<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
-------- --------
Commission File Number: 000-21589
TRIANGLE PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 56-1930728
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4 University Place
4611 University Drive
Durham, North Carolina 27707
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (919) 493-5980
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No __
As of August 5, 1999, there were 37,523,268 shares of Triangle
Pharmaceuticals, Inc. Common Stock outstanding.
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
TABLE OF CONTENTS
Part I. Financial Information
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1999 (unaudited) and December 31, 1998.......................... 3
Condensed Consolidated Statements of Operations (unaudited) -
Three and Six Months Ended June 30, 1999 and June 30, 1998
and Period From Inception (July 12, 1995) Through June 30, 1999.......... 4
Condensed Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended June 30, 1999 and June 30, 1998 and
Period From Inception (July 12, 1995) Through June 30, 1999.............. 5
Condensed Consolidated Statements of Stockholders' Equity -
Period From Inception (July 12, 1995) Through December 31,
1995, 1996, 1997 and 1998 and
the Six Months Ended June 30, 1999 (unaudited)........................... 6
Notes to Condensed Consolidated Financial Statements (unaudited)..........7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................9-25
Item 3. Quantitative and Qualitative Disclosures About Market Risk................ 26
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds................................. 27
Item 4. Submission of Matters to a Vote of Security Holders....................... 28
Item 5. Other Information......................................................... 29
Item 6. Exhibits and Reports on Form 8-K.......................................... 30
Signatures......................................................................... 31
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRIANGLE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
------------------ ------------------
<S> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents.......................................... $ 17,987 $ 77,653
Restricted deposits................................................ 52 49
Investments........................................................ 48,618 22,933
Interest receivable................................................ 920 612
Prepaid expenses................................................... 1,215 769
------------------ ------------------
Total current assets............................................ 68,792 102,016
------------------ ------------------
Property, plant and equipment, net..................................... 4,419 4,164
Investments............................................................ 7,480 18,106
Restricted deposits.................................................... -- 27
------------------ ------------------
Total assets.................................................... $ 80,691 $ 124,313
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 10,249 $ 11,778
Capital lease obligation-current................................... 131 126
Long-term debt-current............................................. 64 158
Accrued expenses................................................... 17,614 10,147
------------------ ------------------
Total current liabilities....................................... 28,058 22,209
------------------ ------------------
Capital lease obligation-noncurrent.................................... 81 153
------------------ ------------------
Total liabilities............................................... 28,139 22,362
------------------ ------------------
Commitments and contingencies (See notes 4 and 5)...................... -- --
Stockholders' equity:
Convertible Preferred Stock, $0.001 par value; 5,000 shares
authorized; 0 and 170 shares, issued and outstanding,
respectively.................................................... -- --
Common Stock, $0.001 par value; 75,000 shares authorized;
30,741 and 28,871 shares, issued and outstanding, respectively.. 31 29
Warrants........................................................... -- 114
Additional paid-in capital......................................... 220,397 218,683
Accumulated deficit during development stage....................... (167,683) (116,823)
Accumulated other comprehensive (loss) income...................... (150) 18
Deferred compensation.............................................. (43) (70)
------------------ ------------------
Total stockholders' equity...................................... 52,552 101,951
------------------ ------------------
Total liabilities and stockholders' equity...................... $ 80,691 $ 124,313
================== ==================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, (JULY 12, 1995)
----------------------------------- --------------------------------- THROUGH
1999 1998 1999 1998 JUNE 30, 1999
----------------- ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
License fees........................ $ 9,245 $ 167 $ 9,445 $ 6,167 $ 19,822
Development......................... 19,127 12,737 36,469 21,433 118,793
Purchased research and development.. 1,247 -- 1,247 -- 12,508
Selling, general and administrative. 3,890 2,591 6,249 5,037 27,656
----------------- ---------------- --------------- ---------------- ---------------
Loss from operations.................. (33,509) (15,495) (53,410) (32,637) (178,779)
Interest income, net.................. 1,080 1,239 2,550 1,973 11,096
----------------- ---------------- --------------- ---------------- ---------------
Net loss.............................. $ (32,429) $ (14,256) $ (50,860) $ (30,664) $ (167,683)
================= ================ =============== ================ ===============
Basic and diluted net loss per common
share............................... $ (1.08) $ (0.61) $ (1.73) $ (1.41)
================= ================ =============== ================
Shares used in computing net loss per
common share........................ 29,930 23,425 29,422 21,725
================= ================ =============== ================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
SIX MONTHS ENDED JUNE 30, (JULY 12, 1995)
------------------------------------------- THROUGH
1999 1998 JUNE 30, 1999
--------------------- -------------------- ---------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (50,860) $ (30,664) $ (167,683)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization.................... 578 385 1,882
Purchased research and development............... 1,247 -- 12,508
Stock-based compensation: license fees........... -- -- 636
Stock-based compensation: development............ 22 22 456
Stock-based compensation: general and
administrative................................ 119 18 387
Change in assets and liabilities:
Receivables................................... (308) (33) (920)
Prepaid expenses.............................. (446) 44 (1,215)
Accounts payable.............................. (1,529) 651 10,249
Accrued expenses.............................. 7,455 3,602 17,482
--------------------- -------------------- ---------------------
Net cash used by operating activities............... (43,722) (25,975) (126,218)
--------------------- -------------------- ---------------------
Cash flows from investing activities:
Sale (purchase) of restricted deposits........... 24 21 (52)
Purchase of investments.......................... (35,473) (6,016) (153,633)
Proceeds from sale and maturity of investments... 20,246 19,890 97,385
Purchase of property, plant and equipment........ (833) (1,287) (6,125)
Acquisition of Avid Corporation, net of cash
acquired...................................... -- -- (3,053)
--------------------- -------------------- ---------------------
Net cash (used) provided by investing activities.... (16,036) 12,608 (65,478)
--------------------- -------------------- ---------------------
Cash flows from financing activities:
Sale of stock, net of related issuance costs..... 164 56,160 209,390
Sale of options under salary investment option
grant program................................. 50 49 217
Proceeds from stock options/warrants exercised... 39 1 66
Proceeds from notes payable...................... -- -- 374
Equipment financing.............................. -- -- 354
Principal payments on capital lease obligations
and notes payable............................. (161) (244) (718)
--------------------- -------------------- ---------------------
Net cash provided by financing activities........... 92 55,966 209,683
--------------------- -------------------- ---------------------
Net (decrease) increase in cash and cash
equivalents...................................... (59,666) 42,599 17,987
Cash and cash equivalents at beginning of period.... 77,653 34,698 --
--------------------- -------------------- ---------------------
Cash and cash equivalents at end of period.......... $ 17,987 $ 77,297 $ 17,987
===================== ==================== =====================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- ------------ PAID-IN ACCUMULATED
SHARES AMOUNT WARRANTS SHARES AMOUNT CAPITAL DEFICIT
---------- ---------- ---------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial sale of stock....... 933 $ 1 $ -- 1,175 $ 1 $ 710 $ --
Additional sale of stock.... 4,249 4 -- 1,495 2 3,137 --
Stock-based compensation.... -- -- -- -- -- 12 --
Comprehensive loss:
Net loss................. -- -- -- -- -- -- (967)
---------- ---------- ---------- ---------- ---------- ----------- -------------
Balance, December 31, 1995.. 5,182 5 -- 2,670 3 3,859 (967)
Sale of stock............... 3,756 4 -- 4,943 5 59,506 --
Stock-based compensation.... -- -- 152 700 1 1,127 --
Stock options exercised..... -- -- -- 317 -- 57 --
Conversion of Preferred to
Common Stock............. (8,938) (9) -- 8,938 9 -- --
Comprehensive loss:
Net loss................. -- -- -- -- -- -- (10,917)
---------- ---------- ---------- ---------- ---------- ----------- -------------
Balance, December 31, 1996.. -- -- 152 17,568 18 64,549 (11,884)
Sale of stock............... -- -- -- 2,014 2 29,521 --
Acquisition of Avid Corp.... -- -- -- 400 -- 8,117 --
Sale of stock options....... -- -- -- -- -- 70 --
Stock-based compensation.... -- -- (38) -- -- -- --
Stock options exercised..... -- -- -- 13 -- 3 --
Comprehensive loss:
Net loss................. -- -- -- -- -- -- (37,668)
---------- ---------- ---------- ---------- ---------- ----------- -------------
Balance, December 31, 1997.. -- -- 114 19,995 20 102,260 (49,552)
Sale of stock............... 170 -- -- 8,868 9 116,325 --
Sale of stock options....... -- -- -- -- -- 97 --
Stock-based compensation.... -- -- -- -- -- -- --
Stock options exercised..... -- -- -- 8 -- 1 --
Comprehensive loss:
Change in unrealized
gains/(losses)
on investments......... -- -- -- -- -- -- --
Net loss................. -- -- -- -- -- -- (67,271)
---------- ---------- ---------- ---------- ---------- ----------- -------------
Balance, December 31, 1998.. 170 -- 114 28,871 29 218,683 (116,823)
(UNAUDITED)
Sale of stock............... -- -- -- 19 -- 164 --
Sale of stock options....... -- -- -- -- -- 50 --
Stock-based compensation.... -- -- -- 6 -- 101 --
Stock options/warrants
exercised................ -- -- (114) 45 -- 154 --
Conversion of Preferred to
Common Stock............. (170) -- -- 1,700 2 (2) --
Additional purchase
consideration
Avid Corp................ -- -- -- 100 -- 1,247 --
Comprehensive loss:
Reclassification
adjustment for
gains/(losses) in net
loss.................. -- -- -- -- -- -- --
Change in unrealized
gains/(losses) on
investments........... -- -- -- -- -- -- --
Net loss................. -- -- -- -- -- -- (50,860)
---------- ---------- ---------- ---------- ---------- ----------- -------------
Balance, June 30, 1999...... -- $ -- $ -- 30,741 $ 31 $ 220,397 $ (167,683)
========== ========== ========== ========== ========== =========== =============
</TABLE>
<TABLE>
<CAPTION>
TRIANGLE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
ACCUMULATED
COMPREHENSIVE OTHER
(LOSS) COMPREHENSIVE DEFERRED
INCOME INCOME /(LOSS) COMPENSATION TOTAL
-------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C>
Initial sale of stock....... $ -- $ -- $ -- $ 712
Additional sale of stock.... -- -- -- 3,143
Stock-based compensation.... -- -- (12) --
Comprehensive loss:
Net loss................. (967) -- -- (967)
-------------- ----------------- --------------- -------------
Balance, December 31, 1995.. (967) -- (12) 2,888
Sale of stock............... -- -- -- 59,515
Stock-based compensation.... -- -- (141) 1,139
Stock options exercised..... -- -- (26) 31
Conversion of Preferred to
Common Stock............. -- -- -- --
Comprehensive loss:
Net loss................. (10,917) -- -- (10,917)
-------------- ----------------- --------------- -------------
Balance, December 31, 1996.. (10,917) -- (179) 52,656
Sale of stock............... -- -- -- 29,523
Acquisition of Avid Corp.... -- -- -- 8,117
Sale of stock options....... -- -- -- 70
Stock-based compensation.... -- -- 48 10
Stock options exercised..... -- -- 6 9
Comprehensive loss:
Net loss................. (37,668) -- -- (37,668)
-------------- ----------------- --------------- -------------
Balance, December 31, 1997.. (37,668) -- (125) 52,717
Sale of stock............... -- -- -- 116,334
Sale of stock options....... -- -- -- 97
Stock-based compensation.... -- -- 48 48
Stock options exercised..... -- -- 7 8
Comprehensive loss:
Change in unrealized
gains/(losses)
on investments........ 18 18 -- 18
Net loss................. (67,271) -- -- (67,271)
-------------- ----------------- --------------- -------------
Balance, December 31, 1998.. (67,253) 18 (70) 101,951
(UNAUDITED)
Sale of stock............... -- -- -- 164
Sale of stock options....... -- -- -- 50
Stock-based compensation.... -- -- 24 125
Stock options/warrants
exercised................ -- -- 3 43
Conversion of Preferred to
Common Stock............. -- -- -- --
Additional purchase
consideration
Avid Corp............. -- -- -- 1,247
Comprehensive loss:
Reclassification
adjustment for
gains/(losses) in net
loss.................. (13) (13) -- (13)
Change in unrealized
gains/(losses) on
investments........... (155) (155) -- (155)
Net loss................. (50,860) -- -- (50,860)
-------------- ----------------- --------------- -------------
Balance, June 30, 1999...... $ (51,028) $ (150) $ (43) $ 52,552
============== ================= =============== =============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of Triangle Pharmaceuticals, Inc. and its wholly-owned subsidiary
(the "Company" or "Triangle") have been prepared in accordance with generally
accepted accounting principles and applicable Securities and Exchange
Commission regulations for interim financial information. These financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
It is presumed that users of this interim financial information have read or
have access to the audited financial statements for the preceding fiscal year
contained in the Company's Annual Report on Form 10-K. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for fair presentation have been included. Operating
results for the interim periods presented are not necessarily indicative of
the results that may be expected for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
3. NET LOSS PER COMMON SHARE
Basic net loss per common share is computed using the weighted average
number of shares of Common Stock outstanding during the period. Diluted net
loss per common share is computed using the weighted average number of shares
of common and dilutive potential common shares outstanding during the period.
Potential common shares consist of stock options, warrants and convertible
preferred stock using the treasury stock method and are excluded if their
effect is antidilutive. For the three month and six month periods ended June
30, 1999 and 1998, the weighted average shares outstanding used in the
calculation of net loss per common share do not include potential shares
outstanding because they have the effect of reducing net loss per common
share.
4. LICENSING AGREEMENTS
The Company's existing license agreements require future payments of
up to $74,250 contingent upon the achievement of certain development
milestones and up to $30,000 upon the achievement of certain sales
milestones. One of the Company's licensors has the option to receive $2,000
of such future milestone payments in shares of Common Stock (based on the
then current market price) in lieu of a cash payment. The Company is also
obligated to issue up to 2,000 shares of Common Stock upon the achievement of
certain development milestones relating to DMP-450 acquired in the
acquisition of Avid Corporation ("Avid"). Additionally, the Company will pay
royalties based on a percentage of net sales of each licensed product
incorporating these drug candidates. Substantially all of the agreements
require minimum royalty payments commencing three years after regulatory
approval. Depending on the Company's success and timing in obtaining
regulatory approval, aggregate annual minimum royalties and annual license
preservation fees could range from $25 (if only a single drug candidate is
approved for one indication) to $46,500 (if all drug candidates are approved
for all indications) under the Company's existing license agreements.
7
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. CONTINGENCIES
On April 1, 1999, the Company issued 100 shares of Common Stock to
the former Avid stockholders for extending the date for payment of certain
contingent consideration under the merger agreement with Avid. The 100 shares
issued were a component of 2,100 contingent shares which the Company may be
obligated to issue depending on the achievement of certain DMP-450
development milestones. The issuance of these shares was recorded as
additional purchase price and has been expensed as purchased research and
development based on the fair market value of the Common Stock at the date on
which such extension was granted.
On May 14, 1999, the stockholders of the Company approved the
December 24, 1998 issuance of 170 shares of Series A Preferred Stock by the
Company, thereby triggering the conversion of these preferred shares into
shares of Common Stock. The conversion feature provided that each share of
Preferred Stock be converted into ten shares of Common Stock.
6. ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS 133"). SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. SFAS 133 is effective for financial statements for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The
Company intends to adopt SFAS 133 when required; however, SFAS 133 is not
expected to have a material impact on the Company's consolidated financial
position, results of operations, or cash flows.
7. SUBSEQUENT EVENT
On August 3, 1999, the Company closed its worldwide strategic
alliance (the "Abbott Alliance") with Abbott Laboratories ("Abbott") covering
six antiviral compounds for the prevention and treatment of HIV and hepatitis
B virus. In the United States, Triangle and Abbott will collaborate with
respect to the development, registration, manufacture, distribution and sales
and marketing of four Triangle compounds as well as co-promoting two Abbott
HIV compounds; one of these Abbott compounds, Norvir-TM- (ritonavir),
received United States Food and Drug Administration ("FDA") approval in 1996
for the treatment and prevention of HIV. Outside the United States, Abbott
has exclusive sales and marketing rights to promote the four Triangle
compounds and Abbott's two HIV compounds. Under the terms of the Abbott
Alliance, Abbott purchased approximately 6,570 shares of Triangle Common
Stock at $18.00 per share. The net proceeds of this issuance, after deducting
issuance costs, are approximately $115,900. Additionally, the Abbott Alliance
provides for non-contingent research funding of $31,700 to be received by
January 15, 2000, up to $185,000 of contingent milestone payments and the
sharing of future commercialization costs and overall profits and losses from
the four Triangle compounds.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN CERTAIN PROJECTIONS,
ESTIMATES AND OTHER FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER OF RISKS
AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED BELOW AT "--RISKS AND
UNCERTAINTIES." WHILE THIS OUTLOOK REPRESENTS MANAGEMENT'S CURRENT JUDGMENT
ON THE FUTURE DIRECTION OF THE BUSINESS, SUCH RISKS AND UNCERTAINTIES COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FUTURE PERFORMANCE
SUGGESTED BELOW. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY THE
RESULTS OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS OR TO REFLECT
EVENTS OR CIRCUMSTANCES ARISING AFTER THE DATE HEREOF.
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" INCLUDED IN THE COMPANY'S 1998 ANNUAL REPORT ON FORM 10-K AS
WELL AS WITH THE COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q.
OVERVIEW
Triangle is engaged in the development of new drug candidates
primarily in the antiviral area. Since its inception on July 12, 1995, the
Company's operating activities have related primarily to recruiting
personnel, negotiating license and option arrangements for its drug
candidates, raising capital and developing its drug candidates. The Company
has not received any revenues from the sale of products and does not expect
any of its drug candidates to be commercially available until at least the
year 2000. As of June 30, 1999, the Company's accumulated deficit was
approximately $167.7 million.
The Company requires substantial capital expenditures relating to
the development and potential commercialization of its drug candidates,
including expenditures for preclinical testing, chemical synthetic scale-up,
manufacture of drug substance for clinical trials and toxicology studies,
clinical trials of drug candidates, sales and marketing expenses and payments
to the Company's licensors. The Company has been unprofitable since its
inception and expects to incur substantial and increasing losses for at least
the next several years, due substantially to the expansion of its drug
development programs and the addition of infrastructure necessary to
commercialize its drug candidates. The Company will require substantial
capital expenditures relating to activities many of which may need to occur
prior to, and in anticipation of, the potential regulatory approval of its
drug candidates, including expenditures associated with the establishment of
a sales and marketing organization, the manufacture of drug substance, and
other administrative expenditures necessary to support the Company. Many of
these capital expenditures may be incurred irrespective of whether the
Company's drug candidates are approved when anticipated or at all. The
Company expects that losses will fluctuate from period to period and that
such fluctuations may be substantial. See "--Risks and Uncertainties--We have
incurred losses since inception and may never reach profitability."
The Company has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The risks, expenses
and difficulties encountered by companies at an early stage of development
must be considered when evaluating the Company's prospects. To address these
risks, the Company must, among other things, successfully develop and
commercialize its drug candidates, secure all necessary proprietary rights,
respond to competitive developments, continue to attract, retain and motivate
qualified personnel and it may need to obtain additional financing to fund
future capital requirements. There can be no assurance that the Company will
be successful in addressing these risks. See "--Risks and Uncertainties--All
of our products are in development and may never be successfully commercialized
which would have an adverse impact on your investment and our business and We
have incurred losses since inception and may never reach profitability."
The operating expenses of the Company will depend on several
factors, including the level of development expenses and the potential
commercialization of its drug candidates. Development expenses will depend on
the progress and results of the Company's drug development efforts, which the
Company cannot predict. Management may in some cases be able to control the
timing of development expenses in part by accelerating or decelerating
preclinical testing and clinical trial activities. The level of expenses
relating to the establishment of a sales and marketing organization, the
manufacture of drug substance, and other administrative expenditures will
depend on the success of the development of the Company's drug candidates;
however, many of these capital expenditures may be incurred irrespective of
whether the Company's drug candidates are approved when anticipated or at
all. As a result of these factors, the Company
9
<PAGE>
believes that period to period comparisons are not necessarily meaningful and
should not be relied upon as an indication of future performance. Due to all
of the foregoing factors, it is possible that the Company's consolidated
operating results will be below the expectations of market analysts and
investors. In such event, the prevailing market price of the Company's Common
Stock could be materially adversely affected. See "--Risks and
Uncertainties--The market price of our stock may be adversely affected by
market volatility."
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
INTEREST INCOME, NET
The Company had net interest income of $1.1 million for the three
months ended June 30, 1999, compared to $1.2 million for the same period in
1998. The decrease in net interest income is due primarily to slightly lower
average cash and investment balances and a decline in low-risk, short-term
interest rates in 1999. See "--Liquidity and Capital Resources."
LICENSE FEES
License fees totaled $9.2 million for the three months ended June
30, 1999, compared to $167,000 for the same period in 1998. License fees in
1999 relate to the expense of license preservation fees, the recognition of
milestone obligations required under the Company's license agreements and
license initiation payments, including $4.0 million in payments arising from
the license and settlement agreements relating to Coviracil-TM-
(emtricitabine) described below, and a $5.0 million development milestone
accrued, but not yet payable, for one of the Company's compounds, L-FMAU. The
increase in license fees relates primarily to the recognition of milestone
obligations as the Company continues to achieve development and other
milestones and the license initiation payments relating to Coviracil.
In May 1999, Emory University ("Emory") and Glaxo Wellcome plc
("Glaxo") settled their litigation pending in the United States District
Court relating to Coviracil, and Triangle became the exclusive licensee of
the United States and all foreign patent applications and patents filed by
Burroughs Wellcome Co. ("Burroughs Wellcome") on the use of Coviracil to
treat hepatitis B. Pursuant to the license and settlement agreements, Emory
and Triangle were also given access to development and clinical data and drug
substance held by Glaxo relating to Coviracil.
DEVELOPMENT EXPENSES
Development expenses totaled $19.1 million for the three months
ended June 30, 1999, compared to $12.7 million for the same period in 1998.
The substantial increase in 1999 development expenses, as compared to the
same period in 1998, is the result of the Company's continued and more
extensive drug development activities on compounds under active development
as these compounds move into later stages of clinical development, including
the addition of development personnel necessary to perform these activities.
The Company expects its development expenses to continue to increase in the
future due to the continued expansion of drug development activities.
PURCHASED RESEARCH AND DEVELOPMENT
Purchased research and development expenses totaled $1.2 million for
the three months ended June 30, 1999, as compared to none for the three
months ended June 30, 1998. On April 1, 1999, the Company issued 100,000
shares of Common Stock as consideration to the former Avid shareholders for
extending the payment date of certain contingent consideration from February
28, 1999 to February 28, 2000. The shares issued were a component of the 2.1
million contingent shares associated with the Avid acquisition. Additional
purchase price and related purchased research and development expense was
recorded based upon the fair market value of the Company's Common Stock at
the date on which the extension was granted as this compound is still at an
early stage of clinical development and has no alternative future use.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("SG&A") expenses totaled $3.9
million for the three months ended June 30, 1999, compared to $2.6 million
for the same period in 1998. The increase in 1999 SG&A, as compared to the
same period in 1998, is predominantly attributable to the growth of the
Company's operations to support expanded clinical and development activities
as well as the continued development of its sales and marketing organization.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
INTEREST INCOME, NET
The Company had net interest income of $2.6 million in the six
months ended June 30, 1999 compared to $2.0 million for the same period in
1998. The increase in interest income is due primarily to an increase in the
average investment balance for the six-month period, associated with
financing activities in the fourth quarter of 1998, partially offset by a
decline in low-risk, short-term interest rates. See "--Liquidity and Capital
Resources."
LICENSE FEES
License fees totaled $9.4 million for the six months ended June 30,
1999, as compared to $6.2 million for the same period in 1998. License fees
in 1999 relate to the expense of license preservation fees, the recognition
of milestone obligations required under the Company's license agreements and
license initiation payments, whereas in 1998, fees were predominantly
associated with a license initiation payment for L-FMAU. The increase in
license fees relates primarily to the recognition of milestone obligations as
the Company continues to achieve development and other milestones.
DEVELOPMENT EXPENSES
Development expenses totaled $36.5 million for the six months ended
June 30, 1999, as compared to $21.4 million for the same period in 1998.
Development expenses for the six month period ended June 30, 1999 consisted
primarily of expenses for development work relating to clinical trials, drug
synthesis, compensation expense, preclinical testing and toxicology studies.
Development expenses for the six months ended June 30, 1998 consisted
primarily of expenses for development work relating to drug synthesis,
clinical trials, compensation expense, toxicology studies, patent related
activities and preclinical testing. The substantial increase in 1999
development expenses, as compared to the same period in 1998, is the result
of the Company's continued and more extensive drug development activities on
its compounds as they move into the later stages of clinical development,
including the addition of development personnel necessary to perform those
activities. The Company expects its development expenses to continue to
increase in the future due to continued expansion of drug development
activities, including preclinical testing, clinical trials, toxicology
studies, the manufacture of drug substance for preclinical tests and clinical
trials as well as the continued pursuit of proprietary rights to its drug
candidates. In addition, if the Company in-licenses or otherwise acquires
rights to additional drug candidates, development expenses would increase as
a result.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
SG&A expenses totaled $6.2 million for the six months ended June 30,
1999 compared to $5.0 million for the same period in 1998. SG&A expenses for
the six months ended June 30, 1999 consisted primarily of compensation
expenses, amounts paid for outside professional services and rent expense.
SG&A expenses for the six months ended June 30, 1998 consisted primarily of
compensation expenses, rent expense and amounts paid for outside professional
services. The increase in 1999 SG&A, as compared to the same period in 1998,
is primarily due to increases in compensation and general operating expenses
associated with increased development activities, the continued development
of the Company's sales and marketing organization and overall corporate
growth. This growth includes but is not limited to the addition of another
leased facility and increased administrative personnel necessary to support
operations. The Company expects that its SG&A expenses will continue to
increase in future periods, especially as the Company continues to expand
development activities and continues development of its sales and marketing
organization.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception (July 12,
1995) through June 30, 1999 primarily with the net proceeds received from
private placements of equity securities, which provided aggregate net
proceeds of approximately $111.9 million (net of offering costs), and the
Company's initial and secondary public offerings, which provided aggregate
net proceeds to the Company totaling approximately $96.8 million (net of
offering costs). In addition, the Company has received approximately $2.0
million as reimbursement of certain development expenses under a license
agreement for one of its drug candidates.
At June 30, 1999 the Company had net working capital of
approximately $40.7 million, a decrease of approximately $39.1 million over
working capital at December 31, 1998. The decrease is principally the result
of payment of development costs for the Company's drug candidates. At June
30, 1999, the Company's principal source of liquidity was $18.0 million in
cash and cash equivalents and $56.1 million in investments which are
"available for sale," reflecting an approximate $44.6 million decrease of
cash, cash equivalent and investment balances over those at December 31, 1998.
The closing of the Abbott Alliance on August 3, 1999 will enhance
the Company's liquidity by providing approximately $115.9 million in net
proceeds (net of estimated offering costs) from the sale of approximately
6.57 million shares of Common Stock, with an additional $31.7 million in
non-contingent research funding payments to be received by January 15, 2000
and potentially up to $185.0 million in contingent milestone payments.
The Company expects that its capital requirements will increase in
future periods as the Company funds its drug development programs, pays
obligations under its license and/or option agreements, develops a sales and
marketing organization, acquires drug substance from third party
manufacturers, and incurs other administrative expenditures necessary to
support the Company. The Company's future capital requirements will depend on
many factors, including the progress of the Company's drug development
programs, the magnitude of these programs, the scope and results of
preclinical testing and clinical trials, the cost, timing and outcome of
regulatory reviews, the costs under the license and/or option agreements
relating to the Company's drug candidates (including costs of obtaining
patent protection for the Company's drug candidates), the timing and terms of
the acquisition of any additional drug candidates, the rate of technological
advances, determinations as to the commercial potential of the drug
candidates, administrative and legal expenses, the establishment of internal
capacity and third party arrangements for sales and marketing functions, the
establishment of third party arrangements for manufacturing, including
Abbott, and other factors.
Amounts payable by the Company in the future under its existing
license agreements are uncertain due to a number of factors, including the
progress of the Company's drug development programs, the Company's ability to
obtain approval to commercialize any drug candidate and the commercial
success of any approved drug. The Company's existing license agreements
require future payments of up to $74.3 million contingent upon the
achievement of certain development milestones and up to $30.0 million upon
the achievement of certain sales milestones. One of the Company's licensors
has the option to receive $2.0 million of such future milestone payments in
shares of Common Stock (based on the then current market price) in lieu of a
cash payment. The Company is also obligated to issue up to 2.0 million shares
of Common Stock contingent upon the achievement of certain development
milestones relating to DMP-450 acquired in the acquisition of Avid.
Additionally, the Company will pay royalties based on a percentage of net
sales of each licensed product incorporating these drug candidates. Most of
the Company's license agreements require minimum royalty payments commencing
three years after regulatory approval. Depending on the Company's success and
timing in obtaining regulatory approval, aggregate annual minimum royalties
and annual license preservation fees could range from $25,000 (if only a
single drug candidate is approved for one indication) to $46.5 million (if
all drug candidates are approved for all indications) under the Company's
existing license agreements.
The Company believes that its existing cash, cash equivalents,
investments, proceeds from the sale of Common Stock to Abbott and
non-contingent cash payments associated with the Abbott Alliance will be
adequate to satisfy its anticipated capital requirements through June 2001.
