
D-2 Compliance Certificate for the Second Closing
D-3 Compliance Certificate for the Third Closing
D-4 Compliance Certificate for the Fourth Closing
D-5 Compliance Certificate for the Fifth Closing
D-6 Compliance Certificate for the Sixth Closing
D-7 Compliance Certificate for the Seventh Closing
E Collaboration Agreement (Kras Products)
F Collaboration Agreement (P53 Products)
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STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT is made as of the 7th day of
October 1994, by and between Introgen Therapeutics, Inc., a Delaware corporation
(the "Company"), and Rhone-Poulenc Rorer Pharmaceuticals Inc. (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Authorization. The Company will authorize the sale and
issuance of up to 2,114,100 shares of its Series B Preferred Stock (the "Series
B Preferred") having the rights, privileges and preferences as set forth in the
Restated Certificate of Incorporation (the "Restated Certificate") in the form
attached to this Agreement as Exhibit A.
1.2 Sales of Preferred. Subject to the terms and conditions
hereof, the Company will issue and sell to the Investor, and the Investor will
buy from the Company at the Closings (defined below) set forth in column 2 of
the Schedule of Purchases attached hereto as Exhibit B, the number of shares of
Series B Preferred set forth in column 3 of the Schedule of Purchases for the
aggregate purchase price set forth in column 4 of the Schedule of Purchases (The
aggregate shares of Preferred Stock to be sold to the Investor hereunder are
hereinafter referred to as the "Shares"). The Shares shall be issued to the
entity listed in Column 1 of the Schedule of Purchases.
1.3 Seven Closings. The purchase and sale of the Shares shall
occur in seven installments. The first 525,000 shares (the "First Installment")
of the Company's Series B Preferred to be sold and purchased hereunder shall be
sold at the First Closing (as defined below). An additional 200,735 shares (the
"Second Installment") of the Company's Series B Preferred to be sold and
purchased here under shall be sold and purchased at the Second Closing (as
defined below). An additional 200,735 shares (the "Third Installment") of the
Company's Series B Preferred Stock to be sold and purchased hereunder shall be
sold and purchased at the Third Closing (as defined below). An additional [*]
shares (the "Fourth Installment") of the Company's Series B Preferred to be sold
and purchased hereunder shall be sold and purchased at the Fourth Closing (as
defined below). An additional [*] shares (the "Fifth Installment") of the
Company's Series B Preferred to be sold and purchased hereunder shall be sold
and purchased at the Fifth Closing (as defined below). An additional [*] shares
(the "Sixth Installment") of the Company's Series B Preferred to be sold and
purchased
<PAGE> 9
hereunder shall be sold and purchased at the Sixth Closing (defined below). An
additional [*] shares (the "Seventh Installment") of the Company's Series B
Preferred to be sold and purchased hereunder shall be sold and purchased at the
Seventh Closing (defined below). The issuance of the First, Second, Third,
Fourth, Fifth, Sixth and Seventh Installments shall be subject to satisfaction
of the conditions precedent to the First, Second, Third, Fourth, Fifth, Sixth
and Seventh Closings, respectively, described herein.
2. Closing Dates; Delivery.
2.1 First Closing Date. The closing of the First Installment
hereunder shall be held at the offices of Wilson, Sonsini, Goodrich & Rosati, a
Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304 at
3:00 p.m., local time, on October 7, 1994 or at such other time and place upon
which the Company and the Investor shall agree (the "First Closing"). The date
of the First Closing is hereinafter referred to as the "First Closing Date."
2.2 Second Closing Date. The closing of the Second Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-2 at such
place as the Company and Investors shall agree (the "Second Closing"). Should
the conditions precedent to the Second Closing specified in Section 7 hereof
not be satisfied or waived in writing by the Investor within twelve months of
the First Closing, the Investor's obligation to buy the Second Installment and
the Company's obligation to sell the Second Installment shall terminate. The
date of the Second Closing is hereinafter referred to as the "Second Closing
Date."
2.3 Third Closing Date. The closing of the Third Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-3, at such
place as the Company and the Investors shall agree (the "Third Closing"). Should
the conditions precedent to the Third Closing specified in Section 9 hereof not
be satisfied or waived in writing by the Investor within twenty-four months of
the First Closing, the Investor's obligation to buy the Third Installment and
the Company's obligation to sell the Third Installment shall terminate. The date
of the Third Closing is hereinafter referred to as the "Third Closing Date."
2.4 Fourth Closing Date. The closing of the Fourth Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-4, at such
place as the Company and
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the Investor shall agree (the "Fourth Closing"). Should the conditions
precedent to the Fourth Closing specified in Section 11 hereof not be satisfied
or waived in writing by the Investor by January 15, 1997, the Investor's
obligation to buy the Fourth Installment and the Company's obligation to sell
the Fourth Installment shall terminate. The date of the Fourth Closing is
hereinafter referred to as the "Fourth Closing Date."
2.5 Fifth Closing Date. The closing of the Fifth Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-4, at such
place as the Company and the Investor shall agree (the "Fifth Closing"). Should
the conditions precedent to the Fifth Closing specified in Section 13 hereof
not be satisfied or waived in writing by the Investor by January 15, 1997, the
Investor's obligation to buy the Fifth Installment and the Company's obligation
to sell the Fifth Installment shall terminate. The date of the Fifth Closing is
hereinafter referred to as the "Fifth Closing Date."
2.6 Sixth Closing Date. The closing of the Sixth Installment
hereunder will take place as soon as practicable after the Company provides to
the Investor a certificate in the form attached hereto as Exhibit D-5, at such
place as the Company and the Investor shall agree (the "Sixth Closing"). Should
the conditions precedent to the Sixth Closing specified in Section 15 hereof
not be satisfied or waived in writing by the Investor by June 15, 1999, the
Investor's obligation to buy the Sixth Installment and the Company's obligation
to sell the Sixth Installment shall terminate. The date of the Sixth Closing is
hereinafter referred to as the "Sixth Closing Date."
2.7 Seventh Closing Date. The closing of the Seventh
Installment hereunder will take place as soon as practicable after the Company
provides to the Investor a certificate in the form attached hereto as Exhibit
D-6, at such place as the Company and the Investor shall agree (the "Seventh
Closing"). Should the conditions precedent to the Seventh Closing specified in
Section 17 hereof not be satisfied or waived in writing by the Investor by June
15, 1999, the Investor's obligation to buy the Seventh Installment and the
Company's obligation to sell the Seventh Installment shall terminate. The date
of the Seventh Closing is hereinafter referred to as the "Seventh Closing Date."
The First Closing, the Second Closing, the Third Closing, the Fourth Closing,
the Fifth Closing, the Sixth Closing and the Seventh Closing shall be
individually referred to as a "Closing" and collectively referred to as
"Closings."
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2.8 Delivery. At each Closing, the Company will deliver to the
Investor at such Closing a certificate, registered in the Investor's name,
representing the number of shares of Series B Preferred to be purchased by the
Investor at such Closing as specified in the Schedule of Purchases, against
payment of the purchase price therefor by check payable to the Company, by
surrender and cancellation of outstanding notes of the Company and/or by wire
transfer per the Company's wiring instructions.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that, except as set forth on a Schedule
of Exceptions attached hereto as Exhibit C, which exceptions shall be deemed to
be representations and warranties as if made hereunder:
3.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to carry on its business
as now conducted and as proposed to be conducted, to enter into this Agreement
and to sell the Shares and carry out the other transactions contemplated
hereunder. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
3.2 Capitalization. The authorized capital of the Company
consists, or will consist prior to the First Closing, of:
(a) 5,125,523 shares of Preferred Stock
("Preferred Stock"), of which 3,011,423 shares have been designated Series A
Preferred Stock and 2,114,100 shares have been designated Series B Preferred
Stock. Prior to the First Closing, there will be 3,011,423 shares of issued and
outstanding Series A Preferred Stock and no issued or outstanding shares of
Series B Preferred Stock. The rights, privileges and preferences of the Series A
and the Series B Preferred Stock are as stated in the Restated Certificate.
(b) 10,000,000 shares of Common Stock ("Common
Stock"), of which 2,036,132 shares are issued and outstanding.
(c) Except as set forth in this Agreement and
the Exhibits hereto, there are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock or any other
securities of the Company.
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(d) Except as set forth in this Agreement and
the Exhibits hereto, the Company is not a party to or is not subject to any
agreement or understanding relating to, and to the Company's knowledge there is
no agreement or understanding between any persons and/or entities which affects
or relates to, the voting of shares of capital stock of the Company or the
giving of written consents by a shareholder or director of the Company.
3.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity.
3.4 Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance (or
reservation for issuance) and delivery of the Series B Preferred sold hereunder
and the Common Stock issuable upon conversion of the Series B Preferred has been
taken or will be taken prior to the Closing. This Agreement constitutes a valid
and legally binding obligation of the Company, enforceable in accordance with
its terms, except as such enforcement is limited by bankruptcy, insolvency and
similar laws affecting creditor rights.
3.5 Valid Issuance of Preferred and Common Stock.
(a) The Series B Preferred purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and not subject to any preemptive rights,
rights of first refusal or other similar rights imposed by the Company, and will
be issued in compliance with all applicable federal and state securities laws.
The Common Stock issuable upon conversion of the Series B Preferred has been
duly and validly reserved for issuance and, upon issuance in accordance with the
terms of the Restated Certificate, shall be duly and validly issued, fully paid
and nonassessable, free of any liens or encumbrances and not subject to any
preemptive rights, rights of first refusal or other similar rights imposed by
the Company, and issued in compliance with all applicable federal and state
securities laws.
(b) The outstanding shares of Common Stock and
Series A Preferred Stock are all duly and validly authorized and issued, fully
paid and nonassessable, and were issued in compliance with all applicable
federal and state securities laws.
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<PAGE> 13
3.6 Liabilities. The Company has not incurred any indebtedness
for money borrowed or any other liabilities (absolute, accrued or contingent) in
excess of $10,000 individually or $50,000 in the aggregate.
3.7 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for registration or qualification, or
taking such action to secure exemption from such registration or qualification,
under applicable state or federal securities laws, which actions shall be taken
on a timely basis as may be required.
3.8 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement or the right of the Company to enter
into it, or to consummate the transactions contemplated hereby, or which might
result, either individually or in the aggregate, in any adverse changes in the
assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (on any basis
therefor known to the Company) involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.9 Employees. The Company is not aware, nor has a third party
asserted to the Company, that any of its employees is obligated under any
contract (including licenses, covenants or contracts of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his best efforts to
promote the interests of the Company or that would conflict with the Company's
business as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the
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<PAGE> 14
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
3.10 Patents and Trademarks. The Company has sufficient title
and ownership of all trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights, processes, and, to its knowledge,
patents, necessary for its business as now conducted and as proposed to be
conducted without any conflict with or infringement of the rights of others.
There are no outstanding options, licenses, or agreements of any kind relating
to the foregoing, nor is the Company bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity.
3.11 Compliance with Other Instruments.
(a) The Company is not in violation or default
of any provisions of its Certificate of Incorporation or Bylaws or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to the Company, and, to its knowledge,
there is no such provision which materially and adversely affects the business
of the Company or its properties or assets. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company.
(b) The Company has avoided every condition,
and has not performed any act, the occurrence of which would result in the
Company's loss of any right granted under any license, distribution or other
agreement.
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3.12 Agreements; Action.
(a) Except for agreements explicitly contemplated
hereby, there are no agreements, understandings, transactions or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof, and none of any such individuals or entities have any
interest in any party to any such agreement, understanding, transaction or
proposed transaction.
(b) There are no agreements, understandings,
instruments, contracts transactions or proposed transactions to which the
Company is a party or by which it is bound which involve (i) obligations of, or
payments to the Company in excess of $5,000, or (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $10,000 or
in excess of $50,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than in
the ordinary course of business.
(d) The Company is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Restated Certificates or Bylaws, which materially adversely affects its business
as now conducted or as proposed to be conducted.
3.13 Disclosure. The Company has fully provided the Investor
with all the information which the Investor has requested for deciding whether
to purchase the Shares and all information which the Company believes is
reasonably necessary to enable the Investor to make such decision. Neither this
Agreement nor any other statements or certificates made or delivered in
connection herewith or otherwise provided to the Investor, when taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading.
3.14 Registration Rights. Except as provided in Section 20 of
this Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
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<PAGE> 16
3.15 Title to Property and Assets. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to its knowledge, holds a
valid leasehold interest free of any liens, claims or encumbrances.
3.16 Financial Statements. The Company has delivered to the
Investor its unaudited financial statements (balance sheet and profit and loss
statement) at December 31, 1993 and for the fiscal year then ended
(respectively), and its unaudited financial statements (balance sheet and profit
and loss statement) as at and for the eight-month period ended August 31, 1994
(the "Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that the
Financial Statements are prepared on a cash basis and do not contain all
footnotes required by generally accepted accounting principles. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein, subject to
normal audit adjustments. Except as set forth in the Financial Statements and in
the material agreements listed in the Schedule of Exceptions, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to August 31, 1994 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. Except as disclosed in the Financial Statements, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to maintain
a standard system of accounting established and administered in accordance with
generally accepted accounting principles.
3.17 Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974.
3.18 Tax Returns, Payments and Elections. The Company has
filed all tax returns and reports as required by law. These returns and reports
are true and correct in all material respects. The Company has not elected
pursuant to the Internal Revenue Code
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<PAGE> 17
of 1986, as amended ("Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 341(f) or Section 1362(a) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections which relate solely to methods of accounting, depreciation or
amortization) which would have a material effect on the Company, its financial
condition, its business as presently conducted or proposed to be conducted or
any of its properties or material assets.
3.19 Insurance. The Company has in full force and effect fire,
casualty and liability insurance policies, with extended coverage, sufficient in
amount (subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed.
3.20 Labor Agreements and Actions. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
The employment of each officer and employee of the Company is terminable at the
will of the Company.
3.21 Real Property Holding Corporation. The Company is not,
and has not been at any time a "United States real property holding corporation"
as defined in Section 897 of the Internal Revenue Code of 1986, as amended.
3.22 Offering. Subject in part on the accuracy of the
Investor's representations set forth in Section 4 of this Agreement, the offer,
sale and issuance of the Shares to be issued in conformity with the terms of
this Agreement constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended (the "Act"), and from all
applicable state registration or qualification requirements.
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<PAGE> 18
4. Representations and Warranties of the Investor. The Investor hereby
represents and warrants the following:
4.1 Authorization. This Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms, except as
such enforcement is limited by bankruptcy, insolvency and similar laws
affecting creditor rights.
4.2 Purchase Entirely for Own Account. This Agreement is made
with the Investor in reliance upon the Investor's representation to the
Company, which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Series B Preferred to be received by the Investor and the
Common Stock issuable upon conversion of the Series B Preferred Stock
(collectively, the "Securities") will be acquired for investment for the
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, the Investor further represents that the
Investor does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to such person or to any
third person, with respect to any of the Securities. Each Investor represents
that it has full power and authority to enter into this Agreement.
4.3 Disclosure of Information. The Investor has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Series B Preferred hereunder. The Investor further represents that
it has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series B Preferred.
The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 3 of this Agreement or the right of the
Investor to rely thereon.
4.4 Investment Experience. The Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, and bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series B
Preferred hereunder.
4.5 Restricted Securities. The Investor understands that the
shares of Series Preferred it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a trans-
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<PAGE> 19
action not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the Act
only in certain limited circumstances. In this connection, the Investor
represents that it is familiar with Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
4.6 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Series B Preferred purchased
hereunder or Common Stock issuable upon the conversion of the Series B
Preferred, unless and until:
(a) There is then in effect a Registration
Statement under the Act covering such proposed disposition and such disposition
is made in accordance with such Registration Statement; or
(b) (i) The Investor shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company, the Investor shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Act.
(c) Notwithstanding the provisions of
paragraphs (a) and (b) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by an Investor pursuant to Rule 144 if
such Investor makes the factual representations reasonably requested by the
Company indicating the availability of the exemption provided by Rule 144.
4.7 Legends. It is understood that the certificates evidencing
the Series B Preferred and the Common Stock issuable upon conversion thereof,
may bear one or all of the following legends:
(a) "These securities have not been registered
under the Securities Act of 1933. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required under the
Securities Act of 1933."
(b) Any legend required by applicable state
securities laws.
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<PAGE> 20
5. Conditions to First Closing of Investor. The Investor's obligation
to purchase the First Installment at the First Closing is, at the option of each
Investor, subject to the fulfillment as of the First Closing Date of the
following conditions:
5.1 Representations and Warranties Correct. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct in all material respects as of the First Closing Date.
5.2 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
First Closing Date shall have been performed or complied with in all material
respects.
5.3 Compliance Certificate. The Company shall have delivered
to the Investors a certificate of the Company in the form of Exhibit D-1 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 of this Agreement.
5.4 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.
5.5 Restated Certificate. The Restated Certificate shall have
been filed with the Delaware Secretary of State.
5.6 Directors. The Company will have a Board of Directors with
six members. Upon the Closing the members of the Company's Board of Directors
shall be David G. Nance, Mahendra G. Shah, Ph.D., Austin Long, III, John N.
Kapoor, Ph.D., Mark B. Chandler and Thierry Soursac, M.D., Ph.D.
5.7 Collaboration Agreements. The Company and the Investor
shall have entered into the Collaboration Agreement (Kras Products) in
substantially the form of Exhibit E and the Collaboration Agreement (P53
Products) in substantially the form of Exhibit F (these agreements shall be
collectively referred to as the "Collaboration Agreements").
6. Conditions to First Closing of Company. The Company's obligation to
sell and issue the First Installment at the First Closing is, at the option of
the Company, subject to the fulfillment as of the First Closing Date of the
following conditions:
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<PAGE> 21
6.1 Representations. The representations made by the Investor
in Section 4 hereof shall be true and correct when made, and shall be true and
correct on the First Closing Date.
6.2 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.
6.3 Restated Certificate. The Restated Certificate shall have
been filed with the Delaware Secretary of State.
7. Conditions to Second Closing of Investor. The
Investor's obligation to purchase the Second Installment at the
Second Closing is, at the option of the Investor, subject to the
fulfillment as of the Second Closing Date of the following
conditions:
7.1 [*]
7.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions, shall be true and correct in
all material respects as of the Second Closing Date.
7.3 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Second Closing Date shall have been performed or complied with in all material
respects.
7.4 Compliance Certificate. The Company shall have delivered
to the Investor a certificate of the Company in the form of Exhibit D-2 hereto,
executed by the President of the Company, dated the Second Closing Date, and
certifying to the fulfillment of the conditions specified in Sections 7.1, 7.2
and 7.3 of this Agreement.
7.5 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.
7.6 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the
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<PAGE> 22
offer and sale of the Series B Preferred and the Common Stock issuable upon
conversion thereof.
8. Conditions to Second Closing of Company. The Company's obligation to
sell and issue the Second Installment at the Second Closing is, at the option of
the Company, subject to the fulfillment as of the Second Closing Date of the
following conditions:
8.1 Representations. The representations made by the Investors
in Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Second Closing Date.
8.2 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.
8.3 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company.
9. Conditions to Third Closing of Investors. The Investor's obligation
to purchase the Third Installment at the Third Closing is, at the option of the
Investor, subject to the fulfillment as of the Third Closing Date of the
following conditions:
9.1 [*]
9.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions, shall be true and correct in
all respects as of the Third Closing Date.
9.3 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Third Closing Date shall have been performed or complied with in all material
respects.
9.4 Compliance Certificate. The Company shall have delivered
to the Investors a certificate of the Company in the form of Exhibit D-3 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 9.1, 9.2 and 9.3 of this Agreement.
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<PAGE> 23
9.5 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.
9.6 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.
10. Conditions to Third Closing of Company. The Company's obligation to
sell and issue the Third Installment at the Third Closing is, at the option of
the Company, subject to the fulfillment as of the Third Closing Date of the
following conditions:
10.1 Representations. The representations made by the
Investors in Section 4 hereof shall be true and correct when made, and shall be
true and correct on the Third Closing Date.
10.2 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred Stock and the Common Stock issuable upon conversion thereof.
10.3 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company.
11. Conditions to Fourth Closing of Investor. The Investor's
obligations to purchase the Fourth Installment at the Fourth Closing is, at the
option of the Investor, subject to the fulfillment as of the Fourth Closing Date
of the following:
11.1 [*]
11.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions, shall be true and correct and
all material respects as of the Fourth Closing Date.
11.3 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Fourth Closing Date shall have been performed or complied with in all material
respects.
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<PAGE> 24
11.4 Compliance Certificate. The Company shall have delivered
to the Investors a certificate of the Company in the form of Exhibit D-4 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 11.1, 11.2 and 11.3 of this Agreement.
11.5 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.
11.6 Collaboration Agreements. The Investor or its
affiliate shall not have delivered notice of termination for each
of the Collaboration Agreements to the Company, pursuant to Section
18.3.1 of such agreements.
12. Conditions to Fourth Closing of Company. The Company's
obligation to sell and issue the Fourth Installment at the Fourth
Closing is, at the option of the Company, subject to fulfillment as
of the Fourth Closing Date of the following conditions:
12.1 Representations. The representations made by the
Investors in Section 4 hereof shall be true and correct when made, and shall be
true and correct on the Fourth Closing Date.
12.2 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred Stock and the Common Stock issuable upon conversion thereof.
12.3 Collaboration Agreements. The Investor or its
affiliate shall not have delivered notice of termination for each
of the Collaboration Agreements to the Company.
13. Conditions to Fifth Closing of Investor. The Investor's
obligations to purchase the Fifth Installment at the Fifth Closing
is, at the option of the Investor, subject to the fulfillment as of
the Fifth Closing Date of the following:
13.1 [*]
13.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions, shall be true and correct and
all material respects as of the Fifth Closing Date.
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<PAGE> 25
13.3 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Fifth Closing Date shall have been performed or complied with in all material
respects.
13.4 Compliance Certificate. The Company shall deliver to the
Investors a certificate of the Company in the form of Exhibit D-4 hereto,
executed by the President of the Company, dated the Fifth Closing Date, and
certifying to the fulfillment of the conditions specified in Sections 13.1, 13.2
and 13.3 of this Agreement.
13.5 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.
13.6 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.
14. Conditions to Fifth Closing of Company. The Company's
obligation to sell and issue the Fifth Installment at the Fifth
Closing is, at the option of the Company, subject to fulfillment as
of the Fifth Closing Date of the following conditions:
14.1 Representations. The representations made by the
Investors in Section 4 hereof shall be true and correct when made, and shall be
true and correct on the Fifth Closing Date.
14.2 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred Stock and the Common Stock issuable upon conversion thereof.
14.3 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company.
15. Conditions to Sixth Closing of Investor. The Investor's
obligations to purchase the Sixth Installment at the Sixth Closing
is, at the option of the Investor, subject to the fulfillment as of
the Sixth Closing Date of the following:
15.1 [*]
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<PAGE> 26
15.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions shall be true and correct in
all material respects as of the Sixth Closing Date.
15.3 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Sixth Closing Date shall have been performed or complied with in all material
respects.
15.4 Compliance Certificate. The Company shall deliver to the
Investors a certificate of the Company in the form of Exhibit D-6 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 15.1, 15.2 and 15.3 of this Agreement.
15.5 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.
15.6 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.
16. Conditions to Sixth Closing of Company. The Company's obligation to
sell and issue the Sixth Installment at the Sixth Closing is, at the option of
the Company, subject to fulfillment as of the Sixth Closing Date of the
following conditions:
16.1 Representations. The representations made by the
Investors in Section 4 hereof shall be true and correct when made, and shall be
true and correct on the Sixth Closing Date.
16.2 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred Stock and the Common Stock issuable upon conversion thereof.
16.3 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company.
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<PAGE> 27
17. Conditions to Seventh Closing of Investor. The Investor's
obligations to purchase the Seventh Installment at the Seventh Closing is, at
the option of the Investor, subject to the fulfillment as of the Seventh Closing
Date of the following:
17.1 [*]
17.2 Representations and Warranties. The Representations and
Warranties made by the Company in Section 3 hereof, as modified or qualified by
the Company in an updated Schedule of Exceptions shall be true and correct and
all material respects as of the Seventh Closing Date.
17.3 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Seventh Closing Date shall have been performed or complied with in all material
respects.
17.4 Compliance Certificate. The Company shall deliver to the
Investor a certificate of the Company in the form of Exhibit D-7 hereto,
executed by the President of the Company, certifying to the fulfillment of the
conditions specified in Sections 17.1, 17.2 and 17.3 of this Agreement.
17.5 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Series B
Preferred and the Common Stock issuable upon conversion thereof.
17.6 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company, pursuant to Section 18.3.1 of such agreements.
18. Conditions to Seventh Closing of Company. The Company's obligation
to sell and issue the Seventh Installment at the Seventh Closing is, at the
option of the Company, subject to fulfillment as of the Seventh Closing Date of
the following conditions:
18.1 Representations. The representations made by the
Investors in Section 4 hereof shall be true and correct when made, and shall be
true and correct on the Seventh Closing Date.
18.2 Blue Sky. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the
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<PAGE> 28
offer and sale of the Series B Preferred Stock and the Common Stock issuable
upon conversion thereof.
18.3 Collaboration Agreements. The Investor or its affiliate
shall not have delivered notice of termination for each of the Collaboration
Agreements to the Company.
19. Additional Covenants and Restrictions Regarding the Purchase of
Series B Preferred. Notwithstanding the foregoing provisions, the following
provisions shall govern the purchase of Series B Preferred pursuant to this
Agreement:
19.1 Purchase Price Adjustment.
(a) For all Closings which occur after January 1,
1995 and prior to an underwritten public offering of the Common Stock of the
Company, the purchase price per share of Series B Preferred indicated on Exhibit
B hereto shall be increased (but not decreased) to the price per share (the
"Adjusted Purchase Price") paid in the most recent equity financing of the
Company, if any, which occurs prior to the applicable Closing and which
involves gross proceeds of at least $2,000,000. The adjustment of the price per
share shall not reduce the aggregate purchase price indicated on Exhibit B, but
shall reduce the number of shares of Series B Preferred Stock purchased to the
quotient of the aggregate purchase price indicated for the applicable Closing
divided by the Adjusted Purchase Price;
(b) At the election of the Investor, the purchase
price per share of Series B Preferred indicated on Exhibit B hereto or the
Adjusted Purchase Price calculated pursuant to Section 19.1(a) above, as
applicable, may be increased (but not decreased) to a price per share (the
"Elected Adjusted Purchase Price") that when divided into the aggregate
purchase price indicated on Exhibit B for the applicable Closing would result
in the Investor holding no more than 19.9% of the outstanding stock of the
Company after such Closing. The adjustment of the purchase price per share
shall not reduce the obligation to pay the aggregate purchase price indicated
on Exhibit B for any Closing, but shall reduce the number of shares of Series B
Preferred Stock to be purchased (possibly to zero).
19.2 Acceleration of Purchases Upon a Public Offering. In the
event of an underwritten public offering of Common Stock of the Company with
aggregate gross proceeds of more than $10,000,000 (an "IPO"):
(a) The Investor shall be obligated to
purchase at the closing of an IPO, the dollar amount of stock indicated on
Exhibit B hereto which still remains unpurchased pursuant to the Closings (the
"Scheduled IPO Purchase Amount"). The price per share shall be the price per
share to the public in the IPO.
(b) Notwithstanding the provisions of
paragraph (a) above, the Investor can reduce the IPO Purchase Amount (x) to 20%
of the gross proceeds to be received in the IPO, but not to exceed the lesser of
$4,000,000 or such dollar amount of shares that when aggregated with the other
shares held by the Investor would amount to 19.9% of the outstanding stock of
the Company (calculated on an as-converted to Common Stock basis) following the
IPO, in the event that there is reasonable evidence of local efficacy of a
Company product in Phase I or later stage clinical trials or (y) to zero, in the
event that there is not reasonable
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<PAGE> 29
evidence of local efficacy of a Company product in Phase I or later stage
clinical trials. Such reduced amount shall be referred to as the "Actual IPO
Purchase Amount".
(c) In the event that the Investor reduces the
Scheduled IPO Purchase Amount pursuant to paragraph (b) above, then the Investor
shall be obligated to pay a sum equal to the Scheduled IPO Purchase Amount less
the Actual IPO Purchase Amount; provided, however, that such sum shall only be
payable (i) at those times when a purchase of Series B Preferred would have
occurred at a Closing, if the Company had not undertaken the IPO and (ii) no
payments need be made until the dollar amount of the Series B Preferred that
would have been purchased at a Closing or Closings following the date of the IPO
(if the Company had not undertaken the IPO) exceeds the Actual IPO Purchase
Amount.
19.3 Purchase of Outstanding Stock. Up to fifteen percent
(15%) of the shares of capital stock of the Company to be purchased at each
Closing contemplated by this Agreement and up to fifteen (15%) of the shares to
be purchased at an acceleration upon an IPO shall, upon the election of Texas
Biomedical Development Partners ("TBDP"), be purchased from TBDP. Such
purchases shall be made upon the same terms (including the applicable price per
share and conditions to closing) as the purchase of Series B Preferred, except
the Investor shall receive shares of Series A Preferred Stock (or Common Stock,
in the event that the Series A Preferred Stock has converted to Common Stock)
from TBDP. TBDP shall exercise its right to sell such shares at the First
Closing. In the event that TBDP wishes to exercise its right to sell such
shares at subsequent Closings, it shall do so by delivering a notice of
election to the Company and the Investor at least five business days prior to a
Closing. Such election shall indicate the number of shares which TBDP wishes to
sell and be accompanied by stock certificate(s), representing at least the
amount of shares that TBDP wishes to sell, which are duly endorsed for transfer
to the Investor.
19.4 Purchase of Common Stock. In the event that the Investor
is obligated to purchase Series B Preferred Stock at a Closing or upon the
acceleration of purchases upon an IPO and the Series B Preferred Stock has
converted to Common Stock pursuant to the terms of the Company's Certificate of
Incorporation then obligation to purchase and sell Series B Preferred shall be
an obligation to purchase and sell Common Stock.
19.5 Standstill Agreement. Prior to the date which is five
years from the date of the Company's initial public offering, neither the
Investor nor any subsidiary, parent corporation or other affiliate of the
Investor's shall acquire beneficial ownership of any voting stock in the Company
("Voting Stock"), any securities convertible into or exchangeable for Voting
Stock, or any other right to acquire Voting Stock (except, in any case, by way
of stock dividends or other distributions or offerings made available to holders
of any Voting Stock generally) or authorize or make a tender, exchange or other
offer, without the written consent of the Company, if the effect of such
acquisition would be to increase the Investor's percentage ownership beyond
thirty-two percent (32%) of the voting power of all Voting Stock of the Company.
20. Registration Rights. The Company covenants and agrees as
follows:
20.1 Definitions. For purposes of this Section 20:
(a) The term "register," "registered," and
"registration" refer to a registration effected by preparing and
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filing a registration statement or similar document in compliance with the Act,
and the declaration or ordering of effectiveness of such registration statement
or document;
(b) The term "Registrable Securities" means
(1) the Common Stock issuable or issued upon conversion of the Series B
Preferred sold pursuant to this Agreement, (2) the Common Stock issuable or
issued upon conversion of any Series A Preferred Stock held by individuals and
entities who have signed a consent for the purpose of being bound by this
Section 20, (3) any Common Stock held by individuals and entities who have
signed a consent for the purposes of being bound by this Section 20 and (4) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Series A Preferred Stock, Series B Preferred Stock, or Common Stock,
excluding in all cases, however, (i) any Registrable Securities sold by a person
in a transaction in which his rights under this Section 20 are not assigned, or
(ii) any Registrable Securities sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction.
(c) The number of shares of "Registrable
Securities then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities.
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 20.13 hereof; and
(e) The term "Form S-3" means such form under the
Act as in effect on the date hereof or any registration form under the Act
subsequently adopted by the Securities and Exchange Commission ("SEC") which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(f) The term "Act" shall mean the Securities Act
of 1933, as amended.
20.2 Request for Registration.
(a) If the Company shall receive at any time
after December 31, 1998, either (i) a written request from the Holders of at
least fifty percent (50%) of the Registrable Securities
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(including securities convertible into Registrable Securities) then outstanding
that the Company file a registration statement under the Act covering the
registration of at least forty percent (40%) of the Registrable Securities (or a
lesser percentage if the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $10,000,000) or (ii) a
written request from the Investor that the Company file a registration statement
under the Act covering the registration of at least sixty percent (60%) of the
Registrable Securities held by the Investor (or a lesser percentage if the
anticipated aggregate offering price, net of underwriting discounts and
commissions would exceed $10,000,000), then the Company shall, within ten (10)
days of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of subsections 20.2(b) and (c), effect as
soon as practicable, and in any event within 120 days of the receipt of such
request, the registration under the Act of all Registrable Securities which the
Holders request to be registered within 20 days of the mailing of such written
notice by the Company.
(b) Notwithstanding the foregoing, the Company
shall not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to subsection 20.2(a):
(i) During the period starting with the
date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date six months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
(ii) After the Company has effected two
registrations pursuant to subsection 20.2(a) (i) (if the request is being made
pursuant to subsection 20.2(a)(i)), and such registration has been declared or
ordered effective, or after the Company has effected a single registration
pursuant to subsection 20.2(a)(ii) (if the request is being made pursuant to
subsection 20.2(a)(ii)) and such registration has been declared or ordered
effective;
(iii) If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its share-
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holders for a registration statement to be filed at such time, then the
Company's obligation to use its best efforts to register, qualify or comply
under subsection 20.2(a) shall be deferred for a period not to exceed 120 days
from the date of receipt of written request from the Holders; provided, however,
that the Company may not utilize this right more than once in any twelve-month
period.
(c) If the Holders initiating the registration
request hereunder ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 20.2
and the Company shall include such information in the written notice referred to
in subsection 20.2(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Holders requesting the registration and such
Holder) to the extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company as
provided in subsection 20.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Holders requesting the
registration and reasonably acceptable to the Company. Notwithstanding any other
provision of this Section 20.2, if the underwriter advises the Holders
requesting the registration that marketing factors require a limitation of the
number of shares to be underwritten, then the Initiating Holders shall so advise
all Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from such
underwriting.
20.3 Company Registration. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substan-
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tially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after mailing of written notice by the Company, the Company shall, subject
to the provisions of Section 20.8, cause to be registered under the Act all of
the Registrable Securities that each such Holder has requested to be registered.
20.4 Obligations of the Company. Whenever required under this
Section 20 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to sixty (60)
days.
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
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(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 20,
on the date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to this Section 20, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
20.5 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 20
with respect to the Registrable Securities of any selling Holder that such
holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
20.6 Expenses of Demand Registration. All expenses, other than
underwriting discounts and commissions and any fees and expenses of a special
counsel of a selling stockholder, incurred in connection with registrations,
filings or qualifications pursuant to Section 20.2, including (without
limitation) all registration, federal and state filing and qualification fees
and expenses, printers' and accounting fees and fees and disbursements of
counsel for the Company, shall be paid by the Company; provided, however, that
the Company shall not be required to pay for any expenses of
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<PAGE> 35
any registration proceeding begun pursuant to Section 20.2 if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered (in which case all Participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 20.2; provided further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 20.2. The
Company's obligations under this 20.6 shall apply to each registration pursuant
to Section 20.2.
20.7 Expenses of Company Registration. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 20.3 for each Holder (which right may be assigned as
provided in Section 20.13), including (without limitation) all registration,
filing, qualification, printers and accounting fees relating or apportionable
thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities and any fees or expenses of a special counsel of a
selling stockholder.
20.8 Underwriting Requirements. In connection with any
offering involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 20.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as is provided for herein. If the underwriters determine
that marketing factors require a limitation of the number of shares to be
underwritten, the underwriters may limit the number of Registrable Securities to
be included in the registration on a pro-rata basis, or may exclude Registrable
Securities entirely from such registration (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by such
selling stockholders) but in no event shall any shares being sold by a
stockholder exercising a demand registration right similar to that granted in
Section 20.2 be excluded from such offering. For purposes of apportionment, any
selling stockholder which is a Holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of
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<PAGE> 36
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling stockholder", and
any pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder", as defined in
this sentence.
20.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 20.
20.10 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 20:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, amended (the "1934 Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 20.10(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that
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<PAGE> 37
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this subsection 20.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 20.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
20.10(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified
party under this Section 20.10 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
20.10, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by
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<PAGE> 38
such counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
20.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 20.10.
(d) The obligations of the Company and Holders
under this Section 20.10 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 20, and
otherwise.
20.11 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a
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<PAGE> 39
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested in availing any Holder of any rule or regulation
of the SEC (exclusive of Rule 144A) which permits the selling of any such
securities without registration or pursuant to such form.
20.12 Form S-3 Registration. In case the Company shall receive
from any Holder or Holders of the Registrable Securities a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to shares of Registrable Securities the
reasonably anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $1,000,000 all or a part of
the Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within 15 days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 20.12: (1) if Form S-3 is not available for such offering by the
Holders; (2) if the Holders, together with the holders of any other securities
of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price
to the public (net of any underwriters' discounts or commissions) of less than
$1,000,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than 120 days
after receipt of the request of the Holder or Holders under this Section 20.12;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period; or (4) in any particular juris-
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diction in which the Company would be required to qualify to do business or to
execute a general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. All expenses incurred in connection with
the registrations requested pursuant to Section 20.12, (exclusive of
underwriting discounts and commissions and any fees and expenses of a special
counsel to a selling shareholder) shall be paid by the Company.
20.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 20 may be
assigned by a Holder to a transferee or assignee of such securities who acquires
(i) at least 300,000 shares of Registrable Securities, or (ii) all shares of
Registrable Securities then held by such Holder if such Holder transfers all
such Registrable Securities to a single entity, provided the Company is, within
a reasonable time after such transfer, furnished with written notice of the name
and the address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned; and provided, further,
that such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. Notwithstanding the above, such rights may
be assigned by a Holder to a limited partner or general partner of the Holder
regardless of the number of shares acquired by such transferee.
20.14 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the Registrable Securities,
enter into any agreement (other than an amendment to this agreement or
supplemental agreement effected in accordance with Section 20.16 of this
Agreement) with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed pursuant to Section 20.2 hereof, unless
under the terms of such agreement such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion
of such securities will not reduce the amount of the Registrable Securities of
the Holders which are included in any such registration or (b) to make a demand
registration which could result in such registration being declared effective
prior to the earlier of either of the dates set forth in
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subsection 20.2(a) or within six months of the effective date of any
registration effected pursuant to Section 20.2.
20.15 "Market Stand-Off" Agreement. Each holder of securities
which are or at one time were Registrable Securities (or which are or were
convertible into Registrable Securities) hereby agrees that, during a period not
to exceed 180 days, following the effective date of a registration statement of
the Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, sell or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Common Stock or Preferred
Stock of the Company held by it at any time during such period except Common
Stock included in such registration; provided, however, that:
(a) such agreement shall be applicable only to
the first such registration statement of the Company which covers Common Stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company,
and all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
20.16 Amendment of Registration Rights and Information Rights. Any
provision of Sections 20 and 21 may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company, the holders of at
least sixty-seven percent (67%) of the Registrable Securities then outstanding
and the holders of a majority of the Series B Preferred Stock then outstanding,
and with the same consent the Company may enter into a supplemental agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of Sections 20 or 21. Any amendment, waiver or
supplemental agreement effected in accordance with this Section 20.16 shall be
binding upon each holder of any securities which are or at one time were
Registrable Securities (or which are or were convertible into Registrable
Securities), each future holder of all such securities, and the Company.
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20.17 Termination of Registration Rights. No stockholder shall be
entitled to exercise any right provided for in this Section 20 after six (6)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
initial underwritten offering of its securities to the general public.
21. Covenants of the Company.
21.1 Delivery of Financial Statements. The Company shall
deliver to each Holder which holds 300,000 shares of Registrable Securities:
(a) as soon as practicable, but in any event
within ninety (90) days after the end of each fiscal year of the Company,
statements of operations and cash flow for such fiscal year, a balance sheet of
the Company as of the end of such year, and a schedule as to the sources and
applications of funds for such year, all in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) as soon as practicable, but in any event
within forty-five (45) days of the end of each quarter, an unaudited statement
of operations and balance sheet for and as of the end of such quarter, in
reasonable detail and prepared in accordance with GAAP, subject to year end
audit adjustments and the absence of footnotes;
(c) as soon as practicable, but in any event
within thirty (30) days of the end of each month (commencing six calendar months
from the first Closing), an unaudited statement of operations and balance sheet
for and as of the end of such month, in reasonable detail and prepared in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes; and
(d) such other information relating to the
financial condition, business, prospects or corporate affairs of the Company as
the Holder may from time to time request, provided, however, that the Company
shall not be obligated to provide information which it deems in good faith to be
proprietary unless such Investor or assignee of such Investor agrees in writing
to hold in confidence and trust and to act in a fiduciary manner with respect to
all information so provided.
21.2 Assignment of Rights to Financial Information. The rights
granted pursuant to Section 21.1 may not be assigned or
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otherwise conveyed by any Holder or by any subsequent transferee of any such
rights without the prior written consent of the Company; provided, however, that
any Holder may assign to any transferee, other than a competitor of the Company,
and after giving notice to the Company, the rights granted pursuant to Section
21.1 to (i) a transferee who acquires at least 300,000 shares of Registrable
Securities.
21.3 Termination of Covenants. The covenants set forth in
Section 21.1 shall terminate as to Holders when the sale of securities pursuant
to a registration statement filed by the Company under the Act in connection
with the firm commitment underwritten offering of its securities to the general
public is consummated or when the Company first becomes subject to the periodic
reporting requirements of Sections 12(g) or 15(d) of the Securities Exchange Act
of 1934, whichever event shall first occur.
22. Investor's Right of First Refusal.
22.1 Right of First Refusal. As more specifically set forth
below, the Company hereby grants to the Investor the right of first refusal to
purchase, pro rata, all or any part of New Securities (as defined in this
Section 22.1) which the Company may, from time to time, propose to sell and
issue. A pro rata share, for purposes of this right of first refusal, is the
ratio that the sum of the number of shares of Common Stock and Common Stock
issuable upon conversion of the Series B Preferred then held by the Investor
bears to the sum of the total number of shares of Common Stock then outstanding
and the number of shares of Common Stock issuable upon conversion of the then
outstanding Preferred Stock.
(a) Except as set forth below, "New Securities"
shall mean any shares of Common Stock or Preferred Stock of the Company, whether
now authorized or not, and rights, options or warrants to purchase shares of
Common Stock or Preferred Stock, and securities of any type whatsoever that are,
or may become, convertible into shares of Common Stock or Preferred Stock.
Notwithstanding the foregoing, "New Securities" does not include (i) the
Preferred purchased under this Agreement, including Common Stock issuable upon
conversion of the Series B Preferred, (ii) securities offered to the public
generally pursuant to a registration statement or pursuant to Regulation A under
the Act, (iii) securities issued pursuant to the acquisition of or strategic
partnering with another corporation by the Company by merger, purchase of
substantially all of the assets, licensing arrangement, joint venture
arrangement or other transaction, (iv) employees, officers and directors of, and
consultants, customers, and vendors to, the Company, pursuant to any arrangement
approved by the Board of
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Directors of the Company, (v) stock issued pursuant to any rights or agreements,
including without limitation convertible securities, options and warrants,
provided that the rights of first refusal established by this Section 22.1 apply
with respect to the initial sale or grant by the Company of such rights or
agreements, (vi) stock issued in connection with any stock split, stock dividend
or recapitalization by the Company.
(b) In the event the Company proposes to
undertake an issuance of New Securities, it shall give the Investor written
notice of its intention, describing the type of New Securities, and the price
and terms upon which the Company proposes to issue the same. The Investor shall
have 20 days from the date of receipt of any such notice to agree to purchase up
to its pro rata share of such New Securities for the price and upon the terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased.
(c) In the event the Investor fails to exercise
the right of first refusal within the 20 day period, the Company shall have 120
days thereafter to enter into an agreement to sell the New Securities not
elected to be purchased by the Investor at the price and upon the terms no more
favorable to the purchasers of such securities than specified in the Company's
notice. In the event the Company has not entered into an agreement to sell the
New Securities within the 120 day period, the Company shall not thereafter
issue or sell any New Securities, without first offering such securities in the
manner provided above.
(d) The right of first refusal granted under this
Agreement shall expire upon the closing of the first public offering of the
Common Stock of the Company to the general public which is effected pursuant to
a registration statement filed with, and declared effective by, the SEC under
the Act.
