Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] 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: 000-26727
BIOMARIN PHARMACEUTICAL INC.
(Exact name of registrant issuer as specified in its charter)
Delaware 68-0397820
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
371 Bel Marin Keys Blvd., Suite 210, Novato,
California 94949
(address of principal executive offices)
(Zip Code)
(415) 884-6700
(Registrant's telephone number, including area code)
(Former name,former address and former fiscal year if changed since last report)
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 past 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 __ No X
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ____ No_____
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 34,801,420 shares
Common Stock, par value $0.001, outstanding as of August 31, 1999.
<PAGE>
BIOMARIN PHARMACEUTICAL INC.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Consolidated Balance Sheets as of December 31, 1998
and June 30, 1999................................................2
Consolidated Statements of Operations for the three-month periods
ended June 30, 1998 and 1999.....................................3
Consolidated Statements of Operations for the six-month periods
ended June 30, 1998 and 1999 and for the period from
March 21, 1997(inception) to June 30, 1999.......................4
Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 1998 and 1999 and for the period from
March 21, 1997(inception) to June 30, 1999.......................5
Notes to Consolidated Financial Statements..........................6
Item 2. Management's Discussion and Analysis.......................8
Item 3. Quantitative and Qualitative Disclosure about Market Risk.25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.........................................26
Item 2. Changes in Securities and Uses of Proceeds................26
Item 3. Defaults upon Senior Securities...........................26
Item 4. Submission of Matters to a Vote of Security Holders.......26
Item 5. Other Information.........................................27
Item 6. Exhibits and Reports on Form 8-K..........................27
SIGNATURE...................................................................28
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND
JUNE 30, 1999
<TABLE>
<CAPTION>
December 31, June 30, Pro Forma
1998 1999 June 30, 1999
--------------------- ------------------------ -------------
<S> <C> <C> <C>
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,413,662 $ 17,244,025
Short-term investments 1,975,800 254,000
Accounts receivable, net 148,396 437,954
Due from Glyko Biomedical Ltd. 114,005 116,383
Due from BioMarin/Genzyme LLC 418,712 941,245
Inventories 71,730 806,677
Prepaid expenses 676,214 1,346,856
--------------------- ------------------------
Total current assets 12,818,519 21,147,140
PROPERTY AND EQUIPMENT, net 6,223,058 16,953,166
GOODWILL AND OTHER INTANGIBLE ASSETS 11,703,726 11,911,178
INVESTMENT IN BIOMARIN/GENZYME LLC 684,657 1,333,923
DEPOSITS 79,142 88,844
--------------------- ------------------------
Total assets $31,509,102 $ 51,434,251
===================== ========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,340,355 $ 6,016,418
Accrued liabilities 640,016 1,847,430 1,286,568
Notes payable short-term 24,366 24,958
--------------------- ------------------------
Total current liabilities 2,004,737 7,888,806
LONG-TERM LIABILITIES:
Convertible notes -- 26,000,000 --
Long-term portion of notes payable 109,845 97,255
--------------------- ------------------------
Total long-term liabilities 109,845 26,097,255
--------------------- ------------------------
Total liabilities 2,114,582 33,986,061
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value:50,000,000 shares
authorized, 26,176,180, and 26,183,057 shares
issued and outstanding at December 31, 1998,
and June 30, 1999, respectively 26,176 26,176 28,832
Additional paid-in capital 50,058,434 49,576,126 76,134,332
Warrants 128,240 128,240
Deferred compensation (3,254,411) (3,252,121)
Notes receivable from stockholders (2,487,500) (2,562,500)
Deficit accumulated during the development stage (15,076,419) (26,467,731)
--------------------- ------------------------
Total stockholders' equity 29,394,520 17,448,190
--------------------- ------------------------
Total liabilities and stockholders' equity $31,509,102 $ 51,434,251
===================== ========================
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 1998 AND 1999