The Company expects that it may be required to raise additional funds through
equity or debt financings or from other sources. There can be no assurance
that additional funding will be available on favorable terms from any of
these sources or at all. See "--Risks and Uncertainties--If we need
additional funds and are unable to raise them, we would have to curtail or
cease operations."
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ABBOTT ALLIANCE
On August 3, 1999, Triangle closed its worldwide alliance with
Abbott. The Abbott Alliance gives Triangle access to Abbott's international
and domestic infrastructure to market and distribute the products receiving
regulatory approval, global manufacturing capabilities, United States
co-promotion rights to two Abbott compounds and financial support to help
fund the continued development of Triangle's portfolio of drug candidates.
The terms of the Abbott Alliance provided for the sale of approximately 6.57
million shares of Triangle Common Stock at $18.00 per share, non-contingent
research funding of $31.7 million to be received by January 15, 2000, up to
$185.0 million of contingent milestone payments as well as the sharing of
commercialization costs and overall profits and losses from the four Triangle
compounds. The completion of the Abbott Alliance generated approximately
$115.9 million of net proceeds, after deducting issuance costs, related to
the sale of Triangle Common Stock, with another $31.7 million in research
funding to be received by January 15, 2000. "See--Liquidity and Capital
Resources."
LITIGATION AND OTHER CONTINGENCIES
As discussed below in "Risks and Uncertainties," the Company is
indirectly involved in several patent opposition and adversarial proceedings
and one lawsuit filed in Australia regarding the patent rights related to two
of its licensed drug candidates, including Coviracil. Although the Company is
not a named party in any of these proceedings, it is obligated to reimburse
its licensors for certain legal expenses associated with these proceedings.
The Company cannot predict the outcome of these proceedings. The Company
believes that an adverse judgment in these pending proceedings would not
result in a material financial obligation to the Company, nor would the
Company have to recognize an impairment under Statement of Financial
Accounting Standards No. 121, "ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED
ASSETS," as no amounts have been capitalized related to these drug
candidates. However, any development of these proceedings adverse to the
Company's interests, including but not limited to any adverse development
related to the patent rights licensed to the Company for these two drug
candidates or the Company's rights or obligations related thereto, could have
a material adverse effect on the Company's future consolidated financial
position, results of operations and cash flows.
YEAR 2000 COMPLIANCE
The Company recognizes the need to ensure that Year 2000 hardware
and software issues will not adversely impact its operations. The Company has
completed an assessment of its internal informational systems which support
business applications and has completed the modification or replacement of
these portions of software, hardware and other equipment that it has
determined are non-compliant. Testing and verification of all critical
systems, by internal and/or external experts, has been completed with testing
and verification of other significant existing internal systems expected
to be complete by October 31, 1999. Additionally, the Company is currently
in the process of confirming compliance regarding Year 2000 issues for the
information systems of its key business vendors. This process entails
communicating with significant suppliers, financial institutions, insurance
companies and other parties that provide significant services to the Company.
The Company is continuing its evaluation of key business vendors and is in
the process of developing contingency plans for all key vendors, regardless
of their state of preparedness. Key vendor evaluation and associated
contingency plans are expected to be complete by October 31, 1999. In
addition, the Company will periodically monitor each key vendor's Year 2000
campaign throughout 1999 to reevaluate each vendor's Year 2000 readiness.
Expenditures required to make the Company Year 2000 compliant will be
expensed as incurred and are not expected to be material to the Company's
consolidated financial position or results of operations. See "--Risks and
Uncertainties--If we fail to be Year 2000 compliant, it could disrupt our
business activities."
FOREIGN CURRENCY RISK MANAGEMENT
In the ordinary course of business, the Company is exposed to
foreign currency exchange rate risk. This exposure primarily relates to the
purchase of drug substance and/or services from foreign vendors in contracts
for which the obligation is denominated in a foreign currency. The Company
periodically enters into foreign exchange contracts to manage these exposures
when it considers it practical to do so.
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The Company has established a control environment, which includes
policies and procedures for risk assessment and the approval, reporting and
monitoring of derivative financial instrument activities. These policies
include only the hedging of firm commitments and prohibit the holding of
derivative instruments for trading purposes. Specific hedging strategies
depend on several factors, including the magnitude of the exposure, offset
through contract terms, cost and availability of the appropriate instruments,
anticipated time horizon, and the variability of the underlying commitment.
The Company monitors the effectiveness of its hedging structures on an
ongoing basis. At June 30, 1999, Triangle had purchased foreign currency
contracts (in currencies participating in the European Monetary Union) to
hedge anticipated foreign currency commitments. The hypothetical loss
associated with a 10% devaluation of these foreign currencies would not
materially affect our consolidated operating results, financial position or
cash flows.
RISK AND UNCERTAINTIES
IN ADDITION TO THE OTHER INFORMATION CONTAINED HEREIN, THE FOLLOWING
RISKS AND UNCERTAINTIES SHOULD BE CAREFULLY CONSIDERED IN EVALUATING TRIANGLE
AND ITS BUSINESS.
ALL OF OUR PRODUCTS ARE IN DEVELOPMENT AND MAY NEVER BE SUCCESSFULLY
COMMERCIALIZED WHICH WOULD HAVE AN ADVERSE IMPACT ON YOUR INVESTMENT AND OUR
BUSINESS.
Many of our drug candidates are at an early stage of development and
all of our drug candidates will require expensive and lengthy testing and
regulatory clearances. None of our drug candidates has been approved by
regulatory authorities. We do not expect any of our drug candidates to be
commercially available before the year 2000. There are many reasons that we
may fail in our efforts to develop our drug candidates, including that:
- our drug candidates will be ineffective, toxic or will not
receive regulatory clearances,
- our drug candidates will be too expensive to manufacture or
market or will not achieve broad market acceptance,
- third parties will hold proprietary rights that may preclude us
from marketing our drug candidates, or
- third parties will market equivalent or superior products.
The success of our business depends upon our ability to successfully
develop and market our drug candidates.
WE HAVE INCURRED LOSSES SINCE INCEPTION AND MAY NEVER ACHIEVE
PROFITABILITY.
We formed Triangle in July 1995 and we have only a limited operating
history for you to review in evaluating our business. We have incurred losses
since our inception. At June 30, 1999, our accumulated deficit was $167.7
million. Our historical costs relate primarily to the acquisition and
development of our drug candidates and selling, general and administrative
costs. We have not generated any revenue to date and do not expect to do so
before the year 2000. In addition, we expect annual losses to increase over
the next several years as we expand our drug development and
commercialization efforts. To become profitable, we must successfully develop
and obtain regulatory approval for our drug candidates and effectively
manufacture, market and sell any products we develop. We may never generate
significant revenue or achieve profitable operations.
IF WE NEED ADDITIONAL FUNDS AND ARE UNABLE TO RAISE THEM, WE WOULD
HAVE TO CURTAIL OR CEASE OPERATIONS.
Our drug development programs and potential commercialization of our
drug candidates require substantial capital expenditures, including expenses
for preclinical testing, chemical synthetic scale-up, manufacture of drug
substance for clinical trials and toxicology studies, clinical trials of drug
candidates, sales and marketing expenses and payments to our licensors. We
expect our capital requirements to increase significantly. Our future capital
needs will depend on many factors, including:
- the progress and magnitude of our drug development programs,
- the scope and results of preclinical testing and clinical
trials,
- the cost, timing and outcome of regulatory reviews,
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- the costs under license and option agreements for our drug
candidates, including the costs of obtaining patent protection
for our drug candidates,
- the costs of acquiring any additional drug candidates,
- the rate of technological advances,
- the commercial potential of our drug candidates,
- the magnitude of our administrative and legal expenses,
- the costs of establishing sales and marketing functions, and
- the costs of establishing third party arrangements for
manufacturing.
We have incurred negative cash flow from operations since we
incorporated Triangle and do not expect to generate positive cash flow from
our operations for at least the next several years. Although the Abbott
Alliance provided us with significant additional funding, there can be no
assurance that such funding will be sufficient to meet our future needs.
Therefore, we may need additional future financings to fund our operations.
We may not be able to obtain adequate financing to fund our operations, and
any additional financing we obtain may be on terms that are not favorable to
us. In addition, any additional financings could substantially dilute our
stockholders. If adequate funds are not available, we will be required to
delay, reduce or eliminate one or more of our drug development programs, to
enter into new collaborative arrangements or to modify the Abbott Alliance on
terms that are not favorable to us. These collaborative arrangements or
modifications could result in the transfer to third parties of rights that we
consider valuable. In addition, we often consider the acquisition of
technologies and drug candidates that would increase our capital requirements.
BECAUSE OUR PRODUCTS MAY NOT SUCCESSFULLY COMPLETE CLINICAL TRIALS
REQUIRED FOR COMMERCIALIZATION, OUR BUSINESS MAY NEVER ACHIEVE PROFITABILITY.
To obtain regulatory approvals needed for the sale of our drug
candidates, we must demonstrate through preclinical testing and clinical
trials that each drug candidate is safe and effective. The clinical trial
process is complex and uncertain. Positive results from preclinical testing
and early clinical trials do not ensure positive results in pivotal clinical
trials. Many companies in our industry have suffered significant setbacks in
pivotal clinical trials, even after promising results in earlier trials. Any
of our drug candidates may produce undesirable side effects in humans. These
side effects could cause us or regulatory authorities to interrupt, delay or
halt clinical trials of a drug candidate. These side effects could also
result in the U.S. Food and Drug Administration, FDA, or foreign regulatory
authorities refusing to approve the drug candidate for any and all targeted
indications. We, the FDA or foreign regulatory authorities may suspend or
terminate clinical trials at any time if we or they believe the trial
participants face unacceptable health risks. Clinical trials may not
demonstrate that our drug candidates are safe or effective.
Clinical trials are lengthy and expensive. They require adequate
supplies of drug substance and sufficient patient enrollment. Patient
enrollment is a function of many factors, including:
- the size of the patient population,
- the nature of the protocol,
- the proximity of patients to clinical sites, and
- the eligibility criteria for the clinical trial.
Delays in patient enrollment can result in increased costs and
longer development times. Even if we successfully complete clinical trials,
we may not be able to file any required regulatory submissions in a timely
manner and we may not receive regulatory approval for the drug candidate.
IF WE OR OUR LICENSORS ARE NOT ABLE TO OBTAIN AND MAINTAIN ADEQUATE
PATENT PROTECTION FOR OUR PRODUCTS, WE MAY BE UNABLE TO COMMERCIALIZE OUR
PRODUCTS OR TO PREVENT OTHER COMPANIES FROM USING OUR TECHNOLOGY IN
COMPETITIVE PRODUCTS.
Our success will depend on our ability and the ability of our
licensors to obtain and maintain patents and proprietary rights for our drug
candidates and to avoid infringing the proprietary rights of others, both in
the United States and in foreign countries. We have no patents in our own
name and we have a small number of patent
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applications of our own pending. One of our patent applications is a joint
application with co-inventors from another institution. We have, however,
licensed or we have an option to license patents, patent applications and
other proprietary rights from third parties for each of our drug candidates.
If we breach our licenses, we may lose rights to important technology and
drug candidates.
Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and factual questions for which
important legal principles are unresolved. We may not develop or obtain
rights to products or processes that are patentable. Even if we do obtain
patents, they may not adequately protect the technology we own or have
in-licensed. In addition, others may challenge, seek to invalidate, infringe
or circumvent any patents we own or in-license, and rights we receive under
those patents may not provide competitive advantages to us. Further, the
manufacture, use or sale of our products or processes may infringe the patent
rights of others.
Several pharmaceutical and biotechnology companies, universities and
research institutions have filed patent applications or received patents that
cover our technologies or technologies similar to ours. Others have filed
patent applications and received patents that conflict with patents or patent
applications we own or have in-licensed, either by claiming the same methods
or compounds or by claiming methods or compounds that could dominate those
owned by or licensed to us. In addition, we may not be aware of all patents
or patent applications that may impact our ability to make, use or sell any
of our drug candidates. For example, United States patent applications are
confidential while pending in the Patent and Trademark Office, PTO, and
patent applications filed in foreign countries are often first published six
months or more after filing. Any conflicts resulting from third party patent
applications and patents could significantly reduce the coverage of our
patents and limit our ability to obtain meaningful patent protection. If
other companies obtain patents with conflicting claims, we may be required to
obtain licenses to these patents or to develop or obtain alternative
technology. We may not be able to obtain any such license on acceptable terms
or at all. Any failure to obtain such licenses could delay or prevent us from
pursuing the development or commercialization of our drug candidates, which
would adversely affect our business.
There are significant risks regarding the patent rights of two of
our in-licensed drug candidates. We may not be able to commercialize
Coviracil or DAPD, Triangle drug candidates currently in active development,
due to patent rights held by third parties other than our licensors. Third
parties have filed numerous patent applications and have received numerous
issued patents in the United States and many foreign countries that relate to
these drug candidates and their use alone or coactively to treat HIV and
Hepatitis B. As a result, our patent position regarding the use of Coviracil
and DAPD to treat HIV and/or hepatitis B is highly uncertain and involves
numerous complex legal and factual questions that are unknown or unresolved.
If any of these questions is resolved in a manner that is not favorable to
us, we would not have the right to commercialize Coviracil and/or DAPD in the
absence of a license from one or more third parties, which may not be
available on acceptable terms or at all. In addition, even if any of these
questions is favorably resolved, we may still attempt to obtain licenses from
one or more third parties to reduce or eliminate the risks relating to some
or all of these matters. Such licenses may not be available on acceptable
terms or at all. Our inability to commercialize either of these drug
candidates could adversely affect our business.
COVIRACIL (EMTRICITABINE)
Coviracil, a purified form of FTC, belongs to the same general class
of nucleosides as lamivudine, also known as 3TC. In the United States, the
FDA has approved 3TC for the treatment of hepatitis B and for use in
combination with zidovudine, also known as AZT, for the treatment of HIV.
Regulatory authorities have approved 3TC for the treatment of hepatitis B in
several other countries and for use in combination with other nucleoside
analogues for the treatment of HIV in a number of other countries. Glaxo
Wellcome plc, Glaxo, currently sells 3TC for the treatment of HIV and
hepatitis B under a license agreement with BioChem Pharma Inc., BioChem
Pharma. We obtained rights to Coviracil under a license from Emory
University, Emory. In 1990 and 1991, Emory filed in the United States and
thereafter in numerous foreign countries patent applications with claims to
compositions of matter and methods to treat HIV and hepatitis B with
Coviracil. In 1991, Yale University, Yale, filed in the United States patent
applications on FTC, including Coviracil and its use to treat hepatitis B,
and subsequently licensed its rights under those patent applications to
Emory. Our license arrangement with Emory includes all rights to Coviracil
and its uses claimed in the Yale patent applications.
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HIV. Emory received a United States patent in 1993 covering a method
to treat HIV with Coviracil. Emory has also received United States and
European patents containing composition of matter claims that cover
Coviracil. BioChem Pharma filed a patent application in the United States in
1989 and received a patent in 1991 covering a group of nucleosides in the
same general class as Coviracil, but which did not include Coviracil. BioChem
Pharma filed foreign patent applications in 1990, which expanded upon its
1989 United States patent application to include FTC among a large class of
nucleosides. The foreign patent applications are pending in many countries
and have issued in a number of countries with claims directed to FTC that may
cover Coviracil and its use to treat HIV. In addition, BioChem Pharma filed a
United States patent application in 1991 specifically directed to Coviracil.
BioChem Pharma has received two patents in the United States based on this
patent application, one directed to Coviracil and the other directed to a
method for treating viral diseases with Coviracil. The PTO has determined
that there is a conflict between the latter BioChem Pharma patent and a
patent application filed by Emory because they have overlapping claims to the
same technology. The PTO is conducting an adversarial proceeding to determine
whether BioChem Pharma or Emory is entitled to the patent claims in dispute.
Emory may not prevail in the adverarial proceeding, and the proceeding may
also delay the decision of the PTO regarding Emory's patent application.
BioChem Pharma also filed patent applications in many foreign countries based
upon its 1991 United States patent application and has received patents in
certain countries. BioChem Pharma may have additional patent applications
pending in the United States.
In the United States, the first to invent a technology is entitled
to patent protection on that technology. For patent applications filed prior
to January 1, 1996, United States patent law provides that a party who
invented a technology outside the United States is deemed to have invented
the technology on the earlier of the date it introduced the invention in the
United States or the date it filed its patent application. In a filing with
the SEC, BioChem Pharma stated that it conducts substantially all of its
research activities outside the United States. BioChem Pharma also stated
that it considers this to be a disadvantage in obtaining United States
patents as compared to companies that mainly conduct research in the United
States. We do not know whether Emory or BioChem Pharma was the first to
invent the technology claimed in their respective United States patent
applications or patents. We also do not know whether BioChem Pharma invented
the technology disclosed in its patent applications in the United States or
introduced that technology in the United States before the date of its patent
applications.
In foreign countries, the first party to file a patent application
on a technology, not the first to invent the technology, is entitled to
patent protection on that technology. We believe that Emory filed patent
applications disclosing Coviracil as a useful anti-HIV agent in many foreign
countries before BioChem Pharma filed its foreign patent applications on that
technology. However, BioChem Pharma has received patents in several foreign
countries. In addition, BioChem Pharma has filed patent applications on
Coviracil and its uses in certain countries in which Emory did not file
patent applications. Emory has opposed or otherwise challenged patent claims
on Coviracil granted to BioChem Pharma in Australia, Japan and Norway. Emory
may not initiate patent opposition proceedings in any other countries or be
successful in any foreign proceeding attempting to prevent the issuance of,
revoke or limit the scope of patents issued to BioChem Pharma. BioChem Pharma
has opposed patent claims on Coviracil granted to Emory in Europe, Japan and
Australia. BioChem Pharma may make additional challenges to Emory patents or
patent applications, which Emory may not succeed in defending. Our sales of
Coviracil for the treatment of HIV may be held to infringe United States and
foreign patent rights of BioChem Pharma. Under the patent laws of most
countries, a product can be found to infringe a third party patent either if
the third party patent expressly covers the product or method of treatment
using the product, or if the third party patent covers subject matter that is
substantially equivalent in nature to the product or method, even if the
patent does not expressly cover the product or method. If it is determined
that the sale of Coviracil for the treatment of HIV infringes a BioChem
Pharma patent, we would not have the right to make, use or sell Coviracil for
the treatment of HIV in one or more countries in the absence of a license
from BioChem Pharma. We may be unable to obtain such a license from BioChem
Pharma on acceptable terms or at all.
HEPATITIS B. Burroughs Wellcome Co., Burroughs Wellcome, filed
patent applications in March 1991 and May 1991 in Great Britain on a method
to treat hepatitis B with FTC and purified forms of FTC, that include
Coviracil. Burroughs Wellcome filed similar patent applications in other
countries, including the United States. Glaxo subsequently acquired Burroughs
Wellcome's rights under those patent applications. Those patent applications
were filed in foreign countries prior to the date Emory filed its patent
application on the use of Coviracil
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to treat hepatitis B. Burroughs Wellcome's foreign patent applications,
therefore, have priority over those filed by Emory. In July 1996, Emory
instituted litigation against Glaxo in the United States District Court to
obtain ownership of the patent applications filed by Burroughs Wellcome,
alleging that Burroughs Wellcome converted and misappropriated Emory's
invention and property and that an Emory employee is the inventor or a
co-inventor of the subject matter covered by the Burroughs Wellcome patent
applications. In May 1999, Emory and Glaxo settled the litigation, and we
became the exclusive licensee of the Unites States and all foreign patent
applications and patents filed by Burroughs Wellcome on the use of Coviracil
to treat hepatitis B. Under the license and settlement agreements, Emory and
we were also given access to development and clinical data and drug substance
held by Glaxo relating to Coviracil.
BioChem Pharma filed a patent application in May 1991 in Great
Britain also directed to a method to treat hepatitis B with FTC. BioChem
Pharma filed similar patent applications in other countries. In January 1996,
BioChem Pharma received a patent in the United States, which included a claim
to treat hepatitis B with Coviracil. The PTO has determined that there is a
conflict between the BioChem Pharma patent and patent applications filed by
Yale and Emory. The PTO is conducting an adversarial proceeding to determine
which parties are entitled to the patent claims in dispute. Yale licensed all
of its rights relating to FTC, including Coviracil, and its uses claimed in
this patent application to Emory, which subsequently licensed these rights to
us. Neither Emory nor Yale may prevail in the adversarial proceeding, and the
proceeding may delay the decision of the PTO regarding Yale's and Emory's
patent applications. In addition, the PTO may determine that it will conduct
adversarial proceedings with respect to a patent application filed by
Burroughs Wellcome. Emory may not pursue or succeed in any such proceedings.
We will not be able to sell Coviracil for the treatment of hepatitis B in the
United States unless a United States court or administrative body determines
that the BioChem Pharma patent is invalid or unless we obtain a license from
BioChem Pharma. We may be unable to obtain such a license on acceptable terms
or at all. In July 1991, BioChem Pharma received a United States patent on the
use of 3TC to treat hepatitis B and has corresponding patent applications
pending or issued in foreign countries. If it is determined that the use of
Coviracil to treat hepatitis B is not substantially different from the use of
3TC to treat hepatitis B, a court could hold that the use of Coviracil to
treat hepatitis B infringes these BioChem Pharma 3TC patents.
In addition, BioChem Pharma has filed in the United States and
foreign countries several patent applications on manufacturing methods
relating to a class of nucleosides that includes Coviracil, from which
BioChem Pharma has received several patents in the United States and many
foreign countries. If we use a manufacturing method that is covered by
patents issued on any of these applications, we will not be able to
manufacture Coviracil without a license from BioChem Pharma. We may not be
able to obtain such a license on acceptable terms or at all.
DAPD
We obtained our rights to DAPD under a license from Emory and the
University of Georgia Research Foundation, Inc., University of Georgia. Our
rights to DAPD include a number of issued United States patents that cover
composition of matter, a method for the synthesis of DAPD, methods for the
use of DAPD alone or in combination with certain other agents for the
treatment of hepatitis B, and a method to treat HIV with DAPD. We also have
rights to several foreign patents and patent applications that cover methods
for the use of DAPD alone or in combination with certain other anti-hepatitis
B agents for the treatment of hepatitis B. Additional foreign patent
applications are pending which contain claims for the use of DAPD to treat
HIV. Emory and the University of Georgia filed patent applications claiming
these inventions in the United States in 1990 and 1992. BioChem Pharma filed
a patent application in the United States in 1988 on a group of nucleosides
in the same general class as DAPD and their use to treat HIV, and has filed
corresponding patent applications in foreign countries. The PTO issued a
patent to BioChem Pharma in 1993 covering a class of nucleosides that
includes DAPD and its use to treat HIV. Corresponding patents have been
issued to BioChem Pharma in many foreign countries. Emory has filed an
opposition to patent claims granted to BioChem Pharma by the European Patent
Office based, in part, upon Emory's assertion that BioChem Pharma's patent
does not disclose how to make DAPD. In a patent opposition hearing held at
the European Patent Office on March 4, 1999, the Opposition Division ruled
that the BioChem Pharma European patent covering DAPD is valid. Emory has
informed Triangle that it intends to appeal this decision to the European
Patent Office Technical Board of Appeal. If the Technical Board of Appeal
affirms the decision of the Opposition Division, or if Emory or Triangle do
not pursue the appeal, we would not be able to sell DAPD in Europe without a
license from BioChem Pharma, which may not be available on acceptable terms
or at all. Patent claims granted to Emory on a portion of the DAPD
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technology by the Australian Patent Office have also been opposed by BioChem
Pharma. We cannot assure you that a court or administrative body would
invalidate BioChem Pharma's patent claims. Further, a sale of DAPD by us may
infringe BioChem Pharma's patents. If Emory, the University of Georgia and we
do not challenge, or are not successful in any challenge to, BioChem Pharma's
issued patents, pending patent applications, or patents that may issue from
such applications, we will not be able to manufacture, use or sell DAPD in
the United States and any foreign countries in which BioChem Pharma receives
a patent without a license from BioChem Pharma. We may not be able to obtain
such a license from BioChem Pharma on acceptable terms or at all.
With respect to any of our drug candidates, litigation, patent
opposition and adversarial proceedings, including the currently pending
proceedings, could result in substantial costs to us. We expect the costs of
the currently pending proceedings to increase significantly during the next
several years. We anticipate that additional litigation and/or proceedings
will be necessary or may be initiated to enforce any patents we own or
in-license, or to determine the scope, validity and enforceability of other
parties' proprietary rights and the priority of an invention. Any of these
activities could result in substantial costs and/or delays to us. The outcome
of any of these proceedings may significantly affect our drug candidates and
technology. United States patents carry a presumption of validity and
generally can be invalidated only through clear and convincing evidence. As
indicated above, the PTO is conducting two adversarial proceedings in
connection with the emtricitabine technology. We cannot assure you that a
court or administrative body would hold our in-licensed patents valid or
would find an alleged infringer to be infringing. Further, the license and
option agreements with Emory, the University of Georgia, The Regents of the
University of California, The DuPont Pharmaceuticals Company, and Mitsubishi
Chemical Corporation provide that each of these licensors is primarily
responsible for any patent prosecution activities, such as litigation, patent
conflict proceeding, patent opposition or other actions, for the technology
licensed to us. These agreements also provide that in general we are required
to reimburse these licensors for the costs they incur in performing these
activities. Similarly, Yale and the University of Georgia, the licensors of
L-FMAU to Bukwang Pharm. Ind. Co., Ltd., are primarily responsible for patent
prosecution activities with respect to L-FMAU at our expense. As a result, we
generally do not have the ability to institute or determine the conduct of
any such patent proceedings unless our licensors elect not to institute or to
abandon such proceedings. If our licensors elect to institute and prosecute
patent proceedings, our rights will depend in part upon the manner in which
these licensors conduct the proceedings. In any proceedings they elect to
initiate and maintain, these licensors may not vigorously pursue or defend or
may decide to settle such proceedings on terms that are unfavorable to us. An
adverse outcome of these proceedings could subject us to significant
liabilities to third parties, require disputed rights to be licensed from
third parties or require us to cease using such technology, any of which
could adversely affect our business. Moreover, the mere uncertainty resulting
from the initiation and continuation of any technology related litigation or
adversarial proceeding could adversely affect our business pending resolution
of the disputed matters.
We also rely on unpatented trade secrets and know-how to maintain
our competitive position, which we seek to protect, in part, by
confidentiality agreements with employees, consultants and others. These
parties may breach or terminate these agreements, and we may not have
adequate remedies for any breach. Our trade secrets may also be independently
discovered by competitors. We rely on certain technologies to which we do not
have exclusive rights or which may not be patentable or proprietary and thus
may be available to competitors. We have filed an application for, but have
not obtained, a trademark registration for our corporate name, corporate
logo, Coviracil-TM- and Coactinon-TM-. An opposition to the European
Community trademark application for the mark Coviracil has been filed by
Orsem and Les Laboratories Serveir based on registrations in certain
countries for the mark Coversyl-Registered Trademark- for pharmaceuticals. We
do not believe that the marks Coviracil and Coversyl are confusingly similar.
However, if we do not prevail in the opposition, we may need to adopt a
different product name for emtricitabine. Several other companies use trade
names that are similar to our name for their businesses. If we are unable to
obtain any licenses that may be necessary for the use of our corporate name,
we may be required to change our name. Our management personnel were
previously employed by other pharmaceutical companies. The prior employers of
these individuals may allege violations of trade secrets and other similar
claims relating to their drug development activities for us.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND MAY FAIL TO
RECEIVE REGULATORY APPROVAL WHICH COULD PREVENT OR DELAY THE
COMMERCIALIZATION OF OUR PRODUCTS.
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The FDA and foreign regulatory authorities require rigorous
preclinical testing, clinical trials and other approval procedures for human
pharmaceutical products. Numerous regulations also govern the manufacturing,
safety, labeling, storage, record keeping, reporting and marketing of
pharmaceutical products. The requirements vary widely from country to
country, and the time required to complete preclinical testing and clinical
trials and to obtain regulatory approvals is uncertain. We expect the process
of obtaining these approvals and complying with appropriate government
regulations to be time consuming and expensive. If we replace a drug
candidate in preclinical testing and/or clinical trials with a modified drug
candidate, it may extend the development period. In addition, if the FDA or
similar foreign regulatory authorities require additional clinical trials, we
could face increased costs and significant development delays. Changes in
regulatory policy or additional regulations adopted during product
development and regulatory review of information we submit could also result
in delays or rejections. The FDA has notified us that three of our drug
candidates, Coactinon, Coviracil for the treatment of HIV, and DAPD for the
treatment of HIV, qualify for designation as "fast track" products under
provisions of the Food and Drug Administration Modernization Act of 1997. The
fast track provisions are designed to expedite the review of new drugs
intended to treat serious or life-threatening conditions and essentially
codified the criteria previously established by the FDA for accelerated
approval. These drug candidates may not, however, continue to qualify for
expedited review and our other drug candidates may fail to qualify for
expedited review. Even though some of our drug candidates have qualified for
expedited review, the FDA may not approve them at all or any sooner than
other drug candidates that do not qualify for expedited review. Further, any
approval may require postmarketing studies or other conditions. Even after
substantial time and expenditures, our drug candidates may not receive
marketing approval on a timely basis or at all. If we are unable to
demonstrate the safety and effectiveness of our drug candidates to the
satisfaction of government authorities, our business will be adversely
affected.