(e) The right of first refusal hereunder is not
assignable except by the Investor.
23. Investor's Board Representation.
23.1 Amendment to Certificate of Incorporation. The Company
shall not amend its Certificate of Incorporation to eliminate the right of the
holders of Series B Preferred Stock to select a member of the Company's Board of
Directors, without the consent of the holders of at least a majority of the
Series B Preferred Stock.
-37-
<PAGE> 45
23.2 Scientific Advisory Board. The holders of Series B
Preferred Stock shall be entitled to appoint a member to the Company's
Scientific Advisory Board who is reasonably acceptable to the Company.
23.3 Post Conversion. Following a conversion of Series B
Preferred Stock into Common Stock and provided that the Investor is still
holding at least fifteen percent (15%) of the outstanding stock of the Company,
the Company shall (i) include a nominee of the Investor who is reasonably
acceptable to the Company in its recommended slate for the Board of Directors
and shall utilize the same degree of effort to have such nominee elected as it
utilizes to have the other members of the slate elected, and (ii) include a
nominee of the Investor who is reasonably acceptable to the Company upon the
Company's Scientific Advisory Board.
24. Miscellaneous.
24.1 Survival of Warranties. The warranties, representations
and covenants of the Company and the Investor contained in this Agreement shall
survive the execution and delivery of this Agreement and the Closing and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the Investor or the Company.
24.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
24.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
24.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
-38-
<PAGE> 46
24.6 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail, or
other courier service, postage prepaid and addressed to the party to be notified
at the address indicated for such party in the Company's stock records or in the
case of the Company on the first page of this Agreement, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties.
24.7 Finder's Fee. Each party represents that it neither is
nor will be obligated for any finders' fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless the Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
24.8 Expenses. Each party shall pay its own fees and expenses
with respect to this Agreement. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement or the Restated Articles,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
24.9 Amendments and Waivers. Any term of this Agreement
(except those set forth in Sections 20 and 21) may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investor. Amendments, waivers and supplemental
agreements relating to Sections 20 and 21 hereof shall be governed by the
provisions of Section 17.16 hereof.
24.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
-39-
<PAGE> 47
24.11 Aggregation of Stock. All shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTROGEN THERAPEUTICS, INC.
By: /s/ DAVID NANCE
-----------------------------
Title: President
RHONE-POULENC RORER
PHARMACEUTICALS INC.
By: /s/ MICHEL DE ROSEN
-----------------------------
Title: President
-40-
<PAGE> 48
EXHIBIT B
SCHEDULE OF PURCHASES
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Aggregate
Number of Purchase
Investor Closing Shares Price
- ------------------------ ------- --------- ----------
<S> <C> <C> <C>
Phone-Poulenc Rorer
International (Holdings) Inc. First 525,000 $3,003,000.00(1)
Delaware Corporate Center I Second 200,735 1,499,490.45
Suite 114 Third 200,735 1,499,490.45
1 Righter Parkway Fourth [*] [*]
Wilmington, DE 19803 Fifth [*] [*]
Sixth [*] [*]
Seventh [*] [*]
--------- ----------
TOTAL [*] [*]
--------- ----------
</TABLE>
(1) $500,000 of ;this purchase price was paid prior to closing pursuant to
the Letter of Intent between the Company and the Investor dated
June 15, 1994.
<PAGE> 49
EXHIBIT C
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of October 7, 1994, is made and
given pursuant to Section 3 of the Introgen Therapeutics, Inc. Series B and
Series B Preferred Stock Purchase Agreement dated October 7, 1994 (the
"Agreement"). The Section numbers in this Schedule of Exceptions correspond to
the Section numbers in the Agreement; however, any information disclosed herein
under any Section number shall be deemed to be disclosed and incorporated into
any other Section number under the Agreement where such disclosure would be
appropriate. Any terms defined in the Agreement shall have the same meaning when
used in this Schedule of Exceptions as when used in the Agreement unless the
context otherwise requires.
3.6 Liabilities.
The Company is a party to the following agreements (copies of which
have been provided to the Investor) which may result in liabilities in
excess of $10,000:
- Consulting Agreement with EJ Financinal Enterprises, Inc.
- Consulting Agreement with Jack A. Roth, M.D.
- Service Agreement with Domecq Technologies, Inc.
- Sponsored Research Agreements and Clinical Study
Agreements with the University of Texas M.D. Anderson
Cancer Center.
- Genetix License and Materials Transfer Agreement.
- Patent and Technology License Agreement with the Board of
Regents of the University of Texas System.
Legal fees and expenses due to Wilson & Varner, PC.
Legal fees and expenses due to Wilson, Sonsini, Goodrich & Rosati, PC.
3.8 Litigation.
In December 1993, Schering Corporation contacted the Company
(then known as Intron Therapeutics, Inc.) and asked that the
name "Intron", allegedly a Schering trademark, cease to be used
by the Company. Schering threatened the Company with trademark
infringement litigation. On January 28, 1994, Schering
<PAGE> 50
notified the Company that Schering would not file an infringement
complaint based upon the Company's representation that the Company
would change its name. The Company subsequently changed its name to
Introgen Therapeutics, Inc. and has notified Schering of the name
change.
The Company believes there will continue to be significant litigation
regarding patent and other intellectual property rights of companies
involved in gene therapy.
3.9 Employees.
The Company entered into a Consulting Agreement with Domecq
Technologies, Inc. effective July 1, 1994. The Company acknowledged in
the Consulting Agreement that Mr. Nance serves as an officer, director
and or trustee of other entities and that it is in the best interest of
the Company for Mr. Nance to continue those activities which are deemed
by the Company to be not conflicting with the Company's interests.
3.10 Patents and Trademarks.
The Company's success will depend, in large part, on the strength of
its current and future patent position relating to gene therapy. The
Company's patent position, like that of others in the gene therapy
field, is highly uncertain and involves complex legal and factual
questions. The Company is the licensee of certain patents and patent
applications of the University of Texas System. Claims made under
patent applications may be denied or significantly narrowed and issued
patents may not provide significant commercial protection to the
Company. There is no assurance that the Company's patents will not be
challenged by others, and the Company could incur substantial costs in
proceedings before the United States Patent Office, including
interference proceedings. These proceedings could also result in
adverse decisions as to the priority of the Company's licensed
inventions. There can be no assurance that the Company's products do
not or will not infringe on the patent or proprietary rights of others,
and the Company may be required to obtain additional licenses to the
patents, patent applications or other proprietary rights of others.
There can be no assurance that any such licenses would be made
available on terms acceptable to the Company, if at all.
-2-
<PAGE> 51
3.12 Agreement; Action. The following parties:
<TABLE>
<CAPTION>
Association with
Name the Company
-------------- -----------------------------
<S> <C>
David G. Nance President and Chief Executive
Officer
Jack A. Roth, M.D. Consultant and Chairman of the
Scientific Advisory Board
Mahendra G. Shah, Ph.D. Vice President
Timothy R. Kelly Chief Financial Officer
Rodney Varner Secretary
John N. Kapoor, Ph.D. Director
</TABLE>
are associated with the following entities which are also
affiliated with the Company.
- Dr. Kapoor, Dr. Shah and Mr. Kelly are associated with EJ
Financial Enterprises, Inc. (a consultant to the Company)
and Texas Biomedical Development Partners (a major
shareholder of the Company).
- Mr. Nance is associated with Texas Biomedical Development
Partners and Technology Capital Corporation.
- Rodney Varner is associated with Wilson & Varner PC which
provides legal services to the Company.
- Dr. Roth is an employee of M.D. Anderson Cancer Center
which is a component of Regents of the University of Texas
System (a Licensor to the Company).
3.13 Disclosure.
The Company's License Agreement with the Board of Regents of the
University of Texas System has been amended. However, such amendment is
not legally binding until it has been approved at a meeting of the
Board of Regents, and no such approval has been obtained.
3.19 Insurance.
The Company has no insurance at this time.
-3-
<PAGE> 52
3.20 Labor Agreements and Actions.
The Company is not bound by any labor union agreements, except as may
indirectly apply through the Company's agreements with the University
of Texas M.D. Anderson Cancer Center ("UTMDACC") related to sponsored
research and clinical studies. The Company pays UTMDACC which in turn
pays UTMDACC and University of Texas personnel and employees. Some of
these personnel and employees may be associated with a state employee
labor union or other union.
-4-
<PAGE> 53
EXHIBIT D-1
The undersigned, hereby certifies that:
1. He is the duly elected and acting President of Introgen
Therapeutics, Inc., a Delaware corporation.
2. The conditions specified in Sections 5.1 and 5.2 of the Series
B Preferred Stock Purchase Agreement dated October 1, 1994
have been fulfilled.
IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of___________________ .
______________________________
__________________, President
-5-
<PAGE> 54
EXHIBIT D-2
The undersigned, hereby certifies that:
1. He is the duly elected and acting President of Introgen
Therapeutics, Inc., a Delaware corporation.
2. The conditions specified in Sections 7.1, 7.2 and 7.3 of the
Series B Preferred Stock Purchase Agreement dated October 1,
1994 have been fulfilled.
IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of______________________ .
______________________________
__________________, President
<PAGE> 55
EXHIBIT D-3
The undersigned, hereby certifies that:
1. He is the duly elected and acting President of Introgen
Therapeutics, Inc., a Delaware corporation.
2. The conditions specified in Sections 9.1, 9.2 and 9.3 of the
Series B Preferred Stock Purchase Agreement dated October 1,
1994 have been fulfilled.
IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of____________________ .
______________________________
__________________, President
<PAGE> 56
EXHIBIT D-4
The undersigned, hereby certifies that:
1. He is the duly elected and acting President of Introgen
Therapeutics, Inc., a Delaware corporation.
2. The conditions specified in Sections 11.1, 11.2 and 11.3 of
the Series B Preferred Stock Purchase Agreement dated October
1, 1994 have been fulfilled.
IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of________________________ .
______________________________
__________________, President
<PAGE> 57
EXHIBIT D-5
The undersigned, hereby certifies that:
1. He is the duly elected and acting President of Introgen
Therapeutics, Inc., a Delaware corporation.
2. The conditions specified in Sections 13.1, 13.2 and 13.3 of
the Series B Preferred Stock Purchase Agreement dated October
1, 1994 have been fulfilled.
IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of______________ .
______________________________
__________________, President
<PAGE> 58
EXHIBIT D-6
The undersigned, hereby certifies that:
1. He is the duly elected and acting President of Introgen
Therapeutics, Inc., a Delaware corporation.
2. The conditions specified in Sections 15.1, 15.2 and 15.3 of
the Series B Preferred Stock Purchase Agreement dated October
1, 1994 have been fulfilled.
IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of________________________ .
______________________________
__________________, President
<PAGE> 59
EXHIBIT D-7
The undersigned, hereby certifies that:
1. He is the duly elected and acting President of Introgen
Therapeutics, Inc., a Delaware corporation.
2. The conditions specified in Section of the Series
B Preferred Stock Purchase Agreement dated October 1,
1994 have been fulfilled.
IN WITNESS WHEREOF, the undersigned has executed this certificate as an
officer of the Company as of_______________________ .
______________________________
__________________, President
-60-
<PAGE> 60
AMENDMENT NUMBER ONE TO THE SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
This Amendment Number One to the Series B Preferred Stock Purchase
Agreement dated October 7, 1994 (the "Purchase Agreement") between Rhone-Poulenc
Rorer Pharmaceuticals Inc. ("Investor") and Introgen Therapeutics, Inc. (the
"Company") is being entered into as of October 11, 1996. This Amendment shall be
void and of no further force or effect in the event that the Company does not
close an underwritten initial public offering of Common Stock with aggregate
gross proceeds of more than $10,000,000 prior to January 1, 1997 (the "IPO").
The parties hereby agree as follows:
1. Acceleration. The parties acknowledge that upon the IPO, the [*] to be
paid upon the Fourth, Fifth, Sixth and Seventh Closings is accelerated,
subject to certain limitations, pursuant to Section 19.2 of the
Purchase Agreement.
2. Initial Public Offering. Investor shall purchase $6,000,000 of Common
Stock in a private placement upon completion of the IPO at the price at
which the Common Stock is offered to the public.
3. Fourth and Fifth Closings. No amounts shall be due upon satisfaction of
the conditions to closing for the Fourth and Fifth Closings, and all
references to such Closings in the Purchase Agreement are hereby
deleted.
4. Sixth Closing. That Section 15.1 of the Purchase Agreement shall be
amended and restated in its entirety to read:
"15.1 [*]"
Upon satisfaction of the conditions to closing for the Sixth Closing
Investor shall make a payment of [*] to the Company and not receive any
equity.
5. Seventh Closing. No amounts shall be due upon the satisfaction of the
conditions to closing for the Seventh Closing, and all references to
such Closing in the Purchase Agreement are hereby deleted.
6. October Purchase. If the Investor has not terminated both of the
Collaboration Agreements between the parties and the date shall be
October 1, 1997, then Investor shall purchase from the Company
$2,500,000 worth of Common Stock from the Company in a private
placement transaction at the higher of (i) the price to the public in
the IPO, or (ii) the average closing price over the [*].
7. For the avoidance of doubt, the provisions of Section 20 of the
Purchase Agreement shall apply to the shares purchased under paragraphs
2 and 6.
<PAGE> 61
8. All capitalized terms used in this Amendment that are not otherwise
defined herein shall have the meaning defined in the Purchase
Agreement.
9. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and all of which together, shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned duly authorized parties have
executed this Amendment as of the date set forth above.
INTROGEN THERAPEUTICS, INC. RHONE-POULENC RORER
PHARMACEUTICALS INC.
By: /s/ DAVID G. NANCE By: /s/ TIMOTHY G. ROTHWELL
-------------------------------- --------------------------------
Title: President and CEO Title: President
----------------------------- -----------------------------
-2-
<PAGE> 1
Exhibit 10.11
PATENT AND TECHNOLOGY LICENSE AGREEMENT
THIS AGREEMENT ("AGREEMENT") is made by and between the BOARD OF REGENTS
("BOARD") of THE UNIVERSITY OF TEXAS SYSTEM ("SYSTEM"), an agency of the State
of Texas, whose address is 201 West 7th Street, Austin, Texas 78701, THE
UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER ("MDA"), a component institution
of the SYSTEM and INTRON THERAPEUTICS, INC., a Texas corporation having a
principal place of business located at 301 Congress, Suite 2025, Austin, Texas
78701 ("LICENSEE").
RECITALS
A. BOARD owns certain PATENT RIGHTS and TECHNOLOGY RIGHTS related to LICENSED
SUBJECT MATTER, which were developed at MDA, a component institution of
the SYSTEM.
B. BOARD desires to have the LICENSED SUBJECT MATTER developed and used for
the benefit of LICENSEE, the inventor, BOARD, and the public as outlined
in the Intellectual Property Policy promulgated by the BOARD.
C. The LICENSED SUBJECT MATTER was the subject of an OPTION AGREEMENT between
MDA and the Texas Biomedical Development Partners ("TBDP"), dated December
15, 1992, a copy of which is attached hereto as Exhibit 1 for approval by
BOARD, granting TBDP the option to negotiate a license from BOARD to the
LICENSED SUBJECT MATTER in consideration for an option fee and commitment
of research support.
D. TBDP exercised its option under the OPTION AGREEMENT in a timely manner by
virtue of the letter dated June 17, 1993, a copy of which is attached
hereto as Exhibit 2 for approval by BOARD, and further assigned TBDP's
right and obligations under the OPTION AGREEMENT (Exhibit 1) to LICENSEE,
thereby granting permission to BOARD to execute this LICENSE AGREEMENT
with LICENSEE.
E. The LICENSED SUBJECT MATTER was also the subject of SPONSORED RESEARCH
AGREEMENTS between MDA and the TBDP, entitled "Development of Therapeutic
Treatment and Prevention of Lung Cancer" (SR93-04) and "Clinical Protocol
for Modification of Oncogene and Tumor Suppressor Gene Expression in
Nori-Small Cell Lung Cancer (CS93-27), respectively, and a copy of each is
attached hereto as Exhibits 3 and 4 (the "RESEARCH AGREEMENTS").
F. The RESEARCH AGREEMENTS have been assigned by TBDP to LICENSEE by virtue
of a letter dated November 26, 1993, a copy of which is attached hereto as
Exhibit 5 for approval by BOARD.
-1-
<PAGE> 2
G. LICENSEE is a company which was formed to develop and commercially exploit
the inventions of LICENSED SUBJECT MATTER, and LICENSEE, therefore, wishes
to obtain a license from BOARD to practice LICENSED SUBJECT MATTER.
NOW, THEREFORE, in consideration of the mutual covenants and premises herein
contained, the parties hereto agree as follows:
I. EFFECTIVE DATE
1.1 This AGREEMENT shall be effective as of July 20, 1994 ("EFFECTIVE DATE"),
subject to approval by BOARD.
II. DEFINITIONS
As used in this AGREEMENT, the following terms shall have the meanings
indicated:
2.1 LICENSED FIELD shall mean all fields of use of the LICENSED SUBJECT
MATTER.
2.2 LICENSED SUBJECT MATTER shall mean inventions and discoveries covered by
PATENT RIGHTS or TECHNOLOGY RIGHTS within LICENSED FIELD.
2.3 PATENT RIGHTS shall mean any and all rights of BOARD in and to:
(a) the patents and patent applications described in Schedule A
hereto (the "Existing Patent Rights") and all patents anywhere in the
world issuing thereon;
(b) any patent or patent application of any kind anywhere in the
world that claims or discloses any invention that is claimed in any of the
Existing Patent Rights, or that takes priority from an application within
the Existing Patent Rights or derives from an application from which any
of the Existing Patent Rights derived;
(c) all divisions, continuations, continuations-in-part, patents of
addition, patents, substitutions, registrations, reissues, reexaminations
or extensions of any kind with respect to any of the applications and
patents described in (a) or (b) above. From time to time during the term
of this AGREEMENT, upon request by either party, LICENSEE and BOARD shall
promptly update Schedule A hereto to include all patent applications and
patents that are then within the PATENT RIGHTS.
2.4 TECHNOLOGY RIGHTS shall mean BOARD's rights in any technical information,
know-how, process, procedure, composition, biological materials, device,
method, formula, protocol, technique, software, design, drawing or data
relating to LICENSED FIELD and made or developed by Dr. Jack A. Roth or
others working in his lab or under his supervision or direction, whether
or not covered by PATENT RIGHTS, which is reasonably necessary for
practicing an invention at any time covered by PATENT RIGHTS.
-2-
<PAGE> 3
2.5 LICENSED PRODUCT shall mean any product, component or material the
manufacture, use or sale of which would infringe a VALID CLAIM.
2.6 LICENSED TERRITORY shall mean the entire world.
2.7 SALE or sold shall mean the transfer or disposition of a LICENSED PRODUCT
for value to a party other than LICENSEE or an AFFILIATE, which transfer
or disposition would, but for the rights and license granted hereunder,
infringe a VALID CLAIM in the country for which such LICENSED PRODUCT is
transferred or disposed.
2.8 NET SALES shall mean the gross revenues received by LICENSEE, its
AFFILIATES or SUBLICENSEES, from the SALE of LICENSED PRODUCTS less sales
and/or use taxes actually paid, import and/or export duties actually paid,
outbound transportation prepaid or allowed, and amounts allowed or
credited due to returns (not to exceed the original billing or invoice
amount).
2.9 AFFILIATE shall mean any business entity more than 50% owned by LICENSEE,
or any business entity that is more than 50% owned by a business entity
that owns more than 50% of LICENSEE.
2.10 VALID CLAIM shall mean either (a) a claim of an issued and unexpired
patent included within the PATENT RIGHTS, which has not been held
unenforceable, unpatentable or invalid by a court or other governmental
agency of competent jurisdiction, and which has not been admitted to be
invalid or unenforceable through reissue, disclaimer or otherwise, or (b)
a pending claim in a patent application within the PATENT RIGHTS, provided
that if such pending claim has not issued as a claim or an issued patent
within the PATENT RIGHTS within [*] after the filing date from which such
patent application takes priority, such pending claim shall not be a VALID
CLAIM for purposes of this AGREEMENT unless and until, subsequent to [*]
period, such pending claim is issued as a claim of an issued and unexpired
patent included within the PATENT RIGHTS as set forth in (a) above. In the
event that a claim of an issued and unexpired patent within the PATENT
RIGHTS is held by a court or other governmental agency of competent
jurisdiction to be unenforceable, unpatentable or invalid, and such
holding is reversed on appeal by a higher court or agency of competent
jurisdiction, such claim shall be reinstated thereafter as a VALID CLAIM
hereunder.
2.11 SUBLICENSEE shall mean any third party to whom LICENSEE has granted a
sublicense under the PATENT RIGHTS to make and sell LICENSED PRODUCTS,
with respect to LICENSED PRODUCTS made and sold by such SUBLICENSEE. As
used herein, "SUBLICENSEE" shall also mean a third party to whom LICENSEE
has granted the exclusive right to distribute LICENSED PRODUCTS supplied
by LICENSEE, provided that such third party is responsible for all
marketing and promotion of the subject LICENSED PRODUCTS within its
exclusive territory.
-3-
<PAGE> 4
III. WARRANTY: SUPERIOR-RIGHTS
3.1 Except for the rights, if any, of the Government of the United States as
set forth hereinbelow, BOARD represents and warrants its belief that it is
the owner of the entire right, title, and interest in and to LICENSED
SUBJECT MATTER, and that it has the sole right to grant licenses
thereunder, and that it has not granted licenses thereunder to any other
entity that would restrict rights granted hereunder except as stated
herein. In addition, BOARD represents and warrants that it owns and will
own all right, title and interest in and to the patent applications listed
in Exhibit A as of the Effective Date, and all patents that will issue
thereon; and that the patents listed on Exhibit A comprise all patents and
applications owned by BOARD or MDA that claim inventions of any of the
inventors listed therein which pertain to the p53 gene or K-ras or gene
therapy.
3.2 LICENSEE understands that the LICENSED SUBJECT MATTER may have been
developed under a funding agreement with the Government of the United
States of America and, if so, that the Government may have certain rights
relative thereto. This AGREEMENT is explicitly made subject to the
Government's rights under any such agreement and any applicable law or
regulation, including P.L. 96-517 as amended by P.L. 98-620. To the extent
that there is a conflict between any such agreement, applicable law or
regulation and this Agreement, the terms of such Government agreement,
applicable law or regulation shall prevail.
3.3 BOARD, by this AGREEMENT, makes no representation as to the patentability,
validity, and/or breadth of the inventions contained in the PATENT RIGHTS.
BOARD, by this AGREEMENT, makes no representation as to whether there are
any patents now held, or which will be held, by others or by BOARD in the
LICENSED FIELD, nor does BOARD make any representation that the inventions
contained in PATENT RIGHTS do not infringe any other patents now held or
that will be held by others or by BOARD.
IV. LICENSE
4.1 BOARD hereby grants to LICENSEE a royalty-bearing, exclusive license under
the LICENSED SUBJECT MATTER to manufacture, have manufactured, use and/or
sell LICENSED PRODUCTS, to practice any method, process or procedure and
to otherwise exploit the LICENSED SUBJECT MATTER, within LICENSED
TERRITORY for use within LICENSED FIELD. Subject to Paragraph 5.8 herein,
such license shall extend to BOARD's undivided interest in any LICENSED
SUBJECT MATTER developed during the term of this AGREEMENT and jointly
owned by BOARD and LICENSEE. This grant shall be subject to Paragraph 3.2,
hereinabove, the payment by LICENSEE to BOARD of all consideration as
provided in this AGREEMENT, including the timely payment of all amounts
due during the term of this Agreement under any sponsored research
agreement covering the Licensed Subject Matter between MDA and LICENSEE
(including but not limited to the RESEARCH AGREEMENTS, reimbursement of
MDA's patent expenses as set forth in Paragraph 5.7 below, and shall be
further subject to rights retained by BOARD and MDA to:
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<PAGE> 5
(a) Publish the general scientific findings from research related to
LICENSED SUBJECT MATTER; and
(b) Use any information contained in LICENSED SUBJECT MATTER for
research, teaching, patient care, and other educationally-related
purposes.
Notwithstanding the foregoing, the license granted in this Section 4.1
under TECHNOLOGY RIGHTS not covered by any PATENT RIGHTS shall be
non-exclusive for all applications that do not pertain in any way to the
p53 gene, the k-ras gene, or mutations thereof, the genetic or functional
inhibition or promotion thereof; the translation or transcription pathways
of such genes or mutations thereof, or any protein or molecule expressed
by such genes or mutations thereof.
4.2 LICENSEE shall have the right to extend the license granted herein to any
AFFILIATE provided that such AFFILIATE consents in writing, with copy to
BOARD, to be bound by this AGREEMENT to the same extent as LICENSEE.
4.3 The license granted under Paragraph 4.1 above shall include the rights to
grant and authorize sublicenses within the scope of the right and license
granted to LICENSEE. LICENSEE shall monitor the operations of its
SUBLICENSEES in connection with the obligations of LICENSEE pursuant to
this AGREEMENT, and shall use reasonable efforts to ensure that such
SUBLICENSEES comply fully with such obligations. LICENSEE shall promptly
inform BOARD of the name and address of each such SUBLICENSEE, and subject
to any obligations of confidentiality to the SUBLICENSEE, shall provide
MDA a copy of the sublicense agreement.
V. PAYMENTS AND REPORTS
5.1 In consideration of rights granted by BOARD to LICENSEE under this
AGREEMENT, LICENSEE agrees to pay MDA the following:
(a) [*] of NET SALES attributed to SALES of LICENSED PRODUCTS by
LICENSEE, AFFILIATES and SUBLICENSEES; and
(b) For any advance payment received by LICENSEE from a third party
pursuant to a sublicense, marketing, distribution, or franchise
agreement, other than amounts paid to LICENSEE in reimbursement of
development or other costs, as provided for in Article 4.3 hereof
and which is creditable against future royalties to be received by
LICENSEE:[*] of said advance payment.
(c) LICENSEE will not be obligated to pay MDA any portion of any
advanced payment received by LICENSEE from a third party [*].
(d) If LICENSEE desires to fund sponsored research, and particularly
where LICENSEE receives R&D money in lieu of or in addition to
royalty revenues pursuant to a sublicense, LICENSEE shall give good
faith consideration to funding such proposals at MDA.
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<PAGE> 6
5.2 In the event that more than one patent within the PATENT RIGHTS is
applicable to any LICENSED PRODUCT subject to royalties under this Article
V, then only one royalty shall be paid to MDA in respect of such quantity
of the LICENSED PRODUCTS and in any event no more than one royalty will be
payable hereunder with respect to any particular LICENSED PRODUCT unit. In
addition:
(a) No royalty shall be payable under Paragraph 5.1 above with respect
to the SALE of LICENSED PRODUCTS between or among LICENSEE,
AFFILIATES and SUBLICENSEES, provided that such LICENSED PRODUCTS
are to be resold to unrelated third parties, or with respect to any
fees or other payments paid between or among LICENSEE and
AFFILIATES; nor shall a royalty be payable under Paragraph 5.1 with
respect to SALES of LICENSED PRODUCTS for use in clinical trials or
as samples.
(b) In the event that a LICENSED PRODUCT is sold in combination as a
single product, or in a kit, with another product or component and
no royalty would be due hereunder on the sale of such other product
or component alone, then NET SALES from such combination sales for
purposes of calculating the amounts due under this Article V shall
be as reasonably allocated by LICENSEE between such LICENSED PRODUCT
and such other product or components, based upon their relative
importance and proprietary protection as commercially reasonable.
5.3 During the Term of this AGREEMENT and for [*] thereafter, LICENSEE shall
keep complete and accurate records if its SALES and NET SALES of LICENSED
PRODUCTS and other income subject to royalties hereunder and all revenues
received from all SUBLICENSEES to enable the royalties payable hereunder
to be determined. LICENSEE shall permit BOARD or its representatives, at
BOARD's expense, to periodically examine its books, ledgers, and records
during regular business hours for the purpose of and [*] are determined to
have been underpaid LICENSEE shall pay the cost of such examination, and
accrued interest at the highest allowable rate.
5.4 Within [*] after March 31, June 30, September 30, and December 31,
LICENSEE shall deliver to BOARD and MDA a true and accurate report, giving
such particulars of the business conducted, if any, by LICENSEE, including
all revenues received from all SUBLICENSEES, during the preceding three
(3) calendar months under this AGREEMENT as are pertinent to an account
for payments hereunder. Such report shall include at least (a) the
quantities of LICENSED SUBJECT MATTER that it has produced; (b) the total
SALES, (c) the calculation of royalties thereon; and (d) the total
royalties so computed and due BOARD. Simultaneously with the delivery of
each such report, LICENSEE shall pay to BOARD the amount, if any, due for
the period of such report. If no payments are due, it shall be so
reported.
5.5 Upon the request of BOARD or MDA but not more often than once per calendar
year, LICENSEE shall deliver to BOARD and MDA a written report as to
LICENSEE's efforts and accomplishments during the preceding year in
commercializing LICENSED SUBJECT MATTER
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<PAGE> 7
in various parts of the LICENSED TERRITORY and its commercialization plans
for the upcoming year.
5.6 All amounts payable hereunder by LICENSEE shall be payable in United
States funds. Checks shall be made payable to The University of Texas M.D.
Anderson Cancer Center. Any withholding or other tax that LICENSEE, an
AFFILIATE, or a SUBLICENSEE are required by law to withhold shall be
deducted from royalties owing to MDA hereunder and promptly paid to the
taxing authority. If royalties paid to LICENSEE or an AFFILIATE by a
SUBLICENSEE on NET SALES of LICENSED PRODUCTS are reduced for withholding
or similar taxes, LICENSEE may deduct a portion of such tax from the
royalties payable to UNIVERSITY with respect to such Net Sales; the
portion to be so deducted shall equal the amount of the tax multiplied by
the fraction B/A, where "A" equals the gross royalty payable to LICENSEE
on such Net Sales prior to the withholding or similar tax, and "B" equals
the gross royalty payable to UNIVERSITY on such Net Sales prior to the
reduction under this Section 5.6. In regard to any tax so deducted,
LICENSEE shall furnish UNIVERSITY with proper evidence of the taxes paid.
In the event that LICENSEE realizes a reduction in its U.S. tax liability
by reason of a foreign tax credit with respect to withholding taxes so
deducted from royalties payable to MDA hereunder, LICENSEE shall pay to
MDA the amount of such reduction in its U.S. tax liability.
5.7 LICENSEE shall reimburse MDA [*] in filing, prosecuting, enforcing and
maintaining PATENT RIGHTS exclusively licensed hereunder and which were
not already reimbursed pursuant to the Option Agreement in Exhibit I
hereto, and shall pay all such future expenses so long as and in such
countries as [*]. In the event that LICENSEE notifies MDA that it does not
wish to reimburse further expenses of prosecuting or maintaining any
application or patent within the PATENT RIGHTS in any country, LICENSEE
shall not be responsible for any such expenses with respect to such
application or patent after MDA's receipt of such notice, and LICENSEE's
license under Paragraph 4.1 above shall become nonexclusive with respect
to such application (and any patent issuing thereon) or patent in such
country. MDA will invoice LICENSEE on a quarterly basis beginning October
1, 1994,[*].
5.8 No payments due or royalty rates under this AGREEMENT shall be reduced as
the result of co-ownership of LICENSED SUBJECT MATTER by BOARD and
LICENSEE.
5.9 It is understood that royalties shall be due under 5.1(a) above only on
SALES of LICENSED PRODUCTS, the SALE of which [*]. However, if the SALE of
a LICENSED PRODUCT [*], LICENSEE shall pay royalties hereunder on all
sales of such LICENSED PRODUCT in any country, regardless of whether the
sale of such product in such country would infringe a VALID CLAIM. [*]
5.10 Effective upon written notice to MDA, LICENSEE may convert the license
granted to LICENSEE under Paragraph 4.1 with respect to any patent or
application within the PATENT RIGHTS to a non-exclusive license. Following
such notice, the amounts to be paid to MDA under Paragraph 5.1 above with
respect to any VALID CLAIMS within such patent or application, after any
other adjustment under this AGREEMENT, shall be [*].
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<PAGE> 8
VI. PATENTS AND INVENTIONS
6.1 If [*] it is agreed by BOARD and LICENSEE that a new patent application
should be filed for LICENSED SUBJECT MATTER, [*] will prepare and file
appropriate patent applications, and [*] will pay the cost of searching,
preparing, filing, prosecuting and maintaining same, subject to Paragraph
5.7 above. [*] shall provide [*] with a copy of the new patent application
for which [*] has paid the cost of filing, as well as copies of any
documents received or filed during prosection thereof. [*] shall consult
with [*] in a timely manner concerning (i) scope and content of all patent
applications within the PATENT RIGHTS prior to filing such patent
applications, and (ii) content of and proposed responses to official
actions of the United States Patent and Trademark Office and foreign
patent offices during prosecution of any patent applications within the
PATENT RIGHTS. For purposes of this Paragraph 6.1, "timely" shall mean
sufficiently in advance of any decision by [*] or any deadline imposed
upon written response by [*] so as to allow [*] to meaningfully review
such decision or written response and also provide comments to [*] in
advance of such decision or deadline to allow comments of [*] respect to
the PATENT RIGHTS to be considered and incorporated into [*] decision or
written response.
6.2 With respect to the filing of any patent application within the PATENT
RIGHTS, or the prosecution of any patent application within the PATENT
RIGHTS, or the maintenance of any patent within the PATENT RIGHTS, if [*]
elects not to file for or continue prosecution of any such patent
application or maintain any such patent,[*] shall promptly notify [*] in
writing sufficiently in advance of any deadline to enable [*] to file for
or continue prosecution of such patent application and/or maintain such
patent, and in such event [*] (or its designee) may at its discretion
pursue such filing, prosecution and/or maintenance of its own expense in
[*] name.
VII. INFRINGEMENT AND DEFENSE
7.1 LICENSEE agrees, itself or through its designee, to use reasonable efforts
generally to enforce the PATENT RIGHTS with respect to substantial
continuing infringements of the PATENT RIGHTS within the LICENSED FIELD,
by initiating legal action, sublicensing the infringing activities or
otherwise. It is understood, however, that such obligation shall not be
deemed to require LICENSEE to take such actions with respect to each such
infringement, and LICENSEE may take into account reasonable strategic and
other considerations in determining which infringers to take action
against, as well as when and whether to do so. If LICENSEE or its designee
commences an action to enforce the PATENT RIGHTS, LICENSEE shall have the
right during the pendency of the action [*]. Any amounts recovered from
third parties by LICENSEE or a SUBLICENSEE with respect to the PATENT
RIGHTS in such action or proceeding shall be applied [*]
7.2 In the event that [*] does not fulfill its obligations under Paragraph 7.1
above,[*] shall have the right to enforce the PATENT RIGHTS relating to
infringement by such a substantial infringer on behalf of [*]; and in such
event [*] shall have the right [*]. Any amounts recovered or received
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<PAGE> 9
from third parties by [*] with respect to the PATENT RIGHTS in such
action, proceeding or license shall be retained by [*].
7.3 In the event that LICENSEE, an AFFILIATE or SUBLICENSEE receives a claim
from a third party alleging an infringement of intellectual property
rights of a third party based upon the manufacture, sale or use of a
LICENSED PRODUCT, LICENSEE shall have the right [*].
7.4 In any suit or dispute involving the enforcement or defense of PATENT
RIGHTS, the parties shall cooperate fully, including without limitation,
subject to the statutory authority of the Attorney General of the State of
Texas as applicable to BOARD and MDA, by joining as a party plaintiff and
executing such documents as the party prosecuting such suit, action or
other proceeding may reasonably request, all at such requesting party's
expense. Upon the request and at the expense of the party bringing suit,
the other party shall make available to the party bringing suit at
reasonable times and under appropriate conditions all relevant personnel,
records, papers, information, samples, specimens, and the like which are
in its possession.
VIII. PATENT MARKING
8.1 LICENSEE agrees that all packaging containing individual LICENSED
PRODUCT(S), and documentation therefor, sold by LICENSEE, AFFILIATES and
SUBLICENSEES of LICENSEE will be marked permanently and legibly with the
number of the applicable patent(s) licensed hereunder in accordance with
each country's patent laws, including Title 35, United States Code.
IX. INDEMNIFICATION
9.1 LICENSEE shall hold harmless and indemnify BOARD, SYSTEM, MDA, its
Regents, officers, employees, students, and agents from and against any
claims, demand, or causes of action whatsoever, including without
limitation those arising on account of any injury or death of persons or
damage to property, caused by, or arising out of, or resulting from, the
exercise or practice of the license granted hereunder by LICENSEE or its
officers, employees, agents or representatives.
9.2 BOARD shall, to the extent authorized under the Constitution and the laws
of the State of Texas, hold LICENSEE harmless from liability resulting
from the negligent acts or omissions of BOARD or MDA, their agents or
employees pertaining to the activities to be carried out pursuant to the
obligations of this AGREEMENT; provided, however, that BOARD shall not
hold LICENSEE harmless from claims arising out of the negligence of
LICENSEE, its officers, agents or any person or entity not subject to
BOARD's or MDA's supervision or control.
X. USE OF BOARD AND COMPONENTS NAME
10.1 (A) In accordance with BOARD policy, LICENSEE shall not use
the name of BOARD, SYSTEM or BOARD, except as described in
10.1 (B), below.
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<PAGE> 10
(B)(i) LICENSEE may use the name of MDA, BOARD, or SYSTEM only when
indicating, as a factual matter, that MDA, BOARD, or SYSTEM is
a licensor of LICENSEE under this AGREEMENT and only in
connection with either or both of the following:
(a) communications associated with LICENSEE's financing
activities; and
(b) communications (other than promotions and
advertisements) directed to describing or responding to
inquiries concerning the business, technology, products,
services and associated activities of LICENSEE.
(c) in all such communications, LICENSEE shall limit such
use, in substance, to stating that a LICENSED PRODUCT or
other LICENSED SUBJECT MATTER was invented by the
inventor thereof as an employee of MDA and/or that MDA
and/or BOARD is the licensor thereof. In no event shall
LICENSEE use the name of MDA, SYSTEM or BOARD in product
advertising or on product packaging or labels affixed to
any products. Communications in accordance with this
Section 10.1(B) shall not be deemed a breach of Section
6 of either of the RESEARCH AGREEMENTS.
(ii) LICENSEE may otherwise use the name of MDA, BOARD, or SYSTEM
when and as required by applicable law, rules and regulations,
or upon written consent of the party the use of whose name is
requested.
XI. CONFIDENTIAL INFORMATION
11.1 BOARD and LICENSEE each agree that all information contained in documents
marked "confidential" which are forwarded to one by the other shall be
received in strict confidence, used only for the purposes of this
AGREEMENT, and not disclosed by the recipient party (except as required by
law or court order), its agent or employees without the prior written
consent of the other party, unless such information (a) was in the public
domain at the time of disclosure, (b) later became part of the public
domain through no act or omission of the recipient party, its employees,
agents, successors or assigns, (c) was lawfully disclosed to the recipient
party by a third party having the right to disclose it, (d) was already
known by the recipient party at the time of disclosure, (e) was
independently developed or (f) is required to be submitted to a government
agency or as otherwise required by law. Notwithstanding the foregoing or
any provision of the RESEARCH AGREEMENTS, LICENSEE may disclose any
LICENSED SUBJECT MATTER comprising confidential information of BOARD to
third parties pursuant to a reasonable confidentiality agreement, and
otherwise as is reasonably necessary to exploit the LICENSED SUBJECT
MATTER as contemplated in this AGREEMENT.
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<PAGE> 11
11.2 Each party's obligation of confidence hereunder shall be fulfilled by
using at least the same degree of care with the other party's confidential
information as it uses to protect its own confidential information. This
obligation shall exist while this AGREEMENT is in force and for a period
of three (3) years thereafter.
XII. ASSIGNMENT
12.1 This AGREEMENT may not be assigned by LICENSEE without the prior written
consent of BOARD; provided that, at any time after eighteen (18) months
after the Effective Date, LICENSEE may assign this AGREEMENT without such
consent to a party that acquires substantially all of the business or
assets of LICENSEE to which this AGREEMENT pertains, so long as LICENSEE
notifies BOARD and the assignee agrees in writing to be bound by the terms
of this AGREEMENT.
XIII. DUE DILIGENCE
13.1 BOARD shall have a right [*] from the EFFECTIVE DATE to terminate the
exclusivity of the license granted by BOARD to LICENSEE pursuant to
Paragraph 4.1 in any national political jurisdiction within the LICENSED
TERRITORY at any time upon written notice to LICENSEE if LICENSEE fails to
provide written evidence,[*]; provided that termination of such
exclusivity shall not occur unless and until a court of competent
jurisdiction has determined in a suit filed by LICENSEE within [*].
XIV. TERM, TERMINATION, AND DEFAULT
14.1 The term of this AGREEMENT shall extend from the Effective Date set forth
hereinabove to the full end of the term or terms for which PATENT RIGHTS
have not expired and if only TECHNOLOGY RIGHTS are licensed and no PATENT
RIGHTS are applicable, for a term of fifteen (15) years. Notwithstanding
the above, upon the expiration, but not an earlier termination of this
AGREEMENT, LICENSEE shall have a non-exclusive, fully paid-up right and
license under the LICENSED SUBJECT MATTER to use and otherwise exploit the
TECHNOLOGY RIGHTS.
14.2 This AGREEMENT will earlier terminate:
(a) upon the expiration of thirty (30) days written notice from BOARD if
LICENSEE shall become bankrupt and/or if the business of LICENSEE
shall be placed in hand of a receiver, assignee, or trustee, whether
by voluntary act of LICENSEE or otherwise;
(b) (i) [*] written notice from BOARD if LICENSEE shall breach or
default on the payment obligations of Article V, or use of name
obligations of Article X; or (ii) upon [*] written notice if
LICENSEE shall breach or default any other obligation under this
AGREEMENT; provided, however, LICENSEE may avoid such termination if
before the end of the applicable period LICENSEE notifies BOARD that
such breach has been cured
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<PAGE> 12
and states the manner of such cure. However, if LICENSEE disputes
such breach in writing within such [*] period, BOARD shall not have
the right to terminate this AGREEMENT unless and until a court of
competent jurisdiction has determined, in a suit filed by LICENSEE
within [*] period, that this AGREEMENT was materially breached, and
LICENSEE fails to cure such breach within [*] after such
determination;[*].
(c) In its entirety or as to any particular patent application or patent
within the PATENT RIGHTS, upon LICENSEE's sixty (60) days prior
written notice to BOARD. From and after the effective date of a
termination under this Paragraph 15.2(c) with respect to a
particular patent application or patent, such patent application and
patent in the particular country shall cease to be within the PATENT
RIGHTS for all purposes of this AGREEMENT. Upon a termination of
this AGREEMENT in its entirety under this Paragraph 15.2(c), all
rights and obligations of LICENSEE and BOARD shall terminate, except
as provided below.
14.3 Upon termination of this AGREEMENT for any cause, nothing herein shall be
construed to release either party of any obligation matured prior to the
effective date of such termination. LICENSEE may, after the effective date
of such termination, sell all LICENSED PRODUCT and parts therefore that it
may have on hand at the date of termination, provided that it pays earned
royalty thereon as provided in this AGREEMENT.
14.4 Articles IX, X, and XI, shall survive the expiration and any termination
of this AGREEMENT. In addition, upon termination of this AGREEMENT, any
and all existing sublicenses shall survive; provided that such
SUBLICENSEES promptly agree in writing to be bound by the applicable terms
of this AGREEMENT. Except as otherwise provided in this Article XV, all
rights and obligations of the parties under this AGREEMENT shall terminate
upon the expiration or termination of this AGREEMENT.
XV. GENERAL
15.1 This AGREEMENT constitutes the entire and only AGREEMENT between the
parties for LICENSED SUBJECT MATTER and all other prior negotiations,
representations, agreements (including that certain PATENT AND TECHNOLOGY
LICENSE AGREEMENT between the parties hereto executed on April 21, 1994
but not approved by BOARD) and understandings are superseded hereby. No
agreements altering or supplementing the terms hereof may be made except
by means of a written document signed by the duly authorized
representatives of the parties.
