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Form 20 - F
[ ] Registration statement pursuant to section 12(b) or (g) of the
Securities Exchange Act of 1934 [Fee required]
or
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee required] - For the fiscal year ended
December 31, 1999
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 [No fee required] - For the transition
period from to
Commission file number(s): SEC Filer, 72731,356
Registrant: File Number: 001-12033
CIK: 0001018735
Nymox Pharmaceutical Corporation
(Exact name of registrant as specified in its charter)
Canada
(Jurisdiction of incorporation or organization)
9900 Cavendish Blvd., Suite 306
St. Laurent, Quebec, Canada, H4M 2V2
Securities registered or to be registered pursuant to section 12(b) of the Act.
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None Not Applicable
Securities registered or to be registered pursuant to section 12(g) of the Act
Common Stock
Securities registered or to be registered pursuant to section 15(d) of the Act
None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report: 20,003,804 shares as of December 31, 1999.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s)), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark which financial statement item the registrant has
elected to follow.
Item 17 [ ] Item 18 [X]
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
You should be aware that this annual report contains forward-looking statements
about, among other things, the anticipated operations, product development,
financial condition and operating results of Nymox, proposed clinical trials and
proposed transactions, including collaboration agreements.
By forward-looking statements, we mean any statements that are not statements of
historical fact, including (but are not limited to) statements preceded by or
that include the words, "believes", "expects", "anticipates", "hopes", "targets"
or similar expressions.
In connection with the "safe harbor" provisions in the Private Securities
Litigation Reform Act of 1995, we are including this cautionary statement to
identify some of the important factors that could cause Nymox's actual results
or plans to differ materially from those projected in forward-looking statements
made by, or on behalf of, Nymox. These factors, many of which are beyond the
control of Nymox, include Nymox's ability to:
- identify and capitalize on possible collaboration, strategic
partnering or divestiture opportunities,
- obtain suitable financing to support its operations and clinical
trials,
- manage its growth and the commercialization of its products,
- achieve operating efficiencies as it progresses from a
development-stage to a later-stage biotechnology company,
- successfully compete in its markets,
- realize the results it anticipates from the clinical trials of its
products,
- succeed in finding and retaining joint venture and collaboration
partners to assist it in the successful marketing, distribution and
commercialization of its products,
- achieve regulatory clearances for its products,
- obtain on commercially reasonable terms adequate product liability
insurance for its commercialized products,
- adequately protect its proprietary information and technology from
competitors and avoid infringement of proprietary information and
technology of its competitors,
- assure that its products, if successfully developed and commercialized
following regulatory approval, are not rendered obsolete by products
or technologies of competitors and
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- not encounter problems with third parties, including key personnel,
upon whom it is dependent.
Although Nymox believes that the forward-looking statements contained in this
annual report are reasonable, it cannot ensure that its expectations will be
met. These statements involve risks and uncertainties. Actual results may differ
materially from those expressed or implied in these statements. Factors that
could cause such differences include, but are not limited to, those discussed in
the section entitled "Significant Risks That Could Materially Impact Our
Operations" in Item 1, Description of Business.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
In this annual report, the term "Nymox" refers to both Nymox Pharmaceutical
Corporation and its affiliates, Nymox Corporation and Serex, Inc. and, where
applicable, a predecessor private corporation, DMS Pharmaceuticals Inc.
INTRODUCTION
Nymox is a development stage biopharmaceutical company based in Maywood,
New Jersey and Saint Laurent, Quebec, Canada.
We specialize in the research and development of therapeutics and diagnostics
for the aging population with an emphasis on Alzheimer's disease. Alzheimer's
disease is a progressive, terminal brain disease of the elderly marked by an
irreversible decline in mental abilities, including memory and comprehension,
and often accompanied by changes in behavior and personality. It currently
afflicts an estimated four million people in the United States and at least
20 million people worldwide. As the baby-boomer generation continues to age,
these figures are expected to rise sharply.
DIAGNOSTIC PRODUCTS FOR ALZHEIMER'S DISEASE
Alzheimer's disease is the most common cause of dementia in persons 65 years of
age and older and is the fourth leading cause of death among the elderly.
Despite the need for an accurate clinical test, the definitive diagnosis of the
disease is possible only after the death of the patient by expert, pathologic
examination of brain tissue.
The Surgeon General's Report on Mental Health, released on December 13, 1999,
identified the importance and the need for the early detection and diagnosis of
Alzheimer's disease. The report described the current approach to Alzheimer's
disease diagnosis, clinical examination and the exclusion of other common causes
of its symptoms, as time- and labor-intensive, costly and largely dependent on
the expertise of the examiner. As a result, the illness is currently
underrecognized, especially in primary care settings, where most older patients
seek care. The report joined other experts writing in the field in recognizing
the need for a better, more reliable method for diagnosing the disease in living
patients and in particular, the need of a simple,
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accurate and convenient test that could detect a biochemical change early in
patients with Alzheimer's disease. We believe our AD7C(TM) provides such a test.
AD7C(TM) TEST
We market a proprietary diagnostic test for Alzheimer's disease, known as the
AD7C(TM) Test, through our reference laboratory in Maywood, New Jersey. The test
is available both as a urine test, where the patient provides a first-morning
urine sample for testing, and as a cerebrospinal fluid test, where a doctor
draws a small sample of spinal fluid from the patient. The patient's doctor then
forwards the sample to our laboratory where our technical staff performs the
test. We then report the results to the doctor.
The AD7C(TM) Test measures the level of a brain protein called neural thread
protein which is elevated early in Alzheimer's disease as reported both in the
scientific literature and at scientific conferences. Researchers at the
Massachusetts General Hospital and Brown University led by Doctors Suzanne de la
Monte and Jack Wands first found large amounts of the protein in the brains of
patients known to have died with Alzheimer's disease. Subsequent research led to
the characterization of the protein and the development of a highly sensitive
test to detect the presence of the protein not only in brain tissue but also in
the spinal fluid and urine of patients diagnosed with Alzheimer's disease. There
is evidence that the protein is associated with the growth and sprouting of
brain cells and accordingly one possible explanation for its increased
production in the brains of patients with Alzheimer's disease may be as one of
the body's responses to the widespread destruction of brain cells that occurs
with AD. The protein is also associated with cell death in brain cell cultures
in the laboratory and therefore may also play a role in the cell loss in the
disease.
Nymox believes that its AD7C(TM) test can assist a physician faced with the task
of diagnosing whether a patient has Alzheimer's disease. In company funded
trials to date, involving over 500 clinical samples, the test results were
positive for over 80% of the patients with verified Alzheimer disease and
negative in over 89% of subjects without the disease (known as a low false
positive rate). The low rate of positive results for patients without the
disease is important for doctors investigating patients with subtle or marginal
symptoms of mental, emotional, cognitive, or behavioral changes. If the doctor
can rule out Alzheimer's with more assurance, a great deal of patient and family
anguish and anxiety will be avoided. A low test score will help the doctor to be
more certain that Alzheimer's disease is not the cause of the patient's symptoms
and to target the other, often reversible causes of the patient's symptoms, such
as depression.
These trials have been confirmed by verification of the diagnosis through
postmortem examination of brain tissue. To date, several studies published in
scientific publications or presented at scientific conferences have confirmed
the accuracy of the AD7C(TM) test. These publications include the Journal of
Clinical Investigation (1997; vol.100; pages 3093-3104), the Journal of
Contemporary Neurology (1998; art. 4a), two publications in the Journal of
Clinical Laboratory Analysis (1998; vol.12: 285-288) and (1998; vol.12:223-226),
and Alzheimer's reports (1999; vol.2,no.6:327-332).
There can be no assurance that further studies will repeat the same level of
success experienced to date.
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The early diagnosis of Alzheimer's disease is important to physicians, patients
and their families and enables them to make informed and early social, legal and
medical decisions about treatment and care. Early diagnosis of Alzheimer's
disease has become increasingly important with new improvements in drug
treatment and care. Even a modest delay in institutionalization can mean
substantial social and financial savings. Conversely, any testing procedure that
could rule out Alzheimer's disease would eliminate the tremendous uncertainty
and anxiety patients and their families otherwise face and would allow
physicians to focus on the other, often reversible, causes of cognitive changes.
Early diagnosis as facilitated by the AD7C(TM) test represents a potentially
large cost-savings in the form of a reduced number of office visits, lab tests,
scans and other procedures required by the traditional methods of diagnosis.
The AD7C(TM) test is an aid to diagnosis, to be considered together with patient
history, physical examination and other relevant medical data. The test does not
replace a physician's diagnosis.
7C GOLD(TM) AN IMPROVED VERSION OF OUR AD7C(TM) TEST
We are developing an improved version of our AD7C(TM) Test that aids physicians
in the diagnosis of Alzheimer's disease. This version is known as the 7C Gold
test. At present, the AD7C(TM) Test is conducted in a specialized reference
laboratory to which physicians send patient samples to be tested. The 7C Gold
test is designed as a kit which permits the testing of patient samples either in
a general purpose medical laboratory or in a physician's office. Subject to
further laboratory and clinical validation and to any necessary regulatory
approvals, we intend to sell the 7C Gold test worldwide within the next 12 to
18 months. We expect that, if approved, the 7C Gold test will increase the
availability and acceptance of our test while lowering its cost to the patient
or health care payer.
OTHER BIOCHEMICAL INDICATORS OF ALZHEIMER'S DISEASE
We are also developing a new diagnostic test for Alzheimer's disease that
detects a distinctive brain antigen referred to as 35i9 which we believe is also
associated with Alzheimer's disease. We hold exclusive patent rights to several
other biochemical indicators for Alzheimer's disease, including the brain
protein, 35i9. We intend to use our extensive scientific, medical and commercial
experience and know-how in the field of Alzheimer's disease in order to develop
new diagnostic tests and treatments for the disease from these and other
indicators.
DEVELOPMENT OF THERAPEUTIC PRODUCTS FOR ALZHEIMER'S DISEASE
At present, there is no cure for Alzheimer's disease. There are three drugs
approved by the FDA, tacrine (brand-name Cognex), donepezil HCI (brand-name
Aricept) and rivastigmine (brand-name Exelon) for the treatment of Alzheimer's
disease. However, at most these drugs offer symptomatic relief for the loss of
mental function associated with the disease and possibly help to delay the
illness- progression. There is no consensus as to the cause of Alzheimer's
disease or even whether it is one disease or many.
There is an urgent need for an effective treatment for the illness, caused in
part by the rising health care, institutional and social costs for the treatment
and care of Alzheimer's disease
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sufferers. The Surgeon General's Report on Mental Health released on
December 13, 1999, put the direct health care costs for the illness in the
United States at almost $18 billion for 1996. In a 1998 statement to the House
Appropriations Subcommittee, the Director of the National Institute on Aging,
Dr. Richard J. Hodes, estimated that the cost of care to family, caregivers and
society in general was as much as $100 billion per year.
These costs are expected to rise sharply as the baby boom generation ages and
more people become at risk for the disease. According to Dr. Hodes, the number
of Americans aged 65 or over, now some 34 million, is expected to more than
double by year 2030. Within this group, the population of persons over the age
of 85 is the fastest growing segment. As people live longer, they become more at
risk of developing Alzheimer's disease.
Nymox's research into drug treatments for Alzheimer's disease is aimed at
compounds that could arrest the progression of the disease and therefore are
targeted for long term use.
DRUGS TARGETING SPHERONS
We are a world leader in research and development into drugs for the treatment
of Alzheimer's disease that target spherons. Nymox researchers believe that
spherons are the cause of senile plaques, the characteristic injury found in the
brains of patients suffering from Alzheimer's disease and widely believed to be
at the root of the illness. Spherons are unique, microscopic-sized balls of
protein found in every person's brain from age 1. As we age, our spherons grow
larger until the cells they are in can no longer hold them. Nymox researchers
believe that, once freed, the spherons burst to form senile plaques and so set
off a chain of events leading to the loss of brain cells and brain function
associated with Alzheimer's disease. In 1998, Nymox researchers summarized their
findings in the Journal of Alzheimer's Disease and in IOS Press - Drug News &
Perspectives. These summaries set forth 20 important criteria of validity
correlating the disappearance of spherons in old age with the appearance of
senile plaques and implicating spherons as the cause of Alzheimer's disease.
Nymox researchers believe that stopping or inhibiting the transformation of
spherons into senile plaques will stop or slow the progress of this illness. You
should be aware that there is no consensus among researchers about the causes or
possible treatments of Alzheimer's disease and that other researchers do not
share this belief that spherons are the cause of Alzheimer's disease or are a
target for the development of treatments for the disease.
Based on these research findings and this approach to the treatment of the
disease, we developed proprietary screening systems and used them to discover,
develop and test drug candidates to inhibit the formation of Alzheimer plaques
from spherons. These candidates have the potential to slow or stop the
progression of the disease. Our most promising compound, NXD-2858, has shown the
capability of being taken orally and of crossing the blood-brain barrier into
the brain. To date, this compound shows no significant evidence of toxicity or
significant potential side effects. We also have two other distinct new drug
candidates, NXD-3109 and NXD-1191, neither of which demonstrate significant
toxicity and both of which had positive animal testing results.
We plan to seek regulatory approval for these drug candidates to begin clinical
studies for humans. You should be aware there is no guarantee that any of these
drug candidates will ever
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be approved for marketing as a treatment for Alzheimer's disease. Drug
candidates that look promising in early studies in the laboratory or with
animals often prove on further testing to be unsafe, ineffective or impractical
to use with human patients. The cost of bringing a drug candidate through the
necessary clinical trial and regulatory approvals is very high and will require
us to seek substantial financing through various sources including the issuing
of more stock, the borrowing of funds secured by financial instruments such as
bonds or agreements with major pharmaceutical companies. We risk not be able to
secure such funding in the necessary amounts or on sufficiently favorable terms.
Nymox has patents covering both methods for using spherons as targets for
developing drugs and for the actual drug candidates discovered.
NEURAL THREAD PROTEIN BASED DRUGS
Nymox also developed a unique drug screening system, based on the research that
led to its AD7C(TM) test, to identify other potential drug candidates for the
treatment of Alzheimer's disease. Dr. Suzanne de la Monte and other researchers
at the Massachusetts General Hospital identified the gene that produces neural
thread protein, the brain protein detected by Nymox's AD7C(TM) test. In this
system, researchers inserted the AD7C gene into human brain cells, triggering
the production of the AD7C brain protein associated with Alzheimer's disease.
The genetically-altered cells then begin to sprout new growths, start to
degenerate and finally die prematurely. Nymox screened compounds for their
ability to impede this process of premature cell death and thus potentially slow
or halt the loss of brain cells in the Alzheimer's disease brain. Nymox licensed
this technology in 1997 from the Massachusetts General Hospital as part of a
sponsored research and licensing agreement.
STATIN DRUGS AS A POSSIBLE PREVENTIVE TREATMENT FOR ALZHEIMER'S DISEASE
In November, 1999, Dr. Ben Wolozin of Loyola University Medical Center in
Chicago reported at the annual meeting of the Society for Neuroscience his
findings that some members of a class of anti-cholesterol drugs called statins
may delay or prevent the onset of Alzheimer's disease. Dr. Wolozin licensed the
commercial and patent rights to this discovery to Nymox.
NEW ANTIBACTERIAL AGENTS AGAINST INFECTIONS AND FOOD CONTAMINATION
Outside of the area of the treatment and diagnosis of Alzheimer's disease, we
are developing a new class of antibacterial agents for the treatment of urinary
tract and other bacterial infections in humans which have proved highly
resistant to conventional antibiotic treatments and for the treatment of E. coli
0157:H7 bacterial contamination in hamburger meat and other food and drink
products.
In the last ten years there has been a growing recognition of the increasing
problem of antibiotic-resistant infections and the need for truly novel
antibacterial drugs. A recent example of this recognition can be found in the
European Commission report dated May 28, 1999, "Opinion of the Scientific
Steering Committee on Antimicrobial Resistance."
In the field of infectious disease treatments, Nymox has developed three new
antibacterial agents:
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- NXB-4221 for the treatment of difficult chronic and persistent urinary
tract infections;
- NXB-5886 for the treatment of streptococcal infection; and
- NXT-1021 for the treatment of staphylococcal infection.
Urinary tract infections in women caused by bacteria such as E. coli have become
increasingly resistant to conventional antibiotic treatment. Some varieties of
streptococcus and staphylococcus bacteria, a common source of infection in
humans, have acquired a broad immunity to antibiotic treatments. Infections from
these antibiotic resistant bacteria are difficult to treat and can be life
threatening. Nymox's three antibacterial agents have all shown the ability to
kill their bacterial targets in culture with no signs of toxicity.
E. coli contamination of food and drink is a serious public health problem
worldwide and a major concern for meat processors in particular. E. coli
bacteria occur normally and usually harmlessly in the gastrointestinal tracts of
humans, cows and other animals. However, one mutant variety of the E. coli
bacteria, E. coli 0157:H7, can cause life-threatening illness and has been
implicated in cases of severe diarrhea, intestinal bleeding and kidney failure,
leading, in some cases, to death in children and the elderly. E. coli
contamination in hamburger meat and other food products and in drinking water
affects about 100,000 people a year.
Nymox developed a potent new antibacterial agent, NXC-4720. Tests of NXC-4720
show it to be highly effective against all known substrains of E. coli 0157:H7,
the bacteria implicated in these severe cases of food and drink contamination.
Tests of NXC-4720 show that it destroys E. coli 0157 strains, including H7,
efficiently, rapidly and at a very low dose. In 1999, we began further trials
for this agent and expect to complete them in 2000.
Nymox has patent rights to these and other antibacterial agents.
HISTORY OF THE COMPANY
Nymox Pharmaceutical Corporation was incorporated in Canada in May, 1995 to
acquire all of the common shares of DMS Pharmaceutical Inc., a private company
which had been carrying on research and development since 1989 on diagnostics
and drugs for brain disorders and diseases of the aged with an emphasis on
Alzheimer's disease.
Nymox's principal executive offices are located at:
Nymox Pharmaceutical Corporation
9900 Cavendish Boulevard, Suite 306
St.-Laurent, Quebec, Canada, H4M 2V2
Phone: (800) 936-9669
Fax: (514) 332-2227
Nymox Corporation
230 West Passaic St.
Maywood, NJ, USA 07607
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ACQUISITION OF A CONTROLLING INTEREST IN SEREX, INC.
On March 2, 2000, we closed our acquisition of a controlling interest in Serex,
Inc., a privately held diagnostic company that was founded by Dr. Judith
Fitzpatrick in 1983 and is based in Maywood, New Jersey.
Serex developed and patented its particle valence technology, a unique, highly
sensitive, new method to detect very small amounts of biochemical indicators in
body fluids such as blood, urine and saliva. Serex incorporated this technology
in its LabTab(TM) assay, which enables the easy and rapid testing of samples by
general-purpose medical laboratories or in doctors? offices. Serex also licensed
the Japanese rights to two of its principal patents to Mizuho Medy Co. Ltd. of
Japan.
Serex's diagnostic technology can be adapted to detect a wide range of
biochemical indicators for diseases, conditions and drug use.
Serex developed its NicoMeter(TM) which can reliably detect one of the metabolic
products of nicotine in human urine and saliva, enabling it to determine the
level of exposure to tobacco products. The urine-based NicoMeter(TM) is
currently being manufactured under contract by Mizuho USA and marketed and sold
under a distribution agreement dated June 10, 1999 by Jant Pharmacal
Corporation.
Serex is developing Nymox's 7C Gold test, using its patented diagnostic
technology to detect in urine and spinal fluid the levels of the brain protein
implicated in Alzheimer?s disease and measured by Nymox's AD7C(TM) test.
Serex has under development a test that can detect biochemical indicators of
cholesterol in human saliva and therefore provide an inexpensive, convenient and
reliable method of determining and monitoring cholesterol levels.
In November, 1999, Serex was granted a United States patent for an antibody and
for the use of the antibody in its technology in order to detect one of the
biochemical indicators for the loss of bone matter, which is a sign of
osteoporosis, the most common bone disease in humans. Osteoporosis results from
the progressive loss of bone material and can cause disabling and potentially
life-threatening bone fractures in particular of the spine and the hips. It is
most common in the elderly and in post-menopausal women.
Serex has also used its patented technology to develop products to detect an
early indicator of pregnancy and to detect a brain protein implicated in certain
brain diseases.
Serex also did preliminary work on tests designed to detect indicators for heart
disease and for blood sugar levels in a type of diabetes and to monitor
therapeutic drug levels.
Since 1996, Serex has collaborated with at least three major pharmaceutical
companies and two diagnostic companies under licensing and development
agreements concerning the development of some of these products. These
agreements contain confidentiality provisions that prohibit the disclosure of
their terms.
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SIGNIFICANT RISKS THAT COULD MATERIALLY IMPACT OUR OPERATIONS
GOVERNMENTAL REGULATION
Our AD7C(TM) test which we provide as a service through our clinical reference
laboratory in Maywood, New Jersey is subject to extensive government regulation
in the United States. Our clinical reference laboratory and its performance of
the AD7C(TM) must be certified by the Health Care Financing Administration
(HCFA) under the Clinical Laboratories Improvement Act of 1988 (CLIA), which
establishes quality standards for the laboratory tests being performed to ensure
the accuracy, reliability and timeliness of patient test results. In addition,
some individual states such as New York State have their own requirements for
the inspection and certification of reference laboratories which offer
diagnostic services for patients within the state. Finally, the FDA has its own
regulations governing in vitro diagnostic products, including analyte-specific
reagents used in clinical reference laboratories. Any changes in our current
certification status, HCFA or state law requirements or in the FDA regulations
could have an impact on our ability to offer or market any reference laboratory
services and/or on our ability to obtain reimbursement from the Medicare and
Medicaid programs and providers.
We plan to seek FDA approval for the marketing, distribution and sale of our
improved version of our AD7C(TM) Test, the 7C Gold test, outside of the clinical
reference laboratory setting in the United States. Such approval is necessary
for all in vitro diagnostic devices like our 7C Gold test.
The regulatory process leading to such approval can be time-consuming and
expensive and can result in an outright denial or a very limited approval only.
Our product will be subject to subject to premarketing and postmarketing
requirements applicable to such devices, including those governing:
i) clinical testing;
ii) design control procedures;
iii) prior FDA approval of a 510(k) application, where the FDA has
determined that our diagnostic device is substantial equivalent to a
marketed device, or a premarket approval application, where the FDA
has been satisfied with clinical studies demonstrating the safety and
efficacy of our device;
iv) postmarketing record and reporting obligations; and
v) good manufacturing practices.
The requirements for a premarket approval application are analogous to those for
the approval of a new drug and include four categories of information:
indications for use, device description and manufacturing methods, alternative
practices and procedures for the diagnosis of the disease and clinical and
nonclinical studies. The requirements for a 510(k) application are generally
less onerous but still include indications for use, safety and effectiveness
data as well as manufacturing and quality assurance data and information. There
can be no assurance that the 7C
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Gold test or any other medical device that we may develop in the future will
obtain the necessary approvals within a specified time framework, if ever.
In addition, the FDA may impose certain postmarketing requirements that may
significantly increase the regulatory costs associated with our product. The FDA
has recourse to a wide range of administrative sanctions and civil and criminal
penalties in order to enforce the applicable laws, rules and regulations.
Our therapeutic products under development by Nymox would also have to receive
regulatory approval. This is a costly, lengthy and risky process. In the United
States, in order for a product to be marketed, it must go through four distinct
development and evaluation stages:
Product Evaluation.
We must conduct preliminary studies of potential drug candidates using
various screening methods to evaluate them for further testing, development
and marketing.
Optimization of Product Formulation.
The activities in this stage of development involve consultations between
us and investigators and scientific personnel. Preliminary selection of
screening candidates to become product candidates for further development
and further evaluation of drug efficacy is based on a panel of research
based biochemical measurements. Extensive formulation work and in vitro
testing are conducted for each of various selected screening candidates
and/or product candidates.
Clinical Screening and Evaluation.
During this phase of development, portions of which may overlap with
product evaluation and optimization of product formulation, initial
clinical screening of product candidates is undertaken and full scale
clinical trials commence. The FDA must approve any clinical testing on
healthy subjects (Phase 1) and on patients (Phase 2 and 3).
Final Product Development.
The activities to be undertaken in final product development include
performing final clinical evaluations, conducting large-scale experiments
to confirm the reproducibility of clinical responses, making clinical lots
for any additional extensive clinical testing that may be required,
performing any further safety studies required by the FDA, carrying out
process development work to allow pilot scale production of the product,
completing production demonstration runs for each potential product, filing
new drug applications, product license applications, investigational device
exemptions (and any necessary supplements or amendments) and undergoing
comprehensive regulatory approval programs and processes.
We cannot assure you that we will successfully complete the development and
commercialization of any therapeutic products.
In the United States, obtaining the necessary FDA approval for any drug is a
lengthy, expensive and often arduous process. We cannot predict with any
certainty the amount of time the FDA
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will take to approve one of our drugs or even whether any such approval will be
forthcoming. Similar requirements exist in many other countries.
In the United States, the FDA approval procedure is a two-step process. We must
file an investigational new drug application for each product with the FDA
before beginning the initial (Phase I) clinical testing of the new drug in
healthy subjects. If the FDA has not commented on or questioned the application
within 30 days of its filing, initial clinical studies may begin. If, however,
the FDA has comments or questions, the questions must be answered to the
satisfaction of the FDA before initial clinical testing can begin. In some
instances, this process could result in substantial delay and expense. Phase I
studies are intended to demonstrate the functional characteristics and safety of
a product.