Even if our drug candidates receive regulatory approval, we may
still face difficulties in marketing and manufacturing those drug candidates.
The approval of any of our drug candidates may limit the indicated uses of
the drug candidate. A marketed product, its manufacturer and the
manufacturer's facilities are subject to continual review and periodic
inspections. The discovery of previously unknown problems with a product,
manufacturer or facility may result in restrictions on the product or
manufacturer, including withdrawal of the product from the market. The
failure to comply with applicable regulatory requirements can, among other
things, result in:
- fines,
- suspended regulatory approvals,
- refusal to approve pending applications,
- refusal to permit exports from the United States,
- product recalls,
- seizure of products,
- injunctions,
- operating restrictions, and
- criminal prosecutions.
Governmental regulation may significantly delay the marketing of our
drug candidates, prevent such marketing altogether, impose costly
requirements on our activities or provide our competitors with an advantage
in the market. Adverse clinical results by others could negatively impact the
development and approval of our drug candidates. Some of our drug candidates
are intended for use as coactive therapy with one or more other drugs, and
adverse safety, effectiveness or regulatory developments in connection with
such other drugs will also have an adverse effect on our business. A delay in
obtaining or failure to obtain regulatory approvals for any of our drug
candidates will have an adverse effect on our business. We cannot predict the
adverse effects that future government regulations may have on our business.
We are also subject to various federal, state and local laws and
regulations relating to safe working conditions, laboratory and manufacturing
practices, the experimental use of animals and the use and disposal of
hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with our
development work.
INTENSE COMPETITION MAY RENDER OUR DRUG CANDIDATES NONCOMPETITIVE OR
OBSOLETE.
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We are engaged in segments of the drug industry that are highly
competitive and rapidly changing. Any of our current drug candidates that we
successfully develop will compete with numerous existing therapies. In
addition, many companies are pursuing novel drugs that target the same
diseases we are targeting. We believe that a significant number of drugs are
currently under development and will become available in the future for the
treatment of HIV and hepatitis B. We anticipate that we will face intense
and increasing competition as new products enter the market and advanced
technologies become available. Our competitors' products may be more
effective, or more effectively marketed and sold, than any of our products.
Competitive products may render our products obsolete or noncompetitive
before we can recover the expenses of developing and commercializing our drug
candidates. Furthermore, the development of a cure or new treatment methods
for the diseases we are targeting could render our drug candidates
noncompetitive, obsolete or uneconomical. Many of our competitors:
- have significantly greater financial, technical and human
resources than we have and may be better equipped to develop,
manufacture and market products,
- have extensive experience in preclinical testing and clinical
trials, obtaining regulatory approvals and manufacturing and
marketing pharmaceutical products, and
- have products that have been approved or are in late stage
development and operate large, well-funded research and
development programs.
Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and
biotechnology companies. Academic institutions, governmental agencies and
other public and private research organizations are also becoming
increasingly aware of the commercial value of their inventions and are more
actively seeking to commercialize the technology they have developed.
If we successfully develop and obtain approval for our drug
candidates, we will face competition based on the safety and effectiveness of
our products, the timing and scope of regulatory approvals, the availability
of supply, marketing and sales capability, reimbursement coverage, price,
patent position and other factors. Our competitors may develop or
commercialize more effective or more affordable products, or obtain more
effective patent protection, than we do. Accordingly, our competitors may
commercialize products more rapidly or effectively than we do, which could
hurt our competitive position.
BECAUSE WE FACE RISKS RELATED TO OUR LICENSE AND OPTION AGREEMENTS,
WE COULD LOSE OUR RIGHTS TO OUR DRUG CANDIDATES.
We have in-licensed or obtained an option to in-license our drug
candidates under agreements with our licensors. These agreements permit our
licensors to terminate the agreements under certain circumstances, such as
our failure to achieve certain development milestones or the occurrence of an
uncured material breach by us. The termination of any of these agreements
could result in the loss of our rights to a drug candidate. Upon termination
of most of our license agreements, we are required to return the licensed
technology to our licensors. In addition, most of these agreements provide
that our licensors are primarily responsible for any patent prosecution
activities, such as litigation, patent conflict, patent opposition or other
actions, for the technology licensed to us. These agreements also provide
that in general we are required to reimburse our licensors for the costs they
incur in performing these activities. We believe that these costs as well as
other costs under our license and option agreements will be substantial and
may increase significantly during the next several years. Our inability or
failure to pay any of these costs with respect to any drug candidate could
result in the termination of the license or option agreement for the drug
candidate.
BECAUSE WE MAY BE UNABLE TO SUCCESSFULLY MANUFACTURE OUR DRUG
CANDIDATES, OUR BUSINESS MAY NEVER ACHIEVE PROFITABILITY.
We do not have any internal manufacturing capacity and we rely on
third party manufacturers for the manufacture of all of our clinical trial
material. We plan to expand our existing relationships or to establish
relationships with additional third party manufacturers for products that we
successfully develop. The terms of the Abbott Alliance provide that Abbott
will manufacture all or a portion of our product requirements for products
that we successfully develop. We may be unable to maintain our relationship
with Abbott or to establish or maintain relationships with other third party
manufacturers on acceptable terms, and third party manufacturers may be
unable to manufacture products in commercial quantities on a cost effective
basis. Our dependence upon third parties for the manufacture of our products
may adversely affect our profit margins and our ability to develop and
commercialize products on a timely and competitive basis. Further, third
party manufacturers may encounter manufacturing or quality control problems
in connection with the manufacture of our products and may be unable to
maintain the necessary governmental licenses and approvals to continue
manufacturing our products.
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WE MAY BE UNABLE TO SUCCESSFULLY MARKET, SELL OR DISTRIBUTE OUR DRUG
CANDIDATES.
In the United States, we currently intend to market the drug
candidates covered by the Abbott Alliance in collaboration with Abbott and to
market other drug candidates that we successfully develop, that do not become
part of the Abbott Alliance, through a direct sales force. Outside of the
United States, we expect Abbott to market drug candidates covered by the
Abbott Alliance and, for any other drug candidates that we successfully
develop that do not become part of the Abbott Alliance, we intend to market
and sell through arrangements or collaborations with third parties. In
addition, we expect Abbott to handle the distribution and sale of drug
candidates covered by the Abbott Alliance both inside and outside the United
States. With respect to the United States, our ability to market the drug
candidates that we successfully develop will be contingent upon recruitment,
training and deployment of a sales and marketing force as well as the
performance of Abbott under the Abbott Alliance. We may be unable to
establish marketing or sales capabilities or to maintain arrangements or
enter into new arrangements with third parties to perform those activities on
favorable terms. In addition, any such third parties may have significant
control or influence over important aspects of the commercialization of our
drug candidates, including market identification, marketing methods, pricing,
composition of sales force and promotional activities. We also may have
limited control over the amount and timing of resources that a third party
may devote to our drug candidates. Our business may never achieve
profitability if we fail to establish or maintain a sales force and
marketing, sales and distribution capabilities.
BECAUSE WE DEPEND ON THIRD PARTIES FOR THE DEVELOPMENT AND
ACQUISITION OF DRUG CANDIDATES, WE MAY NOT BE ABLE TO SUCCESSFULLY ACQUIRE
ADDITIONAL DRUG CANDIDATES OR COMMERCIALIZE OR DEVELOP OUR CURRENT DRUG
CANDIDATES.
We have engaged and intend to continue to engage third party
contract research organizations and other third parties to help us develop
our drug candidates. Although we have designed the clinical trials for our
drug candidates, the contract research organizations have conducted many of
the clinical trials. As a result, many important aspects of our drug
development programs have been and will continue to be outside of our direct
control. In addition, the contract research organizations may not perform all
of their obligations under arrangements with us. If the contract research
organizations do not perform clinical trials in a satisfactory manner or
breach their obligations to us, the development and commercialization of any
drug candidate may be delayed or precluded. We do not intend to engage in
drug discovery. Our strategy for obtaining additional drug candidates is to
utilize the relationships of our management team and Scientific Advisory
Board to identify drug candidates for in-licensing from companies,
universities, research institutions and other organizations. We may not
succeed in acquiring additional drug candidates on acceptable terms or at all.
BECAUSE WE MAY NOT BE ABLE TO ATTRACT AND RETAIN KEY PERSONNEL AND
ADVISORS, WE MAY NOT SUCCESSFULLY DEVELOP OUR PRODUCTS OR ACHIEVE OUR OTHER
BUSINESS OBJECTIVES.
We are highly dependent on our senior management and scientific
staff, including Dr. David Barry, our Chairman and Chief Executive Officer.
We have entered into employment agreements with each officer of Triangle. Dr.
Barry's employment agreement contains certain non-competition provisions. In
addition, the employment agreements for each of the other officers provide
for certain severance payments which are contingent upon the officer's
refraining from competition with Triangle. The loss of the services of any
member of our senior management or scientific staff may significantly delay
or prevent the achievement of product development and other business
objectives. Our ability to attract and retain qualified personnel,
consultants and advisors is critical to our success. In order to pursue our
drug development programs and marketing plans, we will need to hire
additional qualified scientific and management personnel. Competition for
qualified individuals is intense and we face competition from numerous
pharmaceutical and biotechnology companies, universities and other research
institutions. We may be unable to attract and retain these individuals, and
our failure to do so would have an adverse effect on our business. In
addition, we rely on members of our Scientific Advisory Board for assistance
in formulating our drug development strategy. All of the members of the
Scientific Advisory Board are employed by other employers and any such member
may have commitments to, or consulting or advisory contracts with, other
entities that may limit their availability to us.
HEALTH CARE REFORM MEASURES AND THIRD PARTY REIMBURSEMENT PRACTICES
ARE UNCERTAIN AND MAY ADVERSELY IMPACT THE COMMERCIALIZATION OF OUR PRODUCTS.
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The efforts of governments and third party payors to contain or
reduce the cost of health care will continue to affect the business and
financial condition of drug companies. A number of legislative and regulatory
proposals to change the health care system have been proposed in recent
years. In addition, an increasing emphasis on managed care in the United
States has and will continue to increase pressure on drug pricing. While we
cannot predict whether legislative or regulatory proposals will be adopted or
what effect those proposals or managed care efforts may have on our business,
the announcement and/or adoption of such proposals or efforts could have an
adverse effect on our profit margins and financial condition. Sales of
prescription drugs depend significantly on the availability of reimbursement
to the consumer from third party payors, such as government and private
insurance plans. These third party payors frequently require that drug
companies give them predetermined discounts from list prices, and they are
increasingly challenging the prices charged for medical products and
services. Present coactive treatment regimens for the treatment of HIV are
expensive; published reports indicate the cost per patient per year can
exceed $13,000, and may increase as new combinations are developed. These
costs have resulted in limitations in the reimbursement available from third
party payors for the treatment of HIV infection, and we expect that
reimbursement pressures will continue in the future. If we succeed in
bringing one or more products to the market, these products may not be
considered cost effective and reimbursement to the consumer may not be
available or sufficient to allow us to sell our products on a competitive
basis.
IF OUR DRUG CANDIDATES DO NOT ACHIEVE MARKET ACCEPTANCE, OUR
BUSINESS MAY NEVER ACHIEVE PROFITABILITY.
Our success will depend on the market acceptance of any products we
develop. The degree of market acceptance will depend upon a number of
factors, including the receipt and scope of regulatory approvals, the
establishment and demonstration in the medical community of the safety and
effectiveness of our products and their potential advantages over existing
treatment methods, and reimbursement policies of government and third party
payors. Physicians, patients, payors or the medical community in general may
not accept or utilize any product that we may develop.
IF WE FAIL TO BE YEAR 2000 COMPLIANT, IT COULD DISRUPT OUR BUSINESS
ACTIVITIES.
The Year 2000 issue is the result of date-sensitive devices, systems
and computer programs that use a two digit rather than a four digit
recognition system to define an applicable year. We have initiated a program
and task force to assess the Year 2000 compliance of our systems and the
systems of our key business vendors. We have inventoried and assessed our
significant internal information and operation systems, and we have replaced
or modified those portions of our software, hardware and other equipment
which we have determined are non-compliant. We have completed the required
changes, testing and verification to our critical internal systems and plan
to complete the testing and verification of other significant internal
systems by October 31, 1999. Accordingly, we expect that the Year 2000 issue
will not pose significant operational problems for our internal systems and
equipment. If, however, we are unable to fix any technologies utilizing a two
digit recognition system, we could experience system failures or
miscalculations causing disruption of operations, including the temporary
inability to process transactions or conduct normal business activities in
the new millennium.
We are also assessing our key business vendors' Year 2000
compliance. We have requested information from these vendors regarding their
compliance efforts and written assurances of their Year 2000 compliance. We
currently plan to complete our risk assessments, readiness evaluations and
action and contingency plans related to these vendors by October 31, 1999.
However, it is extremely difficult to assess the likelihood of these third
parties' Year 2000 compliance or the impact their noncompliance may have on
our operations. If we fail to implement successfully our Year 2000 compliance
plan, our business could be adversely affected. In addition, significant
delays or unanticipated Year 2000 issues with key business vendors could
adversely affect the development of our drug candidates and our financial
condition.
The projected incremental expenditures associated with our Year 2000
compliance program are not expected to be material to our consolidated
financial position, results of operations, and cash flow. We are expensing
the Year 2000 compliant costs as incurred. The aggregate cost and dates on
which we expect aspects of the Year 2000 project to be completed are based
upon our best estimates and were derived utilizing assumptions of future
events, continued availability of certain internal and external resources,
and other factors.
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WE MAY NOT HAVE ADEQUATE INSURANCE PROTECTION AGAINST PRODUCT
LIABILITY.
Our business exposes us to potential product liability risks that
are inherent in the testing, manufacturing and marketing of drug products and
we may face product liability claims in the future. We currently have only
limited product liability insurance. We may be unable to maintain our
existing insurance and/or obtain additional insurance in the future at a
reasonable cost or in sufficient amounts to protect against potential losses.
A successful product liability claim or series of claims brought against us
could require us to pay substantial amounts that would decrease our
profitability.
WE MAY INCUR SUBSTANTIAL COSTS RELATED TO OUR USE OF HAZARDOUS
MATERIALS.
We use hazardous materials, chemicals, viruses and various
radioactive compounds in our drug development programs. Although we believe
that our handling and disposing of these materials comply with state and
federal regulations, the risk of accidental contamination or injury still
exists. In the event of such an accident, we could be held liable for any
damages or fines that result and any such liability could exceed our
resources.
OUR CONTROLLING STOCKHOLDERS MAY MAKE DECISIONS WHICH YOU DO NOT
CONSIDER TO BE IN YOUR BEST INTEREST.
As of August 5, 1999, our directors, executive officers and their
affiliates (excluding Abbott) owned approximately 23% of our outstanding
common stock and Abbott owned approximately 17.5% of our outstanding common
stock. Pursuant to the terms of the Abbott Alliance, Abbott has the right to
purchase additional amounts of our common stock up to a maximum aggregate
percentage of 21% of our outstanding common stock and has certain rights to
purchase shares directly from the Company in order to maintain its existing
level of ownership, also known as antidilution protection. In addition, we
have granted Abbott the right to appoint one or more representatives to our
Board of Directors, Board, in proportion to its ownership of our common
stock. As a result, our controlling stockholders are able to significantly
influence all matters requiring stockholder approval, including the election
of directors and the approval of significant corporate transactions. This
concentration of ownership could also delay or prevent a change in control of
Triangle that may be favored by other stockholders.
THE MARKET PRICE OF OUR STOCK MAY BE ADVERSELY AFFECTED BY MARKET
VOLATILITY.
The market price of our common stock is likely to be volatile and
could fluctuate widely in response to many factors, including:
- announcements of the results of clinical trials,
- developments with respect to patents or proprietary rights,
- announcements of technological innovations by us or our
competitors,
- announcements of new products or new contracts by us or our
competitors,
- actual or anticipated variations in our operating results due to
the level of development expenses and other factors,
- changes in financial estimates by securities analysts and whether
our earnings meet or exceed such estimates,
- conditions and trends in the pharmaceutical and other industries,
- new accounting standards,
- general market conditions and other factors, and
- the occurrence of any of the risks described in these "Risk
Factors."
In addition, if our stockholders sell a substantial number
of shares of our common stock in the public market, the market price of our
common stock could be reduced. As of August 5, 1999, there were 37,523,268
shares of common stock outstanding, of which approximately 17,000,000 were
immediately eligible for resale in the public market without restriction.
Holders of approximately 9,600,000 shares have rights to cause us to register
them for sale to the public. We have filed registration statements to
register the sale of approximately 7,000,000 of these shares. In addition,
Abbott will have the right on or after June 30, 2002 to cause us to register
for resale in the public market the 6,571,428 shares of common stock
purchased at the closing of the Abbott Alliance. Any such sales may make it
more difficult for us to raise needed capital
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through an offering of our equity or convertible debt securities and may
reduce the market price of our common stock.
Further, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market prices of equity
securities of many companies in our industry. Often, these fluctuations have
been unrelated or disproportionate to the operating performance of such
companies. These market fluctuations, as well as general economic, political
and market conditions such as recessions or international currency
fluctuations, may reduce the market price of our common stock. In the past,
following periods of volatility in the market price of the securities of
companies in our industry, securities class action litigation has often been
instituted against those companies. If we face such litigation in the future,
it would result in substantial costs and a diversion of management attention
and resources, which would negatively impact our business.
ANTITAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW
COULD DELAY, DEFER OR PREVENT A TENDER OFFER OR TAKEOVER ATTEMPT THAT YOU
CONSIDER TO BE IN YOUR BEST INTEREST.
We have adopted a number of provisions that could have antitakeover
effects. On January 29, 1999, our Board adopted a preferred stock purchase
rights plan, commonly referred to as a "poison pill." The rights plan is
intended to deter an attempt to acquire Triangle in a manner or on terms not
approved by the Board. Thus, the rights plan will not prevent an acquisition
of Triangle which is approved by the Board. Our charter authorizes our Board
to issue shares of undesignated preferred stock without stockholder approval
on terms as the Board may determine. Moreover, the issuance of preferred
stock may make it more difficult for a third party to acquire, or may
discourage a third party from acquiring, voting control of Triangle. Our
bylaws divide the Board into three classes of directors with each class
serving a three year term. These and other provisions of our charter and our
bylaws, as well as certain provisions of Delaware law, could delay or impede
the removal of incumbent directors and could make more difficult a merger,
tender offer or proxy contest involving Triangle, even if the events could be
beneficial to our stockholders. These provisions could also limit the price
that investors might be willing to pay for our common stock.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Triangle is exposed to various market risks, including changes in
foreign currency exchange rates and interest rates. Market risk is the
potential loss arising from adverse changes in market rates and prices, such
as foreign currency exchange and interest rates. At June 30, 1999, Triangle
had approximately $1.2 million of forward foreign currency contracts to hedge
anticipated foreign currency obligations and was also subject to interest
rate risk associated with its investment portfolio. All derivative financial
instruments are purchased in accordance with established policies and
procedures and require the approval, reporting and monitoring of derivative
financial instrument activities. The following discusses our exposure to
market risk related to changes in interest rates and foreign currency
exchange rates.
INTEREST RATE SENSITIVITY
Triangle is subject to interest rate risk on its investment
portfolio. We maintain an investment portfolio consisting primarily of high
quality government and corporate bonds with an average maturity of less than
one year. We attempt to mitigate default risk by investing in high credit
quality securities and by monitoring the credit rating of investment issuers.
Our investment portfolio includes only marketable securities with active
secondary or resale markets to help ensure portfolio liquidity and we have
implemented guidelines limiting the duration of investments. These
available-for-sale securities are subject to interest rate risk and will
decrease in value if market interest rates increase. If market rates were to
increase by 10% from levels at June 30, 1999, the fair value of the portfolio
is expected to decline by an immaterial aggregate amount primarily due to the
short maturity of the portfolio. At June 30, 1999, our portfolio consisted of
approximately $48.6 million of investments maturing within one year and
approximately $7.5 million of investments maturing after one year but within
18 months. Additionally, we generally have the ability to hold our fixed
income investments to maturity and therefore do not expect our consolidated
operating results, financial position or cash flows to be affected by a
significant amount due to a sudden change in interest rates.
FOREIGN CURRENCY EXCHANGE RISK
The majority of our transactions occur in U.S. dollars and we do not
have subsidiaries or investments in foreign countries. Therefore, we are not
subject to significant foreign currency exchange risk. We have, however,
established policies and procedures for market risk assessment, including a
foreign currency hedging program. The goal of our hedging program is to
economically guarantee, or lock into, exchange rates on firm foreign currency
cash outflows and to minimize the impact to the Company of foreign currency
fluctuations. These policies specifically provide for the hedging of firm
commitments and prohibit the holding of derivative instruments for
speculative or trading purposes. At June 30, 1999, Triangle had purchased
approximately $1.2 million of foreign currency contracts, in currencies
participating in the European Monetary Union maturing throughout 1999, to
hedge anticipated foreign currency commitments. The hypothetical loss
associated with a 10% devaluation of these foreign currencies would not
materially affect our consolidated operating results, financial position or
cash flows.
26
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TRIANGLE PHARMACEUTICALS, INC.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
c. Issuance of Unregistered Securities
On April 1, 1999, the Company issued 100,000 shares of Common Stock
to the former Avid stockholders for extending the date for payment of certain
contingent consideration under the merger agreement with Avid. No additional
consideration was received by the Company upon the issuance of such Common
Stock. No underwriters were involved in the issuance of such Common Stock.
On May 14, 1999, the Company issued 1,700,000 shares of Common Stock
to the holders of shares of Series A Preferred Stock (the "Preferred Shares")
in connection with the conversion of such Preferred Shares. Pursuant to the
terms of the Series A Preferred Stock, each outstanding Preferred Share
automatically converted into ten shares of Common Stock upon receipt of
stockholder approval, at the Company's annual meeting of stockholders held on
May 14, 1999, of the terms of the December 24, 1998 private placement of the
Preferred Shares. The consideration received by the Company in the private
placement of the Preferred Shares was $17,000,000 in cash, or a price of
$100.00 per Preferred Share. Net proceeds to the Company from the sale of the
Preferred Shares were approximately $15,800,000. Vector Securities
International, Inc. acted as placement agent for the sale of the Preferred
Shares. No additional consideration was received by the Company upon the
conversion of the Preferred Shares into Common Stock. The Company has agreed
to file a resale registration statement with the SEC relating to the sale of
the Common Stock issued upon the conversion of the Preferred Shares.
The above securities were offered and sold by the Company in
reliance upon exemptions from registration under Regulation D promulgated by
the SEC or, alternatively, under Section 4(2) of the Securities Act of 1933.
The Company did not use any general advertisement or solicitation in
connection with the offer or sale of the securities. Appropriate legends were
affixed to the certificates for the securities.
27
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 1999 Annual Meeting of Stockholders of Triangle
Pharmaceuticals, Inc. (the "Meeting") was held on May 14,
1999. The holders of 21,974,166 of the 28,927,819 shares of
the Company's Common Stock and none of the 170,000 shares of
the Company's Series A Preferred Stock (representing 1,346,534
votes which could be cast) outstanding on the record date were
present at the Meeting in person or by proxy.
(b) At the Meeting, M. Nixon Ellis, Ph.D. and Anthony B. Evnin,
Ph.D. were duly nominated and properly elected as Directors of
the Company to serve until the 2002 annual meeting of
stockholders or until their successors are elected and have
qualified. The number of votes cast for and withheld with
respect to each nominee for office are indicated below:
AGAINST/
FOR WITHHELD
--------------- -----------
M. Nixon Ellis, Ph.D. 21,970,115 4,051
Anthony B. Evnin, Ph.D. 21,970,115 4,051
The terms of office of David W. Barry, M.D., Standish M.
Fleming, Dennis B. Gillings, Ph.D., Henry G. Grabowski, Ph.D.
and George McFadden as directors of the Company continued
after the Meeting.
At the Meeting, a proposal to approve the terms of the Series
A Preferred Stock financing was approved. On December 24,
1998, the Company completed a private placement of 170,000
shares of Series A Preferred Stock, par value $0.001 per
share. Upon the receipt of stockholder approval, each
outstanding share of Preferred Stock converted automatically
into ten shares of Common Stock. The number of votes cast
for, against and to abstain on the proposal are indicated
below:
FOR AGAINST ABSTENTIONS
--------------- ------------- ---------------
18,184,049 440,424 5,472
At the Meeting, a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent
accountants for the fiscal year ending December 31, 1999 was
approved. The number of votes cast for, against and to abstain
on the proposal are indicated below:
FOR AGAINST ABSTENTIONS
--------------- ------------- ---------------
21,968,571 2,955 2,640
28
<PAGE>
ITEM 5. OTHER INFORMATION
On August 3, 1999, the Company closed its worldwide strategic
alliance with Abbott covering six antiviral compounds for the prevention and
treatment of HIV and hepatitis B virus. In the United States, Triangle and
Abbott will collaborate with respect to the development, registration,
manufacture, distribution and sales and marketing of four Triangle compounds
as well as co-promotion two Abbott HIV compounds in the United States; one of
these Abbott compounds, Norvir-TM- (ritonavir), has received FDA approval in
1996 for the treatment and prevention of HIV. Outside the United States,
Abbott has exclusive sales and marketing rights to promote the four Triangle
compounds and will continue to promote its two HIV compounds. Under the terms
of the Abbott Alliance, Abbott purchased approximately 6.57 million shares of
Triangle Common Stock at $18.00 per share. The net proceeds of this issuance,
after deducting issuance costs, are approximately $115.9 million.
Additionally, the Abbott Alliance provides for non-contingent research
funding of $31.7 million by January 15, 2000, up to $185.0 million of
contingent milestone payments and the sharing of future commercialization
costs and overall profits and losses from the four Triangle compounds.
Reference is made to the press release dated August 13, 1999 filed herewith.
29
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
(1)3.1 Restated Certificate of Incorporation of the Company
(1)3.2 Second Restated Certificate of Incorporation of the
Company
+10.1 Exclusive License Agreement among Glaxo Group
Limited, The Wellcome Foundation Limited, Glaxo
Wellcome Inc., Emory University and the Company dated
May 6, 1999
+10.2 Settlement Agreement by and among Emory University,
the Company, Dr. David W. Barry, Glaxo Wellcome plc,
Glaxo Wellcome Inc., Glaxo Group Limited and The
Wellcome Foundation Limited dated May 6, 1999
+10.3 Amendment to License Agreement by and between Bukwang
Pharm. Ind. Co., Ltd., and the Company dated April 1,
1999
+10.4 First Amendment to License Agreement by and between
the Company and Emory University dated May 6, 1999
10.5 Amendment Number One to the Agreement and Plan of
Merger by and among Avid Corporation, the Company and
Forrest H. Anthony, Alan G. Walton and Marcia T.
Bates dated February 28, 1999
10.6 Amendment Number One to the Agreement and Plan of
Reorganization by and among the Company, Avid
Corporation and Forrest H. Anthony, Alan G. Walton
and Marcia T. Bates dated February 28, 1999
11.1 Computation of Net Loss Per Common Share
27.1 Financial Data Schedule
99.1 Press release, dated August 13, 1999
(+) Certain confidential portions of this Exhibit were
omitted by means of marking such portions with an
asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without
the Mark pursuant to the Company's Application
Requesting Confidential Treatment under Rule 406 under
the Securities Act.
(1) These exhibits were previously filed as part of, and are
hereby incorporated by reference to, the same numbered
exhibit filed with the Company's Form 10-K (No. 000-21589)
filed on March 19, 1999.
b. Reports on Form 8-K
On June 18, 1999, the Company filed a Current Report on Form
8-K dated June 2, 1999 announcing its execution of a
Collaboration Agreement, a Co-Promotion Agreement, a Common
Stock Purchase Agreement, and a Stockholder Rights Agreement
associated with a strategic alliance with Abbott. These
agreements, and a manufacturing agreement executed in August
1999, collectively establish a worldwide strategic alliance
between Triangle and Abbott for six antiviral compounds.
Pursuant to the agreements, Abbott and Triangle will
collaborate with respect to the clinical development,
registration, distribution, and marketing of various
proprietary pharmaceutical products for the prevention and
treatment of HIV and the hepatitis B virus. In the United
States, Triangle and Abbott will co-promote four Triangle
products in active development and two Abbott products, one
approved in 1996 and the other in active development. Outside
the United States, Abbott will promote all six compounds under
exclusive sales and marketing rights for the Triangle
compounds. Triangle and Abbott will share profits and losses
for all Triangle drug candidates and Triangle will receive
detailing fees and commissions on incremental sales of Abbott
products.
30
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed
on its behalf by the undersigned, thereunto duly authorized.
TRIANGLE PHARMACEUTICALS, INC.
Date: August 12, 1999 By: /s/ David W. Barry
-------------------------------------
David W. Barry
Chairman and Chief Executive Officer
TRIANGLE PHARMACEUTICALS, INC.
Date: August 12, 1999 By: /s/ James A. Klein, Jr.
-------------------------------------
James A. Klein, Jr.
Chief Financial Officer and Treasurer
31
<PAGE>
EXHIBIT 10.1
EXECUTION COPY
EXCLUSIVE LICENSE AGREEMENT
AMONG
GLAXO GROUP LIMITED,
THE WELLCOME FOUNDATION LIMITED,
GLAXO WELLCOME INC.,
EMORY UNIVERSITY
AND
TRIANGLE PHARMACEUTICALS, INC.