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------------------------------------
1998 1999
----------------------- -------------------------
(unaudited) (unaudited)
<S> <C> <C>
REVENUES:
Revenues--products $ -- $ 326,827
Revenues--services -- 31,079
Revenues from BioMarin/Genzyme LLC -- 1,157,458
Revenues--other -- 42,119
----------------------- -------------------------
Total revenues -- 1,557,483
OPERATING COSTS AND EXPENSES:
Cost of products -- 32,710
Cost of services -- 79,572
Research and development 1,047,325 6,479,328
Selling, general and administrative 1,029,090 1,110,820
----------------------- -------------------------
Loss from operations (2,076,415) (6,144,947)
INTEREST INCOME 146,875 299,018
INTEREST EXPENSE -- (560,862)
EQUITY IN LOSS OF BIOMARIN/GENZYME LLC -- (375,123)
----------------------- -------------------------
Net loss $(1,929,540) $(6,781,914)
======================= =========================
NET LOSS PER SHARE, basic and diluted $ (0.09) $ (0.26)
======================= =========================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 20,566,500 26,176,256
======================= =========================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1999, AND
FOR THE PERIOD FROM MARCH 21, 1997 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<CAPTION>
Period from
March 21, 1997
Six Months Ended (Inception), to
June 30, June 30,
-------------------------------------------------
1998 1999 1999
---------------------- ----------------------- ---------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
REVENUES:
Revenues--products $ -- $ 528,865 $ 667,027
Revenues--services -- 77,961 190,096
Revenues from BioMarin/Genzyme LLC -- 1,903,730 2,741,187
Revenues--other -- 151,245 253,900
---------------------- ----------------------- ---------------------
Total revenues -- 2,661,801 3,852,210
OPERATING COSTS AND EXPENSES:
Cost of products -- 116,750 165,997
Cost of services -- 98,233 156,928
Research and development 2,155,558 10,371,330 22,787,761
Selling, general and administrative 1,331,745 2,803,578 7,248,763
---------------------- ----------------------- ---------------------
Loss from operations (3,487,303) (10,728,090) (26,507,239)
INTEREST INCOME 239,268 452,629 1,202,530
INTEREST EXPENSE -- (560,862) (560,862)
EQUITY IN LOSS OF BIOMARIN/GENZYME LLC -- (554,989) (602,160)
---------------------- ----------------------- ---------------------
Net loss $(3,248,035) $ (11,391,312) $(26,467,731)
====================== ======================= =====================
NET LOSS PER SHARE, basic and diluted $ (0.16) $ (0.44) $ (1.44)
====================== ======================= =====================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 20,566,500 26,176,218 18,397,901
====================== ======================= =====================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1999, AND FOR
THE PERIOD FROM MARCH 21, 1997 (INCEPTION) TO JUNE 30, 1999
<TABLE>
<CAPTION>
Period from
March 21,
Six Months Ended 1997
June 30, (Inception), to
----------------------------------
1998 1999 June 30, 1999
----------------- ---------------- ---------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,248,035) $(11,391,312) $(26,467,731)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 38,517 1,039,651 1,352,086
Amortization of deferred compensation -- 636,235 821,640
Amortization of goodwill -- 542,548 813,822
Accrued interest on notes receivable from stockholders (75,000) (75,000) (262,500)
Compensation in the form of common stock and common
stock options -- -- 18,020
Loss from BioMarin/Genzyme LLC -- 2,458,719 2,505,850
Write-off of in-process technology -- -- 2,625,000
Changes in operating assets and liabilities:
Accounts receivable -- (289,558) (437,954)
Due from Glyko Biomedical, Ltd. -- (2,378) (116,383)
Due from BioMarin/Genzyme LLC -- (522,533) (941,245)
Inventories -- 15,053 (56,677)
Prepaid expenses (364,281) (670,642) (1,346,856)
Deposits (51,682) (9,701) (88,843)
Accounts payable 480,920 4,676,063 6,016,418
Accrued liabilities (43,395) 457,414 1,097,430
Due to Glyko, Inc. 59,090 -- --
--------------- ---------------- ---------------------
Net cash used in operating activities (3,203,866) (3,135,441) (14,467,923)
--------------- ---------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (472,671) (11,769,760) (18,305,253)
Investment in BioMarin/Genzyme LLC -- (3,107,985) (3,839,773)
Sale (purchase) of short-term investments (1,116,921) 1,721,800 (254,000)
Purchase of assets from OGS -- (750,000) (750,000)