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15.2 Any notice required by this AGREEMENT shall be given by prepaid, first
class, certified mail, return receipt requested, and addressed in the case
of BOARD to:
BOARD OF REGENTS
The University of Texas System
201 West Seventh Street
Austin, Texas 78701
ATTENTION: Office of General Counsel
with a copy to: The University of Texas
M.D. Anderson Cancer Center
Office of Technology Development
1020 Holcombe Boulevard, Suite 1405
Houston, Texas 77030
ATTENTION: William J. Doty
or in the case of LICENSEE to: Intron Therapeutics, Inc.
301 Congress, Suite 2025
Austin, Texas 78701
ATTENTION: Mr. David Nance
with a copy to: Kenneth A. Clark, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
or such other address as may be given from time to time under the terms of
this notice provision.
15.3 LICENSEE shall comply with all applicable federal, state and local laws
and regulations in connection with its activities pursuant to this
AGREEMENT.
15.4 This AGREEMENT shall be construed and enforced in accordance with the laws
of the United States of America and of the State of Texas.
15.5 Failure of BOARD to enforce a right under this AGREEMENT shall not act as
a waiver of that right or the ability to later assert that right relative
to the particular situation involved.
15.6 Headings included herein are for convenience only and shall not be used to
construe this AGREEMENT.
15.7 If any provision of this AGREEMENT shall be found by a court to be void,
invalid or unenforceable, the same shall be reformed to comply with
applicable law or stricken if not so conformable, so as not to affect the
validity or enforceability of this AGREEMENT.
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<PAGE> 14
IN WITNESS WHEREOF, parties hereto have caused their duly authorized
representatives to execute this AGREEMENT.
THE UNIVERSITY OF TEXAS BOARD OF REGENTS OF THE
M.D. ANDERSON CANCER CENTER UNIVERSITY OF TEXAS SYSTEM
By: /s/ DAVID J. BACHRACH By: /s/ THOMAS G. RICKS
--------------------------------- -----------------------------------
David J. Bachrach Thomas G. Ricks
Executive Vice President Vice Chancellor for
for Administration and Finance Asset Management
APPROVED AS TO CONTENT: APPROVED AS TO FORM:
By: /s/ WILLIAM J. DOTY By: /s/ DUDLEY R. DOBIE, JR.
--------------------------------- -----------------------------------
William J. Doty Dudley R. Dobie, Jr.
Director, Technology Development Manager, Intellectual Property
INTRON THERAPEUTICS, INC.
By: /s/ DAVID G. NANCE
---------------------------------
David G. Nance
President
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<PAGE> 15
ATTACHMENT A
Patent and technology rights for U.S. and Foreign Patent Application entitled:
[*]
<PAGE> 16
EXHIBIT 1
OPTION AGREEMENT
December 15, 1992
Mr. David Nance
Managing Partner
Texas Biomedical Development Partners
301 Congress Avenue, 14th Floor
Austin, Texas 78701
RE: [*]
Dear Mr. Nance:
In accordance with our recent conversation, I am pleased to inform you that The
University of Texas M.D. Anderson Cancer Center (MDA) hereby extends an option
to Texas Biomedical Development Partners (TBDP) to negotiate a license to the
above captioned technology.
This option comprises a promise by MDA not to offer the above-cited technology
to others during a prescribed period of time and a promise to negotiate in good
faith for the grant of a license. It does not in any way constitute a license in
itself. This option is personal to and not assignable by TBDP.
If accepted by your signature below, this option will become active as of
December 10, 1992 and will expire on the latter of June 10, 1994 or within 90
days after completion of the Sponsored Research contemplated herein. If the
notice by TBDP to exercise their option to negotiate a license has not been
received by MDA by June 30, 1994, or 90 days after the completion of the
referenced sponsored research, then MDA will thereafter be free to seek other
prospective licenses for this technology with no further consideration due TBDP.
Should MDA receive written notification from TBDP exercising said option on or
before June 30, 1994, or 90 days subsequent to the completion of the referenced
sponsored research, the parties agree to negotiate a license to the captioned
matter in good faith, consistent with the attached form of agreement (Attachment
A hereto) and consistent with the following terms:
- TBDP will reimburse MDA's patent and other out-of-pocket costs.
- TBDP will pay MDA a running royalty of [*] of licensed products, or [*]
received by TBDP as consideration from any sublicensee, whichever
amount is less.
- TBDP will pay MDA that portion equal to MDA's portion of the running
royalty of any advance royalty or fee received by TBDP from a
sublicensee which is creditable against future running royalties by
the sublicensee.
- TBDP will not be obligated to pay MDA any portion of any advance
payment received by TBDP from a sublicensee which is not creditable
against future running royalties by the sublicensee.
- TBDP will convey individually to Dr. Jack A. Roth ten percent (10%) of
the capital stock of the new company established by TBDP to complete the
development and commercialization of the captioned matter. Dr. Roth's
share of capital stock in the new company shall not be diluted up to
Initial Public Offering (IPO). However, in the event that the new
company, for example, merges with or is acquired by another entity, or
transfers or sublicenses materially all of its rights under the
contemplated license agreement prior to IPO, then TBDP will convey to
Dr. Roth twenty-five percent (25%) of the capital stock of the new
company previously established to develop the captioned matter.
Additionally, if TBDP wishes, at some future date, to syndicate the
development and commercialization of the captioned matter and must give
up equity in the new company, then Dr. Roth's pre-IPO equity position
shall be diluted on a prorate basis with all other capital stockholders.
However, Dr. Roth's share of the capital stock in the new company shall
not be diluted below ten percent (10%) up to IPO.
- TBDP will commit to the development and commercialization of the
captioned matter and will grant MDA a first right of refusal to
conduct the research required for said development and
commercialization.
Should TBDP exercise its option in the time and manner provided herein and
should TBDP and MDA fail to reach agreement on license terms by July 31, 1994,
then MDA will thereafter be free to seek other
<PAGE> 17
Mr. David Nance EXHIBIT 1
December 15, 1992
Page 2
prospective licensees with no further consideration due TBDP, except MDA agrees
to use reasonable efforts to secure reimbursement of TBDP's direct costs
hereunder from said licensee.
It is agreed between the parties that the consideration for this option is [*]
option fee, plus a commitment of up to [*] for Phase I Clinical Trials and [*]
for basic research (subject to internal approval by MDA, approval by TBDP, and a
definitive Sponsored Research Agreement mutually agreed to and executed by the
parties) on the captioned matter. The [*] option fee, payable upon execution of
this Option Agreement by TBDP, will be applied by MDA as a credit against any
future payments for reimbursement of patent expenses due under a license
agreement subsequently entered into pursuant hereto. The option fee is only
refundable to TBDP in the event that MDA elects not to perform the referenced
research and thereby terminates this Option Agreement. MDA agrees to notify TBDP
of MDA's intention, if any, to terminate this Option Agreement within a
reasonable period of time.
If the provisions of this Option Agreement are satisfactory to you, then please
indicate your acceptance of these terms by signing and returning the enclosed
copy of this letter.
Very truly yours,
/s/ WILLIAM J. DOTY
--------------------------------------
William J. Doty
Director, Technology Development
WJD:ipm
cc: Jack A. Roth, M.D.
Tapas Mukhopadhyay, Ph.D.
Michael A. Tainsky, Ph.D.
AGREED TO BY TEXAS BIOMEDICAL DEVELOPMENT PARTNERS
By: /s/ DAVID NANCE
------------------------------------
David Nance
Managing Partner
Date: 12-17-92
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<PAGE> 18
EXHIBIT 2
June 17, 1993
Mr. William J. Doty
Director
Technology Development
The University of Texas
M.D. Anderson Cancer Center
1515 Holcombe Boulevard
Houston, TX 77030
FAX (713) 794-1356
Re: [ * ] and Option Agreement for "Methods and Compositions for
Retroviral Vector Mediated Transduction", Jack A. Roth,
M.D., et al., dated December 15, 1992.
Dear Bill:
This is to inform you that Texas Biomedical Development Partners (TBDP)
wishes to exercise the above referenced options and to immediately begin
preparation of a License Agreements as contemplated in the Option Agreements.
Further, TBDP wishes to assign its rights and responsibilities under the
respective Option Agreements and under the prospective License Agreements to new
corporations established to commercialize the technologies optioned and/or
supported by Sponsored Research Agreements with TBDP.
Respecting the technologies and research associated with the laboratory of
[*]
Respecting the technologies and research associated with the laboratory of
Dr. Roth, the new company is Intron Therapeutics Inc., a Delaware Corporation .
If you have any questions please do not hesitate to call.
I look forward to working with you to document and expedite the License
Agreements.
Yours very truly,
/s/ DAVID NANCE
--------------------------------------
David Nance
Managing Partner
<PAGE> 19
EXHIBIT 3
[SR 93-04 SPONSORED
RESEARCH AGREEMENT]
<PAGE> 20
EXHIBIT 4
[CS 93-27 SPONSORED RESEARCH
AGREEMENT FOR CLINICAL STUDY]
<PAGE> 21
EXHIBIT 5
November 26, 1993
Mr. Michael J. Best
Chief Financial officer
The University of Texas
M.D. Anderson Cancer Center
1515 Holcombe Boulevard
Houston, TX 77030
RE: Sponsored Research Agreement (SR93-04), "Development of Therapeutic
Treatment and Prevention of Lung Cancer", and Sponsored Research Agreement
(CS93-27), "Clinical Protocol for Modification of Oncogene and Tumor
Suppressor Gene Expression in Non-Small Cell Lung Cancer (NSCLC)".
Dear Mr. Best:
Pursuant to Article 11 of the above referenced sponsored research agreements,
Texas Biomedical Development Partners herewith provides notification that it has
assigned substantially all of its business respecting the subject sponsored
research agreements to Intron Therapeutics, Inc.
Please contact me if you have any questions.
Sincerely,
/s/ DAVID NANCE
- -------------------
David Nance
Managing Partner
cc: Jack A. Roth, M.D.
William J. Doty
Donna S. Gilberg, CPA
<PAGE> 22
AMENDMENT NO. 1
TO THE
PATENT AND TECHNOLOGY LICENSE AGREEMENT
This is AMENDMENT NO. 1 effective this 1st day of September, 1996,
("EFFECTIVE AMENDMENT NO. 1 DATE") to the patent and Technology License
Agreement dated July 20, 1994 (hereinafter referred to as the "AGREEMENT"), by
and between THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER (hereinafter
referred to as "MDA"), located at Houston, Texas, and which is a component
institution of THE UNIVERSITY OF TEXAS SYSTEM (hereinafter referred to as
"SYSTEM") which is governed by a BOARD OF REGENTS (hereinafter referred to as
"BOARD") and INTROGEN THERAPEUTICS, INC., located at 301 Congress Avenue, Suite
1850, Austin, Texas 78701 (hereinafter referred to as "LICENSEE").
RECITALS
A. BOARD is the owner of the PATENT AND TECHNOLOGY RIGHTS of the
invention(s) listed in ATTACHMENT A hereto ("INVENTIONS(s)").
B. LICENSEE is a company interested in the development and
commercialization of new technologies directed to the treatment of
cancer, and other threatening diseases, to which end LICENSEE, MDA and
BOARD entered into the AGREEMENT noted hereinabove.
C. LICENSEE wishes to add the INVENTION(s) to its rights and obligations
under the AGREEMENT.
D. BOARD wishes to grant LICENSEE rights to the INVENTION(s) under the
AGREEMENT to promote its practical development for the benefit of the
MDA's patients and for the benefit of the people of the state of Texas.
E. The definitions set forth in the AGREEMENT shall apply in this
AMENDMENT NO. 1, except to the extent that a definition herein is
specific to this AMENDMENT NO. 1.
NOW, THEREFORE, in consideration for the mutual covenants contained herein, the
sufficiency of which is hereby acknowledged, the parties hereby agree to the
following:
-1-
<PAGE> 23
AMENDED TERMS
1. Attachment A to the AGREEMENT is hereby amended by adding to the
LICENSED SUBJECT MATTER thereof the INVENTION(s) listed in Schedule A
of this Amendment.
2. In addition to the reimbursements for patent expenses provided for
under the AGREEMENT and all other amendments thereto, LICENSEE shall
reimburse MDA [*] of the EFFECTIVE DATE of this AMENDMENT NO. 1 for [*]
related to the INVENTION(s) and shall further reimburse MDA for [*] for
the INVENTION(s) pursuant to Article 4.1(a) of the AGREEMENT [*],
pursuant to invoicing by MDA.
OTHERWISE, the terms and provisions of the original AGREEMENT thereto
shall remain in full force and effect, provided, however, that in the event of a
conflict in the terms and conditions between this AMENDMENT NO. 1 and the
AGREEMENT, the terms and conditions of the AGREEMENT shall prevail.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THEIR DULY
AUTHORIZED REPRESENTATIVES TO EXECUTE THIS AMENDMENT NO. 1.
THE UNIVERSITY OF TEXAS BOARD OF REGENTS OF THE
M.D. ANDERSON CANCER CENTER UNIVERSITY OF TEXAS SYSTEM
By: /s/ DAVID J. BACHRACH By: /s/ CHARLES B. MULLINS
------------------------------------ ----------------------------------
David J. Bachrach Charles B. Mullins, M.D.
Executive Vice President Chancellor
for Administration and Finance
APPROVED AS TO CONTENT APPROVED AS TO FORM
By: /s/ WILLIAM J. DOTY By: /s/ DUDLEY R. DOBIE, JR.
------------------------------------ ----------------------------------
William J. Doty Dudley R. Dobie, Jr.
Director, Technology Development Manager, Intellectual Property
INTROGEN THERAPEUTICS, INC.
By: /s/ DAVID G. NANCE
-----------------------------------
David G. Nance
President
-2-
<PAGE> 24
SCHEDULE A
Patent and Technology rights for U.S. and Foreign Patent Application entitled:
[*]
-3-
<PAGE> 1
Exhibit 10.14
SR 93-04
SPONSORED RESEARCH AGREEMENT
Agreement, made this 11th day of February, 1993, by and by and between
THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER (hereinafter referred to as
"CANCER CENTER"), a component institution of The University of Texas System
(hereinafter referred to as "SYSTEM"), located in Houston, Texas, and Texas
Biomedical Development Partners (hereinafter referred to as "SPONSOR"), located
in Austin, Texas.
WITNESSETH:
WHEREAS, CANCER CENTER has research facilities and situations which
would allow investigation and study of the "Development of Therapeutic Treatment
and Prevention of Lung Cancer" an described in Exhibit I hereinafter referred to
as ("Research"), a copy of which in attached hereto and incorporated herein by
reference; and
WHEREAS, both SPONSOR and CANCER CENTER consider it necessary and
desirable to perform the Research;
NOW, THEREFORE , the parties agree as follows:
1. Evaluation. SPONSOR agrees to engage the services of CANCER CENTER
as an independent contractor to perform the Research. The Research will be under
the supervision of Jack A. Roth, M.D. (Principal Investigator) at CANCER CENTER,
with the assistance of appropriate associates and colleagues at CANCER CENTER as
may be required.
2. Research. CANCER CENTER agrees as an independent contractor to
conduct the Research. Such Research was originally approved by CANCER CENTER in
accordance with CANCER CENTER policy and may be subsequently amended only in
accordance with CANCER CENTER policy and the written agreement of CANCER CENTER
and SPONSOR as provided for in Article 15 herein below.
3. Invention and Patents.
a. For all purposes herein, "Invention" shall mean any
discovery, concept or idea whether or not patentable or copyrightable, which (i)
arises out of work performed pursuant to the obligations of this Agreement; (ii)
is conceived and reduced to practice during the term of the Agreement as defined
in Article 13 herein below; and (iii) includes but is not limited to processes,
methods, software, formula, techniques, compositions of matter, devices, and
improvements thereof and know-how relating thereto. Inventions made solely by
the Principal investigator and/or other CANCER CENTER personnel
as identified in Article I hereinabove or agents of CANCER CENTER shall be the
sole property of CANCER CENTER.
<PAGE> 2
b. In the event that an invention is made, CANCER CENTER
agrees to include such invention in the option Agreement of December 17, 1992
(attached hereto as Exhibit II) previously entered into by CANCER CENTER and
SPONSOR and give notice of such Invention to SPONSOR within thirty (30) days of
the identification of such Invention.
4. Confidentiality. In the course of work performed pursuant to the
Research under this Agreement, should either party provide confidential
information to the other party, the recipient party shall, until three (3) years
after the termination of this Agreement, maintain the confidentiality of that
information as it maintains the confidentiality of its own confidential
information, and shall not disclose such confidential information to any other
party, nor shall the recipient party disclose the disclosing party's
confidential information to the recipient's employees other than those employees
having a "need-to-know". Confidential information shall be clearly marked as
such. If disclosed orally, the party making the disclosure shall be responsible
for clearly informing the recipient party of the confidentiality of the
information disclosed. Notwithstanding the other provisions of this paragraph,
nothing disclosed hereunder shall be construed as confidential information
which:
a. is or becomes available to the public (except by a breach
of this Agreement by a party hereto);
b. is rightfully received from another party not under
obligation of confidentiality to the disclosing party;
c. is not known by the recipient party, or is independently
developed by the recipient party by persons without access to the confidential
information;
d. is approved for release by the party designating the
information an confidential;
e. is not identified as confidential at the time of
disclosure;
f. is not in writing or physical form at time of disclosure or
reduced to a written or physical form and identified as confidential within
thirty (30) days of disclosure; or
g. is required to be disclosed under the laws of the United
States of America or the State of Texas or other governmental bodies, provided
that the parties shall first exhaust all reasonable measures available to
protect the confidentiality of such information upon disclosure.
5. Publication Rights. Notwithstanding the provisions of Article 4 of
this Agreement, CANCER CENTER may publish scientific papers relating to the
collaborative research performed under this Agreement. In the event that CANCER
CENTER wishes to publish, CANCER CENTER shall notify SPONSOR of its desire to
publish [*] in advance of publication and shall furnish to SPONSOR a written
description of the subject matter of the publication in order to permit SPONSOR
to review and comment thereon.
-2-
<PAGE> 3
6. Publicity. CANCER CENTER acknowledges SPONSOR's intention to
distribute periodically informational releases and announcements to the news
media regarding the progress of research hereunder. SPONSOR shall not release
such materials containing the name of CANCER CENTER or any of its employees
without prior written approval by an authorized representative of CANCER CENTER,
and said approval shall not be unreasonably withheld. Should CANCER CENTER
reject the news release, CANCER CENTER and SPONSOR agree to discuss the reasons
for CANCER CENTER's rejection, and every effort shall be made to develop an
appropriate informational news release within the bounds of accepted academic
practices. SPONSOR reserves the same right in the event that CANCER CENTER
desires to distribute a news release concerning the research program. Nothing
herein shall be construed as prohibiting CANCER CENTER or SPONSOR from reporting
on this study to a governmental agency.
7. Responsibility. The parties each agree to assume individual
responsibility for the actions and omissions of their respective employees,
agents and assigns in conjunction with this evaluation.
8. Independent Contractor. SPONSOR will not have the right to direct or
control the activities of CANCER CENTER in performing the services provided
herein, and CANCER CENTER shall perform services hereunder only as an
independent contractor, and nothing herein contained shall be construed to be
inconsistent with this relationship or status. Under no circumstances shall
CANCER CENTER be considered to be an employee or agent of SPONSOR. This
Agreement shall not constitute, create or in any way be interpreted as a joint
venture, partnership or formal business organization of any kind.
9. Title to Equipment. CANCER CENTER shall retain title to all
equipment purchased and/or fabricated by it with funds provided by SPONSOR under
this Agreement.
10. Survivorship. The provisions of Article 3, 4, 5, 6, and 12 shall
survive any expiration or termination of this Agreement.
11. Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party; provided, however, that
SPONSOR may assign this Agreement to any purchaser or transferee of all or
substantially all of SPONSOR's business upon prior written notice to CANCER
CENTER.
12. Indemnification. CANCER CENTER shall, to the extent authorized
under the Constitution and the laws of the State of Texas, hold SPONSOR harmless
from liability resulting from the negligent acts or omissions of CANCER CENTER,
its agents or employees pertaining to the activities to be carried out pursuant
to the obligations of this Agreement; provided, however, that CANCER CENTER
shall not hold SPONSOR harmless from claims arising out of the negligence of
SPONSOR, its officers, agents or any person or entity not subject to CANCER
CENTER supervision or control.
SPONSOR shall indemnify and hold harmless SYSTEM, CANCER CENTER, their
regents, officers, agents and employees from any liability or loss resulting
from judgments or claims against them arising out of the activities to be
carried out pursuant to the obligations of this Agreement or the use by
-3-
<PAGE> 4
SPONSOR of the results of the Research, provided, however, that the following is
excluded from SPONSOR's obligation to indemnify and hold harmless:
a. the negligent failure of CANCER CENTER to comply with
any applicable governmental requirements; or
b. the negligence or willful malfeasance by a regent,
officer, agent or employee of CANCER CENTER or
SYSTEM.
13. Award. SPONSOR agrees to pay CANCER CENTER a fee of [*]. This fee,
as shown [*] in Exhibit 1, which is attached hereto and is incorporated herein
by reference, for information only, shall be payable [*].
14. Basic Term. This Agreement shall become effective as of the date
first herein above written and unless earlier terminated as hereinafter
provided, shall continue in force for a period of Eighteen (18) months after the
same.
15. Default and Termination. In the event that either party to this
Agreement shall be in default of any of its material obligations hereunder and
shall fail to remedy such default within [*] after receipt of written notice
thereof, the party not in default shall have the option of terminating this
Agreement by giving written notice thereof, notwithstanding anything to the
contrary contained in this Agreement. Termination of this Agreement shall not
affect the rights and obligations of the parties which accrued prior to the
effective date of termination. SPONSOR shall pay CANCER CENTER for all
reasonable expenses Incurred or committed to be expanded as of the effective
termination date, subject to the maximum amount as specified in Article 13.
16. Entire Agreement. The parties acknowledge that this Agreement and
the attached Exhibits hereto represent the sole and entire Agreement between the
parties hereto pertaining to the Research and that such supersedes all prior
Agreements, understandings, negotiations and discussions between the parties
regarding same, whether oral or written. There are no warranties,
representations or other Agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein. No supplement,
amendment, alteration, modification, waiver or termination of this Agreement
shall be binding unless executed in writing by the parties hereto.
17. Reform of Agreement. If any provision of this Agreement is, or in
doomed invalid, illegal or unenforceable in any United States jurisdiction, such
provision shall be deemed amended to conform to applicable laws so as to be
valid and enforceable; or if it cannot be so amended without materially altering
the Intention of the parties, it shall be stricken, and the remainder of this
Agreement shall remain in full force and affect.
-4-
<PAGE> 5
18. Default and Termination. Any notices, statements, payments, or
reports by this Agreement shall be considered given if sent by United States
Certified Mail, postage prepaid and addressed as follows:
If to CANCER CENTER:
Michael J. Sent
Chief Financial officer
The University of Texas M.D. Anderson Cancer Center 1515 Holcombe Blvd.
Houston, Texas 77030
If to SPONSOR
David Nance
Managing Partner
Texas Biomedical Development Partners
100 Congress Avenue, Suite 200 Austin, Texas 78701
19. Caption. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
20. Governing Law. This Agreement shall be governed and interpreted in
accordance with the substantive laws of the State of Texas and with applicable
laws of the United States of America.
-5-
<PAGE> 6
IN WITNESS WHEREOF, CANCER CENTER and SPONSOR entered into this
Agreement effective as of the date first herein above written and have executed
three (3) originals each of which are of equal dignity.
TEXAS BIOMEDICAL DEVELOPMENT THE UNIVERSITY TEXAS
PARTNERS M.D. ANDERSON CANCER CENTER
By:/s/ DAVID NANCE By:/s/MICHAEL J. BEST
- --------------------------------------- ------------------------------
David Nance Michael J. Best
Managing Partner Chief Financial Officer
I have read this agreement and
understanding my obligations hereunder: CONTENT APPROVED:
By:/s/ JACK A. ROTH By:/s/ DONNA S. GILBERG
- --------------------------------------- ------------------------------
Jack A. Roth, M.D. Donna S. Gilberg, CPA
Principal Investor Manager, Sponsored Agreements
FORM APPROVED:
By:/s/ CHARLES M. BALCH By:/s/ MATTHEW E. BURR
- --------------------------------------- ------------------------------
Charles M. Balch, M.D. Matthew E. Burr, J.D.
Head, Division of Surgery Legal Services Officer
-6-
<PAGE> 7
EXHIBIT I
Development of Therapeutic Treatment and Prevention of Lung Cancer
The purpose of the research support component of the Texas Biomedical
Development Partners Sponsored Research Agreement is to provide support for
projects directly related to developing technology for the use of gene therapy
for the prevention and treatment of cancer. The funds will provide support for
professional staff, technicians, supplies, and equipment. The following
projects are included:
1) Development of novel vectors for gene transduction. New vector
systems will be studied for delivering gene constructs to cancer
cells. Current projects include adenoviruses and [*] vectors [*].
2) Identification of targets for gene therapy [*].
3) Determination of the role of oncogenes and tumor suppressor genes
in cancer development [*].
4) Development of clinically relevant animal models [*].
5) Studies on techniques to modify oncogene and tumor suppressor gene
expression [*].
BUDGET [*]
<PAGE> 8
AMENDMENT NO. 1
TO
RESEARCH AGREEMENT
This Amendment No. 1 to Research Agreement ("AMENDMENT") is made and
entered into as of July 20, 1994 by and between INTRON THERAPEUTICS, INC., a
Delaware Corporation ("SPONSOR") and THE UNIVERSITY OF TEXAS M.D. ANDERSON
CANCER CENTER ("CANCER CENTER"), a component institution of the University of
Texas System ("SYSTEM").
RECITALS
A. SPONSOR and CANCER CENTER entered into a SPONSORED RESEARCH
AGREEMENT, number SR 93-04, dated as of February 11, 1993 (the "RESEARCH
AGREEMENT").
B. SPONSOR, CANCER CENTER and the Regents of the University of Texas
System have entered into a PATENT AND TECHNOLOGY LICENSE AGREEMENT dated as of
July 20, 1994 (the "LICENSE AGREEMENT").
C. CANCER CENTER and SPONSOR wish to extend the term of the RESEARCH
AGREEMENT, acknowledge that the RESEARCH to be conducted thereunder will include
matters beyond the study outline attached to the RESEARCH AGREEMENT as
originally executed, and that SPONSOR will have the option to include within the
LICENSED SUBJECT MATTER under the LICENSE AGREEMENT any intellectual property
that is made in the course of performing under the RESEARCH.
NOW, THEREFORE, it is hereby agreed as follows:
21. DEFINITIONS. Any capitalized terms that are not otherwise
defined herein shall be defined in the RESEARCH AGREEMENT or the LICENSE
AGREEMENT. In addition, for all purposes of the RESEARCH AGREEMENT, the term
"RESEARCH" shall be deemed to include all work of CANCER CENTER personnel in
performing the study described in Exhibit I to RESEARCH AGREEMENT as originally
executed and as modified from time to time, as well as any work that is
performed by Dr. Jack A. Roth or other CANCER CENTER personnel comprising
additional research projects described in Attachment A-n, where n represents the
ordinal number of a particular project.
22. Invention and Patents. Section 3 of the RESEARCH AGREEMENT
shall be amended as follows:
(a) So much of Section 3(a) of the RESEARCH AGREEMENT
as reads "(i) arises out of work performed pursuant to the obligations of this
AGREEMENT' is hereby amended to read "(i) arises out of the Research;"
<PAGE> 9
(b) Paragraph (b) of Section 3 is hereby deleted and
replaced in its entirety with the following:
"b. In the event that an Invention is made, CANCER CENTER
shall notify SPONSOR, which notice shall reference
this Section 3 and include a description of the
Invention in reasonable detail. SPONSOR shall have
the option to include all worldwide patent rights
with respect to such Invention within the "EXISTING
PATENT RIGHTS" under Section 2.3(a) of the LICENSE
AGREEMENT,' and to include related information,
know-how, biological materials and the like within
the TECHNOLOGY RIGHTS under the LICENSE AGREEMENT. To
exercise such option with respect to any particular
Invention, SPONSOR shall so notify CANCER CENTER
within 120 days after receipt of CANCER CENTER's
notice thereof as described above. Promptly following
such exercise, the parties shall revise Schedule A to
the LICENSE AGREEMENT to reflect the additional paten
applications so included. CANCER CENTER warrants to
SPONSOR that CANCER CENTER has the right to grant to
SPONSOR the option and rights contemplated in this
Section 3 and that upon exercise of the option
described herein with respect to any Invention, all
worldwide patent rights therein will be included
under the LICENSE AGREEMENT.'
23. Term. Section 14 of the RESEARCH AGREEMENT is hereby
amended by adding to the end thereof the following: "Following such initial
Eighteen (18) month period, unless earlier terminated as provided in Section 15,
this Agreement shall continue in full force and effect until terminated by
either parry for any reason on ninety (90) days prior written notice to the
other party."
24. Other. Except as expressly provided in this AMENDMENT, all
other terms, conditions and provisions of the RESEARCH AGREEMENT shall continue
in effect as provided therein.
IN WITNESS WHEREOF, CANCER CENTER and SPONSOR entered into this
AMENDMENT effective as of the date first hereinabove written and have executed
(3) originals each of which are of equal dignity.
-2-
<PAGE> 10
IN WITNESS WHEREOF, each of the parties has executed this Amendment as
of the date first above written.
TEXAS BIOMEDICAL DEVELOPMENT THE UNIVERSITY OF TEXAS
PARTNERS M.D. ANDERSON CANCER CENTER
By:/s/ DAVID NANCE By:/s/ MICHAEL J. BEST
- ----------------------------------- -------------------------
David Nance Michael J. Best
Managing Partner Chief Financial Officer
I have read this agreement and
understand my obligations
hereunder: CONTENT APPROVED:
By:/s/ JACK A. ROTH By:/s/ DONNA S. GILBERG
- ----------------------------------- -------------------------
Jack A. Roth, M.D. Donna S. Gilberg, CPA
Principal Investor Manager, Sponsored
Agreements
FORM APPROVED:
By:/s/ HELMUTH GOEFERT By:NOT APPLICABLE
- ----------------------------------- -------------------------
Helmuth Goefert, M.D. Matthew E. Burr, J.D.
Head, Division of Legal Services Officer
Surgery and Anesthesiology
(Ad interim)
-3-
<PAGE> 11
AMENDMENT NO. 2
TO
SPONSORED RESEARCH AGREEMENT
STATE OF TEXAS
COUNTY OF HARRIS
AMENDMENT, effective this lst day of January, 1995, between THE
UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER (hereinafter referred to as
"CANCER CENTER"), a component of THE UNIVERSITY OF TEXAS SYSTEM (hereinafter
referred to as "SYSTEM") located at Houston, Texas, and INTROGEN THERAPEUTICS,
formerly Intron Therapeutics, Inc. ((hereinafter referred to as "SPONSOR"), of
the Sponsored Research Agreement made by these parties and dated the 11th day of
February, 1993 and amended the 20th day of July, 199_, regarding research on the
evaluation and study of the "Development of Therapeutic Treatrnent and
Prevention of Lung Cancer".
1. CANCER CENTER and SPONSOR agree that the period of work
identified the original Sponsored Research Agreement shall be
extended to the latter of February 29, 1996 or the completion
of the project.
2. CANCER CENTER and SPONSOR agree that the work to be done
during this extended work period will be performed according
to the procedures described in the revised workscope, the
title of which is "Development of Gene Therapeutic Treatment
and Prevention for Cancer", a copy of which is attached hereto
as Exhibit I and incorporated herein by reference. The
workscope has been amended and approved in accordance with
institutional policy. The sponsored research agreement may be
extended by the Sponsor upon notification to CANCER CENTER and
Investigator to provide CANCER CENTER and Investigator with
the funds needed to complete the research provided the
research is within the workscope as herein described.
3. CANCER CENTER and SPONSOR agree that the specific additional
costs associated with this work shall be [*].
4. CANCER CENTER acknowledges that [*].
OTHERWISE, the terms and provisions of the original Agreement executed
on the 11th of February, 1993 and amended on the 20th day of July, 1994 by and
between the parties shall in full force and effect, provided, however, that in
the event of a conflict in the terms and conditions between this Amendment No. 2
and the Sponsored Research Agreement, the terms and conditions of this Amendment
shall prevail.
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed two (2) original
counterparts of this Amendment No. 2, each of which are of equal dignity and
effective a of the date first hereinabove written.
SPONSOR THE UNIVERSITY OF TEXAS SYSTEM
M.D. ANDERSON CANCER CENTER
BY:/s/ DAVID NANCE BY:/s/ MICHAEL J. BEST
- ----------------------------------- --------------------------------------
David Nance Michael J. Best
President Chief Financial Officer
Introgen Therapeutics, Inc.
I have read this amendment and understand
my obligations hereunder:
BY:/s/ JACK A. ROTH
--------------------------------------
Jack A. Roth, M.D.
Principal Investigator
BY:/s/ HELMUTH GOEPFERT
--------------------------------------
Helmuth Goepfert, M.D.
Ad Interim Head, Div. of Surgery
CONTENT APPROVED:
BY:/s/ DONNA S. GILBERG
--------------------------------------
Donna S. Gilberg, CPA
Manager, Sponsored Programs
Payment Mailing Address:
The University of Texas
M.D. Anderson Cancer Center
Attention: Manager, Sponsored Programs
P.O. Box 297402
Houston, Texas 77297
Tax ID: 74-6001118-A1
-2-
<PAGE> 13
EXHIBIT I
[*]
<PAGE> 14
AMENDMENT NO. 3
TO
SPONSORED RESEARCH AGREEMENT
AMENDMENT, effective this 31st day of December, 1995, between THE
UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER (hereinafter referred to as
"CANCER CENTER"), a component of THE UNIVERSITY OF TEXAS SYSTEM (hereinafter
referred to as "SYSTEM") located at Houston, Texas, and INTROGEN THERAPEUTICS
(hereinafter referred to as "SPONSOR"), of the Sponsored Research Agreement made
by these parties and dated the 11th day of February, 1993 and subsequently
amended, regarding research on the evaluation and study of the "Development of
Therapeutic Treatment and Prevention of Lung Cancer".
1. CANCER CENTER and SPONSOR agree that the period of work
identified in the Original Sponsored Research Agreement shall
be extended to December 31, 1996.
2. CANCER CENTER and SPONSOR agree that the work to be done
during this extended work period will be performed according
to the procedures described in the revised workscope, the
title of which is "Development of Gene Therapeutic Treatment
and Prevention for Cancer", a copy of which is attached hereto
as Exhibit I and incorporated herein by reference. The
workscope has been amended and approved in accordance with
institutional Policy.
3. CANCER CENTER and SPONSOR agree that the specific additional
costs associated with this work shall be [*].
4. CANCER CENTER and SPONSOR agree that the fee of [*].
5. Access to Information. All results of and information arising
from the Research shall be made available and accessible to
SPONSOR by CANCER CENTER. SPONSOR shall have the right to
obtain copies or duplicates of such results and information on
a timely basis, in either written or electronic form, upon
SPONSOR giving CANCER CENTER reasonable notice of SPONSOR"s
desire to obtain such results and information.
OTHERWISE, the terms and provisions of the original Agreement executed
on the 11th day of February, 1993 and subsequently amended by and between the
parties hereto shall remain in full force and effect, provided, however, that in
the event of a conflict in the terms and conditions between this Amendment No. 3
and the Sponsored Research Agreement the terms and conditions of this Amendment
shall prevail.
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed two (2) original
counterparts of this Amendment No. 3, each of which are of equal dignity and
effective as of the date first hereinabove written.
INTROGEN THERAPEUTICS, INC. THE UNIVERSITY OF TEXAS
M.D. ANDERSON CANCER CENTER
BY:/s/ DAVID NANCE BY:/s/ MICHAEL J. BEST
------------------------------- ---------------------------------
David Nance Michael J. Best
President Chief Financial Officer
Introgen Therapeutics, Inc.
I have read this
amendment and
understand my
obligations hereunder:
BY:/s/ JACK A. ROTH
---------------------------------
Jack A. Roth, M.D.
Principal Investigator
BY:/s/ HELMUTH GOEPFERT
---------------------------------
Helmuth Goepfert, M.D.
Ad Interim Head, Div. of Surgery
PAYMENT MAILING ADDRESS:
The University of Texas
M.D. Anderson Cancer Center
Atten: Manager, Sponsored Programs
P.O. Box 297402
Houston, Texas 77297
Tax ID: 74-6001118-Al
-2-
<PAGE> 16
EXHIBIT I
[*]
<PAGE> 1
Exhibit 10.17
SPONSORED RESEARCH AGREEMENT
THIS SPONSORED RESEARCH AGREEMENT (the "Agreement") is made as of March
29, 1996 ("Effective Date") by and between Sidney Kimmel Cancer Center ("SKCC")
and Introgen Therapeutics, Inc., a Delaware corporation duly organized and
existing under the laws of Delaware ("Sponsor").
RECITALS
A. SKCC desires to conduct certain research hereinafter described, and
Sponsor is willing to advance funds for purposes of such research.
B. As a benefit of funding such research, Sponsor desires to obtain the
exclusive rights to certain inventions made during the course of such research
pursuant to the License Agreement entered into between the parties of even date
with this Agreement (the "License Agreement").
NOW THEREFORE, in consideration of the mutual covenants and promises
herein contained, SKCC and Sponsor agree as follows:
ARTICLE 1
RESEARCH PROGRAM
1.1 General.
(a) Within forty-five (45) days of the Effective Date, the
parties will agree by mutual consent on a research program that will be set
forth in Attachment A hereto (the "Research Program"). SKCC will use its
reasonable efforts to conduct the Research Program in accordance with the
description set forth in Attachment A, and will furnish the facilities necessary
to carry out said Research Program. The Research Program will be under the
direction of [*] (the "Principal Investigator") and will be conducted at Sidney
Kimmel Cancer Center. The Research Program may be modified from time to time
with the consent of Sponsor and the Principal Investigator.
(b) Except as the parties may otherwise agree, it is
understood that the Research Program will not include: [*] licensed or assigned
to [*] as amended prior to the Effective Date. [*].
1.2 Period. The Research Program shall be performed during the period
commencing on the Effective Date and continuing for two (2) years thereafter.
The duration of the Research Program period may be extended by written
agreement between Sponsor, SKCC and the Principal Investigator.
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1.3 Records. SKCC will ensure that the Principal Investigator and other
personnel assisting in the Research Program will keep accurate financial and
scientific records relating to the Research Program and will make such records
available to Sponsor or Sponsor's authorized representative throughout the term
of this Agreement during normal business hours upon reasonable notice. It is
understood that such records shall include detailed, witnessed laboratory
notebooks sufficient to document any inventions made in the course of the
Research Program. Upon request by Sponsor and at Sponsor's expense, SKCC agrees
promptly to provide copies of all such materials to Sponsor, in whatever
condition maintained by the Principal Investigator and his staff.
1.4 Disclaimer. SKCC does not guarantee that any patentable inventions
will result from the Research Program, that the claims of any patent obtained
will cover Sponsor's commercial interests, or that any such patent will be free
of dominance by other patents, including those based upon inventions made by
other SKCC faculty independent of the Research Program.
1.5 Use of Funds. All funds provided by Sponsor shall be used only in
accordance with the Research Program.
ARTICLE 2
COMPENSATION
2.1 Payments. As consideration for the performance by SKCC of its
obligations under this Agreement, Sponsor will pay SKCC [*]. Beginning with the
first calendar month commencing after the date of this Agreement, and continuing
for two years, Sponsor shall pay to SKCC the amounts referenced above at such
times and in such amounts as deemed necessary and appropriate to achieve the
objectives of this Agreement, with such payments being made, [*].
2.2 Handling. SKCC shall use the funds provided by Introgen for wages
and supplies, and such other operating expenses as SKCC and Sponsor mutually
approve, which are incurred directly in the performance of the Research Program.
It is understood that funds of the Research Program which are not used in a
particular month may be used in subsequent periods during the term of this
Agreement [*].
ARTICLE 3
CONSULTATION AND REPORTS
3.1 Designated Representative. Sponsor's designated representative for
consultation and communications with the Principal Investigator shall be David
G. Nance, President & CEO of Sponsor, or such other person as Sponsor may from
time to time designate in writing to SKCC and the Principal Investigator.
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3.2 Coordination. The parties acknowledge that Sponsor will also
conduct activities related to the research to be performed by SKCC under the
Research Program. To ensure that such activities remain coordinated, Sponsor
shall meet or consult with the Principal Investigator periodically to establish
and revise priorities for work to be performed under the Research Program,
including the research experiments and other steps to be taken by Principal
Investigator in pursuit of those priorities, all under the provisions of Section
1.1 above. Unless otherwise agreed, such meetings or consultations shall take
place [*], and the Principal Investigator shall conduct the Research Program in
all respects in accordance with the priorities and steps so established by
mutual agreement of the parties pursuant to Section 1.1 above.
3.3 Reports. The Principal Investigator shall submit to Sponsor [*] a
written technical report summarizing in reasonable detail the research and
results obtained therefrom during the prior [*] period relating to research in
connection with the Research Program. [*], the Principal Investigator shall
submit to Sponsor a final written technical report of all activities undertaken
and all accomplishments achieved in connection with the Research Program. In
addition, [*] of the Research Program, SKCC's Office of Accounting shall submit
to Sponsor a final financial report of income and expenses of the Research
Program [*].
ARTICLE 4
PUBLICITY
Except as required by law or in the normal course of business
identification, neither SKCC nor Sponsor shall issue any press release or make
any other written statements in connection with work performed under this
Agreement intended for use in the public media in a manner suggesting any
endorsement by the other, without approval of such other party, which approval
shall not be unreasonably withheld. Both Sponsor and SKCC, however, shall
acknowledge Sponsor's support of the Research Plan under this Agreement in
scientific publications and other scientific communications. In any other
statements, the parties shall describe the scope and nature of their
participation accurately and appropriately.
ARTICLE 5
PUBLICATION AND ACADEMIC RIGHTS
5.1 Ownership. Subject to Section 7.1 below, SKCC retains all ownership
rights with respect to inventions, data, results and other proprietary
information developed by SKCC personnel during the course of the Research
Program. Subject to the rights granted to Sponsor pursuant to this Agreement and
the License Agreement and to Article 6 below, SKCC shall have the right to
publish or otherwise disclose all technical reports, information and/or data
developed by SKCC personnel during the course of the Research Program. Subject
to Article 6 below, Sponsor shall have the right
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to use, disclose and exploit such reports, data and information for so long as
the license granted to Sponsor under Section 3.1(b) of the License Agreement
remains in effect.
5.2 Publication. To avoid loss of patent rights as a result of
premature public disclosure of patentable information, SKCC, the Principal
Investigator and his staff each agree to submit to Sponsor, [*] to submission
for publication or disclosure, materials intended for publication or disclosure
relating to technical reports, data, or information developed by the Principal
Investigator or other SKCC personnel during the course of or as a follow-up to
the Research Program. Sponsor shall notify SKCC [*] of such materials whether or
not Sponsor desires SKCC to file a patent application on any invention disclosed
in such materials pursuant to the License Agreement. In the event that Sponsor
desires to file such a patent application, the Principal Investigator shall
withhold publication and disclosure of such materials [*] from the date of
receipt of such materials by Sponsor. Further, if Sponsor believes that such
material contains Confidential Information (as defined in Section 6 below) of
Sponsor, SKCC, the Principal Investigator and his staff each agree [*].
ARTICLE 6
CONFIDENTIAL INFORMATION
The parties may, from time to time, in connection with the License
Agreement and the Research Program, disclose to each other Confidential
Information. "Confidential Information" shall mean any information disclosed
orally, in writing or otherwise by one party (the "Disclosing Party") to the
other party (the "Receiving Party"). The Receiving Party shall not use
Confidential Information of the Disclosing Party except as expressly authorized
in this Agreement or the License Agreement, and shall use its best efforts to
prevent the disclosure of the Disclosing Party's Confidential Information to
third parties; provided that the Receiving Party's obligations under this
Article 6 shall not apply to Confidential Information that:
(i) is in the Receiving Party's possession at the
time of disclosure thereof as demonstrated by documentary evidence;
(ii) is or later becomes part of the public domain
through no fault of the Receiving Party's personnel;
(iii) is received from a third party having no
obligations of confidentiality to the Disclosing Party; or
(iv) is developed independently by the Receiving
Party without access to the Disclosing Party's Confidential Information.