[***] Confidential Treatment Requested
<PAGE>
EXCLUSIVE LICENSE AGREEMENT
THIS AGREEMENT is made and entered into as of this 6th day of May,
1999, by and among GLAXO GROUP LIMITED, a company organized and existing under
the laws of England and having its registered office at Glaxo Wellcome House,
Berkeley Avenue, Greenford, Middlesex, UB6 ONN, United Kingdom, THE WELLCOME
FOUNDATION LIMITED, a company organized and existing under the laws of
England and having its registered office at Glaxo Wellcome House, Berkeley
Avenue, Greenford, Middlesex, UB6 ONN, United Kingdom, together with GLAXO
WELLCOME INC., a corporation organized and existing under the laws of the
State of North Carolina and having its principal place of business at Five
Moore Drive, Research Triangle Park, North Carolina 27709 (hereinafter
collectively referred to as "GW"), EMORY UNIVERSITY, a Georgia non-profit
corporation with offices at 1380 South Oxford Road, N.E., Atlanta, Georgia
30322 (hereinafter referred to as "EMORY") and TRIANGLE PHARMACEUTICALS,
INC., a corporation organized and existing under the laws of the State of
Delaware and having its principal place of business located at 4 University
Place, 4611 University Drive, Durham, North Carolina 27707 (hereinafter
referred to as "TRIANGLE").
WITNESSETH:
WHEREAS, GW owns certain patents and patent applications covering the
use of the compound FTC (as hereinafter defined), certain technology
regarding the compound FTC, and a certain quantity of FTC Drug Substance (as
hereinafter defined);
WHEREAS, Emory is the owner of certain patents and patent applications
covering the compound FTC, and is the owner of certain technology regarding
the compound FTC;
WHEREAS, Triangle and Emory have entered into a License Agreement,
dated as of April 17, 1996, pursuant to which Emory has granted to Triangle
the exclusive rights under certain patents and patent applications which
contain claims covering the compound FTC and its use; and
WHEREAS, Emory and its licensee, Triangle, are developing FTC for use
in the Field (as hereinafter defined) and in certain territories;
NOW, THEREFORE, for and in consideration of the mutual covenants and
the premises herein contained, the parties, intending to be legally bound,
hereby agree as follows.
<PAGE>
ARTICLE 1. DEFINITIONS
The following terms as used herein shall have the following meanings:
1.1 "AFFILIATE" shall mean any corporation or non-corporate business
entity which controls, is controlled by, or is under common control with, a
party to this Agreement. A corporation or non-corporate business entity shall
be regarded as in control of another corporation if it owns, or directly or
indirectly controls, at least [***] ([***]%) percent of the voting stock of
the other corporation, or (a) in the absence of the ownership of at least
[***] ([***]%) percent of the voting stock of a corporation or (b) in the
case of a non-corporate business entity or non-profit corporation, if it
possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of such corporation or non-corporate business
entity, as applicable. For the avoidance of doubt, it is agreed that Glaxo
Wellcome plc is an Affiliate of GW.
1.2 "AGREEMENT" or "LICENSE AGREEMENT" shall mean this Agreement,
including all APPENDICES attached to this Agreement.
1.3 "DOLLARS" shall mean United States dollars.
1.4 "EFFECTIVE DATE" shall mean the date first set forth above or such
later date, if any, that all the conditions set forth in Article 9 have been
satisfied or, if applicable, waived.
1.5 "EMORY/TRIANGLE LICENSE AGREEMENT" shall mean the License
Agreement between Emory and Triangle, dated as of April 17, 1996, pursuant to
which Emory has granted to Triangle exclusive rights under certain patents
and patent applications relating to FTC, as may, from time to time, be
amended by Emory and Triangle.
1.6 "FDA" shall mean the United States Food and Drug Administration or
any successor entity.
1.7 "FIELD" shall mean the prevention and treatment of disease in
humans arising from infection by the human immunodeficiency virus (HIV)
and/or hepatitis B virus (HBV).
1.8 "FIRST COMMERCIAL SALE" shall mean the date, after approval by the
relevant regulatory authority, on which Emory or an Affiliate, or a
Sublicensee (including, but not limited to Triangle or its Affiliates and
Sublicensees or any Triangle Marketing Collaborator), or assignee first
transfers title to a Licensed Product to a third party for monetary
consideration.
1.9 "FTC" shall mean the (-)-enantiomer of
cis-4-amino-5-fluoro-1-[2-(hydroxymethyl)-1, 3-oxathiolan-5-yl]
- -2(1H)-pyrimidinone, also known as (2R,cis)
- -4-amino-5-fluoro-1-[2-(hydroxymethyl)-1,3-oxathiolan-5-yl]
- -2(1H)-pyrimidinone.
1.10 "FTC DRUG SUBSTANCE" shall mean such quantity of FTC, not less
than [***] in GW's possession as of the date first set forth above.
2
<PAGE>
1.11 "GW" shall mean Glaxo Group Limited, The Wellcome Foundation
Limited and Glaxo Wellcome Inc.
1.12 "GW COMPOUNDS" shall mean all compounds with respect to which GW
owns or is exclusively licensed under a patent claim to:
(i) the compound per se, or
(ii) a pharmaceutical composition containing it, or
(iii) its use to treat infections caused by HBV or HIV,
other than in combination with another active ingredient.
For the avoidance of doubt, the parties agree that:
(a) any combination of compounds not including the Licensed Compound,
but including a compound that is manufactured for commercial sale, sold or
marketed by GW or its Affiliates, and
(b) a combination containing Licensed Compound and any compound
manufactured for commercial sale, sold or marketed by GW or its Affiliates,
which combination is covered by a claim in a patent or patent application
owned or controlled by GW is and shall remain a GW Compound until the
expiration of such patent claim.
1.13 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and all regulations and rules promulgated thereunder.
1.14 "INDEMNITEES" shall mean (a) in the case of the indemnity set
forth in Sections 11.1 and 11.2, GW, its Affiliates, and their respective
directors, officers and employees; (b) in the case of the indemnity set forth
in Section 11.3, Emory, its Affiliates, Sublicensees, and their respective
directors, officers and employees; and (c) in the case of the Indemnitees
referenced in Section 11.4, the parties identified in Sections 11.1, 11.2 and
11.3, as applicable.
1.15 "LICENSED COMPOUND" shall mean (a) the compound with the chemical
name of 4-amino-5-fluoro-1-[2-(hydroxymethyl)-1, 3-oxathiolan-5-yl]-2(1H)-
pyrimidinone and shall be construed to include each isomer or
polymorph thereof, either separately or as part of a mixture; or (b) any
salts, esters and N-alkylated derivatives of any of the foregoing, or (c) FTC.
1.16 "LICENSED PATENTS" shall mean the patents and patent applications
identified in APPENDIX A attached hereto and made a part hereof, together
with any and all substitutions, extensions, divisionals, continuations,
continuations-in-part, renewals, supplementary protection certificates or
foreign counterparts of such patents and patent applications which issue
thereon, anywhere in the world, including reexamined and reissued patents.
3
<PAGE>
1.17 "LICENSED PRODUCT(S)" shall mean any pharmaceutical product
suitable for use in humans containing one or more Licensed Compounds as
active ingredients, alone or in combination with other active ingredients.
1.18 "LICENSED TECHNOLOGY" shall mean (a) the data, information,
reports, and other know-how, whether patented or not, listed on APPENDIX B
attached hereto and made a part hereof and (b) those regulatory filings
relating to Licensed Compound referred to in Section 8.4 hereof.
1.19 "LICENSED TERRITORY" shall mean the world.
1.20 "MAJOR MARKET COUNTRY" shall mean any of the [***]
1.21 "MARKETING COLLABORATOR" shall mean any entity or party with whom
Triangle (or Emory or any Emory Sublicensee) has a marketing arrangement with
respect to the marketing, sale, promotion or detail of Licensed Products,
including but not limited to co-marketing or co-promotion arrangements.
1.22 "MINOR MARKET COUNTRY" shall mean any country of the Territory
which is not specifically included in the definition of Major Market Country.
1.23 "NET SALES" shall mean:
(a) in the case of Licensed Product(s) which contain as their sole
active ingredient a Licensed Compound the proceeds of the sales of such
Licensed Product(s) sold by Emory, its Affiliates and Sublicensees (including
but not limited to Triangle or Triangle's Affiliates, Sublicensees or any
Triangle Marketing Collaborator) to third parties for use in the Field less
all normal and customary trade and quantity discounts, allowances, rebates
(including those paid to third party payors) and credits granted to third
parties on a country by country basis in the Licensed Territory, returns,
retroactive price reductions in lieu of returns and free replacements
actually granted to such third parties and taxes applicable to the use or
sale of Licensed Product(s) which Emory, its Affiliates and Sublicensees
(including but not limited to Triangle, its Affiliates, Sublicensees or any
Triangle Marketing Collaborator) have to pay or absorb on such use or sale on
a country by country basis in the Licensed Territory; or
(b) in the case of Licensed Products which contain as their active
ingredients both a Licensed Compound and one or more other compounds (a
"COMBINATION PRODUCT") the proceeds of the sales of Combination Product(s)
sold by Emory its Affiliates and Sublicensees (including but not limited to
Triangle or Triangle's Affiliates, Sublicensees or any Triangle Marketing
Collaborator) to third parties for use in the Field less all normal and
customary trade and quantity discounts, allowances, rebates (including those
paid to third party payors) and credits granted to third parties on a country
by country basis in the Licensed Territory, returns, retroactive price
4
<PAGE>
reductions in lieu of returns and free replacements actually granted to such
third parties and taxes applicable to the use or sale of Combination
Product(s) which Emory, its Affiliates and Sublicensees (including but not
limited to Triangle, its Affiliates, Sublicensees or any Triangle Marketing
Collaborator) have to pay or absorb on such use or sale on a country by
country basis in the Licensed Territory multiplied by a fraction the
numerator of which shall be the price at which Licensed Product is sold alone
in the quantity included in the Combination Product in a given country and
the denominator of which is the price of the Combination Product in such
country. In the event that the numerator of the formula referred to in the
preceding sentence cannot be determined due to the fact that a value for the
Licensed Product sold alone is not available in such country, then the
numerator of the formula shall be the simple average of the prices (in effect
with respect to the period for which royalties are being calculated
hereunder) at which Licensed Products are sold alone in the quantity included
in the Combination Product in all other countries of the Licensed Territory.
In the event that no Licensed Products are sold alone in any country of the
Licensed Territory, the parties shall negotiate in good faith a formula with
respect to the calculation of Net Sales for Combination Products.
1.24 "REGISTRATION" shall mean, in relation to any Licensed Product,
such approvals by the regulatory authorities in a given country (including,
where applicable, pricing approvals) as may be legally required before such
Licensed Product may be commercialized in such country.
1.25 "SETTLEMENT AGREEMENT" shall mean that certain settlement
agreement, by and among Glaxo Wellcome plc, Glaxo Wellcome Inc., Emory,
Triangle and Dr. David W. Barry, providing for the settlement, release and
dismissal of [***] and all related claims, and the claims of Dr. David W.
Barry.
1.26 "SUBLICENSEE" shall mean and refer to any party to whom Emory
licenses or sublicenses any of the rights granted by GW to Emory hereunder in
accordance with Section 2.2 hereof, including but not limited to Triangle.
Sublicensee shall also mean and refer to any party to whom Triangle licenses
or sublicenses any of the rights granted by GW to Emory hereunder, and
subsequently sublicensed to Triangle pursuant to the terms of the
Emory/Triangle License Agreement.
1.27 "VALID CLAIM" shall mean (a) an issued claim of any unexpired
patent included among the Licensed Patents, or (b) a pending claim of any
pending patent application included among the Licensed Patents, which has
not been held unenforceable, unpatentable or invalid by a decision of a court
or governmental body of competent jurisdiction, and which decision is
unappealable or unappealed within the time allowed for appeal, which has not
been rendered unenforceable through disclaimer or otherwise or which has not
been lost through an interference or opposition proceeding (and which
proceeding is unappealable or unappealed within the time allowed for appeal).
5
<PAGE>
ARTICLE 2. GRANT OF LICENSES
2.1A GRANT OF LICENSED PATENTS TO EMORY. Subject to Section 2.3
below, GW and its Affiliates hereby grant to Emory the exclusive right and
license to practice, with the right to sublicense, the Licensed Patents to
develop, make, have made, use, import, offer for sale and sell Licensed
Products in the Field within the Licensed Territory. For the avoidance of
doubt, it is hereby confirmed that no license, right or immunity from suit
under any GW patent or know-how is granted by this Agreement to Emory, its
Affiliates and its Sublicensees to develop, make, have made, import, use or
sell any Licensed Compound or Licensed Product in physical combination with any
GW Compound.
2.1B GRANT OF LICENSED TECHNOLOGY TO EMORY. Subject to Section 2.3
below, GW and its Affiliates hereby grant to Emory the exclusive right and
license to practice, with the right to sublicense, the Licensed Technology to
develop, make, have made, use, import, offer for sale and sell Licensed
Products in the Field within the Licensed Territory.
2.2 SUBLICENSE TO TRIANGLE; SUBLICENSING IN GENERAL. The parties
acknowledge that certain of the rights granted by GW to Emory hereunder are
being simultaneously sublicensed by Emory to Triangle pursuant to the terms
of an amendment to the Emory/Triangle License Agreement dated as of the date
hereof. GW hereby consents to the sublicense of the Licensed Patents by Emory
to Triangle. GW hereby also consents to the sublicense of the Licensed
Technology by Emory to Triangle. Emory hereby guarantees the performance of
each of its Sublicensees (including, but not limited to, Triangle, and its
Affiliates and Sublicensees). Emory and Triangle, as the case may be, may
enter into further sublicenses of the rights granted to it hereunder without
GW's consent. Triangle agrees that all royalty payments which are due under
the terms of this Agreement and which arise from the sale by Triangle and its
Affiliates, Sublicensees and Marketing Collaborators of Licensed Products
shall be paid directly to GW.
2.3 RIGHTS RESERVED TO GW. Notwithstanding Section 2.1A and 2.1B
above, there is reserved to GW the right (a) under the Licensed Patents to
make, have made, use and import Licensed Compounds and to use Licensed
Technology in support of or in connection with its own research and (b) to
promote, make, have made, use, import, offer for sale and sell any compound,
other than a Licensed Compound, for use in combination or association with a
Licensed Compound. This provision shall not be construed by implication,
estoppel or otherwise to confer any rights upon GW under any patents owned by
Emory or to sell any compound in physical combination with Licensed Compound.
GW shall not have the right to sublicense or otherwise transfer the rights
under Section 2.3(a) above, except to (i) to a successor to all or
substantially all of the business of GW to which this Agreement pertains, or
(ii) an Affiliate.
2.4 NO IMPLIED LICENSE. (a) The license and rights granted in this
Agreement shall not be construed by implication, estoppel or otherwise
(except as expressly granted herein) to confer any rights upon Emory or
Emory's Affiliates or Sublicensees under:
6
<PAGE>
(i) any patents or patent applications owned or controlled by
GW to make, have made, use, import, offer for sale or sell any
compound other than a Licensed Compound. It is acknowledged by the
parties that certain patent and patent applications owned or
controlled by GW may contain claims to manufacturing processes (but
not any Swiss-style second medical use claims) which may be useful
in the manufacture of Licensed Compounds or Licensed Products and
which are not covered by the Licensed Patents (the "Specifically
Excluded Claims") and that no rights are conferred upon Emory or
Emory's Affiliates or Sublicensees under the Specifically Excluded
Claims, or
(ii) any manufacturing or other technology not specifically
identified in this Agreement as being licensed to Emory, its
Affiliates and Sublicensees.
(b) To the best of GW's knowledge, GW and its Affiliates do not,
as of the date of this Agreement, own or control any manufacturing process
patent or patent application that:
(i) recites in a claim a nucleoside or an intermediate for
producing a nucleoside; and
(ii) is specifically applicable to the manufacture of Licensed
Compound,
except for PCT International Publication Numbers WO 95/29174 and WO 92/20669.
Notwithstanding the foregoing, no assurance is given by GW and its Affiliates
with respect to any patent or patent application which may contain claims to
manufacturing processes that are not specific to nucleosides.
2.5 COVENANT-NOT-TO-SUE. (a) GW and its Affiliates shall not, during
the term of this Agreement, assert, induce, assist or direct any third party
to assert against Emory, its Affiliates or its Sublicensees any patent claim,
other than the Specifically Excluded Claims, granted on an application filed
as of the Effective Date of this Agreement or within six months thereafter
that is or might be infringed by reason of and which, but for this covenant,
would prevent the manufacture, use, import, offer for sale or sale by Emory
or its Affiliates or Sublicensees in the Territory and for use in the Field
of (i) a Licensed Compound, or (ii) Licensed Compound in physical combination
with any compound(s) other than a GW Compound, or (ii) a Licensed Compound
in physical combination with a GW Compound in a particular country if, and
only if, a third party would be free to manufacture, use, import, offer for
sale such physical combination in such country without rights from GW.
(b) GW represents and warrants to Emory and Triangle that neither GW
nor its Affiliates have delayed or will delay the filing of any patent
application for the purpose of excluding such patent application from the
scope or effect of this Section 2.5.
(c) It is hereby confirmed, for the avoidance of doubt, that Emory, its
Affiliates and its Sublicensees shall be entitled to promote Licensed
Compound for use in the Field in co-administration with any and all products,
including products owned, controlled, sold, distributed, marketed or promoted
by GW and its Affiliates. It is also hereby confirmed that no license, right
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or immunity from suit under any GW patent or know-how is granted by this
Agreement to Emory, its Affiliates and its Sublicensees to develop, make,
have made, import, use or sell any Licensed Compound or Licensed Product in
physical combination with any GW Compound.
(d) It is hereby confirmed, for the avoidance of doubt, that the
covenant-not-to-sue contained in Section 2.5(a) hereof shall not apply to any
patent claim or patent application which GW acquires, whether by license,
assignment, acquisition of assets, acquisition of stock, merger, operation of
law or other transfer, from any party (other than an Affiliate (as of the
date of this Agreement) of GW) subsequent to the date of this Agreement,
regardless of the date of application or the date of grant of such patent
claim.
ARTICLE 3. FEES, ROYALTIES AND OTHER PAYMENTS
3.1 LICENSED PATENTS FEE. As consideration for granting to Emory the
license referred to in Section 2.1A hereunder to the Licensed Patents, and the
consent by GW to the sublicense by Emory of the Licensed Patents to Triangle,
Triangle shall pay to GW a non-creditable, non-refundable license fee of [***]
Dollars [***] (the "Licensed Patents Fee") payable as specified in the
succeeding sentence. [***] Dollars ($[***]) of such Licensed Patents Fee
shall be payable to Glaxo Wellcome Inc. by wire transfer within [***] ([***])
[***] of the Effective Date, and [***] Dollars ($[***]) of such Licensed
Patents Fee shall be payable to Glaxo Group Limited by wire transfer within
[***] ([***]) [***] of the Effective Date; PROVIDED, in each case, that wire
transfer instructions have been given to Triangle within [***] ([***]) [***]
after the Effective Date by each of Glaxo Wellcome Inc. and Glaxo Group
Limited.
3.2 EARNED ROYALTIES ON LICENSED TECHNOLOGY. As consideration for
granting to Emory the license referred to in Section 2.1B hereunder to the
Licensed Technology, and the consent by GW to the sublicense by Emory of the
Licensed Technology to Triangle, Emory shall pay, or cause to be paid to, GW
a royalty of [***] percent ([***]%) of the Net Sales of Licensed Products
sold in the Licensed Territory for use in the Field by Emory, its Affiliates
and Sublicensees (including but not limited to Triangle, its Affiliates,
Sublicensees or any Triangle Marketing Collaborators). The parties agree,
however, that the royalty obligation of [***] percent ([***]%) with respect
to Net Sales of Licensed Products sold by Triangle (and its Affiliates,
Sublicensees and Marketing Collaborators) shall be paid by Triangle directly
to GW, in lieu of being paid to Emory and in complete satisfaction thereof.
Royalties shall be paid in respect of Licensed Products sold in a given Major
Market Country for a period of [***] from the date of First Commercial Sale
of the first Licensed Product in such Major Market Country. Royalties shall
be paid in respect of Licensed Products sold in a given Minor Market Country
from the date of First Commercial Sale of the first Licensed Product in such
Minor Market Country and lasting until the expiry of the [***] ([***]) [***]
period from the First Commercial Sale of the first Licensed Product in the
first Major Market Country. All royalties on Net Sales of Licensed Products
sold in the United States of America whether by Emory, its Affiliates or
Sublicensees (including but not limited to Triangle or Triangle's Affiliates,
Sublicensees or any Triangle Marketing Collaborator) shall be payable to
Glaxo Wellcome Inc., while all royalties on Net Sales of Licensed Products
sold in all other countries of the Licensed Territory whether by
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Emory, its Affiliates or Sublicensees (including but not limited to Triangle
or Triangle's Affiliates, Sublicensees or any Triangle Marketing
Collaborator) shall be payable to Glaxo Group Limited.
3.3 ACCRUAL OF ROYALTIES. No royalty shall be payable on a Licensed
Product made, sold, or used for tests or development purposes or distributed
as samples. No royalties shall be payable on sales among Emory, its
Affiliates and Sublicensees (including, but not limited to, Triangle), but
royalties shall be payable on subsequent sales by Emory, its Affiliates or
Sublicensees (including, but not limited to, Triangle or Triangle's
Affiliates, Sublicensees or any Triangle Marketing Collaborator, so long as
Triangle pays royalties to GW with respect to all sales made by such Triangle
Marketing Collaborator) to a third party. No multiple royalty shall be
payable because the manufacture, use, importation, sale, or offer for sale of
a Licensed Product may be covered by more than one aspect of the Licensed
Technology.
3.4 WITHHOLDING TAX ASSISTANCE. In the event that Emory, its
Affiliates, Sublicensees or any Triangle Marketing Collaborator (including,
but not limited to, Triangle and its Affiliates, Sublicensees or any Triangle
Marketing Collaborator) are required to pay or withhold any amount from any
payment (whether a fee, a royalty payment or otherwise) due to Glaxo Group
Limited or Glaxo Wellcome Inc., as the case may be, under the terms of this
Agreement, then in such event Emory, its Affiliates or Sublicensees
(including, but not limited to, Triangle and its Affiliates, Sublicensees or
any Triangle Marketing Collaborator) shall give each of Glaxo Wellcome Inc.
or Glaxo Group Limited, as the case may be, such assistance as may be
reasonably necessary to enable or assist each of Glaxo Wellcome Inc. or Glaxo
Group Limited, as the case may be, to claim exemption therefrom or a
reduction thereof, and Emory, its Affiliates or Sublicenses (including, but
not limited to, Triangle and its Affiliates, Sublicensees or any Triangle
Marketing Collaborator) shall, upon request, provide documentation from time
to time to confirm the payment of such tax or withholding. GW agrees to
reimburse any party providing assistance to GW pursuant to this Section 3.4
for such party's reasonable and necessary out-of-pocket expenses incurred in
rendering such assistance.
ARTICLE 4. REPORTS AND ACCOUNTING
4.1 ROYALTY REPORTS AND RECORDS. (a) Commencing with the First
Commercial Sale of the initial Licensed Product, Emory shall furnish, or
cause to be furnished to GW, written reports, substantially in the format
attached as Appendix C hereto, covering each of Emory's or Triangle's fiscal
quarters showing:
(i) the gross sales of all Licensed Products sold by Emory, its
Affiliates and Sublicensees (including but not limited to Triangle or
Triangle's Affiliates, Sublicensees or any Triangle Marketing
Collaborator) in the Licensed Territory during the reporting period,
together with the calculations of Net Sales in accordance with
Section 1.23 hereof; and
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(ii) the royalties payable in Dollars, which shall have accrued
hereunder in respect to such sales;
(iii) the exchange rates used, if any, in determining the amount of
Dollars;
(iv) the discounts, allowances, rebates, credits, returns, free
replacements and taxes applicable to the use and sale of Licensed
Products that have been required to be withheld during the reporting
period; and
(v) a summary of all financial reports provided to Emory by
Emory's Affiliates and Sublicensees (including but not limited to
Triangle) to which Emory has granted a license or sublicense of any of
the rights licensed by GW to Emory under this Agreement covering Net
Sales of Licensed Products.
(b) With respect to sales of Licensed Products invoiced in Dollars, the
gross sales, Net Sales, and royalties payable shall be expressed in Dollars.
With respect to sales of Licensed Products invoiced in a currency other than
Dollars, the gross sales, Net Sales, and royalties payable shall be expressed
in the domestic currency of the party making the sale together with the
Dollar equivalent of the royalty payable, calculated using the simple average
of the exchange rates for such domestic currency published in THE WALL STREET
JOURNAL on the last day of each month during the reporting period. If any
Emory Affiliate or Sublicensee (including but not limited to Triangle) makes
any sales invoiced in a currency other than its domestic currency, the gross
sales and Net Sales shall be converted to its domestic currency in accordance
with the Affiliate's or Sublicensee's normal accounting practices. Emory or
its Affiliate or Sublicensee (including but not limited to Triangle) making
any royalty payment shall furnish to GW appropriate evidence of payment of
any tax or other amount deducted from any royalty payment.
(c) Reports shall be made on a quarterly basis. Quarterly reports shall
be due within sixty (60) days of the close of every Emory or Triangle fiscal
quarter. Emory and its Affiliates and Sublicensees (including but not limited
to Triangle, and its Affiliates and Sublicensees) shall for a period of [***]
keep accurate records in sufficient detail and in accordance with normal
accounting principles to enable royalties and other payments payable
hereunder to be determined. Emory shall be responsible for all royalties and
late payments that are due to GW that have not been paid by Emory's
Affiliates and Sublicensees (including but not limited to Triangle, and its
Affiliates and Sublicensees).
4.2 RIGHT TO AUDIT EMORY. GW shall have the right, upon prior notice
to Emory, not more than once in each Emory fiscal year nor more than once in
respect of each fiscal year, through an independent certified public
accountant selected by GW and acceptable to Emory, which acceptance shall not
be unreasonably refused or delayed, to have access during normal business
hours to those records of Emory and its Affiliates as may be reasonably
necessary to verify the accuracy of the royalty reports required to be
furnished by Emory pursuant to Section 4.1 of the Agreement. Such accountant
may report only the accuracy or inaccuracy of the royalty reports furnished
by Emory and, in the event they are determined to be inaccurate, the
corrections in the amounts which need to be made to such reports. The accountant
may not disclose to GW any
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other confidential information that it learns as a result of such audit.
Emory shall include in any sublicenses granted pursuant to this Agreement a
provision requiring the Sublicensee to keep and maintain records of sales
made pursuant to such Sublicense and to grant access to such records by GW's
independent certified public accountant in the same manner and extent
prescribed in this Section 4.2. If such independent certified public
accountant's report shows any underpayment of royalties by Emory, its
Affiliates or Sublicensees, within [***] after Emory's receipt of such
report, Emory shall remit or shall cause its Sublicensees to remit to GW:
(a) the amount of such underpayment; and
(b) if such underpayment exceeds [***] ([***]%) percent of the total
royalties owed for the fiscal year then being reviewed, the reasonable and
necessary fees and expenses of such independent certified public accountant
performing the audit. Otherwise, GW's accountant's fees and expenses shall be
paid by GW. Any overpayment of royalties shall be fully creditable against
future royalties payable in any subsequent royalty periods and, if no future
royalties are due, shall be promptly refunded. Upon the expiration of [***]
following the end of any fiscal year, the calculation of royalties payable
with respect to such fiscal year shall be binding and conclusive on GW and
Emory, unless an audit is initiated before expiration of such [***].
4.3 RIGHT TO AUDIT TRIANGLE. GW shall have the right, upon prior notice
to Triangle, not more than once in each Triangle fiscal year nor more than
once in respect of each fiscal year, through an independent certified public
accountant selected by GW and acceptable to Triangle, which acceptance shall
not be unreasonably refused or delayed, to have access during normal business
hours to those records of Triangle and its Affiliates as may be reasonably
necessary to verify the accuracy of the royalty reports required to be
furnished by Triangle pursuant to Section 4.1 of the Agreement, or the
royalty reports required to be furnished by Triangle under the terms of the
license agreement between Emory and Triangle, as the case may be. Such
accountant may report only the accuracy or inaccuracy of the royalty reports
furnished by Triangle, and in the event they are determined to be inaccurate,
the corrections in the amounts which need to be made to such reports. The
accountant may not disclose to GW any other confidential information that it
learns as a result of such audit. Triangle shall include in any sublicenses
granted by it pursuant to this Agreement a provision requiring the
Sublicensee to keep and maintain records of sales made pursuant to such
sublicense and to grant access to such records by GW's independent certified
public accountant in the same manner and extent prescribed in this Section
4.3. If such independent certified public accountant's report shows any
underpayment of royalties by Triangle, its Affiliates of Sublicensees, within
[***] after Triangle's receipt of such report, Triangle shall remit or shall
cause its Sublicensees to remit to GW:
(a) the amount of such underpayment; and
(b) if such underpayment exceeds [***] ([***]%) percent of the total
royalties owed for the fiscal year then being reviewed, the reasonable and
necessary fees and expenses of such independent certified public accountant
performing the audit. Otherwise, GW's accountant's fees and expenses shall be
paid by GW. Any overpayment of royalties shall be fully creditable against
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future royalties payable in any subsequent royalty periods. Upon the
expiration of [***] following the end of any fiscal year, the calculation of
royalties payable with respect to such fiscal year shall be binding and
conclusive on GW and Triangle, unless an audit is initiated before expiration
of such [***] .