After Phase I testing, we must conduct extensive clinical trials with patients
in order to establish the efficacy and safety of our drug. Once we complete the
required clinical testing, we expect to have to file a new drug application for
FDA approval in order to market most, if not all, of our new drugs. The
application is complicated and detailed and must include the results of
extensive clinical and other testing, the cost of which is substantial. The FDA
conducts an extensive and often lengthy review of such applications. The agency
is required to review applications within 180 days of their filing, but, during
the review, frequently requests that additional information be submitted. This
starts the 180-day regulatory review period anew when the requested additional
information is submitted and, as a result, can significantly extend the review
period. Until the FDA actually approves the new drug application, there can be
no assurance that the agency will consider the information requested and
submitted to justify approval. The packaging and labeling of products are also
subject to FDA regulation. Accordingly, it is impossible to anticipate when the
FDA will approve a new drug application.
We must also obtain approval for our drugs or diagnostic devices from the
comparable regulatory authority in other countries before we can begin marketing
our product in that country. The approval procedure varies from country to
country and can involve additional testing. The time required may differ from
that required for FDA approval. Although there are some procedures for unified
filings for certain European countries, in general each country has its own
procedures and requirements, many of which are time-consuming and expensive.
Thus, there can be substantial delays in obtaining required approvals from both
the FDA and foreign regulatory authorities after the relevant applications are
filed.
After such approvals are obtained, further delays may be encountered before the
products become commercially available. If, subsequent to approval, new
information becomes available concerning the safety or effectiveness of any
approved product, the regulatory authority may require the labeling for the
affected product to be revised or the product to be withdrawn. Our manufacturing
of any approved drug must conform with the FDA's good manufacturing practice
regulations which govern the production of pharmaceutical products and be
subject to inspections and compliance orders.
Government regulation also affects our ability to receive an appropriate level
of reimbursement for our products. Throughout the developed world, both public
and private health care plans are under considerable financial and political
pressure to contain their costs. The two principal methods of restricting
expenditures on drugs and diagnostic products and services are to deny coverage
or, if coverage is granted, to limit reimbursement. For single-payer government
health
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care systems, a decision to deny coverage or to severely restrict
reimbursement for one of our products can have an adverse effect on our business
and revenues.
In the United States, where, to a significant degree, the patient population for
our products is elderly, Medicare and Medicaid are sources of reimbursement. In
general, any restriction on reimbursement, coverage or eligibility under either
program could adversely affect reimbursement to Nymox for products and services
provided to beneficiaries of the Medicare and/or Medicaid programs. Many elderly
people are covered by a variety of private health care organizations either
operating private health care plans or Medicare or Medicaid programs subject to
government regulation. These organizations are also under considerable financial
constraints and we may not be able to secure coverage or adequate reimbursement
from these organizations. Without coverage, we will have to look to the patients
themselves who may be unwilling or unable to pay for the product; in turn,
doctors may be reluctant to order or prescribe our products in the absence of
coverage of the product for the patient.
In response to rising health care costs, the U.S. Congress implemented sweeping
changes to the U.S. Medicare and Medicaid systems in the Balanced Budget Act of
1997 and is currently considering a number of other proposals that could
significantly impact on the level of funding for Medicare and Medicaid programs.
Under the new Part C: Medicare + Choice programs, beneficiaries can now opt for
a variety of health delivery models, including coordinated care plans, HMOs,
preferred provider organizations and provider sponsored organizations, private
fee-for-service plans and medical savings account plans. In addition, states now
have the option to require Medicaid recipients to enroll with managed health
care plans without first obtaining a waiver, making it substantially easier for
the states to meet their Medicaid obligations through private managed care
organizations. All these health care delivery systems, including the original
Medicare and Medicaid systems, are subject to funding formulas and spending caps
and may compensate for these restrictions by limiting coverage, eligibility
and/or payments. The long-term impact of these legislative changes in terms of
their efficiency, effectiveness and financial viability in delivering health
care services to an aging population is uncertain at present. Any legislative or
regulatory actions to reduce or contain federal spending under either the
Medicare or Medicaid programs could adversely affect our ability to participate
in either program as a provider or supplier of services or products and the
amount of reimbursement under these programs potentially available to us.
Our AD7C(TM) Test, and any of the new diagnostic and therapeutic products and
services that we may develop, will be subject to coverage determinations by
health care providers and payers. Federal and state regulations and law and
internal coverage policies of health care organizations affect our ability to
obtain payments for our products and services. The Medicare program will not pay
for any expenses incurred for items or services that are not reasonable and
necessary for the diagnosis or treatment of illness or injury or to improve the
functioning of a malformed body member. Historically, HCFA interpreted this
provision in order to exclude from Medicare coverage those medical and health
care services that are not demonstrated to be safe and effective by acceptable
clinical evidence. HCFA recently revised both its national coverage policies and
procedures in general and specifically its coverage of diagnostic laboratory
tests and constituted a Medicare Coverage Advisory Committee to provide advice
on the effectiveness and appropriateness of medical items and services that are
eligible for coverage under Medicare. It is unknown how these changes will
affect our ability to obtain Medicare coverage for its products and services.
However, an adverse national coverage decision with respect to one of our
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products or services will make it impossible to receive reimbursement from
Medicare for that product and more difficult to convince private health care
organizations to provide coverage for it. Even if we receive a favorable
coverage decision for one of our products or services, there is no guarantee
that the level of reimbursement for it will be close to our retail price for it
or commensurate with the costs of developing and marketing it.
PATENTS AND PROPRIETARY INFORMATION
We believe that patent and trade secret protection is important to our business,
and that our success will depend, in part, on our ability to obtain strong
patents, to maintain trade secret protection and to operate without infringing
the proprietary rights of others.
The commercial success of products incorporating our technologies may depend, in
part, upon our ability to obtain strong patent protection. We cannot assure you
that additional patents covering new products or improvements will be issued or
that any new or existing patents will be of commercial benefit or be valid and
enforceable if challenged.
We pursue a policy of seeking patent protection for valuable patentable subject
matter of our proprietary technology and require all employees, consultants and
other persons who may have access to its proprietary technology to sign
confidentiality agreements.
Nymox has patents issued and allowed and patent applications pending in the
United States and selected countries including Canada, most European countries,
Australia and Japan. These patents and patent application cover much of our
current product development and technologies, including:
o new drug candidates for the treatment of Alzheimer's disease;
o proprietary screening technologies for finding therapeutic drugs for
Alzheimer's disease. These screening technologies consist of
biological systems and defined conditions used to determine if a drug
candidate possesses a useful action that can predict its potential for
use in humans or animals. For example, Nymox patented screening
methods that show whether a potential drug can inhibit or arrest some
of the pathological changes of Alzheimer's disease. As a second
example, Nymox patented screening methods that show whether a
potential drug can modify in a useful way the amounts of chemical
markers of Alzheimer's disease in a subject. While no proven
therapeutic drugs for AD have yet been found using these screening
technologies, they are a useful component to our drug development
program. (See "Development of Therapeutic Products for Alzheimer's
Disease" above.)
o unique proteins which are related to Alzheimer's disease and which
may, after further research and clinical trials, prove useful in
either diagnostic or therapeutic applications;
o promising diagnostic markers for Alzheimer's disease; and
o anti-infective agents.
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Nymox has some seven patents in the United States and a corresponding larger
number of patents worldwide relating to the inventions and discoveries in those
patents.
Nymox also has an exclusive license to a family of patents from the
Massachusetts General Hospital covering rights to the AD7C(TM) diagnostic and
therapeutic products. Under this license, the Massachusetts General Hospital is
entitled to royalties of 4% from worldwide sales of the AD7C(TM) test. The
earliest of these patents expires in the year 2013. Nymox also has a similar
research and license agreement with Rhodes Island Hospital, where the principal
researchers, Dr. Suzanne de la Monte and Dr. Jack Wands, now conduct their
research into the brain protein detected by our AD7C(TM) Test, covering new
developments and discoveries in this area not otherwise covered by the
Massachusetts General Hospital agreement.
Nymox's affiliate, Serex, Inc., in which it recently acquired a controlling
interest, also actively pursues a policy of seeking patent protection for its
patentable technologies and discoveries in the United States and in selected
other countries including some European countries, Canada, Australia and Japan.
Its patents issued and allowed and patent applications pending cover such areas
of its technologies and discoveries as:
o its particle valence technology which can detect very small amounts of
biochemical indicators for diseases, conditions and drug use in body
fluids such as blood, urine and saliva.
o a test that can detect biochemical indicators of cholesterol in human
saliva and therefore provide a method of determining and monitoring
cholesterol levels;
o an antibody, which, used in Serex's proprietary technology, can detect
one of the biochemical indicators for the loss of bone matter, which
is a sign of osteoporosis, the most common bone disease in man.
Many companies have patents covering various drugs, methods and discoveries in
the fields of diagnostics and therapeutics for Alzheimer's disease and related
conditions and of new anti-infective agents. We believe that the patents issued
to date will not preclude Nymox from developing and marketing our products;
however, it is impossible to predict the extent to which licenses from third
parties will be necessary. If Nymox were to need licenses from third parties
there can be no assurance that we could obtain such licenses on commercially
reasonable terms, if at all.
The fields of diagnostic methods and diagnostic tests for common human diseases
and conditions, where Serex has many of its patents, have many patents covering
many areas of diagnostic methods, tests and technologies. We believe that these
patents issued to date to other companies will not preclude Serex from
developing and marketing its products but you should be aware that it is often
difficult to determine the nature, breadth and validity of competing patent
claims in these fields, that there has been significant litigation in some of
these areas (not involving Serex) and that, if and when Serex's products become
more commercially successful, Serex's products or patents may become the subject
matter of litigation. If Serex were to need licenses from third parties there
can be no assurance that it could obtain such license on commercially reasonable
terms, if at all.
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Neither Nymox nor Serex are currently involved in litigation over patent and
other intellectual property rights but significant litigation over these matters
in the pharmaceutical and biotechnology industry is not uncommon. The validity
and extent of patent rights can be very difficult to determine and involve
complex legal, factual and scientific questions. Important legal issues about
patent protection in the field of biotechnology have not been resolved. Patent
litigation is costly and time-consuming and can consume substantial resources.
An adverse decision can preclude the marketing of a product, expose us to
significant liabilities or require us to obtain third party licenses which may
not be available at commercially reasonable prices.
We also rely upon trade secrets, know-how, and continuing technological
advancement to develop and maintain our competitive position. We control the
disclosure and use of our know-how and confidential information through
agreements with the parties involved. In addition, we have confidentiality
agreements with our key employees, consultants, officers and directors. There
can be no assurance, however, that all confidentiality agreements will be
honored, that others will not independently develop equivalent technology, that
disputes will not arise as to the ownership of intellectual property, or that
disclosure of our trade secrets will not occur. Furthermore, there can be no
assurance that others have not obtained or will not obtain patent protection
that will exclude us from using our trade secrets and confidential information.
To the extent that consultants or research collaborators use intellectual
property owned by others in their work with us, disputes may also arise as to
the rights to related or resulting know-how or inventions.
COMPETITION
Rapidly evolving technology and intense competition are the hallmarks of modern
pharmaceutical and biotechnology industries. Our competitors include:
- major pharmaceutical, diagnostic, chemical and biotechnology
companies, many of which have financial, technical and marketing
resources significantly greater than ours;
- biotechnology companies, either alone or in collaborations with large,
established pharmaceutical companies to support research, development
and commercialization of products that may be competitive with ours;
and
- academic institutions, government agencies and other public and
private research organizations which are conducting research into
Alzheimer's disease and which increasingly are patenting, licensing
and commercializing their products either on their own or through
joint ventures.
In the field of Alzheimer's disease diagnosis, our AD7C(TM) Test faces growing
competition which could detrimentally impact on our ability to successfully
market and sell our diagnostic test. Our competitors include:
- Athena Diagnostics, Inc. which is currently marketing three tests
claimed to aid in the diagnosis of Alzheimer's disease: a genetic test
for the rare cases of familial, early-onset Alzheimer's disease;
a genetic test for a relatively common mutation
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of a gene said to increase the likelihood of a person with at least
one of the genes contracting the disease; and a test for two proteins
in the spinal fluid of patients.
- Mitokor, Inc. which developed a blood test known as Mito-Load that
looks for certain mutations in mitochondrial DNA said to be associated
with Alzheimer's disease. Mitokor recently entered into a
non-exclusive licensing agreement in Japan for the marketing and sale
of its product there.
- Synapse Technologies, Inc. which developed a blood test known as p97
Diagnostic that detects a protein said to be diagnostic of Alzheimer's
disease. Synapse Technologies also licensed its technology for use in
Japan.
- NeuroLogic, Inc. announced in September, 1999 that it acquired an
exclusive world-wide license to a cellular test for Alzheimer's
disease.
There are also a number of other proposed biochemical signs of the disease that
could potentially be developed into a commercial diagnostic test as well as
various scanning and imaging technologies which might compete some day for a
portion of the diagnostic market for Alzheimer's disease.
We also face intense competition for the development of an effective treatment
for Alzheimer's disease. The market conditions for an Alzheimer's disease drug
strongly favor the entry of other corporations into the area. The current market
for therapeutic drugs for Alzheimer's disease is an estimated $2 billion. This
market is expected to grow rapidly as new drugs enter the market and as the baby
boom generation becomes more at risk for developing Alzheimer's disease. As a
result, most of the major pharmaceutical companies and many biotechnology
companies have ongoing research and development programs for drugs and
treatments for Alzheimer's disease. Many of these companies have much greater
scientific, financial and marketing resources than we have and may succeed in
developing and introducing effective treatments for Alzheimer's disease before
we can. At present, only one drug for Alzheimer's disease is being widely
marketed in the United States, Aricept by Pfizer. Aricept only treats some of
the symptoms of Alzheimer's disease by enhancing memory and other mental
functions and not the underlying causes of the illness.
A similar competitive reality prevails in the field of novel anti-infectives.
Over the past ten years, there has been an increasing awareness of the medical
need and of emerging market opportunities for new treatments for antibiotic
resistant bacterial infections. Many of the major pharmaceutical companies are
developing anti-infective drugs that either modify their existing drugs or
involve new anti-bacterial properties. Many biotechnology companies are
developing new classes of anti-bacterial drugs. At least three major
pharmaceutical companies have vaccines against bacterial infections in
development. To the extent that these companies are able to develop drugs or
vaccines that offer treatment for some or all of the indications for our
anti-infectives, the market for our products may be adversely affected.
The problem of E. coli 0157:H7 contamination of hamburger meat and other food
products is also well-known and a number of companies and researchers have been
pursuing various potential solutions, including irradiation with x-rays, better
detection of contamination, electronic pasteurization, vaccination and
competitive exclusion of the pathogenic E. coli
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bacteria by harmless bacteria. The development of alternative solutions to the
problem of E. coli infection may adversely affect the market for our treatment
for E. coli 0157:H7 infection in cattle and contamination of food products.
MARKETING
We currently market our AD7C(TM) Test as a clinical reference laboratory service
primarily in the United States. Our affiliate, Serex, Inc., is marketing its
NicoMeter(TM), which can determine the level of exposure to tobacco products, in
the United States under a distribution agreement with Jant Pharmacal Corporation
and in Japan with Mizuho Medy Co. Ltd. of Japan. We have not started to
commercially market or distribute any of our other products under development
and most of them will require regulatory approval in each country before being
marketed there.
At present, we have our own small sales force and do most of our marketing
ourselves. To increase our marketing, distribution and sales capabilities both
in the United States and around the world, we will need to enter into licensing
arrangements, contract sales agreements and co-marketing deals. We cannot assure
you that we will be able to enter into agreements with other companies on terms
acceptable to us, that any licensing arrangement will generate any revenue for
the company or that the costs of engaging and retaining the services of a
contract sales organization will not exceed the revenues generated.
If successfully developed and approved, we plan to market and sell our
therapeutic and diagnostic products directly or through co-promotion
arrangements or other licensing arrangements with third parties. In cases where
we have sole or shared marketing rights, we plan to build a small, focused sales
force if and when such products approach marketing approval in some markets,
including Europe. Implementation of this strategy will depend on many factors,
including the market potential of any products we develop as well as on our
financial resources. To the extent we will enter into co-promotion or other
licensing arrangements, any revenues received by us will be dependent on the
efforts of third parties.
ITEM 2. DESCRIPTION OF PROPERTY
a) Nymox laboratory facilities in Maywood, New Jersey comprise
4,678 square feet of leased space. That lease agreement expires
February 28, 2004. Our office and research facilities in St. Laurent,
Quebec, Canada comprise 6,923 square feet of leased space. The lease
agreement expires on August 31, 2003. Nymox owns a full complement of
equipment used in all aspects of its research and development work and
its reference laboratory. Nymox believes that its facilities are
adequate for its current needs and that additional space, if
required, would be available on commercially reasonable terms.
b) Not applicable.
ITEM 3. LEGAL PROCEEDINGS
Nymox's United States subsidiary, Nymox Corporation, commenced an action against
a former employee, Hossein Ali Ghanbari, in Montgomery County, Maryland, for
repayment of two promissory notes. On August 5, 1999, the court granted Nymox
Corporation's Motion for Partial Summary Judgment in the sum of $168,731.83.
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Hossein Ali Ghanbari has made counterclaims against Nymox Corporation. On
February 3, 2000, the large majority of these counterclaims were dismissed on a
motion for summary dismissal. The remaining counterclaims allege that Nymox
Corporation allegedly defamed Ghanbari, that Nymox Corporation wrongfully
discharged Ghanbari and that Nymox Corporation failed to apply on time to the
Province of Quebec for a tax holiday for Ghanbari. Ghanbari has claimed that he
is entitled to compensatory damages totaling $10.5 million and punitive damages
totaling $10 million. Nymox Corporation denies the allegations raised in the
counterclaims, believes the counterclaims lack merit and is vigorously defending
these counterclaims.
ITEM 4. CONTROL OF REGISTRANT
a), b) The following table sets out as of March 31, 2000 the number of
common shares owned by Dr. Paul Averback, the President and CEO of Nymox and
a member of the Nymox board of directors, and by all directors and officers as
a group. Dr. Averback is the only person known to Nymox to own more than 10% of
the common shares.
<TABLE>
<CAPTION>
Number of Common Percent of
Shares owned by Class of
Name of Shareholder Shareholder Common Shares
- ------------------- ---------------- -------------
<S> <C> <C>
Dr. Paul Averback 12,643,895 60.6%
All directors and officers
as a group 12,685,895 60.8%
</TABLE>
In addition, as of March 31, 2000, Dr. Averback's wife owned 848,172 common
shares (4.1%) and 9022-1433 Canada Inc., a company owned by Dr. Averback and his
wife, owns 500,000 common shares (2.4%).
Nymox does not know of any other shareholder who beneficially owns more than 10%
of Nymox's shares.
c) Not applicable.
ITEM 5. NATURE OF TRADING MARKET
Nymox's common shares trade on the Nasdaq Stock Market. Nymox's common shares
traded on the Nasdaq National Market from December 1, 1997 until September 16,
1999 when they began trading on the Nasdaq SmallCap Market. Nymox's common
shares also traded on the Montreal Exchange from December 18, 1995 until
November 19, 1999.
The following tables set out the high and low reported trading prices of the
common shares on the Nasdaq Stock Market during the periods indicated.
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<TABLE>
<CAPTION>
Year Quarterly Period High Sales Price Low Sales Price
---- ---------------- ---------------- ---------------
<S> <C> <C> <C>
1997 4th Quarter $8.750 $6.250
---- ---------------- ---------------- ---------------
1st Quarter $13.625 $5.688
2nd Quarter $8.375 $5.750
3rd Quarter $7.375 $2.5625
1998 4th Quarter $6.250 $2.500
---- ---------------- ---------------- ---------------
1st Quarter $5.875 $2.875
2nd Quarter $4.188 $2.750
3rd Quarter $4.750 $2.500
1999 4th Quarter $4.625 $2.500
---- ---------------- ---------------- ---------------
2000 1st Quarter $10.563 $4.000
---- ---------------- ---------------- ---------------
</TABLE>
According to information furnished to Nymox by the transfer agent for the common
shares, as of March 31, 2000, total shares outstanding were 20,858,422. There
were 891 holders of record of the common shares and 3,261 beneficial
shareholders in total. Of these, 90 were holders of record of the common shares
and 1304 were beneficial shareholders with addresses in the United States and
such holders owned an aggregate of 1,886,798 shares, representing 9.4% of the
outstanding shares of common stock.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
a) Canada has no system of exchange controls. There are no exchange
restrictions on borrowing from foreign countries or on the remittance
of dividends, interest, royalties and similar payments, management
fees, loan repayments, settlement of trade debts or the repatriation
of capital.
b) There are no limitations on the rights of non-Canadians to exercise
voting rights on their shares of Nymox.
ITEM 7. TAXATION
UNITED STATES FEDERAL INCOME TAXATION
The following is, as of the date of this annual report, a general summary of the
material U.S. federal income tax consequences that are applicable to the
following persons who may, directly or indirectly, acquire common shares of
Nymox and hold such common shares as capital assets:
- citizens or residents (as specially defined for federal income tax
purposes) of the United States,
- corporations or partnerships created or organized in the United States
or under the laws of the United States or any state,
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- estates the income of which is subject to the United States federal
income taxation regardless of its source and
- a trust, if a U.S. court is able to exercise primary supervision over
the administration of such trust and one or more U.S. persons have the
authority to control all substantial decisions of such trust or a
trust that has been elected to be treated as a domestic trust
(U.S. Shareholders).
This discussion does not deal with:
- any aspects of federal income taxation that may be relevant to a
particular U.S. Shareholder based on his particular circumstances
(including potential application of the alternative minimum tax or
unrelated business income tax),
- certain U.S. Shareholders subject to special treatment under the
federal income tax laws or foreign individuals or entities,
- U.S. Shareholders owning directly or by attribution 10% or more of the
common shares or
- any aspect of state, local or non-United States tax laws.
DIVIDENDS PAID ON COMMON SHARES
Subject to the application of the rules relating to a "passive foreign
investment company", referred to as a PFC, distributions paid on common shares
(including any Canadian taxes withheld) to a U.S. Shareholder will be treated as
ordinary income for United States federal income tax purposes to the extent of
Nymox's current and accumulated earnings and profits (as computed for U.S.
federal income tax purposes). Distributions in excess of such earnings and
profits will be applied against the U.S. shareholders tax basis in common
shares, and any distributions in excess of such tax basis will be treated as
gain from the sale or exchange of such common shares. Distributions from Nymox
generally will not qualify for the United States dividends-received deduction
available to corporations. Canadian withholding tax withheld or paid will be
eligible for credit or, at the U.S. Shareholder's election, deduction, subject
to generally applicable limitations.
DISPOSITION OF COMMON SHARES
Subject to the applicable PFC rules discussed below, if a U.S. Shareholder holds
common shares as a capital asset, any gain or loss on a sale or exchange of such
shares will be capital gain or loss, which will be long-term capital gain or
loss if the holding period is one year or more. Generally, the maximum tax rate
for U.S. shareholders who are individuals on long term capital gain is 20%. The
sale of common shares through certain brokers will be subject to the information
reporting and back-up withholding rules of the United States Internal Revenue
Code of 1986, as amended, referred to as the Code.
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PASSIVE FOREIGN INVESTMENT COMPANY
For any taxable year of Nymox, if at least 75% of Nymox's gross income is
"passive income" as defined in the Code, or if at least 50% of Nymox's assets,
by average fair market value, are assets that produce or are held for the
production of passive income, Nymox will be a PFC. The PFC determination is made
on the basis of facts and circumstances that may be beyond Nymox's control. It
is not possible to express an opinion as to whether or not Nymox is or will be a
PFC in its current or future taxable years because this depends on, among other
things, the amount and type of gross income that Nymox will earn in the future
and the characterization of certain assets as passive or active, which
determination cannot be made until the facts are known.
If Nymox is a PFC for any taxable year during which a U.S. Shareholder owns,
directly or indirectly, any common shares, the U.S. Shareholder will be subject
to special U.S. federal income tax rules, set forth in Sections 1291 to 1297 of
the Code, with respect to all of such U.S. Shareholder's common shares. In the
absence of (i) an election by such U. S. Shareholder to treat Nymox as a
"qualified electing fund" (the "Q.E.F. Election"), as discussed below, or
(ii) the election to mark to market the common shares (the "Mark to Market
Election"), as described below, the U.S. Shareholder would be required to report
any gain on the disposition of any common shares as ordinary income rather than
capital gain and to compute the tax liability on such gain as well as on any
"excess distribution" as defined in the Code, as if such amounts generally had
been earned pro-rata over the U.S. Shareholder's holding period for such common
shares and were subject to the highest ordinary income tax rate for each taxable
year of the U.S. Shareholder during such holding period. Such U.S. Shareholder
would also be liable for interest, which may be non-deductible by certain U.S.
Shareholders, on the foregoing tax liability as if such liability had been due
with respect to each such prior year. In addition, gifts, exchanges pursuant to
corporate reorganizations and the use of common shares as security for a loan
may be treated as taxable dispositions, and a stepped-up basis upon the death of
such a U.S. Shareholder may not be available.
The foregoing rules may be avoided if a Q.E.F. Election is in effect with
respect to a U. S. Shareholder for each of the years that Nymox is a PFC during
such U.S. Shareholder's holding period. A Q.E.F. Election may be made by a U.S.
Shareholder on or before the due date, including extensions, for filing such
U.S. Shareholder' s tax return for such taxable year. Such a U.S. Shareholder
would be taxed on its pro-rata share of Nymox's earnings and profits for Nymox's
taxable year in which it was, or was treated as, a PFC and which ends with or
within such U.S. Shareholder's taxable year, regardless of whether such amounts
are actually distributed by Nymox. This may result in tax liability without a
commensurate distribution with which to pay the liability. An electing U.S.