--------------- ---------------- ---------------------
Net cash used in investing activities (1,589,592) (13,905,945) (23,149,026)
--------------- ---------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable -- -- 134,211
Bridge loan -- -- 880,000
Repayment of equipment loan -- (11,998) (11,998)
Funds held in escrow for sale of common stock (3,333,719) -- --
Proceeds from sale of convertible notes, net of issuance
costs -- 24,883,747 24,883,747
Proceeds from sale of common stock, net of issuance costs 3,328,002 -- 28,975,014
--------------- ---------------- ---------------------
Net cash provided by (used in) financing activities (5,717) 24,871,749 54,860,974
--------------- ---------------- ---------------------
Net increase (decrease) in cash and cash equivalents (4,799,175) 7,830,363 17,244,025
CASH AND CASH EQUIVALENTS:
Beginning of period 5,987,433 9,413,662 --
--------------- ---------------- ---------------------
End of period $ 1,188,258 $17,244,025 $17,244,025
=============== ================ =====================
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The Company is a developer of carbohydrate enzyme therapies for debilitating,
life-threatening, chronic genetic disorders and other diseases or conditions.
The Company was incorporated in October 1996 as a wholly-owned subsidiary of
Glyko Biomedical. The Company was funded by Glyko Biomedical and began
operations on March 21, 1997, the date of inception. In October 1998, the
Company acquired Glyko, Inc., a wholly-owned subsidiary of Glyko Biomedical in a
transaction valued at $14.5 million.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information on substantially the same basis as the annual audited
financial statements. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, considered necessary for a fair presentation
have been included. Operating results for the three and six month periods ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1999. These consolidated financial statements
should be read in conjunction with the financial statements and footnotes
thereto for the year ended December 31, 1998 included in the Company's Form S-1
Registration Statement.
2. SIGNIFICANT ACCOUNTING POLICIES:
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method. Leasehold improvements are amortized over the life of the
asset or the term of the lease, whichever is shorter. Significant additions and
improvements are capitalized, while repairs and maintenance are charged to
expense as incurred.
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
Estimated
December 31, 1998 June 30, 1999 Useful Lives
--------------------- ------------------- -------------------------
<S> <C> <C> <C>
Computer hardware and software $ 161,994 $ 308,859 3 years
Office furniture and equipment 372,037 656,975 5 years
Laboratory equipment 3,468,978 5,869,180 5 years
Shorter of life of
Leasehold improvements 2,532,484 11,470,239 asset or lease term
--------------------- -------------------
6,535,493 18,305,253
Less: Accumulated depreciation (312,435) (1,352,087)
--------------------- -------------------
Total, net $ 6,223,058 $16,953,166
===================== ===================
</TABLE>
Research and Development
Research and development expenses include the expenses associated with contract
research and development provided to third parties, research and development
provided in connection with the joint venture, including clinical and regulatory
costs, and internal research and development costs. All research and development
costs discussed above are expensed as incurred.
Net Income (Loss) per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by
the weighted average common shares outstanding during the period. Diluted net
income per share is calculated by dividing net income by the weighted average of
common stock outstanding and potential common shares during the period.
Potential common shares include dilutive shares issuable upon the exercise of
outstanding common stock options, warrants, and contingent issuances of common
stock. For periods in which the Company has losses, such potential common shares
are excluded from the computation of diluted net loss per share, as their effect
is antidilutive.
6
<PAGE>
3. INITIAL PUBLIC OFFERING:
The Company completed its Initial Public Offering (IPO) of 4,500,000 shares of
common stock at $13.00 per share on July 23, 1999, raising estimated net
proceeds of $52.9 million. Concurrent with the IPO, Genzyme invested in the
Company $10 million at the IPO price of $13 per share (769,230 common shares).