4.4 CONFIDENTIALITY OF RECORDS. All information subject to review under
this Article 4 shall be confidential. Except where otherwise required by
applicable law, GW and its accountant shall retain all such information in
confidence.
ARTICLE 5. PAYMENTS
5.1 PAYMENTS AND DUE DATES. Except as otherwise provided herein,
royalties payable to GW during the period covered by each royalty report
required to be submitted under Article 4 of this Agreement shall be due and
payable to the relevant GW party as specified in Section 3.2 hereof on the
date such royalty report is due. Payments of royalties in whole or in part
may be made in advance of such due date. Any payments due under this
Agreement shall be made by wire transfer to an account of the relevant GW
party specified in Section 3.2 hereof designated by such GW party, as the
case may be, from time to time; PROVIDED, HOWEVER, that in the event that the
relevant GW party as specified in Section 3.2 hereof, fails to designate such
account, Emory (or Triangle, as the case may be) may remit payment to the
relevant GW party in accordance with Section 3.2 hereof, and at the address
applicable for the receipt of notices hereunder.
5.2 INTEREST. Royalties and other payments required to be paid by Emory
(or Triangle, as the case may be) pursuant to this Agreement shall, if
overdue, bear interest at the lessor of [***] or a per annum rate of [***]
percent ([***] %) until paid from the date that such royalty or payment was
due until the date that such payment is paid. The payment of such interest
shall not foreclose GW from exercising any other rights it may have because
any payment is overdue.
ARTICLE 6. PATENT PROSECUTION
6.1. GW OBLIGATIONS. GW shall be primarily responsible, at GW's
expense, for all patent prosecution activities pertaining to the Licensed
Patents. GW shall, at its discretion, obtain from the relevant patent
offices, prosecute and maintain any interference or opposition involving or
in respect of the Licensed Patents or pertaining to their validity,
enforceability, allowability or subsistence (all of the foregoing activities
being referred to as "GW PATENT PROSECUTION ACTIVITIES") and shall provide
Emory, at Emory's cost, with copies of such applications, substantive filings
and substantive correspondence pertaining to such GW Patent Prosecution
Activities (pre and post the date hereof), in a timely manner, as required to
keep Emory informed of the status of GW Patent Prosecution Activities. GW
shall give good faith consideration to any suggestions or requests made by
Emory with respect to the prosecution of Licensed Patents.
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6.2 EMORY'S ASSUMPTION RIGHTS. If GW decides to abandon or allow to
lapse any of the patent applications or patents within the Licensed Patents
or to discontinue any other GW Patent Prosecution Activities in respect
thereof in any country of the Licensed Territory, GW shall notify Emory of
its decision to do so at least sixty (60) days before the decision is
implemented or becomes effective; PROVIDED, HOWEVER, that in the event that
sixty (60) days notice is not possible, GW shall give Emory such advance
notice as is reasonably practicable. Such notice shall contain a statement of
GW's out-of pocket expenses incurred in respect of such GW Patent Prosecution
Activities commencing with the Effective Date and ending on the date of such
notice. Thereafter, GW shall allow Emory, at Emory's discretion, to assume GW
Patent Prosecution Activities in respect thereof, PROVIDED, HOWEVER, that
Emory agrees in writing to reimburse GW for [***] percent ([***]%) of the
expenses specified in such notice. GW shall be responsible for all expenses
incurred by GW in respect to such GW Patent Prosecution Activities, except to
the extent, if any, that Emory assumes any GW Patent Prosecution Activities
which GW elects to abandon, allows to lapse or not to pursue, in which event,
Emory shall be responsible for any expenses it incurs in connection therewith
from and after the date of assumption. With respect to any GW Patent
Prosecution Activities assumed by Emory pursuant to this Section 6.2, Emory
shall thereafter have the right to abandon, allow to lapse or discontinue
such GW Patent Prosecution Activities, at its discretion.
ARTICLE 7. INFRINGEMENT OF LICENSED PATENTS
7.1 THIRD PARTY INFRINGEMENT. If Emory or GW becomes aware of any
activity that it believes represents a substantial infringement of a Valid
Claim, the party obtaining such knowledge shall promptly advise the other of
all relevant facts and circumstances pertaining to the potential
infringement. GW shall have the initial right to enforce any rights within
the Licensed Patents against such infringement, at its own expense.
7.2 EMORY'S RIGHT TO PURSUE THIRD PARTY INFRINGERS. To the extent
that any activity notified under Section 7.1 may represent a substantial
infringement of a Valid Claim and if GW shall fail, within [***] after
receiving notice from Emory of a potential infringement of the Licensed
Patents or after providing Emory with notice of such infringement, either (a)
to terminate such infringement or (b) to institute an action to prevent
continuation thereof and, thereafter, to prosecute such action diligently, or
if GW notifies Emory prior to the expiration of such [***] that it does not
plan to terminate the infringement of the Licensed Patents or institute such
action, then Emory shall have the right to do so. In the event that GW
institutes such an action, Emory and Triangle agree to fully cooperate with
GW, including being joined, at GW's expense, as a party if such action is
necessary. If Emory institutes such an action, GW shall cooperate with Emory
in such effort, including being joined, at Emory's expense, as a party to
such action if necessary. Any damage award or settlement payments made to GW
in connection with any action filed by it relating to infringement of the
Licensed Patents, after first reimbursing GW for its expenses, shall be
equally divided by GW and Emory. In the event Emory institutes any action
relating to infringement in any country of the Licensed Patents, Emory may
deposit up to [***] ([***]%) of any royalties which are otherwise payable to
GW in respect of sales of Licensed Products in that country during the
pendency of any such infringement action in
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an interest-bearing escrow account (bearing interest at rates comparable to
other Emory deposits of immediately available funds). Emory shall, upon the
final resolution or settlement of such infringement action, provide GW with
an accounting of the total royalty payments escrowed (and interest thereon)
and Emory's expenses incurred in such infringement action. Emory shall be
entitled to offset any expenses which Emory fails to recoup from any damage
award or settlement payments arising from such infringement action against
such escrowed royalties. Upon the conclusion of such litigation, any escrowed
payments (and interest thereon) in excess of Emory's unrecouped expenses
shall be immediately paid to GW. Any damage award or settlement payments made
to Emory in respect of a Licensed Patent in excess of Emory's expenses in
connection with any infringement action Emory initiates relating to the
Licensed Patents shall be equally divided by GW and Emory. It is expressly
understood that GW shall not be entitled to enforce or share in any recovery
solely with respect to any patent owned by Emory.
ARTICLE 8. TRANSFER OF TECHNOLOGY AND FTC DRUG SUBSTANCE
8.1 DELIVERY OBLIGATIONS. Within sixty (60) days after the Effective
Date, GW shall deliver to each of Emory at Emory's office and to Triangle at
Triangle's place of business a copy of the Licensed Technology. Within fifteen
(15) days after the Effective Date, GW shall deliver to Emory at Triangle's
place of business, all FTC Drug Substance and the existing batch records and
certificates of analysis relating to the FTC Drug Substance. Thereafter, GW
and Emory agree that Triangle shall have legal title to the FTC Drug
Substance.
8.2 WARRANTY DISCLAIMER. Emory acknowledges that it shall be
responsible for conducting (or for causing Triangle to conduct) any quality
assurance or quality control activities necessary in order for the FTC Drug
Substance to meet Good Clinical Practices and other regulatory requirements.
GW DOES NOT MAKE, AND SHALL NOT BE DEEMED TO HAVE MADE, ANY
REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE QUALITY, SAFETY OR
UTILITY OF THE FTC DRUG SUBSTANCE WHICH IS BEING TRANSFERRED BY GW "AS IS".
GW EXPRESSLY DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AND ANY OTHER IMPLIED WARRANTIES WITH RESPECT TO THE
QUALITY, SAFETY, OR UTILITY OF THE FTC DRUG SUBSTANCE.
8.3 RESPONSIBILITY. Emory agrees that Emory or Triangle or other
Sublicensees (as the case may be) shall bear all responsibility (including
regulatory responsibility) and liability for the use of any of the FTC Drug
Substance. Emory agrees that it shall not use, and Emory shall cause Triangle
and any other Sublicensee not to use any of the FTC Drug Substance in any
clinical trial or otherwise in humans unless results of its quality assurance
testing indicate that the FTC Drug Substance meets the specifications set
forth in a IND (which has been filed with, and not withdrawn from, the FDA)
with respect to FTC or a Licensed Compound, as determined in accordance with
the analytical methodology set forth therein.
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8.4 TRANSFER OF REGULATORY FILINGS. (a) Within ten (10) days of the
Effective Date, GW shall prepare and deliver to Triangle, one complete
photocopy of GW's US IND for FTC (US Ind #[***]). Thereafter, GW shall
promptly prepare and submit to FDA (with a copy to Triangle) a Letter of
Authorization to enable Triangle to incorporate by reference any information
contained in US IND #[***] with respect to the Licensed Compound. After the
Letter of Authorization has been processed by FDA, GW shall promptly submit
to FDA (with a copy to Triangle) a request to inactivate US IND #[***]; and
GW shall not thereafter make any request to reactivate such IND filing.
(b) Within ten (10) days of the Effective Date, GW shall prepare and
deliver to Triangle, one complete photocopy of GW's Canadian IND for FTC (HPB
file number [***]). Thereafter, GW shall promptly take such actions as are
necessary to inactivate (or to effectuate the Canadian regulatory equivalent
of inactivate) the Canadian IND, while still allowing Triangle the
opportunity to incorporate by reference any of the information contained in
the Canadian IND with respect to the Licensed Compound. GW shall not
thereafter make any request to reactivate the Canadian IND filing.
ARTICLE 9. CERTAIN COVENANTS AND ACKNOWLEDGEMENTS
9.1 CONDITIONS. This Agreement will not come into effect until the
conditions set forth in (a) and (b) below have been met:
(a) the HSR Act shall have been fully complied with by the parties
hereto, including the expiration or early termination of all applicable
waiting periods or compliance with any second request thereunder; and
(b) the Settlement Agreement shall have been executed and delivered by
all parties thereto.
ARTICLE 10. WARRANTIES AND REPRESENTATIONS
10.1 WARRANTIES OF GW. GW hereby represents and warrants to Emory that:
(a) APPENDIX A is a complete list of all patents and patent
applications within the Licensed Patents owned or controlled by GW and its
Affiliates as of the date hereof, except as may be otherwise specifically
excluded by the terms of this Agreement.
(b) To the best of GW's knowledge, APPENDIX B is a complete list of all
Licensed Technology developed, owned or acquired by GW and its Affiliates.
(c) Subject to the limitations contained in Section 10.4 hereof, each
of GW and its Affiliates have the right and authority to grant and convey the
rights granted and properties conveyed by each of GW and its Affiliates under
this Agreement.
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(d) To the best of GW's knowledge, the FTC Drug Substance delivered to
Emory hereunder constitutes the entire quantity of FTC presently possessed by
GW in bulk or dosage form. GW shall not bear any responsibility for
reductions in the quantity of FTC Drug Substance which occur between the date
of this Agreement and the date of transfer due to force majeur events.
(e) To the best of GW's knowledge, the rights contained in the Licensed
Patents and the rights contained in Section 2.5 hereof together provide Emory
sufficient rights to be able to develop, make, have made, use, import, offer
for sale and sell Licensed Compound in the Field.
10.2 WARRANTIES OF EMORY. Emory hereby represents and warrants to GW
that the Board of Directors (or, if applicable, officials exercising similar
functions) of Emory (or, if different, of Emory's ultimate parent entity)
have, in accordance with Section 801.10(c)(3) of the Premerger Notification
Rules, determined that the fair market value of the exclusive rights to be
acquired by Emory from GW pursuant to this Agreement and the Settlement
Agreement, less the fair market value of that portion of those exclusive
rights which Emory will exclusively assign, license, or sublicense to
Triangle, does not exceed $[***].
10.3 WARRANTIES OF EACH PARTY. Each party hereto represents to the
others that it is free to enter into this Agreement and to carry out all of
the provisions hereof, including, in the case of GW, its grant to Emory of
the license described in Section 2.1A and 2.1B hereunder.
10.4 GENERAL WARRANTY DISCLAIMER. GW MAKES NO REPRESENTATION OR
WARRANTY OTHER THAN THOSE EXPRESSLY PROVIDED HEREUNDER AND GW HEREBY
EXPRESSLY DISCLAIMS ALL SUCH OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY, OR THE FITNESS FOR A
PARTICULAR PURPOSE OF THE LICENSED COMPOUND, THE LICENSED PRODUCT, THE
LICENSED PATENTS OR THE LICENSED TECHNOLOGY.
WITHOUT LIMITING THE FOREGOING, GW MAKES NO REPRESENTATION OR WARRANTY
THAT THE LICENSED COMPOUND OR ANY LICENSED PRODUCT ARE, OR WILL BE SHOWN TO
BE, SAFE OR EFFECTIVE FOR ANY INDICATION.
10.5 EXCLUSION OF IP WARRANTIES. GW MAKES NO REPRESENTATION OR
WARRANTY OR ANY KIND WITH RESPECT TO THE VALIDITY OF THE LICENSED PATENTS,
LICENSED TECHNOLOGY OR LICENSED PRODUCTS. WITHOUT LIMITING THE FOREGOING, GW
MAKES NO REPRESENTATION OR WARRANTY THAT THE LICENSED COMPOUND, THE LICENSED
PRODUCT OR THE LICENSED PATENTS WILL BE FREE FROM THE INTELLECTUAL PROPERTY
CLAIMS OF THIRD PARTIES. GW WILL NOT BEAR ANY RESPONSIBILITY OR LIABILITY IF
A THIRD PARTY WERE TO ASSERT RIGHTS WHICH WOULD HAVE THE EFFECT OF PREVENTING
A LICENSED COMPOUND OR LICENSED PRODUCT FROM LAWFULLY REACHING THE MARKET IN
ANY COUNTRY OF THE TERRITORY.
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10.6 NO LIABILITY FOR CONSEQUENTIAL DAMAGES AND LIMITATION OF LIABILITY.
GW shall not be liable to Emory, its Affiliates, or its Sublicensees
(including but not limited to Triangle, or its Affiliates, Sublicensees and
Marketing Collaborators), its or their customers, or any other third party
for compensatory, special, incidental, indirect, consequential or exemplary
damages resulting from the manufacture, testing, design, labeling, use, sale,
distribution or promotion of Licensed Products by or through Emory, its
Affiliates or Sublicensees (including but not limited to Triangle, or its
Affiliates, Sublicensees and Marketing Collaborators).
ARTICLE 11. INDEMNIFICATION
11.1 EMORY'S INDEMNIFICATION. Subject to compliance by the Indemnitees
with their obligations set forth in Section 11.4, Emory shall defend,
indemnify, and hold harmless the Indemnitees, from and against any and all
claims, demands, losses, liabilities, expenses, and damages including
investigative costs, court costs and reasonable attorneys' fees and expenses
(collectively, the "Liabilities") which Indemnitees may suffer, pay, or
incur as a result of or in connection with: (a) any and all personal injury
(including death) and property damage caused or contributed to, in whole or
in part, by the manufacture, testing, design, use, labeling, sale,
distribution, promotion of any Licensed Products by Emory or Emory's
Affiliates or Sublicensees (including but not limited to Triangle and its
Affiliates and Sublicensees), (b) any breach by Emory or its Affiliates or
Sublicensees of its representations, warranties and covenants contained in
this Agreement. Emory's obligations under this Article shall survive the
expiration or termination of this Agreement for any reason. Any provision of
this Article 11 to the contrary notwithstanding, with respect to any claim
for indemnification made by any Indemnitee under subsection (a) above
involving the co-administration of a Licensed Product and one or more
products marketed, sold, promoted or distributed by GW, Emory shall have no
obligations or liabilities to GW and its Affiliates under this Article 11
unless and until (and only to the extent) that there is a judicial
determination (unappealable or unappealed within the time allowed for appeal)
or agreement between the Indemnitee and Emory that the liabilities for
which indemnification is being sought were caused by, or contributed to, by
the manufacture, testing, design, use, labeling, sale, distribution or
promotion of any Licensed Products by Emory or its Affiliates or Sublicensees
(including, but not limited to Triangle, and its Affiliates or Sublicensees).
11.2 TRIANGLE'S INDEMNIFICATION. Subject to compliance by the
Indemnitees with their obligations set forth in Section 11.4, Triangle shall
indemnify and hold the Indemnitees harmless from and against any and all
Liabilities which Indemnitees may suffer, pay or incur as a result of or in
connection with: (a) any and all personal injury (including death) and
property damage caused or contributed to, in whole or in part, by the
manufacture, testing, design, use, labeling, sale, distribution, promotion
of any Licensed Products by Triangle or Triangle's Affiliates or
Sublicensees, (b) any breach by Triangle of its representations, warranties
and covenants contained in this Agreement. Triangle's obligations under this
Article shall survive expiration or termination of this Agreement for any
reason. Any provision of this Article 11 to the contrary notwithstanding,
with respect to any claim for indemnification made by any Indemnitee under
17
<PAGE>
subsection (a) above involving the co-administration of a Licensed Product
and one or more products marketed, sold, promoted or distributed by GW,
Triangle shall have no obligations or liabilities to GW and its Affiliates
under this Article 11 unless and until (and only to the extent) that there is
a judicial determination (unappealable or unappealed within the time allowed
for appeal) or agreement between the Indemnitee and Triangle that the
liabilities for which indemnification is being sought were caused by, or
contributed to, by the manufacture, testing, design, use, labeling, sale,
distribution or promotion of any Licensed Products by Triangle or its
Affiliates or Sublicensees.
11.3 GW'S INDEMNIFICATION. Subject to compliance by the Indemnitees
with their obligations set forth in Section 11.4, GW shall indemnify and hold
the Indemnities harmless from and against any and all Liabilities which
Indemnitees may suffer, pay or incur as a result of or in connection with any
breach by GW of any of its representations, warranties and covenants set
forth in this Agreement GW's obligations under this Article shall survive
expiration or termination of this Agreement for any reason. Any provision
of this Article 11 to the contrary notwithstanding, with respect to any claim
for indemnification made by any Indemnitee under subsection (a) above
involving the co-administration of a Licensed Product and one or more
products marketed, sold, promoted or distributed by GW, GW shall have no
obligations or liabilities to Emory and its Affiliates under this Article 11
unless and until (and only to the extent) that there is a judicial
determination (unappealable or unappealed within the time allowed for appeal)
or agreement between the Indemnitee and GW that the liabilities for which
indemnification is being sought were caused by, or contributed to, by the
manufacture, testing, design, use, labeling, sale, distribution or promotion
of any products marketed, sold, promoted or distributed by GW.
11.4 INDEMNIFICATION PROCEDURES. Any Indemnitee which intends to claim
indemnification under this Article shall promptly notify the other party (the
"Indemnitor") in writing of any matter in respect of which the Indemnitee or
any of its employees intend to claim such indemnification. The Indemnitee
shall permit, and shall cause its employees to permit, the Indemnitor, at
its discretion, to settle any such matter and agrees to the complete control
of such defense or settlement by the Indemnitor; PROVIDED, HOWEVER, that such
settlement does not adversely affect the Indemnitee's rights hereunder or
impose any material obligations on the Indemnitee in addition to those set
forth herein in order for it to exercise such rights. No such matter shall be
settled without the prior written consent of the Indemnitor and the Indemnitor
shall not be responsible for any legal fees or other costs incurred other
than as provided herein. The Indemnitee and its employees shall cooperate
fully with the Indemnitor and its legal representatives in the investigation
and defense of any matter covered by the applicable indemnification. The
Indemnitee shall have the right, but not the obligation, to be represented by
counsel of its own selection and expense.
18
<PAGE>
ARTICLE 12. CONFIDENTIALITY
12.1 TREATMENT OF CONFIDENTIAL INFORMATION. Except as otherwise
provided hereunder, during the term of this Agreement and in the event Emory
shall terminate this Agreement in accordance with Section 13.3 for a period
of [***] ([***]) years thereafter and in event of any other termination for a
period of [***] ([***]) years thereafter:
(a) Emory and its Affiliates and Sublicensees shall retain in
confidence and use only for purposes of this Agreement, any written
information and data (including without limitation Licensed Technology)
supplied by or on behalf of GW under this Agreement; and
(b) GW shall retain in confidence and use only for purposes of this
Agreement any written information and data supplied by or on behalf of Emory
to GW under this Agreement.
For purposes of this Agreement, all such information and data which a
party is obligated to retain in confidence shall be called "INFORMATION."
12.2 RIGHT TO DISCLOSE. (a) To the extent that it is reasonably
necessary to fulfill its obligations or exercise its rights under this
Agreement, or any rights which survive termination or expiration hereof, a
party may disclose Information to its Affiliates, Sublicensees (actual or
prospective), consultants, outside contractors, actual or prospective
investors, and clinical investigators on condition that such entities or
persons agree:
(i) to keep the Information confidential for at least a period of
[***] ([***]) years from the date of disclosure and otherwise to the same
extent as such party is required to keep the Information confidential; and
(ii) to use the Information only for those purposes for which the
disclosing party is authorized to use the Information.
(b) Each party or its Affiliates or Sublicensees, as applicable, may
disclose Information to the government or other regulatory authorities to the
extent that such disclosure (i) is necessary or desirable for the prosecution
and enforcement of patents, or authorizations to conduct preclinical or
clinical trials of, or to commercially market, Licensed Products, provided
such party is then otherwise entitled to engage in such activities in
accordance with the provisions of this Agreement, or (ii) is legally required
including, without limitation, all applicable securities laws and regulations.
12.3 RELEASE FROM RESTRICTIONS. The obligation not to disclose or use
Information shall not apply to any part of such Information that:
(a) is or becomes patented (but the existence of a patent shall only
permit disclosure and not, unless otherwise provided hereunder, use),
published or otherwise part of the public domain, other than by unauthorized
acts of the party obligated not to disclose such Information (for
19
<PAGE>
purposes of this Article 12 the "receiving party") or its Affiliates or
Sublicensees in contravention of this Agreement;
(b) is disclosed to the receiving party or its Affiliates or
Sublicensees by a third party provided that such Information was not
obtained by such third party directly or indirectly from the other party to
this Agreement under an obligation of confidentiality;
(c) prior to disclosure under this Agreement, was already in the
possession of the receiving party, its Affiliates or Sublicensees, provided
that such Information was not obtained directly or indirectly from the other
party to this Agreement under an obligation of confidentiality;
(d) results from research and development by the receiving party or its
Affiliates or Sublicensees, independent of disclosures from the other party
to this Agreement, provided that the persons developing such information have
not had exposure to the Information received from the other party to this
Agreement;
(e) is required by law to be disclosed by the receiving party, provided
that in the case of disclosure in connection with any litigation, the
receiving party uses reasonable efforts to notify the other party immediately
upon learning of such requirement in order to give the other party reasonable
opportunity to oppose such requirement; or
(f) The disclosing party agrees in writing may be disclosed.
ARTICLE 13. TERM AND TERMINATION
13.1 TERM. Unless sooner terminated as otherwise provided in this
Agreement, the term of this Agreement shall commence on the Effective Date
and shall continue in full force and effect until the expiration of Emory's
obligations to pay royalties hereunder.
13.2 TERMINATION BY DEFAULT. If either Emory or Triangle defaults in
the performance of, or fails to be in compliance with, any material
agreement, condition or covenant of this Agreement including without
limitation the obligation to make royalty payments hereunder with respect to
the Licensed Technology, GW may terminate this Agreement including all rights
granted with respect to the Licensed Technology granted pursuant to Section
2.1B hereunder, as well as all rights to the Licensed Patents granted
pursuant to Section 2.1A hereunder, if such default, noncompliance, breach or
nonpayment shall not have been remedied, or reasonable steps shall not have
been initiated to remedy the same, within (60) days after receipt by Emory or
Triangle, as the case may be, of a written notice thereof from GW. If GW
defaults in the performance of, or fails to be in compliance with, any
material agreement, condition or covenant of this Agreement, Emory may
terminate this Agreement if such default or noncompliance shall not have been
remedied, or reasonable steps shall not have been initiated to remedy the
same, within sixty (60) days after receipt by GW of a written notice thereof
from Emory. In the event of
20
<PAGE>
a breach of this Agreement by any party hereto, the non-breaching parties
shall be entitled to all remedies provided by law or in equity in addition to
the remedies provided in this Agreement.
13.3 TERMINATION BY [***]. In the event [***] determines, in its sole
discretion, to cease development of the Licensed Products in a given country
or not to seek Registration of Licensed Products in a given country prior to
Registration of a Licensed Product in such country, [***] shall have the
right to terminate this Agreement in such country (without affecting this
Agreement in the remaining countries of the Territory), by giving GW [***]
prior written notice thereof.
13.4 OBLIGATIONS UPON TERMINATION. If this Agreement is terminated as a
result of Emory's or Triangle's breach pursuant to Section 13.2, or is
terminated in whole (but not in part) by [***] in accordance with Section
13.3, then Emory shall promptly cease using the Licensed Technology and the
Licensed Patents, and furthermore Emory and Triangle shall cease using the
FTC Drug Substance, and shall promptly return to GW or destroy, at GW's
option, all remaining quantities of the FTC Drug Substance. If GW elects to
have Triangle or Emory destroy the FTC Drug Substance, Triangle or Emory, as
the case may be, shall certify in writing that all quantities of FTC Drug
Substance have been destroyed within thirty (30) days of such election. If
this Agreement is terminated in part (but not in whole) by Emory in
accordance with Section 13.3, then Emory shall promptly cease using the
Licensed Technology and the Licensed Patents in respect of each such country
in which the license has been terminated by Emory.
13.5 EFFECT OF EXPIRATION OR TERMINATION. In the event of any
expiration or termination pursuant to this Article 13, neither party shall
have any remaining rights or obligations under this Agreement other than as
provided below:
(a) GW will have the right to receive all royalties and other payments
accrued prior to the effective date of termination, including interest
thereon as determined in accordance with Section 5.2 hereof;
(b) termination or expiration of this Agreement for any reason shall
have no effect on the parties' obligations under Articles 11 and 12;
(c) termination of this Agreement by Emory pursuant to Section 13.2
shall have no effect on Emory's rights under Sections 2.1A, 2.1B and 2.2,
subject to the fulfillment of its royalty and related obligations in
connection therewith as specified elsewhere in this Agreement;
(d) upon expiration of Emory's royalty obligations under this Agreement
in a given country, Emory, its Affiliates or Sublicensees (including
Triangle, its Affiliates and Sublicensees) shall have a perpetual, fully
paid-up license to use the Licensed Technology and Licensed Patents in such
country, and the covenant-not-to-sue provided in Section 2.5 hereof shall
continue in perpetuity with respect to such country without further
consideration from Emory, its Affiliates and Sublicensees;
21
<PAGE>
(e) termination of this Agreement by GW pursuant to Section 13.2 or by
Emory pursuant to Section 13.3, shall give rise to Emory's obligations under
Section 13.4; and
(f) except as otherwise specified herein, the parties' shall retain any
other remedies for breach of this Agreement they may otherwise have.
13.6 SEVERABILITY OF SUBLICENSEES. GW's right to terminate this
Agreement pursuant to Section 13.2 shall be severable with respect to each of
Emory's Sublicensees. Any remedy available to GW under Section 13.2 with
respect to any default or noncompliance by Triangle shall be limited to
termination of the rights granted to Emory hereunder only in that portion of
the Licensed Territory pursuant to which Triangle is Emory's Sublicensee
under the Emory/Triangle License Agreement; and any remedy available to GW
under Section 13.2 with respect to any default or noncompliance by any Emory
Sublicensee other than Triangle shall be limited to termination of the rights
granted to Emory hereunder only in that portion of the Licensed Territory in
which such Emory Sublicensee is sublicensed by Emory.
ARTICLE 14. ASSIGNMENT
14.1 ASSIGNMENT. None of the parties shall assign this Agreement or
any part thereof without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed. Each party may,
however, without consent, assign or sell its rights under this Agreement (a)
to an Affiliate; (b) in connection with the sale or transfer of all or
substantially all of its assets of its business to which this Agreement
pertains; or (c) in the event of its merger or consolidation with another
company irrespective of the surviving company in such merger or
consolidation. Any permitted assignee shall assume all obligations of its
assignor under this Agreement. No assignment shall relieve the assigning
party of responsibility for the performance of any accrued obligation which
such party has under this Agreement.
ARTICLE 15. GENERAL PROVISIONS
15.1 LEGAL COMPLIANCE. Each party shall comply with all laws and
regulations relating to the performance of its obligation or the exercise of
its rights hereunder.
15.2 INDEPENDENT CONTRACTORS. It is understood and agreed that the
parties hereto are independent contractors and are engaged in the operation
of their own respective businesses, and neither party hereto is to be
considered the agent, partner, or joint venturer of the other party for any
purpose whatsoever, and neither party shall have any authority to enter into
any contracts or assume any obligations for the other party nor make any
warranties or representations on behalf of that other party. It is
understood and agreed that to the extent that any relationship other than an
independent contractors relationship may have existed, or was alleged to have
existed, prior to the Effective Date of this Agreement, between GW or its
Affiliates on the one hand, and one or more
22
<PAGE>
of Emory or its Affiliates, and Triangle or its Affiliates on the other
hand, such relationship is hereby terminated and the parties are now solely
independent contractors.