Shareholder's basis in the common shares would be increased by the amounts
included in income. Distributions out of earnings and profits previously
included by such U.S. Shareholder generally would not be treated as a taxable
dividend for United States federal income tax purposes and would result in a
corresponding reduction of basis in common shares. An electing U.S. Shareholder
will not be currently taxed on the undistributed ordinary income and net capital
gain of Nymox for any year that Nymox is not classified as a PFC.
If Nymox is a PFC, a U.S. Shareholder may avoid certain of the tax consequences
described in the preceding two paragraphs if the Nymox common stock is
marketable and meets the other requirements of Section 1296 of the Code, and the
U.S. Shareholder elects to mark to market the
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common stock on an annual basis. The common stock will be marketable so long as
it is regularly traded on a recognized exchange.
In general, a U.S. Shareholder in a PFC who elects under Section 1296 to mark
the common stock to market would include in income each year an amount equal to
the excess, if any, of the fair market value of the common stock as of the close
of the taxable year over the U.S. Shareholder's adjusted basis in such stock.
A U.S. Shareholder who makes the Section 1296 election would also generally be
allowed a deduction for the excess, if any, of the adjusted basis of the common
stock over the fair market value as of the close of the taxable year. Deductions
under this rule, however, are allowable only to the extent of any net mark to
market gains with respect to the common stock included by the shareholder for
prior taxable years.
Once the Mark to Market election is made, it is binding for all subsequent
years, unless the common stock ceases to be marketable, or the IRS consents to
the revocation of the election.
If Nymox is a PFC, each U.S. Shareholder is strongly urged to consult with his
or her tax advisor to determine whether the Q.E.F. Election or the Mark to
Market Election should be made. Each requires attention to specific rules and
regulations, and each may not be available to a specific U.S. shareholder.
Nymox intends to notify its U.S. Shareholders within 45 days after the end of
the taxable year for which Nymox believes it might be a PFC. Nymox has further
undertaken (i) to provide its U.S. Shareholders with timely and accurate
information as to its status as a PFC and the manner in which the Q.E.F.
Election can be made and (ii) to comply with all record-keeping, reporting and
other requirements so that U.S. Shareholders, at their option, may make a Q.E.F.
Election.
FUTURE DEVELOPMENTS
The foregoing discussion is based on existing provisions of the Code, existing
and proposed regulations thereunder and current administrative rulings and court
decisions, all of which are subject to change. Any such changes could affect the
validity of this discussion. In addition, the implementation of certain aspects
of the PFC rules requires the issuance of regulations which in many instances
have not been promulgated and which may have retroactive effect.
There can be no assurance that current authorities will not be changed and, if
so, as to the form they will take or the effect they may have on this
discussion.
CANADIAN FEDERAL INCOME TAXATION
The following is, as of the date of annual report, a summary of the principal
Canadian federal income tax considerations generally applicable to shareholders
who receive a dividend from Nymox and who, at all relevant times, for purposes
of the Income Tax Act (Canada) the ("Tax Act"), hold and will hold Nymox common
shares as capital property and deal with Nymox at arm's length.
Nymox's common shares will generally constitute capital property to a holder
unless the holder holds such shares in the course of carrying on a business or
the holder has acquired such shares in a transaction or transactions considered
to be an adventure in the nature of trade. This
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summary is based on the current provisions of the Tax Act, the regulations
under that act, counsel's understanding of current administrative and assessing
policies of the Canada Customs and Revenue Agency and all specific proposals to
amend the Tax Act publicly announced or released by or on behalf of the Minister
of Finance (Canada) before the date of this annual report ("Tax Proposals").
The Tax Act contains certain provisions relating to securities held by certain
financial institutions (the "Mark-to-Market Rules"). This summary does not take
into account these Mark-to-Market Rules or any amendments to them contained in
the Tax Proposals and taxpayers that are "financial institutions" for purposes
of those rules should consult their own tax advisors.
This summary is not exhaustive of all possible Canadian federal income tax
considerations and, except for the Tax Proposals, does not take into account or
anticipate any changes in law, whether by legislative, governmental or judicial
action, nor does it take into account tax legislation of any province, territory
or foreign jurisdiction. This summary is of a general nature only and is not
intended to be, nor should it be construed as, legal or tax advice to any
particular holder of Nymox common shares.
CANADIAN RESIDENTS
The following summary is relevant to a holder of Nymox common shares who, for
purposes of the Tax Act and any applicable tax treaty or convention, is resident
in Canada at all relevant times.
Tax Treatment of Capital Gains and Capital Losses for Canadian Residents
On a disposition or deemed disposition of a Nymox common share, the holder will
realize a capital gain (or capital loss) equal to the amount by which the
proceeds of disposition for the Nymox common share exceed (or are less than) the
aggregate of any costs of disposition and the adjusted cost base to the holder
of the Nymox common share immediately before the disposition.
A holder of Nymox common shares will be required to include in income
three-quarters of the amount of any capital gain (a "Taxable capital gain") and
may deduct three-quarters of the amount of any capital loss (an "Allowable
capital loss") against Taxable capital gains realized by the holder in the year
of the disposition. Allowable capital losses in excess of Taxable capital gains
may be carried back and deducted in any of the three preceding years or carried
forward and deducted in any following year against taxable capital gains
realized in such years to the extent and under the circumstances described in
the Tax Act.
A Canadian-controlled private corporation will also be subject to a refundable
tax of 6 2/3% on certain investment income, including taxable capital gains
realized on the disposition of Nymox common shares, that will be refunded when
the corporation pays taxable dividends (at a rate of $1.00 for every $3.00 of
taxable dividend paid).
A capital loss realized by a holder of Nymox common shares that is a
corporation, a partnership of which a corporation is a member or a trust of
which a corporation is a beneficiary may be reduced by the amount of dividends
received in certain circumstances. Capital gains realized by an individual may
give rise to a liability for alternative minimum tax.
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<PAGE> 25
Tax Treatment of Dividends Received by Canadian Residents
In the case of a holder of Nymox common shares who is an individual, any
dividends received on the common shares will be included in computing his income
and will be subject to the gross-up and dividend tax credit rules normally
applicable to taxable dividends paid by taxable Canadian corporations. A holder
that is a corporation may be liable to pay refundable tax under Part IV of the
Tax Act. However, a public corporation which is not controlled, whether because
of a beneficial interest in one or more trusts or otherwise, by or for the
benefit of an individual (other than a trust) or a related group of individuals
(other than trusts) will not be liable to pay refundable tax under Part IV of
the Tax Act.
In the case of a holder of Nymox common shares that is a corporation, the amount
of any capital loss otherwise determined resulting from the disposition of a
Nymox common share may be reduced by the amount of dividends previously received
or deemed to have been received thereon. Any such restriction will not occur
where the corporate holder owned the Nymox common share for 365 days or longer
and such holder (together with any persons with whom it did not deal at arm's
length) did not own more than 5% of the shares of any class or series of Nymox
at the time the relevant dividends were received or deemed to have been
received. Analogous rules apply where a corporation is a member of a partnership
or a beneficiary of a trust, which owns Nymox common shares.
SHAREHOLDERS WHO ARE NOT RESIDENTS OF CANADA
The following summary is relevant to a holder of Nymox common shares, who, at
all relevant times, for purposes of the Tax Act and any applicable tax treaty or
convention, is a non-resident or is deemed to be a non-resident of Canada and
does not use and is not deemed to use or hold Nymox common shares in the course
of carrying on a business in Canada. Special rules, which are not discussed
below, may apply to a non-resident that is an insurer which carries on business
in Canada and elsewhere.
Dividends Paid To Non-Residents of Canada
Under the Tax Act, dividends paid or credited to a non-resident are subject to
withholding tax at the rate of 25% of the gross amount of the dividends. This
withholding tax may be reduced or eliminated pursuant to the terms of an
applicable tax treaty between Canada and the country of residence of the
non-resident. For example, for persons who are resident in the United States for
purposes of the Canada-United States Income Tax Convention, (the "Convention")
the rate of withholding tax on dividends is reduced to 15% generally and 5% when
the United States resident is a company that beneficially owns at least 10% of
the voting stock of the company paying the dividends.
Under the Convention, dividends paid to certain religious, scientific,
charitable and other similar tax-exempt organizations and certain organizations
that are resident in, and exempt from tax in, the United States are exempt from
Canadian non-resident withholding tax. Provided that certain administrative
procedures designed to establish with the Canadian tax authorities the right of
such entities to benefit from this withholding tax exemption are complied with
by the tax-exempt entities prior to the Distribution, Nymox would not be
required to withhold such tax on such
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<PAGE> 26
payment. Alternatively, the above-described tax-exempt entities may claim a
refund of Canadian withholding tax otherwise withheld by Nymox on the
distribution of dividends.
Tax Treatment of Capital Gains of Non-Residents of Canada
On a disposition or deemed disposition of a Nymox common share, a non-resident
holder will realize a capital gain (or capital loss) equal to the amount by
which the proceeds of disposition for the Nymox common share exceed (or are less
than) the aggregate of any costs of disposition and the adjusted cost base to
the non-resident holder of the Nymox common share immediately before the
disposition.
A non-resident of Canada is liable for Canadian income tax on a capital gain
realized on the disposition of property only where that property constitutes
"taxable Canadian property". Three-quarters of any capital gain from the
disposition of taxable Canadian property is subject to Canadian tax.
Under the Tax Act, shares of Nymox will not constitute taxable Canadian property
unless, at any time, in the five years immediately preceding the disposition,
the non-resident holder, persons with whom the non-resident holder did not deal
at arms length, or the non-resident holder together with all such persons owned
(or had a right to acquire) 25% or more of the shares of any class of Nymox.
Even in circumstances where shares of Nymox are taxable Canadian property to a
non-resident holder, the non-resident holder may be entitled to relief from
Canadian tax on any capital gain realized on the disposition thereof pursuant to
the terms of an applicable tax treaty between Canada and the country of
residence of the non-resident. For example, the Convention provides that gains
realized by a resident of the United States on the disposition or deemed
disposition of shares of a company will generally not be subject to tax under
the Tax Act, provided that the value of the shares is not derived principally
from real property situated in Canada. Nymox believes that the value of its
shares is not currently derived principally from real property situated in
Canada and it does not expect this to change in the foreseeable future.
Provided that the Nymox common shares remain listed on a prescribed stock
exchange, which includes the Nasdaq SmallCap Market System, a non-resident
holder who disposes of Nymox common shares will not be required to comply with
the Canadian notification procedures generally applicable to dispositions of
taxable Canadian property.
ITEM 8. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for Nymox
for the periods indicated, derived from financial statements prepared in
accordance with generally accepted accounting principles ("GAAP"). We prepare
our basic financial statements in accordance with Canadian GAAP and include, as
a note to the statements, a reconciliation of material differences to United
States GAAP. The financial statements have been audited by KPMG, Montreal,
Canada in the case of the years ended December 31, 1996,1997,1998 and 1999, and
by Deloitte & Touche, Montreal, Canada, in the case of the period ended July 31,
1995 and December 31, 1995, and by Bergeron & Senecal, Brossard, Canada, in the
case of the period ended July 31, 1994. The data set forth below should be read
in conjunction with the Company's financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" included elsewhere herein.
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<PAGE> 27
Effective August 1, 1995, Nymox changed its fiscal year from a July 31 year-end
to a December 31 year-end.
NYMOX PHARMACEUTICAL CORPORATION
Selected Consolidated Financial Data
(In U.S. dollars - Note 4)
<TABLE>
<CAPTION>
July 31, July 31, Dec.31, Dec.31, Dec.31, Dec.31, Dec.31,
1994 1995 1995 1996 1997 1998 1999
(12 months) (12 months) (5 months)
<S> <C> <C> <C> <C> <C> <C> <C>
CANADIAN GAAP
Current Assets - 0 - 8,289 1,571,466 2,006,675 1,750,388 2,708,543 776,824
Capital Assets 8,713 234,846 253,693 913,166 983,484 1,279,692 1,168,316
Total Assets 165,872 243,134 1,825,159 2,919,841 2,733,872 3,988,235 2,140,491
Total Liabilities 66,082 84,244 104,827 266,214 202,543 301,004 833,344
Shareholders' Equity 134,433 158,891 1,720,332 2,653,628 2,531,329 3,687,231 1,307,147
Revenues - 0 - - 0 - - 0 - 157,237 70,055 273,565 190,203
Research & Development
Expenditures (note 1) 38,332 257,700 395,770 1,466,085 1,671,412 2,087,742 1,132,941
Net Loss 40,411 261,602 480,736 2,562,921 3,463,905 4,783,213 3,314,296
Loss per Share (note 2) -0.00 0.02 0.03 0.15 0.19 0.25 0.17
U.S. GAAP (NOTE 3)
Net Loss 53,225 285,910 1,194,226 3,175,587 3,755,409 4,979,562 3,409,166
Loss per Share (note 2) -0.00 0.02 0.07 0.18 0.20 0.26 0.17
Shareholders' Equity 92,088 107,533 1,753,311 2,699,092 2,428,052 3,304,352 1,139,731
</TABLE>
[FN]
- ----------------
Notes:
1) We earn investment tax credits by making qualifying research and
development expenditures. These amounts shown are net of investment tax
credits.
2) For periods prior to December 31, 1995, the number of shares outstanding is
assumed to be 15,000,000 representing the number of shares issued by Nymox
to DMS Pharmaceuticals Inc. in September 1995. Nymox has never paid
dividends on its common stock.
3) Reference is made to Note 10 of Nymox's audited financial statements as at
and for the year ended December 31, 1999 for a reconciliation of
differences between Canadian and U.S. GAAP.
4) Effective January 1, 2000, the Corporation will adopt the United
States dollar as its measurement currency as a result of the increasing
proportion of operating, financing and investing transactions in the
Canadian operations that are denominated in U.S. dollars. For Canadian
G.A.A.P. purposes, the financial information for all periods presented has
been translated into U.S. dollars at the December 31, 1999 exchange rate,
which was 1.4433 Canadian dollars to the U.S. dollar. For U.S. G.A.A.P.
purposes, assets and liabilities for all years presented have been
translated into U.S. dollars at the ending exchange rate for the respective
year and the statement of earnings at the average rate for the respective
year. Reference is made to notes 2(a) and 10 of the consolidated financial
statements.
</FN>
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<PAGE> 28
As of March 31, 2000 the exchange rate is CAN$1.4532 to US$1.00. The following
table sets forth certain information regarding exchange rates for the periods
reflected in the preceding financial data.
Recent history of the exchange rate for Canadian dollars to United States
dollars.
<TABLE>
<CAPTION>
PERIOD ENDED Dec.31/95 Dec.31/96 Dec.31/97 Dec.31/98 Dec.31/99
- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Period end $1.3655 $1.3697 $1.4288 $1.5375 $1.4433
Average $1.3725 $1.3638 $1.3849 $1.4836 $1.4858
High $1.4238 $1.3822 $1.4398 $1.5770 $1.5302
Low $1.3285 $1.3310 $1.3357 $1.4075 $1.4440
</TABLE>
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
We are a development stage biopharmaceutical company that specializes in the
research and development of therapeutics and diagnostics for the aging
population with an emphasis on Alzheimer's disease.
We market and provide a clinical laboratory test, the AD7C(TM) test that is an
aid to the diagnosis of Alzheimer's disease. We have under development an
improved version of the AD7C(TM) test, 7C Gold, which, when completed and
approved, can be used in a general-purpose medical laboratory or a doctor's
office rather than in a highly specialized reference laboratory.
We also have under development therapeutic agents for the treatment of
Alzheimer's disease and of certain antibiotic-resistant infections as well as
antibacterial agents for E. coli contamination of food and drink products.
We also recently acquired a controlling interest in Serex, Inc., a New Jersey
company specializing in diagnostic products.
We began generating revenue from sales of our AD7C(TM) test in 1997.
All figures are presented in U.S. dollars, unless otherwise stated.
LIQUIDITY AND CAPITAL RESOURCES
We fund our operations and projects primarily by selling shares of Nymox's
common stock. However, since 1997, a small portion of our funding came from
service revenues. This source of funding became more significant in late 1998,
following the launch of our urinary version of the AD7C(TM) test. Since its
incorporation in May, 1995, Nymox raised the capital necessary to fund its
on-going research and development work and its marketing and sales operations
primarily through private placements of its shares.
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<PAGE> 29
On December 1, 1997, the shares began trading on the Nasdaq Stock Market.
Nymox's common shares also traded on the Montreal Exchange from December 18,
1995 to November 19,1999.
Private placements completed by Nymox since December, 1995 are as follows:
- December 1995, 1,578,635 common shares at a price of CAN$2.00
(US$1.38) per share for total proceeds of CAN$3,157,270
(US$2,187,536);
- April 1996, 877,300 common shares at a price of CAN$6.00 (US$4.15) per
share for total proceeds of CAN$5,263,800 (US$3,647,059);
- May 1997, 696,491 common shares at a price of CAN$6.50 (US$4.50) and
warrants exercisable at a price of CAN$8.50 (US$5.88) per share for
total proceeds of CAN$4,527,191 (US$3,136,694). In 1998, all 696,491
of these warrants were exercised for additional proceeds to Nymox of
CAN$5,920,174 (US$4,101,832);
- May 1998, 231,630 common shares at a price of CAN$8.50 (US$5.88) for
total proceeds of CAN$1,968,855 (US$1,364,134). A total of 110,000
warrants were issued as well, exercisable at a price of CAN$8.50
(US$5.88) per share (50,000) and CAN$10.00 (US$6.93) per share
(60,000). These warrants have since expired;
- January, 1999, 190,000 common shares at CAN$8.50 (US$5.88) per share,
for total proceeds of CAN$1,615,000 (US$1,118,963). A total of 95,000
warrants were issued as well, exercisable at the price of CAN$10.00
(US$6.93) per share. These warrants have since expired;
- September, 1999, 122,000 common shares at CAN$5.00 (US$3.46) per
share, for total proceeds of CAN$610,000 (US$422,642).
- March, 2000, 666,667 common shares at $6.00 per share, for total
proceeds of $4,000,000. A total of 93,334 warrants were issued as
well, exercisable at a price of $9.375 per share (66,667) and $7.8125
per share (26,667). These warrants expire on March 6, 2004.
In total, Nymox has raised over $20 million, since its incorporation in
May 1995.
As well, on March 14, 2000, we became entitled to draw down on the $12 million
equity line of credit with Jaspas Investments Limited, a British Virgin Islands
corporation, through a common stock purchase agreement dated November 1,1999 for
the future issuance and purchase of Nymox's common shares. We expect the stock
purchase agreement with Jaspas to provide significant, long-term financing that
will enable us to advance our research and product development for the next
three years. We plan to seek additional capital within the limits on financing
contained in the common stock purchase agreement in order to accelerate product
development and marketing and obtaining necessary regulatory approvals.
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<PAGE> 30
You should refer to our F-1 Registration Statement filed with the SEC on
February 29, 2000 and declared effective on March 14, 2000 for the details of
our agreement with Jaspas. In general, the draw down facility created by the
facility operates like this: the investor, Jaspas, committed up to $12 million
to purchase Nymox's common shares of Nymox over a thirty month period. Once a
month, Nymox may request a draw of up to $750,000 of that money, subject to a
formula based on average stock price and average trading volume, setting the
maximum amount of any request for any given draw. At the end of a 22 day trading
period following the draw down request, the amount of money that Jaspas will
provide to Nymox and the number of shares Nymox will issue to Jaspas in return
for that money is settled based on the formula in the stock purchase agreement.
Jaspas receives a six (6%) percent discount to the market price for the 22 day
period and Nymox receives the settled amount of the draw down less a 3%
placement fee payable to its placement agents, Ladenburg Thalmann & Co. Inc. and
Paul Revere Capital Corp.
The facility is based on a "use-it-or-lose" principle. We are under no
obligation to request a draw for any month. However if we do not request a draw
for a given month, we may never to be able to draw those funds again. We may
make up to a maximum of twenty-four (24) draws.
In lieu of providing Jaspas with a minimum draw down commitment, we agreed to
issue to Jaspas a stock purchase warrant to purchase up to 200,000 shares of our
common stock with an exercise price of 110% of our share price on the closing
date of November 12, 1999 or $4.53. Jaspas may purchase under the warrant up to
100,000 Nymox shares any time between November 30, 1999 and November 30, 2004.
Jaspas may purchase the remaining 100,000 shares if and only if we do not draw
down at least $7 million within 18 months of March 14, 2000.
We have no financial obligations of significance other than long-term lease
commitments for our premises in the United States and Canada of $15,304 per
month in 2000 and ongoing research funding payments to a U.S. medical facility
totaling $172,000 for 2000.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenue
Revenues on service fees for the AD7C(TM) test amounted to $153,252 for the year
ended December 31, 1999, compared with $104,804 for the year ended December 31,
1998. All of the service fee revenue was derived in the United States from our
AD7C(TM) urine test service offered through our reference laboratory service in
Kensington, Maryland.
Our 7C Gold test successfully completed its initial key validation studies in
September 1999 and we plan to apply for FDA approval. We expect that approval of
the 7C Gold test will have a positive impact on the acceptance of our test in
the medical and health care communities and on our marketing and sales.
Interest revenue was $36,951 in 1998 compared to $168,761 in 1997, derived from
interest earned on the cash and short-term investments received from the private
placements referred to previously.
30
<PAGE> 31
Expenses
Research and development expenditures were reduced by management to $1,137,122
for the year ended December 31, 1999, compared with $2,091,745 for the year
ended December 31, 1998. In 1999, research tax credits amounted to $4,181
compared to $4,003 in 1997. Expenses in this area are budgeted to increase
in 2000 with the new financing secured by the Company.
Marketing expenses were also reduced by management to $942,205 for the year
ended December 31, 1999 compared to $2,245,023 for the year ended December 31,
1998.
General and administrative expenses amounted to $1,333,234 for the year ended
December 31, 1999, compared with $620,939 in the year ended December 31, 1998.
This rise is attributable to an increase in cost of sales of $215,177 resulting
from the increase in sales of the AD7C(TM) test; in professional fees of
$373,786, and in salaries of $113,928.
Net losses for the period ended December 31, 1999 were $3,314,296, or $0.17
per share, compared to $4,783,213, or $0.25 per share, for the same period
in 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, cash totaled $449,363. In November, 1999, the
Corporation signed a common stock purchase agreement whereby the investor is
committed to purchase up to $12 million of the Corporation's common shares over
a thirty month period commencing in March 2000 when our F-1 registration
statement was declared effective. In March 2000, the Corporation completed a
private placement with an institutional investor for 666,667 common shares for
total proceeds of $4,000,000.
We invested $164,783 in additional capital assets in the year ended December 31,
1999, consisting mostly of patent costs, compared to $390,125 in the same period
in 1998. The decrease is attributable to a reduction in purchases of equipment.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenue
Revenues on service fees for the AD7C(TM) test amounted to $104,804 for the year
ended December 31, 1998, compared with $17,033 for the year ended December 31,
1997. More than half of these revenues were generated in the last two months of
1998 when we launched the urinary version of our AD7C(TM) urine test service
through our reference laboratory service in Kensington, Maryland. All of the
service fee revenue was derived in the United States.
Interest revenue increased to $168,761 in 1998 compared to $53,022 in 1997,
derived from interest earned on the cash and short-term investments received
from the private placements referred to previously.
31
<PAGE> 32
Expenses
Research and development expenditures amounted to $2,091,745 for the year ended
December 31, 1998, compared with $1,775,340 for the year ended December 31,
1997. The increase is principally attributable to increased expenditures on
reagents and clinical studies related to R&D in therapeutics and anti-infectives
(net increase $330,269) at the Kensington, Maryland laboratory during the year.
In 1998, research tax credits amounted to $4,003 compared to $103,928 in 1997.
The reduction in tax credits is attributable to the transfer of research and
development to the United States.
Marketing expenses amounted to $2,245,023 for the year ended December 31, 1998
compared to $1,334,202 for the year ended December 31, 1997. A major marketing
effort in 1998 accounted for the increased expenditures; the effort focused
specifically on mass mailings and publicity (net increase $573,123) and
presentations at conferences (net increase $401,508).
General and administrative expenses amounted to $620,939 for the year ended
December 31, 1998, compared with $408,456 in the year ended December 31, 1997.
The increase is attributable to increases in professional fees (net increase
$134,231) and increased costs related to shareholder relations (net increase
$50,680). Increases in both areas result from first time contracts in 1998 with
shareholder relations and public relations firms.
Net losses for the period ended December 31, 1998 were $4,783,213, or $0.25 per
share, compared to $3,463,905, or $0.19 per share, for the same period in 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenue
Revenues on service fees for the AD7C(TM) test amounted to $53,022 for the year
ended December 31, 1997. There were no service fee revenues generated during the
year ended December 31, 1996. These revenues were generated in the last half of
1997 when we launched the CSF version of our AD7C(TM) urine test service through
our reference laboratory service in Kensington, Maryland. All of the service fee
revenue was derived in the United States.
Interest revenue increased to $53,022 in 1997 compared to $157,237 in 1996,
derived from interest earned on the cash and short-term investments received
from the private placements referred to previously.
Expenses
Research and development expenditures represented our most significant
expenditure and amounted to $1,775,340 for the year ended December 31, 1997,
compared with $1,632,370 for the year ended December 31, 1996. The increased
expenses were largely attributable to increased expenditures related to
laboratory expenses ($123,328) at the Kensington, Maryland laboratory during the
year. The Kensington facility was in operation for only 10 months in 1996. We
also paid the third installment under our research and license agreement with
Massachusetts General Hospital in the amount of $225,000, which was $25,000
higher than the 1996 payment.