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Notwithstanding the foregoing, the parties acknowledge and agree that
any Licensed Subject Matter (as defined in the License Agreement) may be used
and disclosed to third parties by Licensee pursuant to the License Agreement.
ARTICLE 7
PATENTS RIGHTS AND TECHNOLOGY RIGHTS
7.1 Ownership. SKCC shall own all right, title and interest in and to
any inventions conceived or first reduced to practice by SKCC personnel during
the term of this Agreement in the course of performing the Research Program, to
the extent that such SKCC personnel would be an inventor thereof under U.S.
patent law. Patent rights to inventions that are made jointly by employees of
SKCC and Sponsor shall be owned jointly. For purposes of this Section 7.1
whether an invention is made "jointly" shall be determined under principles of
inventorship in accordance with U.S. patent law, and "joint ownership" means
that, subject to any royalties owing under the License Agreement, each party is
free to exploit such patent rights and authorize others to do so, with no
obligation to account to the other party, for profits or otherwise or to obtain
the consent of the other party.
7.2 Notice. SKCC shall notify Sponsor promptly in writing of all
discoveries and inventions disclosed to SKCC by Principal Investigator, [*] or
other SKCC personnel under [*] supervision that arise out of or in connection
with the Research Program during the term of this Agreement. The filing for,
prosecution of applications and maintenance of patents on such inventions shall
be handled in accordance with Article 9 of the License Agreement.
7.3 Assignments. SKCC shall have in place or obtain appropriate written
agreements from all personnel involved in the Research Program, such agreements
to require that all discoveries and inventions first conceived or reduced to
practice as a result of or in connection with research conducted at SKCC shall
be reported promptly and assigned to SKCC.
ARTICLE 8
INDEPENDENT CONTRACTOR
For the purposes of this Agreement and all services to be provided
hereunder, the parties shall be, and shall be deemed to be, independent
contractors and not agents or employees of the other party. Neither party shall
have authority to make any statements, representations or commitments of any
kind, or to take any action which shall be binding on the other party, except as
may be expressly provided for herein or authorized in writing.
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ARTICLE 9
TERM AND TERMINATION
9.1 Term. The term of this Agreement shall commence on the Effective
Date and extend for two (2) years, unless sooner terminated in accordance
with the provisions of this Article 9.
9.2 Termination by Sponsor. In the event that Sponsor determines, at
any time [*], that the Research Program is no longer academically, technically
or commercially feasible or desirable, Sponsor shall have the right to terminate
this Agreement [*].
9.3 Termination for Breach. In the event that either party to this
Agreement shall be in breach or default of an obligation under this Agreement
and shall fail to remedy such breach or default within [*], the other party to
this Agreement shall be entitled to terminate this Agreement [*].
9.4 Consequences of Termination. Termination or cancellation of this
Agreement shall not affect the rights and obligations of the parties accrued
prior to termination; nor shall a termination of this Agreement affect the
parties' rights or obligations under the License Agreement except as provided in
Section 5.3.2 of the License Agreement.
9.5 Survival. The following sections of this Agreement shall survive
expiration or termination of this Agreement for any reason: Sections 2.2 and
3.3, and Articles 4, 5, 6, 7, 9 and 10.
ARTICLE 10
GENERAL
10.1 Assignment. This Agreement may not be assigned or transferred by
either party without the prior written consent of the other party; provided,
however, that Sponsor may assign or transfer its rights and obligations under
this Agreement to a successor to all or substantially all of its assets or
business relating to this Agreement, whether by sale, merger, operation of law
or otherwise upon written notice to SKCC.
10.2 Entire Agreement. This Agreement constitutes the entire and only
agreement between the parties relating to the subject matter hereof, and all
prior negotiations, representations, agreements and understandings are
superseded hereby. No agreements altering or supplementing the terms hereof may
be made except by means of a written document signed by the duly authorized
representatives of the parties.
10.3 Notices. Any notice required by this Agreement shall be given by
prepaid, first class, certified mail, return receipt requested, addressed to:
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If to SKCC: David Wood
Sidney Kimmel Cancer Center
3099 Science Park Road
San Diego, CA 92121
If to Licensee: David G. Nance, President
Introgen Therapeutics, Inc.
301 Congress Avenue
Suite 2025
Austin, TX 78701
or at such other addresses as may be given from time to time in accordance with
the terms of this notice provision.
10.4 Governing Law. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Texas, without regard to
conflicts of laws.
10.5 Headings. The headings of the several sections of this Agreement
are intended for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
10.6 Severability. If any provision of this Agreement shall be found by
a court to be void, invalid or unenforceable, the same shall be reformed to
comply with applicable law or stricken if not so conformable, so as not to
affect the validity or enforceability of the remainder of this Agreement.
10.7 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
INTROGEN THERAPEUTICS, INC. SIDNEY KIMMEL CANCER CENTER
("Sponsor") ("SKCC")
By: /s/ DAVID G. NANCE By: /s/ DAVID E. WOOD
-------------------- ------------------------
Print Name: David G. Nance Print Name: David E. Wood
Title: President Title: Executive Vice President
Date: March 29, 1996 Date: March 29, 1996
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ATTACHMENT A
RESEARCH PROGRAM
[*]
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EXHIBIT 10.18
LICENSE AGREEMENT
This License Agreement ("Agreement") is made as of March 29, 1996 (the
"Effective Date") by and between the Sidney Kimmel Cancer Center ("SKCC") and
Introgen Therapeutics, Inc. ("Licensee"), a corporation duly organized and
existing under the laws of Delaware.
R E C I T A L S:
A. SKCC owns certain Patent Rights and Related Technology (as defined
below).
B. Licensee and SKCC have entered into a Research Agreement of even
date herewith, pursuant to which Licensee has agreed to fund certain research
conducted by SKCC (the "Research Agreement").
C. Licensee wishes to obtain a license from SKCC to the Patent Rights
and Related Technology, and other subject matter resulting from research
conducted pursuant the Research Agreement, all on the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
1.1 "Licensed Product" shall mean any product, the manufacture, use or
sale of which would infringe a Valid Claim.
1.2 "Licensed Subject Matter" shall mean inventions, discoveries and
other subject matter covered by Patent Rights or within the Related Technology.
1.3 "Net Sales" shall mean the gross revenues actually received by
Licensee, its Affiliates and Sublicensees from sales of a Licensed Product,
which sales would, but for the license granted hereunder, infringe a Valid Claim
in the country for which the Licensed Product is made or sold, less (a) normal
and customary rebates, cash and trade discounts or the like actually given, (b)
sales, use and/or other taxes or duties actually paid, (c) outbound shipping and
insurance charges actually paid, (d) import and/or export duties actually paid,
and (e) amounts credited due to actual returns.
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1.4 "Patent Rights" shall mean any and all rights in and to:
(a) the patent applications listed in Exhibit A ("Existing
Applications"), any foreign counterparts of such Existing Applications
and any patent or application anywhere in the world that is owned or
controlled by SKCC to the extent such patent or application claims and
discloses subject matter which could have been claimed in the Existing
Applications.
(b) any patent or patent application of any kind anywhere in
the world that is owned or controlled by SKCC that claims and discloses
any invention that is conceived (and evidenced in writing) or reduced
to practice by [*], which inventions are made in the course of
performing the Research Program during the term of the Research
Agreement (as the Research Program is defined in Section 1.1 of the
Research Agreement). It is understood that the Research Program shall
not include subject matter to the extent such subject matter consists
of [*] licensed or assigned to [*] under certain License and Sponsored
Research Agreements [*] as amended prior to the Effective Date. [*].
(c) all divisions, continuations, substitutions,
registrations, reissues, reexaminations or extensions of any kind with
respect to any of the foregoing.
(d) continuations-in-part of any of the foregoing applications
and patents issuing on such continuations-in-part, patents of addition,
and all reissues, renewals and extensions of such patents and patents
of addition, shall also be within the Patent Rights, but only to the
extent the same claim and disclose subject matter that could have been
claimed in the patents or applications described in (a), (b) or (c)
above. Accordingly, it is understood that new subject matter that could
not have been claimed in the patents or applications described in (a),
(b) or (c) above shall not be within the Patent Rights.
In the event that SKCC is a joint owner of an invention by reason of the fact
that an employee or consultant of Licensee is a joint inventor of such an
invention, it is understood that the Patent Rights include only SKCC's rights as
a joint owner of the patents and patent applications that claim such joint
invention. In addition, the Patent Rights shall not include patents or
applications described in 1.4(b) above, to the extent [*] are not required to
assign the same to SKCC; nor shall the Patent Rights be deemed to include any
patent or application owned by Licensee, or licensed to Licensee by a third
party. From time to time during the term of this Agreement, upon request by
either party, Licensee and Sponsor shall promptly update Exhibit A hereto to
include all patent applications and patents that are within the Patent Rights.
1.5 "Research Program" shall mean the Research Program conducted by
SKCC personnel pursuant to the Research Agreement.
1.6 "Affiliate" shall mean any corporation or other entity that is
directly or indirectly controlling, controlled by or under common control with
Licensee. For the purpose of this definition, "control" shall mean the direct or
indirect ownership of more than fifty percent (50%) of the shares of
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the subject entity entitled to vote in the election of directors (or, in the
case of an entity that is not a corporation, for the election of the
corresponding managing authority).
1.7 "Related Technology" shall mean any and all technical information,
know-how, process, procedure, composition, device, method, formula, protocol,
technique, design, drawing, data or other subject matter owned or controlled by
SKCC directly made in the course of performing the Research Program.
1.8 "Sublicensee" shall mean a third party to whom Licensee has granted
the right to manufacture and sell Licensed Products, with respect to Licensed
Products made and sold by such third party.
1.9 "Valid Claim" shall mean (a) a claim of an issued and unexpired
patent included within the Patent Rights, which has not been held unenforceable,
unpatentable or invalid by a court or other governmental agency of competent
jurisdiction, and (b) a pending claim of a patent application included within
the Patent Rights for [*] from the first date from which such application takes
priority for filing purposes. In the event that a claim of an issued and
unexpired patent within the Patent Rights is held by a court or other
governmental agency of competent jurisdiction to be unenforceable, unpatentable
or invalid, and such holding is reversed on appeal by a higher court or agency
of competition jurisdiction, such claim shall be reinstated thereafter as a
Valid Claim hereunder.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Warranties. SKCC represents and warrants that (a) SKCC is and shall
be the owner of the entire right, title, and interest in and to the Patent
Rights; (b) SKCC has the sole right and authority to enter into this Agreement
and grant the rights and licenses hereunder; (c) SKCC has not previously granted
and will not grant any rights in the Licensed Subject Matter that are
inconsistent with the rights and licenses granted to Licensee or contemplated
herein; (d) SKCC has obtained written agreements from all personnel associated
with SKCC who will perform work in connection with the Research Program, which
agreements assign to SKCC all patent rights in any invention conceived or
reduced to practice by such personnel in the course of performing research at
SKCC. SKCC makes no representations or warranties as to the (i) validity or
scope of the Patent Rights, or (ii) except as provided below, freedom of
Licensed Products from infringement of third party proprietary rights. SKCC
assumes no obligation to bring or prosecute actions against third parties for
patent infringement.
2.2 Representation to Knowledge. In addition, SKCC represents that to
the best knowledge of [*] and the technology transfer office at SKCC, as of the
Effective Date: (a) exercise of the license granted hereunder will not infringe
the rights of any third party to any patent, patent
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application, invention or any other proprietary right; provided that no
representation is made with respect to any patents (i) of which Dr. Jack Roth is
an inventor, or (ii) listed on Exhibit D attached hereto or claiming subject
matter described in the publications listed on Exhibit D; (b) SKCC does not own
or control rights to any patent, patent application or invention that relates to
the subject matter of the Existing Applications, or the practice of which would
be infringed by Licensee's exercise of the license granted hereunder; and (c)
except for the Existing Applications, the applications listed on Exhibit B
hereto and the inventions disclosed therein, SKCC does not own or control rights
to any patent, patent application or invention pertaining to gene or cell
therapy. The parties acknowledge and agree that any representations made in this
Section 2.2 are made with respect to the best knowledge of [*] and the
technology transfer office at SKCC as of the Effective Date and not with respect
to any knowledge of the foregoing parties acquired after the Effective Date. As
to subsection (a) above, it is understood among the parties that SKCC has not
conducted a patent search with respect to the Patent Rights.
2.3 Disclaimer. EXCEPT AS PROVIDED IN THIS ARTICLE 2, NEITHER PARTY
MAKES ANY REPRESENTATIONS OR WARRANTIES OTHER THAN THOSE EXPRESSLY STATED IN
THIS AGREEMENT, AND SPECIFICALLY, SKCC MAKES NO EXPRESS OR IMPLIED WARRANTIES OF
NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 3
LICENSE
3.1 Grant.
(a) Patent Rights. SKCC hereby grants to Licensee a worldwide,
royalty-bearing, exclusive license under the Patent Rights to manufacture, have
manufactured, use, sell, import and export Licensed Products, to practice any
method, process or procedure claimed in the Patent Rights, and to otherwise
exploit the Patent Rights.
(b) Related Technology. SKCC also hereby grants to Licensee a
worldwide nonexclusive license under the Related Technology to manufacture, have
manufactured, use, sell, import and export Licensed Products and to otherwise
exploit the Related Technology. It is understood that this Section 3.1(b) shall
not be deemed to limit Introgen's rights under Section 3.1(a) above.
3.2 Sublicenses. Licensee may grant and authorize sublicenses within
the scope of the licenses granted to Licensee pursuant to this Agreement.
Licensee shall include or reference in all sublicense agreements at a minimum
terms and conditions substantially similar to those listed in Exhibit C attached
hereto. Licensee shall promptly inform SKCC of each such sublicense.
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3.3 Reservation of Rights. The licenses granted in this Article 3 are
subject to a reserved nonexclusive license in SKCC to use the Patent Rights
solely for its own educational and non- commercial research purposes.
ARTICLE 4
PAYMENTS AND REPORTS
4.1 Patent Expenses. Within thirty (30) days after execution of this
Agreement, Introgen shall reimburse SKCC for the documented expenses paid by
SKCC prior to the Effective Date to outside patent counsel and government patent
offices with respect to the preparation, filing and prosecution of the Existing
Applications; provided that such amounts to be reimbursed shall not exceed [*].
4.2 Base Royalty. In consideration of the rights and licenses granted
by SKCC to Licensee under this Agreement, except as otherwise provided in this
Article 4, Licensee agrees to pay to SKCC as running royalties the following
percentage of Net Sales from Licensed Products sold by Licensee, its Affiliates
and Sublicensees:
(a) Subject to paragraph (b) below, the following percentage
of cumulative Net Sales of all Licensed Products:
[*] of the first [*] in cumulative Net Sales
[*] oF [*] in cumulative Net Sales
[*] of Net Sales over [*]
(b) Notwithstanding paragraph (a) above, if the Valid Claims
that cover a Licensed Product are dominated (to the extent such Valid
Claims cover such Licensed Product) by claims of an issued patent owned
or controlled by Licensee (other than the Patent Rights), the royalty
on Net Sales of such Licensed Products shall be reduced to [*] of such
Net Sales. The parties shall endeavor to mutually agree as to whether
the particular Valid Claims are so dominated.
In the event that the only Valid Claims which cover the sale of a Licensed
Product in a particular country are claims of a patent or application with
respect to which one or more employees or contractors of Licensee or a third
party are joint inventors, the royalty rates specified above on sales of such
Licensed Product in such country shall be reduced by [*].
4.3 Royalty Term. The running royalties under Section 4.2 shall be
payable only for sales of Licensed Products by Licensee, Affiliates or
Sublicensees in a county after the date of the first commercial sale of such
Licensed Product in the particular country until the expiration of the last to
expire of the patents within the Patent Rights.
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4.4 Multiple Royalties. If Licensee, its Affiliate or Sublicensee is
required to pay to non- Affiliate third parties royalties with respect to a
Licensed Product under agreements entered into after the Effective Date for
patent rights or other technologies which Licensee, its Affiliate or
Sublicensee, in its reasonable judgment, determines are desirable to license or
acquire with respect to such Licensed Product, and the total of such third party
royalties and the royalties to be paid by Licensee to SKCC would exceed [*] on
sales of such Licensed Products by Licensee and/or Affiliates or [*] on sales of
such Licensed Products by Sublicensees, the amounts to be paid under Section 4.2
shall be reduced in accordance with the following formulas:
(a) Royalties payable on sales by Licensee and/or Affiliates
of such Licensed Products shall equal the amount calculated in
accordance with Section 4.2, multiplied by the fraction [*], where "X"
equals the total percentage of Net Sales payable as royalties to SKCC
and such third parties on such sales (prior to the adjustment
hereunder and any similar adjustment in the amount to be paid to such
third parties).
(b) Royalties payable on sales by Licensee's Sublicensees of
such Licensed Products shall equal the amount calculated in accordance
with Section 4.2, multiplied by the fraction [*], where "X" equals the
total percentage of Net Sales payable as royalties to SKCC and such
third parties on sales by Licensee's Sublicensees of Licensed Products
(prior to the adjustment hereunder and any similar adjustment in the
amount to be paid to such third parties).
Notwithstanding the foregoing, the reductions in (a) and (b) above shall not
reduce by more than [*] the amounts otherwise payable under this Agreement to
SKCC with respect to a Licensed Product, after taking any other adjustments
hereunder into account. It is understood the adjustment in this Section 4.4
shall not apply to increase the amounts payable under Section 4.2.
4.5 Single Royalty; Non-Royalty Sales. In the event that more than one
patent within the Patent Rights is applicable to any Licensed Product subject to
royalties under this Article 4, then only one royalty shall be paid to SKCC in
respect of such Licensed Product. It is understood that royalties shall only be
payable under this Article 4 with respect to Licensed Products whose manufacture
or sale would infringe a Valid Claim in the country for which such Licensed
Product is made or sold. No royalty shall be payable under Section 4.2 above
with respect to sales of Licensed Products among Licensee and Affiliates for
resale; and in no event shall more than one royalty be due hereunder with
respect to any Licensed Product unit; nor shall a royalty be payable under
Section 4.2 with respect to sales of Licensed Products for use in research
and/or development, in clinical trials or as samples.
4.6 Combination Products. In the event that a Licensed Product is sold
in combination as a single product with another product, component or service
for which no royalty would be due hereunder if sold separately, Net Sales from
such combination sales for purposes of calculating the amounts due under this
Article 4 shall be reasonably allocated between such Licensed Product and such
other product, component and/or service. Without limiting the foregoing, it is
understood and
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agreed that in no event shall Net Sales include amounts charged for surgical
procedures, hospital stays or other charges not specifically made for the sale
of Licensed Products. The parties will endeavor to mutually agree upon the
reasonable allocations described above.
4.7 Records. Licensee shall keep complete and accurate records of its
Net Sales in sufficient detail to enable the royalties payable hereunder to be
determined. Licensee shall also keep reports of Net Sales made by its
Sublicensees and Affiliates. Upon SKCC's written request, but not more
frequently than once per calendar year, Licensee shall permit representatives or
agents of SKCC, at SKCC's expense, to examine such records during Licensee's
regular business hours for the purpose of and to the extent necessary to verify
any report required under this Agreement with respect to Net Sales received not
more than three (3) years prior to the date of SKCC's request. Notwithstanding
any of the foregoing, inspections of the records of Sublicensees shall be
limited to the extent that Licensee has the right to authorize SKCC to make such
inspection; provided that, if Licensee does not have the right to authorize SKCC
to make such an inspection, upon SKCC's request, Licensee shall exercise its own
right to inspect the Sublicensee's records at SKCC's expense (such expenses to
be approved in advance by SKCC) and shall share with SKCC the results of such
inspections. Licensee shall have the right to have its representative
participate in such inspection. In the event that the amounts due to SKCC are
determined to have been underpaid, Licensee shall pay to SKCC any amount due and
unpaid, together with interest on such amount at the prime rate in effect at
Bank of America NT&SA, San Francisco, California, or at the maximum rate
permitted by law, whichever is lower. In the event the inspection establishes an
underpayment greater than [*] for the period covered by the inspection, Licensee
agrees to pay the reasonable out-of-pocket costs of such inspection.
4.8 Reports. Beginning with the first accrual of Net Sales on which a
royalty is due hereunder, Licensee shall provide to SKCC a [*] royalty report,
as follows: Within [*] after the end of each [*], Licensee shall deliver to SKCC
a true and accurate report, giving such particulars of the business conducted by
Licensee, Affiliates and its Sublicensees, if any, during such [*] as are
pertinent to an account for payments hereunder. Such report shall be reasonably
detailed and shall include at least (a) the total of Net Sales; (b) the
calculation of royalties; and (c) the total royalties so calculated and due
SKCC. To the extent consistent with Licensee's internal reporting procedures,
Licensee shall make good faith efforts to reflect in its reports hereunder Net
Sales on a product-by-product and country-by-country or territory-by-territory
basis. Simultaneously with the delivery of each such report, Licensee shall pay
to SKCC the total royalties, if any, due to SKCC for the period of such report.
If no royalties are due, Licensee shall so report. SKCC shall not provide to
third parties any information contained in reports provided to Licensee
hereunder, or learned by SKCC under Section 4.7 above; provided that SKCC may
have such reports reviewed by its accountants and legal advisors. Licensee
agrees to forward to SKCC, on an annual basis, a copy of all reports of Net
Sales received by Licensee from its Sublicensees during the preceding twelve
(12) month period as shall be pertinent to a royalty accounting under said
sublicense agreements. Such reports may be redacted to omit any information not
necessary to determine Net Sales or amounts due to SKCC hereunder.
-7-
<PAGE> 8
4.9 Payments. All amounts payable hereunder by Licensee shall be
payable in United States Dollars. If any currency conversion shall be required
in connection with the payment of royalties hereunder, such conversion shall be
made by using the exchange rates used by Licensee in calculating Licensee's own
revenues for financial reporting purposes. Any withholding or other tax that
Licensee or any of its Affiliates are required by law to withhold and pay on
behalf of SKCC shall be deducted from said royalties and promptly paid to the
taxing authority.
4.10 Conversion. Effective upon [*], Licensee may convert the license
granted to Licensee under Section 3.1(a) to a [*]; provided, however, Licensee
may not convert the license as provided under this Section 4.10 with respect to
[*]. In the event of conversion, the amounts to be paid to SKCC under this
Article 4 following the effective date of such notice after any adjustment shall
be [*], to the extent such payments are made with respect to Valid Claims within
such patent for which the license is so converted.
ARTICLE 5
TERM AND TERMINATION
5.1 Term. Unless terminated earlier pursuant to this Article 5, the
term of this Agreement shall commence on the Effective Date and continue in full
force and effect until expiration, revocation or invalidation of the last patent
or the abandonment of the last application within the Patent Rights, whichever
is later. Licensee's license with respect to the Related Technology shall
survive this Agreement except upon a termination by SKCC under Section 5.3.2
below.
5.2 Termination for Breach. In the event of a material breach of this
Agreement (including a material breach of warranty), the nonbreaching party
shall be entitled to terminate this Agreement by written notice to the breaching
party, if such breach is not cured within [*] after written notice is given by
the nonbreaching party to the breaching party specifying the breach. However, if
the party alleged to be in breach of this Agreement disputes such breach within
such [*] period, the nonbreaching party shall not have the right to terminate
this Agreement unless it has been determined pursuant to an arbitration under
Section 11.9 below that this Agreement was materially breached, and the
breaching party fails to comply with its obligations hereunder within [*] after
such determination. The right to terminate under this Section 5.2 shall be in
addition to, and not in lieu of, any other rights or remedies the nonbreaching
party may have under this Agreement, whether at law or in equity. Any
termination of this Agreement under this Section 5.2 by SKCC shall not relieve
Licensee of any obligation to pay any fees owed to SKCC nor impair any right of
SKCC that accrues prior to the effective date of such termination.
5.3 Termination Upon Notice.
5.3.1 By Licensee. Licensee may terminate this Agreement, in
its entirety or as to any particular patent or application within the Patent
Rights, or as to any particular Licensed Product,
-8-
<PAGE> 9
at any time by [*]. From and after the effective date of a termination under
this Section 5.3 with respect to a particular patent or application, such
patent(s) and application(s) in the particular country shall cease to be within
the Patent Rights for all purposes of this Agreement, and all rights and
obligations of Licensee with respect to such patent(s) and application(s) shall
terminate; from and after the effective date of a termination under this Section
5.3 with respect to a particular Licensed Product, the license granted to
Licensee under Section 3.1 shall terminate with respect to such Licensed
Product. Upon a termination of this Agreement in its entirety under this Section
5.3.1, all rights and obligations of the parties shall terminate, except as
provided in Section 5.4 below; provided that following such termination,
Licensee shall pay all patent expenses and royalties for the Patent Rights,
which in each case were due hereunder and accrued prior to the effective date of
such termination.
5.3.2 By SKCC. SKCC may terminate this Agreement upon [*]
provided that SCKK so terminates this Agreement in such event within [*]. Upon
termination of this Agreement by SKCC under this Section 5.3.2, all of the
licenses granted to Licensee under this Agreement shall immediately terminate.
5.4 Survival.
(a) Termination of this Agreement for any reason shall not
release either party hereto from any liability which at the time of such
termination has already accrued to the other party.
(b) In the event this Agreement is terminated for any reason,
Licensee and its Affiliates shall have the right to sell or otherwise dispose of
the stock of any products then on hand, all subject to the payment to SKCC of
fees and royalties pursuant to Article 4 hereof. Upon termination of this
Agreement by SKCC for any reason (other than a termination by SKCC under Section
5.3.2 above), any sublicense granted by Licensee hereunder shall survive,
provided that upon request by SKCC, such Sublicensee promptly agrees in writing
to be bound by the applicable terms of this Agreement.
(c) Articles 1, 2.3, 4.7, 4.8, 5, 7, 8, 10 and 11 shall
survive the expiration and any termination of this Agreement. Except as
otherwise provided in this Article 5, all rights and obligations of the parties
under this Agreement shall terminate upon the expiration or termination of this
Agreement. In addition, any termination of this Agreement shall not relieve
Licensee of any payment obligations to SKCC that accrue prior to the effective
date of such termination.
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<PAGE> 10
ARTICLE 6
INFRINGEMENT
6.1 Enforcement. Licensee shall have the exclusive right (itself or
through others), at its sole option, to bring suit to enforce the Patent Rights.
All recoveries in such suit (whether initiated by Licensee or its designee, or
brought as a counterclaim in a suit commenced by a third party) will [*].
6.2 Defense. If Licensee or a Sublicensee, distributor or other
customer is sued by a third party charging infringement of patent rights that
dominate a claim of the Patent Rights or that cover the development,
manufacture, use, distribution or sale of a Licensed Product, Licensee will
promptly notify SKCC. As between the parties to this Agreement, [*] will be
entitled to control the defense in any such action(s) and [*]. If Licensee is
required to pay a royalty or other amount to a third party to make and/or sell a
Licensed Product as a result of a final judgment or settlement, [*].
6.3 Cooperation. In any suit, action or other proceeding in connection
with enforcement and/or defense of the Patent Rights, [*]. Upon the request of
and, at the expense of [*] shall make available at reasonable times and under
appropriate conditions all relevant personnel, records, papers, information,
samples, specimens and other similar materials [*]. Any such cooperation
provided by [*] shall be subject to reimbursement by [*] for reasonable
out-of-pocket expenses.
ARTICLE 7
INDEMNIFICATION
Licensee shall defend, hold harmless and indemnify SKCC, its officers,
directors, employees and agents from and against amounts paid to third parties
as a result of any claims, liabilities, expenses (including reasonable
attorneys' fees), demands, or causes of action whatsoever caused by, or arising
out of, or resulting from, the exercise or practice of the rights and license
granted under this Agreement by Licensee; provided that (a) Licensee receives
prompt notice of any such claim, demand or cause of action, (b) Licensee shall
not be obligated with respect to any settlement unless Licensee consents in
writing to such settlement, and (c) Licensee shall have the exclusive right to
defend any such claim, demand or cause of action.
ARTICLE 8
USE OF SKCC NAME
Except as required by law or in the normal course of business
identification, neither Licensee or SKCC shall issue any press release or other
public statements in connection with this Agreement
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<PAGE> 11
intended for use in the public media in a manner suggesting any endorsement by
the other of Licensee or SKCC, respectively, without the approval of such other
party, which approval shall not be unreasonably withheld.
ARTICLE 9
PATENTS AND INVENTIONS
9.1 Prosecution by[*]. [*] shall have the right, at its option, to
control the filing for, prosecution and maintenance of the Patent Rights. If [*]
elects not to control the filing for, prosecution and maintenance of the Patent
Rights, [*] shall have the right to do so at its expense. As used herein,
"prosecution and maintenance" of patents and patent applications shall be deemed
to include, without limitation, the conduct of interferences or oppositions,
and/or requests for re- examinations, reissues or extensions of patent terms.
[*] reasonably informed as to the status of the Patent Rights. [*] in a timely
manner concerning (i) the scope and content of all patent applications within
the Patent Rights, and (ii) content of and proposed responses to official
actions of the United States Patent and Trademark Office and foreign patent
offices during the prosecution of any patent applications within the Patent
Rights. For purposes of this Section 9.1, "timely" shall mean sufficiently in
advance of any decision by [*] or any deadline imposed upon the written response
by [*] so as to allow [*] to meaningfully review such decision or written
response and also provide comments to [*] in advance of such decision or
deadline to allow comments of [*] with respect to the Patent Rights to be
considered and incorporated into [*] decision or written response. [*] of any
election not to pursue the prosecution or maintenance of a patent application or
patent within the Patent Rights reasonably in advance of any applicable
deadlines.
9.2 Payments by [*].
9.2.1 From and after the Effective Date, [*] for all
reasonable costs associated with prosecuting and maintaining the patents within
the Patent Rights; provided, that [*] prior approval shall be required for any
costs in excess of [*], other than any previously approved costs, which approval
shall not be withheld unreasonably. If [*] for the prosecution and maintenance
of an application or patent within the Patent Rights, in any country it shall
promptly notify [*]. If [*] with respect to an application or patent within the
Patent Rights in [*] the subject patent or patent application, respectively,
shall cease to be within the Patent Rights in such country for purposes of this
Agreement. If [*] with respect to an application or patent within the Patent
Rights in any country other than those listed in the preceding sentence, the
license granted to Licensee under such application or patent (as the case may
be) shall [*].
9.2.2 It is understood that a potential exists that subject
matter covered by the Patent Rights may overlap with subject matter covered by
certain other patent rights owned or controlled by Licensee. Although the
parties are not aware of the extent of such overlap, if any, as of the Effective
Date, in the course of prosecuting the patents it is anticipated that such an
overlap may become
-11-
<PAGE> 12
known. Both SKCC and Licensee desire to resolve any such issues amicably, and
therefore agree to use good faith efforts to resolve, without the expense and
resources of formal adversary proceedings, any issues that may arise with
respect to such overlapping subject matter. So that SKCC will not have an undue
advantage in resolving such issues, it is agreed [*].
ARTICLE 10
CONFIDENTIAL INFORMATION
The parties acknowledge and agree that Exhibits A and B contain
confidential information of SKCC. Licensee agrees not to use such confidential
information except as expressly authorized in this Agreement or the Research
Agreement, and shall use reasonable efforts to prevent the disclosure of such
confidential information to third parties; provided, that Licensee may disclose
such confidential information to third parties if Licensee discloses such
confidential information with the same degree of protection that Licensee uses
when it discloses its own confidential information. Notwithstanding the
foregoing, Licensee shall not disclose the contents of Exhibit B to a third
party without SKCC's approval.
ARTICLE 11
GENERAL
11.1 Obligation to Exploit. Licensee shall [*] bring Licensed Products
to market and to meet the market demand therefor.
11.2 Complete Agreement. This Agreement, together with the Research
Agreement, constitutes the entire understanding and only agreement between the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, representations, agreements, and understandings, written or
oral, that the parties may have reached with respect to the subject matter
hereof. No agreements altering or supplementing the terms hereof may be made
except by means of a written document signed by the duly authorized
representatives of each of the parties hereto. It is understood that the
Research Agreement is separate and independent from this Agreement.
11.3 No Implied Obligations. Licensee's sole obligation to exploit the
Licensed Subject Matter is as set forth in Section 11.1. Nothing in this
Agreement shall be deemed to require Licensee to otherwise exploit the Licensed
Subject Matter nor prevent Licensee from commercializing products similar to or
competitive with a Licensed Product.
11.4 Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party, except to a party that
succeeds to all or substantially all of such party's business or assets relating
to this Agreement whether by sale, merger, operation of law or
-12-
<PAGE> 13
otherwise; provided that such assignee or transferee agrees in writing to be
bound by the terms and conditions of this Agreement. SKCC may assign its right
to receive payments hereunder upon prior written notice to Licensee.
11.5 Force Majeure. In the event either party hereto is prevented from
or delayed in the performance of any of its obligations hereunder by reason of
acts of God, war, strikes, riots, storms, fires, or any other cause whatsoever
beyond the reasonable control of the party, the party so prevented or delayed
shall be excused from the performance of any such obligation to the extent and
during the period of such prevention or delay.
11.6 Notices. Any notice or other communication required by this
Agreement shall be made in writing and given by prepaid, first class, certified
mail, return receipt requested, and shall be deemed to have been served on the
date received by the addressee at the following address or such other address as
may from time to time be designated to the other party in writing:
If to SKCC: David Wood
Sidney Kimmel Cancer Center
3099 Science Park Road
San Diego, CA 92121
If to Licensee: David G. Nance, President
Introgen Therapeutics, Inc.
301 Congress Avenue
Suite 2025
Austin, TX 78701
11.7 Compliance with Law. Licensee shall comply with all applicable
federal, state and local laws and regulations in connection with its activities
pursuant to this Agreement.
11.8 Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of Texas, without regard to
conflicts of laws principles.
11.9 Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement, or the existence, validity, breach or termination of
this Agreement, whether during or after its term, will be reasonably promptly
and finally settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, as modified or supplemented
below:
(a) The arbitration proceeding will take place in Austin,
Texas if a proceeding is brought by SKCC or in San Diego, California if a
proceeding is brought by Licensee.
-13-
<PAGE> 14
(b) The arbitral award will be the exclusive remedy of the
parties for all claims, counterclaims, issues or accounting presented or pled to
the arbitrators. The award will include reasonable attorneys fees and costs.
(c) Nothing in this Section 11.9 will prevent a party from
seeking injunctive relief against the other party from any judicial or
administrative authority pending the resolution of a dispute by arbitration.
11.10 No Waiver. A waiver, express or implied, by either SKCC or
Licensee of any right under this Agreement or of any failure to perform or
breach hereof by the other party hereto shall not constitute or be deemed to be
a waiver of any other right hereunder or of any other failure to perform or
breach hereof by such other party, whether of a similar or dissimilar nature
thereto.
11.11 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY BE
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY
BREACH OF THIS AGREEMENT; PROVIDED, THAT IF SKCC IS OBLIGATED TO PAY SUCH
DAMAGES TO THIRD PARTIES UNDER ARTICLE 7, LICENSEE SHALL BE LIABLE FOR SUCH
DAMAGES TO THE EXTENT PROVIDED IN ARTICLE 7.
11.12 Headings. Headings included herein are for convenience only, do
not form a part of this Agreement and shall not be used in any way to construe
or interpret this Agreement.
11.13 Severability. If any provision of this Agreement shall be found
by a court to be void, invalid or unenforceable, the same shall be reformed to
comply with applicable law or stricken if not so conformable, so as not to
affect the validity or enforceability of the remainder of this Agreement.
11.14 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement.
SIDNEY KIMMEL CANCER CENTER INTROGEN THERAPEUTICS, INC.
("SKCC") ("Licensee")
By:/s/ DAVID WOOD By:/s/ DAVID NANCE
------------------------------- -------------------------------------
Name: David Wood Name: David Nance
----------------------------- -----------------------------------
Title: Executive Vice President Title: President
---------------------------- ----------------------------------
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<PAGE> 15
EXHIBIT A
PATENT RIGHTS
[*]
<PAGE> 16
EXHIBIT B
EXISTING PATENT RIGHTS
[*]
<PAGE> 17
EXHIBIT C
MINIMUM TERMS AND CONDITIONS OF SUBLICENSE AGREEMENTS
Licensee shall include or reference in any sublicense agreement at a minimum
terms and conditions between Licensee and the Sublicensee substantially similar
to the following:
1. The terms contained in Sections 4.7, 4.8 and 11.7, Article 7, Article
8 and Article 10 of this Agreement; and
2. The following disclaimer:
SUBLICENSEE ACKNOWLEDGES AND AGREES THAT THE LICENSED SUBJECT
MATTER IS SUBJECT TO THE TERMS OF A LICENSE AGREEMENT (THE
"LICENSE AGREEMENT") BETWEEN SIDNEY KIMMEL CANCER CENTER
("SKCC") AND LICENSEE. SKCC MAKES NO REPRESENTATIONS AND
EXTENDS NO WARRANTIES TO SUBLICENSEE OF ANY KIND, EITHER
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
NONINFRINGEMENT OF THIRD PARTY PROPRIETARY RIGHTS,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
VALIDITY OF PATENT RIGHT CLAIMS, ISSUED OR PENDING.
<PAGE> 18
EXHIBIT D
PUBLICATIONS
1. USP# 5,166,320
Carrier System and Method for the Introduction of Genes into Mammalian
Cells
2. USP# 5,328,470
Treatment of Diseases by Site-Specific Instillation of Cells or
Site-Specific Transformation of Cells and Kits Therefore
3. USP# 5,252,479
Safe Vector for Gene Therapy
4. USP# 5,399,346
Gene Therapy
5. PCT# WO 93/10814
Anti-Cancer Immunotherapeutic Vector Constructs
6. PCT# WO 94/06910
Gene Therapy by Retroviral Vector with Tumor Suppressive Gene
7. PCT# WO 93/22443
In Vivo Homologous Sequence Targeting in Eukaryotic Cells
[*]
<PAGE> 1
EXHIBIT 10.22
================================================================================
COLLABORATION AGREEMENT
(p53 PRODUCTS)
BY AND BETWEEN
RHONE-POULENC RORER PHARMACEUTICALS, INC.
AND
INTROGEN THERAPEUTICS, INC.
OCTOBER 7, 1994
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. DEFINITIONS..................................................................................................1
2. NORTH AMERICAN DEVELOPMENT...................................................................................5
2.1 Early Stage Development Program...................................................................5
2.2 Collaboration Products............................................................................5
2.3 Development Activities............................................................................5
2.4 Reports and Records...............................................................................6
2.5 Review of Publication.............................................................................7
3. DEVELOPMENT COMMITTEE........................................................................................8
3.1 Development Committee.............................................................................8
3.2 Membership........................................................................................8
3.3 Development Committee Meetings....................................................................8
3.4 North American Plans and Budgets..................................................................8
3.5 Plans for Later Stage Development.................................................................9
3.6 Decision Making...................................................................................9
4. EARLY STAGE DEVELOPMENT PROGRAM FUNDING......................................................................9
4.1 Funding of Early Stage Development Program........................................................9
4.2 Term of Early Stage Development Program..........................................................10
4.3 Excess Early Stage Development Program Costs.....................................................10
4.4 Capital Equipment................................................................................10
4.5 Payments.........................................................................................10
5. COLLABORATION PRODUCT DEVELOPMENT OUTSIDE THE EARLY STAGE
DEVELOPMENT PROGRAM.........................................................................................11
5.1 RPRP Territory...................................................................................11
5.2 Co-Exclusive Territory...........................................................................11
5.3 Other Territory..................................................................................11
5.4 Use of Clinical Data.............................................................................11
5.5 Development Committee Review.....................................................................12
5.6 Further Studies..................................................................................12
6. EXCLUSIVITY.................................................................................................12
6.1 Option to Commercialize..........................................................................12
6.2 Exclusivity......................................................................................13
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
7. MARKETING RIGHTS............................................................................................13
7.1 RPRP Territory...................................................................................13
7.2 Co-Exclusive Territory...........................................................................13
7.3 North America....................................................................................13
7.4 Other Territory..................................................................................14
7.5 Sublicensees.....................................................................................14
7.6 Covenants........................................................................................14
8. ROYALTIES...................................................................................................14
8.1 Running Royalties................................................................................14
8.2 Royalty Offset...................................................................................15
9. THIRD PARTY ROYALTIES.......................................................................................17
9.1 RPRP Obligations.................................................................................17
9.2 Introgen Obligations.............................................................................17
9.3 North America....................................................................................17
9.4 Efforts to Obtain Sublicense Rights..............................................................18
10. PAYMENTS; BOOKS AND RECORDS.................................................................................18
10.1 Royalty Reports and Payments.....................................................................18
10.2 Payment Method...................................................................................18
10.3 Late Payment.....................................................................................18
10.4 Currency Conversion..............................................................................18
10.5 No Withholding Taxes.............................................................................19
10.6 Records; Inspection..............................................................................19
11. DUE DILIGENCE...............................................................................................19
11.1 Due Diligence....................................................................................19
12. MANUFACTURING RIGHTS........................................................................................19
12.1 RPRP Territory...................................................................................19
12.2 Co-Exclusive Territory...........................................................................19
12.3 North America....................................................................................2-
12.4 Other Territory..................................................................................2-
12.5 Supply Agreements................................................................................2-
13. LICENSE GRANTS..............................................................................................2-
13.1 Grant to RPRP....................................................................................2-
13.2 Grant to Introgen................................................................................21
13.3 Grant to Joint Venture...........................................................................21
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
13.4 Sublicenses......................................................................................21
13.5 Improvements by Introgen.........................................................................21
13.6 No Rights Beyond Collaboration Products..........................................................21
14. INTELLECTUAL PROPERTY.......................................................................................22
14.1 Ownership of Inventions..........................................................................22
14.2 Patent Prosecution...............................................................................22
14.3 Defense of Third Party Infringement Claims.......................................................23
14.4 Enforcement......................................................................................24
15. REPRESENTATIONS AND WARRANTIES..............................................................................24
15.1 Warranties.......................................................................................24
15.2 Disclaimer of Warranties.........................................................................25
15.3 Effect of Representations and Warranties.........................................................25
16. CONFIDENTIALITY.............................................................................................25
16.1 Confidential Information.........................................................................25
16.2 Permitted Disclosures............................................................................26
17. INDEMNIFICATION.............................................................................................26
17.1 Indemnification of Introgen......................................................................26
17.2 Indemnification of RPRP..........................................................................26
17.3 Procedure........................................................................................27
18. TERM AND TERMINATION........................................................................................27
18.1 Term.............................................................................................27
18.2 Termination for Cause............................................................................28
18.3 Termination for Convenience by RPRP..............................................................28
18.4 Effect of Breach or Termination..................................................................28
18.5 Survival.........................................................................................29
19. MISCELLANEOUS...............................................................................................30
19.1 Governing Law....................................................................................30
19.2 Force Majeure....................................................................................30
19.3 No Implied Waivers; Rights Cumulative............................................................30
19.4 Independent Research.............................................................................30
19.5 Independent Contractors..........................................................................30
19.6 Notices..........................................................................................30
19.7 Assignment.......................................................................................31
19.8 Modification.....................................................................................31
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
19.9 Severability.....................................................................................31
19.10 Non-Disclosure...................................................................................31
19.11 Entire Agreement.................................................................................32
19.12 Counterparts.....................................................................................32
19.13 Headings.........................................................................................32
19.14 Patent Marking...................................................................................32
19.15 Export Laws......................................................................................32
EXHIBITS
A - Existing Introgen Licensed Patents
B - European Countries
C - Initial Program Plan and Budget
</TABLE>
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<PAGE> 6
COLLABORATION AGREEMENT
(P53 PRODUCTS)
This AGREEMENT (the "Agreement"), effective as of October 7, 1994 (the
"Effective Date"), is made by and between Rhone-Poulenc Rorer Pharmaceuticals
Inc., a Pennsylvania corporation having offices at 500 Arcola Road, P.O. Box
1200, Collegeville, Pennsylvania 19426-0107 ("RPRP"), and Introgen Therapeutics,
Inc., a Delaware corporation having offices at 301 Congress Avenue, Suite 2025,
Austin, Texas 78701 ("Introgen").
RECITALS
A. Introgen has established expertise related to gene therapy and RPRP
has established a major research program in the field of gene therapy for the
treatment of human cancer.
B. The parties desire to establish a collaborative relationship to
develop and commercialize novel gene therapy products as set forth below.