15.3 PUBLICITY. On the date that this Agreement is executed, GW, Emory
and Triangle shall issue a joint press release the form of which shall be
agreed to by all parties hereto. Each of GW, Emory and Triangle shall be
permitted to issue additional press releases limited to the subject of the
economic or financial impact of this Agreement on each of GW, Emory or
Triangle, as the case may be, however, none of the specific financial terms
of this Agreement shall be disclosed. The other parties hereto shall have a
reasonable opportunity to review and comment on any such proposed press
release, which comments shall not be unreasonably refused. The specific terms
of this Agreement shall be confidential and neither party may publicly
disclose, except to legal, accounting and financial consultants and except as
otherwise provided herein, any such term without the prior written approval
of the other party, unless such disclosure is compelled by a court or
administrative agency or otherwise required by law. In the event that such
disclosure is compelled by a court or administrative agency or otherwise
required by law, the disclosing party shall make reasonable effort to provide
the other party with notice beforehand. Emory and its Affiliates and
Sublicensees (including Triangle) may disclose the terms of this Agreement to
a bona fide prospective sublicensee or Marketing Collaborator, subject to an
obligation of confidentiality of such sublicensee or Marketing Collaborator
that is no less restrictive than the confidentiality obligations contained
herein. GW and Emory hereby acknowledge that Triangle has notified each of
them that this Agreement constitutes a material agreement to Triangle and
must be filed by Triangle with the Securities and Exchange Commission
pursuant to Triangle's reporting obligations under the Securities and
Exchange Act of 1934, as amended. In any case where a party makes disclosure
of the terms hereunder to a court, it shall be disclosed under seal. In all
other respects, except as required by law, neither party shall use the name
of the other party in any publicity release without the prior written
permission of such other party, which shall not be unreasonably withheld.
The parties acknowledge that for the avoidance of doubt, each of GW and Emory
shall be free to disclose both the existence and the terms of this Agreement
to the [***] for the [***] in connection with [***] between Emory and GW.
15.4 HSR ACT COMPLIANCE. Promptly after the execution of this
Agreement, each of GW and Triangle shall file with the Federal Trade
Commission and the United States Department of Justice HSR Act Notification
and Report forms together with all information and documents necessary to
comply with the HSR Act notification and reporting requirements, and each of
them shall promptly furnish any and all additional information and
documentary material thereafter requested by either of such agencies, in
connection with the transactions contemplated by this Agreement. Each of GW
and Triangle shall also furnish to the other such information as the other
shall reasonably request to assist it in making such filings as it may be
legally required to make under the HSR Act. Each party shall use its best
efforts to obtain HSR Act clearance of the transactions contemplated by this
Agreement. All fees in connection with the HSR Act shall be borne by
Triangle, except that each party shall pay its own attorney's fees and
expenses.
23
<PAGE>
15.5 GOVERNING LAW. This Agreement and all amendments, modifications,
alterations, or supplements hereto, and the rights of the parties hereunder,
shall be construed under and governed by the laws of the [***] exclusive of
its conflicts of laws principles.
15.6 ENTIRE AGREEMENT; AMENDMENTS. (a) This Agreement and the
Settlement Agreement constitute the entirety of the agreements and
understandings between GW on the one hand and any other party on the other
hand and anyone acting for, associated with or employed by any party
concerning the subject matter hereof and thereof, respectively and replace
and supersede any and all prior discussions, agreements or understandings.
With respect to the subject matter hereof and thereof, respectively, there
are no promises, representations or agreements, whether oral or written,
between the parties hereto or anyone acting for, associated with or employed
by any party hereto other than as set forth in this Agreement and the
Settlement Agreement. Each party hereto represents and warrants that, other
than as recited herein and therein, there has been no reliance, inducement,
representation or agreement causing, affecting or in connection with this
Agreement and the Settlement Agreement.
(b) This Agreement can be amended or modified only by a written
instrument referencing this Agreement and executed by all of the parties
hereto.
15.7 SEVERABILITY. All rights and restrictions contained herein may be
exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this
Agreement, not essential to the commercial purpose of this Agreement, shall
be held to be illegal, invalid or unenforceable by a court of competent
jurisdiction, it is the intention of the parties that the remaining
provisions or portions thereof shall constitute their agreement with respect
to the subject matter hereof, and all such remaining provisions, or portions
thereof, shall remain in full force and effect. To the extent legally
permissible, any illegal, invalid or unenforceable provision of this
Agreement shall be replaced by a valid provision which shall implement the
commercial purpose of the illegal, invalid, or unenforceable provision. In
the event that any provision essential to the commercial purpose of this
Agreement is held to be illegal, invalid or unenforceable and cannot be
replaced by a valid provision which will implement the commercial purpose of
this Agreement, this Agreement and the rights granted herein, shall terminate.
15.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.9 NOTICES. All notices, statements, and reports required to be given
under this Agreement shall be in writing and shall be deemed to have been
given upon delivery in person or, when deposited (a) in the mail in the
country of residence of the party giving the notice, registered or certified
postage prepaid or (b) with a professional courier service (e.g. FedEx,
Airborne Express or UPS), and addressed as follows:
24
<PAGE>
If to GW: Glaxo Group Limited
Glaxo Wellcome House
Berkeley Avenue
Greenford, Middlesex UB6 ONN
United Kingdom
Attn: Company Secretary
Fax: [***]
With a required copy to:
The Wellcome Foundation Limited
Glaxo Wellcome House
Berkeley Avenue
Greenford, Middlesex
UB6 ONN, United Kingdom
Attn: Company Secretary
Fax: [***]
And a required copy to:
Glaxo Wellcome Inc.
Five Moore Drive
Research Triangle Park
North Carolina 27709
USA
Attn: General Counsel
Fax: [***]
If to Emory: Emory University
Office of the Executive Vice President
401 Administration Building
Atlanta, Georgia 30322
Attn: John L. Temple
Fax: [***]
With a required copy to:
Emory University
Office of the Vice President and General Counsel
401 Administration Building
Atlanta, Georgia 30322
Attn: General Counsel
Fax: [***]
25
<PAGE>
If to Triangle: Triangle Pharmaceuticals, Inc.
4 University Place, 4611 University Drive
Durham, NC 27707
Attn: Christopher A. Rallis,
Vice President Business Development,
Secretary and General Counsel
Fax: [***]
Any party hereto may change the address to which notices to such party
are to be sent by giving notice to the other party at the address and in the
manner provided above. Any notice may be given, in addition to the manner
set forth above, by telex, facsimile or cable, provided that the party giving
such notice obtains acknowledgment by telex, facsimile or cable that such
notice has been received by the party to be notified. Notices made in this
manner shall be deemed to have been given when such acknowledgment has been
transmitted.
15.10 WAIVER. The failure of a party to enforce at any time for any
period any of the provisions hereof shall not be construed as a waiver of
such provisions or the rights of such party thereafter to enforce each such
provision.
26
<PAGE>
IN WITNESS WHEREOF, GW, Emory and Triangle have caused this Agreement to
be signed by their duly authorized representatives, as of the day and year
indicated above.
GLAXO GROUP LIMITED
By: /s/ S M Bicknell
-------------------------------
Name: S M BICKNELL
Title: Assistant Secretary
THE WELLCOME FOUNDATION LIMITED
By: /s/ S M Bicknell
-------------------------------
Name: S M BICKNELL
Title: Assistant Secretary
GLAXO WELLCOME INC.
By: /s/ Paul A. Holcombe, Jr.
--------------------------------
Name: Paul A. Holcombe, Jr.
Title: Senior Vice President, General Counsel
and Secretary
EMORY UNIVERSITY
By: /s/ John L. Temple
--------------------------------
Name: John L. Temple
Title: Executive Vice President
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ David W. Barry
--------------------------------
Name: David W. Barry
Title: Chairman and Chief Executive Officer
26
<PAGE>
APPENDIX A
LICENSED PATENTS
CASE NO. PB1226
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
COUNTRY APPLICATION NO. STATUS
- ------------------------------------------------------------------------------
<S> <C> <C>
Australia 1351292 Granted
- ------------------------------------------------------------------------------
Canada 2105487 Pending
- ------------------------------------------------------------------------------
Czechoslovakia PV1836.93 Granted
- ------------------------------------------------------------------------------
Europe 92905707.3 Pending/Allowed
- ------------------------------------------------------------------------------
Hong Kong 98103372.5 Pending
- ------------------------------------------------------------------------------
Hungary P9302496 Pending
- ------------------------------------------------------------------------------
Ireland 920702 Pending
- ------------------------------------------------------------------------------
Israel 101145 Granted
- ------------------------------------------------------------------------------
Japan 50556492 Pending
- ------------------------------------------------------------------------------
Republic of Korea 93702626 Pending
- ------------------------------------------------------------------------------
Malaysia PI9200357 Granted
- ------------------------------------------------------------------------------
New Zealand 241842 Granted
- ------------------------------------------------------------------------------
Philippines 44010 Granted
- ------------------------------------------------------------------------------
Portugal 100199 Pending
- ------------------------------------------------------------------------------
Russia 93045710.14 Granted
- ------------------------------------------------------------------------------
Slovak Republic PV0951.93 Granted
- ------------------------------------------------------------------------------
Taiwan 81101695 Granted
- ------------------------------------------------------------------------------
Ukraine 94051479 Pending
- ------------------------------------------------------------------------------
United States 846367 Granted
- ------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------
South Africa 921660 Granted
- ------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE>
CASE NO. PA1344
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
COUNTRY APPLICATION NO. STATUS
- ------------------------------------------------------------------------------
<S> <C> <C>
Europe 93910190.3 Pending/Allowed
- ------------------------------------------------------------------------------
Japan S1999693 Pending
- ------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------
</TABLE>
CASE NO. PB1614
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
COUNTRY APPLICATION NO. STATUS
- ------------------------------------------------------------------------------
<S> <C> <C>
Brazil PI9607850.2 Pending
- ------------------------------------------------------------------------------
China 96193016.0 Pending
- ------------------------------------------------------------------------------
Europe 96911954.4 Pending
- ------------------------------------------------------------------------------
Hong Kong 98110455.0 Pending
- ------------------------------------------------------------------------------
Hungary P9801576 Pending
- ------------------------------------------------------------------------------
Japan 528932.96 Pending
- ------------------------------------------------------------------------------
Norway 97.4512 Pending
- ------------------------------------------------------------------------------
Pakistan 172.96 Granted
- ------------------------------------------------------------------------------
Poland P322503 Pending
- ------------------------------------------------------------------------------
[***] [***] [***]
- ------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
APPENDIX B
LICENSED TECHNOLOGY
GW FTC DATA
1. PRECLINICAL DATA
The attached "Index to Item 8" lists the preclinical studies submitted in the
US IND (IND #[***]) on 28 January 1994. All studies listed in the "index to
Item 8" and Section 1.1 below were submitted in the Canadian regulatory
filing referenced as HPB file number [***] [***] on 16 March 1995 except for
the last study listed in Section 1.1 as noted.
1.1 TOXICOLOGY - COMPLETED STUDIES (FINAL REPORTS ISSUED)
In addition to the toxicology studies listed in the "Index to Item 8", the
following studies have been submitted to the US IND since the original IND
submission. These studies were submitted in the original Canadian IND on 16
March 1995 except for the last study, item d.
[***]
1.2 TOXICOLOGY - COMPLETED STUDIES (DATA TO BE ANALYZED AND/OR REPORTS TO BE
WRITTEN)
-3-
<PAGE>
[***]
1.2 VIROLOGY
[***]
2. CLINICAL DATA
[***]
-4-
<PAGE>
INDEX TO ITEMS 8 - US IND
PHARMACOLOGY AND TOXICOLOGY INFORMATION
PRECLINICAL TECHNICAL SUMMARIES:
Pharmacology
Toxicology
Pharmacokinetics
Microbiology (Virology)
Mechanism of Action Studies
Antiviral Preclinical Studies
PHARMACOLOGY STUDY REPORTS
[***]
-5-
<PAGE>
[***]
TOXICOLOGY STUDY REPORTS
[***]
-6-
<PAGE>
PHARMACOKINETICS (ADME) STUDY REPORTS
[***]
-7-
<PAGE>
MICROBIOLOGY (VIROLOGY) STUDY REPORTS AND REFERENCES
[***]
-8-
<PAGE>
MICROBIOLOGY (VIROLOGY) STUDY REPORTS AND REFERENCES
(CONTINUED)
[***]
-9-
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX C
- -------------------------------------------------------------------------------
CONSOLIDATED EMORY ROYALTY REPORT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
[***]
[***]
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Payment to GGL
- ---------------------------------------------------------------------------------------------------------------------------------
[COUNTRY] [DATE] [LOCAL CURRENCY]
[COUNTRY] [DATE] [LOCAL CURRENCY]
Example of Countries which may be applicable:
CHINA (Sub-licensed) HONG KONG DOLLARS
CHINA HONG KONG DOLLARS
CZECH CZECH KOAUNA
DENMARK DANISH KRONA
ECUADOR U.S. DOLLARS
ESTONIA POUNDS STERLING
- ---------------------------------------------------------------------------------------------------------------------------------
Total 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
Less: Withholding tax (if applicable)
------
------
Net Royalty to GGL 0.00
------
------
[***]
- ---------------------------------------------------------------------------------------------------------------------------------
[***] US DOLLARS N/A N/A
[***] US DOLLARS N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
[***] 0.00 0.00 0.00 0.00
- ---------------------------------------------------------------------------------------------------------------------------------
Payment Date to GGL [Date]
-----------
Payment Date to GW Inc. [Date]
-----------
</TABLE>
- -----------------------------------------------------------------------------
THE INFORMATION CONTAINED IN THIS STATEMENT IS CONFIDENTIAL AND IS SUBJECT TO
THE RELEVANT PROVISIONS OF THE LICENSE AGREEMENT UNDER WHICH THIS ROYALTY
PAYMENT IS DUE.
- -----------------------------------------------------------------------------
**An explanation of adjustments must be made separately
This report is framed on the assumption that Triangle is the exclusive world
wide licensee
<PAGE>
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the "Settlement Agreement"), which is entered
into as of May 6, 1999, and effective as of the Effective Date (as defined in
the License Agreement described below), by and among Emory University, a
non-profit Georgia corporation, having a place of business in Atlanta,
Georgia ("Emory"), Triangle Pharmaceuticals, Inc., a Delaware corporation,
having a place of business in Research Triangle Park, North Carolina
("Triangle"), Dr. David W. Barry, Triangle's Chairman and CEO, ("Dr. Barry"),
Glaxo Wellcome plc, an English corporation, having a place of business in
Greenford, England ("GW plc"), and Glaxo Wellcome Inc. a North Carolina
corporation, having a place of business in Research Triangle Park, North
Carolina ("GW Inc.") (GW plc and GW Inc. shall be referred to collectively
herein as "GW"), Glaxo Group Limited, an English corporation, having a place
of business at Greenford, Middlesex ("GGL") and The Wellcome Foundation
Limited, an English corporation, having a place of business in Greenford,
England ("The WFL").
W I T N E S S E T H:
WHEREAS, Emory, on one hand, and GW plc and GW Inc., on the other hand,
desire to enter into a settlement to amicably resolve [***] in [***] for [***]
(the "FTC Litigation") without further court proceedings;
WHEREAS, Triangle and Dr. Barry, in his individual capacity, on one
hand, and GW plc. and GW Inc., on the other hand, desire to settle any
differences that have arisen between them including relating to FTC and Dr.
Barry's separation from Burroughs Wellcome Co. (or any successor company or
Affiliates), without engaging in court proceedings;
WHEREAS, the parties agree that each should receive consideration as
provided herein for entering into this Settlement of their respective
differences and in order to avoid further litigation;
WHEREAS, as aspects of this settlement, the parties desire that GW cause
the appropriate entity to assign certain FTC patent rights to Emory, license
certain other FTC patent rights to Emory, convey all rights relating to
certain FTC related data and technology to Emory and convey a certain
quantity of FTC drug substance to Emory for use in the development and
marketing of FTC by Emory's licensee, Triangle, or any subsequent or
successor licensee; and the parties agree that GW shall receive a certain
payment and royalty on such sales of FTC as set forth in the License
Agreement described below and Emory shall release GW from all claims of
liability in the FTC Litigation and that Emory shall receive the monetary
payments and assignment of patent properties described below;
WHEREAS, GGL and The WFL have rights in certain patent property relevant
to this Settlement Agreement and to the License Agreement described below; and
[***] Confidential Treatment Requested
<PAGE>
WHEREAS, the parties desire to set forth the details of their
obligations relating to the licensing matters referred to above in a separate
Exclusive License Agreement among GGL, The WFL, GW Inc., Emory and Triangle
(the "License Agreement") to be executed concurrently herewith.
NOW, THEREFORE, in consideration of the premises and the promises and
mutual agreements hereinafter contained, the sufficiency of which is
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Settlement Agreement but not defined
herein, shall have the meanings defined in the License Agreement.
ARTICLE 2
TERMS OF SETTLEMENT AGREEMENT
2.1 PAYMENT BY GW TO EMORY. In connection with this Settlement Agreement,
GW shall pay Emory a total of [***] ($[***]) in the following manner. Within
[***] GW shall pay to Emory ([***]). GW shall pay Emory an additional ([***])
within [***]. Such payments shall be made by wire transfer or as otherwise
mutually agreed by the parties; provided, in each case, that wire transfer
instructions have been given to GW Inc. within [***] (for the first payment)
and [***] (for the second payment).
2.2 GW'S ASSIGNMENT OF THE FTC FOR HBV PATENT PROPERTY FAMILY TO EMORY. As
of the Effective Date, GW shall assign (or cause the appropriate entity to
assign) to Emory all of GW and its Affiliates' rights, title and interest in
and to the patents and patent applications arising out of United Kingdom
patent application number [***] which claims a method of using FTC to treat
HBV (the "Assigned Patents"). The Assigned Patents are listed in Appendix A
hereto, which shows the status of each such application in each country in
which it has been filed according to GW's records. Emory shall prepare, file
and register, at its own expense, the documentation necessary to effectuate
the assignment of the Assigned Patents. Commencing upon the Effective Date
and continuing thereafter, GW shall not be responsible for maintaining,
prosecuting or taking any action regarding the Assigned Patents, provided,
however, GW agrees to execute, or cause the execution of, any document or
instrument reasonable necessary to effectuate the assignment of the Assigned
Patents.
Within sixty (60) days of the Effective Date, GW and its Affiliates will
transfer to Emory all files and documents relating to the preparation and
prosecution of all patents and patent applications assigned under this
section. Thereafter, GW and its Affiliates shall cooperate with
2
<PAGE>
Emory, at Emory's expense in doing such acts and executing such papers as may
reasonably be required to prosecute and maintain the patents and patent
applications.
GW represents that it produced, in the FTC Litigation, all files and
documents relating to the making and development of the inventions described
in the patent and patent applications assigned under this section that it
could locate following a reasonable good faith search, and GW expressly
releases Emory from any obligation of confidentiality imposed by the
protective order entered in the FTC Litigation solely with respect to those
documents; provided, however, Emory provides GW fourteen (14) days notice
or, if that is not possible, as much notice as reasonably practicable, as to
the identity of the GW documents Emory proposes to disclose, so that GW has
an opportunity to object that the GW documents (or any part thereof) do not
relate to the making or development of the invention. GW further agrees
that it will use reasonable efforts to preserve and make available to Emory
the originals of those documents to the extent such originals are extant and
have been previously located or can be located following a reasonable search
to the extent reasonably required for the prosecution, enforcement or
maintenance of the assigned patents or patent applications.
2.3 STIPULATION OF DISMISSAL. Emory and GW plc and GW Inc. (collectively
the "Stipulating Parties") agree that within ten (10) days of the Effective
Date, they will act promptly to cause their attorneys to sign and file in the
FTC Litigation a Stipulation of Dismissal with Prejudice in the form appended
hereto as Appendix B.
2.4 MUTUAL RELEASES. Effective as of the Effective Date, the Stipulating
Parties, for themselves, their successors and assigns, hereby release and
forever discharge each other, their Affiliates, their past and present
directors, officers and employees, agents, attorneys, successors, assigns,
customers, licensees (including, without limitation, Triangle), and other
transferees from any and all promises, agreements (other than this Settlement
Agreement and the License Agreement), causes of action, actions, claims, and
demands whatsoever in law or in equity relating to FTC with or against such
parties, and any liabilities, losses, costs and expenses related thereto
relating to FTC, which they ever had, now have, or which they or their
successors or assigns can, shall or may in the future have upon or by reason
of any and all claims relating to FTC or relating to any other claim which
has or could have been brought in the FTC Litigation, based on occurrences up
to and including the Effective Date. For the avoidance of doubt, it is
expressly understood and acknowledged that Emory does not release GW or its
Affiliates from any claim or liability of any alleged infringement of any
patent rights Emory may have relating to 3TC, and the GW, its Affiliates do
not release Emory from any claim or liability related to 3TC.
2.5 RELEASES AMONG EMORY, TRIANGLE, DR. BARRY AND GW. Effective as of the
Effective Date (i) on the one hand, Emory, Triangle and Dr. Barry and (ii) on
the other hand, GW, for themselves and their heirs, their Affiliates, their
successors and assigns, hereby release and forever discharge each other,
their Affiliates, their past and present directors, officers and employees,
agents, attorneys, successors, assigns, customers, and other transferees for
any and all promises, agreements (other than this Settlement Agreement and
the License Agreement and other than the executory obligations under that
certain Termination Agreement between Dr. Barry and Burroughs Wellcome Co.
dated as of June 30, 1995 and the letter agreement between
3
<PAGE>
Dr. Barry and GW plc, dated July 21, 1995, relating to, among other things,
Dr. Barry's cooperation in certain patent prosecution matters), causes of
action, claims and demands whatsoever in law or in equity with or against
such parties, and any liabilities, losses, costs and expenses related
thereto, which they ever had, now have, or which they or their successors or
assigns can, shall or may in the future have upon or by reason of any and all
claims which have or could have been brought on any matter, including but not
limited to any matter relating in any way to FTC or Dr. Barry's separation
from Burroughs Wellcome Co. (or any successor company) or Affiliates based on
occurrences up to and including the Effective Date. These releases and this
Settlement Agreement do not include, affect or release any promises,
agreements, causes of action, claims or demands between or among Emory,
Triangle or Dr. Barry or any of them.
ARTICLE 3
PUBLICITY AND CONFIDENTIALITY
On the date that this Settlement Agreement is executed, GW, Emory and
Triangle shall issue a joint press release the form of which shall be agreed
to by all parties hereto. Each of GW, Emory and Triangle shall be permitted
to issue additional press releases limited to the subject of the economic or
financial impact of this Settlement Agreement on each of GW, Emory or
Triangle, as the case may be, however, none of the specific financial terms
of this Settlement Agreement shall be disclosed. The other parties hereto
shall have a reasonable opportunity to review and comment on any such
proposed press release, which comments shall not be unreasonably refused.
The specific terms of this Settlement Agreement shall be confidential and
neither party may publicly disclose, except to legal, accounting and
financial consultants and except as otherwise provided herein, any such term
without the prior written approval of the other party, unless such disclosure
is compelled by a court or administrative agency or otherwise required by
law. In the event that such disclosure is compelled by a court or
administrative agency or otherwise required by law, the disclosing party
shall make reasonable effort to provide the other party with notice
beforehand. Emory and its Affiliates and Sublicensees (including Triangle)
may disclose the terms of this Settlement Agreement to a bona fide
prospective sublicensee or Marketing Collaborator, subject to an obligation
of confidentiality of such sublicensee or Marketing Collaborator that is no
less restrictive than the confidentiality obligations contained herein. GW
and Emory hereby acknowledge that Triangle has notified each of them that
this Settlement Agreement constitutes a material agreement to Triangle and
must be filed by Triangle with the Securities and Exchange Commission
pursuant to Triangle's reporting obligations under the Securities and
Exchange Act of 1934, as amended. In any case where a party makes disclosure
of the terms hereunder to a court, it shall be disclosed under seal. In all
other respects, except as required by law, neither party shall use the name
of the other party in any publicity release without the prior written
permission of such other party, which shall not be unreasonably withheld.
The parties acknowledge that for the avoidance of doubt, each of GW and Emory
shall be free to disclose both the existence and the terms of this Settlement
Agreement to the [***] for the [***] in connection with [***] between Emory
and GW.
4
<PAGE>
ARTICLE 4
DISCOVERY MATERIALS FROM THE FTC LITIGATION
The Stipulating Parties further agree that discovered materials from the
FTC Litigation, can be used by the Stipulating Parties in [***], in the same
manner and to the same extent that they could be used as if discovered in
that case. The Stipulating Parties do not waive any objections regarding
admissibility or use. The Stipulating Parties further agree to abide by the
Protective Order entered in the FTC Litigation. The parties agree that the
facts and circumstances surrounding the negotiation and terms of this
Settlement Agreement and of the License Agreement are not admissible and
shall not be introduced in any action (including [***]), unless the action
concerns the enforcement of the terms of the Settlement Agreement or the
License Agreement.
ARTICLE 5
ENTIRE AGREEMENT
This Settlement Agreement and the License Agreement constitute the
entirety of the agreements and understandings between GW on the one hand and
any of the other parties on the other hand and anyone acting for, associated
with or employed by any party concerning the subject matter hereof and replace
and supersede any and all prior discussions, agreements or understandings.
With respect to the subject matter hereof, there are no promises,
representations or agreements, whether oral or written, between the parties
hereto or anyone acting for, associated with or employed by any party hereto
other than as set forth in this Settlement Agreement and the License
Agreement. Each party hereto represents and warrants that, other than as
recited herein, there has been no reliance, inducement, representation or
agreement causing, affecting or in connection with this Agreement.
This Settlement Agreement can be amended or modified only by a written
instrument referencing this Settlement Agreement and executed by the parties
hereto.
It is understood and agreed that this Settlement Agreement, any
consideration given or accepted in connection with it and the covenants made
in it are all made, given and accepted in settlement and compromise of
disputed claims and are not an admission of liability by anyone.
Each party has undertaken such independent investigation and evaluation
as he, she or it deems appropriate and is entering this agreement in reliance
on that and not in reliance on any advice, disclosure, representation or
information provided by or expected from any other party or party's lawyers.
This is an agreement of settlement and compromise, made in recognition that
the parties may have different or incorrect understandings, information and
contentions, as to facts and law, and with each party compromising and
settling any potential correctness or incorrectness of its understandings,
information and contentions as to the facts and law, so that no
misunderstanding or misinformation and no claim of fraud or fraudulent
inducement occurring prior to or in connection with the execution hereof shall
be a ground for rescission hereof or for recovery of damages, except as
otherwise expressly provided herein.
5
<PAGE>
ARTICLE 6
INDEPENDENT CONTRACTORS
It is understood and agreed that the parties hereto are independent
contractors and are engaged in the operation of their own respective
businesses, and neither party hereto is to be considered the agent, partner,
or joint venturer of the other party for any purpose whatsoever, and neither
party shall have any authority to enter into any contracts or assume any
obligations for the other party nor make any warranties or representations on
behalf of that other party. It is understood and agreed that to the extent
that any relationship other than an independent contractors relationship may
have existed, or was alleged to have existed, prior to the Effective Date,
among GW or its Affiliates on the one hand, and one or more of Emory or its
Affiliates, and Dr. Barry, Triangle or its Affiliates on the other hand, such
relationship is hereby terminated and the parties are now solely independent
contractors.
ARTICLE 7
ASSIGNMENT AND BENEFIT
This Settlement Agreement may not be assigned by any party hereto
without the prior written consent of the other party or parties. However,
each party may, at its discretion, (i) assign this Settlement Agreement in
whole or in part to one or more of its Affiliates as defined in the License
Agreement, and/or (ii) assign this Settlement Agreement to a third party as
part of the sale or merger of all or substantially all of the party's
pharmaceutical business and related assets to which this Settlement Agreement
and the License Agreement relate. In the event of any assignment under this
Settlement Agreement, the assignor and assignee shall be jointly and
severally liable for the assignor's obligations hereunder.
This Settlement Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the parties.
ARTICLE 8
GW'S WARRANTY
GW, and its Affiliates, warrant that the patent applications and patents
listed in Appendix A are all of the patents and patent applications owned by
GW and its Affiliates that claim the use of FTC for the treatment of HBV and
all of the patent applications that were filed based on or claiming priority
from United Kingdom application number [***] GW warrants that it and its
Affiliates have taken whatever steps GW believed were reasonably necessary to
preserve and/or maintain the Assigned Patents. Any claim by Emory, its
Affiliates, or Triangle or its Affiliates, brought against GW with respect to
an alleged breach or violation of this Article must be commenced within one
year from the Effective Date.
6
<PAGE>
ARTICLE 9
GOVERNING LAW
This Settlement Agreement is made and shall be interpreted in accordance
with the laws of the [***] without reference to provisions relating to
conflicts of law.
ARTICLE 10
NOTICE
In the event that any party hereto desires to provide notice to any
other party hereto relating to this Settlement Agreement, such party shall
do so in accordance with the notice provision (Section 15.9) of the License
Agreement.
ARTICLE 11
COUNTERPARTS
This Settlement Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Settlement Agreement to
be executed with effect as of the Effective Date.
[INTENTIONALLY LEFT BLANK]
7
<PAGE>
GLAXO WELLCOME PLC
By: /s/ S M Bicknell
------------------------------------
Name: S M BICKNELL
Title: Assistant Secretary
GLAXO WELLCOME INC.
By: /s/ Paul A. Holcombe, Jr.
------------------------------------
Name: Paul A. Holcombe, Jr.