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<PAGE> 33
Under the agreement, we were obligated to make certain regularly scheduled
payments to Massachusetts General as research grants in exchange for royalties
from any sales of resulting products. In 1997, research tax credits amounted to
$103,928 compared to $166,286 in 1996. The reduction was attributable to the
transfer of certain research and development activities to the United States.
Marketing expenses in 1997 amounted to $1,334,202 for the year ended December
31, 1997 compared to $868,769 for the year ended December 31, 1996. Expenditures
in 1997 consisted largely of the costs of establishing and maintaining a sales
and marketing force ($786,392) and costs related to marketing activities such as
presentations at conferences, publicity, travel, general expenses, printing and
postage ($547,357). Expenditures in 1996, consisted of publicity related costs
in connection with pre-marketing of the AD7C(TM) test ($516,871), salaries
($123,328) and other costs related to marketing activities ($228,643).
General and administrative expenses amounted to $408,456 for the year ended
December 31, 1997 compared with $344,474 in the year ended December 31, 1996.
The increase was attributable to legal costs and expenses related to United
States public company registration and the NASDAQ listing ($82,866).
Net losses for the period ended December 31, 1997 were $3,463,905, or $0.19 per
share, compared to $2,562,921, or $0.15 per share, for the same period in 1996.
INFLATION: We do not believe that inflation has had a significant impact on
the results of our operations.
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None; not applicable. See "Note 9 - Fair Values" in financial report.
ITEM 10. DIRECTORS AND OFFICERS
a) The directors and executive officers of NYMOX are:
Senator W. David Angus, QC, 62, Chairman and Director since May 13, 1999, is a
member of the Senate of Canada, serving on the Standing Committee on Banking,
Trade and Commerce. He is also a senior partner at the Montreal office of
Stikeman, Elliott, Canada's global law firm, and a director of several other
Canadian corporations and charitable organizations, including Air Canada, AON
Reed Stenhouse, Eastern Canada Towing Ltd. and the McGill University Health
Center.
Dr. Paul Averback, M.D., D.A.B.P., 49, President and Director since September
1995, is the founder of Nymox and the inventor of much of its initial
technology. Prior to founding Nymox, Dr. Averback served as President of Nymox's
predecessor, DMS Pharmaceuticals Inc. He received his M.D. in 1975 and taught
pathology at universities, including Cambridge University, England (1977-1980),
during which time he initiated his research on Alzheimer's disease. He has
practiced medicine in numerous Canadian institutions as well as in private
practice. Dr. Averback has published extensively in the scientific and medical
literature.
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<PAGE> 34
Dr. Colin B. Bier, Ph.D., 54, Director since December 1995, is a leading
authority on toxicology and pharmaceutical and biotechnological regulatory
affairs and has extensive management experience in the biomedical sector.
Dr. Bier was formerly Vice-President and Director of Toxicology at Bio-Research
Laboratories, President and Chief Executive Officer of ITR Laboratories and has
consulted, managed and been affiliated with numerous biochemical enterprises.
Dr. Hans Black, MD, 46, Director since May 13, 1999, has a doctorate in medicine
from McGill University, and is Chairman and Chief Investment Officer of
Interinvest Consulting Corporation, a Montreal-based global money management
firm with offices in Toronto and Boston and affiliates in Bermuda and Zurich.
Dr. Black appears regularly on the PBS network show, Nightly Business Report,
and has been a guest lecturer at Harvard, Temple and McGill Universities.
Michael R. Sonnenreich, 61, Director since April 18, 2000, is a graduate of
Harvard University Law School, and is currently Chairman and CEO of Kikaku
America International, Senior Partner of Sonnenreich, Roccograndi & Woo P.C.,
President and CEO of Glocal Communications Corp. Ltd. of London, Vice Chairman
of PharMa International Corporation of Tokyo, Director of Asset Advisory
Services of Zurich, Member of the Board of Advisors of John Hopkins University
School of Advanced International Studies and Member of the Board of Overseers of
Tufts University Medical School. Mr. Sonnenreich has in the past been a Board
Member or a Trustee of numerous important companies and universities, and has
long-term involvements with many non-profit institutions, and served as
President of the National Coordinating Council on Drug Education.
Professor Walter P. von Wartburg, 60, Director since April 18, 2000, is a
partner in the private law practice of Law & Life Sciences in Basel,
Switzerland, specialized in biotech and drug regulatory affairs. He is a
graduate of the Universities of Basel, Paris, Princeton, Stanford and Harvard
Law School; Professor on public health policy at the Saint Gall Graduate School
of Economics, Business and Public Administration, and was a Member of the
Executive Committee of Novartis Inc. until 1999. He is author of various books
and articles on drug abuse, pharmaceutical legislation, biotechnology, and on
issues of management, communications and business administration. He is also
Chairman or Board Member of numerous institutions.
Mr. Roy M. Wolvin, 45, Secretary-Treasurer and Chief Financial Officer
since September 1995. Prior to September 1995, Mr. Wolvin was Account Manager,
private business, for a Canadian chartered bank. Mr. Wolvin holds a degree in
Economics from the University of Western Ontario.
Directors are elected at each annual meeting for a term of office until the next
annual meeting. Executive officers are appointed by the board of directors and
serve at the pleasure of the board. Other than Dr. Averback, no other officer or
director previously was affiliated with DMS Pharmaceuticals Inc.
There are no family relationships between any director or executive officer and
any other director or executive officer.
34
<PAGE> 35
ITEM 11. COMPENSATION OF OFFICERS AND DIRECTORS
a) The table below provides compensation information for the fiscal year
ended December 31, 1999 for each executive officer of Nymox and for
the directors and executive officers as a group.
Summary Compensation Table
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
Fiscal Year ending Fiscal Year ending
Dec. 31, 1998 Dec. 31, 1999
------------------------------- -------------------------------
Other Cash Other Cash
Name and Principal Position Salary Compensation Salary Compensation
- --------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Dr. Paul Averback, President and $150,000 $150,000
Director (US$103,925) - (US$103,925) -
Mr. Roy Wolvin, Secretary-Treasurer $70,200 $70,200
(US$48,640) - (US$48,640) -
All directors and executive $220,200 $220,200
officers as a group (US$152,565) - (US$152,565) -
</TABLE>
See "Options" below for information about stock options granted to directors,
executive officers and other employees.
Nymox does not have written employment contracts with any of the executive
officers named above.
Directors of Nymox, with the exception of the President, are paid a fee of
$1,000 for each board meeting attendance and are reimbursed for expenses
incurred in connection with their office.
b) The Company does not have any pension plans or other type of plans providing
retirement or similar benefits for directors or executive officers.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
Options and Warrants
<TABLE>
<CAPTION>
TOTAL AMOUNT OF COMMON SHARES SUBJECT TO PURCHASE PRICE PURCHASE PRICE Expiration Date
EXERCISABLE OPTIONS CAN$ US$
- ---------------------------------------- -------------- -------------- ---------------
<S> <C> <C> <C>
100,000 $ 7.00 $ 4.85 Nov 9, 2002
275,000 $ 3.25 $ 2.25 Jan 17, 2006
20,000 $13.75 $ 9.53 Jan 17, 2006
20,000 $ 9.80 $ 6.79 Jan 17, 2006
40,000 $10.00 $ 6.93 Jan 17, 2006
100,000 $11.50 $ 7.97 Apr 30, 2006
10,000 $16.75 $11.60 Aug 13, 2006
</TABLE>
35
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10,000 $ 9.00 $ 6.24 Aug 13, 2006
20,000 $10.00 $ 6.93 Aug 13, 2006
25,000 $ 9.00 $ 6.24 Oct 31, 2007
60,000 $10.00 $ 6.93 Oct 31, 2007
6,000 $ 9.25 $ 6.41 Dec 19, 2007
50,000 $10.00 $ 6.93 Jan 22, 2009
150,000 $ 4.50 $ 3.12 May 13, 2009
50,000 $ 4.50 $ 3.12 Jun 1, 2009
WARRANTS
200,000 $4.5315 Nov 30, 2004
160,000 $4.0625 Nov 30, 2004
109,879 $ 3.70 Jan 8, 2005
5,783 $ 3.70 Jan 8, 2005
66,667 $ 9.375 Mar 6, 2004
26,667 $7.8125 Mar 6, 2004
</TABLE>
The total number of shares subject to options at March 31, 2000 is 1,165,500, of
which options representing 936,000 are currently exercisable. Of those, the
total number of shares subject to options held by directors and officers of
Nymox is 395,000 of which options representing 295,000 shares are currently
exercisable.
There are no rights, warrants or options presently outstanding under which Nymox
could issue additional common shares, with the exception of options enabling
certain directors, employees and consultants of Nymox to acquire common shares
under Nymox's stock option plan and of warrants entitling the holders to acquire
up to 568,996 common shares of Nymox as outlined in the above table.
Nymox has created a stock option plan for its key employees, its officers and
directors and certain consultants. The board of directors of Nymox administers
the plan. The board may grant options to purchase a specified number of common
shares of Nymox to a designated individual. The total number of common shares to
be optioned to any one individual cannot exceed 5% of the total number of issued
and outstanding shares and the maximum number of common shares which may be
optioned under the plan cannot exceed 2,500,000 shares without shareholder
approval.
The board fixes the option price per share for common shares that are the
subject of any option, when it grants any such option. The option price cannot
involve a discount to the market price when the option is granted. The period
during which an option is exercisable shall not exceed 10 years from the date
when the option is granted. The options may not be assigned, transferred or
pledged and expire within three months of the termination of employment and six
months of the death of an individual.
On January 17, 1996, the board of directors granted options to purchase up to
400,000 common shares for a period of 10 years. Of these, options to purchase
120,000 common shares were granted to directors and officers of Nymox and
options to purchase 280,000 shares were granted to consultants of Nymox.
Specifically the board granted:
36
<PAGE> 37
- options to purchase 310,000 common shares of Nymox at a price of
CAN$3.25 (US$2.25) per share for a period of ten years to a total of
seven beneficiaries, of which options a total of 35,000 common shares
have been exercised to date;
- options to two directors of Nymox to acquire 5,000 common shares of
Nymox, effective as of each of the first five anniversary dates of
January 17, 1996 for a total of 25,000 shares each, provided they
still be associated with the Company as of the vesting dates. The
vesting schedule and prices per block of shares are as follows:
January 17,1997 - 5,000 shares - CAN$13.75 (US$9.53) per share
January 17,1998 - 5,000 shares - CAN$ 9.80 (US$6.79) per share
January 17,1999 - 5,000 shares - CAN$10.00 (US$6.93) per share
January 17,2000 - 5,000 shares - CAN$10.00 (US$6.93) per share
January 17,2001 - 5,000 shares - CAN$10.00 (US$6.93) per share
- options to one senior executive of Nymox additional to acquire 10,000
common shares of Nymox, effective as of each of the first four
anniversary dates of January 17, 1996 for a total of 40,000 additional
shares, provided he still be associated with the Company as of the
vesting dates. The vesting schedule and prices per block of shares are
as follows:
January 17,1997 - 10,000 shares - CAN$13.75 (US$9.53) per share
January 17,1998 - 10,000 shares - CAN$ 9.80 (US$6.79) per share
January 17,1999 - 10,000 shares - CAN$10.00 (US$6.93) per share
January 17,2000 - 10,000 shares - CAN$10.00 (US$6.93) per share.
Under the same plan, on April 30, 1996, the board granted options to purchase
100,000 common shares of Nymox at a price of CAN$11.50 (US$7.97) per share for a
period of ten years to three beneficiaries.
On August 13, 1996, the board granted one consultant of Nymox options to acquire
10,000 common shares of the Company at a price of CAN$16.75 (US$11.60)for a
period of ten years. This consultant was granted additional options to acquire
10,000 common shares of Nymox, effective as of each of the first four
anniversary dates of August 13, 1996 for a total of 40,000 additional shares,
provided he is still be associated with Nymox as of the vesting dates. The
vesting schedule and prices per block of shares are as follows:
August 13,1997 - 10,000 shares - CAN$ 9.00 (US$6.24) per share
August 13,1998 - 10,000 shares - CAN$10.00 (US$6.93) per share
August 13,1999 - 10,000 shares - CAN$10.00 (US$6.93) per share
August 13,2000 - 10,000 shares - CAN$10.00 (US$6.93) per share.
Under the same plan, on October 31, 1997, the board granted options to purchase
up to 155,000 common shares to four beneficiaries. Specifically the board
granted:
- options to purchase 25,000 common shares of the Company at a price of
CAN$9.00 (US$6.24) per share for a period of 10 years to five
beneficiaries;
37
<PAGE> 38
- options to two directors of the Company options to acquire 5,000
common shares of Nymox, effective as of each of the first five
anniversary dates of October 31, 1997, at a price of CAN$10.00
(US$6.93) per share for a total of 25,000 additional shares each,
provided they still be associated with Nymox as of the vesting dates;
and
- options to a director and an executive of Nymox to acquire 10,000
common shares of Nymox, effective as of each of the first four
anniversary dates of October 31, 1997, at a price of CAN$10.00
(US$6.93) per share for a total of 40,000 additional shares each,
provided they still be associated with Nymox as of the vesting dates.
On December 19, 1997 and on May 13, 1999, the board granted options to purchase
up to 15,500 common shares under Nymox's stock option plan to certain key
employees of Nymox at a price of CAN$9.25 (US$6.41) per share for a period of
ten years, provided they still be associated with Nymox as of the vesting dates.
All options granted to these employees vest over a period of three years from
the date when the board granted them. Of these options, 6,000 are currently
vested.
On November 9, 1998, the board granted one consultant of Nymox options to
acquire 100,000 common shares of the Company at a price of CAN$7.00 (US$4.85)
per share, such options to be exercisable for a period of four years from
November 9, 1998.
On January 22, 1999, the board granted one executive of Nymox options to acquire
50,000 common shares of Nymox at a price of $10.00 (US$6.93) per share, such
options to be exercisable for a period of 10 years from January 22, 1999.
On May 13, 1999, the board granted options to purchase up to 150,000 common
shares under Nymox's stock option plan for a period of ten years at a price of
CAN$4.50 (US$3.12) per share to seven beneficiaries. It also granted a director
of Nymox additional options to acquire 40,000 shares at a price of CAN$10.00
(US$6.93) per shares, vesting 10,000 shares per year, starting on May 13, 2000
and continuing to May 13, 2004, provided the director still be associated with
Nymox as of the vesting dates.
On May 13, 1999, the board granted one consultant of the Company options to
acquire 100,000 common shares of the Company at a price of CAN$4.50 (US$3.12)
per share, such options to be exercisable for a period of 10 years from June 1,
1999. These options are subject to vesting at the rate of 12,500 per quarter
commencing June 1, 1999 to March 1, 2001.
On February 4, 2000, the board granted one key employee of Nymox options to
acquire 10,000 common shares of Nymox at a price of $US$3.70 per share,
effective as of each of the first four anniversary dates of December 23, 1999
for a total of 40,000 shares, for a period of ten years, provided she still be
associated with Nymox as of the vesting dates.
To date, a total of 1,053,100 options granted to former employees and
consultants to purchase common shares of the Company have expired, of which
108,900 were exercised prior to the expiry date. In addition, 30,000 options
granted to consultants have been canceled and 35,000 options have been exercised
by a consultant still associated with the Company.
38
<PAGE> 39
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
A former director and senior officer of Nymox, Hossein Ghanbari, while still
with Nymox, received a loan of CAN$56,000 for the purchase of a home following
his move from the United States to Canada to assume his duties with Nymox. This
loan was interest free and had no fixed terms of repayment. He subsequently used
additional funds of $125,000 to assist in the purchase of a home following his
return to the United States from Canada to work for Nymox's United States
subsidiary, Nymox Corporation. He repaid $5,000 of the $125,000 while still with
Nymox Corporation. On January 22, 1999, he gave Nymox Corporation two promissory
notes for these debts, payable on demand. The promissory note for the loan for
CAN$56,000 was interest-free; the promissory note for the outstanding sum of
$120,000 bore interest at the rate of 9% per annum.
Hossein Ghanbari is no longer with Nymox and Nymox Corporation has since
obtained partial summary judgment on these promissory notes in the amount of
$168,731.83. See - Information About the Company - Certain Legal Proceedings.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
a) Not applicable
b) Not applicable
c) Not applicable
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
Not applicable
PART IV
ITEM 17. FINANCIAL STATEMENTS
Not applicable
ITEM 18. FINANCIAL STATEMENTS
The financial statements listed in item 19 are incorporated by reference in this
item.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial statements (which appear after the signature page hereto):
At and for the year ended December 31, 1999:
Consolidated Balance Sheet -- December 31, 1999
Consolidated Statement of Earnings and Deficit
Consolidated Statements of Changes in Financial Position
Notes
39
<PAGE> 40
At and for the year ended December 31, 1998:
Consolidated Balance Sheet -- December 31, 1998
Consolidated Statement of Earnings and Deficit
Consolidated Statements of Changes in Financial Position
Notes
At and for the year ended December 31, 1997:
Consolidated Statement of Earnings and Deficit
Consolidated Statements of Changes in Financial Position
Notes
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
NYMOX PHARMACEUTICAL CORPORATION
/s/ Paul Averback
---------------------------------
(Registrant)
Paul Averback, MD
Title: President
Date: May 15, 2000
40
<PAGE> 41
EXHIBIT INDEX
NYMOX PHARMACEUTICAL CORPORATION
Form 20-F Annual Report
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
3.1 Articles of Incorporation, as amended. (incorporated by reference N\A
to Exhibit 3.1 to the Company's 20-F filed
with the Commission December 9, 1996.)
3.2 Bylaws of the Company (incorporated by N\A
reference to Exhibit 3.2 to the Company's 20-F
filed with the Commission December 9, 1996.)
10.1 Memorandum of Agreement between Paul Averback and the Company N\A
(incorporated by reference to Exhibit 10.1 to the Company's 20-F
filed with the Commission December 9, 1996.)
10.2 Share Option Plan of the Company (incorporated by reference to N\A
Exhibit 10.2 to the Company's 20F filed with
the Commission December 9, 1996.)
10.3 Research and License Agreement between the Massachusetts General N\A
Hospital Corporation and the Company (incorporated by reference
to Exhibit 10.3 to the Company's 20-F filed
with the Commission December 9, 1996.)
10.4 Research and License Amendment between the Massachusetts General N\A
Hospital Corporation and the Company (incorporated by reference
to Exhibit 10.5 to the Company's 20-F filed
with the Commission December 9, 1996.)
10.5 Common Stock Purchase Agreement between Nymox Pharmaceutical N\A
Corporation and Jaspas Investments Limited dated November 1, 1999
(incorporated by reference to Exhibit 2.0 to the Company's form
F-1 registration statement filed with the
Commission February 29, 2000.)
10.6 Registration Rights Agreement between Nymox Pharmaceutical N\A
Corporation and Jaspas Investments Limited dated November 1, 1999
(incorporated by reference to Exhibit 2.1 to the Company's form
F-1 registration statement filed with the
Commission February 29, 2000.)
10.7 Escrow Agreement among Nymox Pharmaceutical N\A
Corporation, Jaspas Investments Limited and
Epstein, Becker & Green, P.C. dated November
1, 1999 (incorporated by reference to Exhibit
2.2 to the Company's form F-1 registration
statement filed with the
Commission February 29, 2000.)
10.8 Stock Purchase Warrant to purchase common N\A
shares issued to Jaspas Investments Limited
dated November 1, 1999 (incorporated by
reference to Exhibit 2.3 to the Company's form
F-1 registration statement filed with the
Commission February 29, 2000.)
10.9 Employment Agreement between Nymox Pharmaceutical Corporation and N\A
Dr. Judith Fitzpatrick (incorporated by reference to Exhibit 2.4
to the Company's form F-1 registration statement filed with the
Commission February 29, 2000.)
10.10 Research and License Agreement between the Filed Herewith
Rhode Island Hospital Corporation and the
Company dated May 14, 1999.
27.0 Financial Data Schedule Filed Herewith
</TABLE>
i
<PAGE> 42
Consolidated Financial Statements of
NYMOX PHARMACEUTICAL
CORPORATION
Years ended December 31, 1999, 1998 and 1997
1
<PAGE> 43
AUDITORS' REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Nymox Pharmaceutical
Corporation as at December 31, 1999 and 1998 and the consolidated statements of
earnings, deficit and cash flows for the years ended December 31, 1999, 1998 and
1997. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
1999 and 1998 and the results of its operations and its cash flows for the years
ended December 31, 1999, 1998 and 1997 in accordance with Canadian generally
accepted accounting principles.
Canadian generally accepted accounting principles vary in certain significant
respects from accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected results of operations for each of the years in the
three-year period ended December 31, 1999 and shareholders' equity as at
December 31, 1999, 1998 and 1997 to the extent summarized in note 10 to the
consolidated financial statements.
/s/ KPMG
Chartered Accountants
Montreal, Canada
March 17, 2000
2
<PAGE> 44
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
<S> <C>
FINANCIAL STATEMENTS
Consolidated Balance Sheets............................................. 1
Consolidated Statements of Earnings..................................... 2
Consolidated Statements of Deficit...................................... 3
Consolidated Statements of Cash Flows................................... 4
Notes to Consolidated Financial Statements.............................. 5
</TABLE>
<PAGE> 45
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Balance Sheets
December 31, 1999 and 1998
(in US dollars)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash $ 449,363 $ 494,906
Short-term investments - 1,464,635
Interest receivable - 31,928
Receivable from a financial institution - 441,696
Accounts receivable 24,611 51,724
Research tax credits receivable 3,180 4,003
Notes receivable (note 3) 181,280 189,839
Other receivables 18,390 29,812
Prepaid expenses 100,000 -
------------ ------------
776,824 2,708,543
Capital assets (note 4) 1,168,316 1,279,692
Deferred share issuance costs (note 6 (c)) 195,351 -
------------ ------------
$ 2,140,491 $ 3,988,235
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 486,916 $ 301,004
Note payable (note 5) 346,428 -
------------ ------------
833,344 301,004
Shareholders' equity:
Share capital (note 6) 16,912,963 15,943,710
Deficit $(15,605,816) $(12,256,479)
------------ ------------
1,307,147 3,687,231
Commitments and contingency (notes 3 and 7)
Subsequent events (note 13)
------------ ------------
$ 2,140,491 $ 3,988,235
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ Paul Averback, M.D.
- -------------------------------------- Director
/s/ Colin Bier, Ph.D.
- -------------------------------------- Director
1
<PAGE> 46
<PAGE> 47
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Earnings
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Service fees $ 153,252 $ 104,804 $ 17,033
Interest 36,951 168,761 53,022
----------- ----------- -----------
190,203 273,565 70,055
Expenses:
Research and development 1,137,122 2,091,745 1,775,340
Less research tax credits (4,181) (4,003) (103,928)
----------- ----------- -----------
1,132,941 2,087,742 1,671,412
Marketing 942,205 2,245,023 1,334,202
General and administrative, and
cost of sales 1,333,234 620,939 408,456
Depreciation and amortization 136,947 93,917 109,952
Interest and bank charges 5,856 9,157 9,938
----------- ----------- -----------
3,551,183 5,056,778 3,533,960
Gain on disposal of capital assets (46,684) - -
----------- ----------- -----------
Net loss $(3,314,296) $(4,783,213) $(3,463,905)
=========== =========== ===========
Loss per share $ (0.17) $ (0.25) $ (0.19)
=========== =========== ===========
Weighted average number of common shares 19,886,430 19,304,435 18,370,873
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE> 48
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Deficit
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -----------
<S> <C> <C> <C>
Deficit, beginning of year $(12,256,479) $ (7,415,759) $(3,791,804)
Net loss (3,314,296) (4,783,213) (3,463,905)
Share issue costs (35,041) (57,507) (160,050)
------------ ------------ -----------
Deficit, end of year $(15,605,816) $(12,256,479) $(7,415,759)
============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 49
NYMOX PHARMACEUTICAL CORPORATION
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(3,314,296) $(4,783,213) $(3,463,905)
Adjustments for:
Depreciation and amortization 136,947 93,917 109,952
Gain on disposal of capital assets (46,684) - -
Foreign exchange (13,453) (4,858) (1,698)
Change in operating assets and liabilities:
Accounts receivable 24,894 (41,925) (7,437)
Interest receivable 31,928 (29,018) 49,950
Receivable from a financial institution 441,696 (441,696) -
Research tax credits receivable 824 99,925 62,357
Other receivables 11,422 (17,539) (485)
Prepaid expenses (102,945) - -
Accounts payable and accrued liabilities 188,872 93,129 (65,703)
----------- ----------- -----------
(2,640,795) (5,031,278) (3,316,969)
Cash flows from financing activities:
Proceeds from issuance of share capital 969,253 5,996,622 3,501,657
Proceeds from notes payable 346,428 - -
Share issue costs (230,392) (57,507) (160,050)
----------- ----------- -----------
1,085,289 5,939,115 3,341,607
Cash flows from investing activities:
Additions to capital assets (164,783) (390,125) (180,269)
Proceeds from disposal of capital assets 185,896 - -
Notes receivable - (151,040) -
Net proceeds on maturity of (purchases of)
short-term investments 1,464,635 (231,290) 451,422
----------- ----------- -----------
1,485,748 (772,455) 271,153
Effect of foreign exchange rate changes on cash 24,215 8,066 3,493
----------- ----------- -----------
Net (decrease) increase in cash (45,543) 143,448 299,284
Cash, beginning of year 494,906 351,458 52,174
----------- ----------- -----------
Cash, end of year $ 449,363 $ 494,906 $ 351,458
=========== =========== ===========
Supplemental cash flow information:
Cash paid during the year for interest $ 5,856 $ 9,157 $ 9,938
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 50
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
1. ORGANIZATION AND BUSINESS ACTIVITIES:
Nymox Pharmaceutical Corporation (the "Corporation"), incorporated under
the Canada Business Corporations Act, is a development stage
biopharmaceutical corporation which specializes in the research and
development of neurological therapeutics and diagnostics for the aging
population, with an emphasis on Alzheimer's disease.