C. Introgen and RPRP's parent, Rhone-Poulenc Rorer Inc., have also
entered into a Stock Purchase Agreement of even date herewith, pursuant to which
RPRP is acquiring Introgen Preferred Stock.
NOW THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:
1. DEFINITIONS
1.1 "Affiliate" shall mean any entity which controls, is controlled or
is under common control with RPRP or Introgen. An entity shall be regarded as in
control of another entity if it owns or controls at least thirty-five percent
(35%) of the shares of the subject entity entitled to vote in the election of
directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority). A "Controlled Affiliate"
shall mean an entity that is controlled by a party wherein such percentage is at
least fifty percent (50%).
1.2 "Co-Exclusive Territory" shall mean Japan, North and South Korea,
Taiwan, the People's Republic of China and India.
1.3 "Collaboration Products" shall mean the gene therapy products
within the Field which are being developed by Introgen and RPRP from time to
time pursuant to the Early Stage Development Program, as specified in the
Program Plan and Budget in effect at the time, and as further defined in
Section 6.1 below.
<PAGE> 7
1.4 "Development Committee" shall have the meaning set forth in Article
3 herein.
1.5 "Early Stage Development" shall mean that part of the Early Stage
Development Program comprising the research, preclinical and clinical activities
with respect to approved Collaboration Products in North America through the
completion of Phase I clinical trials.
1.6 "Early Stage Development Program" shall have the meaning set forth
in Section 2.1 herein.
1.7 "Early Stage Development Program Costs" shall mean all direct and
indirect costs incurred by Introgen in conducting the Early Stage Development
Program in accordance with the applicable approved Program Plan and Budget.
1.8 "Field" shall mean gene therapy products for the treatment or
prevention of disease through the delivery to patient's cells of a gene or
portion thereof, including without limitation, transcriptional or translational
control sequences, via in vivo viral vectors and/or non-viral delivery systems,
which result in [*]
1.9 "FDA" means the U.S. Food and Drug Administration.
1.10 "IND" shall mean an investigational New Exemption for a
Collaboration Product, as defined in the U.S. Food, Drug and Cosmetic Act and
the regulations promulgated thereunder.
1.11 "Introgen Technology" shall mean Introgen Patents, Introgen
Licensed Patents and Introgen Know-how.
1.11.1 "Introgen Patents" shall mean all patents and
reissues, renewals and extensions thereof, and patent applications therefor, and
any divisions, continuations, in whole or in part, thereof, which claim a
process, composition of matter, or method of treatment used in the manufacture,
sale or use of a Collaboration Product and that are owned by Introgen or its
Controlled Affiliates during the term of this Agreement.
1.11.2 "Introgen Know-How" shall mean confidential
information and materials, including, but not limited to, pharmaceutical,
chemical, biological and biochemical products, technical and non-technical data,
and information relating to the results of tests, assays, methods and processes,
and drawings, plans, diagrams, specifications and/or other documents containing
said information and data, discovered, developed or acquired by Introgen or its
Controlled Affiliates during the term of this Agreement to the extent such
relates to the manufacture, sale or use of a Collaboration Product and to the
extent that Introgen or its Controlled Affiliates have the right to license or
sublicense the same.
1.11.3 "Introgen Licensed Patents" shall mean all patents
and reissues, renewals and extensions thereof, and patent applications therefor,
and any divisions, continuations, in whole or in part, thereof, which claim a
process, composition of matter, or method of treatment used in the manufacture,
sale or use of a Collaboration Product, that are the subject of a license or
license option
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to Introgen or its Controlled Affiliates, in each case to the extent that
Introgen or its Controlled Affiliate has the right to license or sublicense the
same during the term of this Agreement. Introgen Licensed Patents as of the
Effective Date are listed on attached Exhibit A.
1.12 "Joint Venture" shall have the meaning set forth in Section 7.3.1
of this Agreement.
1.13 "Later Stage Clinical Development" shall mean all clinical
research and regulatory affairs necessary to obtain all governmental approvals
required to market each Collaboration Product for a particular indication in
North America following the Early Stage Development for such Collaboration
Product for such indication.
1.14 "Manufacturing Costs" with respect to units of a Collaboration
Product means (i) those costs associated with manufacture of such units which
would be viewed by the manufacturing party's independent auditor as costs that
could be capitalized on the balance sheet as inventory and would include all raw
material (including normal scrap) and actual direct labor costs and a proper
accounting of actual manufacturing overhead allocated to such units. It would
exclude any excess capacity, excess direct labor inefficiencies, unusable
material, or any other costs related to such units not deemed to add value or
not deemed to be ongoing in the production process for such product; and (ii)
with respect to portions acquired from a non-Affiliate vendor, the amounts paid
to the vendor.
1.15 "Net Sales" shall mean the total amount invoiced to third parties
in connection with sales or use of Collaboration Products by RPRP, its
Affiliates or its permitted Sublicensees, less the following reasonable and
customary accrual-basis deductions to the extent applicable to such invoiced
amounts in accordance with U.S. generally accepted accounting practices, as
consistently applied by both RPRP and RPR Inc. for financial reporting purposes:
(i) all trade, cash and quantity credits, discounts, refunds or rebates
(including without limitation Medicaid rebates); (ii) amounts for claims,
allowances or credits for returns; retroactive price reductions; chargebacks;
and (iii) packaging, handling fees and prepaid freight, sales taxes, duties and
other governmental charges (including value added tax), but excluding what is
commonly known as income taxes), in each case if charged separately on the
invoice and paid by the customer. For the removal of doubt, Net Sales shall not
include sales by RPRP to its Affiliate or its permitted Sublicensees for resale.
A "sale" shall also include a transfer or other disposition for consideration
other than cash, in which case such consideration shall be valued at the fair
market value thereof. Transfers or dispositions for charitable or promotional
purposes or for pre-clinical, clinical, regulatory or governmental purposes
prior to receiving marketing approval are not considered a "sale;" provided that
such transfers or dispositions are at a price less than [*] over RPRP's
Manufacturing Cost for the units so transferred or disposed.
1.16 "North America" shall mean Canada, the United States (and its
territories and possessions including the commonwealth of Puerto Rico) and
Mexico.
1.17 "PLA" and "ELA" means a Product License Application and an
Establishment License Application, respectively, as defined in the Public Health
Service Act, Biological Products and the regulations promulgated thereunder,
viz. 21 CFR Part 600, or its foreign equivalents.
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1.18 "Phase I" means Phase I clinical trials as prescribed by
applicable FDA Regulations.
1.19 "Product Plan and Budget" shall have the meaning set forth in
Section 3.4.2 below.
1.20 "Program Plan and Budget" shall have the meaning set forth in
Section 3.4.1 hereof.
1.21 "RPR Inc." shall mean Rhone-Poulenc Rorer, Inc., a Pennsylvania
Corporation.
1.22 "RPRP Development Costs" shall have the meaning set forth in
Section 7.3.3 below.
1.23 "RPRP Technology" shall mean RPRP Patents, RPRP Licensed Patents
and RPRP know-how.
1.23.1 "RPRP Patents" shall mean all patents and reissues,
renewals and extensions thereof, and patent applications therefor, and any
divisions, continuations, in whole or in part, thereof, which claim a process,
composition of matter, or method of treatment used in the manufacture, sale or
use of a Collaboration Product and that are owned by RPRP, RPR Inc. or their
Controlled Affiliates during the term of this Agreement.
1.23.2 "RPRP Know-How" shall mean confidential information
and materials, including, but not limited to, pharmaceutical, chemical,
biological and biochemical products, technical and non-technical data, and
information relating to the results of tests, assays, methods and processes, and
drawings, plans, diagrams, specifications and/or other documents containing said
information and data, discovered, developed or acquired by RPRP or its
Controlled Affiliates during the term of this Agreement to the extent such
relates to the manufacture, sale or use of a Collaboration Product and to the
extent that RPRP, RPR Inc. or their Controlled Affiliates have the right to
license or sublicense the same.
1.23.3 "RPRP Licensed Patents" shall mean all patents and
reissues, renewals and extensions thereof, and patent applications therefor, and
any divisions, continuations, in whole or in part, thereof, which claim a
process, a composition of matter, or method of treatment used in the
manufacture, sale or use of a Collaboration Product, that are the subject of a
license or license option to RPRP, RPR Inc. or their Controlled Affiliates and
to the extent that RPRP, RPR Inc. or their Controlled Affiliates have the right
to license or sublicense the same during the term of this Agreement.
1.24 "RPRP Territory" means those Eastern and Western European
countries set forth on Exhibit B hereto.
1.25 "Other Territory" shall mean [*]
1.26 "Sublicensee" shall mean, with respect to a particular
Collaboration Product, a third party to whom Introgen or RPRP has granted a
license or sublicense under the RPRP Technology and/or Introgen Technology to
make, use and sell such Collaboration Product. As used in this
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Agreement, "Sublicensee" shall also include a third party to whom Introgen or
RPRP has granted the right to distribute such Collaboration Product, provided
that such third party is responsible for the marketing and promotion of such
products within the applicable territory.
1.27 "Term of the Early Stage Development Program" shall be that period
of time described in Section 4.2 below.
2. NORTH AMERICAN DEVELOPMENT
2.1 Early Stage Development Program. Subject to the terms and
conditions set forth herein, RPRP and Introgen shall cooperate with respect to
the Early Stage Development of Collaboration Products in accordance with an
"Early Stage Development Program" for North America which shall be carried out
in accordance with a Program Plan and Budget prepared and approved on an annual
basis in accordance with Article 3.4 hereof. The Early Stage Development Program
shall include all of the approved Program Plans and Budgets in effect from time
to time. The activities conducted in connection with the Early Stage Development
Program will be overseen and administered by the Development Committee, pursuant
to Article 3 below. Introgen shall use its best efforts to conduct the Early
Stage Development in accordance with such Program Plan and Budget and within the
time schedules contemplated therein.
2.2 Collaboration Products. The Initial Collaboration Products to be
developed hereunder will contain or employ Introgen's Retroviral p53
Transduction Vector and/or its Adenoviral p53 Transduction Vector. From time to
time, upon agreement of RPRP and Introgen, new projects may be added to the
Early Stage Development Program to be developed as Collaboration Products. Such
projects may include RPRP or Introgen products. It is understood that RPRP may
terminate its support for the development for any Collaboration Product as
provided in Section 18.3.2 below or as otherwise agreed by the parties.
2.3 Development Activities.
2.3.1 Early Stage Development Program. Introgen will be
responsible for conducting, directly or through third parties, all development
of each new project and each Collaboration Product in North America through the
completion of Early Stage Development in accordance with the Program Plan and
Budget in effect from time to time. As soon as possible after completion of the
necessary preclinical studies required by the applicable Product Plan and Budget
for a Collaboration Product, Introgen shall be responsible for preparing, with
the cooperation of RPRP, a data package for each Collaboration Product
sufficient to meet IND requirements of the FDA.
2.3.2 Later Stage Clinical Development.
(a) In addition to the Early Stage Development
Program, RPRP and Introgen will cooperate in the Later Stage Clinical
Development of each Collaboration Product; provided, RPRP will be primarily
responsible for conducting all such Later Stage Clinical Development, at RPRP's
expense. Introgen shall be consulted and fully informed with respect to such
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Later Stage Clinical Development at all times through its representatives on the
Development Committee. All Later Stage Clinical Development shall be monitored
and managed by the Development Committee; [*].
(b) It is anticipated that RPRP will establish a
committee of independent experts (the "External Review Committee") to provide
advice with respect to Later Stage Clinical Development. The Chief Scientific
Officer of Introgen, or other designee of Introgen, if a clinician of recognized
stature, shall serve on and chair the External Review Committee; otherwise, RPRP
and Introgen shall agree on the chair of such External Review Committee. In any
event, Introgen shall have a representative on such External Review Committee.
(c) It is understood that additional preclinical
studies may be required following the completion of Early Stage Development with
respect to a Collaboration Product. The parties anticipate that, where
appropriate, such work will be performed by Introgen and reimbursed by RPRP, as
agreed from time to time by the Development Committee.
2.3.3 FDA Filings. Introgen shall be responsible for the
preparation and filing of all IND's in North America with respect to the
Collaboration Products, which shall be filed in Introgen's name; provided RPRP
shall have a reasonable opportunity to review and comment upon such filings in
advance of their filing. RPRP shall be responsible for all further submissions
to existing INDs once Later Stage Clinical Development has begun, provided that
Introgen is given a reasonable opportunity to review and comment upon such
submissions prior to the filing of such submissions. Introgen shall cooperate in
transferring to RPRP authority for such correspondence. RPRP, at its expense,
shall prepare all PLAs and ELA's for filing in North America with respect to
each Collaboration Product. All such PLA's and ELA's shall be filed in the names
of RPRP and Introgen, to the extent permitted by applicable FDA regulations
(taking into account the supply arrangements under Section 12.3. below), or in
such other manner as the Development Committee approves. In addition, RPRP shall
in all events have the right to file separately a PLA/ELA in its own name to
qualify, as a permitted supply source for the United States, its manufacturing
facility for the RPRP Territory (consistent with Section 12.3. below).
2.4 Reports and Records.
2.4.1 Records. Introgen and RPRP shall maintain records of
the Early Stage Development Program (or cause such records to be maintained) in
sufficient detail and in good scientific manner as will properly reflect all
work done and results achieved in the performance of the Early Stage Development
Program (including all data in the form required under any applicable
governmental regulations). Each party shall allow the other to have prompt
access to all materials and data generated on behalf of such party with respect
to each Collaboration Product at reasonable times and in a reasonable manner.
2.4.2 Introgen Reports. Introgen shall periodically, and not
less often than semi-annually during the term of this Agreement, provide the
Development Committee with a written report summarizing the progress of the
Early Stage Development performed by Introgen with respect
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to each Collaboration Product during the preceding calendar half-year. Unless
otherwise agreed, such reports shall be due on 28 February and 30 August of each
calendar year during the Early Stage Development Program.
2.4.3 RPRP Reports. RPRP shall periodically, and not less
often than semi-annually during the term of this Agreement, provide the
Development Committee with a written report summarizing the progress of the
Later Stage Clinical Development performed by RPRP with respect to each
Collaboration Product during the preceding calendar half-year. Unless otherwise
agreed, such reports shall be due on 28 February and 30 August of each calendar
year during the term of this Agreement.
2.5 Review of Publication. As soon as is practicable prior to the oral
public disclosure, and prior to the submission to any outside person for
publication of a manuscript describing the scientific data resulting from any
stage of the Early Stage Development Program or Later Stage Clinical
Development, Introgen or RPRP, as the case may be, shall disclose to the
Development Committee the disclosure or manuscript to be made or submitted, and
shall allow the Development Committee at least thirty (30) days to determine
whether such disclosure or manuscript contains subject matter for which patent
protection should be sought prior to publication or which the other believes
should be modified to avoid necessary regulatory or commercial difficulties.
With respect to publications by investigators or other third parties, such
publications shall be subject to review by the Development Committee under this
Section 2.5 to the extent that Introgen or RPRP (as the case may be) has the
right to do so.
2.5.1 Publication Rights. After the expiration of thirty
(30) days from the date of mailing such disclosure or manuscript, unless
Introgen or RPRP has received from the other the written notice specified below,
the authoring party shall be free to submit such manuscript for publication or
to publish the disclosed research results in any manner consistent with academic
standards.
2.5.2 Delay of Publication. Prior to the expiration of the
thirty (30) day period specified in this Section 2.5, the Development Committee
may notify the submitting party of its determination that such oral presentation
or manuscript contains objectionable material or material that consists of
patentable subject matter for which patent protection should be sought. The
notified party shall withhold its proposed public disclosure and confer with the
Development Committee to determine the best course of action to take in order to
modify the disclosure or to obtain patent protection. After resolution of the
regulatory or commercial issues, or the filing of a patent application or due
consideration as to whether a patent application can reasonably be filed, the
submitting party shall be free to submit the manuscript and/or make its public
oral disclosure. If the submitting party declines to file an appropriate patent
application pursuant to the request of the Development Committee, then either
Introgen or RPRP may undertake to file such application in accordance with
Article 14 below.
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3. DEVELOPMENT COMMITTEE
3.1 Development Committee. RPRP and Introgen will establish a
Development Committee to oversee, review and coordinate the development of
Collaboration Products worldwide, including the conduct of the Early Stage
Development Program and Later Stage Clinical Development in North America.
3.2 Membership. The Development Committee shall be comprised of an
equal number of representatives from each of RPRP and Introgen, selected by such
parties. The exact number of such representatives shall be three (3) for each of
RPRP and Introgen, or such greater number as the parties may agree. Introgen and
RPRP may replace its Development Committee representatives at any time, with
written notice to the other party. From time to time, the Development Committee
may establish subcommittees to oversee particular projects or activities, and
such subcommittees will be constituted as the Development Committee agrees.
3.3 Development Committee Meetings. During the term of this Agreement,
the Development Committee shall meet every two months, or more often as agreed
by the parties, in Houston, Texas, or such other location as the parties agree.
The parties agree that at least two (2) meetings of the Development Committee
per full calendar year will be held at RPRP's facilities. At its meetings, the
Development Committee will (i) formulate and review the Early Stage Development
Program objectives, (ii) monitor the progress of the Early Stage Development
Program toward those objectives, (iii) review and approve the Program Plan and
Budget, and Product Plans and Budgets, pursuant to Section 3.4 of this
Agreement, and (iv) monitor the progress of both Early Stage Development and
Later Stage Clinical Development. With the consent of the parties, other
representatives of Introgen or RPRP or their Affiliates or Sublicensees, may
attend Development Committee meetings as non-voting observers. With respect to
matters relating to Early Stage Development, Introgen's lead representative
shall chair meetings of the Development Committee, and with respect to matters
relating to Later Stage Clinical Development, RPRP's lead representative shall
chair such meetings. The party whose representatives chair a meeting with
respect to particular matters shall be responsible for preparing the agenda and
minutes for such meetings.
3.4 North American Plans and Budgets.
3.4.1 Program Plan and Budget. Introgen shall be responsible
for preparing reasonably detailed plans and budgets on an annual basis for the
"Program Plan and Budget" through which the Early Stage Development Program will
be carried out. The Program Plan and Budget shall specify the research
objectives and work plan activities of the Early Stage Development Program
research of both parties, and the headcounts and other costs and expenses of
Introgen, including consultants and third party contractors, in connection with
the Early Stage Development Program.
3.4.2 Product Plans and Budgets. In connection with the
Program Plan and Budget, Introgen shall be responsible for developing individual
Product Plans and Budgets with respect to Early Stage Development for each
particular Collaboration Product, which shall contain the research objectives
and work plan activities, headcounts and other costs and expenses with
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respect to each such Collaboration Product (each a "Product Plan and Budget").
Such individual Product Plans and Budgets shall be incorporated into and be a
part of the annual Program Plan and Budget. Following Early Stage Development
with respect to a Collaboration Product, RPRP will be responsible for developing
individual Product Plans and Budgets for Later Stage Clinical Development
pursuant to Section 2.3.2 and 3.5 below.
3.4.3 Annual Review. Attached hereto as Exhibit C is the
initial Program Plan and Budget, which shall be fixed for the period from the
Effective Date through 30 December 1995, unless otherwise agreed. Beginning in
1995, by August 1 of each year during the Early Stage Development Program,
Introgen shall submit to the Development Committee a proposed Program Plan and
Budget for the Early Stage Development Program for the following calendar year.
The Development Committee shall review such proposal as soon as possible and
shall establish and approve no later than October 31 of such year the final
Program Plan and Budget for the next succeeding year.
3.4.4 Periodic Reviews. The Development Committee shall
review the Program Plan and Budget on an ongoing basis and may make changes to
the Program Plan and Budget then in effect; provided, however, the Program Plan
and Budget in effect for a year shall not be modified except as approved by the
Development Committee.
3.5 Plans for Later Stage Development. Concurrently with the submission
and establishment of Product Plans and Budgets for the Early Stage Development
to be conducted under the Early Stage Development Program in accordance with
Section 3.4 above, RPRP shall submit to the Development Committee an outline of
the Product Plan and Budget for Later Stage Clinical Development for each
Collaboration Product in North America. Following RPRP's election to proceed
with Later Stage Clinical Development of a Collaboration Product under Section
6.1 below, RPRP shall submit a reasonably detailed Product Plan and Budget for
such Later Stage Development, and shall keep the Development Committee
reasonably informed as to any material changes to such Product Plan and Budget.
The Development Committee shall review and discuss such Product Plans and
Budgets; [*].
3.6 Decision Making. Except as set forth in Section 2.3.2(a) and 3.5
above, decisions of the Development Committee shall be made by majority
approval. In the event that a deadlock arises within the Development Committee,
the dispute will be referred to Introgen's president and RPRP's Biotech Division
President, who shall meet to resolve the dispute. If such dispute remains
deadlocked, the parties may submit such dispute to arbitration, on mutually
agreed terms.
4. EARLY STAGE DEVELOPMENT PROGRAM FUNDING
4.1 Funding of Early Stage Development Program. During the Term of the
Early Stage Development Program, subject to Sections 4.3 and 4.5 below, RPRP
shall pay to Introgen the budgeted Early Stage Development Program Costs set
forth in the applicable Program Plan and Budget. RPRP may elect to pay for Early
Stage Development Program Costs paid or accrued by Introgen in connection with
the Early Stage Development Program in excess of that provided for in
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the Program Plan and Budget, as approved by the Development Committee. Introgen
shall apply all such funds paid by RPRP toward the Early Stage Development
Program in accordance with the Program Plan and Budget.
4.2 Term of Early Stage Development Program. Subject to Section 18.3
below, the Term of the Early Stage Development Program shall continue from the
Effective Date until October 1, 1997 or such later date as the parties may
agree.
4.3 Excess Early Stage Development Program Costs. Unless otherwise
agreed by the parties, Introgen shall not be obligated to incur nor shall RPRP
be obligated to pay Early Stage Development Program Costs in connection with the
Early Stage Development Program beyond amounts provided for in the approved
Program Plan and Budget.
4.4 Capital Equipment. The Program Plan and Budget may include
reasonable depreciation charges or lease expenses for certain capital equipment
to be purchased or leased by Introgen for use in connection with the Early Stage
Development Program. It is understood that Introgen will be the owner of all
capital equipment purchased by Introgen in connection with the Early Stage
Development Program, whether or not separately identified in the Program Plan
and Budget.
4.5 Payments. Promptly following the Effective Date, and prior to the
beginning of each calendar quarter during the Term of the Early Stage
Development Program, the Development Committee shall approve a spending forecast
for the next quarter, consistent with the Program Plan and Budget then in
effect. On or before October 15, 1994, and the first day of each subsequent
calendar quarter during the Term of the Early Stage Development Program, RPRP
shall pay to Introgen the amount of the approved forecasted amount; provided
that if for any reason the Development Committee does not approve a forecasted
amount prior to the due date, RPRP shall pay to Introgen the amount budgeted for
the quarter in the Program Plan and Budget them in effect. Within thirty (30)
days following the end of each quarter during the Term of the Early Stage
Development Program, Introgen shall provide to RPRP a summary of the Early Stage
Development Program Costs actually incurred by Introgen during such quarter. If
the actual development expenses incurred by Introgen in such quarter are less
than the amounts advanced by RPRP, then the difference will be carried forward
and credited to the next quarterly payment to be advanced. If such Early Stage
Development Program Costs were greater than the amount advanced by RPRP, then
RPRP agrees to pay the difference within thirty (30) days of receiving
Introgen's invoice, provided that in no event shall RPRP be obligated to
reimburse aggregate Program Development Costs in any calendar year in excess of
the aggregate Program Development Costs reflected in the Program Plan and Budget
for such year then in effect.
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5. COLLABORATION PRODUCT DEVELOPMENT OUTSIDE THE EARLY STAGE
DEVELOPMENT PROGRAM
5.1 RPRP Territory. RPRP shall be responsible for, and shall have the
exclusive right to conduct, all clinical development of Collaboration Products
within the Field in the RPRP Territory, at RPRP's own expense.
5.2 Co-Exclusive Territory. RPRP and Introgen shall each have the right
to develop the Collaboration Products within the Field in the Co-Exclusive
Territory, at their own expense, including the right to authorize Sublicensees
permitted under Section 7.5 and 13.4 below to conduct such development.
5.3 Other Territory. [*]
5.4 Use of Clinical Data.
5.4.1 Exchange. RPRP and Introgen shall each have access to
and the right to use for any purpose, including incorporation in any regulatory
filing, any preclinical and/or clinical data with respect to the Collaboration
Product developed by Introgen or RPRP in the course of the Early Stage
Development Program or otherwise (including in the Co-Exclusive Territory or the
RPRP Territory). Introgen and RPRP will provide to the other access to all
regulatory fillings made for clinical trial and marketing approval by Introgen
or RPRP or on their behalf in any country with respect to each Collaboration
Product, together with the underlying pre-clinical and clinical data, at
reasonable times and on reasonable notice, to the extent each has the right to
do so.
5.4.2 Sublicensees. Either Party may provide the IND package
prepared pursuant to Section 2.3.1, or any other clinical or preclinical data
provided under Section 5.4.1, to Sublicensees permitted under Section 7.5 and
13.4 below, except as set forth in this Section 5.4.2 and 5.4.3 below. Introgen
and RPRP shall each use commercially reasonable efforts to obtain from its
permitted Sublicensees reasonable, prompt access to all regulatory filings and
underlying data prepared by or for such Sublicensee with respect to a
Collaboration Product at reasonable times and in a reasonable manner, with the
right to provide such filings and/or access to the other of Introgen and RPRP
and their respective Sublicensees. However, if a prospective licensee is
unwilling to provide such access, the party hereto proposing to enter into the
sublicense (the "Sublicensing Party") may grant the sublicense, but the
Sublicensee shall not have access to clinical data or regulatory filings
provided by the other of Introgen or RPRP (or such other party's Sublicensees).
If the Sublicensee does not allow the Sublicensing Party to provide to the other
of Introgen or RPRP (and their Sublicensees) all clinical data and regulatory
filings made by or on behalf of the Sublicensee with respect to the sublicensed
Collaboration Product, the Sublicensing Party shall not provide to the
Sublicensee access to any such clinical data or regulatory filings of the other
of Introgen or RPRP (or its respective Sublicensees).
5.4.3 Japanese Data. [*].
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5.4.4 Regulatory Requirements. In all agreements with third parties or
Affiliates involving the development of clinical data for a Collaboration
Product, RPRP and Introgen shall require that such third parties and Affiliates
provide RPRP or Introgen (respectively) access to all such data, to the extent
that such data is required to be obtained from such third parties by the FDA
and/or the Commission of Proprietary Medicines of the European Community or the
European Medicines Evaluation Agency.
5.5 Development Committee Review. Notwithstanding Section 5.1 or 5.2,
all protocols for clinical trials to be conducted for Collaboration Products in
any territory shall be submitted for review by the Development Committee prior
to the initiation of such trials and filing such protocols with any health
regulatory agency; and RPRP and Introgen will be bound by the recommendations of
the Development Committee with respect to such protocols. In addition, Introgen
and RPRP shall submit their product registration plans to the Development
Committee for review and comment, and the recommendations of the Development
Committee with respect to such plans shall be binding on Introgen and RPRP. It
is understood, however, that this Section 5.5 only requires that each party
abide by such recommendations as are agreed by the Development Committee, and
does not require that the Development Committee approve protocols or
registration plans.
5.6 Further Studies. In the event that RPRP and Introgen agree that
there are preclinical and/or clinical studies that may be mutually beneficial
with respect to obtaining approval for any Collaboration Products outside North
America. Introgen and RPRP may agree to conduct such studies jointly, on
mutually agreed terms.
6. EXCLUSIVITY
6.1 Option to Commercialize. Following completion of Phase I clinical
trials for a Collaboration Product during the Term of the Early Stage
Development Program, Introgen shall provide to RPRP a report summarizing the
results of such Phase I trials. Within one hundred eighty (180) days following
its receipt of such report, RPRP shall notify Introgen whether RPRP wishes to
proceed with the Later Stage Clinical Development and commercialization of such
Collaboration Product as provided in this Agreement, taking into consideration
the recommendation of the Development Committee. In the event that RPRP does not
so notify Introgen within the one hundred eighty (180) day period, such product
shall cease to be a "Collaboration Product" for all purposes of this Agreement
(but such unelected product shall continue to be subject to Section 6.2 below).
As used in this Section 6.1, "completion of Phase I clinical trials" for a
particular Collaboration Product shall be deemed to occur when Introgen has
dosed all patients called for in the protocol for Phase I clinical trials filed
in the applicable IND, and has either completed all patient follow-up as defined
in such protocol or initiated the next phase of clinical trials. Following
RPRP's election to proceed with the further development and commercialization of
a Collaboration Product under this Section 6.1, the particular Collaboration
Product shall be as defined in the IND therefor filed with the FDA pursuant to
the Early Stage Development Program. After the Term of the Early Stage
Development Program, "Collaboration Products" shall include only those
Collaboration Products that completed Phase I clinical trials during the Term of
the Early Stage Development Program and with respect to which
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RPRP has exercised its right to further develop and commercialize the same
pursuant to this Section 6.1.
6.2 Exclusivity. During the period from the Effective Date until the
tenth anniversary thereof, neither Introgen nor RPRP, RPR Inc. or their
Controlled Affiliates, shall develop or commercialize a product within the
Field, except as a Collaboration Product pursuant to this Agreement.
Notwithstanding the foregoing, it is understood that Introgen may conduct
research and development work on potential products and technologies for use
within the Field outside the Early Stage Development Program; provided that
Introgen may not license to third parties or market any product within the Field
during the ten (10) year period specified in this Section 6.2, without RPRP's
prior approval.
7. MARKETING RIGHTS
7.1 RPRP Territory. RPRP shall have the exclusive right to market, sell
and distribute the Collaboration Products in the RPRP Territory for use within
the Field.
7.2 Co-Exclusive Territory. RPRP and Introgen shall each have the
co-exclusive right to market, sell and distribute Collaboration Products in the
Co-Exclusive Territory for use within the Field, and subject to Article 9, each
may retain any revenues it obtains in the Co-Exclusive Territory as the result
of such activities, without accounting to the other. Each of RPRP and Introgen
may market the Collaboration Product in the Co-Exclusive Territory under such
labels and tradenames as it may elect; provided that neither party shall have
any right to use tradenames or trademarks owned by the other party or by the
Joint Venture described in Section 7.3 below.
7.3 North America. Rights to market, sell and distribute the
Collaboration Products in North America shall be as follows:
7.3.1 Election to Form Joint Venture. Within [*] after the
filing of a PLA for a Collaboration Product in the United States, on request by
Introgen, the parties shall establish a joint commercial operation to market
such Collaboration Product within the Field throughout North America. Such
operation may be a joint venture company or such other arrangement as the
parties mutually agree (the "Joint Venture"). No later than ninety (90) days
after filing of a PLA for a Collaboration Product in the United States, Introgen
and RPRP shall meet to discuss RPRP's preliminary launch, marketing and sales
plans, launch budget projections, Introgen's possible contributions and RPRP's
Development Costs for such Collaboration Product.
7.3.2 Responsibilities and Profit. Introgen and RPRP will
equally share the costs and responsibilities for marketing the Collaboration
Product in North America through the Joint Venture, and will share any profits
from sales of such Collaboration Product in North America [*] basis; provided,
however that [*]. At the time Introgen elects to establish the Joint Venture,
the parties will agree upon the form of each party's contribution (whether
physical resources, funding or otherwise), and each party shall thereafter
provide the agreed contribution.
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7.3.3 RPRP Development Costs. As used in this Section 7.3,
"RPRP Development Costs" shall mean: (i) amounts [*] of such Collaboration
Product [*]; and (ii) [*] to such Later Stage Clinical Development in [*] (on a
proportionate basis based on the percentage of [*]); and (iii) [*] of the
amounts [*] the Collaboration Product outside North America, and [*],
Development Costs shall include [*] of the amounts set forth in (i) and (ii)
above. As used herein, a "pivotal study" shall mean a clinical trial conducted
outside North America that is required to be filed with the FDA in order to
obtain marketing approval in the United States and that is designated as a
"pivotal study" for such purposes by the Development Committee. RPRP Development
Costs ("Costs") shall be adjusted to then-current dollars using the change in
the Consumer Price Index, U.S. Cities Average for All Urban Consumers, as
published by the U.S. Department of Labor, Bureau of Labor Statistics from the
date the Costs are incurred until the date such costs are recouped.
7.3.4 RPRP Exclusive. In the event that Introgen does not
elect to enter into a Joint Venture for marketing of a Collaboration Product in
North America in accordance with 7.3.1 above, or subsequently elects not to
proceed with such Joint Venture, RPRP shall have the exclusive right to market,
sell and distribute such Collaboration Product in North America, subject to the
payment of the amounts set forth in Section 8.1 and Article 9.
7.4 Other Territory. [*]
7.5 Sublicensees. Introgen may authorize Sublicensees to market, sell
and distribute Collaboration Products in the Co-Exclusive Territory and other
territories in which Introgen has the right to market Collaboration Products
under this Agreement; provided that Introgen shall notify RPRP of any
prospective Sublicensee and consult with RPRP prior to so authorizing any such
Sublicensee. Introgen shall not authorize any such Sublicensee to authorize
further Sublicensees to market and sell a Collaboration Product. Unless
otherwise agreed by RPRP and Introgen, RPRP and the Joint Venture shall not
authorize any Sublicensee to market, sell or distribute any Collaboration
Product, provided, however, that either party may market, sell or distribute
through an Affiliate.
7.6 Covenants. It is understood that, with respect to any particular
Collaboration Product, the manufacture, use and sale of such Collaboration
Products by Introgen and/or RPRP in any country may not require a license under
intellectual property rights of the other. Accordingly, notwithstanding that
such a license may not be required, neither Introgen nor RPRP shall market, sell
or distribute a Collaboration Product anywhere in the world except in accordance
with this Agreement, including this Article 7.
8. ROYALTIES
8.1 Running Royalties. RPRP shall pay running royalties to Introgen [*]
of Net Sales by RPRP and its Affiliates (and its Sublicensees permitted under
Sections 7.5 above and 13.4 below) of Collaboration Products [*].
Notwithstanding the above, no royalty will be due to Introgen under this Article
8 with respect to such sales of a Collaboration Product in North America if a
Joint Venture is formed for such Collaboration Products pursuant to Section 7.3
above and such Joint Venture has not terminated.
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8.2 Royalty Offset. RPRP and Introgen understand and recognize that
RPRP is a party to consulting, license and/or research funding agreements (but
not agreements where third party non-government investors finance the research
or development of technology for RPRP) with other commercial and research
institutions ("collaborators") which agreements provide for RPRP's payment of
royalties on products manufactured, used or sold by RPRP based on the
contribution of said collaborators to the discovery and development of said
products. Consequently, it is foreseeable that a Collaboration Product developed
with Introgen may become subject to multiple royalty obligations as the result
of more than one collaborator's contribution to the development of, or ownership
of patent rights covering, the Collaboration Product. In order to avoid the
development of a dispute over royalty entitlements and to provide RPRP with the
incentive to invest in and commercialize products which might otherwise not be
commercialized due to excess royalty obligations, RPRP and Introgen agree that
the royalty rates applicable to any specific Collaboration Product pursuant to
the first sentence of Section 8.1 (the "Introgen Royalty") or pursuant to an
agreement with a third party collaborator not an Affiliate at the time of
agreement or the payment of a royalty (the "Third Party Royalties") may be
reduced to provide reasonable royalty income to each contributing collaborator.
RPRP shall make reasonable and diligent efforts to establish agreements and
amend its existing royalty-bearing agreements with said collaborators so as to
ensure the fair distribution of royalty income based on Collaboration Products
for which more than one royalty claim is made, provided the Introgen Royalty
paid to Introgen shall in no event be adjusted to [*] on a country by country
basis (notwithstanding any other provision of this Agreement). It is understood
that this Section shall not be invoked by RPRP as regards Introgen until the sum
of the Introgen Royalty and Third Party Royalties payable by RPRP for a
Collaboration Product ("Total Royalty") is greater than [*] on a country by
country basis. Thereafter, royalty reduction shall be applied equitably in
accordance with the formula in this Section 8.2, taking into account each
collaborator's minimum royalty rate, to reduce on a percentage basis the royalty
rates specified in all collaborator agreements having an applicable royalty
adjustment provision therein and thereby adjust, to the extent possible, RPRP's
Total Royalty burden to no more than [*] on a country by country basis.
(a) Royalty payment reductions shall be
calculated quarterly, based on the Total Royalties payable by RPRP with respect
to Net Sales for such quarter. Within ninety (90) days after the end of each
calendar year, RPRP and Introgen shall reconcile the calculation of royalty
reductions under this Section 8.2 for the preceding calendar year, based upon
the total Net Sales for such year and the Total Royalties with respect to such
Net Sales. If the amount deducted from the Introgen Royalty exceed the amount of
such reconciled reduction, the difference shall be paid to Introgen within
thirty (30) days; if the amount actually deducted from the Introgen Royalty is
less than the amount of such reconciled reduction, the difference may be applied
by RPRP as a credit against royalties owed to Introgen in the then-current
calendar year, in equal quarterly installments.
(b) Unless a more equitable procedure is agreed
to by all participating parties to whom RPRP owes a royalty on a Collaboration
Product, the reduction in the Introgen Royalty and each of the other Third Party
Royalties shall be calculated and applied to royalty payment obligations on a
country by country basis as follows:
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(i) Calculate the effective overall
Royalty rate for each collaborator (i.e., Introgen and each of
the other collaborators receiving Third Party Royalties) based
on total worldwide Net Sales for the quarter or year, as
applicable ("EFF RATE");
(ii) On a country by country basis,
total the EFF RATE of all collaborators ("TOTAL RATE");
(iii) On a country by country basis,
[*];
If [*] is greater than [*]:
(iv) Calculate the adjustable
portions of [*];
(v) Calculate [*];
(vi) Multiply the [*] for each
collaborator by the [*];
(vii) Subtract the product obtained
in (vi) from the [*] for each collaborator [*]; and
(viii) Calculate for each
collaborator their reduced royalty rate by adding the [*] on a
country by country basis.
(c) Notwithstanding the foregoing calculation,
in no event shall the Introgen Royalty with respect to a Collaboration Product
in any country be reduced by an amount greater than [*] of the amount by which
the Total Royalty for such Collaboration Product in such country exceeds [*]
(prior to any reduction under a provision substantially identical to Section
8.2(b) above). However, it is understood that at such time as third parties have
agreed to be bound by the calculation in this Section 8.2, and Introgen approves
the resulting impact on the Introgen Royalty, Introgen may agree to waive this
paragraph (c).
(d) At least ninety (90) days prior to entering
into any agreement that would require the payment of any royalty to a third
party with respect to a patent right or technology specifically intended for use
in a Collaboration Product, RPRP or Introgen (as the case may be) agrees to
notify the other of such fact and the party with whom it proposes to enter into
such agreement. Following such notice, RPRP and Introgen (respectively) agree to
keep the other reasonably informed as to the progress of its negotiations with
such third party, including the proposed principal terms of the agreement, as
they reasonably progress. It is understood that the terms of the agreement will
not have been finalized at the time of the initial notice under this Section
8.2(c), and that such notice is only to inform the other party of an intention
to enter into such an agreement.
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9. THIRD PARTY ROYALTIES
9.1 RPRP Obligations. RPRP shall be solely responsible for the payment
of any royalties, license fees and milestone or other payments due to third
parties under licenses or similar agreements necessary to allow the manufacture,
use or sale of any Collaboration Product worldwide, except as set forth in 9.3
below and except for royalties due as a result of sales of Collaboration
Products in the Co-Exclusive Territory or the Undesignated Territory by
Introgen, its Affiliates or Sublicensees (other than RPRP). RPRP's
responsibilities hereunder shall include the reimbursement of Introgen for
royalties owed by Introgen on sales of Collaboration Products pursuant to that
certain Patent and Technology License Agreement executed as of April 21, 1994,
between Introgen and the Board of Regents of the University of Texas System (the
"UT Agreement"). It is understood that Introgen intends to have in effect a
subsequent Patent and Technology License Agreement with the University of Texas,
dated as of July 20, 1994 (the "Restated UT Agreement"), which will supersede
the existing UT Agreement, and that when the Restated UT Agreement becomes
effective, the reference in the preceding sentence to the Patent and Technology
Agreement shall mean the Restated UT Agreement. In the event that Introgen
enters into any other license or agreement during the term of this Agreement for
which royalties, license fees or milestone or other payments would be due with
respect to a Collaboration Product, RPRP shall not be obligated to pay any
amounts due with respect to such license or agreement unless RPRP approves such
agreement or license and agrees to pay the same to the extent such relates to
the commercialization of Collaboration Products by RPRP, its Affiliates and
permitted Sublicensees. If RPRP does not so approve any such license or
agreement and agree to pay such amounts, the subject matter covered by such
license or agreement shall not be within the Introgen Technology for purposes of
this Agreement.
9.2 Introgen Obligations. If RPRP enters into a license or agreement
during the term of this Agreement for which royalties would be due with respect
to a Collaboration Product, Introgen shall not be obligated to pay any royalties
due with respect to such license or agreement unless Introgen approves such
license or agreement and agrees to pay the same to the extent such relates to
the commercialization of Collaboration Products by Introgen, its Affiliates and
Sublicensees (other than RPRP), and agrees to pay [*] with respect to the
Collaboration Products that are sold by Introgen, its Affiliates and
Sublicensees in the Co-Exclusive Territory. If Introgen does not so approve any
such license or agreement and agree to pay such the amounts, the subject matter
covered by such license or agreement shall not be within the RPRP Technology for
purposes of this Agreement. Introgen's portion of any such license fees,
milestone payments and other amounts (other than royalties) shall be payable on
the later of the date the amounts are payable by RPRP to the third party or the
first commercial sale of the Collaboration Product by Introgen, its Affiliate or
Sublicensee in the Co-Exclusive Territory.
9.3 North America. In the event that a Joint Venture is formed for a
Collaboration Product in North America pursuant to Section 7.3.1, all royalties
due third parties for the manufacture, use or sale of Collaboration Products in
North America, and [*] of all license fees, milestone payments and other
payments made to third parties under licenses or agreements with respect to
patent rights or technologies incorporated in the Collaboration Products, shall
be deducted from the resulting revenues to the Joint Venture prior to
determining the profits to be shared by
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Introgen and RPRP from such North American sales as set forth in Section 7.3.2;
provided that both RPRP and Introgen approved such license or agreement. If both
RPRP and Introgen do not approve such license or agreement, the patent rights or
technologies covered thereby shall not be included within the Introgen
Technology or RPRP Technology licensed to the Joint Venture.
9.4 Efforts to Obtain Sublicense Rights. If RPRP or Introgen undertakes
to acquire from a third party a technology or patent rights that are intended
for use or application with respect to a Collaboration Product, RPRP and
Introgen (as the case may be) shall use good faith efforts to acquire from such
third party the right to sublicense or otherwise make available to the other
party hereto, such technology or patent rights to the extent the same are to be
used in or applied to Collaboration Products. It is understood, however, that
neither party will be obligated to incur additional costs or hardship in
connection with such efforts to acquire such sublicensing or other rights in
accordance with this Section 9.4.
10. PAYMENTS; BOOKS AND RECORDS
10.1 Royalty Reports and Payments. After the first commercial sale of a
Collaboration Product on which royalties are required, RPRP agrees to make
quarterly written reports to Introgen within [*] after the end of each calendar
quarter, stating in each such report the number, description, and aggregate Net
Sales of the Collaboration Product sold during the calendar quarter upon which a
royalty is payable under Section 8.2 above. Concurrently with the making of such
reports, RPRP shall pay to Introgen royalties at the rate specified in Article
8. In addition, RPRP and Introgen each agree to submit to the other such reports
and payments as are payable to third parties and for which RPRP or Introgen (as
the case may be) are responsible under Article 9 above, at least ten (10) days
prior to the date such reports and payments are due to the third party.
10.2 Payment Method. All payments due under this Agreement shall be
made by bank wire transfer in immediately available funds to an account
designated by the recipient. All payments hereunder shall be made in U.S.
dollars.
10.3 Late Payment. Any payments due under this Agreement which are not
paid within ten (10) days of the date such payments are due shall bear interest
to the extent permitted by applicable law at the prime rate as reported by the
Chase Manhattan Bank, New York, New York, on the date such payment is due, plus
an additional two percent (2%), calculated on the number of days such payment is
delinquent. This Section 10.3 shall in no way limit any other remedies available
to any party.