Title: Senior Vice President,
General Counsel and Secretary
GLAXO GROUP LIMITED
By: /s/ S N Bicknell
------------------------------------
Name: S M BICKNELL
Title: Assistant Secretary
THE WELLCOME FOUNDATION LIMITED
By: /s/ S M Bicknell
------------------------------------
Name: S M BICKNELL
Title: Assistant Secretary
EMORY UNIVERSITY
By: /s/ John L. Temple
------------------------------------
Name: John L. Temple
Title: Executive Vice President
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ David W. Barry
------------------------------------
Name: David W. Barry
Title: Chairman and Chief Executive
Officer
DR. DAVID W. BARRY, IN HIS INDIVIDUAL CAPACITY,
/s/ David W. Barry
- ---------------------------------------
8
<PAGE>
APPENDIX A
CASE NO. PB1225
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Country Application No. Status
- -----------------------------------------------------------------------
<S> <C> <C>
Australia 1367692 Granted
- -----------------------------------------------------------------------
Canada 2105486 Pending
- -----------------------------------------------------------------------
Czechoslovakia PV183593 Granted
- -----------------------------------------------------------------------
Europe 92906520.9 Pending
- -----------------------------------------------------------------------
Hungary P9302493 Pending
- -----------------------------------------------------------------------
Ireland 920701 Pending
- -----------------------------------------------------------------------
Israel 101144 Granted
- -----------------------------------------------------------------------
Japan 50582592 Pending
- -----------------------------------------------------------------------
Republic of Korea 93702639 Pending
- -----------------------------------------------------------------------
Mexico 923213 Pending
- -----------------------------------------------------------------------
Malaysia P19200358 Pending
- -----------------------------------------------------------------------
New Zealand 241843 Dead
264621 Granted
- -----------------------------------------------------------------------
Philippines 44011 Pending
- -----------------------------------------------------------------------
Portugal 100198 Pending
- -----------------------------------------------------------------------
Russia 93043875.04 Granted
- -----------------------------------------------------------------------
Saudi Arabia 92120445 Pending
- -----------------------------------------------------------------------
Slovak Republic PV95093 Granted
- -----------------------------------------------------------------------
Thailand 015608 Pending
- -----------------------------------------------------------------------
Taiwan 81101693 Granted
- -----------------------------------------------------------------------
Ukraine 94051484 Pending
- -----------------------------------------------------------------------
[***] [***] [***]
- -----------------------------------------------------------------------
South Africa 921658 Granted
- -----------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX B
[***]
<PAGE>
This _____ day of May, 1999
Respectfully submitted,
_______________________________________
Thomas C. Harney, Esq.
Kilpatrick Stockton LLP
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309
(404) 815-6500
Robert L. Baechtold, Esq.
Fitzpatrick Cella Harper and Scinto
30 Rockefeller Plaza
New York, New York 10172-3801
(212) 218-2100
Counsel for Plaintiff
_______________________________________
Albert L. Jacobs, Jr.
Daniel A. Ladow
Desiree M. Broderick
Admitted PRO HAC VICE
Graham & James, LLP.
885 Third Avenue
New York, New York 10022
(212) 848-1000
J. Rogers Lunsford, III
Georgia Bar No. 461200
Elizabeth G. Lowry
Georgia Bar No. 460313
SMITH GAMBRELL & RUSSELL, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
(404) 815-3500
2
<PAGE>
Of Counsel:
Susan S. Dunn, Esq.
Timothy A. Thelan, Esq.
Glaxo Wellcome Inc.
Five Moore Drive
Research Triangle Park
North Carolina 27709
(919) 483-1355 Counsel for Defendants
3
<PAGE>
AMENDMENT TO LICENSE AGREEMENT
This Amendment to License Agreement ("Amendment") is entered into as of
April 1, 1999, by and between BUKWANG PHARM. IND. CO., LTD., with its
principal offices at 398-01, Daebang-Dong, Dongjak-Ku, Seoul 156-020, Korea
("Bukwang") and TRIANGLE PHARMACEUTICALS, INC., with its principal offices
located at 4 University Place, 4611 University Drive, Durham, North Carolina
27707 ("Triangle") and amends certain terms of that certain License
Agreement, dated as of February 27, 1998, between Bukwang and Triangle (the
"Agreement"). Capitalized terms not defined herein shall have the meanings
given them in the Agreement.
RECITALS
A. Bukwang and Triangle have previously entered into the Agreement,
pursuant to which Bukwang has licensed certain patent rights and know-how to
Triangle relating to a compound known as L-FMAU.
B. As part of its diligence efforts in respect of L-FMAU, Triangle is
required to conduct 3-month toxicity studies in two species of animals and
has commenced such toxicity studies in [***] and [***].
C. Bukwang and Triangle desire to amend certain terms of the Agreement
relating to such toxicity studies, as set forth in this Amendment.
NOW, THEREFORE, for good and valuable consideration, Triangle and
Bukwang hereby agree as follows:
1. AMENDMENTS. The Agreement is hereby amended as follows:
(a) SECTION 6.1. In the third sentence of Section 6.1, delete the
phrase "3-month" and replace it with the phrase [***].
(b) SECTION 6.1. At the end of the fifth sentence of Section 6.1,
change the period (".") to a semi-colon (";") and insert the
following proviso immediately thereafter: "provided, however,
that Triangle shall be responsible for [***] percent ([***]%)
of all costs resulting from extending the length of such
toxicity studies from 3-months to [***]."
2. GENERAL TERMS. The Agreement, as amended by this Amendment,
constitutes the entire agreement between Bukwang and Triangle or
regarding the subject matters contained therein and herein. In the
event of any conflict between the provisions of the Agreement and
this Amendment, the provisions of this Amendment shall govern and
control. This Amendment shall be governed by, and construed in
accordance with, the laws of the [***] without regard to its
conflicts of laws
[***] Confidential Treatment Requested
<PAGE>
principles. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and all
of which shall constitute one and the same instrument. If any
provision of this Amendment is for any reason held to be
ineffective, unenforceable or illegal, such condition shall not
affect the validity or enforceability of any of the remaining
portions hereof; provided, further, that the parties shall
negotiate in good faith to replace any ineffective, unenforceable
or illegal provision with an effective replacement as soon as is
practicable.
IN WITNESS WHEREOF, Bukwang and Triangle have each executed this
Amendment through an authorized officer as of the date written below.
BUKWANG PHARM. IND. CO., LTD.
By: /s/ S.K. Lee
------------------------------
Its: Managing Director
------------------------------
Date: Apr. 13, 1999
------------------------------
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ Chris A. Rallis
------------------------------
Its: Vice President, Bus. Dev.
------------------------------
Date: April 2, 1999
------------------------------
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO LICENSE AGREEMENT
This First Amendment to License Agreement ("First Amendment") is
entered into as of May 6, 1999, and effective as of the Effective Date (as
defined in the GW License Agreement) by and between Triangle Pharmaceuticals,
Inc., a for-profit Delaware corporation with principal offices located at 4
University Place, 4611 University Drive, Durham, North Carolina 27707
("COMPANY") and Emory University, a not-for-profit Georgia corporation with
offices at 1380 South Oxford Road, N.E., Atlanta, Georgia 30322 ("LICENSOR"),
and amends certain terms of that certain License Agreement, dated as of April
17, 1996 between LICENSOR and COMPANY (the "Agreement").
RECITALS:
A. LICENSOR and COMPANY have previously entered into the Agreement,
pursuant to which LICENSOR has licensed certain patent rights and know-how to
COMPANY with respect to FTC.
B. LICENSOR has acquired certain rights from a third party which
LICENSOR and COMPANY desired to be included within the Agreement.
C. LICENSOR and COMPANY desire to amend certain terms of the
Agreement as set forth in this First Amendment.
NOW, THEREFORE, for good and valuable consideration, COMPANY and
LICENSOR hereby agree as follows:
1. DEFINITIONS. As used in this First Amendment, the following
terms shall have the following meanings:
(a) "GW Agreements" shall mean the GW License Agreement and the
Settlement Agreement.
(b) "GW License Agreement" shall mean the Exclusive License
Agreement by and among Glaxo Group Limited, The Wellcome Foundation
Limited, Glaxo Wellcome, Inc. (collectively "GW"), LICENSOR and
COMPANY, dated as of even date herewith, pursuant to which GW has,
among other things, granted LICENSOR certain rights under patents
and patent applications relating to FTC.
(c) "Settlement Agreement" shall mean the Settlement Agreement,
dated as of even date herewith, by and among Glaxo Wellcome plc and
GW on the one hand, and LICENSOR, COMPANY and Dr. David W. Barry on
the other hand, providing for the settlement, release and dismissal
of the FTC litigation and related claims (including but not limited
to [***]), and certain claims of Dr. David W. Barry against Glaxo
Wellcome, plc, GW and their Affiliates.
[***] Confidential Treatment Requested
<PAGE>
(d) All other terms used in this First Amendment and not
otherwise defined herein shall have the same meanings ascribed to
them in the Agreement.
2. AMENDMENTS. The Agreement is hereby amended as follows:
(a) The patents and patent applications to which LICENSOR
acquires title under the GW Agreements shall be deemed to be
"Licensed Patents" under the Agreement.
(b) The patents and patent applications under which LICENSOR
obtains an exclusive license or a covenant not to sue under the GW
Agreements shall be deemed to be the "GW Patents" referred to in the
Agreement.
(c) APPENDIX "A" to the Agreement is deleted and replaced with
APPENDIX "A" attached to this First Amendment.
(d) The data package, regulatory filings and any other
know-how, information or technology to which LICENSOR acquires any
right, title, license or other interest under the GW Agreements
shall be deemed to be the "GW Know How" referred to in the Agreement.
(e) The GW Know How shall be deemed to constitute "Licensed
Technology" under the Agreement and shall be subject to all
applicable provisions thereunder including, but not limited to,
COMPANY's obligations under Section 11.7 of the Agreement.
(f) Pursuant to Subsection 2.6(b) of the Agreement, COMPANY
acknowledges that LICENSOR has given COMPANY the required notice of
and information concerning the licenses and covenants not to sue
under the GW Patents and the title and licenses under the GW Know
How that LICENSOR is obtaining under the GW Agreements. Pursuant to
Section 2.6 of the Agreement, COMPANY hereby elects to obtain from
LICENSOR a sublicense under the GW Patents and the GW Know How and
LICENSOR hereby grants to COMPANY a sublicense and a sub-immunity
from suit under the GW Patents and the GW Know How, each of which is
exclusive in accordance with and coterminous with the provisions of
Sections 2.1, 2.2, 2.3, 2.4 and 2.5 of the Agreement.
(g) COMPANY shall have the right to grant sublicenses and
sub-immunities from suit under the GW Patents and GW Know How, to
the same extent and under the same conditions provided in Sections
2.4 and 3.7 of the Agreement.
(b) COMPANY shall be responsible for paying the royalties due
to GW under the GW License Agreement resulting from sale of Licensed
Products (as defined in the GW License Agreement) by COMPANY, its
Affiliates and
2
<PAGE>
sublicensees. COMPANY hereby indemnifies LICENSOR, its trustees,
directors, employees, students and their respective successors and
assigns and holds them harmless against all claims by GW of non-payment
or underpayment of such royalties. COMPANY will pay such royalties
directly to GW, as prescribed by the GW License Agreement, with notice
to LICENSOR. COMPANY's obligation under this paragraph (g) shall
terminate in respect of a given country upon the expiration or
termination of the GW License Agreement in such country.
(i) COMPANY will pay LICENSOR the Additional Milestone payment as
provided by Subsection 3.3(b) of the Agreement, but COMPANY will be
relieved of its obligation to pay the Additional Milestone payment
provided by Subsection 3.3(a) of the Agreement. Subsection 3.3(a) of the
Agreement is hereby deleted.
(j) The royalties actually paid by COMPANY, its Affiliates and
sublicensees under the GW License Agreement shall be deemed to be "Third
Party Royalties" under Subsection 3.9(a) of the Agreement and COMPANY,
its Affiliates and sublicensees shall have the right of deduction
defined by that Subsection 3.9(a) with respect to the royalties paid
thereunder to GW. This right of deduction shall apply irrespective of
whether GW has a patent in a country where any Licensed Product is made,
used, sold or offered for sale and irrespective or whether any such
patent is infringed by the activities of COMPANY, its Affiliates,
sublicensees or any party in a co-promotion or co-marketing relationship
with COMPANY in such country. Notwithstanding Section 3.9 of the
Agreement, COMPANY's payment of royalties to GW and the offset of a
portion of those royalties against COMPANY's royalty obligations to
LICENSOR shall not be an acknowledgment by either COMPANY or LICENSOR
that any GW Patents would be infringed but for the license or immunity
from suit granted by GW under the GW License Agreement.
(k) Pursuant to Section 4.2 of the GW License Agreement, COMPANY
agrees to keep and maintain records of sales of Licensed Products made
pursuant to this sublicense granted hereby and to grant to GW's
independent certified accountant in the same manner and to the same
extent as prescribed in the GW License Agreement.
(l) LICENSOR agrees not to assume responsibility for any GW Patent
Prosecution Activities (as defined in the GW License Agreement) [***].
(m) Any right which LICENSOR acquires to pursue third party
infringers in respect of the GW Patents shall be immediately exercisable
by COMPANY in accordance with the applicable terms and provisions set
forth in the GW License Agreement and Article 8 of the Agreement.
3
<PAGE>
(n) LICENSOR and COMPANY each covenant that, during the term of
the Agreement, it will:
(i) fulfill all of its obligations under the GW Agreements,
including, but not limited to, any royalty obligations set forth
therein;
(ii) take no action or omit to take any action which would
cause it to be in breach of any provision of the GW Agreements; and
(iii) immediately notify the other party in the event it
receives notice from GW that it is in default under the GW
Agreements or that GW has terminated or intends to terminate the GW
Agreements. In the event of any default of the type described in
this clause (iii), LICENSOR or COMPANY, as applicable, agrees that
if it fails or does not intend to cure such default, the other
party may, at such other party's option, do so and may offset (in
the case of COMPANY) or invoice (in the case of LICENSOR) any
reasonable expenses such other party incurs in curing such default.
(o) Notwithstanding any provision to the contrary in the GW
Agreements, COMPANY may not assign to GW or any Affiliate of GW any
rights transferred, license or sublicensed to COMPANY under the GW
Agreements.
3. GENERAL TERMS.
(a) Except as expressly amended hereby, the remaining terms of the
Agreement shall remain in full force and effect.
(b) The Agreement, as amended by this First Amendment, constitutes
the entire agreement between LICENSOR and COMPANY or regarding the
subject matters contained therein and herein.
(c) In the event of any conflict between the provisions of the
Agreement and this First Amendment, the provisions of this First
Amendment shall govern and control.
(d) This First Amendment shall be governed by, and construed in
accordance with, the laws of the [***] without regard to its conflicts
of laws principles.
(e) This First Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument.
4
<PAGE>
(f) If any provision of this First Amendment is for any reason
held to be ineffective, unenforceable or illegal, such condition shall
not affect the validity or enforceability of any of the remaining
portions hereof; provided, further, that the parties shall negotiate in
good faith to replace any ineffective, unenforceable or illegal provision
with an effective replacement as soon as is practical.
(g) In the event the Effective Date shall not have occurred on or
before ninety (90) days from the date first set forth above, this First
Amendment shall become null and void.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE>
IN WITNESS WHEREOF, LICENSOR and COMPANY have each executed this
First Amendment through an authorized officer as of the date first written
above.
EMORY UNIVERSITY
By: /s/ John L. Temple
------------------------------
John L. Temple
Its: Executive Vice President
TRIANGLE PHARMACEUTICALS, INC.
By: /s/ David W. Barry
-----------------------------
David W. Barry
Its: Chairman and Chief Executive
Officer
[SIGNATURE PAGE TO FIRST AMENDMENT]
6
<PAGE>
APPENDIX "A"
FTC APPLICATIONS AND PATENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DOCKET NO. COUNTRY SERIAL NO. FILED PATENT NO. GRANT DATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
EMU105CIP U.S. 07/659,760 02/22/91 5,210,085 05/11/93
- -------------------------------------------------------------------------------------------------
EMU105CIP U.S. 08/017,820 02/16/93 5,814,639 09/29/98
DIV
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
EMU134 U.S. 08/483,653 06/07/95 5,827,727 10/27/98
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
EMU135 U.S. 08/485,318 06/07/95 5,728,575 03/17/98
- -------------------------------------------------------------------------------------------------
EMU136 U.S. 08/481,556 06/07/95 5,700,937 12/23/97
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
[***] [***] [***] [***] [***]
- -------------------------------------------------------------------------------------------------
EMU134 U.S. 09/115,780 07/14/98 5,892,075 04/06/99
CON
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FTC APPLICATIONS AND PATENTS
FOREIGN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
DOCKET NO. COUNTRY SERIAL NO. FILING DATE PATENT NO. ISSUE DATE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EMU104 PCT PCT/ US91/ 07/31/91 Pub. No. Pub. Date
00685 WO 08/08/91
91/11186
- -------------------------------------------------------------------------------------
Australia 73004/91 07/31/91 658136
- -------------------------------------------------------------------------------------
Barbados 81/219 07/31/91 81/219
- -------------------------------------------------------------------------------------
Bulgaria 96717 07/31/91
- -------------------------------------------------------------------------------------
Canada 2,075,189 07/31/91
- -------------------------------------------------------------------------------------
Europe 91904454.5 07/31/91 0513200 09/09/98
- -------------------------------------------------------------------------------------
provisional protection under Article 67(3) in Germany,
Belgium, Austria, France, Luxembourg, Spain, Greece,
Sweden, Denmark, Switzerland, Italy and the Netherlands
- -------------------------------------------------------------------------------------
Finland 923446 07/31/91
- -------------------------------------------------------------------------------------
Hungary P9202496 07/31/91
- -------------------------------------------------------------------------------------
Hungary P/P00581 07/31/91 211.300
- -------------------------------------------------------------------------------------
Japan 3-504897 07/31/91 618/1995
- -------------------------------------------------------------------------------------
Korea 92-701845 07/31/91 188357 01/12/99
- -------------------------------------------------------------------------------------
Malawi 49/92 07/31/91 MW 49/92 12/12/94
- -------------------------------------------------------------------------------------
Monaco PV 07/31/91 93 2233 02/23/93
PCT/US91/
00685
- -------------------------------------------------------------------------------------
Norway P923014
- -------------------------------------------------------------------------------------
Romania 1256/310792 108564
- -------------------------------------------------------------------------------------
Russia 92016627.04 07/31/91
- -------------------------------------------------------------------------------------
Sri Lanka 10414 01/29/93
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FTC APPLICATIONS AND PATENTS
FOREIGN
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
DOCKET NO. COUNTRY SERIAL NO. FILING DATE PATENT NO. ISSUE DATE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EMU108 PCT PCT/US92/ 02/20/92 WO 09/03/92
01339 92/14743
- -----------------------------------------------------------------------------------
Australia 15617/92 02/20/92 665187 04/10/96
- -----------------------------------------------------------------------------------
Australia D1 37943/95 11/20/95 679649
- -----------------------------------------------------------------------------------
Australia D2 80773/98 02/20/92
- -----------------------------------------------------------------------------------
Brazil 9205661 02/20/92
- -----------------------------------------------------------------------------------
Bulgaria 980621 02/20/92
- -----------------------------------------------------------------------------------
Canada 2,104,399 02/20/92
- -----------------------------------------------------------------------------------
China 92101981.5 02/20/92
- -----------------------------------------------------------------------------------
China D1 95109814.4 02/20/92
- -----------------------------------------------------------------------------------
China D2 98108905.4 02/20/92
- -----------------------------------------------------------------------------------
Czechoslovakia PV-0497-92 02/20/92
- -----------------------------------------------------------------------------------
Europe 92908027.3 02/20/92
- -----------------------------------------------------------------------------------
Finland 933684 02/20/92
- -----------------------------------------------------------------------------------
Hungary P93-02377 02/20/92
- -----------------------------------------------------------------------------------
Hungary P/P00510 06/30/95 211344
- -----------------------------------------------------------------------------------
Indonesia P-002339 02/22/92 0001489 04/17/97
- -----------------------------------------------------------------------------------
Ireland 920545 02/21/92
- -----------------------------------------------------------------------------------
Israel 100965 02/17/92
- -----------------------------------------------------------------------------------
Japan 4-507549 02/20/92 2901160 03/19/99
- -----------------------------------------------------------------------------------
Japan D1 340469/1997 11/06/97
- -----------------------------------------------------------------------------------
Malaysia PI 9200287 02/21/92
- -----------------------------------------------------------------------------------
Mexico 9200747 02/21/92
- -----------------------------------------------------------------------------------
New Zealand 241625 02/17/92 241625 07/09/96
- -----------------------------------------------------------------------------------
New Zealand 250842 02/17/92
- -----------------------------------------------------------------------------------
Nigeria RP 48/92 02/21/92 11,263
- -----------------------------------------------------------------------------------
Norway P932980 02/20/92
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
EMIJ108 Pakistan 79/92 02/25/92 79/92 03/28/94
- -------------------------------------------------------------------------------
Philippines 43955 02/20/92
----------------------------------------------------------------
Philippines D1 1-55191 02/20/92
----------------------------------------------------------------
Philippines D2 1-55192 02/20/92
----------------------------------------------------------------
Philippines D3 1-55193 02/20/92
----------------------------------------------------------------
Philippines D4 1-55194 02/20/92
----------------------------------------------------------------
Poland P300471 02/20/92 169842 03/06/96
----------------------------------------------------------------
Poland 310211 08/01/95 171150 03/29/96
----------------------------------------------------------------
Portugal 100151 02/21/92
----------------------------------------------------------------
Republic of 93-702516 02/20/92 172590 10/24/98
Korea
----------------------------------------------------------------
Romania 93-01137 02/20/92
----------------------------------------------------------------
Russia 93058540.04 02/20/92
----------------------------------------------------------------
South Africa 92/1251 07/20/92 92/1251 10/27/93
----------------------------------------------------------------
Taiwan 81101183 02/18/92
----------------------------------------------------------------
Thailand 015518 02/18/92
----------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX A
CASE NO. PB1225
- ------------------------------------------------------------------------------
Country Application No. Status
- ------------------------------------------------------------------------------
Australia 1367692 Granted
- ------------------------------------------------------------------------------
Canada 2105486 Pending
- ------------------------------------------------------------------------------
Czechoslovakia PV183593 Granted
- ------------------------------------------------------------------------------
Europe 92906520.9 Pending
- ------------------------------------------------------------------------------
Hungary P9302493 Pending
- ------------------------------------------------------------------------------
Ireland 920701 Pending
- ------------------------------------------------------------------------------
Israel 101144 Granted
- ------------------------------------------------------------------------------
Japan 50582592 Pending
- ------------------------------------------------------------------------------
Republic of Korea 93702639 Pending
- ------------------------------------------------------------------------------
Mexico 923213 Pending
- ------------------------------------------------------------------------------
Malaysia PI9200358 Pending
- ------------------------------------------------------------------------------
New Zealand 241843 Dead
264621 Granted
- ------------------------------------------------------------------------------
Philippines 44011 Pending
- ------------------------------------------------------------------------------
Portugal 100198 Pending
- ------------------------------------------------------------------------------
Russia 93043875.04 Granted
- ------------------------------------------------------------------------------
Saudi Arabia 92120445 Pending
- ------------------------------------------------------------------------------
Slovak Republic PV95093 Granted
- ------------------------------------------------------------------------------
Thailand 015608 Pending
- ------------------------------------------------------------------------------
Taiwan 81101693 Granted
- ------------------------------------------------------------------------------
Ukraine 94051484 Pending
- ------------------------------------------------------------------------------
[***]
- ------------------------------------------------------------------------------
South Africa 921658 Granted
- ------------------------------------------------------------------------------
<PAGE>
APPENDIX A
LICENSED PATENTS
CASE NO. PB1226
- ------------------------------------------------------------------------------
Country Application No. Status
- ------------------------------------------------------------------------------
Australia 1351292 Granted
- ------------------------------------------------------------------------------
Canada 2105487 Pending
- ------------------------------------------------------------------------------
Czechoslovakia PV1836.93 Granted
- ------------------------------------------------------------------------------
Europe 92905707.3 Pending/Allowed
- ------------------------------------------------------------------------------
Hong Kong 98103372.5 Pending
- ------------------------------------------------------------------------------
Hungary P9302496 Pending
- ------------------------------------------------------------------------------
Ireland 920702 Pending
- ------------------------------------------------------------------------------
Israel 101145 Granted
- ------------------------------------------------------------------------------
Japan 50556492 Pending
- ------------------------------------------------------------------------------
Republic of Korea 93702626 Pending
- ------------------------------------------------------------------------------
Malaysia PI9200357 Granted
- ------------------------------------------------------------------------------
New Zealand 241842 Granted
- ------------------------------------------------------------------------------
Philippines 44010 Granted
- ------------------------------------------------------------------------------
Portugal 100199 Pending
- ------------------------------------------------------------------------------
Russia 93045710.14 Granted
- ------------------------------------------------------------------------------
Slovak Republic PV0951.93 Granted
- ------------------------------------------------------------------------------
Taiwan 81101695 Granted
- ------------------------------------------------------------------------------
Ukraine 94051479 Pending
- ------------------------------------------------------------------------------
United States 846367 Granted
- ------------------------------------------------------------------------------
[***]
- ------------------------------------------------------------------------------
South Africa 921660 Granted
- ------------------------------------------------------------------------------
-1-
<PAGE>
CASE NO. PA1344
- ------------------------------------------------------------------------------
Country Application No. Status
- ------------------------------------------------------------------------------
Europe 93910190.3 Pending/Allowed
- ------------------------------------------------------------------------------
Japan 51999693 Pending
- ------------------------------------------------------------------------------
[***]
- ------------------------------------------------------------------------------
[***]
- ------------------------------------------------------------------------------
CASE NO. PB1614
- ------------------------------------------------------------------------------
Country Application No. Status
- ------------------------------------------------------------------------------
Brazil PI9607850.2 Pending
- ------------------------------------------------------------------------------
China 96193016.0 Pending
- ------------------------------------------------------------------------------
Europe 96911954.4 Pending
- ------------------------------------------------------------------------------
Hong Kong 98110455.0 Pending
- ------------------------------------------------------------------------------
Hungary P9801576 Pending
- ------------------------------------------------------------------------------
Japan 528932.96 Pending
- ------------------------------------------------------------------------------
Norway 97.4512 Pending
- ------------------------------------------------------------------------------
Pakistan 172.96 Granted
- ------------------------------------------------------------------------------
Poland P322503 Pending
- ------------------------------------------------------------------------------
[***]
- ------------------------------------------------------------------------------
-2-
<PAGE>
EXHIBIT 10.5
AMENDMENT NUMBER ONE TO THE
AGREEMENT AND PLAN OF MERGER
This Amendment Number One (this "Amendment") to the Agreement and
Plan of Merger dated as of August 28, 1997 (the "Agreement") between Project
Z Corporation ("Project Z") and Avid Corporation ("Avid") is made as of this
28th day of February, 1999, by and among Avid (including its capacity as
successor to Project Z), Triangle Pharmaceuticals, Inc. ("Triangle"), and
Forrest H. Anthony, Alan G. Walton and Marcia T. Bates (the "Securityholder
Agent"), on behalf of and as attorney-in-fact for all of the stockholders,
optionholders and warrantholders of Avid immediately prior to the merger of
Project Z with and into Avid (the "Former Avid Stockholders"). Capitalized
terms used herein which are not defined herein shall have the definitions
ascribed to them in the Reorganization Agreement (defined below).
RECITALS
A. Triangle, Project Z and Avid entered into an Agreement and Plan
of Reorganization dated as of June 30, 1997 (the "Reorganization Agreement"),
which contained the terms for the merger of Project Z with and into Avid and
after which Avid would become a wholly-owned subsidiary of Triangle.
B. Avid and Project Z entered into the Agreement, pursuant to which
Project Z merged with and into Avid on August 28, 1997, and Avid became a
wholly-owned subsidiary of Triangle.
C. Triangle, Avid and the Securityholder Agent, on behalf of and as
attorney-in-fact for the Former Avid Stockholders, are concurrently herewith
entering into an amendment to the Reorganization Agreement (the
"Reorganization Amendment") to extend the eighteen (18) month period set
forth in Section 1.6(b)(ii)(B) of the Reorganization Agreement after which,
if Triangle has not Initiated a Definitive Clinical Trial with the Lead
Compound or elected in writing to continue the development of the Lead
Compound, the Securityholder Agent will have the option to either exercise
the Lead Compound Option and to amend certain other provisions of the
Agreement as set forth in the Reorganization Amendment.
D. Triangle, Avid (including its capacity as successor to Project Z)
and the Securityholder Agent desire to amend the Agreement to make it
consistent with the terms of the Reorganization Agreement as amended by the
Reorganization Amendment.
NOW, THEREFORE, in consideration of the foregoing and the promises
and covenants contained herein, and for other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. AMENDMENTS TO AGREEMENT.
1.1 ARTICLE IV.A.2.B.(I). Article IV.A.2.b.(i) of the Agreement is hereby
amended and restated in its entirety as follows:
"(i) In the event that Parent, in its sole
discretion, (x) Initiates (as defined in Section 1.6(b)(iii) of the
Reorganization Agreement) a Definitive
<PAGE>
Clinical Trial (as defined in Section 1.6(b)(iii) of the
Reorganization Agreement) with the Lead Compound (as defined in
Section 1.6(b)(iii) of the Reorganization Agreement), or (y) notifies
the Securityholder Agent (as defined in Section 7.2(g) of the
Reorganization Agreement) in a writing that specifically references
Section 1.6(b)(ii)(A) of the Reorganization Agreement of its election
to continue the development of the Lead Compound even if Parent has
not Initiated a Definitive Clinical Trial with the Lead Compound,
Parent shall within seventy-five (75) days thereafter make available
to the Exchange Agent (as defined in Section IV.E.1 below) for
distribution pursuant to Section IV.E below, 1,500,000 shares of
Parent Common Stock."