Since inception, the Corporation's activities have been primarily focused
on developing certain pharmaceutical technologies and obtaining outside
funding to support the continued development of its technologies. The
Corporation is subject to a number of risks, including the successful
development and marketing of its technologies. In order to achieve its
business plan, the Corporation anticipates the need to raise additional
capital. (See notes 6 (c) and 13 (b)).
The Corporation is listed on the NASDAQ Stock Market.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Consolidation and change in measurement currency:
The consolidated financial statements of the Corporation have been
prepared under Canadian generally accepted accounting principles
("GAAP") and include the accounts of its wholly-owned US subsidiary,
Nymox Corporation. Intercompany balances and transactions have been
eliminated on consolidation.
Consolidated financial statements prepared under US GAAP would differ
in some respects from those prepared in Canada. A reconciliation of
earnings and shareholders' equity reported in accordance with Canadian
GAAP and with US GAAP is presented in note 10.
Effective January 1, 2000, the Corporation will adopt the United
States dollar as its measurement currency as a result of the
significance of business activities conducted in the United States and
the increasing proportion of operating, financing and investing
transactions in the Canadian operations that are denominated in U.S.
dollars. In accordance with Canadian GAAP, these consolidated
financial statements have been presented in US dollars using the
convenience translation method whereby all Canadian dollar amounts
were converted into US dollars at the closing exchange rate at
December 31, 1999, which was $1.4433 Canadian dollar per US dollar.
(b) Short-term investments:
The Corporation's portfolio of short-term investments, which does not
include equity securities, consisted principally of government
securities and commercial paper that are highly liquid and readily
convertible into cash. These are recorded at the lower of cost and
market value.
5
<PAGE> 51
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(c) Capital assets:
Capital assets are recorded at cost. Depreciation and amortization are
provided using the following methods and annual rates:
<TABLE>
<CAPTION>
Asset Method Rate
----- ------ ----
<S> <C> <C>
Computer equipment Straight-line 20%
Laboratory equipment Straight-line 20%
Office equipment and fixtures Straight-line 20%
</TABLE>
The capitalized amount with respect to patents relates to direct costs
incurred in connection with securing the patents. The cost of the
patents does not necessarily reflect their present or future value and
the amount ultimately recoverable is dependent upon the successful
commercialization of the related products. Accordingly, patents are
being amortized using the straight-line method commencing in the year
of commercial production of the developed products. The capitalized
amount is being amortized over the remaining years of the initial life
of the patent.
(d) Research and development expenditures:
Research expenditures, net of research tax credits, are expensed as
incurred. Development expenditures, net of tax credits, are expensed
as incurred, except if they meet the criteria for deferral in
accordance with generally accepted accounting principles.
(e) Foreign exchange:
The Corporation's foreign subsidiary is considered to be an integrated
foreign operation. Foreign denominated monetary assets and liabilities
of the Canadian and foreign operations are translated at the rates of
exchange prevailing at the balance sheet dates. Other assets and
liabilities denominated in foreign currencies are translated at the
exchange rates prevailing when the assets were acquired or the
liabilities incurred. Sales and expenses denominated in foreign
currencies are translated at the average exchange rate prevailing
during the year, except for depreciation and amortization which are
translated at the same rates as those used in the translation of the
corresponding assets. Foreign exchange gains and losses are included
in the determination of net earnings.
6
<PAGE> 52
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
(f) Stock-based compensation plan:
No compensation expense is recognized under the Corporation's
stock-based compensation plan when stock options are issued to
employees. Any consideration paid by employees on exercise of stock
options is credited to share capital.
(g) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
(h) Loss per share:
The loss per share amounts have been calculated using the weighted
average number of common shares outstanding during the year. Fully
diluted loss per share has not been disclosed because the effect of
common shares issuable upon the exercise of options and warrants would
be anti-dilutive.
(i) Statement of cash flows:
In 1999, the Corporation adopted the new recommendations of the
Canadian Institute of Chartered Accountants with respect to the
presentation of cash flow information. Under the new recommendations,
all non-cash transactions are excluded from the cash flow statement
and disclosed elsewhere in the financial statements. Cash equivalents
are restricted to investments that are readily convertible into a
known amount of cash, that are subject to minimal risk of changes in
value and which have an original maturity of three months or less. The
information for 1998 and 1997 has been restated to conform to the new
presentation.
3. NOTES RECEIVABLE:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Note receivable, unsecured, non-interest bearing,
payable on demand $ 38,800 $ 38,800
Note receivable, unsecured, bearing interest at 9%
per annum beginning February 1, 1999, payable
on demand, denominated in US dollars 142,480 151,039
-------- --------
$181,280 $189,839
======== ========
</TABLE>
7
<PAGE> 53
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
3. NOTES RECEIVABLE (CONTINUED):
The notes are receivable from a former director and senior executive who is
no longer associated with the Company. In 1999, Nymox Corporation, the
Corporation's subsidiary, commenced an action against the former director
for repayment of the two promissory notes and on August 5, 1999, the court
granted Nymox Corporation's motion for summary judgment. At December 31,
1999, the notes receivable had not been collected because the former
director has outstanding counterclaims against Nymox Corporation for
compensatory and punitive damages for alleged defamation and in connection
with his employment.
The Corporation has not recorded a provision in its accounts for payment of
damages or for any loss on the collectibility of the notes receivable
because, in the opinion of management, an unfavorable outcome in this
litigation is not probable.
4. CAPITAL ASSETS:
<TABLE>
<CAPTION>
1999
----------------------------------------
Accumulated Net book
Cost depreciation value
---------- ------------ ----------
<S> <C> <C> <C>
Computer equipment $ 57,713 $ 25,203 $ 32,510
Laboratory equipment 258,145 104,053 154,092
Office equipment and fixtures 26,527 11,750 14,777
Patents 1,042,427 75,491 966,936
Intellectual property rights 1 - 1
---------- -------- ----------
$1,384,813 $216,497 $1,168,316
========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------
Accumulated Net book
Cost depreciation value
---------- ------------ ----------
<S> <C> <C> <C>
Computer equipment $ 54,346 $ 17,687 $ 36,659
Laboratory equipment 497,346 152,753 344,593
Office equipment and fixtures 26,991 8,097 18,894
Patents 884,306 4,761 879,545
Intellectual property rights 1 - 1
---------- -------- ----------
$1,462,990 $183,298 $1,279,692
========== ======== ==========
</TABLE>
8
<PAGE> 54
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
5. NOTE PAYABLE:
The note payable bears interest at the prime lending rate of a Canadian
financial institution plus 2%, and is repayable on May 1, 2000. The note
payable is subject to earlier repayment in certain circumstances.
6. SHARE CAPITAL:
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
Authorized:
An unlimited number of common shares
Issued and outstanding:
20,003,804 common shares (1998 - 19,727,904) $16,912,963 $15,943,710
=========== ===========
</TABLE>
(a) Changes in the Corporation's share capital are presented below:
<TABLE>
<CAPTION>
Shares Dollars
------ -------
<S> <C> <C>
Issued and outstanding, December 31, 1997 18,632,873 $ 9,597,888
Issue of common shares for cash (b) 366,000 2,169,681
Issue of common shares pursuant to exercise
of warrants 696,491 4,101,832
Issue of common shares pursuant to exercise
of stock options 33,000 74,309
Cancellation of shares (460) -
---------- -----------
Balance, December 31, 1998 19,727,904 15,943,710
Issue of common shares for cash (b) 177,000 746,553
Issue of common shares pursuant to exercise
of stock options 98,900 222,700
---------- -----------
Balance, December 31, 1999 20,003,804 $16,912,963
========== ===========
</TABLE>
9
<PAGE> 55
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
6. SHARE CAPITAL (CONTINUED):
(b) Private placements:
In 1999, the Corporation completed private placements for 177,000
common shares for total aggregate proceeds of $746,553. In 1998, the
Corporation completed private placements for 366,000 common shares for
total aggregate proceeds of $2,169,681. The share issue costs related
to these private placements have been charged against the deficit.
(c) Common Stock Purchase Agreement:
In November 1999, the Corporation and Jaspas Investments Limited
("Jaspas"), a corporation based in the British Virgin Islands, signed
a common stock purchase agreement (the "Agreement") that establishes
the terms and conditions for the future issuance and purchase of the
Corporation's common shares by Jaspas. In general terms, Jaspas is
committed to purchase up to $12 million of the Corporation's common
shares over a thirty-month period. However, Jaspas may not purchase
more than 19.9% of the Corporation's common shares issued and
outstanding as of November 12, 1999, the closing date under the
Agreement, without obtaining shareholder approval.
The Agreement establishes what is referred to by the parties as an
equity drawdown facility. On a monthly basis, the Corporation may
request a drawdown on the facility subject to a formula, based on the
average stock price and average trading volume, that sets the maximum
amount for any given draw. At the end of a 22-day trading period
following the drawdown request, the amount of money that Jaspas will
provide to the Corporation and the number of shares that the
Corporation will issue is settled based on the formula using the
average daily share price for each of the 22 trading days. Jaspas
receives a 6% discount on the market price determined for the 22-day
trading period, and the Corporation will receive the settled amount
less a 3% placement fee payable to the placement agents.
The Corporation may make up to 24 drawdowns to a maximum of
$750,000/drawdown and $12,000,000 in total. There are certain
conditions that must be satisfied before Jaspas is obligated to
purchase the Corporation's common shares. At December 31, 1999, no
drawdowns were made by the Corporation under this facility as it was
in the process of preparing a registration statement for the issue of
shares to the Securities and Exchange Commission, one of the
conditions of the Agreement.
The Corporation has also issued a warrant to Jaspas to purchase
200,000 common shares (see note 6 (d)).
The fees related to this transaction amounted to $195,351 and have
been accounted for as deferred financing fees to be amortized over the
thirty-month drawdown period.
10
<PAGE> 56
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
- --------------------------------------------------------------------------------
6. SHARE CAPITAL (CONTINUED):
(d) Warrants:
The Corporation has issued the following warrants to purchase common
shares:
<TABLE>
<CAPTION>
Exercise Outstanding at
price per Exercised December 31,
Warrants share Issued to date Expired 1999 Expiry
-------- ---------- ------- --------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Series A CAN$8.50 696,491 696,491 - - -
Series B CAN$8.50 50,000 - 50,000 - -
Series C CAN$10.00 60,000 - 60,000 - -
Series D CAN$10.00 95,000 - 95,000 - -
Series E US$4.53 200,000 (i) - - 200,000 November 30, 2004
Series F US$4.06 160,000 (ii) - - 160,000 November 30, 2004
</TABLE>
(i) Warrant issued to Jaspas in connection with the common stock
purchase agreement referred to in note 6 (c). The warrant
entitles Jaspas to purchase 100,000 common shares at an exercise
price of US$4.5315. Jaspas may purchase a further 100,000 common
shares at the same price only if the Corporation has not drawn
down at least US$7,000,000 within eighteen months from the
effective date of the registration statement referred to in
note 6 (c).
(ii) Warrant issued to placement agents in connection with the common
stock purchase agreement. The warrants are exercisable at a price
of US$4.0625.
(e) Stock options:
The Corporation has established a stock option plan (the "Plan") for
its key employees, its officers and directors, and certain
consultants. The Plan is administered by the Board of Directors of the
Corporation. The Board may from time to time designate individuals to
whom options to purchase common shares of the Corporation may be
granted, the number of shares to be optioned to each, and the option
price per share. The option price per share cannot involve a discount
to the market price at the time the option is granted. The total
number of shares to be optioned to any one individual cannot exceed 5%
of the total issued and outstanding shares and the maximum number of
shares which may be optioned under the Plan cannot exceed 2,500,000
common shares without shareholder approval.
11
<PAGE> 57
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
6. SHARE CAPITAL (CONTINUED):
(e) Stock options (continued):
Changes in outstanding options were as follows for the last two fiscal
periods:
<TABLE>
<CAPTION>
Weighted Weighted
average average
exercise exercise
Number price price
--------- ----------- -----------
(CAN$) (US$)
<S> <C> <C> <C>
Balance, December 31, 1997 1,834,000 $ 5.48 $ 3.80
Granted 125,000 6.58 4.56
Exercised (33,000) 3.25 2.25
Cancelled - - -
--------- ----------- -----------
Balance, December 31, 1998 1,926,000 5.73 3.97
Granted 351,500 5.37 3.72
Exercised (98,900) 3.25 2.25
Expired (55,000) 9.57 6.63
Cancelled (993,100) 3.32 2.30
--------- ----------- -----------
Balance, December 31, 1999 1,130,500 $ 6.87 $ 4.76
========= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1999, options outstanding and exercisable were as follows:
Options outstanding Options exercisable Exercise price per share Expiry date
------------------- ------------------- ------------------------ -----------
<S> <C> <C> <C>
100,000 100,000 CAN$7.00 (US$4.85) November 9, 2002
20,000 20,000 CAN$13.75 (US$9.53) January 17, 2006
50,000 20,000 CAN$10.00 (US$6.93) January 17, 2006
275,000 275,000 CAN$3.25 (US$2.25) January 17, 2006
20,000 20,000 CAN$9.80 (US$6.79) January 17, 2006
100,000 100,000 CAN$11.50 (US$7.97) April 30, 2006
10,000 10,000 CAN$16.75 (US$11.60) August 13, 2006
10,000 10,000 CAN$9.00 (US$6.24) August 13, 2006
30,000 20,000 CAN$10.00 (US$6.93) August 13, 2006
130,000 60,000 CAN$10.00 (US$6.93) October 31, 2007
25,000 25,000 CAN$9.00 (US$6.24) October 31, 2007
6,000 - CAN$9.25 (US$6.41) December 19, 2007
3,000 - CAN$9.25 (US$6.41) December 19, 2007
50,000 50,000 CAN$10.00 (US$6.93) January 22, 2009
6,500 - CAN$9.25 (US$6.79) May 13, 2009
195,000 150,000 CAN$4.50 (US$3.12) May 13, 2009
100,000 37,500 CAN$4.50 (US$3.12) June 1, 2009
---------- --------
1,130,500 903,500
========== ========
</TABLE>
12
<PAGE> 58
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
7. COMMITMENTS:
(a) Operating leases:
Minimum lease payments under operating leases for the Corporation's
premises for the next four years are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $103,000
2001 53,000
2002 37,000
2003 6,000
--------
$199,000
========
</TABLE>
(b) Research funding:
The Corporation is committed to make research grants to an unrelated
medical facility in the U.S. in the aggregate amount of approximately
$387,000 in the next three years as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $172,000
2001 172,000
2002 43,000
--------
$387,000
========
</TABLE>
Under this license, the medical facility benefits from research
funding and collaboration from the Corporation and is entitled to
royalties based on a percentage of sales of any commercialized product
derived from this research.
(c) License agreement:
In January 1999, the Corporation granted a non-exclusive license to an
American corporation to utilize all proprietory technology, including
its rights to patents and know-how, necessary to conduct the AD7C test
in a reference laboratory. The Corporation will receive compensation
under the agreement based on the number of tests conducted by the
American company. The license, which is for the US territory, is for
an initial term of 24 months and is subject to automatic renewal for
two additional one-year terms.
13
<PAGE> 59
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
8. INCOME TAXES:
Details of the components of income taxes are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Loss before income taxes:
Canadian operations $(2,631,662) $(1,782,794) $(1,725,041)
U.S. operations (682,634) (3,000,419) (1,738,864)
----------- ----------- -----------
(3,314,296) (4,783,213) (3,463,905)
Basic income tax rate 38.0% 38.0% 38.0%
----------- ----------- -----------
Income tax recovery at statutory rates 1,260,000 1,817,000 1,316,000
Adjustments in income taxes resulting from:
Non-recognition of losses and other
unclaimed deductions (1,260,000) (1,817,000) (1,316,000)
----------- ----------- -----------
Income taxes $ - $ - $ -
=========== =========== ===========
</TABLE>
The Corporation has non-capital losses carried forward and accumulated
scientific research and development expenditures which are available to
reduce future years' taxable income. The related income tax benefit of
these items will be recorded in earnings when realized. These expire as
follows:
<TABLE>
<CAPTION>
Federal Provincial
------- ----------
<S> <C> <C>
Non-capital losses:
2000 $ 25,000 $ 25,000
2001 40,000 40,000
2002 637,000 -
2003 1,379,000 884,000
2004 962,000 755,000
2005 2,095,000 2,096,000
2006 2,435,000 2,435,000
Scientific research and development expenditures:
(Indefinitely) 1,149,000 2,794,000
</TABLE>
14
<PAGE> 60
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
8. INCOME TAXES (CONTINUED):
The Corporation also has investment tax credits available in the amount of
approximately $330,000 available to reduce future years' federal taxes
payable. The benefit of these credits will be recorded when realized. These
credits expire as follows:
<TABLE>
<CAPTION>
<S> <C>
2005 $ 18,000
2006 201,000
2007 103,000
2008 8,000
</TABLE>
In addition, the Corporation's US subsidiary has losses carried forward of
approximately $5,840,000 which expire as follows:
<TABLE>
<CAPTION>
<S> <C>
2011 $ 460,000
2012 1,730,000
2018 2,700,000
2019 950,000
</TABLE>
9. FINANCIAL INSTRUMENTS:
(a) Foreign currency risk management:
As indicated in note 2 (a), the Corporation will adopt the US dollar
as its measurement currency effective January 1, 2000 because a
substantial portion of revenues, expenses, assets and liabilities of
its Canadian and US operations are denominated in US dollars. The
Canadian operation also has transactions denominated in Canadian
dollars, principally relating to salaries and rent. The Corporation
does not engage in the use of derivative financial instruments to
manage its currency exposures. Foreign exchange gains and losses have
been less than $50,000 in each of the years ended December 31, 1999,
1998 and 1997.
(b) Credit risk:
Financial instruments that potentially subject the Corporation to
significant concentrations of credit risk consist principally of
short-term investments. The Corporation minimizes this risk by having
investment policies that require placement of short-term investments
in financial institutions evaluated as highly creditworthy.
15
<PAGE> 61
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
9. FINANCIAL INSTRUMENTS (CONTINUED):
(c) Fair value disclosure:
The Corporation has determined that the carrying value of its
short-term financial assets and liabilities approximates fair value
due to the immediate or short-term maturity of these financial
instruments.
10. CANADIAN/U.S. REPORTING DIFFERENCES:
(a) Consolidated statements of earnings:
The reconciliation of earnings reported in accordance with Canadian
GAAP and with U.S. GAAP is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ -------------
<S> <C> <C> <C>
Net loss, Canadian GAAP $(3,314,296) $(4,783,213) $(3,463,906)
Adjustments:
Amortization of patents (i) 9,142 (50,622) (35,779)
Stock-based compensation - options
granted to non-employees (ii) (198,815) (274,088) (108,350)
Change in reporting currency (iii) 94,803 128,361 (147,374)
----------- ----------- ------------
Net loss, U.S. GAAP $(3,409,166) $(4,979,562) $(3,755,409)
=========== =========== ============
Loss per share, U.S. GAAP $ (0.17) $ (0.26) $ (0.20)
=========== =========== ============
</TABLE>
16
<PAGE> 62
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED):
(b) Consolidated shareholders' equity:
The reconciliation of shareholders' equity reported in accordance with
Canadian GAAP and with U.S. GAAP is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
Shareholders' equity, Canadian GAAP $1,307,147 $3,687,231 $2,531,329
Adjustments:
Amortization of patents (i) (157,307) (176,549) (131,070)
Stock-based compensation - options
granted to non-employees (ii):
Cumulative compensation expense (947,853) (792,788) (540,278)
Additional paid-in capital 1,000,416 749,038 518,700
Change in reporting currency (iii) (62,672) (162,580) 49,371
---------- ---------- ----------
(167,416) (382,879) (103,277)
---------- ---------- ----------
Shareholders' equity, U.S. GAAP $1,139,731 $3,304,352 $2,428,052
========== ========== ==========
</TABLE>
(i) In accordance with APB Opinion 17, Intangible Assets, the
patents are amortized using the straight-line method over the
legal life of the patents from the date the patent was secured.
For Canadian GAAP purposes, patents are amortized commencing in
the year of commercial production of the developed products.
(ii) In accordance with FAS 123, Accounting for Stock-Based
Compensation, compensation related to the stock options granted
to non-employees has been recorded in the accounts based on the
fair value of the stock options at the grant date. The fair value
of the stock options was estimated as described in note 10(c)(3).
There are no comparable Canadian standards.
17
<PAGE> 63
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED):
(b) Consolidated shareholders' equity (continued):
(iii) Change in reporting currency:
As explained in note 2 (a), the Company will adopt the US dollar
as its reporting currency effective January 1, 2000. For Canadian
GAAP purposes, the financial information for 1999, 1998 and 1997
has been translated into US dollars at the December 31, 1999
exchange rate. For United States GAAP reporting purposes, assets
and liabilities for all years presented have been translated into
US dollars at the ending exchange rate for the respective year
and the statement of earnings at the average exchange rate for
the respective year.
(c) Other disclosures required by United States GAAP:
(1) Development stage company:
The Corporation is in the process of developing unique patented
products which are subject to approval of regulatory authorities.
The Corporation has completed the research and discovery phase of
its Alzheimer's diagnostic AD7C test and is currently offering
testing services in their CLIA certified clinical reference
laboratory. It has had limited revenues to date on the sale of
its products under development. Accordingly, the Corporation is a
development stage company as defined in Statement of Financial
Accounting Standards No. 7 and the following disclosures are
required:
<TABLE>
<CAPTION>
Cumulative Cumulative
since the date of since the date of
inception of inception of
the Corporation the Corporation
to December 31, to December 31,
1999 1998
----------------- ----------------
<S> <C> <C>
Interest revenue $ 415,971 $ 379,020
Service fees 275,088 121,836
Gross research and development expenditures 7,460,818 6,323,696
Other expenses 9,269,381 6,851,140
Cash inflow (outflow):
Operating activities (15,058,838) (12,418,044)
Investing activities (204,495) (1,690,241)
Financing activities 17,153,115 16,067,825
============ ===========
</TABLE>
18
<PAGE> 64
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED):
(c) Other disclosures required by United States GAAP (continued):
(1) Development stage company (continued):
The statement of shareholders' equity since date of inception is
presented below.
<TABLE>
<CAPTION>
Additional
Consi- Paid-in Accumulated
Shares deration Capital Deficit Total
--------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1990:
Common shares issued 2,500,000 $ 172,414 - $ - $ 172,414
Net loss - - - (109,241) (109,241)
--------- ---------- --------- ----------- -----------
Balance, July 31, 1990 2,500,000 172,414 - (109,241) 63,173
Year ended July 31, 1991:
Net loss - - - (21,588) (21,588)
Cumulative translation adjustment - 1,499 - (950) 549
--------- ---------- --------- ----------- -----------
Balance, July 31, 1991 2,500,000 173,913 - (131,779) 42,134
Year ended July 31, 1992:
Common shares issued 9,375 31,468 - - 31,468
Net loss - - - (45,555) (45,555)
Cumulative translation adjustment - (6,086) - 5,598 (488)
--------- ---------- --------- ----------- -----------
Balance, July 31, 1992 2,509,375 199,295 - (171,736) 27,559
Year ended July 31, 1993:
Common shares issued 201,250 159,944 - - 159,944
Common shares cancelled (500,000) - - - -
Net loss - - - (38,894) (38,894)
Cumulative translation adjustment - (13,994) 12,830 (1,164)
--------- ---------- --------- ----------- -----------
Balance, July 31, 1993 2,210,625 345,245 - (197,800) 147,445
Year ended July 31, 1994:
Common shares issued 2,500 7,233 - - 7,233
Net loss - - - (53,225) (53,225)
Cumulative translation adjustment - (25,173) - 15,808 (9,365)
--------- ---------- --------- ----------- -----------
Balance, July 31, 1994 2,213,125 327,305 - (235,217) 92,088
Year ended July 31, 1995:
Common shares issued 78,078 303,380 - - 303,380
Net loss - - - (285,910) (285,910)
Cumulative translation adjustment - 5,196 - (7,221) (2,025)
--------- ---------- --------- ----------- -----------
Balance, July 31, 1995 2,291,203 635,881 - (528,348) 107,533
Period ended December 31, 1995:
Adjustment necessary to
increase the number of
common shares 12,708,797 - - - -
--------- ---------- --------- ----------- -----------
Adjusted number of
common shares 15,000,000 635,881 - (528,348) 107,533
Common shares issued 2,047,082 2,997,284 - - 2,997,284
Net loss - - - (1,194,226) (1,194,226)
Share issue costs - (153,810) - - (153,810)
Cumulative translation adjustment - 2,858 - (6,328) (3,470)
--------- ---------- --------- ----------- -----------
Balance, December 31, 1995
carried forward 17,047,082 3,482,213 - (1,728,902) 1,753,311
</TABLE>
19
<PAGE> 65
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED):
(c) Other disclosures required by United States GAAP (continued):
(1) Development stage company (continued):
<TABLE>
<CAPTION>
Additional
Consi- paid-in Accumulated
Shares deration capital deficit Total
---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995
brought forward 17,047,082 $ 3,482,213 $ - $ (1,728,902) $ 1,753,311
Year ended December 31, 1996:
Common shares issued 882,300 3,852,364 - - 3,852,364
Net loss - - - (3,175,587) (3,175,587)
Share issue costs - (170,699) - - (170,699)
Stock-based compensation - - 434,145 - 434,145
Cumulative translation adjustment - (16,769) (2,217) 24,544 5,558
---------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 17,929,382 7,147,109 431,928 (4,879,945) 2,699,092
Year ended December 31, 1997:
Common shares issued 703,491 3,180,666 - - 3,180,666
Net loss - - (3,755,409) (3,755,409)
Share issue costs - (161,482) - - (161,482)
Capital stock subscription - 352,324 - - 352,324
Stock-based compensation - - 108,350 - 108,350
Cumulative translation adjustment - (299,275) (21,578) 325,364 4,511
---------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 18,632,873 10,219,342 518,700 (8,309,990) 2,428,052
Year ended December 31, 1998:
Common shares issued 1,095,031 5,644,638 - - 5,644,638
Net loss - - - (4,979,562) (4,979,562)
Share issue costs - (54,131) - - (54,131)
Stock-based compensation - - 274,088 - 274,088
Cumulative translation adjustment - (685,156) (43,750) 720,173 (8,733)
---------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 19,727,904 15,124,693 749,038 (12,569,379) 3,304,352
Year ended December 31, 1999:
Common shares issued 275,900 969,253 - - 969,253
Net loss - - - (3,409,166) (3,409,166)
Share issue costs - (35,041) - - (35,041)
Stock-based compensation - - 198,815 - 198,815
Cumulative translation adjustment - 943,133 52,563 (884,178) 111,518
---------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 20,003,804 $17,002,038 $1,000,416 $(16,862,723) $ 1,139,731
=========================================================================================================
</TABLE>
20
<PAGE> 66
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED):
(c) Other disclosures required by United States GAAP (continued):
(2) Income taxes:
In accordance with Statement of Financial Accounting
Standards No. 109, the income tax effect of temporary differences
that give rise to the net deferred tax asset is presented below:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Scientific research and experimental
development $ 662,000 $ 596,000
Non-capital losses 2,933,000 1,801,000
Investment tax credits 330,000 321,000
Less valuation allowance (3,925,000) (2,718,000)
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
</TABLE>
There are no material deferred tax liabilities.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the
generation of future taxable income and tax planning strategies.