In addition the convertible notes recorded on the accompanying balance sheet at
June 30, 1999, plus accrued interest, were converted into 2,672,020 shares of
common stock and the underwriters' over-allotment exercise in August raised
estimated net proceeds of $8.2 million at the IPO price (675,000 shares).
The pro forma balance sheet as of June 30, 1999 reflects the conversion of the
convertible notes plus accrued interest discussed above.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
The following discussion and analysis of financial condition and results
of operations contains "forward-looking statements" as defined under
securities laws. These statements can be identified by the use of
terminology such as "believes," "expects," "anticipates," "plans," "may,"
"will," "projects," "continues," "estimates," "potential," "opportunity"
and so on. These forward-looking statements may be found in the "Risk
Factors," and other sections of this document. Our actual results or
experience could differ significantly from the forward-looking
statements. Factors that could cause or contribute to these differences
include those discussed in "Risk Factors," as well as those discussed
elsewhere in this document.
Overview
We are a developer of carbohydrate enzyme therapies for debilitating,
life-threatening, chronic genetic disorders and other diseases or conditions.
Since our inception on March 21, 1997, we have been engaged in research and
development activities, including preclinical studies, clinical trials and
clinical manufacturing, the establishment of laboratory and manufacturing
facilities, and administrative activities. BioMarin was incorporated in October
1996 as a wholly-owned subsidiary of Glyko Biomedical. BioMarin was funded by
Glyko Biomedical and began operations on March 21, 1997, the date of inception.
We have incurred net losses since inception and had an accumulated deficit
through June 30, 1999 of $26.5 million. Our losses have resulted primarily from
research and development activities and related administrative expenses. We
expect to continue to incur operating losses through at least the year 2000.
To date, we have not generated revenues from the sale of our drug candidates.
Our financial results may vary depending on many factors, including:
. The progress of BM101 in the regulatory
processes and initial sales activities
. The investment in manufacturing process
development and in manufacturing capacity for BM101
and other product candidates
. The acceleration of our other pharmaceutical
candidates into preclinical studies and clinical trials
. The progress of our additional research and
development efforts
In September 1998, we established a joint venture with Genzyme for the
worldwide development and commercialization of BM101 for the treatment of MPS-I.
Under the agreement, our company and Genzyme are each required to make capital
contributions to the joint venture equal to 50% of the expenses associated with
the development and commercialization of BM101. We will share equally in any
profits generated from the sales of BM101.
On April 13, 1999, we issued $26.0 million of convertible promissory notes. The
notes plus accrued interest converted into 2,672,020 shares of our common stock
at $10.00 per share.
In October 1998, we acquired Glyko, Inc., a wholly-owned subsidiary of Glyko
Biomedical in a transaction valued at $14.5 million. Glyko, Inc. provides
products and services that perform carbohydrate analysis and medical diagnosis
to research institutions and commercial laboratories. As consideration for the
acquisition of all of the outstanding shares of Glyko, Inc., we: (1) issued
2,259,039 shares of common stock to Glyko Biomedical, (2) assumed stock options
of Glyko, Inc. employees exercisable for 255,540 shares of our common stock and
(3) paid $500 in cash.
8
<PAGE>
Results of Operations
The Quarters Ended June 30, 1999 and 1998
Revenues for the second quarter of 1999 totaled $1,557,000 compared to no
revenues in the second quarter 1998. Second quarter 1999 revenues included
$1,157,000 from the joint venture with Genzyme General (Nasdaq: GENZ) for the
development and commercialization of BM101 in the treatment of
Mucopolysaccharidosis-I (MPS-I), a chronic, debilitating genetic disease which
afflicts children and leads to death before adulthood in a majority of patients.
The Genzyme joint venture was formed in September of 1998. Second quarter 1999
revenues also included $400,000 from the sales of analytical and diagnostic
products and services by Glyko, Inc., BioMarin's subsidiary for analytical and
diagnostic products and services, which was acquired in October of 1998. On an
ongoing basis, Glyko, Inc. revenues for the second quarter of 1999 were up 24%
in comparison to the second quarter of 1998 as a result of May and June revenues
from the acquisition of the biochemical reagents business of Oxford
GlycoSciences Plc. (LSE:OGS).