10.4 Currency Conversion. If any currency conversion shall be required
in connection with the calculation of royalties hereunder, such conversion shall
be made using the selling exchange rate for conversion of the foreign currency
into U.S. Dollars, quoted for current transactions reported in The Wall Street
Journal for the last business day of the calendar quarter to which such payment
pertains.
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10.5 No Withholding Taxes. So that there will be no withholding taxes
applicable to payments by RPRP to Introgen under this Agreement, RPRP agrees
that all amounts to be paid to Introgen hereunder shall be paid directly by RPRP
from accounts of RPRP in the United States to the accounts of Introgen
designated under Section 10.3 above.
10.6 Records; Inspection. Each party and its Affiliates shall keep
complete, true and accurate books of account and records for the purpose of
determining the royalty amounts payable under this Agreement. Such books and
records shall be kept at the principal place of business of such party or its
Affiliate, as the case may be, for at least [*] following the end of the
calendar quarter to which they pertain. Such records will be open for inspection
during such [*] period by a representative or agent of the other party for the
purpose of verifying the royalty statements. Such inspections may be made no
more than once each calendar year, at reasonable times mutually agreed by
Introgen and RPRP. The auditing party's representative or agent will be obliged
to execute a reasonable confidentiality agreement prior to commencing any such
inspection. Inspections conducted under this Section 10.7 shall be at the
expense of the auditing party, unless a variation or error producing an increase
exceeding [*] of the amount stated for any period covered by the inspection is
established in the course of any such inspection, whereupon all costs relating
to the inspection for such period will be paid the party being audited.
11. DUE DILIGENCE
11.1 Due Diligence. RPRP shall use its best efforts to diligently
conduct the Later Stage Clinical Development with respect to at least one
Collaboration Product and to obtain regulatory approvals to market such
Collaboration Product in North America and the RPRP Territory. In addition, RPRP
shall use no less the reasonable efforts to complete Later Stage Clinical Trials
and obtain such approvals for all other Collaboration Products. After obtaining
regulatory approvals for any Collaboration Products in a county within the RPRP
Territory (and if a Joint Venture is not formed with respect to such
Collaboration Product, in a county within North America), RPRP shall launch such
Collaboration Product and use no less than reasonable efforts to promote and
meet the market demand therefor in such county.
12. MANUFACTURING RIGHTS
12.1 RPRP Territory. Except as otherwise provided herein, RPRP shall
have the exclusive right to manufacture Collaboration Products for sale within
the Field in the RPRP Territory.
12.2 Co-Exclusive Territory. Except as provided herein, RPRP and
Introgen shall each have the right to manufacture its respective requirements
for the Collaboration Products distributed in the Co-Exclusive Territory. At
Introgen's option and request, Introgen shall have the right to purchase
Collaboration Products from RPRP for sale in the Co-Exclusive Territory, at a
price equal to [*], such right being subject to RPRP's manufacturing capacity
after providing for RPRP's reasonably anticipated supply requirements. However,
in no case shall the [*] the average selling price of the Collaboration Products
in the country for which Introgen resells such Collaboration Products.
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12.3 North America. Subject to Section 12.3.3 below, Introgen shall
have the exclusive right to supply Collaboration Products for sale in North
America.
12.3.1 Manufacture and Supply. In the event that a Joint
Venture is formed under 7.3.1 above to market a Collaboration Product in North
America, Introgen shall have the exclusive right to supply such Collaboration
Product to the Joint Venture, and except as set forth below, the Joint Venture
shall purchase such Collaboration Product exclusively from Introgen. In the
event that a Joint Venture is not so formed with respect to a Collaboration
Product, Introgen shall have the exclusive right to supply such Collaboration
Product to RPRP for sale in North America, and RPRP shall purchase such
Collaboration Product exclusively from Introgen for sale in North America. At
its option, however, Introgen may forego such rights to manufacture for North
America, in which case RPRP may do so as provided in 12.3.3 below. It is
understood that Introgen may engage subcontractors with respect to the
manufacture of Collaboration Products for supply to the Joint Venture or RPRP.
12.3.2 Transfer Price. Introgen will supply Collaboration
Products to the Joint Venture or RPRP (as the case may be) for sale in North
America at a price equal to [*]; provided, however, that in no case shall the
margin portion of Introgen's transfer price [*] the average selling price of the
Collaboration Products in North America. For purpose of Collaboration Products
used for Later Stage Clinical Development the price will be equal to [*].
12.3.3 [*] In the event that [*] in North America, or [*]
quantities for sale in North America. With respect to the supply of the [*] to
the Joint Venture in such case, [*] receive a price equal to [*] provided,
however, that in no case shall the [*]. For the purpose of [*] used for Later
Stage Clinical Development the [*] be equal to [*].
12.4 Other Territory. For countries within the Other Territory, the
party having exclusive marketing rights in any such country shall also have
rights to manufacture Collaboration Products for sale in such country, unless
otherwise agreed by the parties.
12.5 Supply Agreements. Upon request by RPRP or Introgen, the parties
shall enter into a supply agreement on reasonable and customary terms with
respect to the supply arrangements contemplated in Sections 12.2 and 12.3 above.
13. LICENSE GRANTS
13.1 Grant to RPRP. Subject to the terms and conditions of this
Agreement, Introgen hereby grants to RPRP the following licenses and
sublicenses, as the case may be, under the Introgen Technology: (i) to use and
sell Collaboration Products in the Field within the RPRP Territory and the
Co-Exclusive Territory; (ii) to make and have made the Collaboration Products
anywhere in the world solely for sale and use in the Field within the RPRP
Territory and the Co-Exclusive Territory, and subject to Section 12.3.3 above,
in North America; and (iii) subject to Sections 7.3 and 12.3, to use and sell
Collaboration Products in the Field in North America. The foregoing licenses to
use and sell Collaboration Products under (i) and (iii) shall be: (a)
royalty-bearing and exclusive as to the RPRP Territory and North America, and
(b) royalty-free (except as provided in Article 9) and non-exclusive as to the
Co-Exclusive Territory. The license under (ii) to make Collaboration Products
shall be non-exclusive.
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13.2 Grant to Introgen. Subject to the terms and conditions of this
Agreement, RPRP hereby grants to Introgen the following licenses and
sublicenses, as the case may be, under the RPRP Technology: (i) to use and sell
the Collaboration Products in the Field in the Co-Exclusive Territory; (ii) to
make and have made the Collaboration Products anywhere in the world for use and
sale in the Field solely within North America and the Co-Exclusive Territory.
The licenses under (i) above shall be royalty-free and co-exclusive (with RPRP),
and the license under (ii) above shall be royalty-free (except as provided in
Article 9) and non-exclusive.
13.3 Grant to Joint Venture. In the event that a Joint Venture is
formed under Section 7.3 above to market a Collaboration Product in North
America and a license grant is required to operate, Introgen and RPRP shall each
grant and hereby grant to the Joint Venture an exclusive, royalty-free (except
as provided in Article 9) license under the Introgen Technology and the RPRP
Technology (respectively) to use and sell such Collaboration Product in North
America.
13.4 Sublicenses. Introgen shall have the right to grant sublicenses to
third parties of the rights granted by RPRP in Section 13.2 above (including the
co-exclusive rights granted to Introgen under 13.2(i)), provided, however,
Introgen will notify RPRP of any prospective Sublicensee and consult with RPRP
prior to granting any such sublicense. Introgen may not authorize any such
Sublicensee in the Co-Exclusive Territory to grant further sublicenses. Unless
agreed in writing by Introgen and RPRP, neither RPRP nor the Joint Venture may
sublicense the rights granted in Section 13.1 or 13.3 above or otherwise
authorize any Sublicensees to sell or market Collaboration Products.
13.5 Improvements by Introgen.
13.5.1 [*] to make, use and sell products incorporating a
[*] then following such [*] at least [*] shall notify [*] in reasonable detail
of the [*] is to be licensed. Upon request by [*] receipt of such a notice,
Introgen and RPRP shall meet as mutually agreed to [*] with respect to [*]
described in [*]. If the parties so agree, [*] for the mutually agreed [*] as
are agreed. Otherwise, [*] may proceed to [*] with respect to any [*] for the
[*] summarized in the notice [*] no further obligation under this Section 13.5.
13.5.2 "Program Inventions." As used in 13.5.1 above, a
"Program Invention" shall mean any invention that is first conceived and reduced
to practice by employees or contractors of Introgen in the course of performing
the Early Stage Development Program (i.e. as a part of work specifically
identified in a Program Plan and Budget), and for which RPRP has funded under
the Early Stage Development Program a substantial portion of the in vitro and in
vivo testing of such invention under the Development Program.
13.5.3 Period. Introgen's obligations under this Section
13.5 shall terminate five (5) years after the end of the Term of the Early Stage
Development Program.
13.6 No Rights Beyond Collaboration Products. Except as may be agreed
by RPRP and Introgen after the Effective Date, this Article 13, and Articles 7
and 12 above, shall not be deemed to grant to RPRP rights with respect to the
use, in products other than the Collaboration Products, of Introgen Technology
incorporated in such Collaboration Products; nor shall such provisions of this
Agreement be deemed to restrict Introgen's right to exploit any Introgen
Technology in products other than Collaboration Products (subject to Sections
13.5 and 6.2 above).
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14. INTELLECTUAL PROPERTY
14.1 Ownership of Inventions. Inventorship of inventions and other
intellectual property rights conceived and/or reduced to practice in connection
with the Early Stage Development Program shall be determined in accordance with
the patent and other intellectual property laws of the United States. Title to
all inventions and other intellectual property made solely by an Introgen
employee in connection with the Early Stage Development Program shall be owned
by Introgen. Title to all inventions and other intellectual property made solely
by an RPRP employee in connection with the Early Stage Development Program shall
be owned by RPRP. Title to all inventions and other intellectual property made
jointly by employees of Introgen and RPRP in connection the Early Stage
Development Program shall be jointly owned by RPRP and Introgen. Except as
expressly provided in this Agreement, it is understood that neither party shall
have any obligation to account to the other for profits, or to obtain any
approval of the other party to license or exploit a joint invention, by reason
of joint ownership of any such intellectual property.
14.2 Patent Prosecution.
14.2.1 Sole Inventions. Introgen or RPRP, as the case may
be, shall, at its expense, control the preparing, filing, prosecuting and
maintaining the patent applications and patents within the Introgen Technology
and RPRP Technology (respectively) worldwide, in such countries as it deems
appropriate, and conducting any interferences, re-examinations, reissues,
oppositions or requests for patent term extensions relating to the Introgen
Technology and RPRP Technology (respectively) using counsel of its choice.
14.2.2 Joint Inventions. To provide for the most sensible,
efficient and cost effective means to protect inventions that are owned jointly
by RPRP and Introgen under 14.1 above, patent counsel for Introgen and RPRP
shall consult with each other. As a result of such consultation, patent counsel
will be chosen to prepare, file, prosecute and maintain patent applications and
patents worldwide on such joint inventions, and the parties shall share the
costs thereof as reasonably agreed, based upon the relative benefits thereof to
each party.
14.2.3 Prosecution by Other Party. In the event that
Introgen or RPRP, as the case may be (the "Owner"), declines to file or, having
filed, declines to further prosecute and maintain any such patent applications
or patents in accordance with 14.2.1 above, or conduct any interferences or
oppositions, or request any re-examinations, reissues or extensions of patent
term with respect to the Technology it owns in accordance with 14.2.1 above, the
other party shall have the right to file, prosecute and maintain such patent
applications or patents or conduct such interferences, at its own expense, in
the name of the Owner in any country, in which event the Owner of such
Technology shall provide, at the other party's request and expense, all
reasonable assistance. If the Owner of such Technology declines or fails to take
any such actions, such Owner shall notify the other party hereto at least sixty
(60) days prior to the date the next action or filing is due to be taken with
respect to the subject patent application or patent. One-half of all such
expenses shall be deducted from the royalties or profits due to the Owner with
respect to the country in which the patent issues.
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14.2.4 Cooperation. Each of Introgen and RPRP shall keep the
other reasonably informed as to the status of such patent matters, including,
without limitation, by providing the other the opportunity to review and comment
on any documents which will be filed in any patent office, and providing the
other copies of any documents that such party receives from such patent offices,
including notice of all interferences, re-examinations, oppositions or requests
for patent term extensions. Introgen and RPRP shall each cooperate with and
assist the other in connection with such activities, at the others' request and
expense.
14.2.5 Third Party Rights. The foregoing provisions of
this Article 14 shall be subject to and limited by any agreements pursuant to
which Introgen and RPRP, as the case may be, acquired any particular Introgen
Technology or RPRP Technology. It is understood that such agreements may
require, for example, that the licensor party from whom Introgen or RPRP
acquired a license to such Technology control the prosecution of particular
patents and patent applications and does not permit access or an opportunity to
comment on the any documents filed in patent offices.
14.3 Defense of Third Party Infringement Claims.
14.3.1 Infringement Claims. If the production, sale or use
of any Collaboration Product pursuant to this Agreement results in a claim, suit
or proceeding alleging patent infringement against Introgen or RPRP (or their
respective Affiliates or Sublicensees), such party shall promptly notify the
other party hereto in writing setting forth the facts of such claim in
reasonable detail. The party subject to such claim shall have the exclusive
right to defend and control the defense of any such claim, suit or proceeding,
at its own expense, using counsel of its own choice, provided, however, it shall
not enter into any settlement which admits or concedes that any aspect of the
Technology of the other party hereto is invalid or unenforceable without the
prior written consent of such other party. Such party shall keep the other party
hereto reasonably informed of all material developments in connection with any
such claim, suit or proceeding.
14.3.2 Third Party Blocking Patent. If an unexpired third
party patent(s) covering the manufacture, use or sale of a Collaboration Product
exist(s) in a country where the Collaboration Product is being manufactured,
used or sold during the term of this Agreement, and if it should prove in RPRP's
judgment impractical or impossible for it or its sublicensees to continue the
manufacture, use or sale of Collaboration Product in such country without
obtaining a royalty-bearing patent license from such third party, then RPRP
shall have the following options:
(a) RPRP may terminate the continued manufacture
and/or sale of the Collaboration Product in such country upon sixty (60) days'
written notice to Introgen, with Introgen's written consent, whereupon RPRP
shall have no further rights in such country; or
(b) RPRP may obtain a license from such third
party and treat such third party as a "collaborator" for purposes of Section 8
and 9 for such country.
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14.4 Enforcement.
14.4.1 Solely Owned Technology. Subject to 14.4.2 below, in
the event that any Introgen Technology or RPRP Technology necessary for
manufacture, use and sale of a Collaboration Product is infringed or
misappropriated by a third-party in any country in which Introgen or RPRP has
rights to market such Collaboration Product, or is subject to a declaratory
judgment action arising from such infringement in such country, Introgen or RPRP
(respectively) shall promptly notify the other party hereto. The owner of such
Technology shall have the initial right (but not the obligation) to enforce the
Technology it owns, or defend any declaratory judgment action with respect
thereto, at its expense. In the event that the owner of such Technology fails to
initiate a suit to enforce such Technology against a commercially significant
infringement in the Field by a third party within one hundred eighty (180) days
of a request by the other party to do so if such infringement is occurring in a
territory in which the other party (the "Licensee") has the right to market the
subject Collaboration Product, such Licensee may initiate such suit in the name
of the owner of such Technology against such infringement, at the expense of
such Licensee. The party involved in any such claim, suit or proceeding, shall
keep the other party hereto reasonably informed of the progress of any such
claim, suit or proceeding. Any recovery by such party received as a result of
any such claim, suit or proceeding shall be used first to reimburse such party
for all expenses (including attorneys and professional fees) incurred in
connection with such claim, suit or proceeding. If the Party initiating the suit
was the owner of the subject Technology, all of the remainder shall be retained
by such owner, and if applicable, included in Net Sales for purposes of Article
8 if the infringing activities were in a country in which royalties would be due
on sales of a Collaboration Product. If the party initiating the suit is the
Licensee, twenty percent (20%) of the remainder shall be paid to the owner of
the subject Technology and eighty percent (80%) to the Licensee.
14.4.2 Jointly Owned Technology. Notwithstanding 14.4.1
above, in the event that any Technology that is jointly owned by RPRP and
Introgen under Section 14.1 of this Agreement is infringed or misappropriated by
a third party, Introgen and RPRP shall mutually agree upon whether, and, if so,
how, to enforce such Joint Technology or defend such Joint Technology in a
declaratory judgment or similar proceeding.
15. REPRESENTATIONS AND WARRANTIES
15.1 Warranties. Each party warrants and represents to the other
that (i) it has the full right and authority to enter into this Agreement and
grant the rights and licenses granted herein; (ii) it has not previously granted
and will not grant any rights in conflict with the rights and licenses granted
herein; (iii) and there are no existing or threatened actions, suits or claims
pending against it with respect to its Technology or its right to enter into and
perform its obligations under this Agreement and (iv) it has not previously
granted, and will not grant during the term of this Agreement, any right,
license or interest in or to its Technology, or any portion thereof, to
manufacture, sell or use a Collaboration Product that is in conflict with the
rights or licenses granted under this Agreement. RPRP further represents and
warrants that, as of the Effective Date, it is a wholly owned subsidiary of RPR
Inc., and that no other "person" (as defined in the Securities Exchange Act of
1934) owns beneficially more than eighty percent (80%) of the outstanding
capital stock of RPR Inc. Introgen
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further represents and warrants that a true and correct copy of the UT Agreement
and the Restated UT Agreement (as defined in Section 9.1 above) were provided to
RPRP by facsimile from Wilson Sonsini Goodrich & Rosati on September 28, 1994.
15.2 Disclaimer of Warranties. Introgen and RPRP specifically
disclaim any guarantee that the Early Stage or Later Stage Development Program
will be successful, in whole or in part. To the extent that Introgen and RPRP
have complied with Articles 2, 3, 4 and 14.2 hereof, the failure of the parties
to successfully develop Collaboration Products will not constitute a breach of
any representation or warranty or other obligation under this Agreement. Neither
Introgen nor RPRP makes any representation or warranty or guaranty that the
Program Plan and Budget will be sufficient for the successful completion of the
Early Stage Development Program. INTROGEN AND RPRP EXPRESSLY DISCLAIM ANY
WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT
TO THE EARLY STAGE OR LATER STAGE DEVELOPMENT PROGRAM AND THE INTROGEN AND RPRP
INTELLECTUAL PROPERTY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY, NONINFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE, VALIDITY
OF INTROGEN OR RPRP TECHNOLOGY, PATENTED OR UNPATENTED, AND NON-INFRINGEMENT OF
THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
15.3 Effect of Representations and Warranties. It is understood that
if the representations and warranties under this Article are not true and
accurate and Introgen or RPRP incurs liabilities, costs or other expenses as a
result of such falsity, Introgen or RPRP, as the case may be, shall indemnify,
defend and hold the other party harmless from and against any such liabilities,
costs or expenses incurred, provided that the indemnifying party receives prompt
notice of any claim against Introgen or RPRP, as the case maybe, resulting from
or related to such falsity, the cooperation of the indemnified party, as
requested in connection with any such claim, and the sole right to control the
defense or settlement thereof.
16. CONFIDENTIALITY
16.1 Confidential Information. Except as expressly provided herein,
the parties agree that, for the term of this Agreement and for five (5) years
thereafter, the receiving party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose any information
furnished to it by the other party hereto pursuant to this Agreement except to
the extent that it can be established by the receiving party by competent proof
that such information:
(a) was already known to the receiving party, other
than under an obligation of confidentiality, at the time of disclosure;
(b) was generally available to the public or otherwise
part of the public domain at the time of its disclosure to the receiving party;
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(c) became generally available to the public or
otherwise part of the public domain after its disclosure and other than through
any act or omission of the receiving party in breach of this Agreement; or
(d) was subsequently lawfully disclosed to the
receiving party by a person other than a party or developed by the receiving
party without reference to any information or materials disclosed by the
disclosing party.
16.2 Permitted Disclosures. Each party hereto may disclose another's
information to the extent such disclosure is reasonably necessary in filing or
prosecuting patent applications, prosecuting or defending litigation, complying
with applicable governmental regulations or otherwise submitting information to
tax or other governmental authorities, making a permitted sublicense or other
exercise of its rights hereunder or conducting clinical trials, provided that if
a party is required to make any such disclosure of another party's confidential
information, other than pursuant to a confidentiality agreement, it will give
reasonable advance notice to the latter party of such disclosure and, save to
the extent inappropriate in the case of patent applications, will use its best
efforts to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or otherwise). Notwithstanding the
foregoing, neither party shall disclose to third parties, clinical data or
regulatory filings received from Introgen or RPRP, except as permitted under
section 5.4 above.
17. INDEMNIFICATION
17.1 Indemnification of Introgen. RPRP shall indemnify each of
Introgen and its Affiliates and the directors, officers, employees, and counsel
of Introgen and such Affiliates and the successors and assigns of any of the
foregoing (the "Introgen Indemnitees"), pay on demand and protect, defend, save
and hold each Introgen Indemnitee harmless from and against, any and all
liabilities, damages, losses, settlements, claims, actions, suits, penalties,
fines, costs or expenses (including, without limitation, reasonable attorneys'
fees and other expenses of litigation) (any of the foregoing, a "Claim")
incurred by any Introgen Indemnitee, arising from or occurring as a result of
(a) activities performed by or on behalf of RPRP in connection with the Later
Stage Clinical Development, (b) activities performed by RPRP in connection with
the development of any Collaboration Product for commercialization outside North
America, (c) third party claims, including without limitation, product liability
claims relating to any Collaboration Products used, sold or otherwise
distributed by RPRP, its Affiliates or Sublicensees, (d) third party claims
relating to any Collaboration Products supplied by Introgen to the Joint
Venture; except in each case to the extent such claim is caused by the
negligence or intentional misconduct of an Introgen Indemnitee. For purposes of
this Section 17.1, it is understood that product liability claims that arise out
of the marketing or use of a Collaboration Product in a country after obtaining
governmental approval to market such Collaboration Product shall not be deemed
to "arise from or occur as a result of" the activities of RPRP described in (a)
above.
17.2 Indemnification of RPRP. Introgen shall indemnify each of RPRP
and its Affiliates and the directors, officers, employees, and counsel of RPRP
and such Affiliates and the successors and assigns of any of the foregoing (the
"RPRP Indemnitees"), pay on demand and protect, defend,
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save and hold each RPRP Indemnitee harmless from and against any and all
liabilities, damages, losses, settlements, claims, actions, suits, penalties,
fines, costs or expenses (including, without limitation, reasonable attorneys'
fees and other expenses of litigation) (any of the foregoing, a "Claim")
incurred by any RPRP Indemnitee, arising from or occurring as a result of (a)
activities performed by or on behalf of Introgen in connection with Early Stage
Development, (b) activities performed by Introgen in connection with the
development of any Collaboration Product for commercialization outside North
America, and (c) third party claims, including without limitation, product
liability claims, relating to any Collaboration Products used, sold or otherwise
distributed by Introgen, its Affiliates or Sublicensees (other than RPRP), or
(d) third party claims relating to any Collaboration Products supplied by RPRP
to Introgen for sale or use by Introgen, its Affiliates or Sublicensees outside
North America, except in each case to the extent such claim is caused by the
negligence or intentional misconduct by an RPRP Indemnitee. For purposes of this
Section 17.2, it is understood that product liability claims that arise out of
the marketing or use of a Collaboration Product in a country after obtaining
governmental approval to market such Collaboration Product shall not be deemed
to "arise from or occur as a result of" the activities of Introgen described in
(a) above.
17.3 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article shall promptly notify the other party (the
"Indemnitor") in writing of any loss, claim, damage, liability or action in
respect of which the Indemnitee or any of its Affiliates, Sublicensees or their
directors, officers, employees or agents intend to claim such indemnification,
and the Indemnitor shall have the right to participate in, and, to the extent
the Indemnitor so desires, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that Indemnitee shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
Indemnitor, if representation of such Indemnitee by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party represented by such counsel in such
proceeding. The indemnity agreement in this Article shall not apply to amounts
paid in settlement of any loss, claim, damage, liability or action if such
settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver written notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article but the
omission so to deliver written notice to the Indemnitor shall not relieve it of
any liability that it may have to any Indemnitee otherwise than under this
Article. The Indemnitee under this Article, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.
18. TERM AND TERMINATION
18.1 Term. This Agreement shall become effective as of the Effective
Date and, unless earlier terminated pursuant to the other provisions of this
Article, shall continue in full force and effect on a product-by-product and
country-by-country basis, until twelve and one-half years after the first
commercial sale of each Collaboration Product in such country.
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<PAGE> 33
18.2 Termination for Cause. Either party to this Agreement may
terminate this Agreement in the event the other party shall have materially
breached or defaulted in the performance of any of its material obligations
hereunder, and such default shall have continued for sixty (60) days after
written notice thereof was provided to the breaching party by the non-breaching
party. Any termination shall become effective at the end of such sixty (60) day
period unless the breaching party (or any other party on its behalf) has cured
any such breach or default prior to the expiration of the sixty (60) day period.
18.3 Termination for Convenience by RPRP.
18.3.1 Entire Agreement. RPRP shall have the right to
terminate this Agreement on one hundred eighty (180) days prior written notice
to Introgen, provided such notice of termination may not be given prior to
December 15, 1995.
18.3.2 Individual Products. Upon one hundred eighty (180)
days prior notice to Introgen, RPRP may terminate the development of any
particular Collaboration Product, and RPRP shall have no further payment
obligations with respect to the development of such Collaboration Product
following the effective date of such termination, except as set forth in
18.4.2(b) below. In such event, such product will cease to be a Collaboration
Product for all purposes of this Agreement, and RPRP shall have no further
rights with respect thereto; provided, however, that unless there is at least
one Collaboration Product remaining, such termination shall also be deemed a
termination of this Agreement under 18.3.1 above.
18.4 Effect of Breach or Termination.
18.4.1 Accrued Obligations. Termination of this Agreement
for any reason shall not release any party hereto from any liability which, at
the time of such termination, has already accrued to the other party or which is
attributable to a period prior to such termination nor preclude either party
from pursuing all rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement.
18.4.2 Wind-Down Expenses.
(a) Following any termination pursuant to Section
18.3.1, RPRP shall reimburse Introgen for all non-cancelable obligations or
commitments incurred by Introgen prior to RPRP's notice of such termination in
the course of performing the Early Stage Development Program, and expenses of
Introgen employees who had been engaged in the performance of the Early Stage
Development Program, which employee expenses are incurred by Introgen during the
six (6) months following the effective date of such termination (including
benefits, a reasonable allocation of overhead, and/or if the employees are
terminated by Introgen, reasonable severance pay); provided that RPRP shall be
responsible only for that portion of such employee expenses equal to the
percentage of such employees' time that was dedicated towards work under the
Early Stage Development Program during the six (6) months prior to RPRP's notice
of termination ("Employee Expenses").
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(b) Following any termination of development of any
particular Collaboration Product pursuant to Section 18.3.2, RPRP shall
reimburse Introgen for all non-cancelable obligations and commitments incurred
by Introgen with respect to such Collaboration Product prior to RPRP's notice of
such termination, and Employee Expenses (as described in 18.3.2(a) above)
incurred by Introgen during the six (6) months following the effective date of
such termination, to the extent that such employees are not reassigned to other
work to be performed under the Early Stage Development Program and funded by
RPRP. Introgen shall use reasonable efforts to mitigate these "wind-down"
expenses by redirecting such obligations and commitments, and employees, to the
furtherance of the continuing Early Stage Development Program and the
development of other Collaboration Products.
18.4.3 Return of Materials. Upon any termination of this
Agreement, Introgen and RPRP shall promptly return to the other all Confidential
Information received from the other (except one copy of which may be retained
for archival purposes).
18.4.4 Stock on Hand. In the event this Agreement is
terminated with respect to Introgen or RPRP for any reason, subject to Articles
8, 9 and Article 10, the terminated party and their respective Affiliates and
Sublicensees, shall have the right to sell or otherwise dispose of the stock of
any Collaboration Product subject to this Agreement then on hand.
18.5 Survival. Section 14.1 and Articles 10, 15, 16, 17, 18 and 19
of this Agreement shall survive expiration or termination of this Agreement for
any reason. In addition, for a period of three (3) years following any
termination of this Agreement prior to the end of the term specified in 18.1
above (other than pursuant to Section 18.2 for material breach by Introgen),
RPRP shall not develop or commercialize directly or through third parties a
product within the Field. In addition:
(a) In the event of a termination under 18.2 above
by reason of a material breach by Introgen, RPRP shall have an exclusive,
worldwide license, with the right to grant sublicenses, under the Introgen
Technology to make, have made, use and sell the Collaboration Products within
the Field, and in addition to the other Articles surviving as set for the above,
Article 9 and Sections 14.3 and 14.4 shall also survive.
(b) In the event of a termination under 18.2 above
by reason of a material breach by RPRP, or by reason of a termination of this
Agreement by RPRP under Section 18.3.1 hereof, Introgen shall have an exclusive,
worldwide license, with the right to grant sublicenses, under the RPRP
Technology to make, have made, use and sell the Collaboration Products, and in
addition to the other Articles surviving as set forth above, Article 9 and
Sections 14.3 and 14.4 shall also survive.
(c) In the event of a termination contemplated
under 18.5(a) or (b), the term "Collaboration Products" shall be deemed to also
include any product within the Field for which an IND was filed under the Early
Stage Development Program but for which Phase I was continuing and not completed
prior to the date of such termination.
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19. MISCELLANEOUS
19.1 Governing Law. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by and construed and enforced in
accordance with, the laws of the State of New York, without reference to
conflicts of laws principles.
19.2 Force Majeure. Nonperformance of any party (except for payment
obligations) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to perform
is beyond the reasonable control and not caused by the negligence or intentional
conduct or misconduct of the nonperforming party.
19.3 No Implied Waivers; Rights Cumulative. No failure on the part
of Introgen or RPRP to exercise and no delay in exercising any right under this
Agreement, or provided by statute or at law or in equity or otherwise, shall
impair, prejudice or constitute a waiver of any such right, nor shall any
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right.
19.4 Independent Research. Each party acknowledges and agrees that
Introgen and RPRP shall have the right to engage in their own research and
development activities outside the Field. Neither party shall, by virtue of this
Agreement, have any right, title or interest in or to such independent
activities or to the income or profits derived therefrom.
19.5 Independent Contractors. Nothing contained in this Agreement is
intended implicitly, or is to be construed, to constitute Introgen or RPRP as
partners in the legal sense. No party hereto shall have any express or implied
right or authority to assume or create any obligations on behalf of or in the
name of any other party or to bind any other party to any contract, agreement or
undertaking with any third party.
19.6 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be personally delivered or sent by
registered or certified mail, return receipt requested, postage prepaid, in each
case to the respective address specified below, or such other address as may be
specified in writing to the other parties hereto:
RPRP: Rhone-Poulenc Rorer Pharmaceuticals, Inc.
500 Arcola Road
P.O. Box 1200
Collegeville, Pennsylvania 19426-0107
Attn: President, Cell and Gene Therapy Division
with a copy to: Rhone-Poulenc Rorer, Inc.
500 Arcola Road
P.O. Box 2200
Collegeville, Pennsylvania 19426-0107
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<PAGE> 36
Attn: General Counsel
Introgen: Introgen Therapeutics, Inc.
301 Congress Ave.
Suite 2025
Austin, Texas 78701
Attn: President
with a copy to: Rodney Varner, Esq.
Wilson & Varner, L.L.P.
301 Congress Avenue
Austin, Texas 78701
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Kenneth A. Clark, Esq.
19.7 Assignment. This Agreement shall not be assignable by either
party to any third party hereto without the written consent of the other party
hereto; except Introgen may assign this Agreement without RPRP's consent to an
entity that acquires substantially all of the business or assets of Introgen,
and RPRP may assign this Agreement without Introgen's consent to an entity that
acquires substantially all of the business or assets of RPR Inc., in each case
whether by merger, acquisition or sale. The terms and conditions of this
Agreement shall be binding on and inure to the benefit of the permitted
successors and assigns of the parties.
19.8 Modification. No amendment or modification of any provision of
this Agreement shall be effective unless in writing signed by all parties
hereto. No provision of this Agreement shall be varied, contradicted or
explained by any oral agreement, course of dealing or performance or any other
matter not set forth in an agreement in writing and signed by all parties.
19.9 Severability. If any provision hereof should be held invalid,
illegal or unenforceable in any jurisdiction, all other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in order to carry out the intentions of the parties hereto as nearly
as may be possible. Such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction.
19.10 Non-Disclosure. Each of the parties hereto agrees: (i) not to
disclose to any third party the financial terms of this Agreement without the
prior written consent of each other party hereto, except to advisors, investors
and others on a need to know basis under circumstances that reasonably ensure
the confidentiality thereof, or to the extent required by law. Without
limitation upon any provision of this Agreement, each of the parties hereto
shall be responsible for the observance by its employees of the foregoing
confidentiality obligations. Notwithstanding the
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foregoing, the parties shall agree upon a press release to announce the
execution of this Agreement, together with a corresponding Q&A outline for use
in responding to inquiries about the Agreement; thereafter, RPRP and Introgen
may each disclose to third parties the information contained in such press
release and Q&A without the need for further approval by the other.
19.11 Entire Agreement. This Agreement together with the Stock
Purchase Agreement entered by the parties of even date herewith, constitute the
entire agreement, both written or oral, with respect to the subject matter
hereof, and supersede all prior or contemporaneous understandings or agreements,
whether written or oral, between Introgen and RPRP with respect to such subject
matter.
19.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together, shall constitute one and the same instrument.
19.13 Headings. Headings used herein are for convenience only and
shall not in any way affect the construction of or be taken into consideration
in interpreting this Agreement.
19.14 Patent Marking. Introgen and RPRP agree to mark and have their
Affiliates and Sublicensees mark all Collaboration Products they sell or
distribute pursuant to this Agreement in accordance with the applicable statute
or regulations in the country or countries of manufacture and sale thereof.
19.15 Export Laws. Notwithstanding anything to the contrary
contained herein, all obligations of Introgen and RPRP are subject to prior
compliance with United States export regulations and such other United States
laws and regulations as may be applicable, and to obtaining all necessary
approvals required by the applicable agencies of the government of the United
States. Introgen and RPRP shall cooperate with each other and shall provide
assistance to the other as reasonably necessary to obtain any required
approvals.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in duplicate originals as of the date first above
written.
INTROGEN THERAPEUTICS, INC. RHONE-POULENC RORER
PHARMACEUTICALS INC.
By: /s/ DAVID G. NANCE By: /s/ MICHEL DE ROSEN
------------------------------- --------------------------------
Name: David G. Nance Name: Michel de Rosen
------------------------------ -------------------------------
Title: President Title: President
----------------------------- ------------------------------
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EXHIBIT A
Existing Introgen Licensed Patents
[*]
<PAGE> 39
EXHIBIT B
European Countries
Albania Macedonia
Andorra Malta
Austria Moldavia
Belgium Monaco
Bosnia Montenegro
Bulgaria Netherlands
Croatia Norway
Czech Republic Poland
Denmark Portugal
Finland Rumania
France San Marino
Germany Slovakia
Greece Slovenia
Hungary Spain
Iceland Sweden
Ireland Switzerland
Italy Turkey
Liechtenstein United Kingdom
Luxembourg Vatican City
<PAGE> 40
EXHIBIT C
Initial Program Plan and Budget
[*]
<PAGE> 41
February 13, 1996
Thierry Soursac, M.D., Ph.D.
Rhone-Poulenc Rorer Pharmaceuticals, Inc.
500 Arcola Road
Collegeville, Pennsylvania 19426-0107
Dear Thierry,
In August 1995, Introgen reviewed with RPR and submitted to the Development
Committee a 1996 program budget under the p53 and K-ras collaboration agreements
between our companies (the "Collaboration Agreements"). However, no budget was
approved by the Development Committee prior to the October 31, 1995 deadline set
forth in the Collaboration Agreements. Under these circumstances, Section 3.6 of
the collaboration Agreements provides for approval of a budget by you and me as
presidents of our respective companies. Accordingly, I am submitting this letter
to you as confirmation of our agreement in accordance with that Section 3.6
regarding a 1996 budget.
Introgen's 1996 budget for pre-clinical research and clinical studies performed
under the terms of the Collaboration Agreements is [*]. Subject to the
discussion below, RPR will pay this amount to Introgen during 1996 for that
work. In addition, RPR has budgeted [*] for payment in 1996 under the terms of
the fourth closing set forth in the Series B Preferred Stock Purchase Agreement
and will pay that amount upon the occurrence of that fourth closing.
Collectively, those amounts total [*] and are hereinafter referred to as the
"[*] Budget."
The [*] Budget includes [*] for clinical studies. This clinical study budget is
based on (1) numerous assumptions regarding the manner in which the various
clinical study protocols are performed and administered and (2) third party
insurance reimbursement of a portion of gross clinical study costs determined
based on historical experience. If Introgen's actual net cost of performing
these studies during 1996 exceeds [*] (due, but not limited, to changes in
clinical protocols or insurance reimbursements being less than anticipated) and
such excess costs are approved by the Development Committee, it is our
understanding RPR agrees to pay, during 1966, such clinical study costs in
excess of the [*] budgeted amount. Introgen agrees to use reasonably diligent
efforts to spend clinical study funds efficiently. Accordingly, Introgen agrees
to negotiate or renegotiate clinical study agreements with The University of
Texas M.D. Anderson Cancer Center and other
<PAGE> 42
institutions (if any) which conduct clinical studies in a manner so as to obtain
clinical study services under terms and conditions that Introgen deems prudent
and practical under the circumstances.
The [*] Budget does not include any amounts related to the prospective
collaborative preclinical research or clinical studies performed by or in
cooperation with the National Cancer Institute. If this collaboration is
approved by the Development Committee, it is our understanding that any costs
paid by RPR relative thereto would be in addition to the [*] Budget.
The [*] Budget does not include any costs related to the prospective
establishment, management or operation of a manufacturing facility in Vitry or
elsewhere on a joint venture or other basis between Introgen and RPR, including
any costs associated with having Introgen employees on site in Vitry or
elsewhere. If this joint venture is consummated, it is our understanding that
any costs paid by RPR relative thereto would be in addition to the [*] Budget.
The [*] Budget does not contemplate Introgen providing services for pre-clinical
or clinical support in Japan or Europe. The costs associated with any such work
will be addressed in a separate budget.
It is possible [*] the primary condition for a fifth closing under the Series B
Preferred Stock Purchase Agreement. In such event, RPR will be required to
purchase additional Introgen preferred stock for [*]. It is agreed that RPR will
make this purchase, and any other milestone equity purchases as a result of
satisfaction of the conditions for sixth and subsequent closings, outside the
scope of the [*] Budget and that none of the [*] Budget will be required to be
used to fund these purchases.
In accordance with the Collaboration Agreements, pre-clinical and clinical
expenses will be paid by RPR to Introgen at the beginning of each calendar
quarter. RPR will pay Introgen these expenses in accordance with the following
schedule:
<TABLE>
<CAPTION>
PAYMENT DATE PRE-CLINICAL CLINICAL TOTAL
- ------------ ------------ -------- -----
<S> <C> <C> <C>
January 1, 1996 [*] [*] [*]
April 1, 1996 [*] [*] [*]
July 1, 1996 [*] [*] [*]
October 1, 1996 [*] [*] [*]
Grand Total [*] [*] [*]
</TABLE>
A summary of the 1996 program budget supporting the above payments is attached.
-2-
<PAGE> 43
Please indicate your acknowledgment and agreement regarding the above matters in
the space provided below and return a signed original to me. Do not hesitate to
call if your have any questions.
Sincerely,
/s/ DAVID G. NANCE
------------------------------------
David G. Nance
Chief Executive Officer
Acknowledged and Agreed:
Rhone-Poulenc Rorer Pharmaceuticals, Inc.
By:
/s/ THIERRY SOURSAC
- -----------------------------------------
Thierry Soursac, M.C., Ph.D.
Senior Vice President
Rhone-Poulenc Rorer Pharmaceuticals, Inc.
-3-
<PAGE> 44
October 7, 1994
Introgen Therapeutics, Inc.
301 Congress Avenue
Austin, Texas 78705
Attn: David G. Nance
Gentlemen:
This letter agreement is being entered into in connection with that certain
Collaboration Agreement (p53 Products) and that certain Collaboration Agreement
(K-ras Products), each dated as of October 7, 1994 by and between Introgen
Therapeutics, Inc. ("Introgen") and Rhone-Poulenc Rorer Pharmaceuticals, Inc.
("RPRP") (the "Collaboration Agreements"), and that certain Stock Purchase
Agreement of the same date being entered into between Introgen and Rhone-Poulenc
Rorer Inc. (the "Stock Purchase Agreement"). Any capitalized terms used herein
that are not otherwise defined, shall be as defined in the Collaboration
Agreements.
This will acknowledge our agreement with respect to the following:
1. Non-Reimbursed Expenses. Notwithstanding Article 4 of each
Collaboration Agreement, Introgen agrees to incur, without
reimbursement by RPRP, at least [*] of combined aggregate Early Stage
Development Costs in the Performance of the Early Stage Development
Programs pursuant to the Program Plans and Budgets in effect from time
to time. Introgen shall incur such Costs prior to the end of December
1995 or, if later, the completion of the first Phase I clinical study
initiated under the Early Stage Development Program under either
Collaboration (provided such completion is not later than twelve (12)
months after initiation of such study). In addition, following the
occurrence of the Second Closing and the Third Closing (as defined in
the Stock Purchase Agreement), Introgen shall similarly incur, without
reimbursement therefor by RPRP [*] in such Early Stage Development
Program Costs for each such Closing (i.e. a total of up to an
additional [*] in the aggregate) during the term of the Early Stage
Development Program and within eighteen (18) months after the date such
Closing occurs.
2. Termination for Lack of Funding. RPRP and Introgen
acknowledge and understand that, if the Early Stage Development
Programs under the Collaboration Agreements are successful, the
aggregate amount of Early Stage Development Program Costs to be funded
by RPRP will be in the range of approximately [*] over the three year
period of the Early Stage Development Program. However, both parties
also understand and agree that the precise budget levels and funding
levels will vary, based upon progress
<PAGE> 45
Introgen Therapeutics, Inc.
October 7, 1994
Page 2
and the activities to be undertaken by Introgen, and that RPRP is not
obligated to provide any particular level of funding. To reinforce
RPRP's commitment to the collaboration, however, if at any time the
aggregate amounts of Early Stage Development Program Costs approved by
the Development Committee under both Collaboration Agreements for an
Agreement Year (as defined below) as reflected in the Program Plans and
Budgets then in effect for all Collaboration Products that have not
been terminated, are less than the amounts set forth below for the
corresponding Agreement Year. Introgen shall have a right to terminate
both Collaboration Agreements upon notice to RPRP:
<TABLE>
<CAPTION>
Agreement Year Amount
-------------- ------------------
<S> <C>
Initial Period $ [*]
Year 1 $ [*]
Year 2 $ [*]
Year 3 $ [*]
</TABLE>
The amounts set forth in the table above shall be calculated without
including any Early Stage Development Program Costs associated with the
conduct of clinical trials. As used above "Agreement Year" shall mean
the Initial Period, Year 1, Year 2 or Year 3, as follows: "Initial
Period" shall mean the period from the Effective Date through December
1994; "Year 1" shall mean January through December 1995; "Year 2" shall
mean January through December 1996; and "Year 3" shall mean the
remaining term of the Early Stage Development Program. In the event
that Introgen terminates the Collaboration Agreements in accordance
with this Paragraph 2, such termination shall be deemed a termination
of the Collaboration Agreements by RPRP under Section 18.3.1 of each
such Agreement, and Introgen's notice of termination shall be deemed a
notice of termination delivered by RPRP for purposes of Sections 7.5,
8.3, 9.6, 10.3, 11.6, 12.3, 13.6, 14.3, 15.6, 16.3, 17.6 and 18.3 of
the Stock Purchase Agreement. It is understood that termination of one
of the Collaboration Agreements shall not affect the amounts set forth
above, so long as the other Collaboration Agreement remains in effect.
It is acknowledged and agreed that Introgen, RPRP and Rhone-Poulenc Rorer Inc.
are entering into the Stock Purchase Agreement and the Collaboration Agreement
sin reliance on the understandings set forth in this letter, and that this
letter is intended to be legally binding upon each of the undersigned. The
parties also agree that this letter forms a part of their agreement with respect
to the Stock Purchase Agreement and the Collaboration Agreements,
notwithstanding Section 19.11 of each Collaboration Agreement.