Since the Corporation is a development stage enterprise, the
generation of future taxable income is dependent on the
successful commercialization of its products and technologies.
21
<PAGE> 67
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
- --------------------------------------------------------------------------------
10. CANADIAN/U.S. REPORTING DIFFERENCES (CONTINUED):
(c) Other disclosures required by United States GAAP (continued):
(3) Stock-based compensation:
The Corporation applies APB Opinion 25, Accounting for Stock
Issued to Employees, in accounting for its stock option plan, and
accordingly, no compensation cost has been recognized for stock
options granted to employees in these financial statements. As
explained in note 10 (b), compensation cost has been recognized
for stock options granted to non-employees. Had compensation cost
been determined for stock options granted to employees based on
the fair value at the grant dates for awards under the plan
consistent with the method of FASB Statement 123, Accounting for
Stock-Based Compensation, the Corporation's net earnings and loss
per share would have been adjusted to the pro-forma amounts
indicated below for US GAAP:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C> <C> <C>
Net loss As reported (US GAAP) $(3,409,166) $(4,379,562)
Pro-forma (3,990,187) (4,379,562)
Loss per share As reported (US GAAP) (0.17) (0.23)
Pro-forma (0.20) (0.23)
</TABLE>
The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: risk-free interest rate
of 5.5% (1998 - 5%), dividend yield of 0%, expected volatility of
80% (1998 - 50%), and expected life of 5 years.
(4) Short-term investments:
Short-term investments are classified as held-to-maturity as the
Corporation has the positive intent and ability to hold these
securities to maturity. As the Corporation's short-term
investments include government securities and commercial paper,
the aggregate fair value approximates carrying value and there
are no significant unrealized gross holding gains or losses.
(5) Comprehensive income:
Effective January 1, 1998, the Corporation adopted Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive
Income, which establishes new rules for the reporting and display
of comprehensive income and its components. The adoption of this
statement has no impact on the Corporation's net income or
shareholders' equity.
22
<PAGE> 68
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
11. SEGMENT DISCLOSURES:
Geographic segment information was as follows:
<TABLE>
<CAPTION>
United
Canada States
----------- -----------
<S> <C> <C>
Revenues:
1999 $ 40,963 $ 149,240
1998 168,761 104,804
1997 53,022 17,033
Net loss:
1999 (2,631,662) (682,634)
1998 (1,782,794) (3,000,419)
1997 (1,725,041) (1,738,864)
Identifiable assets:
1999 1,714,416 426,075
1998 3,422,944 565,291
1997 2,480,322 253,550
</TABLE>
12. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. Although the change in date has
occurred, it is not possible to conclude that all aspects of the Year 2000
Issue that may affect the Company, including those related to customers,
suppliers, or other third parties, have been fully resolved.
23
<PAGE> 69
NYMOX PHARMACEUTICAL CORPORATION
Notes to Consolidated Financial Statements, Continued
Years ended December 31, 1999, 1998 and 1997
(in US dollars)
13. SUBSEQUENT EVENTS:
(a) Business acquisition:
On January 8, 2000, the Corporation entered into a share purchase
agreement to acquire a controlling interest in Serex, Inc. ("Serex"),
a privately-held development stage corporation based in New Jersey.
On March 2, 2000, the Corporation acquired 72.3% of the issued and
outstanding common stock of Serex in exchange for 187,951 common
shares of the Corporation having a fair value of $657,825, and a
warrant to purchase 115,662 of the Corporation's common shares at a
price of $3.70 per share exercisable on the following dates: (i)
January 8, 2001 - 35,783 shares, (ii) January 8, 2002 - 30,000 shares,
(iii) January 8, 2003 - 30,000 shares, (iv) January 8, 2004 - 19,879
shares. The net assets acquired consist principally of technology and
other intellectual property rights.
In connection with this acquisition, the Corporation issued 40,000
options to the selling shareholder to purchase the Corporation's
shares. The options are exercisable at a price of $3.70/share over a
four-year period.
(b) Private placement:
In March 2000, the Corporation completed a private placement with an
institutional investor for 666,667 common shares for total proceeds of
$4,000,000. In connection with this transaction, the Corporation
issued 66,667 warrants to purchase the Corporation's common shares at
a price of $9.375/share and 26,667 warrants to the placement agent to
purchase the Corporation's common shares at a price of $7.8125/share.
The warrants expire on March 6, 2004.
24
<PAGE> 1
EXHIBIT 10.10
RESEARCH AND LICENSE AGREEMENT
THIS AGREEMENT is between RHODE ISLAND HOSPITAL CORPORATION, a
not-for-profit Rhode Island corporation having offices at 593 Eddy Street,
Providence, RI 02903 ("RIH") and NYMOX CORPORATION, a corporation having its
principal place of business at 5516 Nicholson Lane, Suite 100A, Kensington, MD
20895-1005 ("NYMOX").
WHEREAS, Jack Wands, M.D. and Suzanne de la Monte, M.D., of the Laboratory
of Liver Research of the RIH funded in part by the Department of Health and
Human Services are interested in the development of new diagnostic or
therapeutic strategies for Alzheimer's Disease and other neurodegenerative
diseases ("TECHNOLOGY");
WHEREAS, RIH and Drs. Wands and de la Monte desire to continue their
research pertaining to the TECHNOLOGY and are seeking additional funds to
continue such research;
WHEREAS, as a center for research and education, RIH is interested in
facilitating the use of this new TECHNOLOGY and in licensing PATENT RIGHTS and
RESEARCH INFORMATION as hereinafter defined and thus benefiting the public and
RIH by facilitating the development of healthcare products, but is without
capacity to commercially develop, manufacture, and distribute any such product;
and
WHEREAS, NYMOX has the capacity and know-how that will enhance the
usefulness of the results of the research performed by Dr. Wands and Dr. de la
Monte and desires to provide RIH with funding to continue the research and to
obtain the right to use the results of this research under a license to PATENT
RIGHTS in order to commercially develop, manufacture, use and distribute
products throughout the world.
NOW THEREFORE, in consideration of the premises and of the faithful
performance of the covenants herein contained, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
1.1. The term "AFFILIATE" as applied to NYMOX shall mean NYMOX and any
company or other legal entity other than NYMOX in whatever country organized,
controlling, or controlled by NYMOX. The term "control" means possession, direct
or indirect, of the powers to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting securities, by
contract or otherwise.
1.2. The term "AGREEMENT YEAR" shall mean the twelve (12) month period
beginning on the EFFECTIVE DATE and each succeeding twelve (12) month period
thereafter for the term of the Agreement. If not otherwise specified, terms
involving time periods shall be applied pro rata according to any time frame in
which less than the full specified period is involved.
1
<PAGE> 2
1.3. The term "EFFECTIVE DATE" shall mean March 1, 1999.
1.4. The term "FIELD OF RESEARCH" shall mean research pertaining to the use
of any form of neural thread protein, its antibodies, and any cDNAs or genes or
genomic fragments coding for neural thread protein, for diagnostic or
therapeutic purposes.
1.5. The term "FIRST COMMERCIAL SALE" shall mean in each country the first
sale of any PRODUCT by NYMOX, its AFFILIATES or SUBLICENSEES, following approval
of its marketing by the appropriate governmental agency for the country in which
the sale is to be made and when governmental approval is not required, the first
sale in that country.
1.6. The term "RIH MATERIAL" shall mean any material or substance
(including transgenic mice or cell lines) which has biological activity in the
FIELD OF RESEARCH (i) which relates to SPONSORED RESEARCH and is in the
possession of the PRINCIPAL INVESTIGATORS on the EFFECTIVE DATE and which RIH
has the right to transfer to NYMOX under the terms and conditions of this
Agreement, or (ii) which is discovered, produced or derived by an INVESTIGATOR
in the performance of SPONSORED RESEARCH.
1.7. The term "INVENTION" shall mean any new and useful process,
manufacture, or composition of matter which is in the FIELD OF RESEARCH (a)
which was conceived (i) prior to the EFFECTIVE DATE or (ii) in the performance
of SPONSORED RESEARCH; and (b) which is first reduced to practice,
constructively or actually (i) by an INVESTIGATOR in the performance of
SPONSORED RESEARCH or (ii) within one year of the termination of the SPONSORED
RESEARCH in which it was conceived by a person who had been an INVESTIGATOR; and
(c) in which RIH has rights by virtue of (i) sole or joint inventorship by an
INVESTIGATOR (or in case of an INVENTION first reduced to practice within said
one year period by a person who has been an INVESTIGATOR) or (ii) the terms of
any agreement that does not preclude granting rights to NYMOX hereunder.
1.8. The term "INVESTIGATOR" shall mean PRINCIPAL INVESTIGATORS, any other
member of RIM's Professional Staff, graduate student, undergraduate student, or
employee of RIH who shall perform SPONSORED RESEARCH.
1.9. The term "LICENSE FIELD" shall mean the manufacture, use or sale of
PRODUCTS for diagnostic or therapeutic purposes.
1.10. The term "NYMOX MATERIALS" shall mean any material or substance first
discovered, produced or derived by an employee of NYMOX prior to termination of
the SPONSORED RESEARCH which pertains to the SPONSORED RESEARCH, and in which
NYMOX has ownership or licensable rights.
1.11.
(a) The term "NET SALES PRICE" shall mean the gross billing price of any
PRODUCT received by NYMOX, its AFFILIATE or SUBLICENSEE for the sale or
distribution of any PRODUCT, less the following amounts actually paid out by
NYMOX, its AFFILIATE or SUBLICENSEE or credited against the amounts received by
them from the sale or distribution of
2
<PAGE> 3
PRODUCT:
(i) discounts allowed;
(ii) returns;
(iii) transportation charges or allowances;
(iv) customs, duties and charges; and
(v) sales, transfer and other excise taxes or other governmental
charges levied on or measured by the sales but no franchise or
income tax of any kind whatsoever.
(b) Transfer of a PRODUCT to an AFFILIATE for sale by the AFFILIATE shall not
be considered a sale; in the case of transfer the NET SALES PRICE shall be based
on the gross billing price of the PRODUCT by the AFFILIATE as invoiced to its
customer.
(c) Every commercial use or disposition of any PRODUCT (excluding any use for
(i) use in assuring product testing or control, (ii) promotional distribution to
physicians or (iii) distribution to researchers by or on behalf of NYMOX or any
of its AFFILIATES or SUBLICENSEES or (iv) obtaining regulatory approvals), in
addition to a bona fide sale to a bona fide customer (not to be construed as
including NYMOX or any such AFFILIATE or SUBLICENSEE) shall be considered a sale
of such PRODUCT at the NET SALES PRICE then payable in an arm's length
transaction.
(d) In the event any PRODUCT is sold as a component of a combination of active
functional elements, NET SALES PRICE for purposes of determining royalty
payments on such combination, shall be calculated by multiplying the NET SALES
PRICE of the combination by the fraction A over A+B, in which "A" is the gross
selling price of the PRODUCT portion of the combination when sold separately
during the ACCOUNTING PERIOD in which the sale was made, and "B" is the gross
selling price of the other active functional elements of the combination sold
separately during the ACCOUNTING PERIOD in question. All gross selling prices
shall be calculated as the average gross selling price of the PRODUCT for the
ACCOUNTING PERIOD as hereafter defined in the country in which the sale is made.
In the event that no separate sale of either such above-designated PRODUCT or
such above-designated active functional elements of the combination is made
during the ACCOUNTING PERIOD in which the sale was made, NET SALES shall be
calculated by multiplying NET SALES PRICE of such combination by the fraction C
over C+D, in which "C" is the standard fully-absorbed cost of the PRODUCT
portion of such combination, and "D" is the standard fully absorbed cost of the
other active functional element(s), such costs being arrived at using the
standard accounting procedures of NYMOX which will be in accord with generally
accepted accounting practices. The "ACCOUNTING PERIOD" shall be the periods for
which royalty payments are due as provided for in paragraph 7.7.
1.12. The term "PATENT RIGHT" shall mean
(a) any United States patent application which contains one or more claims
to an INVENTION; and
(b) any division or continuation and any foreign patent application or
equivalent
3
<PAGE> 4
corresponding to such patent applications and any Letters Patent or the
equivalent thereof issuing thereon or reissue or extension thereof.
1.13. The term "PRINCIPAL INVESTIGATORS" shall mean Jack Wands, M.D. and
Suzanne de la Monte, M.D.
1.14. The term "PRODUCT" shall mean any diagnostic article, composition,
apparatus, substance, chemical, material, method or service (a) whose
manufacture, use, or sale infringes one or more claims of any PATENT RIGHT, or
(b) which, in the absence of any PATENT RIGHT which would be infringed by such
manufacture, use or sale, (i) incorporates one or more RIH MATERIALS or (ii)
whose discovery, development, manufacture or use employs any RIH MATERIAL,
RESEARCH INFORMATION or PROCESS or unpatented INVENTION or NYMOX MATERIAL.
1.15. The term "PROCESS" shall mean any process or method for the
production, manufacture or use of any PRODUCT.
1.16. The term "RESEARCH INFORMATION" shall mean any research data,
formulas, process information or other information pertaining to the SPONSORED
RESEARCH (a) known to PRINCIPAL INVESTIGATORS on the EFFECTIVE DATE and which
PRINCIPAL INVESTIGATORS are not under obligation to any third party to maintain
in confidence, or (b) thereafter produced by an INVESTIGATOR in the performance
of SPONSORED RESEARCH.
1.17. The term "RESEARCH PROPOSAL" shall mean the written description of
SPONSORED RESEARCH attached hereto as Appendix A on the EFFECTIVE DATE or
thereafter appended hereto as Appendix A and incorporated herein pursuant to
paragraph 2.4(c) and shall include a reasonably detailed description of the
goals and scope of such research, and a budget that details the equipment,
materials, personnel, and the funds to be supplied by NYMOX to support the
research described in such proposal.
1.18. The term "SPONSORED RESEARCH" shall mean scientific research
pertaining to the FIELD OF RESEARCH funded in whole or in part by NYMOX and
performed by an INVESTIGATOR after the EFFECTIVE DATE pursuant to a RESEARCH
PROPOSAL attached as Appendix A.
1.19. The term "SUBLICENSEE" shall mean any non-AFFILIATE third party
licensed by NYMOX to make, have made, use or sell any PRODUCT or use any
PROCESS.
1.20. "VALID CLAIM" shall mean a claim of any PATENT RIGHT which has not
been finally rejected or declared invalid by a patent office or by a court of
competent jurisdiction in any unappealed and unappealable decision.
1.21. The use herein of the plural shall include the singular, and the use
of the masculine shall include the feminine.
4
<PAGE> 5
SECTION 2. RIH RESEARCH AND NYMOX'S SUPPORT THEREOF
2.1. Beginning on the EFFECTIVE DATE and continuing thereafter, unless
sooner terminated, for the next three (3) years, RIH shall:
(a) through the PRINCIPAL INVESTIGATORS and any other INVESTIGATOR conduct
SPONSORED RESEARCH and the grants and other amounts paid by NYMOX pursuant to
paragraphs 2.2(a) and 2.2(b) plus any additional funds paid pursuant to
paragraph 2.4(c) shall be used to support the expenses of SPONSORED RESEARCH, in
accordance with the RESEARCH PROPOSAL;
(b) promptly and systematically disclose to NYMOX RESEARCH INFORMATION
which NYMOX shall be entitled to use except to the extent such use is covered by
(i) a PATENT RIGHT under which NYMOX has elected not to be licensed under this
Agreement or (ii) any other patent, other than a PATENT RIGHT, owned by RIH and
not licensed to NYMOX
(c) promptly and systematically describe NYMOX RIH MATERIALS, and at
NYMOX'S request provide such RIH MATERIALS to NYMOX in accordance with
paragraph 3.3, which NYMOX shall be entitled to use in accordance with
paragraph 3.4 except to the extent (i) such RIH MATERIAL is covered by (A)
a PATENT RIGHT under which NYMOX has elected not to be licensed under this
Agreement or (B) any other patent, other than a PATENT RIGHT, owned by NYMOX and
not licensed to NYMOX or (ii) RIH does not have the right to grant to NYMOX the
right to use such RIH MATERIAL in accordance with paragraph 3.4;
(d) as to all SPONSORED RESEARCH:
(i) for the purpose of facilitating disclosure to NYMOX of RESEARCH
INFORMATION, INVENTIONS and RIH MATERIAL, permit duly authorized
employees of or representatives of NYMOX to visit the PRINCIPAL
INVESTIGATORS' laboratories at the RIH or other RIH facilities
where SPONSORED RESEARCH is conducted at the reasonable
convenience of PRINCIPAL INVESTIGATORS or any other pertinent
INVESTIGATOR; and
(ii) promptly advise NYMOX of any INVENTION and provide NYMOX with
adequate advance notice of the intent to file, filing allowance
and issuance of any PATENT RIGHT, except those filed by RIH at
its own expense pursuant to paragraph 5.1.
2.2. In consideration of said undertaking by PRINCIPAL INVESTIGATORS, NYMOX
shall at NYMOX's expense:
A. beginning with the EFFECTIVE DATE, make annual research grants to
RIH for the support of
SPONSORED RESEARCH in accordance with budgets that shall be supplied to NYMOX by
PRINCIPAL INVESTIGATORS (all figures in U.S. dollars) in the following amounts:
5
<PAGE> 6
One hundred seventy-two thousand dollars ($172,000) in the First AGREEMENT YEAR,
One hundred seventy-two thousand dollars ($172,000) in the Second AGREEMENT
YEAR,
One hundred seventy-two thousand dollars ($172,000) in the Third AGREEMENT YEAR,
or such greater amounts as shall be agreed to under paragraph 2.4(c).
B. pay to the RIH the grants set forth in the foregoing subparagraph
(a) in advance in accordance with the following:
Forty-three thousand dollars ($43,000) within ten days of the execution of this
AMENDMENT for the calendar quarter beginning on the EFFECTIVE DATE;
Forty-three thousand dollars ($43,000) on or about the first day of each
calendar quarter for the next eleven (11) consecutive quarters.
It is understood and agreed by the parties that, unless otherwise agreed,
the funds provided in advance by NYMOX shall not be expended by the PRINCIPAL
INVESTIGATORS prior to the start of the AGREEMENT YEAR for which such funds were
intended. In the event that the SPONSORED RESEARCH is terminated in accordance
with Article 10, any advance funds paid to RIH in excess of the amounts due RIH
under Article 10 and the noncancellable expenses reasonably committed to or
incurred by RIH prior to the termination shall be returned to NYMOX.
(c) provide PRINCIPAL INVESTIGATORS and INVESTIGATORS with NYMOX MATERIALS
in accordance with the terms and conditions of paragraphs 3.1 and 3.5 and in
reasonable amounts sufficient to allow PRINCIPAL INVESTIGATORS to carry out the
SPONSORED RESEARCH, and such other projects as the parties may agree to conduct,
to the extent reasonably available for distribution by NYMOX; and,
2.3.
(a) The grants paid by NYMOX pursuant to paragraphs 2.2(a), 2.2(b) or
2.4(c) shall be used to support the Total Direct Costs ("TDC"), as defined by
the U.S. Department of Health and Human Services ("DHHS"), of SPONSORED
RESEARCH, in accordance with the budgets that shall be supplied to NYMOX by
PRINCIPAL INVESTIGATORS and to pay all indirect costs ("Indirect Costs")
attendant to such TDC. The budgets shall be adjusted as necessary to allow for
payment of full Indirect Costs. The Indirect Costs shall be calculated as the
product of the Modified Total Direct Costs ("MTDC"), as defined by DHHS, of
SPONSORED RESEARCH and the RIH's research Indirect Cost Rate in effect at the
time the attendant MTDC are incurred. The Indirect Cost Rate shall be the
Hospital Research Rate on MTDC that is negotiated annually by RIH with the DHHS.
In no event shall any such adjustment require NYMOX to pay funds in excess of
those specified in paragraph 2.2 or which have been agreed to under
paragraph 2.4(c).
(b) If the research grants which NYMOX is obligated to pay RIH during any
AGREEMENT YEAR exceed the sum of the actual TDC of the SPONSORED RESEARCH
conducted during that
6
<PAGE> 7
AGREEMENT YEAR, and the total Indirect Costs during that AGREEMENT YEAR, the
excess shall be applied to SPONSORED RESEARCH in a future AGREEMENT YEAR. Any
interest earned by RIH on funds paid by NYMOX prior to being expended shall
belong to RIH.
2.4.
(a) Each INVESTIGATOR may conduct research outside the FIELD OF RESEARCH.
INVESTIGATORS shall be free to seek funding for such research from any source
including a commercial sponsor other than NYMOX.
(b) INVESTIGATORS shall be free at any time to seek funding for any
research in the FIELD OF RESEARCH, including additional funding for SPONSORED
RESEARCH, from any state or federal agency, private or public foundation except
foundations owned or operated by a commercial entity other than NYMOX, provided
that the terms and conditions of the funding agreement are not in conflict with
the terms and conditions of this Agreement including but not limited to NYMOX's
rights in and to SPONSORED RESEARCH.
(c) At any time during the term of this Agreement either party may propose
in writing additional research in the FIELD OF RESEARCH not previously described
in any RESEARCH PROPOSAL appended hereto as Appendix A. Each such proposal shall
include a description of the additional research proposed and a budget of the
costs to be funded by NYMOX and a schedule of payment of such costs. Unless the
parties shall otherwise agree in writing, negotiations between them over any
such proposal shall not extend beyond the sixtieth (60) day next following the
date when the proposal shall have first been so made, and whenever such
negotiations shall end without agreement between the parties to proceed with the
proposed research, the party proposing the additional research may go ahead
without the other party and seek funding from any other sponsor including but
not limited to a commercial sponsor for such proposal as set forth in
subparagraph (d). When such proposal is accepted by the RIH and NYMOX, it shall
be appended hereto as a RESEARCH PROPOSAL and shall be subject to the terms and
conditions of this Agreement unless otherwise specified, and the SPONSORED
RESEARCH described therein shall commence and budgeted amounts shall be paid as
set forth in the proposal or as otherwise agreed by the parties in writing. In
no event shall any additional research be added to SPONSORED RESEARCH nor shall
the direction of SPONSORED RESEARCH be altered without the concurrence of RIH.
(d) An INVESTIGATOR may not seek funding from another commercial sponsor
for an additional research proposal in the FIELD OF RESEARCH unless and until
such proposal has been submitted to NYMOX in accordance with the foregoing
subparagraph (c) and the parties have failed to agree in writing to append such
proposal hereto as a RESEARCH PROPOSAL within the stipulated sixty (60) days. In
the event of such failure to agree an INVESTIGATOR shall be free to seek and
accept funding from another commercial sponsor for such research proposal,
provided, that the subject matter of the proposal is not so closely related
scientifically to SPONSORED RESEARCH that sponsorship of such proposal by such
other commercial sponsor (i) would in the opinion of RIH after consultation with
NYMOX create a conflict of interest for RIH or any INVESTIGATOR performing
SPONSORED RESEARCH or (ii) would result in an agreement which is prohibited by
paragraph 6.7 of this Agreement or (iii) would conflict with the terms and
conditions of this Agreement. A "conflict of interest" for the purposes of this
paragraph 2.4 means that the sponsorship of such proposal by such other
commercial entity is likely to result in a product
7
<PAGE> 8
for the other commercial sponsor competitive with a PRODUCT likely to result
from the SPONSORED RESEARCH. In the event that RIH is of the opinion that there
is no "conflict of interest," NYMOX shall be notified promptly in writing of
such opinion. If NYMOX disagrees with such opinion, NYMOX shall have the right
to have the existence of a "conflict of interest" determined by alternative
dispute resolution pursuant to paragraph 11.3(b) by submitting such issue to
alternative dispute resolution within thirty (30) days of receipt of such
notice. INVESTIGATORS shall not be free to seek such funding until the later of
the expiration of such thirty (30) day period, or if an alternative dispute
resolution is initiated, a determination by alternative dispute resolution that
there is no "conflict of interest."