Cost of products and cost of services from Glyko, Inc. operations were $112,000
in the second quarter of 1999 and were zero in the comparable period of 1998. On
an ongoing basis, Glyko's total product and service costs as a percent of the
sales of products and services were 31% in the second quarter of 1999 compared
to 39% in the second quarter of 1998.
Research and development expenses for the second quarter of 1999 increased by
$5,432,000 from $1,047,000 in the second quarter of 1998 to $6,479,000 in the
second quarter of 1999. This increase was due primarily to increased activity in
support of the joint venture for BM101 and in support of the Company's enzyme
product candidates for MPS-VI and burn debridement.
Selling, general and administrative expenses increased from $1,029,000 in the
second quarter of 1998 to $1,111,000 in the second quarter of 1999 due to the
consolidation of Glyko, Inc. selling and administrative expenses and to
increased BioMarin administrative staff expenses to support expanded operations.
BioMarin's equity in the loss of its joint venture with Genzyme was $375,000 for
the second quarter 1999 while there was no joint venture in the second quarter
of 1998.
Interest income increased by $152,000 from $147,000 in the second quarter of
1998 to $299,000 in the second quarter of 1999 due to increased cash reserves
resulting from a convertible note financing in April 1999. The interest expense
accrued on the convertible notes at an interest rate of 10% per year totaled
$561,000 in the second quarter.
The net loss was $1,930,000 ($0.09 per share, both basic and diluted) in the
second quarter of 1998 and increased to $6,782,000 ($0.26 per share) in the
comparable period of 1999.
The Six Months Ended June 30, 1999 and 1998
For the six month periods ended June 30, 1998 and 1999, revenues were zero and
$2,662,000 respectively. The basic reasons for this increase in revenues are the
same as described for the second quarter increase in revenues. Joint venture
revenues were $1,904,000 and Glyko, Inc. revenues were $726,000 for the first
six months of 1999.
Research and development expenses increased from $2,156,000 in the first half of
1998 to $10,371,000 in the comparable period of 1999. Increased expenses in
support of the joint venture with Genzyme, the MPS-VI program and the burn
debridement program were the major factors in the growth of research and
development expenses.
Selling, general and administrative expenses increased from $1,332,000 in the
first half of 1998 to $2,804,000 in the first half of 1999. This increase was
primarily the result of the increase in the first quarter of 1999 compared to
the same period of 1998. The first quarter increase resulted from the
consolidation of Glyko, Inc. selling and administrative expenses in 1999
expenses, an increase in staffing in BioMarin administration in 1999 compared to
1998, and an increase in facilities expense charged to administration in 1999.
9
<PAGE>
BioMarin's equity in the loss of its joint venture with Genzyme was $555,000 for
the first half of 1999 while there was no joint venture in the first half of
1998.
Interest income increased by $ 214,000 from $239,000 in the first half of 1998
to $453,000 in the first half of 1999 primarily due to increased cash reserves
resulting from a convertible note financing in April 1999. The interest expense
accrued on the convertible notes totaled $561,000.
The net loss was $3,248,000 ($0.16 per share) and $11,391,000 ($ 0.44 per share)
for the first six months of 1998 and 1999 respectively.
Liquidity and Capital Resources
We have financed our operations since our inception by the issuance of common
stock and convertible notes and the related interest income earned on cash
balances available for short-term investment. Since inception, we have raised
aggregate estimated net proceeds of $125.8 million after the IPO and concurrent
Genzyme investment. We were initially funded by Glyko Biomedical with a $1.5
million investment. We have since raised additional capital from the sale of
common stock in private placements, the sale of promissory notes convertible
into common stock, an investment of $8.0 million by Genzyme as part of our joint
venture with them, an initial public offering including the underwriters'
over-allotment exercise and the concurrent $10 million Genzyme investment in our
Company.