<PAGE> 46
Introgen Therapeutics, Inc.
October 7, 1994
Page 3
If the foregoing accurately reflects our agreement, please sign a copy of this
letter as indicated below. This letter agreement may be signed in one or more
counterparts, all of which together shall constitute one instrument.
Very truly yours,
RHONE-POULENC RORER RHONE-POULENC RORER INC.
PHARMACEUTICALS, INC.
By: /s/ MICHEL DE ROSEN By: /s/ MICHEL DE ROSEN
-------------------------------- ---------------------------------
Name: Michel de Rosen Name: Michel de Rosen
------------------------------ -------------------------------
Acknowledged and Agreed:
INTROGEN THERAPEUTICS, INC.
By: /s/ DAVID G. NANCE
--------------------------------
Name: David G. Nance
------------------------------
<PAGE> 1
EXHIBIT 10.23
===============================================================================
COLLABORATION AGREEMENT
(K-ras PRODUCTS)
BY AND BETWEEN
RHONE-POULENC RORER PHARMACEUTICALS, INC.
AND
INTROGEN THERAPEUTICS, INC.
OCTOBER 7, 1994
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. DEFINITIONS....................................................... 1
2. NORTH AMERICAN DEVELOPMENT........................................ 5
2.1 Early Stage Development Program........................ 5
2.2 Collaboration Products................................. 5
2.3 Development Activities................................. 5
2.4 Reports and Records.................................... 6
2.5 Review of Publication.................................. 7
3. DEVELOPMENT COMMITTEE............................................. 8
3.1 Development Committee.................................. 8
3.2 Membership............................................. 8
3.3 Development Committee Meetings......................... 8
3.4 North American Plans and Budgets....................... 8
3.5 Plans for Later Stage Development...................... 9
3.6 Decision Making........................................ 9
4. EARLY STAGE DEVELOPMENT PROGRAM FUNDING........................... 10
4.1 Funding of Early Stage Development Program............. 10
4.2 Term of Early Stage Development Program................ 10
4.3 Excess Early Stage Development Program Costs........... 10
4.4 Capital Equipment...................................... 10
4.5 Payments............................................... 10
5.1 RPRP Territory......................................... 11
5.2 Co-Exclusive Territory................................. 11
5.3 Other Territory........................................ 11
5.4 Use of Clinical Data................................... 11
5.5 Development Committee Review........................... 12
5.6 Further Studies........................................ 12
6. EXCLUSIVITY....................................................... 12
6.1 Option to Commercialize................................ 12
6.2 Exclusivity............................................ 13
6.3 Right of First Discussion in Expanded Field............ 13
7. MARKETING RIGHTS.................................................. 13
7.1 RPRP Territory......................................... 13
7.2 Co-Exclusive Territory................................. 13
7.3 North America.......................................... 14
7.4 Other Territory........................................ 14
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
7.5 Sublicensees........................................... 15
7.6 Covenants.............................................. 15
8. ROYALTIES......................................................... 15
8.1 Running Royalties...................................... 15
8.2 Royalty Offset......................................... 15
9. THIRD PARTY ROYALTIES............................................. 17
9.1 RPRP Obligations....................................... 17
9.2 Introgen Obligations................................... 18
9.3 North America.......................................... 18
9.4 Efforts to Obtain Sublicense Rights.................... 18
10. PAYMENTS; BOOKS AND RECORDS....................................... 18
10.1 Royalty Reports and Payments........................... 18
10.2 Payment Method......................................... 19
10.3 Late Payment........................................... 19
10.4 Currency Conversion.................................... 19
10.5 No Withholding Taxes................................... 19
10.6 Records; Inspection.................................... 19
11. DUE DILIGENCE..................................................... 20
11.1 Due Diligence.......................................... 20
12. MANUFACTURING RIGHTS.............................................. 20
12.1 RPRP Territory......................................... 20
12.2 Co-Exclusive Territory................................. 20
12.3 North America.......................................... 20
12.4 Other Territory........................................ 21
12.5 Supply Agreements...................................... 21
13. LICENSE GRANTS.................................................... 21
13.1 Grant to RPRP.......................................... 21
13.2 Grant to Introgen...................................... 21
13.3 Grant to Joint Venture................................. 21
13.4 Sublicenses............................................ 21
13.5 Improvements by Introgen............................... 22
13.6 No Rights Beyond Collaboration Products................ 22
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
14. INTELLECTUAL PROPERTY............................................. 22
14.1 Ownership of Inventions................................ 22
14.2 Patent Prosecution..................................... 23
14.3 Defense of Third Party Infringement Claims............. 24
14.4 Enforcement............................................ 24
15. REPRESENTATIONS AND WARRANTIES.................................... 25
15.1 Warranties............................................. 25
15.2 Disclaimer of Warranties............................... 25
15.3 Effect of Representations and Warranties............... 26
16. CONFIDENTIALITY................................................... 26
16.1 Confidential Information............................... 26
16.2 Permitted Disclosures.................................. 26
17. INDEMNIFICATION................................................... 27
17.1 Indemnification of Introgen............................ 27
17.2 Indemnification of RPRP................................ 27
17.3 Procedure.............................................. 28
18. TERM AND TERMINATION.............................................. 28
18.1 Term................................................... 28
18.2 Termination for Cause.................................. 28
18.3 Termination for Convenience by RPRP.................... 28
18.4 Effect of Breach or Termination........................ 29
18.5 Survival............................................... 30
19. MISCELLANEOUS..................................................... 30
19.1 Governing Law.......................................... 30
19.2 Force Majeure.......................................... 30
19.3 No Implied Waivers; Rights Cumulative.................. 30
19.4 Independent Research................................... 31
19.5 Independent Contractors................................ 31
19.6 Notices................................................ 31
19.7 Assignment............................................. 32
19.8 Modification........................................... 32
19.9 Severability........................................... 32
19.10 Non-Disclosure......................................... 32
19.11 Entire Agreement....................................... 32
19.12 Counterparts........................................... 33
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
19.13 Headings............................................... 33
19.14 Patent Marking......................................... 33
19.15 Export Laws............................................ 33
</TABLE>
EXHIBITS
A - Existing Introgen Licensed Patents
B - European Countries
C - Initial Program Plan and Budget
-iv-
<PAGE> 6
COLLABORATION AGREEMENT
(K-Ras PRODUCTS)
This AGREEMENT (the "Agreement"), effective as of October 7, 1994 (the
"Effective Date"), is made by and between Rhone-Poulenc Rorer Pharmaceuticals
Inc., a Pennsylvania corporation having offices at 500 Arcola Road, P.O. Box
1200, Collegeville, Pennsylvania 19426-0107 ("RPRP"), and Introgen Therapeutics,
Inc., a Delaware corporation having offices at 301 Congress Avenue, Suite 2025,
Austin, Texas 78701 ("Introgen").
RECITALS
A. Introgen has established expertise related to gene therapy and RPRP
has established a major research program in the field of gene therapy for the
treatment of human cancer.
B. The parties desire to establish a collaborative relationship to
develop and commercialize novel gene therapy products as set forth below.
C. Introgen and RPRP's parent, Rhone-Poulenc Rorer Inc., have also
entered into a Stock Purchase Agreement of even date herewith, pursuant to which
RPRP is acquiring Introgen Preferred Stock.
NOW THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:
1. DEFINITIONS
1.1 "Affiliate" shall mean any entity which controls, is controlled or
is under common control with RPRP or Introgen. An entity shall be regarded as in
control of another entity if it owns or controls at least thirty-five percent
(35%) of the shares of the subject entity entitled to vote in the election of
directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority). A "Controlled Affiliate"
shall mean an entity that is controlled by a party wherein such percentage is at
least fifty percent (50%).
1.2 "Co-exclusive Territory" shall mean Japan, North and South Korea,
Taiwan, the People's Republic of China and India.
1.3 "Collaboration Products" shall mean the gene therapy products
within the Field which are being developed by Introgen and RPRP from time to
time pursuant to the Early Stage Development Program, as specified in the
Program Plan and Budget in effect at the time, and as further defined in Section
6.1 below.
<PAGE> 7
1.4 "Development Committee" shall have the meaning set forth in Article
3 herein.
1.5 "Early Stage Development" shall mean that part of the Early Stage
Development Program comprising the research, preclinical and clinical activities
with respect to approved Collaboration Products in North America through the
completion of Phase I clinical trials.
1.6 "Early Stage Development Program" shall have the meaning set forth
in Section 2.1 herein.
1.7 "Early Stage Development Program Costs" shall mean all direct and
indirect costs incurred by Introgen in conducting the Early Stage Development
Program in accordance with the applicable approved Program Plan and Budget.
1.8 "Expanded Field" shall mean gene therapy products which [*]
1.9 "Field" shall mean gene therapy products for the delivery of a gene
construct to patient cells via in vivo viral vectors or non-viral delivery
systems which expresses a molecule that [*] in each case for the treatment or
prevention of disease.
1.10 "FDA" means the U.S. Food and Drug Administration.
1.11 "IND" shall mean an investigational New Exemption for a
Collaboration Product, as defined in the U.S. Food, Drug and Cosmetic Act and
the regulations promulgated thereunder.
1.12 "Introgen Technology" shall mean Introgen Patents, Introgen
Licensed Patents and Introgen Know-how.
1.12.1 "Introgen Patents" shall mean all patents and
reissues, renewals and extensions thereof, and patent applications therefor, and
any divisions, continuations, in whole or in part, thereof, which claim a
process, composition of matter, or method of treatment used in the manufacture,
sale or use of a Collaboration Product and that are owned by Introgen or its
Controlled Affiliates during the term of this Agreement.
1.12.2 "Introgen Know-How" shall mean confidential
information and materials, including, but not limited to, pharmaceutical,
chemical, biological and biochemical products, technical and non-technical data,
and information relating to the results of tests, assays, methods and processes,
and drawings, plans, diagrams, specifications and/or other documents containing
said information and data, discovered, developed or acquired by Introgen or its
Controlled Affiliates during the term of this Agreement to the extent such
relates to the manufacture, sale or use of a Collaboration Product and to the
extent that Introgen or its Controlled Affiliates have the right to license or
sublicense the same.
1.12.3 "Introgen Licensed Patents" shall mean all patents
and reissues, renewals and extensions thereof, and patent applications therefor,
and any divisions, continuations, in whole or in part, thereof, which claim a
process, composition of matter, or method of treatment used in the
-2-
<PAGE> 8
manufacture, sale or use of a Collaboration Product, that are the subject of a
license or license option to Introgen or its Controlled Affiliates, in each case
to the extent that Introgen or its Controlled Affiliate has the right to license
or sublicense the same during the term of this Agreement. Introgen Licensed
Patents as of the Effective Date are listed on attached Exhibit A.
1.13 "Joint Venture" shall have the meaning set forth in Section 7.3.1
of this Agreement.
1.14 "Later Stage Clinical Development" shall mean all clinical
research and regulatory affairs necessary to obtain all governmental approvals
required to market each Collaboration Product for a particular indication in
North America following the Early Stage Development for such Collaboration
Product for such indication.
1.15 "Manufacturing Costs" with respect to units of a Collaboration
Product means (i) those costs associated with manufacture of such units which
would be viewed by the manufacturing party's independent auditor as costs that
could be capitalized on the balance sheet as inventory and would include all raw
material (including normal scrap) and actual direct labor costs and a proper
accounting of actual manufacturing overhead allocated to such units. It would
exclude any excess capacity, excess direct labor inefficiencies, unusable
material, or any other costs related to such units not deemed to add value or
not deemed to be ongoing in the production process for such product; and (ii)
with respect to portions acquired from a non-Affiliate vendor, the amounts paid
to the vendor.
1.16 "Net Sales" shall mean the total amount invoiced to third parties
in connection with sales or use of Collaboration Products by RPRP, its
Affiliates or its permitted Sublicensees, less the following reasonable and
customary accrual-basis deductions to the extent applicable to such invoiced
amounts in accordance with U.S. generally accepted accounting practices, as
consistently applied by both RPRP and RPR Inc. for financial reporting purposes:
(i) all trade, cash and quantity credits, discounts, refunds or rebates
(including without limitation Medicaid rebates); (ii) amounts for claims,
allowances or credits for returns; retroactive price reductions; chargebacks;
and (iii) packaging, handling fees and prepaid freight, sales taxes, duties and
other governmental charges (including value added tax), but excluding what is
commonly known as income taxes), in each case if charged separately on the
invoice and paid by the customer. For the removal of doubt, Net Sales shall not
include sales by RPRP to its Affiliate or its permitted Sublicensees for resale.
A "sale" shall also include a transfer or other disposition for consideration
other than cash, in which case such consideration shall be valued at the fair
market value thereof. Transfers or dispositions for charitable or promotional
purposes or for pre-clinical, clinical, regulatory or governmental purposes
prior to receiving marketing approval are not considered a "sale;" provided that
such transfers or dispositions are at a price less than [*] RPRP's Manufacturing
Cost for the units so transferred or disposed.
1.17 "North America" shall mean Canada, the United States (and its
territories and possessions including the commonwealth of Puerto Rico) and
Mexico.
-3-
<PAGE> 9
1.18 "PLA" and "ELA" means a Product License Application and an
Establishment License Application, respectively, as defined in the Public Health
Service Act, Biological Products and the regulations promulgated thereunder,
viz. 21 CFR Part 600, or its foreign equivalents.
1.19 "Phase I" means Phase I clinical trials as prescribed by
applicable FDA Regulations.
1.20 "Product Plan and Budget" shall have the meaning set forth in
Section 3.4.2 below.
1.21 "Program Plan and Budget" shall have the meaning set forth in
Section 3.4.1 hereof.
1.22 "RPR Inc." shall mean Rhone-Poulenc Rorer, Inc., a Pennsylvania
Corporation.
1.23 "RPRP Development Costs" shall have the meaning set forth in
Section 7.3.3 below.
1.24 "RPRP Technology" shall mean RPRP Patents, RPRP Licensed Patents
and RPRP know-how.
1.24.1 "RPRP Patents" shall mean all patents and reissues,
renewals and extensions thereof, and patent applications therefor, and any
divisions, continuations, in whole or in part, thereof, which claim a process,
composition of matter, or method of treatment used in the manufacture, sale or
use of a Collaboration Product and that are owned by RPRP, RPR Inc. or their
Controlled Affiliates during the term of this Agreement.
1.24.2 "RPRP Know-How" shall mean confidential information
and materials, including, but not limited to, pharmaceutical, chemical,
biological and biochemical products, technical and non-technical data, and
information relating to the results of tests, assays, methods and processes, and
drawings, plans, diagrams, specifications and/or other documents containing said
information and data, discovered, developed or acquired by RPRP or its
Controlled Affiliates during the term of this Agreement to the extent such
relates to the manufacture, sale or use of a Collaboration Product and to the
extent that RPRP, RPR Inc. or their Controlled Affiliates have the right to
license or sublicense the same.
1.24.3 "RPRP Licensed Patents" shall mean all patents and
reissues, renewals and extensions thereof, and patent applications therefor, and
any divisions, continuations, in whole or in part, thereof, which claim a
process, a composition of matter, or method of treatment used in the
manufacture, sale or use of a Collaboration Product, that are the subject of a
license or license option to RPRP, RPR Inc. or their Controlled Affiliates and
to the extent that RPRP, RPR Inc. or their Controlled Affiliates have the right
to license or sublicense the same during the term of this Agreement.
1.25 "RPRP Territory" means those Eastern and Western European
countries set forth on Exhibit B hereto.
1.26 "Other Territory" shall mean [*]
-4-
<PAGE> 10
1.27 "Sublicensee" shall mean, with respect to a particular
Collaboration Product, a third party to whom Introgen or RPRP has granted a
license or sublicense under the RPRP Technology and/or Introgen Technology to
make, use and sell such Collaboration Product. As used in this Agreement,
"Sublicensee" shall also include a third party to whom Introgen or RPRP has
granted the right to distribute such Collaboration Product, provided that such
third party is responsible for the marketing and promotion of such products
within the applicable territory.
1.28 "Term of the Early Stage Development Program" shall be that period
of time described in Section 4.2 below.
2. NORTH AMERICAN DEVELOPMENT
2.1 Early Stage Development Program. Subject to the terms and
conditions set forth herein, RPRP and Introgen shall cooperate with respect to
the Early Stage Development of Collaboration Products in accordance with an
"Early Stage Development Program" for North America which shall be carried out
in accordance with a Program Plan and Budget prepared and approved on an annual
basis in accordance with Article 3.4 hereof. The Early Stage Development Program
shall include all of the approved Program Plans and Budgets in effect from time
to time. The activities conducted in connection with the Early Stage Development
Program will be overseen and administered by the Development Committee, pursuant
to Article 3 below. Introgen shall use its best efforts to conduct the Early
Stage Development in accordance with such Program Plan and Budget and within the
time schedules contemplated therein.
2.2 Collaboration Products. The Initial Collaboration Products to be
developed hereunder will contain or employ Introgen's Retroviral K-ras related
Transduction Vector and/or its Adenoviral K-ras related Transduction Vector.
From time to time, upon agreement of RPRP and Introgen, new projects may be
added to the Early Stage Development Program to be developed as Collaboration
Products. Such projects may include RPRP or Introgen products. It is understood
that RPRP may terminate its support for the development for any Collaboration
Product as provided in Section 18.3.2 below or as otherwise agreed by the
parties.
2.3 Development Activities.
2.3.1 Early Stage Development Program. Introgen will be
responsible for conducting, directly or through third parties, all development
of each new project and each Collaboration Product in North America through the
completion of Early Stage Development in accordance with the Program Plan and
Budget in effect from time to time. As soon as possible after completion of the
necessary preclinical studies required by the applicable Product Plan and Budget
for a Collaboration Product, Introgen shall be responsible for preparing, with
the cooperation of RPRP, a data package for each Collaboration Product
sufficient to meet IND requirements of the FDA.
-5-
<PAGE> 11
2.3.2 Later Stage Clinical Development.
(a) In addition to the Early Stage Development
Program, RPRP and Introgen will cooperate in the Later Stage Clinical
Development of each Collaboration Product; provided, RPRP will be primarily
responsible for conducting all such Later Stage Clinical Development, at RPRP's
expense. Introgen shall be consulted and fully informed with respect to such
Later Stage Clinical Development at all times through its representatives on the
Development Committee. All Later Stage Clinical Development shall be monitored
and managed by the Development Committee; [*].
(b) It is anticipated that RPRP will establish a
committee of independent experts (the "External Review Committee") to provide
advice with respect to Later Stage Clinical Development. The Chief Scientific
Officer of Introgen, or other designee of Introgen, if a clinician of recognized
stature, shall serve on and chair the External Review Committee; otherwise, RPRP
and Introgen shall agree on the chair of such External Review Committee. In any
event, Introgen shall have a representative on such External Review Committee.
(c) It is understood that additional preclinical
studies may be required following the completion of Early Stage Development with
respect to a Collaboration Product. The parties anticipate that, where
appropriate, such work will be performed by Introgen and reimbursed by RPRP, as
agreed from time to time by the Development Committee.
2.3.3 FDA Filings. Introgen shall be responsible for the
preparation and filing of all IND's in North America with respect to the
Collaboration Products, which shall be filed in Introgen's name; provided RPRP
shall have a reasonable opportunity to review and comment upon such filings in
advance of their filing. RPRP shall be responsible for all further submissions
to existing INDs once Later Stage Clinical Development has begun, provided that
Introgen is given a reasonable opportunity to review and comment upon such
submissions prior to the filing of such submissions. Introgen shall cooperate in
transferring to RPRP authority for such correspondence. RPRP, at its expense,
shall prepare all PLAs and ELA's for filing in North America with respect to
each Collaboration Product. All such PLA's and ELA's shall be filed in the names
of RPRP and Introgen, to the extent permitted by applicable FDA regulations
(taking into account the supply arrangements under Section 12.3. below), or in
such other manner as the Development Committee approves. In addition, RPRP shall
in all events have the right to file separately a PLA/ELA in its own name to
qualify, as a permitted supply source for the United States, its manufacturing
facility for the RPRP Territory (consistent with Section 12.3. below).
2.4 Reports and Records.
2.4.1 Records. Introgen and RPRP shall maintain records of the
Early Stage Development Program (or cause such records to be maintained) in
sufficient detail and in good scientific manner as will properly reflect all
work done and results achieved in the performance of the Early Stage Development
Program (including all data in the form required under any applicable
governmental regulations). Each party shall allow the other to have prompt
access to all materials
-6-
<PAGE> 12
and data generated on behalf of such party with respect to each Collaboration
Product at reasonable times and in a reasonable manner.
2.4.2 Introgen Reports. Introgen shall periodically, and not
less often than semi-annually during the term of this Agreement, provide the
Development Committee with a written report summarizing the progress of the
Early Stage Development performed by Introgen with respect to each Collaboration
Product during the preceding calendar half-year. Unless otherwise agreed, such
reports shall be due on 28 February and 30 August of each calendar year during
the Early Stage Development Program.
2.4.3 RPRP Reports. RPRP shall periodically, and not less
often than semi-annually during the term of this Agreement, provide the
Development Committee with a written report summarizing the progress of the
Later Stage Clinical Development performed by RPRP with respect to each
Collaboration Product during the preceding calendar half-year. Unless otherwise
agreed, such reports shall be due on 28 February and 30 August of each calendar
year during the term of this Agreement.
2.5 Review of Publication. As soon as is practicable prior to the oral
public disclosure, and prior to the submission to any outside person for
publication of a manuscript describing the scientific data resulting from any
stage of the Early Stage Development Program or Later Stage Clinical
Development, Introgen or RPRP, as the case may be, shall disclose to the
Development Committee the disclosure or manuscript to be made or submitted, and
shall allow the Development Committee at least thirty (30) days to determine
whether such disclosure or manuscript contains subject matter for which patent
protection should be sought prior to publication or which the other believes
should be modified to avoid necessary regulatory or commercial difficulties.
With respect to publications by investigators or other third parties, such
publications shall be subject to review by the Development Committee under this
Section 2.5 to the extent that Introgen or RPRP (as the case may be) has the
right to do so.
2.5.1 Publication Rights. After the expiration of thirty (30)
days from the date of mailing such disclosure or manuscript, unless Introgen or
RPRP has received from the other the written notice specified below, the
authoring party shall be free to submit such manuscript for publication or to
publish the disclosed research results in any manner consistent with academic
standards.
2.5.2 Delay of Publication. Prior to the expiration of the
thirty (30) day period specified in this Section 2.5, the Development Committee
may notify the submitting party of its determination that such oral presentation
or manuscript contains objectionable material or material that consists of
patentable subject matter for which patent protection should be sought. The
notified party shall withhold its proposed public disclosure and confer with the
Development Committee to determine the best course of action to take in order to
modify the disclosure or to obtain patent protection. After resolution of the
regulatory or commercial issues, or the filing of a patent application or due
consideration as to whether a patent application can reasonably be filed, the
submitting party shall be free to submit the manuscript and/or make its public
oral disclosure. If the
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submitting party declines to file an appropriate patent application pursuant to
the request of the Development Committee, then either Introgen or RPRP may
undertake to file such application in accordance with Article 14 below.
3. DEVELOPMENT COMMITTEE
3.1 Development Committee. RPRP and Introgen will establish a
Development Committee to oversee, review and coordinate the development of
Collaboration Products worldwide, including the conduct of the Early Stage
Development Program and Later Stage Clinical Development in North America.
3.2 Membership. The Development Committee shall be comprised of an
equal number of representatives from each of RPRP and Introgen, selected by such
parties. The exact number of such representatives shall be three (3) for each of
RPRP and Introgen, or such greater number as the parties may agree. Introgen and
RPRP may replace its Development Committee representatives at any time, with
written notice to the other party. From time to time, the Development Committee
may establish subcommittees to oversee particular projects or activities, and
such subcommittees will be constituted as the Development Committee agrees.
3.3 Development Committee Meetings. During the term of this Agreement,
the Development Committee shall meet every two months, or more often as agreed
by the parties, in Houston, Texas, or such other location as the parties agree.
The parties agree that at least two (2) meetings of the Development Committee
per full calendar year will be held at RPRP's facilities. At its meetings, the
Development Committee will (i) formulate and review the Early Stage Development
Program objectives, (ii) monitor the progress of the Early Stage Development
Program toward those objectives, (iii) review and approve the Program Plan and
Budget, and Product Plans and Budgets, pursuant to Section 3.4 of this
Agreement, and (iv) monitor the progress of both Early Stage Development and
Later Stage Clinical Development. With the consent of the parties, other
representatives of Introgen or RPRP or their Affiliates or Sublicensees, may
attend Development Committee meetings as non-voting observers. With respect to
matters relating to Early Stage Development, Introgen's lead representative
shall chair meetings of the Development Committee, and with respect to matters
relating to Later Stage Clinical Development, RPRP's lead representative shall
chair such meetings. The party whose representatives chair a meeting with
respect to particular matters shall be responsible for preparing the agenda and
minutes for such meetings.
3.4 North American Plans and Budgets.
3.4.1 Program Plan and Budget. Introgen shall be responsible
for preparing reasonably detailed plans and budgets on an annual basis for the
"Program Plan and Budget" through which the Early Stage Development Program will
be carried out. The Program Plan and Budget shall specify the research
objectives and work plan activities of the Early Stage Development Program
research of both parties, and the headcounts and other costs and expenses of
Introgen, including consultants and third party contractors, in connection with
the Early Stage Development Program.
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3.4.2 Product Plans and Budgets. In connection with the
Program Plan and Budget, Introgen shall be responsible for developing individual
Product Plans and Budgets with respect to Early Stage Development for each
particular Collaboration Product, which shall contain the research objectives
and work plan activities, headcounts and other costs and expenses with respect
to each such Collaboration Product (each a "Product Plan and Budget"). Such
individual Product Plans and Budgets shall be incorporated into and be a part of
the annual Program Plan and Budget. Following Early Stage Development with
respect to a Collaboration Product, RPRP will be responsible for developing
individual Product Plans and Budgets for Later Stage Clinical Development
pursuant to Section 2.3.2 and 3.5 below.
3.4.3 Annual Review. Attached hereto as Exhibit C is the
initial Program Plan and Budget, which shall be fixed for the period from the
Effective Date through 30 December 1995, unless otherwise agreed. Beginning in
1995, by August 1 of each year during the Early Stage Development Program,
Introgen shall submit to the Development Committee a proposed Program Plan and
Budget for the Early Stage Development Program for the following calendar year.
The Development Committee shall review such proposal as soon as possible and
shall establish and approve no later than October 31 of such year the final
Program Plan and Budget for the next succeeding year.
3.4.4 Periodic Reviews. The Development Committee shall review
the Program Plan and Budget on an ongoing basis and may make changes to the
Program Plan and Budget then in effect; provided, however, the Program Plan and
Budget in effect for a year shall not be modified except as approved by the
Development Committee.
3.5 Plans for Later Stage Development. Concurrently with the submission
and establishment of Product Plans and Budgets for the Early Stage Development
to be conducted under the Early Stage Development Program in accordance with
Section 3.4 above, RPRP shall submit to the Development Committee an outline of
the Product Plan and Budget for Later Stage Clinical Development for each
Collaboration Product in North America. Following RPRP's election to proceed
with Later Stage Clinical Development of a Collaboration Product under Section
6.1 below, RPRP shall submit a reasonably detailed Product Plan and Budget for
such Later Stage Development, and shall keep the Development Committee
reasonably informed as to any material changes to such Product Plan and Budget.
The Development Committee shall review and discuss such Product Plans and
Budgets; [*].
3.6 Decision Making. Except as set forth in Section 2.3.2(a) and 3.5
above, decisions of the Development Committee shall be made by majority
approval. In the event that a deadlock arises within the Development Committee,
the dispute will be referred to Introgen's president and RPRP's Biotech Division
President, who shall meet to resolve the dispute. If such dispute remains
deadlocked, the parties may submit such dispute to arbitration, on mutually
agreed terms.
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4. EARLY STAGE DEVELOPMENT PROGRAM FUNDING
4.1 Funding of Early Stage Development Program. During the Term of the
Early Stage Development Program, subject to Section 4.3 and 4.5 below, RPRP
shall pay to Introgen the budgeted Early Stage Development Program Costs set
forth in the applicable Program Plan and Budget. RPRP may elect to pay for Early
Stage Development Program Costs paid or accrued by Introgen in connection with
the Early Stage Development Program in excess of that provided for in the
Program Plan and Budget, as approved by the Development Committee. Introgen
shall apply all such funds paid by RPRP toward the Early Stage Development
Program in accordance with the Program Plan and Budget.
4.2 Term of Early Stage Development Program. Subject to Section 18.3
below, the Term of the Early Stage Development Program shall continue from the
Effective Date until October 1, 1997 or such later date as the parties may
agree.
4.3 Excess Early Stage Development Program Costs. Unless otherwise
agreed by the parties, Introgen shall not be obligated to incur nor shall RPRP
be obligated to pay Early Stage Development Program Costs in connection with the
Early Stage Development Program beyond amounts provided for in the approved
Program Plan and Budget.
4.4 Capital Equipment. The Program Plan and Budget may include
reasonable depreciation charges or lease expenses for certain capital equipment
to be purchased or leased by Introgen for use in connection with the Early Stage
Development Program. It is understood that Introgen will be the owner of all
capital equipment purchased by Introgen in connection with the Early Stage
Development Program, whether or not separately identified in the Program Plan
and Budget.
4.5 Payments. Promptly following the Effective Date, and prior to the
beginning of each calendar quarter during the Term of the Early Stage
Development Program, the Development Committee shall approve a spending forecast
for the next quarter, consistent with the Program Plan and Budget then in
effect. On or before October 15, 1994, and the first day of each subsequent
calendar quarter during the Term of the Early Stage Development Program, RPRP
shall pay to Introgen the amount of the approved forecasted amount; provided
that if for any reason the Development Committee does not approve a forecasted
amount prior to the due date, RPRP shall pay to Introgen the amount budgeted for
the quarter in the Program Plan and Budget them in effect. Within thirty (30)
days following the end of each quarter during the Term of the Early Stage
Development Program, Introgen shall provide to RPRP a summary of the Early Stage
Development Program Costs actually incurred by Introgen during such quarter. If
the actual development expenses incurred by Introgen in such quarter are less
than the amounts advanced by RPRP, then the difference will be carried forward
and credited to the next quarterly payment to be advanced. If such Early Stage
Development Program Costs were greater than the amount advanced by RPRP, then
RPRP agrees to pay the difference within thirty (30) days of receiving
Introgen's invoice, provided that in no event shall RPRP be obligated to
reimburse aggregate Program Development Costs in any calendar
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year in excess of the aggregate Program Development Costs reflected in the
Program Plan and Budget for such year then in effect.
5. COLLABORATION PRODUCT DEVELOPMENT OUTSIDE THE EARLY STAGE
DEVELOPMENT PROGRAM
5.1 RPRP Territory. RPRP shall be responsible for, and shall have the
exclusive right to conduct, all clinical development of Collaboration Products
within the Field in the RPRP Territory, at RPRP's own expense.
5.2 Co-Exclusive Territory. RPRP and Introgen shall each have the right
to develop the Collaboration Products within the Field in the Co-Exclusive
Territory, at their own expense, including the right to authorize Sublicensees
permitted under Section 7.5 and 13.4 below to conduct such development.
5.3 Other Territory. [*]
5.4 Use of Clinical Data.
5.4.1 Exchange. RPRP and Introgen shall each have access to
and the right to use for any purpose, including incorporation in any regulatory
filing, any preclinical and/or clinical data with respect to the Collaboration
Product developed by Introgen or RPRP in the course of the Early Stage
Development Program or otherwise (including in the Co-Exclusive Territory or the
RPRP Territory). Introgen and RPRP will provide to the other access to all
regulatory fillings made for clinical trial and marketing approval by Introgen
or RPRP or on their behalf in any country with respect to each Collaboration
Product, together with the underlying pre-clinical and clinical data, at
reasonable times and on reasonable notice, to the extent each has the right to
do so.
5.4.2 Sublicensees. Either Party may provide the IND package
prepared pursuant to Section 2.3.1, or any other clinical or preclinical data
provided under Section 5.4.1, to Sublicensees permitted under Section 7.5 and
13.4 below, except as set forth in this Section 5.4.2 and 5.4.3 below. Introgen
and RPRP shall each use commercially reasonable efforts to obtain from its
permitted Sublicensees reasonable, prompt access to all regulatory filings and
underlying data prepared by or for such Sublicensee with respect to a
Collaboration Product at reasonable times and in a reasonable manner, with the
right to provide such filings and/or access to the other of Introgen and RPRP
and their respective Sublicensees. However, if a prospective licensee is
unwilling to provide such access, the party hereto proposing to enter into the
sublicense (the "Sublicensing Party") may grant the sublicense, but the
Sublicensee shall not have access to clinical data or regulatory filings
provided by the other of Introgen or RPRP (or such other party's Sublicensees).
If the Sublicensee does not allow the Sublicensing Party to provide to the other
of Introgen or RPRP (and their Sublicensees) all clinical data and regulatory
filings made by or on behalf of the Sublicensee with respect to the sublicensed
Collaboration Product, the Sublicensing Party shall not provide to the
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<PAGE> 17
Sublicensee access to any such clinical data or regulatory filings of the other
of Introgen or RPRP (or its respective Sublicensees).
5.4.3 Japanese Data. [*]
5.4.4 Regulatory Requirements. In all agreements with third
parties or Affiliates involving the development of clinical data for a
Collaboration Product, RPRP and Introgen shall require that such third parties
and Affiliates provide RPRP or Introgen (respectively) access to all such data,
to the extent that such data is required to be obtained from such third parties
by the FDA and/or the Commission of Proprietary Medicines of the European
Community or the European Medicines Evaluation Agency.
5.5 Development Committee Review. Notwithstanding Sections 5.1 or 5.2,
all protocols for clinical trials to be conducted for Collaboration Products in
any territory shall be submitted for review by the Development Committee prior
to the initiation of such trials and filing such protocols with any health
regulatory agency; and RPRP and Introgen will be bound by the recommendations of
the Development Committee with respect to such protocols. In addition, Introgen
and RPRP shall submit their product registration plans to the Development
Committee for review and comment, and the recommendations of the Development
Committee with respect to such plans shall be binding on Introgen and RPRP. It
is understood, however, that this Section 5.5 only requires that each party
abide by such recommendations as are agreed by the Development Committee, and
does not require that the Development Committee approve protocols or
registration plans.
5.6 Further Studies. In the event that RPRP and Introgen agree that
there are preclinical and/or clinical studies that may be mutually beneficial
with respect to obtaining approval for any Collaboration Products outside North
America. Introgen and RPRP may agree to conduct such studies jointly, on
mutually agreed terms.
6. EXCLUSIVITY
6.1 Option to Commercialize. Following completion of Phase I clinical
trials for a Collaboration Product during the Term of the Early Stage
Development Program, Introgen shall provide to RPRP a report summarizing the
results of such Phase I trials. Within one hundred eighty (180) days following
its receipt of such report, RPRP shall notify Introgen whether RPRP wishes to
proceed with the Later Stage Clinical Development and commercialization of such
Collaboration Product as provided in this Agreement, taking into consideration
the recommendation of the Development Committee. In the event that RPRP does not
so notify Introgen within the one hundred eighty (180) day period, such product
shall cease to be a "Collaboration Product" for all purposes of this Agreement
(but such unelected product shall continue to be subject to Section 6.2 below).
As used in this Section 6.1, "completion of Phase I clinical trials" for a
particular Collaboration Product shall be deemed to occur when Introgen has
dosed all patients called for in the protocol for Phase I clinical trials filed
in the applicable IND, and has either completed all patient follow-up as defined
in such protocol or initiated the next phase of clinical trials. Following
RPRP's election to proceed with
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the further development and commercialization of a Collaboration Product under
this Section 6.1, the particular Collaboration Product shall be as defined in
the IND therefor filed with the FDA pursuant to the Early Stage Development
Program. After the Term of the Early Stage Development Program, "Collaboration
Products" shall include only those Collaboration Products that completed Phase I
clinical trials during the Term of the Early Stage Development Program and with
respect to which RPRP has exercised its right to further develop and
commercialize the same pursuant to this Section 6.1.
6.2 Exclusivity. During the period from the Effective Date until the
tenth anniversary thereof, neither Introgen nor RPRP, RPR Inc. or their
Controlled Affiliates, shall develop or commercialize a product within the
Field, except as a Collaboration Product pursuant to this Agreement.
Notwithstanding the foregoing, it is understood that Introgen may conduct
research and development work on potential products and technologies for use
within the Field outside the Early Stage Development Program; provided that
Introgen may not license to third parties or market any product within the Field
during the ten (10) year period specified in this Section 6.2, without RPRP's
prior approval.
6.3 Right of First Discussion in Expanded Field. At least one hundred
eighty (180) days prior to commercializing, or granting to any third party a
right or license to commercialize, a product specifically directed for use
within the Expanded Field, Introgen and its Controlled Affiliates shall notify
RPRP, and upon written request by RPRP within thirty (30) days after receiving
such notice, the parties will discuss as mutually convenient a potential
agreement to collaborate with respect to such product, on such terms as may be
agreed. Similarly, at least one (180) days prior to commercializing, or granting
to a third party a right or license to market, a product specifically directed
for use within the Expanded Field, or acquiring a right or license from a third
party with respect to such a product, RPRP shall notify Introgen, and upon
written request by Introgen within thirty (30) days after receiving such notice,
the parties will discuss as mutually convenient a potential agreement to
collaborate with respect to such product, on such terms as may be agreed. RPRP
shall cause RPR, Inc. and their Controlled Affiliates to comply with this
Section 6.3 to the same extent as RPRP is bound by this Section. Each party's
obligations under this Section 6.3 shall terminate on the tenth anniversary of
the Effective Date. If either Introgen or RPRP (as the case may be) does not
request further discussions within thirty (30) days after receiving a notice
from the other party under this Section 6.3, or if after such a request the
parties do not enter into an agreement within the one hundred eighty (180) day
period described above for any reason, the other party shall have no further
obligations under this Section 6.3 with respect to the product or other subject
matter described in its notice.
7. MARKETING RIGHTS
7.1 RPRP Territory. RPRP shall have the exclusive right to market, sell
and distribute the Collaboration Products in the RPRP Territory for use within
the Field.
7.2 Co-Exclusive Territory. RPRP and Introgen shall each have the
co-exclusive right to market, sell and distribute Collaboration Products in the
Co-Exclusive Territory for use within the
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Field, and subject to Article 9, each may retain any revenues it obtains in the
Co-Exclusive Territory as the result of such activities, without accounting to
the other. Each of RPRP and Introgen may market the Collaboration Product in the
Co-Exclusive Territory under such labels and tradenames as it may elect;
provided that neither party shall have any right to use tradenames or trademarks
owned by the other party or by the Joint Venture described in Section 7.3.
7.3 North America. Rights to market, sell and distribute the
Collaboration Products in North America shall be as follows:
7.3.1 Election to Form Joint Venture. Within [*] after the
filing of a PLA for a Collaboration Product in the United States, on request by
Introgen, the parties shall establish a joint commercial operation to market
such Collaboration Product within the Field throughout North America. Such
operation may be a joint venture company or such other arrangement as the
parties mutually agree (the "Joint Venture"). No later than ninety (90) days
after filing of a PLA for a Collaboration Product in the United States, Introgen
and RPRP shall meet to discuss RPRP's preliminary launch, marketing and sales
plans, launch budget projections, Introgen's possible contributions and RPRP's
Development Costs for such Collaboration Product.
7.3.2 Responsibilities and Profit. Introgen and RPRP will
equally share the costs and responsibilities for marketing the Collaboration
Product in North America through the Joint Venture, and will share any profits
from sales of such Collaboration Product in North America [*] basis; provided,
however that [*]. At the time Introgen elects to establish the Joint Venture,
the parties will agree upon the form of each party's contribution (whether
physical resources, funding or otherwise), and each party shall thereafter
provide the agreed contribution.
7.3.3 RPRP Development Costs. As used in this Section 7.3,
"RPRP Development Costs" shall mean: (i) amounts [*] of such Collaboration
Product [*]; and (II) [*] to such Later Stage Clinical Development [*] (on a
proportionate basis based on the percentage of total [*]; and (iii) [*] of the
amounts [*] the Collaboration Product outside North America, and [*],
Development Costs shall include [*] the amounts set forth in (i) and (ii) above.
As used herein, a "pivotal study" shall mean a clinical trial conducted outside
North America that is required to be filed with the FDA in order to obtain
marketing approval in the United States and that is designated as a "pivotal
study" for such purposes by the Development Committee. RPRP Development Costs
("Costs") shall be adjusted to then-current dollars using the change in the
Consumer Price Index, U.S. Cities Average for All Urban Consumers, as published
by the U.S. Department of Labor, Bureau of Labor Statistics from the date the
Costs are incurred until the date such costs are recouped.
7.3.4 RPRP Exclusive. In the event that Introgen does not
elect to enter into a Joint Venture for marketing of a Collaboration Product in
North America in accordance with 7.3.1 above, or subsequently elects not to
proceed with such Joint Venture, RPRP shall have the exclusive right to market,
sell and distribute such Collaboration Product in North America, subject to the
payment of the amounts set forth in Section 8.1 and Article 9.
7.4 Other Territory. [*]
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7.5 Sublicensees. Introgen may authorize Sublicensees to market, sell
and distribute Collaboration Products in the Co-Exclusive Territory and other
territories in which Introgen has the right to market Collaboration Products
under this Agreement; provided that Introgen shall notify RPRP of any
prospective Sublicensee and consult with RPRP prior to so authorizing any such
Sublicensee. Introgen shall not authorize any such Sublicensee to authorize
further Sublicensees to market and sell a Collaboration Product. Unless
otherwise agreed by RPRP and Introgen, RPRP and the Joint Venture shall not
authorize any Sublicensee to market, sell or distribute any Collaboration
Product, provided, however, that either party may market, sell or distribute
through an Affiliate.
7.6 Covenants. It is understood that, with respect to any particular
Collaboration Product, the manufacture, use and sale of such Collaboration
Products by Introgen and/or RPRP in any country may not require a license under
intellectual property rights of the other. Accordingly, notwithstanding that
such a license may not be required, neither Introgen nor RPRP shall market, sell
or distribute a Collaboration Product anywhere in the world except in accordance
with this Agreement, including this Article 7.
8. ROYALTIES
8.1 Running Royalties. RPRP shall pay running royalties to Introgen [*]
of Net Sales by RPRP and its Affiliates (and its Sublicensees permitted under
Sections 7.5 above and 13.4 below) of Collaboration Products [*].
Notwithstanding the above, no royalty will be due to Introgen under this Article
8 with respect to such sales of a Collaboration Product in North America if a
Joint Venture is formed for such Collaboration Products pursuant to Section 7.3
above and such Joint Venture has not terminated.
8.2 Royalty Offset. RPRP and Introgen understand and recognize that
RPRP is a party to consulting, license and/or research funding agreements (but
not agreements where third party non-government investors finance the research
or development of technology for RPRP) with other commercial and research
institutions ("collaborators") which agreements provide for RPRP's payment of
royalties on products manufactured, used or sold by RPRP based on the
contribution of said collaborators to the discovery and development of said
products. Consequently, it is foreseeable that a Collaboration Product developed
with Introgen may become subject to multiple royalty obligations as the result
of more than one collaborator's contribution to the development of, or ownership
of patent rights covering, the Collaboration Product. In order to avoid the
development of a dispute over royalty entitlements and to provide RPRP with the
incentive to invest in and commercialize products which might otherwise not be
commercialized due to excess royalty obligations, RPRP and Introgen agree that
the royalty rates applicable to any specific Collaboration Product pursuant to
the first sentence of Section 8.1 (the "Introgen Royalty") or pursuant to an
agreement with a third party collaborator not an Affiliate at the time of
agreement or the payment of a royalty (the "Third Party Royalties") may be
reduced to provide reasonable royalty income to each contributing collaborator.