Section 3. TRANSMISSION OF AND RIGHTS TO USE RIH
MATERIALS AND NYMOX MATERIALS
3.1. RIH and PRINCIPAL INVESTIGATORS shall not distribute NYMOX MATERIALS
to any one other than INVESTIGATORS or use them for any purpose other than
SPONSORED RESEARCH without the prior written approval of NYMOX.
3.2. During the life of this Agreement RIH agrees not to grant to any third
party commercial or for-profit entity the right to use any RIH MATERIAL in the
LICENSE FIELD without NYMOX's written consent except where such RIH MATERIAL or
its manufacture or its use is claimed in a PATENT RIGHT (i) to which NYMOX fails
to exercise an option for a license pursuant to paragraph 6.1, or (ii) to which
NYMOX's license rights have been terminated, or (iii) which is licensed
non-exclusively in the LICENSE FIELD hereunder, or (iv) which is licensed
coexclusively in the LICENSE FIELD hereunder, provided that in the case of such
co-exclusively licensed PATENT RIGHT, RIH shall have the right to grant the
right to use such RIH MATERIAL only to the party to which such PATENT RIGHT is
co-exclusively licensed.
3.3. To the extent allowed by law and the requisite informed consent of any
person whose tissue contributes substantially to any RIH MATERIALS, PRINCIPAL
INVESTIGATORS promptly, upon NYMOX's request, shall provide NYMOX with an amount
of such RIH MATERIAL specified by NYMOX and reasonably needed for the purposes
of this Agreement including those specified in paragraph 3.4 but in no event
shall PRINCIPAL INVESTIGATORS be obligated to provide NYMOX such RIH MATERIAL in
an amount that would interfere with PRINCIPAL INVESTIGATORS' ability to conduct
SPONSORED RESEARCH.
3.4. NYMOX shall have the right to use RIH MATERIALS provided to it for
(i) any commercial purposes solely in the LICENSE FIELD including but not
limited to the development, manufacture, sale and use of any PRODUCT or practice
of any PROCESS; (ii) for research and development purposes in the FIELD OF
RESEARCH so long as such uses that may lead to publications are discussed with
the PRINCIPAL INVESTIGATORS under whose direction the RIH MATERIALS are produced
prior to the use of the transferred RIH MATERIALS for such purposes and the
INVESTIGATOR who produces the RIH MATERIALS is given the credit and recognition
customary for academic scientific publication by acknowledgment or co-authorship
as appropriate; and (iii) transfers to third parties, provided, however, that in
the case of transfer to third parties NYMOX has obtained the consent of the
PRINCIPAL INVESTIGATORS under whose direction the RIH MATERIALS are produced for
the following cases: (a) in the case of RIH
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MATERIALS that have not been described by an INVESTIGATOR in a journal that
requires dissemination of the described materials as a condition of publication,
and which are being transferred to any party allowed to publish the results of
research performed using the described materials, prior to the transfer, and (b)
in all cases, prior to depositing any RIH MATERIALS in any depository in support
of any patent application.
3.5.
(a) During the period SPONSORED RESEARCH is being performed hereunder, RIH
and PRINCIPAL INVESTIGATORS shall not, without NYMOX's prior written approval,
distribute or knowingly allow to be distributed RIH MATERIALS to for-profit
entities except for use outside the FIELD OF RESEARCH and LICENSE FIELD or to
for-profit non-exclusive licensees or co-exclusive licensees in the LICENSE
FIELD or persons known to be employed thereby or consulting or performing
research therefor in the FIELD OF RESEARCH unless, (1) a description of the RIH
MATERIAL is published in a journal that requires dissemination of the described
materials as a condition for publication, or (2) RIH and NYMOX have mutually
agreed not to seek PATENT RIGHTS claiming such RIH MATERIAL or its manufacture
or use. Under the circumstances described in (1) or (2) of this paragraph 3.5,
RIH and PRINCIPAL INVESTIGATORS shall have the right to distribute such RIH
MATERIAL, only to:
(i) scientists who agree in writing not to transfer such RIH
MATERIALS to any other person or entity or to use such RIH
MATERIALS for commercial purposes or for research for commercial
purposes; or
(ii) third persons solely for the purpose of obtaining chemical,
physical, or biological analysis or characterization of such RIH
MATERIALS, provided that such persons agree in writing not to
transfer or grant access to such RIH MATERIALS or any non-public
information regarding such RIH MATERIALS to any other person or
entity and to use such RIH MATERIALS only for the purpose of the
agreed upon analysis or characterization and not to disclose such
analysis or characterization to any third party.
(b) During the period SPONSORED RESEARCH is being performed hereunder, RIH
and PRINCIPAL INVESTIGATORS shall have the right to transfer RIH MATERIALS to
not-for-profit entities or persons known to be affiliated therewith provided
that such entities or persons agree in writing not to (i) transfer such RIH
MATERIALS to any other person or entity, (ii) use such RIH MATERIALS for
commercial purposes, and (iii) sequence or close any genetic material or
sequence in such RIH MATERIALS or products thereof.
(c) In the event that a PRINCIPAL INVESTIGATOR is no longer available to
perform SPONSORED RESEARCH at RIH but continues to be employed by a
not-for-profit entity, it is understood that at said former PRINCIPAL
INVESTIGATOR's request RIH shall make available to said former PRINCIPAL
INVESTIGATOR, RIH MATERIALS, provided that in the event that said former
PRINCIPAL INVESTIGATOR is replaced by a new PRINCIPAL INVESTIGATOR pursuant to
paragraph 10.2, the amounts of such RIH MATERIAL shall not interfere with the
ability of said new PRINCIPAL INVESTIGATOR to conduct SPONSORED RESEARCH at RIH,
and further provided that said former PRINCIPAL INVESTIGATOR agrees in writing
(i) not to
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use said RIH MATERIALS for commercial purposes or in research sponsored by any
for-profit entity and (ii) not to transfer said RIH MATERIALS to any third party
except under the same conditions set forth in paragraphs 3.5(a) and 3.5(b)
hereof.
(d) Prior to any such distribution of any such RIH MATERIALS by reason of
the conditions described in subparagraphs (a), (b) or (c) above, RIH and NYMOX
shall use reasonable efforts to consider the patentability of such RIH MATERIALS
and cooperate to file, where appropriate, PATENT RIGHTS protecting such RIH
MATERIALS prior to their distribution.
SECTION 4. CONFIDENTIALITY AND PUBLICATION RIGHTS
4.1. In the event that NYMOX discloses to any RIH personnel any information
which relates to the SPONSORED RESEARCH that NYMOX considers confidential, the
rights and obligations of the parties with respect to such information shall be
governed by the terms and conditions set forth in Appendix C.
4.2. Recognizing RIH's desire to publish previously unpublished RESEARCH
INFORMATION and NYMOX's desire to develop the results of SPONSORED RESEARCH for
the earliest introduction to the public:
(a) RIH agrees to submit to NYMOX an early draft of each document as
follows:
(i) Each manuscript first disclosing RESEARCH INFORMATION or an
INVENTION or describing a RIH MATERIAL at least thirty (30) days
prior to its submission for publication; and
(ii) Each abstract disclosing RESEARCH INFORMATION or an INVENTION or
a RIH MATERIAL at least seven (7) days prior to its submission
for publication.
NYMOX shall have the right to advise RIH as to the patentability of any
INVENTIONS disclosed therein and of NYMOX's desire to have PATENT RIGHTS
claiming such INVENTIONS filed. RIH shall use reasonable efforts to carry out
such advice in accordance with the terms of this Agreement. At the end of such
thirty (30) day or seven (7) day period, RIH shall have the right, at its
discretion, to submit such manuscript or abstract for publication.
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(b) Nothing in this Agreement shall be construed to prohibit or limit
in any way:
(i) The filing by RIH of any report required by any public authority
pertaining to SPONSORED RESEARCH;
(ii) The non-public disclosure and discussion of RESEARCH INFORMATION
between the INVESTIGATORS and their academic colleagues. RIH
shall advise the INVESTIGATORS that when making such non-public
disclosures, consideration should be given to RIH's and NYMOX's
interest in obtaining the benefits of worldwide patent coverage
of any INVENTIONS included in RESEARCH INFORMATION.
SECTION 5. PATENTS
5.1. Each INVESTIGATOR who during the course of SPONSORED RESEARCH shall
make an INVENTION, solely or jointly, ("RIH INVENTOR") shall promptly report
such INVENTION to RIH. Each RIH INVENTOR shall assign all of his rights, title
and interest in an INVENTION TO RIH. Each employee of NYMOX who makes an
INVENTION jointly with an INVESTIGATOR, shall report such INVENTION to NYMOX and
shall assign all his rights, title and interest in such INVENTION to NYMOX.
INVENTIONS made jointly by INVESTIGATOR and NYMOX employees shall be jointly
owned. NYMOX shall report such INVENTION in writing to RIH's Office of Research
Administration. RIH and NYMOX agree that for each PATENT RIGHT jointly assigned
to RIH and NYMOX, NYMOX and RIH each own a one-half undivided interest in such
PATENT RIGHT in each country in which it is filed and RIH's interest therein is
subject to the license rights granted to NYMOX under this Agreement. RIH and
NYMOX shall each be allowed to sell, license or otherwise transfer its rights to
such PATENT RIGHT without the consent of the other; however, RIH's rights in
this respect are subject to the terms and conditions of this Agreement and
NYMOX's licensing rights thereto.
Each party shall promptly advise the other in writing of each
INVENTION disclosed to it. Representatives of RIH and NYMOX shall then discuss
whether a patent application or applications pertaining to such INVENTION should
be filed and in which countries. If both parties mutually agree that patent
application(s) should be filed, applications assigned solely to RIH shall be
filed by RIH, applications assigned solely to NYMOX shall be filed by NYMOX and
jointly assigned applications shall be filed as mutually agreed upon by the
parties. The titles, serial numbers and other identifying data of any patent
applications claiming an INVENTION filed after the EFFECTIVE DATE by mutual
agreement of RIH and NYMOX shall be listed in Appendix D and shall become PATENT
RIGHTS.
Reasonable and customary patent costs incurred by RIH for PATENT
RIGHTS filed by mutual agreement ("PATENT COSTS") shall be reimbursed in full by
NYMOX upon NYMOX's receipt of RIH's notice of payment of such PATENT COSTS,
except as provided for below. Such PATENT COSTS shall include but not be limited
to the costs of preparing, filing, prosecuting (including mutually agreed upon
interferences or oppositions), issuing or maintaining and working the PATENT
RIGHTS. For PATENT COSTS not reimbursed by NYMOX within thirty (30) days after
receipt of RIH's notice of payment of such costs, NYMOX shall pay RIH interest
at the rate of
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one and one half (1.5) percent per month compounded each month that they remain
unpaid. For PATENT RIGHTS in which other commercial entities have acquired
license rights, NYMOX shall reimburse the RIH only for the same share of such
costs as reimbursed by each of the other commercial entities, but in no event
shall NYMOX be required to reimburse RIH for more than 50% of the PATENT COSTS
for such PATENT RIGHTS.
In the event NYMOX is not interested in having PATENT RIGHTS filed
with respect to a particular INVENTION made solely by RIH INVENTOR(S), NYMOX
shall advise RIH of such fact within ninety (90) days from the date on which the
INVENTION was disclosed to NYMOX by RIH or sooner as specified by RIH if
necessary to avoid the lost of PATENT RIGHTS. RIH, at its own expense may then
file and prosecute such patent application in any country where NYMOX elects not
to file, and such patent applications and patents shall not be included with the
rights licensed to NYMOX pursuant to paragraphs 6.1, 6.2 and 6.3 of this
Agreement and RIH shall be free to license such patent application or patent to
any other party.
In the event that RIH does not wish to file a patent application with respect to
a particular INVENTION, or does not wish to file patent applications with
respect to specific countries, it shall first without delay notify NYMOX, and
NYMOX shall be free, where not contrary to United States law, to file at its
expense patent applications in the name of RIH. If necessary, RIH shall render
NYMOX, at NYMOX's expense, all necessary assistance in order to facilitate such
filing. Any such application shall be considered a PATENT RIGHT for all purposes
of this Agreement.
5.2. With respect to any PATENT RIGHT filed by mutual agreement of the
parties, each patent application, office action, response to office action,
request for terminal disclaimer, and request for reissue or reexamination of any
patent issuing from such application shall be provided to NYMOX sufficiently
prior to the filing of such application, response or request to allow for review
and comment by NYMOX.
SECTION 6. LICENSES
6.1. As to each PATENT RIGHT assigned in whole or in part to RIH or in
which RIH has a licensable right, RIH shall, upon written request submitted by
NYMOX within the eighteen (18) months next following the U.S. filing date of
such PATENT RIGHT, grant to NYMOX and any AFFILIATE of NYMOX designated in
writing by NYMOX, a license as defined in the next succeeding paragraphs 6.2 and
6.3 under RIM's rights; and, in the absence of such request by NYMOX, RIH may
grant a license to said PATENT RIGHT to any other person or persons on any
terms. The option to acquire a license hereunder does not apply to any PATENT
RIGHT that NYMOX has advised RIH's Office of Research Administration in writing
that NYMOX is not interested in having filed, prosecuted or maintained.
6.2. To the extent not prohibited by the United States government or by
contractual obligations requiring RIH to license a PATENT RIGHT to any other
sponsor of research with respect to INVENTIONS made jointly by a person who is
not an INVESTIGATOR but who is a co-inventor of a PATENT RIGHT with an
INVESTIGATOR, at the written request of NYMOX or any
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AFFILIATE of NYMOX in accordance with the foregoing paragraph 6.1, RIH hereby
grants to NYMOX:
(a) an exclusive, worldwide, royalty-bearing license under PATENT RIGHTS
in the LICENSE FIELD (i) to make, have made, use, sell and have sold
PRODUCTS and (ii) to use PROCESS; and
A. the right to grant sublicenses in the LICENSE FIELD to any PATENT
RIGHTS licensed
exclusively hereunder or co-exclusively to NYMOX pursuant to paragraph 6.3
provided that any SUBLICENSEE agrees to be bound by the terms and conditions of
this Agreement applicable to SUBLICENSEES. If NYMOX has only a non-exclusive
license to any PATENT RIGHTS, RIH will, upon request of NYMOX, grant NYMOX the
right to grant sublicenses thereunder unless it has a reasonable basis for
refusing such grant.
6.3. To the extent and only to the extent that RIH is prohibited from
granting to NYMOX an exclusive license to pay PATENT RIGHT for the reasons set
forth in paragraph 6.2, the license granted to NYMOX under paragraph 6.2 shall
be co-exclusive with such other sponsor where exclusivity is prohibited by RlH's
contractual obligations to such other sponsor and nonexclusive where exclusivity
is prohibited by the United States government.
6.4. The above licenses to sell any PRODUCT includes the right to grant to
the purchaser of such PRODUCT from NYMOX, its AFFILIATES, and SUBLICENSEES the
right to use such purchased PRODUCT in a method coming within the scope of
PATENT RIGHTS.
6.5. All licenses pursuant to paragraphs 6.2, 6.3 and 6.4 above to
INVENTIONS conceived or first actually reduced to practice during the course of
research funded by a U.S. federal agency are subject to the rights, conditions
and limitations imposed by U.S. law. RIH agrees to use its best efforts to
diligently comply with the requirements of such laws and applicable regulations.
The words "exclusive license" as used herein shall mean exclusive except for the
royalty-free non-exclusive license granted to the U.S. government by RIH
pursuant to 35 USC Section 202(c)(4) for any PATENT RIGHT claiming an INVENTION
subject to 35 USC Section 201 and the rights of RIH and INVESTIGATORS as set
forth in paragraph 6.6.
6.6. All licenses granted pursuant to paragraphs 6.2, 6.3 and 6.4 above are
subject to RlH's and INVESTIGATOR's rights to use for its internal research and
patient care purposes any INVENTION claimed in the licensed PATENT RIGHT,
however, except as set forth in paragraph 2.2(c), such rights do not obligate
NYMOX to supply PRODUCT or NYMOX MATERIALS for such use.
6.7. RIH represents that on the date this agreement is signed by RIH, that
to the best of its knowledge (i) there is no agreement in effect on the
EFFECTIVE DATE between RIH or PRINCIPAL INVESTIGATORS and any party (not
including the United States Government) which prohibits RIH from granting to
NYMOX the exclusive licenses set forth in paragraphs 6.2 and 6.3 and (ii) that
all INVESTIGATORS are obligated to assign all right, title and interest in
INVENTIONS and PATENT RIGHTS to RIH.
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(a) Notwithstanding anything else to the contrary, RIH agrees during the
period SPONSORED RESEARCH is being performed not to enter into an
agreement with any third party commercial entity to fund PRINCIPAL
INVESTIGATORS or any INVESTIGATOR to conduct SPONSORED RESEARCH.
(b) RIH agrees to use reasonable care not to enter into an agreement with
a third party to acquire materials for use in SPONSORED RESEARCH under
terms that will prevent RIH from granting NYMOX sole and exclusive
rights to PATENT RIGHTS.
6.8. NYMOX, its AFFILIATES and SUBLICENSEES shall use reasonable efforts to
develop a PRODUCT as defined by paragraph 1.14(a) or 1.14(b)(i) selected by
NYMOX for commercial sales and distribution or to use PROCESSES for commercial
purposes throughout the world. Prior to the end of three (3) years from the date
each PATENT RIGHT is first filed in the United States or eighteen (18) months
from the date NYMOX is granted a license to such PATENT RIGHT pursuant to
paragraph 6.1 and 6.2, whichever shall occur first, RIH and NYMOX shall meet to
designate reasonable objectives and the time periods in which such objectives
are to be met by NYMOX, its AFFILIATES or SUBLICENSEES with respect to PRODUCT
selected by NYMOX. By way of example, such objectives may include commencement
of animal toxicity studies, submission of a Notice of Claimed Investigational
Exemption for a New Drug with the U.S. Food and Drug Administration (the "FDA"),
commencement and diligent performance of human studies and submission of a
Product License Application (a "PLA") with the FDA. If such meeting occurs prior
to the third anniversary of the first U.S. filing date of such PATENT RIGHT and
the parties agree that such objectives cannot be designated at that time, the
period to designate such objectives may be extended for up to one (1) year.
NYMOX shall exert reasonable efforts to obtain such objectives. In the event
NYMOX subsequently indicates in writing to RIH that such objectives cannot be
met or fails to meet such objectives, NYMOX and RIH shall enter into good faith
negotiations to reconsider such objectives. In the event that the parties cannot
agree to the initial objectives by the fifth anniversary or to modify objectives
within ninety (90) days after beginning good faith negotiations, the matter
shall be submitted to alternative dispute resolution pursuant to paragraph 11.3
to determine the objectives and the time periods therefor which should be met
pursuant to this paragraph 6.8. The alternative dispute resolver in setting and
determining the objectives shall consider the state of the technology; the
efforts exerted by NYMOX; the business circumstances of NYMOX, including
finances and manpower available to NYMOX; and technical and regulatory problems.
Thereafter, NYMOX shall exert reasonable efforts to achieve such objectives.
In the event that NYMOX indicates that it cannot meet the objectives
whether set by the parties or by alternative dispute resolution because of
technological or regulatory problems, RIH shall not unreasonably deny an
extension of the objectives.
If NYMOX (i) fails to meet the objectives established by agreement of
the parties for development either of diagnostic PRODUCTS or therapeutic
PRODUCTS and fails to negotiate reconsideration of such objectives or to request
alternative dispute resolution or (ii) fails to meet objectives established by
alternative dispute resolution, RIH shall have the right to terminate the
licenses to such PATENT RIGHT granted hereunder in the portion of the field,
diagnostics or therapeutics, in which the objectives have not been met or
convert such licenses to non-exclusive
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licenses in the applicable portion of the field by providing to NYMOX sixty (60)
days prior written notice. Prior to the expiration of such sixty (60) day
period, NYMOX may submit such action to alternative dispute resolution to
determine whether or not NYMOX has exerted reasonable efforts pursuant to this
paragraph 6.8, and once such action has been submitted to alternative dispute
resolution the licenses and rights may only be modified or canceled in the event
of a decision in the alternative dispute resolution that NYMOX has not exerted
such reasonable efforts. If the alternative dispute resolver decides that NYMOX
has exerted reasonable efforts, the alternative dispute resolver shall establish
new objectives.
NYMOX shall insure that, for any PRODUCT or PROCESS being developed or
commercialized by an AFFILIATE or SUBLEASEE, such AFFILIATE or SUBLICENSEE shall
assume the obligations imposed on NYMOX under this paragraph 6.8.
6.9. At the end of each AGREEMENT YEAR, after objectives are established,
NYMOX shall report in writing to RIH on the progress made toward the objectives
established pursuant to Paragraph 6.8.
6.10. In the event NYMOX or any AFFILIATE or SUBLICENSEE intends to sell any
PRODUCT whose manufacture, use or sale is not subject to one or more VALID
CLAIMS of any PATENT RIGHT licensed to NYMOX, NYMOX will notify RIH in writing
of such intent not later than sixty (60) days prior to its distribution of such
PRODUCT, and shall discuss with RIH and renegotiate as necessary a "Competitive"
royalty as provided in paragraph 7.l(d).
SECTION 7. ROYALTIES
7.1. On all sales of PRODUCTS anywhere in the world by NYMOX, its
AFFILIATES or SUBLICENSEES, NYMOX shall pay RIH royalties in accordance with the
following schedule subject to the provisions of paragraph 7.l(d), such
undertaking and schedule having been agreed to for the purpose of reflecting and
advancing the mutual convenience of the parties.
(a) For each PRODUCT sold by NYMOX or its AFFILIATES or SUBLICENSEES where
such PRODUCT, its manufacture or use shall be subject to a VALID CLAIM
of any PATENT RIGHT: licensed exclusively to NYMOX, the royalty shall
be four percent (4%) of the NET SALES PRICE; and
(b) For each PRODUCT sold by NYMOX or its AFFILIATES or SUBLICENSEES where
such PRODUCT, its manufacture or use shall be subject to a VALID CLAIM
of any PATENT RIGHT licensed non-exclusively to NYMOX, the royalty
shall be one-half of the rate specified for such PRODUCT in (a) above;
and
(c) During each of the seven (7) years next following the FIRST COMMERCIAL
SALE anywhere in the world by NYMOX, its AFFILIATES, or SUBLICENSEES
of each PRODUCT whose manufacture, use or sale shall employ or
incorporate any RIH MATERIAL, RESEARCH INFORMATION or NYMOX MATERIAL
where such RIH MATERIAL, RESEARCH
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INFORMATION or NYMOX MATERIAL is not subject to one or more VALID
CLAIMS of any PATENT RIGHT in the country in which such PRODUCT is
manufactured, used or sold, NYMOX shall pay RIH a royalty on the sale
of such PRODUCT of one (1) percent of the NET SALES PRICE of such
PRODUCT; and
(d) Notwithstanding paragraphs 7.1(a), (b) and (c) and 7.2 below, if at
the time NYMOX requests in writing a license pursuant to paragraph 6.1
or notifies RIH in writing of its intent to distribute a PRODUCT whose
manufacture, use or sale is not subject to one or more VALID CLAIMS of
any PATENT RIGHT licensed to NYMOX pursuant to paragraph 6.10, and no
royalty as specified in this paragraph 7.1 is "Competitive" as
hereinafter defined, RIH shall grant to NYMOX a license at the lowest
royalty rate that is Competitive at the time RIH receives NYMOX's
written request. A royalty rate shall be regarded as "Competitive" if
it is within the range of royalty rates that RIH would charge in an
arms length transaction with a licensee which was not and had not been
a sponsor of research at RIH, taking into account the value of the
licensed technology at the time of RIH's receipt of a written request
for a license or notice of intent to distribute a PRODUCT by NYMOX.
7.2. If NYMOX is required to pay a royalty or royalties to any third party
to practice PATENT RIGHTS licensed hereunder, NYMOX may reduce the amount paid
to RIH hereunder by one-half of the amount paid to such third party or parties,
provided, however, that the aggregate of any reduction in royalties under this
paragraph 7.2 shall not exceed fifty (50) percent of any royalty payment
otherwise due RIH under paragraph 7.1.
7.3. If and whenever RIH shall as permitted herein license any PATENT RIGHT
to another licensee for the purpose of making, using or selling PRODUCTS in the
FIELD, at a royalty or royalties more favorable to such licensee than herein
provided for NYMOX, RIH shall give written notice thereof to NYMOX and as of the
effective date of such more favorable royalty or royalties, NYMOX's obligation
hereunder to pay royalty or royalties to RIH shall be revised to the more
favorable rate.
7.4. In the event that the royalty paid to RIH is a significant factor in
the return realized by NYMOX so as to diminish NYMOX's capability to respond to
competitive pressures in the market, RIH agrees to consider a reasonable
reduction in the royalty paid to RIH as to each such PRODUCT for the period
during which such market condition exists. Factors determining the size of the
reduction will include profit margin on PRODUCT and on analogous products,
prices of competitive products, total prior sales by NYMOX, and NYMOX's
expenditures in PRODUCT development.