1.2 ARTICLE IV.A.2.B.(II). Article IV.A.2.b.(ii) of the Agreement is hereby
amended and restated in its entirety as follows:
"(ii) If neither of the conditions described in
Section IV.A.2.b.(i) above is satisfied on or prior to thirty (30)
months after the Closing Date and the Securityholder Agent elects not
to exercise the Lead Compound Option (as defined in Section 5.17 of the
Reorganization Agreement) within the thirty (30) day period set forth
in Section 5.17 of the Reorganization Agreement, Parent shall within
seventy-five (75) days thereafter make available to the Exchange Agent
for distribution pursuant to Section IV.E below, 100,000 shares of
Parent Common Stock."
2. SECOND PAYMENT.
Triangle shall, on or before May 14, 1999, or as soon
thereafter as is reasonably practicable, deliver 100,000 shares of Triangle
Common Stock (the "Second Payment") to the Escrow Agent. The certificate for
the Second Payment shall be issued as of April 1, 1999, shall be deposited in
the Escrow Fund and shall be held by the Escrow Agent for each of the Former
Avid Stockholders in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive from
the First Payment pursuant to Section 1.7 of the Reorganization Agreement by
virtue of such holder's ownership of outstanding shares of Company Capital
Stock immediately prior to the Effective Time, and assuming for the purposes
of such allocation that the holders of all Assumed Options and the holders of
all Assumed Warrants were the holders of the number of shares of the Company
Common Stock that would have been issued had all of the Assumed Options and
all of the Assumed Warrants been exercised in full immediately prior to the
Effective Time (assuming that the exercise price was paid in cash). The
Second Payment shall not be subject to claims against the Escrow Fund by
Triangle for Losses pursuant to Section 7.2 of the Reorganization Agreement,
except for Losses, if any, identified in Subsection 7.2(a)(iv) of the
Reorganization Agreement. Subject to the receipt of an Agent Certificate, in
form acceptable to Triangle, pursuant to Section 1.7(d)(i) of the
Reorganization Agreement with respect to the distribution of the Second
Payment, the Second Payment shall be distributed from the Escrow Account
within seventy-five (75) days after the expiration of the thirty (30) month
period set forth in Section 1.6(b)(ii)(B) of the Reorganization Agreement.
Triangle shall be entitled to rely without investigation on the accuracy of
the information set forth in such Agent Certificate.
-2-
<PAGE>
3. EFFECT OF AMENDMENT.
Except as amended and set forth above, the Agreement shall
continue in full force and effect. In the event of any conflict between the
terms of the Agreement and the terms of this Amendment, the terms of this
Amendment shall govern and control.
4. FURTHER ASSURANCES.
The parties agree to execute such further instruments,
agreement and documents and to take such further action as may reasonably be
necessary to carry out the intent of this Amendment.
5. COUNTERPARTS.
This Amendment may be executed in any number of
counterparts, each which will be deemed an original, and all of which
together shall constitute one instrument.
6. SEVERABILITY.
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from
this Amendment and the balance of the Amendment shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with
its terms.
7. GOVERNING LAW.
This Amendment shall be governed by and construed under the
laws of the State of Delaware regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
This Amendment is hereby executed as of the date first above written.
TRIANGLE: TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By:
------------------------------
M. Nixon Ellis, President and
Chief Operating Officer
AVID: AVID CORPORATION, a Pennsylvania
corporation
By:
-----------------------------
M. Nixon Ellis, President
SECURITYHOLDER AGENT:
---------------------------------
Forrest H. Anthony
---------------------------------
Alan G. Walton
---------------------------------
Marcia T. Bates
[SIGNATURE PAGE TO AMENDMENT NUMBER ONE TO
THE AGREEMENT AND PLAN OF MERGER]
<PAGE>
EXHIBIT 10.6
AMENDMENT NUMBER ONE TO THE
AGREEMENT AND PLAN OF REORGANIZATION
This Amendment Number One (this "Amendment") to the Agreement and
Plan of Reorganization dated as of June 30, 1997 (the "Agreement") among
Triangle Pharmaceuticals, Inc. ("Triangle"), Project Z Corporation ("Project
Z") and Avid Corporation ("Avid"), is made as of this 28th day of February,
1999, by and among Triangle, Avid and Forrest H. Anthony, Alan G. Walton and
Marcia T. Bates (the "Securityholder Agent"), on behalf of and as
attorney-in-fact for all of the stockholders, optionholders and
warrantholders of Avid immediately prior to the merger of Project Z with and
into Avid (the "Former Avid Stockholders"). Capitalized terms used herein
which are not defined herein shall have the definitions ascribed to them in
the Agreement.
RECITALS
A. Triangle, Project Z and Avid entered into the Agreement, pursuant
to which Project Z merged with and into Avid on August 28, 1997, and Avid
became a wholly-owned subsidiary of Triangle.
B. Triangle, Avid and the Securityholder Agent, on behalf of and as
attorney-in-fact for the Former Avid Stockholders, desire to extend the
eighteen (18) month period set forth in Section 1.6(b)(ii)(B) of the
Agreement after which, if Triangle has not Initiated a Definitive Clinical
Trial with the Lead Compound or elected in writing to continue the
development of the Lead Compound, the Securityholder Agent will have the
option to either exercise the Lead Compound Option and to amend certain other
provisions of the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the promises
and covenants contained herein, and for other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. AMENDMENTS TO AGREEMENT.
1.1 SECTION 1.6(B). The first paragraph of Section
1.6(b) is hereby amended and restated in its entirety as follows:
"(b) STOCK CONSIDERATION. The "Stock Consideration"
shall be the number of shares of Parent Common Stock equal to the sum
of (x) the First Payment (as defined in Section 1.6(b)(i) below) plus
(y) the Second Payment (as defined in Amendment Number One to this
Agreement) plus (z) the Milestone Payments (as defined in Section
1.6(b)(ii) below)."
1.2 SECTION 1.6(B)(II)(A). Section 1.6(b)(ii)(A) of the
Agreement is hereby amended and restated in its entirety as follows:
"(A) In the event that Parent, in its sole
discretion, (x) Initiates (as defined in Section 1.6(b)(iii) below) a
Definitive Clinical Trial (as defined in Section 1.6(b)(iii) below)
with the Lead Compound (as defined in Section 1.6(b)(iii) below), or
(y) notifies the Securityholder Agent (as defined in Section
<PAGE>
7.2(g) below) in a writing that specifically references this Section
1.6(b)(ii)(A) of its election to continue the development of the Lead
Compound even if Parent has not Initiated a Definitive Clinical Trial
with the Lead Compound, Parent shall within seventy-five (75) days
thereafter make available to the Exchange Agent (as defined in Section
1.10(a) below) for distribution pursuant to Section 1.10, 1,500,000
shares of Parent Common Stock."
1.3 SECTION 1.6(B)(II)(B). Section 1.6(b)(ii)(B) of the
Agreement is hereby amended and restated in its entirety as follows:
"(B) If neither of the conditions described in
Section 1.6(b)(ii)(A) above is satisfied on or prior to thirty (30)
months after the Closing Date and the Securityholder Agent elects not
to exercise the Lead Compound Option (as defined in Section 5.17
below) within the thirty (30) day period set forth in Section 5.17
below, Parent shall within seventy-five (75) days thereafter make
available to the Exchange Agent for distribution pursuant to Section
1.10, 100,000 shares of Parent Common Stock."
1.4 SECTION 1.7(B)(III). Section 1.7(b)(iii) of the Agreement
is hereby amended and restated in its entirety as follows:
"(iii) REVALUATION OF DESIGNATED ASSETS.
Notwithstanding any prior distribution of the Designated Assets, as of
the date on which all unexercised Assumed Options and Assumed Warrants
expire (the "Revaluation Date"), the Designated Assets shall be
redistributed among the Former Company Stockholders in accordance with
Section 1.7(b)(ii) based on the valuation of such Designated Assets as
of the Revaluation Date. Solely for purposes of the redistribution of
the Designated Assets as of the Revaluation Date contemplated by this
Section 1.7(b)(iii), the shares of Parent Common Stock included in
such Designated Assets shall be valued at the average of the closing
prices of Parent Common Stock on the Nasdaq National Market for the
five (5) consecutive trading days ending five (5) trading days prior
to the Revaluation Date. No revaluation or redistribution of any of
the Designated Assets shall occur with respect to the Stock
Consideration, if any, distributed by Parent after the Revaluation
Date. In no event, however, shall the aggregate value of the Merger
Consideration distributed to the holders of Company Preferred Stock be
less than the aggregate value of the Merger Consideration distributed
to the holders of the Company Common Stock and the holders of Assumed
Options and Assumed Warrants."
1.5 SECTION 1.8(C)(I)(A). Section 1.8(c)(i)(A) of the
Agreement is hereby amended and restated in its entirety as follows:
"(A) At the Effective Time, each Assumed Option
shall be, in connection with the Merger, assumed by Parent. Each
Assumed Option so assumed by Parent under this Agreement shall be
amended prior to the Effective Time to provide that from and after
the Effective Time such Assumed Option (1) may be exercised through a
cashless exercise procedure (to the extent that the Assumed Option
does not already permit the holder thereof to do so) and may be
-2-
<PAGE>
exercised notwithstanding the failure of the holder thereof to enter
or remain in the employ of Parent or the Company following the
Merger, (2) may not be exercised at any time prior to the earlier of
(a) thirty (30) months after the Closing Date and (b) the date, if
any, of the written notice from the Securityholder Agent addressed to
the last known domicile address of the holder of such Assumed Option
informing such holder that one of the conditions described in Section
1.6(b)(ii)(A) above has been satisfied (the earlier of such dates
being the "Option Exercise Date"), (3) may not be exercised at any
time after 5:00 p.m. eastern standard time on the date that is
forty-five (45) days after the Option Exercise Date, and (4)
represents only the right to receive upon exercise the portion of the
Merger Consideration issuable to such holder pursuant to Section 1.7
above. Except as so amended, each Assumed Option shall continue to
have, and be subject to, the same terms and conditions set forth in
the Option Plan under which it was issued and/or as provided in the
respective option agreements governing such Assumed Option
immediately prior to the Effective Time. Parent shall reserve from
the Cash Distribution the amount, if any, that the holders of the
Assumed Options would have received had all of the Assumed Options
and all of the Assumed Warrants been exercised in full immediately
prior to the Effective Time (assuming that the exercise price was
paid in cash). The portion of the Cash Distribution reserved by
Parent for issuance upon exercise of the Assumed Options is referred
to as the "Assumed Option Amount." "
1.6 SECTION 1.8(D)(I)(A). Section 1.8(d)(i)(A) of the
Agreement is hereby amended and restated in its entirety as follows:
"(A) At the Effective Time, each Assumed Warrant
shall be, in connection with the Merger, assumed by Parent. Each
Assumed Warrant so assumed by Parent under this Agreement shall be
amended prior to the Effective Time to provide that from and after the
Effective Time such Warrant (1) may be exercised through a cashless
exercise procedure (to the extent that the Assumed Warrant does not
already permit the holder thereof to do so), (2) may not be exercised
at any time prior to the earlier of (a) thirty (30) months after the
Closing Date and (b) the date, if any, of the written notice from the
Securityholder Agent addressed to the last known domicile address of
the holder of such Assumed Warrant informing such holder that one of
the conditions described in Section 1.6(b)(ii)(A) above has been
satisfied (the earlier of such dates being the "Warrant Exercise
Date"), (3) may not be exercised at any time after 5:00 p.m. eastern
standard time on the date that is forty-five (45) days after the
Warrant Exercise Date, and (4) represents only the right to receive
upon exercise the portion of the Merger Consideration issuable to such
holder pursuant to Section 1.7 above. Except as so amended (and as the
warrants issued by the Company to Dominion Ventures, Inc. may be
further amended as contemplated by Section 6.3(s) below prior to the
Effective Time), each Assumed Warrant shall continue to have, and be
subject to, the same terms and conditions as provided in the
respective Assumed Warrant agreement immediately prior to the
Effective Time. Parent shall reserve from the Cash Distribution the
amount, if any, that the holders of the Assumed Warrants would have
received had all of the Assumed Warrants and all
-3-
<PAGE>
of the Assumed Options been exercised in full immediately prior to the
Effective Time (assuming that the exercise price was paid in cash).
The portion of the Cash Distribution reserved by Parent for issuance
upon exercise of the Assumed Warrants is referred to as the "Assumed
Warrant Amount." "
1.7 SECTION 5.17. The first paragraph of Section 5.17 of the
Agreement is hereby amended and restated in its entirety as follows:
"5.17 OPTION TO OBTAIN RIGHTS TO LEAD COMPOUND. In
the event that neither of the conditions described in Section
1.6(b)(ii)(A) is satisfied on or prior to the date that is thirty (30)
months after the Closing Date, the Securityholder Agent shall have the
option ("Lead Compound Option"), subject to the conditions and on the
terms described below, to acquire on behalf of each holder of any
Company Capital Stock outstanding immediately prior to the Effective
Time and each holder of an Assumed Option or an Assumed Warrant that
is timely and properly exercised after the Closing (together, the
"Former Company Stockholders") pursuant to the Technology Transfer
Agreement in the form attached hereto as EXHIBIT 5.17 (the "Technology
Transfer Agreement"): (i) all of Parent's and the Company's rights in
the Lead Compound, in all improvements solely and exclusively of, and
enhancements solely and exclusively to, the Lead Compound (the "Lead
Compound Improvements") and in all documents and data created solely
and exclusively in connection with the development of the Lead
Compound (the "Lead Compound Information") (and in both the case of
Lead Compound Improvements and Lead Compound Information, not in any
way related to any of the other compounds, technologies or assets of
Parent or the Company), and (ii) one copy of all documents that
contain any data regarding clinical trials of the Lead Compound in
combination with other drugs or drug candidates, redacted to exclude
therefrom any other information contained therein (together with the
Lead Compound Information, the "Lead Compound Documents"). In the
event the Securityholder Agent delivers written notice to Parent of
his or her election to exercise the Lead Compound Option within thirty
(30) calendar days after the date of the Parent Notice (as defined in
Section 5.17(a) below), Parent shall thereafter, subject to and in
compliance with good medical and clinical trial practices, promptly
and permanently cease, and shall cause the Company to cease, all
development and use of the Lead Compound, the Lead Compound
Improvements and the Lead Compound Documents (collectively, the "Lead
Compound Rights")."
1.8 SECTION 7.2(B)(I). Section 7.2(b)(i) of the Agreement is
hereby amended and restated in its entirety as follows:
"(i) In the event that neither of the conditions
described in Section 1.6(b)(ii)(A) is satisfied on or prior to the
date that is eighteen (18) months after the Closing Date, Parent and
the Securityholder Agent shall deliver written notice to the Escrow
Agent certifying that neither of the conditions has been satisfied.
The Escrow Agent shall within seventy-five (75) days thereafter
deliver to the stockholders of the Company the portion of the Escrow
Fund, if any, in excess of 200,000 shares of Parent
-4-
<PAGE>
Common Stock, not including the Second Payment. Deliveries of Escrow
Amounts to the stockholders of the Company pursuant to this Section
7.2(b)(i) shall be made in accordance with Section 1.7(b)(ii) based on
their interest in such Escrow Amounts as of February 28, 1999. Parent
shall reserve from such distribution the amount, if any, that the
holders of the Assumed Options and the Assumed Warrants would have
received had all of the Assumed Options and all of the Assumed
Warrants been exercised in full on February 28, 1999. Solely for
purposes of the distribution pursuant to this Section 7.2(b)(i) the
shares of Parent Common Stock included in such distribution shall be
valued at the average of the closing prices of Parent Common Stock on
the Nasdaq National Market for the five (5) consecutive trading days
ending February 28, 1999, and not at the value as of the Revaluation
Date. The Escrow Agent shall not be obligated to deliver any Escrow
Amounts to the stockholders of the Company pursuant to Section
7.2(b)(i) unless and until the Securityholder Agent shall have
delivered an Agent Certificate to Parent and the Escrow Agent with
respect to such Escrow Amounts as required by this Section 7.2(b)(i)."
1.9 SECTION 7.2(B)(II). Section 7.2(b)(ii) of the Agreement
is hereby amended and restated in its entirety as follows:
"(ii) As soon as all claims specified in any
Officer's Certificate delivered to the Escrow Agent prior to
termination of the Escrow Period have been resolved and after the
termination of the Escrow Period, the Escrow Agent shall deliver to
the stockholders of the Company the remaining portion of the Escrow
Fund, not including the Second Payment, not required to satisfy such
claims. Deliveries of Escrow Amounts to the stockholders of the
Company pursuant to this Section 7.2(b)(ii) shall be made in
accordance with Section 1.7(b)(ii) based on their interest in such
Escrow Amounts as of August 31, 1999. Parent shall reserve from such
distribution the amount, if any, that the holders of the Assumed
Options and the Assumed Warrants would have received had all of the
Assumed Options and all of the Assumed Warrants been exercised in full
on August 31, 1999. Solely for purposes of the distribution pursuant
to this Section 7.2(b)(ii) the shares of Parent Common Stock included
in such distribution shall be valued at the average of the closing
prices of Parent Common Stock on the Nasdaq National Market for the
five (5) consecutive trading days ending August 31, 1999, and not at
the value as of the Revaluation Date. The Escrow Agent shall not be
obligated to deliver any Escrow Amounts to the stockholders of the
Company pursuant to Section 7.2(b)(ii) unless and until the
Securityholder Agent shall have delivered an Agent Certificate to
Parent and the Escrow Agent with respect to such Escrow Amounts as
required by this Section 7.2(b)(ii)."
2. SECOND PAYMENT.
Triangle shall, on or before May 14, 1999, or as soon
thereafter as is reasonably practicable, deliver 100,000 shares of Triangle
Common Stock (the "Second Payment") to the Escrow Agent. The certificate for
the Second Payment shall be issued as of April 1, 1999, shall be deposited in
the Escrow Fund and shall be held by the Escrow Agent for each of the Former
Avid Stockholders in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive from
the aggregate of the First
-5-
<PAGE>
Payment and the Second Payment pursuant to Section 1.7 of the Agreement by
virtue of such holder's ownership of outstanding shares of Company Capital
Stock immediately prior to the Effective Time, and assuming for the purposes
of such allocation that the holders of all Assumed Options and the holders of
all Assumed Warrants were the holders of the number of shares of the Company
Common Stock that would have been issued had all of the Assumed Options and
all of the Assumed Warrants been exercised in full immediately prior to the
Effective Time (assuming that the exercise price was paid in cash). The
Second Payment shall not be subject to claims against the Escrow Fund by
Triangle for Losses pursuant to Section 7.2 of the Agreement, except for
Losses, if any, identified in Subsection 7.2(a)(iv) of the Agreement. Subject
to the receipt of an Agent Certificate, in form acceptable to Triangle,
pursuant to Section 1.7(d)(i) of the Agreement with respect to the
distribution of the Second Payment, the Second Payment shall be distributed
from the Escrow Account within seventy-five (75) days after the expiration of
the thirty (30) month period set forth in Section 1.6(b)(ii)(B) of the
Agreement. Triangle shall be entitled to rely without investigation on the
accuracy of the information set forth in such Agent Certificate.
3. SECURITYHOLDER AGENT'S EXPENSES.
Triangle shall pay the reasonable fees and expenses of
legal counsel to the Securityholder Agent incurred in connection with the
drafting and review of this Amendment and the transactions contemplated
hereby, subject to verification of fees by Triangle.
4. EFFECT OF AMENDMENT.
Except as amended and set forth above, the Agreement shall
continue in full force and effect. In the event of any conflict between the
terms of the Agreement and the terms of this Amendment, the terms of this
Amendment shall govern and control.
5. FURTHER ASSURANCES.
The parties agree to execute such further instruments,
agreement and documents and to take such further action as may reasonably be
necessary to carry out the intent of this Amendment.
6. COUNTERPARTS.
This Amendment may be executed in any number of
counterparts, each which will be deemed an original, and all of which
together shall constitute one instrument.
7. SEVERABILITY.
If one or more provisions of this Amendment are held to be
unenforceable under applicable law, such provision shall be excluded from
this Amendment and the balance of the Amendment shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with
its terms.
-6-
<PAGE>
8. GOVERNING LAW.
This Amendment shall be governed by and construed under the
laws of the State of Delaware regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-7-
<PAGE>
This Amendment is hereby executed as of the date first above written.
TRIANGLE: TRIANGLE PHARMACEUTICALS, INC., a
Delaware corporation
By:
---------------------------------
M. Nixon Ellis, President and
Chief Operating Officer
AVID: AVID CORPORATION, a Pennsylvania
corporation
By:
---------------------------------
M. Nixon Ellis, President
SECURITYHOLDER AGENT:
------------------------------------
Forrest H. Anthony
------------------------------------
Alan G. Walton
------------------------------------
Marcia T. Bates
[SIGNATURE PAGE TO AMENDMENT NUMBER ONE TO
THE AGREEMENT AND PLAN OF REORGANIZATION]
<PAGE>
EXHIBIT 11.1
TRIANGLE PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)
COMPUTATION OF NET LOSS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1999 JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Historical weighted average
shares outstanding.......... 29,930 29,422 23,425 21,725
-------------------- ------------------ ------------------- -------------------
Shares used in computing net
loss per common share....... 29,930 29,422 23,425 21,725
==================== ================== =================== ===================
Net Loss...................... $ (32,429) $ (50,860) $ (14,256) $ (30,664)
==================== ================== =================== ===================
Basic and diluted net loss per
common share................ $ (1.08) $ (1.73) $ (0.61) $ (1.41)
==================== ================== =================== ===================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS CONSOLIDATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THIS QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 17,987,000
<SECURITIES> 48,618,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 68,792,000
<PP&E> 6,218,000
<DEPRECIATION> (1,799,000)
<TOTAL-ASSETS> 80,691,000
<CURRENT-LIABILITIES> 28,058,000
<BONDS> 81,000
0
0
<COMMON> 31,000
<OTHER-SE> 52,521,000
<TOTAL-LIABILITY-AND-EQUITY> 80,691,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 53,410,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (50,860,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (50,860,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50,860,000)
<EPS-BASIC> (1.73)
<EPS-DILUTED> (1.73)
</TABLE>
<PAGE>
CONTACT:
Peter A. Arakelian Douglas MacDougall
Director of Investor Relations and Priscilla Harlan
Public Relations Feinstein Kean Partners Inc.
Triangle Pharmaceuticals, Inc. (617) 577-8110
(919) 493-5980 www.fkpi.com
www.tripharm.com
FOR IMMEDIATE RELEASE:
TRIANGLE PHARMACEUTICALS, INC. REPORTS FINANCIAL RESULTS
FOR SECOND QUARTER 1999
DURHAM, N.C., AUGUST 13, 1999 -- Triangle Pharmaceuticals, Inc. (Nasdaq: VIRS)
today reported financial results for the second quarter ended June 30, 1999.
For the quarter ended June 30, 1999, the Company reported a net loss of
$32,429,000, or ($1.08) per share, compared to a net loss of $14,256,000, or
($0.61) per share in the second quarter of 1998. For the six months ended June
30, 1999, the Company reported a net loss of $50,860,000, or ($1.73) per share,
compared to a net loss of $30,664,000, or ($1.41) per share for the same
six-month period in 1998.
The Company reported net interest income of $1,080,000 for the quarter ended
June 30, 1999, compared to net interest income of $1,239,000 in the same
three-month period in 1998. For the six months ended June 30, 1999, the Company
reported net interest income of $2,550,000, compared to net interest income of
$1,973,000 for the six months ended June 30, 1998. Cash, cash equivalents and
total investments were $74,085,000 on June 30, 1999, compared to $118,692,000 on
December 31, 1998.
Total operating expenses and loss from operations were $33,509,000 in the second
quarter of 1999, reflecting increased expenditures associated with the
continuing development of Triangle's drug candidates. Included within second
quarter operating expenses is a one-time $4,000,000 payment arising from the
license and settlement agreements relating to Coviracil(TM) (emtricitabine) as
well as a $5,000,000 development milestone accrual for L-FMAU. Total operating
expenses and loss from operations in the second quarter of 1998 were
$15,495,000. For the six months ended June 30, 1999, total operating expenses
and loss from operations were $53,410,000 compared to $32,637,000 for the six
months ended June 30, 1998.
"During the past quarter we have continued to make significant progress toward
achieving our 1999 objectives," said David W. Barry, M.D., Chairman and Chief
Executive Officer of Triangle Pharmaceuticals, Inc. "We negotiated a very
favorable worldwide strategic alliance with Abbott Laboratories. Completion of
the alliance on August 3, 1999 provided us approximately $118.3 million in gross
proceeds from the sale of Triangle Common Stock and will provide us with $31.7
million in research funding to be received by January 15, 2000. We also have the
potential to
<PAGE>
Triangle Pharmaceuticals Reports Financial Results for Second Quarter 1999
August 13, 1998
Page 2
receive up to another $185 million in contingent milestone
payments. This alliance provides us with a strong international presence,
additional commercial strength in the U.S. market, and financial support which
enhances our ability to meet our development and commercial objectives. We
continue to advance the development of our portfolio of drug candidates,
particularly Coactinon(TM) (emivirine) and Coviracil for HIV, which are in late
stage clinical trials."
Dr. Barry continued, "Our progress testifies to the determination and focus of
the entire Triangle team, and in order to optimally position us to work with our
new partner, we are pleased to announce that the following have been promoted to
Executive Vice President: George R. Painter, III, Ph.D., Research and
Development; Chris A. Rallis, J.D., Business Development and General Counsel;
Franck S. Rousseau, M.D., Medical Affairs and Chief Medical Officer; and Carolyn
S. Underwood, Commercial Operations. James A. Klein, Jr., Chief Financial
Officer, has elected to leave Triangle later this month to pursue other
interests. Jim has contributed greatly in helping Triangle achieve its present
success, and we sincerely thank him for his endeavors." Dr. Barry further noted
that Triangle will appoint Thomas R. Staab, II as acting CFO and Treasurer.
Triangle Pharmaceuticals, Inc. is a specialty pharmaceutical company engaged in
the development of new antiviral drug candidates, with a particular focus on
therapies for the human immunodeficiency virus, including the acquired
immunodeficiency syndrome ("AIDS"), and hepatitis B virus. More information
about Triangle's portfolio, management and product development strategy is
available on the Triangle Pharmaceuticals' website at:
HTTP://WWW.TRIPHARM.COM.
STATEMENTS IN THIS PRESS RELEASE MAY CONSTITUTE FORWARD-LOOKING STATEMENTS AND
ARE SUBJECT TO NUMEROUS RISKS AND UNCERTAINTIES, INCLUDING THE FAILURE TO
SUCCESSFULLY COMPLETE PIVOTAL CLINICAL TRIALS, THE COMPANY'S FUTURE CAPITAL
NEEDS, THE INABILITY TO COMMERCIALIZE COVIRACIL(TM) (EMTRICITABINE) AND DAPD DUE
TO PATENT RIGHTS HELD BY THIRD PARTIES, THE COMPANY'S ABILITY TO OBTAIN
ADDITIONAL FUNDING, PATENT PROTECTION AND REQUIRED REGULATORY APPROVALS FOR ITS
DRUG CANDIDATES, THE DEVELOPMENT OF COMPETITIVE PRODUCTS BY OTHERS, THE COST OF
COACTIVE THERAPY AND THE EXTENT TO WHICH COACTIVE THERAPY ACHIEVES MARKET
ACCEPTANCE, THE COMPANY'S SUCCESS IN IDENTIFYING NEW DRUG CANDIDATES, ACQUIRING
RIGHTS TO THE CANDIDATES ON FAVORABLE TERMS AND DEVELOPING ANY CANDIDATES TO
WHICH THE COMPANY ACQUIRES ANY RIGHTS, AND THESE AND OTHER RISKS DETAILED FROM
TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN
THIS PRESS RELEASE. THE COMPANY DISCLAIMS ANY OBLIGATIONS TO UPDATE THE
STATEMENTS IN THIS PRESS RELEASE.
- financial chart follows -
<PAGE>
TRIANGLE PHARMACEUTICALS, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <S> <C> <C> <C>
Total revenues $ -- $ --- $ -- $ --
Operating expenses:
License fees 9,245 167 9,445 6,167
Development 19,127 12,737 36,469 21,433
Purchased research and development 1,247 -- 1,247 --
Selling, general and administrative 3,890 2,591 6,249 5,037
-------- -------- -------- --------
Loss from operations (33,509) (15,495) (53,410) (32,637)
Interest income, net 1,080 1,239 2,550 1,973
-------- -------- -------- --------
Net loss $(32,429) $(14,256) $(50,860) $(30,664)
-------- -------- -------- --------
-------- -------- -------- --------
Basic and diluted net loss per
common share $ (1.08) $ (0.61) $ (1.73) $ (1.41)
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in computing net loss
per common share 29,930 23,425 29,422 21,725
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
SELECTED CONSOLIDATED BALANCE SHEET INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
Cash, cash equivalents and
investments $ 74,085 $ 118,692
Working capital 40,734 79,807
Total assets 80,691 124,313
Total stockholders' equity 52,552 101,951
</TABLE>