RPRP shall make reasonable and diligent efforts to establish agreements and
amend its existing royalty-bearing agreements with said collaborators so as to
ensure the fair distribution of royalty income based on Collaboration Products
for which more than one royalty claim is made, provided the Introgen Royalty
paid to Introgen shall in no event be adjusted to [*] on a country by country
basis
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(notwithstanding any other provision of this Agreement). It is understood that
this Section shall not be invoked by RPRP as regards Introgen until the sum of
the Introgen Royalty and Third Party Royalties payable by RPRP for a
Collaboration Product ("Total Royalty") is greater than [*] on a country by
country basis. Thereafter, royalty reduction shall be applied equitably in
accordance with the formula in this Section 8.2, taking into account each
collaborator's minimum royalty rate, to reduce on a percentage basis the royalty
rates specified in all collaborator agreements having an applicable royalty
adjustment provision therein and thereby adjust, to the extent possible, RPRP's
Total Royalty burden to no more than [*] on a country by country basis.
(a) Royalty payment reductions shall be calculated
quarterly, based on the Total Royalties payable by RPRP with respect to Net
Sales for such quarter. Within ninety (90) days after the end of each calendar
year, RPRP and Introgen shall reconcile the calculation of royalty reductions
under this Section 8.2 for the preceding calendar year, based upon the total Net
Sales for such year and the Total Royalties with respect to such Net Sales. If
the amount deducted from the Introgen Royalty exceed the amount of such
reconciled reduction, the difference shall be paid to Introgen within thirty
(30) days; if the amount actually deducted from the Introgen Royalty is less
than the amount of such reconciled reduction, the difference may be applied by
RPRP as a credit against royalties owed to Introgen in the then-current calendar
year, in equal quarterly installments.
(b) Unless a more equitable procedure is agreed to by
all participating parties to whom RPRP owes a royalty on a Collaboration
Product, the reduction in the Introgen Royalty and each of the other Third Party
Royalties shall be calculated and applied to royalty payment obligations on a
country by country basis as follows:
(i) Calculate the effective overall Royalty
rate for each collaborator (i.e., Introgen and each of the
other collaborators receiving Third Party Royalties) based on
total worldwide Net Sales for the quarter or year, as
applicable ("EFF RATE");
(ii) On a country by country basis, total
the EFF RATE of all collaborators ("TOTAL RATE");
(iii) On a country by country basis, [*];
If [*] is greater than [*]:
(iv) Calculate the adjustable portions of
[*];
(v) Calculate [*];
(vi) Multiply the [*] for each collaborator
by the [*];
(vii) Subtract the product obtained in (vi)
from the [*] for each collaborator [*]; and
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(viii) Calculate for each collaborator their
reduced royalty rate by [*] on a country by country basis.
(c) Notwithstanding the foregoing calculation, in no
event shall the Introgen Royalty with respect to a Collaboration Product in any
country be reduced by an amount greater than [*] of the amount by which the
Total Royalty for such Collaboration Product in such country exceeds [*] (prior
to any reduction under a provision substantially identical to Section 8.2(b)
above). However, it is understood that at such time as third parties have agreed
to be bound by the calculation in this Section 8.2, and Introgen approves the
resulting impact on the Introgen Royalty, Introgen may agree to waive this
paragraph (c).
(d) At least ninety (90) days prior to entering into
any agreement that would require the payment of any royalty to a third party
with respect to a patent right or technology specifically intended for use in a
Collaboration Product, RPRP or Introgen (as the case may be) agrees to notify
the other of such fact and the party with whom it proposes to enter into such
agreement. Following such notice, RPRP and Introgen (respectively) agree to keep
the other reasonably informed as to the progress of its negotiations with such
third party, including the proposed principal terms of the agreement, as they
reasonably progress. It is understood that the terms of the agreement will not
have been finalized at the time of the initial notice under this Section 8.2(c),
and that such notice is only to inform the other party of an intention to enter
into such an agreement.
9. THIRD PARTY ROYALTIES
9.1 RPRP Obligations. RPRP shall be solely responsible for the payment
of any royalties, license fees and milestone or other payments due to third
parties under licenses or similar agreements necessary to allow the manufacture,
use or sale of any Collaboration Product worldwide, except as set forth in 9.3
below and except for royalties due as a result of sales of Collaboration
Products in the Co-Exclusive Territory or the Undesignated Territory by
Introgen, its Affiliates or Sublicensees (other than RPRP). RPRP's
responsibilities hereunder shall include the reimbursement of Introgen for
royalties owed by Introgen on sales of Collaboration Products pursuant to that
certain Patent and Technology License Agreement executed as of April 21, 1994,
between Introgen and the Board of Regents of the University of Texas System (the
"UT Agreement"). It is understood that Introgen intends to have in effect a
subsequent Patent and Technology License Agreement with the University of Texas,
dated as of July 20, 1994 (the "Restated UT Agreement"), which will supersede
the existing UT Agreement, and that when the Restated UT Agreement becomes
effective, the reference in the preceding sentence to the Patent and Technology
Agreement shall mean the Restated UT Agreement. In the event that Introgen
enters into any other license or agreement during the term of this Agreement for
which royalties, license fees or milestone or other payments would be due with
respect to a Collaboration Product, RPRP shall not be obligated to pay any
amounts due with respect to such license or agreement unless RPRP approves such
agreement or license and agrees to pay the same to the extent such relates to
the commercialization of Collaboration Products by RPRP, its Affiliates and
permitted Sublicensees. If RPRP does not so approve any such license or
agreement
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and agree to pay such amounts, the subject matter covered by such license or
agreement shall not be within the Introgen Technology for purposes of this
Agreement.
9.2 Introgen Obligations. If RPRP enters into a license or agreement
during the term of this Agreement for which royalties would be due with respect
to a Collaboration Product, Introgen shall not be obligated to pay any royalties
due with respect to such license or agreement unless Introgen approves such
license or agreement and agrees to pay the same to the extent such relates to
the commercialization of Collaboration Products by Introgen, its Affiliates and
Sublicensees (other than RPRP), and agrees to pay [*] with respect to the
Collaboration Products that are sold by Introgen, its Affiliates and
Sublicensees in the Co-Exclusive Territory. If Introgen does not so approve any
such license or agreement and agree to pay such the amounts, the subject matter
covered by such license or agreement shall not be within the RPRP Technology for
purposes of this Agreement. Introgen's portion of any such license fees,
milestone payments and other amounts (other than royalties) shall be payable on
the later of the date the amounts are payable by RPRP to the third party or the
first commercial sale of the Collaboration Product by Introgen, its Affiliate or
Sublicensee in the Co-Exclusive Territory.
9.3 North America. In the event that a Joint Venture is formed for a
Collaboration Product in North America pursuant to Section 7.3.1, all royalties
due third parties for the manufacture, use or sale of Collaboration Products in
North America, and [*] of all license fees, milestone payments and other
payments made to third parties under licenses or agreements with respect to
patent rights or technologies incorporated in the Collaboration Products, shall
be deducted from the resulting revenues to the Joint Venture prior to
determining the profits to be shared by Introgen and RPRP from such North
American sales as set forth in Section 7.3.2; provided that both RPRP and
Introgen approved such license or agreement. If both RPRP and Introgen do not
approve such license or agreement, the patent rights or technologies covered
thereby shall not be included within the Introgen Technology or RPRP Technology
licensed to the Joint Venture.
9.4 Efforts to Obtain Sublicense Rights. If RPRP or Introgen undertakes
to acquire from a third party a technology or patent rights that are intended
for use or application with respect to a Collaboration Product, RPRP and
Introgen (as the case may be) shall use good faith efforts to acquire from such
third party the right to sublicense or otherwise make available to the other
party hereto, such technology or patent rights to the extent the same are to be
used in or applied to Collaboration Products. It is understood, however, that
neither party will be obligated to incur additional costs or hardship in
connection with such efforts to acquire such sublicensing or other rights in
accordance with this Section 9.4.
10. PAYMENTS; BOOKS AND RECORDS
10.1 Royalty Reports and Payments. After the first commercial sale of a
Collaboration Product on which royalties are required, RPRP agrees to make
quarterly written reports to Introgen within [*] after the end of each calendar
quarter, stating in each such report the number, description, and aggregate Net
Sales of the Collaboration Product sold during the calendar quarter upon which a
royalty is payable under Section 8.2 above. Concurrently with the making of such
reports, RPRP shall
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pay to Introgen royalties at the rate specified in Article 8. In addition, RPRP
and Introgen each agree to submit to the other such reports and payments as are
payable to third parties and for which RPRP or Introgen (as the case may be) are
responsible under Article 9 above, at least ten (10) days prior to the date such
reports and payments are due to the third party.
10.2 Payment Method. All payments due under this Agreement shall be
made by bank wire transfer in immediately available funds to an account
designated by the recipient. All payments hereunder shall be made in U.S.
dollars.
10.3 Late Payment. Any payments due under this Agreement which are not
paid within ten (10) days of the date such payments are due shall bear interest
to the extent permitted by applicable law at the prime rate as reported by the
Chase Manhattan Bank, New York, New York, on the date such payment is due, plus
an additional two percent (2%), calculated on the number of days such payment is
delinquent. This Section 10.3 shall in no way limit any other remedies available
to any party.
10.4 Currency Conversion. If any currency conversion shall be required
in connection with the calculation of royalties hereunder, such conversion shall
be made using the selling exchange rate for conversion of the foreign currency
into U.S. Dollars, quoted for current transactions reported in The Wall Street
Journal for the last business day of the calendar quarter to which such payment
pertains.
10.5 No Withholding Taxes. So that there will be no withholding taxes
applicable to payments by RPRP to Introgen under this Agreement, RPRP agrees
that all amounts to be paid to Introgen hereunder shall be paid directly by RPRP
from accounts of RPRP in the United States to the accounts of Introgen
designated under Section 10.3 above.
10.6 Records; Inspection. Each party and its Affiliates shall keep
complete, true and accurate books of account and records for the purpose of
determining the royalty amounts payable under this Agreement. Such books and
records shall be kept at the principal place of business of such party or its
Affiliate, as the case may be, for at least [*] following the end of the
calendar quarter to which they pertain. Such records will be open for inspection
during such [*] period by a representative or agent of the other party for the
purpose of verifying the royalty statements. Such inspections may be made no
more than once each calendar year, at reasonable times mutually agreed by
Introgen and RPRP. The auditing party's representative or agent will be obliged
to execute a reasonable confidentiality agreement prior to commencing any such
inspection. Inspections conducted under this Section 10.7 shall be at the
expense of the auditing party, unless a variation or error producing an increase
exceeding [*] of the amount stated for any period covered by the inspection is
established in the course of any such inspection, whereupon all costs relating
to the inspection for such period will be paid the party being audited.
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11. DUE DILIGENCE
11.1 Due Diligence. RPRP shall use its best efforts to diligently
conduct the Later Stage Clinical Development with respect to at least one
Collaboration Product and to obtain regulatory approvals to market such
Collaboration Product in North America and the RPRP Territory. In addition, RPRP
shall use no less the reasonable efforts to complete Later Stage Clinical Trials
and obtain such approvals for all other Collaboration Products. After obtaining
regulatory approvals for any Collaboration Products in a county within the RPRP
Territory (and if a Joint Venture is not formed with respect to such
Collaboration Product, in a county within North America), RPRP shall launch such
Collaboration Product and use no less than reasonable efforts to promote and
meet the market demand therefor in such county.
12. MANUFACTURING RIGHTS
12.1 RPRP Territory. Except as otherwise provided herein, RPRP shall
have the exclusive right to manufacture Collaboration Products for sale within
the Field in the RPRP Territory.
12.2 Co-Exclusive Territory. Except as provided herein, RPRP and
Introgen shall each have the right to manufacture its respective requirements
for the Collaboration Products distributed in the Co-Exclusive Territory. At
Introgen's option and request, Introgen shall have the right to purchase
Collaboration Products from RPRP for sale in the Co-Exclusive Territory, at a
price equal to [*], such right being subject to RPRP's manufacturing capacity
after providing for RPRP's reasonably anticipated supply requirements. However,
in no case shall the [*] the average selling price of the Collaboration Products
in the country for which Introgen resells such Collaboration Products.
12.3 North America. Subject to Section 12.3.3 below, Introgen shall
have the exclusive right to supply Collaboration Products for sale in North
America.
12.3.1 Manufacture and Supply. In the event that a Joint
Venture is formed under 7.3.1 above to market a Collaboration Product in North
America, Introgen shall have the exclusive right to supply such Collaboration
Product to the Joint Venture, and except as set forth below, the Joint Venture
shall purchase such Collaboration Product exclusively from Introgen. In the
event that a Joint Venture is not so formed with respect to a Collaboration
Product, Introgen shall have the exclusive right to supply such Collaboration
Product to RPRP for sale in North America, and RPRP shall purchase such
Collaboration Product exclusively from Introgen for sale in North America. At
its option, however, Introgen may forego such rights to manufacture for North
America, in which case RPRP may do so as provided in 12.3.3 below. It is
understood that Introgen may engage subcontractors with respect to the
manufacture of Collaboration Products for supply to the Joint Venture or RPRP.
12.3.2 Transfer Price. Introgen will supply Collaboration
Products to the Joint Venture or RPRP (as the case may be) for sale in North
America at a price equal to [*]; provided, however, that in no case shall the
margin portion of Introgen's transfer price [*] the average selling
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price of the Collaboration Products in North America. For purpose of
Collaboration Products used for Later Stage Clinical Development the price will
be equal to [*].
12.3.3 [*] In the event that [*] in North America, or [*]
quantities for sale in North America. With respect to the supply of the [*] to
the Joint Venture in such case, [*] receive a price equal to [*] provided,
however, that in no case shall the [*]. For the purpose of [*] used for Later
Stage Clinical Development the [*] be equal to [*].
12.4 Other Territory. For countries within the Other Territory, the
party having exclusive marketing rights in any such country shall also have
rights to manufacture Collaboration Products for sale in such country, unless
otherwise agreed by the parties.
12.5 Supply Agreements. Upon request by RPRP or Introgen, the parties
shall enter into a supply agreement on reasonable and customary terms with
respect to the supply arrangements contemplated in 12.2 and 12.3 above.
13. LICENSE GRANTS
13.1 Grant to RPRP. Subject to the terms and conditions of this
Agreement, Introgen hereby grants to RPRP the following licenses and
sublicenses, as the case may be, under the Introgen Technology: (i) to use and
sell Collaboration Products in the Field within the RPRP Territory and the
Co-Exclusive Territory; (ii) to make and have made the Collaboration Products
anywhere in the world solely for sale and use in the Field within the RPRP
Territory and the Co-Exclusive Territory, and subject to Section 12.3.3 above,
in North America; and (iii) subject to Sections 7.3 and 12.3, to use and sell
Collaboration Products in the Field in North America. The foregoing licenses to
use and sell Collaboration Products under (i) and (iii) shall be: (a)
royalty-bearing and exclusive as to the RPRP Territory and North America, and
(b) royalty-free (except as provided in Article 9) and non-exclusive as to the
Co-Exclusive Territory. The license under (ii) to make Collaboration Products
shall be non-exclusive.
13.2 Grant to Introgen. Subject to the terms and conditions of this
Agreement, RPRP hereby grants to Introgen the following licenses and
sublicenses, as the case may be, under the RPRP Technology: (i) to use and sell
the Collaboration Products in the Field in the Co-Exclusive Territory; (ii) to
make and have made the Collaboration Products anywhere in the world for use and
sale in the Field solely within North America and the Co-Exclusive Territory.
The licenses under (i) above shall be royalty-free and co-exclusive (with RPRP),
and the license under (ii) above shall be royalty-free (except as provided in
Article 9) and non-exclusive.
13.3 Grant to Joint Venture. In the event that a Joint Venture is
formed under Section 7.3 above to market a Collaboration Product in North
America and a license grant is required to operate, Introgen and RPRP shall each
grant and hereby grant to the Joint Venture an exclusive, royalty-free (except
as provided in Article 9) license under the Introgen Technology and the RPRP
Technology (respectively) to use and sell such Collaboration Product in North
America.
13.4 Sublicenses. Introgen shall have the right to grant sublicenses to
third parties of the rights granted by RPRP in Section 13.2 above (including the
co-exclusive rights granted to Introgen under 13.2(i)), provided, however,
Introgen will notify RPRP of any prospective Sublicensee and
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consult with RPRP prior to granting any such sublicense. Introgen may not
authorize any such Sublicensee in the Co-Exclusive Territory to grant further
sublicenses. Unless agreed in writing by Introgen and RPRP, neither RPRP nor the
Joint Venture may sublicense the rights granted in Section 13.1 or 13.3 above or
otherwise authorize any Sublicensees to sell or market Collaboration Products.
13.5 Improvements by Introgen.
13.5.1 [*] to make, use and sell products incorporating a [*]
then following such [*] at least [*] shall notify [*] in reasonable detail of
the [*] is to be licensed. Upon request by [*] receipt of such a notice,
Introgen and RPRP shall meet as mutually agreed to [*] with respect to [*]
described in [*]. If the parties so agree, [*] for the mutually agreed [*] as
are agreed. Otherwise, [*] may proceed to [*] with respect to any [*] for the
[*] summarized in the notice [*] no further obligation under this Section 13.5.
13.5.2 "Program Inventions." As used in 13.5.1 above, a
"Program Invention" shall mean any invention that is first conceived and reduced
to practice by employees or contractors of Introgen in the course of performing
the Early Stage Development Program (i.e. as a part of work specifically
identified in a Program Plan and Budget), and for which RPRP has funded under
the Early Stage Development Program a substantial portion of the in vitro and in
vivo testing of such invention under the Development Program.
13.5.3 Period. Introgen's obligations under this Section 13.5
shall terminate five (5) years after the end of the Term of the Early Stage
Development Program.
13.6 No Rights Beyond Collaboration Products. Except as may be agreed
by RPRP and Introgen after the Effective Date, this Article 13, and Articles 7
and 12 above, shall not be deemed to grant to RPRP rights with respect to the
use, in products other than the Collaboration Products, of Introgen Technology
incorporated in such Collaboration Products; nor shall such provisions of this
Agreement be deemed to restrict Introgen's right to exploit any Introgen
Technology in products other than Collaboration Products (subject to Sections
13.5 and 6.2 above).
14. INTELLECTUAL PROPERTY
14.1 Ownership of Inventions. Inventorship of inventions and other
intellectual property rights conceived and/or reduced to practice in connection
with the Early Stage Development Program shall be determined in accordance with
the patent and other intellectual property laws of the United States. Title to
all inventions and other intellectual property made solely by an Introgen
employee in connection with the Early Stage Development Program shall be owned
by Introgen. Title to all inventions and other intellectual property made solely
by an RPRP employee in connection with the Early Stage Development Program shall
be owned by RPRP. Title to all inventions and other intellectual property made
jointly by employees of Introgen and RPRP in connection the Early Stage
Development Program shall be jointly owned by RPRP and Introgen. Except as
expressly provided in this Agreement, it is understood that neither party shall
have any obligation to account to the other for profits, or to obtain any
approval of the other party to license or exploit a joint invention, by reason
of joint ownership of any such intellectual property.
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14.2 Patent Prosecution.
14.2.1 Sole Inventions. Introgen or RPRP, as the case may be,
shall, at its expense, control the preparing, filing, prosecuting and
maintaining the patent applications and patents within the Introgen Technology
and RPRP Technology (respectively) worldwide, in such countries as it deems
appropriate, and conducting any interferences, re-examinations, reissues,
oppositions or requests for patent term extensions relating to the Introgen
Technology and RPRP Technology (respectively) using counsel of its choice.
14.2.2 Joint Inventions. To provide for the most sensible,
efficient and cost effective means to protect inventions that are owned jointly
by RPRP and Introgen under Section 14.1 above, patent counsel for Introgen and
RPRP shall consult with each other. As a result of such consultation, patent
counsel will be chosen to prepare, file, prosecute and maintain patent
applications and patents worldwide on such joint inventions, and the parties
shall share the costs thereof as reasonably agreed, based upon the relative
benefits thereof to each party.
14.2.3 Prosecution by Other Party. In the event that Introgen
or RPRP, as the case may be (the "Owner"), declines to file or, having filed,
declines to further prosecute and maintain any such patent applications or
patents in accordance with 14.2.1 above, or conduct any interferences or
oppositions, or request any re-examinations, reissues or extensions of patent
term with respect to the Technology it owns in accordance with 14.2.1 above, the
other party shall have the right to file, prosecute and maintain such patent
applications or patents or conduct such interferences, at its own expense, in
the name of the Owner in any country, in which event the Owner of such
Technology shall provide, at the other party's request and expense, all
reasonable assistance. If the Owner of such Technology declines or fails to take
any such actions, such Owner shall notify the other party hereto at least sixty
(60) days prior to the date the next action or filing is due to be taken with
respect to the subject patent application or patent. One-half of all such
expenses shall be deducted from the royalties or profits due to the Owner with
respect to the country in which the patent issues.
14.2.4 Cooperation. Each of Introgen and RPRP shall keep the
other reasonably informed as to the status of such patent matters, including,
without limitation, by providing the other the opportunity to review and comment
on any documents which will be filed in any patent office, and providing the
other copies of any documents that such party receives from such patent offices,
including notice of all interferences, re-examinations, oppositions or requests
for patent term extensions. Introgen and RPRP shall each cooperate with and
assist the other in connection with such activities, at the others' request and
expense.
14.2.5 Third Party Rights. The foregoing provisions of this
Article 14 shall be subject to and limited by any agreements pursuant to which
Introgen and RPRP, as the case may be, acquired any particular Introgen
Technology or RPRP Technology. It is understood that such agreements may
require, for example, that the licensor party from whom Introgen or RPRP
acquired a license to such Technology control the prosecution of particular
patents and patent applications and does not permit access or an opportunity to
comment on the any documents filed in patent offices.
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14.3 Defense of Third Party Infringement Claims.
14.3.1 Infringement Claims. If the production, sale or use of
any Collaboration Product pursuant to this Agreement results in a claim, suit or
proceeding alleging patent infringement against Introgen or RPRP (or their
respective Affiliates or Sublicensees), such party shall promptly notify the
other party hereto in writing setting forth the facts of such claim in
reasonable detail. The party subject to such claim shall have the exclusive
right to defend and control the defense of any such claim, suit or proceeding,
at its own expense, using counsel of its own choice, provided, however, it shall
not enter into any settlement which admits or concedes that any aspect of the
Technology of the other party hereto is invalid or unenforceable without the
prior written consent of such other party. Such party shall keep the other party
hereto reasonably informed of all material developments in connection with any
such claim, suit or proceeding.
14.3.2 Third Party Blocking Patent. If an unexpired third
party patent(s) covering the manufacture, use or sale of a Collaboration Product
exist(s) in a country where the Collaboration Product is being manufactured,
used or sold during the term of this Agreement, and if it should prove in RPRP's
judgment impractical or impossible for it or its sublicensees to continue the
manufacture, use or sale of Collaboration Product in such country without
obtaining a royalty-bearing patent license from such third party, then RPRP
shall have the following options:
(a) RPRP may terminate the continued manufacture
and/or sale of the Collaboration Product in such country upon sixty (60) days'
written notice to Introgen, with Introgen's written consent, whereupon RPRP
shall have no further rights in such country; or
(b) RPRP may obtain a license from such third party
and treat such third party as a "collaborator" for purposes of Section 8 and 9
for such country.
14.4 Enforcement.
14.4.1 Solely Owned Technology. Subject to 14.4.2 below, in
the event that any Introgen Technology or RPRP Technology necessary for
manufacture, use and sale of a Collaboration Product is infringed or
misappropriated by a third-party in any country in which Introgen or RPRP has
rights to market such Collaboration Product, or is subject to a declaratory
judgment action arising from such infringement in such country, Introgen or RPRP
(respectively) shall promptly notify the other party hereto. The owner of such
Technology shall have the initial right (but not the obligation) to enforce the
Technology it owns, or defend any declaratory judgment action with respect
thereto, at its expense. In the event that the owner of such Technology fails to
initiate a suit to enforce such Technology against a commercially significant
infringement in the Field by a third party within one hundred eighty (180) days
of a request by the other party to do so if such infringement is occurring in a
territory in which the other party (the "Licensee") has the right to market the
subject Collaboration Product, such Licensee may initiate such suit in the name
of the owner of such Technology against such infringement, at the expense of
such Licensee. The party involved in any such claim, suit or proceeding, shall
keep the other party hereto reasonably informed of the progress of any such
claim, suit or proceeding. Any recovery by such party received as a result
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of any such claim, suit or proceeding shall be used first to reimburse such
party for all expenses (including attorneys and professional fees) incurred in
connection with such claim, suit or proceeding. If the Party initiating the suit
was the owner of the subject Technology, all of the remainder shall be retained
by such owner, and if applicable, included in Net Sales for purposes of Article
8 if the infringing activities were in a country in which royalties would be due
on sales of a Collaboration Product. If the party initiating the suit is the
Licensee, twenty percent (20%) of the remainder shall be paid to the owner of
the subject Technology and eighty percent (80%) to the Licensee.
14.4.2 Jointly Owned Technology. Notwithstanding 14.4.1 above,
in the event that any Technology that is jointly owned by RPRP and Introgen
under Section 14.1 of this Agreement is infringed or misappropriated by a third
party, Introgen and RPRP shall mutually agree upon whether, and, if so, how, to
enforce such Joint Technology or defend such Joint Technology in a declaratory
judgment or similar proceeding.
15. REPRESENTATIONS AND WARRANTIES
15.1 Warranties. Each party warrants and represents to the other that
(i) it has the full right and authority to enter into this Agreement and grant
the rights and licenses granted herein; (ii) it has not previously granted and
will not grant any rights in conflict with the rights and licenses granted
herein; (iii) and there are no existing or threatened actions, suits or claims
pending against it with respect to its Technology or its right to enter into and
perform its obligations under this Agreement and (iv) it has not previously
granted, and will not grant during the term of this Agreement, any right,
license or interest in or to its Technology, or any portion thereof, to
manufacture, sell or use a Collaboration Product that is in conflict with the
rights or licenses granted under this Agreement. RPRP further represents and
warrants that, as of the Effective Date, it is a wholly owned subsidiary of RPR
Inc., and that no other "person" (as defined in the Securities Exchange Act of
1934) owns beneficially more than eighty percent (80%) of the outstanding
capital stock of RPR Inc. Introgen further represents and warrants that a true
and correct copy of the UT Agreement and the Restated UT Agreement (as defined
in Section 9.1 above) were provided to RPRP by facsimile from Wilson, Sonsini,
Goodrich & Rosati on September 28, 1994.
15.2 Disclaimer of Warranties. Introgen and RPRP specifically disclaim
any guarantee that the Early Stage or Later Stage Development Program will be
successful, in whole or in part. To the extent that Introgen and RPRP have
complied with Articles 2, 3, 4 and 14.2 hereof, the failure of the parties to
successfully develop Collaboration Products will not constitute a breach of any
representation or warranty or other obligation under this Agreement. Neither
Introgen nor RPRP makes any representation or warranty or guaranty that the
Program Plan and Budget will be sufficient for the successful completion of the
Early Stage Development Program. INTROGEN AND RPRP EXPRESSLY DISCLAIM ANY
WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT
TO THE EARLY STAGE OR LATER STAGE DEVELOPMENT PROGRAM AND THE INTROGEN AND RPRP
INTELLECTUAL PROPERTY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY, NONINFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE,
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VALIDITY OF INTROGEN OR RPRP TECHNOLOGY, PATENTED OR UNPATENTED, AND
NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
15.3 Effect of Representations and Warranties. It is understood that if
the representations and warranties under this Article are not true and accurate
and Introgen or RPRP incurs liabilities, costs or other expenses as a result of
such falsity, Introgen or RPRP, as the case may be, shall indemnify, defend and
hold the other party harmless from and against any such liabilities, costs or
expenses incurred, provided that the indemnifying party receives prompt notice
of any claim against Introgen or RPRP, as the case maybe, resulting from or
related to such falsity, the cooperation of the indemnified party, as requested
in connection with any such claim, and the sole right to control the defense or
settlement thereof.
16. CONFIDENTIALITY
16.1 Confidential Information. Except as expressly provided herein, the
parties agree that, for the term of this Agreement and for five (5) years
thereafter, the receiving party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose any information
furnished to it by the other party hereto pursuant to this Agreement except to
the extent that it can be established by the receiving party by competent proof
that such information:
(a) was already known to the receiving party, other
than under an obligation of confidentiality, at the time of disclosure;
(b) was generally available to the public or
otherwise part of the public domain at the time of its disclosure to the
receiving party;
(c) became generally available to the public or
otherwise part of the public domain after its disclosure and other than through
any act or omission of the receiving party in breach of this Agreement; or
(d) was subsequently lawfully disclosed to the
receiving party by a person other than a party or developed by the receiving
party without reference to any information or materials disclosed by the
disclosing party.
16.2 Permitted Disclosures. Each party hereto may disclose another's
information to the extent such disclosure is reasonably necessary in filing or
prosecuting patent applications, prosecuting or defending litigation, complying
with applicable governmental regulations or otherwise submitting information to
tax or other governmental authorities, making a permitted sublicense or other
exercise of its rights hereunder or conducting clinical trials, provided that if
a party is required to make any such disclosure of another party's confidential
information, other than pursuant to a confidentiality agreement, it will give
reasonable advance notice to the latter party of such disclosure and, save to
the extent inappropriate in the case of patent applications, will use its best
efforts to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or
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otherwise). Notwithstanding the foregoing, neither party shall disclose to third
parties, clinical data or regulatory filings received from Introgen or RPRP,
except as permitted under section 5.4 above.
17. INDEMNIFICATION
17.1 Indemnification of Introgen. RPRP shall indemnify each of Introgen
and its Affiliates and the directors, officers, employees, and counsel of
Introgen and such Affiliates and the successors and assigns of any of the
foregoing (the "Introgen Indemnitees"), pay on demand and protect, defend, save
and hold each Introgen Indemnitee harmless from and against, any and all
liabilities, damages, losses, settlements, claims, actions, suits, penalties,
fines, costs or expenses (including, without limitation, reasonable attorneys'
fees and other expenses of litigation) (any of the foregoing, a "Claim")
incurred by any Introgen Indemnitee, arising from or occurring as a result of
(a) activities performed by or on behalf of RPRP in connection with the Later
Stage Clinical Development, (b) activities performed by RPRP in connection with
the development of any Collaboration Product for commercialization outside North
America, (c) third party claims, including without limitation, product liability
claims relating to any Collaboration Products used, sold or otherwise
distributed by RPRP, its Affiliates or Sublicensees, (d) third party claims
relating to any Collaboration Products supplied by Introgen to the Joint
Venture; except in each case to the extent such claim is caused by the
negligence or intentional misconduct of an Introgen Indemnitee. For purposes of
this Section 17.1, it is understood that product liability claims that arise out
of the marketing or use of a Collaboration Product in a country after obtaining
governmental approval to market such Collaboration Product shall not be deemed
to "arise from or occur as a result of" the activities of RPRP described in (a)
above.
17.2 Indemnification of RPRP. Introgen shall indemnify each of RPRP and
its Affiliates and the directors, officers, employees, and counsel of RPRP and
such Affiliates and the successors and assigns of any of the foregoing (the
"RPRP Indemnitees"), pay on demand and protect, defend, save and hold each RPRP
Indemnitee harmless from and against any and all liabilities, damages, losses,
settlements, claims, actions, suits, penalties, fines, costs or expenses
(including, without limitation, reasonable attorneys' fees and other expenses of
litigation) (any of the foregoing, a "Claim") incurred by any RPRP Indemnitee,
arising from or occurring as a result of (a) activities performed by or on
behalf of Introgen in connection with Early Stage Development, (b) activities
performed by Introgen in connection with the development of any Collaboration
Product for commercialization outside North America, and (c) third party claims,
including without limitation, product liability claims, relating to any
Collaboration Products used, sold or otherwise distributed by Introgen, its
Affiliates or Sublicensees (other than RPRP), or (d) third party claims relating
to any Collaboration Products supplied by RPRP to Introgen for sale or use by
Introgen, its Affiliates or Sublicensees outside North America, except in each
case to the extent such claim is caused by the negligence or intentional
misconduct by an RPRP Indemnitee. For purposes of this Section 17.2, it is
understood that product liability claims that arise out of the marketing or use
of a Collaboration Product in a country after obtaining governmental approval to
market such Collaboration Product shall not be deemed to "arise from or occur as
a result of" the activities of Introgen described in (a) above.
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17.3 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article shall promptly notify the other party (the
"Indemnitor") in writing of any loss, claim, damage, liability or action in
respect of which the Indemnitee or any of its Affiliates, Sublicensees or their
directors, officers, employees or agents intend to claim such indemnification,
and the Indemnitor shall have the right to participate in, and, to the extent
the Indemnitor so desires, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that Indemnitee shall have the
right to retain its own counsel, with the fees and expenses to be paid by the
Indemnitor, if representation of such Indemnitee by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party represented by such counsel in such
proceeding. The indemnity agreement in this Article shall not apply to amounts
paid in settlement of any loss, claim, damage, liability or action if such
settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver written notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article but the
omission so to deliver written notice to the Indemnitor shall not relieve it of
any liability that it may have to any Indemnitee otherwise than under this
Article. The Indemnitee under this Article, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.
18. TERM AND TERMINATION
18.1 Term. This Agreement shall become effective as of the Effective
Date and, unless earlier terminated pursuant to the other provisions of this
Article, shall continue in full force and effect on a product-by-product and
country-by-country basis, until twelve and one-half years after the first
commercial sale of each Collaboration Product in such country.
18.2 Termination for Cause. Either party to this Agreement may
terminate this Agreement in the event the other party shall have materially
breached or defaulted in the performance of any of its material obligations
hereunder, and such default shall have continued for sixty (60) days after
written notice thereof was provided to the breaching party by the non-breaching
party. Any termination shall become effective at the end of such sixty (60) day
period unless the breaching party (or any other party on its behalf) has cured
any such breach or default prior to the expiration of the sixty (60) day period.
18.3 Termination for Convenience by RPRP.
18.3.1 Entire Agreement. RPRP shall have the right to
terminate this Agreement on one hundred eighty (180) days prior written notice
to Introgen, provided such notice of termination may not be given prior to
December 15, 1995.
18.3.2 Individual Products. Upon one hundred eighty (180) days
prior notice to Introgen, RPRP may terminate the development of any particular
Collaboration Product, and RPRP shall have no further payment obligations with
respect to the development of such Collaboration
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Product following the effective date of such termination, except as set forth in
18.4.2(b) below. In such event, such product will cease to be a Collaboration
Product for all purposes of this Agreement, and RPRP shall have no further
rights with respect thereto; provided, however, that unless there is at least
one Collaboration Product remaining, such termination shall also be deemed a
termination of this Agreement under 18.3.1 above.
18.4 Effect of Breach or Termination.
18.4.1 Accrued Obligations. Termination of this Agreement for
any reason shall not release any party hereto from any liability which, at the
time of such termination, has already accrued to the other party or which is
attributable to a period prior to such termination nor preclude either party
from pursuing all rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement.
18.4.2 Wind-Down Expenses.
(a) Following any termination pursuant to Section
18.3.1, RPRP shall reimburse Introgen for all non-cancelable obligations or
commitments incurred by Introgen prior to RPRP's notice of such termination in
the course of performing the Early Stage Development Program, and expenses of
Introgen employees who had been engaged in the performance of the Early Stage
Development Program, which employee expenses are incurred by Introgen during the
six (6) months following the effective date of such termination (including
benefits, a reasonable allocation of overhead, and/or if the employees are
terminated by Introgen, reasonable severance pay); provided that RPRP shall be
responsible only for that portion of such employee expenses equal to the
percentage of such employees' time that was dedicated towards work under the
Early Stage Development Program during the six (6) months prior to RPRP's notice
of termination ("Employee Expenses").
(b) Following any termination of development of any
particular Collaboration Product pursuant to Section 18.3.2, RPRP shall
reimburse Introgen for all non-cancelable obligations and commitments incurred
by Introgen with respect to such Collaboration Product prior to RPRP's notice of
such termination, and Employee Expenses (as described in 18.3.2(a) above)
incurred by Introgen during the six (6) months following the effective date of
such termination, to the extent that such employees are not reassigned to other
work to be performed under the Early Stage Development Program and funded by
RPRP. Introgen shall use reasonable efforts to mitigate these "wind-down"
expenses by redirecting such obligations and commitments, and employees, to the
furtherance of the continuing Early Stage Development Program and the
development of other Collaboration Products.
18.4.3 Return of Materials. Upon any termination of this
Agreement, Introgen and RPRP shall promptly return to the other all Confidential
Information received from the other (except one copy of which may be retained
for archival purposes).
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18.4.4 Stock on Hand. In the event this Agreement is
terminated with respect to Introgen or RPRP for any reason, subject to Articles
8, 9 and Article 10, the terminated party and their respective Affiliates and
Sublicensees, shall have the right to sell or otherwise dispose of the stock of
any Collaboration Product subject to this Agreement then on hand.
18.5 Survival. Section 14.1 and Articles 10, 15, 16, 17, 18 and 19 of
this Agreement shall survive expiration or termination of this Agreement for any
reason. In addition, for a period of three (3) years following any termination
of this Agreement prior to the end of the term specified in 18.1 above (other
than pursuant to Section 18.2 for material breach by Introgen), RPRP shall not
develop or commercialize directly or through third parties a product within the
Field. In addition:
(a) In the event of a termination under 18.2 above by
reason of a material breach by Introgen, RPRP shall have an exclusive, worldwide
license, with the right to grant sublicenses, under the Introgen Technology to
make, have made, use and sell the Collaboration Products within the Field, and
in addition to the other Articles surviving as set for the above, Article 9 and
Sections 14.3 and 14.4 shall also survive.
(b) In the event of a termination under 18.2 above by
reason of a material breach by RPRP, or by reason of a termination of this
Agreement by RPRP under Section 18.3.1 hereof, Introgen shall have an exclusive,
worldwide license, with the right to grant sublicenses, under the RPRP
Technology to make, have made, use and sell the Collaboration Products, and in
addition to the other Articles surviving as set forth above, Article 9 and
Sections 14.3 and 14.4 shall also survive.
(c) In the event of a termination contemplated under
18.5(a) or (b), the term "Collaboration Products" shall be deemed to also
include any product within the Field for which an IND was filed under the Early
Stage Development Program but for which Phase I was continuing and not completed
prior to the date of such termination.
19. MISCELLANEOUS
19.1 Governing Law. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by and construed and enforced in
accordance with, the laws of the State of New York, without reference to
conflicts of laws principles.
19.2 Force Majeure. Nonperformance of any party (except for payment
obligations) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to perform
is beyond the reasonable control and not caused by the negligence or intentional
conduct or misconduct of the nonperforming party.
19.3 No Implied Waivers; Rights Cumulative. No failure on the part of
Introgen or RPRP to exercise and no delay in exercising any right under this
Agreement, or provided by statute or at law or in equity or otherwise, shall
impair, prejudice or constitute a waiver of any such right, nor
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shall any partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.
19.4 Independent Research. Each party acknowledges and agrees that
Introgen and RPRP shall have the right to engage in their own research and
development activities outside the Field. Neither party shall, by virtue of this
Agreement, have any right, title or interest in or to such independent
activities or to the income or profits derived therefrom.
19.5 Independent Contractors. Nothing contained in this Agreement is
intended implicitly, or is to be construed, to constitute Introgen or RPRP as
partners in the legal sense. No party hereto shall have any express or implied
right or authority to assume or create any obligations on behalf of or in the
name of any other party or to bind any other party to any contract, agreement or
undertaking with any third party.
19.6 Notices. All notices, requests and other communications hereunder
shall be in writing and shall be personally delivered or sent by registered or
certified mail, return receipt requested, postage prepaid, in each case to the
respective address specified below, or such other address as may be specified in
writing to the other parties hereto:
RPRP: Rhone-Poulenc Rorer Pharmaceuticals, Inc.
500 Arcola Road
P.O. Box 1200
Collegeville, Pennsylvania 19426-0107
Attn: President, Cell and Gene Therapy
Division
with a copy to: Rhone-Poulenc Rorer, Inc.
500 Arcola Road
P.O. Box 2200
Collegeville, Pennsylvania 19426-0107
Attn: General Counsel
Introgen: Introgen Therapeutics, Inc.
301 Congress Ave.
Suite 2025
Austin, Texas 78701
Attn: President
with a copy to: Rodney Varner, Esq.
Wilson & Varner, L.L.P.
301 Congress Avenue
Austin, Texas 78701
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Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Kenneth A. Clark, Esq.
19.7 Assignment. This Agreement shall not be assignable by either party
to any third party hereto without the written consent of the other party hereto;
except Introgen may assign this Agreement without RPRP's consent to an entity
that acquires substantially all of the business or assets of Introgen, and RPRP
may assign this Agreement without Introgen's consent to an entity that acquires
substantially all of the business or assets of RPR Inc., in each case whether by
merger, acquisition or sale. The terms and conditions of this Agreement shall be
binding on and inure to the benefit of the permitted successors and assigns of
the parties.
19.8 Modification. No amendment or modification of any provision of
this Agreement shall be effective unless in writing signed by all parties
hereto. No provision of this Agreement shall be varied, contradicted or
explained by any oral agreement, course of dealing or performance or any other
matter not set forth in an agreement in writing and signed by all parties.
19.9 Severability. If any provision hereof should be held invalid,
illegal or unenforceable in any jurisdiction, all other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in order to carry out the intentions of the parties hereto as nearly
as may be possible. Such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction.
19.10 Non-Disclosure. Each of the parties hereto agrees: (i) not to
disclose to any third party the financial terms of this Agreement without the
prior written consent of each other party hereto, except to advisors, investors
and others on a need to know basis under circumstances that reasonably ensure
the confidentiality thereof, or to the extent required by law. Without
limitation upon any provision of this Agreement, each of the parties hereto
shall be responsible for the observance by its employees of the foregoing
confidentiality obligations. Notwithstanding the foregoing, the parties shall
agree upon a press release to announce the execution of this Agreement, together
with a corresponding Q&A outline for use in responding to inquiries about the
Agreement; thereafter, RPRP and Introgen may each disclose to third parties the
information contained in such press release and Q&A without the need for further
approval by the other.
19.11 Entire Agreement. This Agreement together with the Stock Purchase
Agreement entered by the parties of even date herewith, constitute the entire
agreement, both written or oral, with respect to the subject matter hereof, and
supersede all prior or contemporaneous understandings or agreements, whether
written or oral, between Introgen and RPRP with respect to such subject matter.
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19.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together, shall constitute one and the same instrument.
19.13 Headings. Headings used herein are for convenience only and shall
not in any way affect the construction of or be taken into consideration in
interpreting this Agreement.
19.14 Patent Marking. Introgen and RPRP agree to mark and have their
Affiliates and Sublicensees mark all Collaboration Products they sell or
distribute pursuant to this Agreement in accordance with the applicable statute
or regulations in the country or countries of manufacture and sale thereof.
19.15 Export Laws. Notwithstanding anything to the contrary contained
herein, all obligations of Introgen and RPRP are subject to prior compliance
with United States export regulations and such other United States laws and
regulations as may be applicable, and to obtaining all necessary approvals
required by the applicable agencies of the government of the United States.
Introgen and RPRP shall cooperate with each other and shall provide assistance
to the other as reasonably necessary to obtain any required approvals.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in duplicate originals as of the date first above
written.
INTROGEN THERAPEUTICS, INC. RHONE-POULENC RORER
PHARMACEUTICALS INC.
By: /s/ DAVID G. NANCE By: /s/ MICHEL DE ROSEN
------------------------------------ --------------------------------
Name: David G. Nance Name: Michel de Rosen
---------------------------------- ------------------------------
Title: President Title: President
--------------------------------- -----------------------------
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EXHIBIT A
Existing Introgen Licensed Patents
[*]
<PAGE> 41
EXHIBIT B
European Countries
Albania Macedonia
Andorra Malta
Austria Moldavia
Belgium Monaco
Bosnia Montenegro
Bulgaria Netherlands
Croatia Norway
Czech Republic Poland
Denmark Portugal
Finland Rumania
France San Marino
Germany Slovakia
Greece Slovenia
Hungary Spain
Iceland Sweden
Ireland Switzerland
Italy Turkey
Liechtenstein United Kingdom
Luxembourg Vatican City
<PAGE> 42
EXHIBIT C
Initial Program Plan and Budget
[*]
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
October 25, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF COUNSEL
We consent to the use of our name in the second paragraph under the caption
"Experts" in the prospectus, which constitutes a part of the Registration
Statement for the Common Stock of Introgen Therapeutics, Inc. on Form S-1.
By: /s/ DAVID PARKER
------------------------------------
David Parker
Arnold, White & Durkee
Austin, Texas
October 25, 1996