7.5. NYMOX shall keep, and shall cause each of its AFFILIATES and
SUBLICENSEES, if any, to keep, full and accurate books of account containing all
particulars that may be necessary for the purpose of calculating all royalties
payable to the RIH. Such books of account shall be kept at their principal place
of business and, with all necessary supporting data shall, during all reasonable
times for the three (3) years next following the end of the calendar year to
which each shall pertain, be open for inspection at reasonable times by RIH or
its designee at RIH's expense for the sole purpose of verifying royalty
statements or compliance with this Agreement.
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7.6. With each semiannual payment, NYMOX shall deliver to RIH a full and
accurate accounting to include at least the following information:
(a) Quantity of each PRODUCT sold or leased (by country) by NYMOX, and
its AFFILIATES or SUBLICENSEES;
(b) Total receipts for each PRODUCT (by country);
(c) Quantities of each PRODUCT (i) used by NYMOX and its AFFILIATES or
SUBLICENSEES unless such PRODUCT is used for the purposes excluded by
paragraph l.ll(c) or (ii) sold to the United States Government for
which the government requires a reduction in the NET SALES PRICE as a
result of its license under 35 USC Sec. 204.
(d) Names and addresses of all SUBLICENSEES of NYMOX; and
(e) Total royalties payable to RIH.
7.7. In each year the amount of royalty due shall be calculated semiannually
as of June 30 and December 31 ("ACCOUNTING PERIOD") and shall be paid
semiannually within the sixty (60) days next following such date, every such
payment shall be supported by the accounting prescribed in paragraph 7.5 and
shall be made in United States currency. Whenever for the purpose of calculating
royalties conversion from any foreign currency shall be required, such
conversion shall be at the rate of exchange thereafter published in the Wall
Street Journal for the business day closest to the last day of the applicable
ACCOUNTING PERIOD.
7.8. Only one royalty calculated at the highest applicable royalty rate
shall be due and payable to RIH by NYMOX for any PRODUCT subject to royalty
under this Agreement regardless of the number of PATENT RIGHTS covering such
PRODUCT, its manufacture and use.
7.9. If the transfer of or conversion into United States Dollar Equivalent
of any such remittance in any such instance is not lawful or possible, the
payment of such part of the royalties as is necessary shall be made by the
deposit thereof, in the currency of the country where the sale was made on which
the royalty was based, to the credit and account RIH or its nominee in any
commercial bank or trust NYMOX located in that country, prompt notice of which
shall be given to NYMOX.
7.10. Any tax required to be withheld by NYMOX under the laws of any foreign
country for the account of RIH, shall be promptly paid by NYMOX for and on
behalf of RIH to the appropriate governmental authority, and NYMOX shall use its
best efforts to furnish RIH with proof of payment of such tax. Any such tax
actually paid on RIH's behalf shall be deducted from royalty payments due RIH.
7.11. The royalty payments due under the Agreement shall, if overdue, bear
interest until payment at a per annum rate equal to one percent (1 %) above the
prime rate in effect at the Bank of Boston on the due date, not to exceed the
maximum permitted by law. The payments of such interest shall not preclude RIH
from exercising any other rights it may have as a consequence of the lateness of
any royalty payment.
17
<PAGE> 18
SECTION 8. INFRINGEMENT
8.1. RIH will protect its PATENT RIGHTS from infringement and prosecute
infringers when, in its sole judgment, such action may be reasonably necessary,
proper and justified.
8.2. If NYMOX shall have supplied RIH with written evidence demonstrating
to RIH's reasonable satisfaction prima facie infringement of a claim of a PATENT
RIGHT by a third party, NYMOX may by notice request RIH to take steps to protect
the PATENT RIGHT, and unless RIH shall within (3) months of the receipt of such
notice either (i) cause infringement to terminate or (ii) initiate legal
proceedings against the infringer, NYMOX may, upon notice to RIH, initiate legal
proceedings against the infringer at NYMOX's expense and in RIM's name if so
required by law. NYMOX's reasonable and customary expenses for such legal
proceedings shall be fully creditable against royalties owed to RIH hereunder,
provided that in no event shall any royalty payment to RIH be reduced by more
than 50%.
8.3. In the event one party shall initiate or carry on legal proceedings to
enforce any PATENT RIGHT against any alleged infringer, the other party shall
fully cooperate with and supply all assistance reasonably requested by the party
initiating or carrying on such proceedings. The party which institutes any suit
to protect or enforce a PATENT RIGHT shall have sole control of that suit and
shall bear the reasonable expenses (excluding legal fees) incurred by said other
party in providing such assistance and cooperation as is requested pursuant to
this paragraph. The party initiating or carrying on such legal proceedings shall
keep the other party informed of the progress of such proceedings and said other
party shall be entitled to counsel in such proceedings but at its own expense.
Any award paid by third parties as the result of such proceedings (whether by
way of settlement or otherwise) shall first be applied to reimbursement of the
unreimbursed legal fees and expenses incurred by either party and then to the
payment to RIH of the amount of royalties which were applied to the expense of
legal proceedings in accordance with paragraph 8.2 above and then the remainder
shall be divided between the parties as follows;
(a)
A. If the amount is lost profits, NYMOX shall receive an amount
equal to the damages the court determines NYMOX has suffered as a
result of the infringement less the amount of any royalties that
would have been due RIH on sales of PRODUCT lost by NYMOX as a
result of the infringement had NYMOX made such sales; and
(ii) RIH shall receive an amount equal to the royalties it would
have received if such sales had been made by NYMOX; or
(b) As to awards other than lost profits, seventy (70) percent to the
party initiating such proceedings and thirty (30) percent to the other
party.
8.4. For the purpose of the proceedings referred to in this paragraph 8,
RIH and NYMOX shall permit the use of their names and shall execute such
documents and carry out such other acts as may be necessary.
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<PAGE> 19
SECTION 9. INDEMNIFICATION AND INSURANCE
9.1.
(a) NYMOX shall indemnify, defend and hold harmless RIH and its trustees,
officers, medical and professional staff, employees, and agents and
their respective successors, heirs and assigns (the "Indemnitees"),
against any liability, damage, loss or expense (including reasonable
attorneys' fees and expenses of litigation) incurred by or imposed
upon the Indemnitees or any one of them in connection with any claims,
suits, actions, demands or judgments arising out of any theory of
product liability (including, but not limited to, actions in the form
of tort warranty, or strict liability) concerning any PRODUCT, PROCESS
or service made, used or sold pursuant to any right or license granted
under this Agreement or (ii) arising out of any other activities to be
carried out pursuant to this Agreement.
(b) NYMOX's indemnification under (a) above shall not apply to any
liability, damage, loss or expense that it is attributable to the
negligent activities, reckless misconduct or intentional misconduct of
the Indemnitees.
(c) NYMOX agrees, at its own expense, to provide attorneys reasonably
acceptable to RIH to defend against any actions brought or filed
against any party indemnified hereunder with respect to the subject of
indemnity contained herein, whether or not such actions are rightfully
brought.
9.2.
(a) Beginning at the time any such PRODUCT, PROCESS or service is being
commercially distributed or sold (other than for the purpose of
obtaining regulatory approvals) by NYMOX or by a SUBLICENSEE,
AFFILIATE or agent of NYMOX, NYMOX shall at its sole cost and expense,
procure and maintain policies of commercial and general RIH liability
insurance in amounts not less than $2,000,000 per incident and
$2,000,000 annual aggregate and naming the Indemnitees as additional
insureds. Such commercial general liability insurance shall provide
(i) product liability coverage and (ii) contractual liability coverage
for NYMOX indemnification under paragraph 9.1 of the Agreement. If
NYMOX elects to self-insure all or part of the limits described above
(including deductibles or retentions which are in excess of $250,000
annual aggregate) such self-insurance program must be acceptable to
the RIH and its insurer. The minimum amounts of insurance coverage
required under this paragraph 9.2 shall not be construed to create a
limit of NYMOX's liability with respect to its indemnification under
paragraph 9.1 of this Agreement.
(b) NYMOX shall provide RIH with written evidence of such insurance upon
request of RIH. NYMOX shall provide RIH with written notice at least
fifteen (15) days prior to the cancellation, non-renewal or material
change in such insurance; if NYMOX does not obtain replacement
insurance providing comparable coverage within such fifteen (15) day
period, RIH shall have the right to terminate this Agreement effective
at the end of such fifteen (15) day period without notice or any
additional waiting periods.
(c) NYMOX shall maintain such comprehensive RIH liability insurance beyond
the expiration or termination of this Agreement during (i) the period
that any PRODUCT, PROCESS, or service, relating to, or developed
pursuant to, this Agreement is being commercially distributed
19
<PAGE> 20
or sold (other than for the purpose of obtaining regulatory approvals)
by NYMOX or by a SUBLICENSEE, AFFILIATE or agent of NYMOX and (ii) a
reasonable period after the period referred to in (c)(i) above which
in no event shall be less than fifteen (15) years.
SECTION 10. TERMINATION
10.1. The SPONSORED RESEARCH hereunder shall have an initial term of three
(3) years.
10.2. So long as the PRINCIPAL INVESTIGATORS are available to direct the
SPONSORED RESEARCH at RIH, NYMOX may not terminate SPONSORED RESEARCH except in
accordance with paragraph 10.1 or 10.3(a). If for any reason the PRINCIPAL
INVESTIGATORS shall no longer be available at RIH, the parties agree to
negotiate in good faith the continuance of such SPONSORED RESEARCH. However, if
a new PRINCIPAL INVESTIGATOR acceptable to NYMOX cannot be agreed upon, NYMOX
may terminate such SPONSORED RESEARCH except for an obligation to continue for
up to six (6) months beyond notification of the departing PRINCIPAL
INVESTIGATOR's departure, salary support at the pretermination level of all
Ph.D. or M.D. personnel who have been committed to the SPONSORED RESEARCH on
half-time or greater basis, provided RIH uses reasonable efforts to reduce such
costs to NYMOX.
10.3. If either party shall materially default in performing any of its
obligations under this Agreement, the nondefaulting party may give notice of the
default to the defaulting party. Unless such default is corrected within sixty
(60) days after such notice, then:
(a) in the event that the default pertains to the obligations of RIH to
perform SPONSORED RESEARCH, NYMOX may immediately terminate in writing
its support of SPONSORED RESEARCH;
(b) in the event that the default pertains to the obligations of NYMOX to
support SPONSORED RESEARCH, RIH may, in writing, immediately terminate
the SPONSORED RESEARCH and may, in writing, immediately terminate any
unexercised license options to PATENT RIGHTS (and, once RIH has given
a notice that NYMOX has defaulted on such support obligations, NYMOX
shall not have the right to exercise any such options unless and until
the default is cured); and
(c) in the event that the default pertains to the obligations of NYMOX
under Articles 6, 7 or 9 with respect to any licenses granted
hereunder, RIH may, in writing, immediately terminate such license.
10.4. NYMOX may at any time terminate any or all licenses granted pursuant
to paragraphs 6.2, 6.3 and 6.4 on a patent by patent and/or country by country
basis upon thirty (30) days prior written notice.
10.5. Termination of the licenses granted NYMOX in accordance with
paragraphs 6.2, 6.3 and 6.4 shall not relieve NYMOX of the obligation to pay the
RIH any royalties due pursuant to paragraphs 7.1 or 7.2 for the sale of PRODUCT
prior to the effective date of such termination, or affect the rights of the RIH
to receive written statements accounting for royalties payable and to
20
<PAGE> 21
inspect NYMOX's books and records as provided for herein.
10.6. Unless sooner terminated, RIH shall have the right to terminate the
licenses and rights granted to NYMOX in any country under this Agreement in the
event that after the FIRST COMMERCIAL SALE of PRODUCT in such country there is a
continuous two (2) year period in which no PRODUCT is sold in such country,
provided that such sale is not prevented by force majeure, government regulation
or intervention, or RIH of a law suit by a third party.
10.7. Unless otherwise terminated, the royalty bearing licenses under PATENT
RIGHTS granted hereunder will continue on a country by country basis until the
last to expire of PATENT RIGHTS, the claims of which but for this Agreement
would be infringed by the manufacture, use or sale of PRODUCT in the applicable
country, at which time NYMOX shall have a fully paid up license.
10.8. Upon any termination of any license under this Agreement, for a period
of one (1) year, NYMOX shall be entitled to finish any work-in-progress and to
sell any completed inventory of a PRODUCT covered by this Agreement which
remains on hand as of the date of the termination, so long as NYMOX pays to RIH
the royalties applicable to said subsequent sales in accordance with the same
terms and conditions as set forth in this Agreement.
10.9. In the event that any license granted to NYMOX under this Agreement is
terminated, any sublicense granted prior to termination of said license shall
remain in full force and effect, provided that:
(i) the SUBLICENSEE is not then in breach of its sublicense
agreement;
(ii) the SUBLICENSEE agrees to be bound to RIH as the licensor under
the terms and conditions of this sublicense agreement, as
modified by the provisions of this paragraph 10.9;
(iii) the SUBLICENSEE, at RIH's written request, assumes in a signed
writing the same obligations to RIH as those assumed by NYMOX
under Articles 9 and 11 hereof;
(iv) RIH shall have the right to receive the greater of (a) any
payments payable to NYMOX under such sublicense agreement to the
extent that they are reasonably and equitably attributable to
such SUBLICENSEE's right under such sublicense to use and
exploit PATENT RIGHTS, RESEARCH INFORMATION and/or RIH
MATERIALS, or (b) the lowest royalty which is within the
"Competitive Range" as defined in paragraph 7.1(d) hereof, at
the time RIH's license to NYMOX is terminated;
(v) the SUBLICENSEE agrees to be bound by the due diligence
obligations of NYMOX pursuant to paragraph 6.8 hereof, (whether
set by the parties or by arbitration) in the field and territory
of the sublicense;
(vi) RIH has the right to terminate such sublicense upon fifteen (15)
days prior written notice to NYMOX and such SUBLICENSEE in the
event of any material breach by
21
<PAGE> 22
the obligation to make payments described in clause (iv) of this
paragraph 10.9, unless such breach is cured prior to the
expiration of such fifteen (15) day period, and shall further
have the right to terminate such sublicense in the event of
SUBLICENSEE's failure to meet its due diligence obligations
pursuant to clause (v) hereof;
(vii) RIH shall not assume, and shall not be responsible to such
SUBLICENSEE for, any representations, warranties or obligations
of NYMOX to such SUBLICENSEE, other than to permit such
SUBLICENSEE to exercise any rights to PATENT RIGHTS, RESEARCH
INFORMATION and RIH MATERIALS that are granted under such
sublicense agreement consistent with the terms of this Agreement.
(a) In the event of a termination of SPONSORED RESEARCH hereunder for any
reason, the provisions of Articles 5, 6, 7, 8, 9 and 11 and paragraphs
10.3 through 10.10 and NYMOX's right to sue RESEARCH INFORMATION and
RIH MATERIALS under paragraph 2. l(b) and (c) shall survive such
termination.
(b) In the event of termination of any license granted hereunder, NYMOX's
right to use RIH MATERIALS, the manufacture, use or sale of which is
claimed in the PATENT RIGHTS to which NYMOX's license shall have been
terminated, shall be terminated; the obligations of the parties with
respect to SPONSORED RESEARCH shall survive, and all provisions of
this Agreement shall survive with respect to all other licenses which
have not been terminated; and the provisions of paragraphs 10.5, 10.8,
10.9 and 10.10 and Articles 9 and 11 shall survive with respect to the
terminated license(s).
SECTION 11. MISCELLANEOUS
11.1. This Agreement constitutes the entire understanding between the
parties with respect to the subject matter hereof, and supersedes and replaces
all prior agreements, understandings, writings, and discussions between the
parties relating to said subject matter.
11.2. In order to facilitate implementation of this Agreement, RIH and NYMOX
are designating the following individuals to act on their behalf with respect to
this Agreement for the matters indicated below:
(a) with respect to matters concerning the conduct of SPONSORED RESEARCH,
budgets, manuscripts for publication, written transmittal of RESEARCH
INFORMATION and MATERIALS for RIH, PRINCIPAL INVESTIGATORS; for NYMOX:
General Counsel;
(b) with respect to any RESEARCH PROPOSAL submitted pursuant to paragraph
2.4, the receipt of research payments made pursuant to paragraph 2.2
or any RESEARCH PROPOSAL appended hereto, all royalty payments, the
form of any Confidentiality Agreement to be signed by an INVESTIGATOR,
the disclosure of any INVENTION or any correspondence pertaining to
any INVENTION or PATENT RIGHT for RIH, the Office of Research
Administration; for NYMOX, General Counsel;
22
<PAGE> 23
(c) any amendment of or waiver under this Agreement, any written notice or
other communication pertaining to the Agreement: for RIH, the Office
of Research Administration; for NYMOX, General Counsel;
(d) the above designations may be superseded from time to time by
alternative designations made by: for RIH, the RIH Director; for
NYMOX: CEO/President.
Any notice or communication required by the foregoing 11.2(a)-(d)
shall be deemed made if mailed first class postage prepaid to the
individuals so designated, except notices pertaining to breach or
termination which shall be made by prepaid, first class, certified
mail, return receipt requested.
11.3. (a) This Agreement shall be governed by and construed and interpreted
in accordance with the substantive laws of The State of Rhode Island and the
United States of America, regardless of the choice of law rules of any
jurisdiction.
(a) For any and all claims, disputes, or controversies arising under, out
of, or in connection with this Agreement, including any dispute
relating to patent validity or infringement, which the parties shall
be unable to resolve within sixty (60) days, the party raising such
dispute shall promptly advise the other party of such claim, dispute,
or controversy in a writing which describes in reasonable detail the
nature of such dispute. By not later than five (5) business days after
the recipient has received such notice of dispute, each party shall
have selected for itself a representative who shall have the authority
to bind such party and shall additionally have advised the other party
in writing of the name and title of such representative. By not later
than ten (10) business days after the date of such notice of dispute,
such representatives shall schedule a date for engaging in an
alternative dispute resolution ("ADR") process with a party mutually
acceptable to the parties. Thereafter, the representatives of the
parties shall engage in good faith in an ADR process under the
auspices of that party. If the representatives of the parties have not
been able to resolve the dispute within thirty (30) business days
after the termination of ADR, the parties shall have the right to
pursue any other remedies legally available to resolve such dispute in
either the Courts of the State of Rhode Island or in the United States
District Court for the District of Rhode Island, to whose jurisdiction
for such purposes RIH and NYMOX each irrevocably consents and submits.
Notwithstanding the foregoing, nothing in this paragraph 11.3(b) shall
be construed to waive any rights or timely performance of any
obligations existing under this Agreement.
11.4. This Agreement may be amended and any of its terms or conditions
may be waived only by a written instrument executed by the parties or, in the
case of a waiver, by the party waiving compliance. The failure of either party
at any time or times to require performance of any provision hereof shall in no
manner affect its rights at a later time to enforce the same. No waiver by
either party of any condition or term shall be deemed as a continuing waiver
of such condition or term or another condition or term.
11.5. This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
permitted assigns.
11.6. Any delays in or failures of performance by either party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the
23
<PAGE> 24
reasonable control of the party affected including but not limited to: Acts of
God; acts, regulations or laws of any government; strikes or other concerted
acts of workers; fires; floods; explosions; riots, wars; rebellion; and
sabotage; and any time for performance hereunder shall be extended by the actual
time of delay caused by such occurrence.
11.7. Neither party shall use the name of the other or of any staff member,
employee or student or any adaptation thereof in any advertising, promotional or
sales literature or publicity without the prior written approval of, for RIH,
the Communications and Public Affairs Office and for NYMOX, CEO/President.
11.8. This Agreement shall not be assignable to the RIH without NYMOX's
written consent except for the right to receive royalties payable herein. NYMOX
may at its own discretion and without approval by the RIH transfer its interest
or any part thereof under this Agreement to a wholly-owned subsidiary or
partnership of which NYMOX is the general partner or any assignee or purchaser
of the portion of its business associated with the licenses and rights granted
under this Agreement. In the event of any such transfer, the transferee shall
assume and be bound by the provisions of this Agreement. Otherwise this
Agreement shall be assignable by NYMOX only with the consent in writing of RIH
which consent shall not be unreasonably withheld.
11.9. If any provision(s) of this Agreement are or become invalid, are ruled
illegal by any court of competent jurisdiction or are deemed unenforceable under
then current applicable law from time to time in effect during the term hereof,
it is the intention of the parties that the remainder of this Agreement shall
not be affected thereby provided that a party's rights under this Agreement are
not materially affected. It is further the intention of the parties that in lieu
of each such provision which is invalid, illegal, or unenforceable, there be
substituted or added as part of this Agreement a provision which shall be as
similar as possible in economic and business objectives as intended by the
parties to such invalid, illegal or unenforceable provision, but shall be valid,
legal and enforceable.
24
<PAGE> 25
IN WITNESS WHEREOF, RIH and NYMOX have caused this instrument to be executed.
NYMOX CORPORATION RHODE ISLAND HOSPITAL CORPORATION
By: /s/ Paul Averback By: /s/ Boyd King
________________________________ ______________________________________
Title: Paul Averback, M.D. Title: Boyd P. King, M.D.
CEO and President Senior Vice President,
Medical Affairs
Date: May 14, 1999 Date: May 14, 1999
By: /s/ Jack Gemmell
________________________________
Title: Jack Gemmell
General Counsel
Date: May 14, 1999
I have read the foregoing Agreement and agree to comply with the obligations of
the Principal Investigator stated therein. In addition, I have read Appendix C
and agree to comply with the obligations of RIH stated therein.
/s/ Jack Wands /s/ Suzanne de la Monte
________________________________ __________________________________
Jack Wands, M.D. Suzanne de la Monte, M.D.
Date: May 14, 1999 Date: May 14, 1999
25
<PAGE> 26
APPENDIX A
CONFIDENTIAL
26
<PAGE> 27
APPENDIX C
NYMOX PROPRIETARY INFORMATION
It is anticipated that in the performance of the SPONSORED RESEARCH
sponsored by NYMOX, the PRINCIPAL INVESTIGATORS and members of the research team
designated by him/her will be provided with or given access by NYMOX to certain
information which NYMOX considers proprietary. The rights and obligations of the
parties with respect to such information are as follows:
1. PROPRIETARY INFORMATION. For the purposes of this Agreement, "Proprietary
Information" refers to information of any kind which is disclosed by NYMOX to
RIH and which, by appropriate marking, is identified as confidential and
proprietary at the time of disclosure. In the event that proprietary information
must be provided visually or orally, obligations of confidence shall attach only
to that information which is confirmed by NYMOX in writing within ten (10)
working days as being confidential.
2. LIMITATIONS ON USE. RIH shall use NYMOX's Proprietary Information solely
for the purposes of the Research and License Agreement between the parties. It
is agreed by NYMOX and RIH that the transfer of Proprietary Information shall
not be construed as a grant of any right or license with respect to the
information delivered except as set forth herein or in a duly executed license
agreement.
3. CARE OF PROPRIETARY INFORMATION. NYMOX and RIH agree that all Proprietary
Information communicated by NYMOX and accepted by RIH in connection with this
Agreement shall be kept confidential by RIH as provided herein unless specific
written release is obtained from NYMOX. RIH agrees to exert reasonable efforts
(no less than the protection given its own confidential information) to maintain
such Proprietary Information in confidence, to make such Proprietary Information
available only to those employees and students who require access to it in the
performance of this Agreement and to inform them of the confidential nature of
such information.
RIH shall be deemed to have discharged its obligations hereunder provided RIH
has exercised the foregoing degree of care and provided further that RIH shall
immediately, upon discovery of any disclosure not authorized hereunder, notify
NYMOX and take reasonable steps to prevent any further disclosure or
unauthorized use.
When the Proprietary Information is no longer required for the purpose of this
Agreement, RIH shall return it or dispose of it as directed by NYMOX. RIH's
obligations of confidentiality with respect to Proprietary Information provided
under this Agreement will expire five (5) years after the date of this
Agreement.
4. INFORMATION NOT COVERED. It is agreed by NYMOX and RIH that information
shall not be deemed Proprietary Information in the event:
a. it is publicly available prior to the date of the Agreement or becomes
publicly available thereafter through no wrongful act of RIH;
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<PAGE> 28
b. it was known to RIH prior to the date of disclosure or becomes
known to RIH thereafter from a third party having an apparent bona
fide right to disclose the information;
c. it is disclosed by RIH in accordance with the terms of NYMOX's
prior written approval;
d. it is disclosed by NYMOX without restriction on further
disclosure;
e. it is independently developed by RIH; or
f. RIH is obligated to produce pursuant to an order of a court of
competent jurisdiction or a valid administrative or Congressional
subpoena, provided that RIH (a) promptly notifies NYMOX and (b)
cooperates reasonably with NYMOX's efforts to contest or limit the
scope of such order.
28
<PAGE> 29
APPENDIX D
PATENT RIGHTS
[this page blank at execution of this Agreement]
29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NYMOX PHARMACEUTICAL CORPORATION AS OF AND
FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 449,363
<SECURITIES> 0
<RECEIVABLES> 24,611
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 776,824
<PP&E> 1,384,813
<DEPRECIATION> 216,497
<TOTAL-ASSETS> 2,140,491
<CURRENT-LIABILITIES> 833,344
<BONDS> 0
0
0
<COMMON> 16,912,963
<OTHER-SE> (15,605,816)
<TOTAL-LIABILITY-AND-EQUITY> 2,140,491
<SALES> 153,252
<TOTAL-REVENUES> 190,203
<CGS> 0
<TOTAL-COSTS> 252,977
<OTHER-EXPENSES> 3,336,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,551,183)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 46,684
<CHANGES> 0
<NET-INCOME> (3,314,296)
<EPS-BASIC> (0.17)
<EPS-DILUTED> (0.16)
</TABLE>