Our combined cash, cash equivalents and short-term investments totaled $17.5
million at June 30, 1999, an increase of $6.1 million from December 31, 1998.
The primary source of cash was the issuance of convertible notes for net
proceeds of $24.9 million. The primary use of cash during the six months ended
June 30, 1999 was to finance operations and to purchase leasehold improvements
and equipment. For the six months ended June 30, 1999, operations used $3.1
million, we purchased $11.8 million of leasehold improvements and equipment,
invested $3.1 million in the joint venture and purchased $750,000 of assets from
Oxford GlycoSciences.
From our inception through June 30, 1999, we have purchased approximately $18.3
million of leasehold improvements and equipment. We expect that our investment
in leasehold improvements and equipment will increase significantly during the
next two years because we will provide facilities and equipment for an increased
number of staff and increase manufacturing capacity.
As part of the acquisition of Glyko, Inc., we acquired in-process research and
development projects, the value of which was expensed as a portion of the
purchase price at the time of the acquisition. The 11 projects acquired are each
relatively small and can be grouped into two categories, analytic projects and
diagnostic projects.
The analytic projects are intended to expand the analytic product line by adding
new enzymes for reagent sales, new kits for agricultural applications, new
instrument capabilities for protein analysis and a major upgrade of software
capabilities. At the time of the acquisition of Glyko, Inc., all of the analytic
projects had completed feasibility work and the software projects were 75%
complete and have since been completed. The development of specialized materials
supporting instrument capabilities is deemed to be the most difficult technical
hurdle for the completion and commercialization of the analytic projects. The
fair value of the analytic projects was $1.7 million at the time of the
acquisition.
The diagnostic projects are intended to expand a product line based on very
precise measurements of the level of complex carbohydrates in blood and urine as
indicators of serious disease conditions including heart disease, kidney disease
and mucopolysaccharidoses or carbohydrate storage diseases. At the time of the
Glyko, Inc. acquisition, preliminary feasibility work had been done for all of
the projects and a software project was well advanced as to programming, which
has since been completed. The development of new more sensitive carbohydrate
chemistry techniques is deemed to be the most difficult technical hurdle for the
completion and commercialization of the diagnostic products. The fair value of
the diagnostic projects was $924,000 at the time of the acquisition.
As of June 30, 1999, we had expended to date approximately $645,000 on the
in-process research and development projects and $675,000 on the diagnostic
projects. If all acquired in-process research and development projects proceed
to completion, we expect to spend approximately $465,000 in incremental direct
expense to complete the analytic projects in phases over approximately 21
months. We expect to spend approximately $1.0 million to
10
<PAGE>
complete the diagnostic projects in phases completed from 9 to 21 months in the
future. None of these projects have been terminated to date.
Since the acquisition of these in-process research and development projects six
months ago, there have been no subsequent developments which indicate that the
completion and commercialization of either of the projects are less likely to be
completed on the original planned schedule or less likely to be a commercial
success.
We have made and plan to make substantial commitments to capital projects,
including the BM101 manufacturing facility in Torrance, California, a
manufacturing facility in Novato, and new research and development facilities in
Novato. If all product programs proceed on schedule, these current capital
commitments and plans for future capital requirements combined will require
approximately $32.0 million in the 18-month period beginning in January 1999.
In September 1998, we established a joint venture with Genzyme for the worldwide
development and commercialization of BM101 for the treatment of MPS-I. We will
share expenses and profits from the joint venture equally with Genzyme. Genzyme
invested $8.0 million upon signing the agreement and has purchased $10.0 million
of common stock at the IPO price of $13 per share in a private placement
concurrent with the IPO. Genzyme has committed to pay us an additional $12.1
million upon approval of the biologics license application for BM101.
On October 7, 1998, we purchased Glyko, Inc. from Glyko Biomedical for an
aggregate purchase price of $14.5 million. The purchase price was paid for with
2,259,039 shares of our common stock, our assumption of certain stock options
held by Glyko, Inc. employees which were exercisable into a maximum of 255,540
shares of our common stock and $500 in cash.
On April 13, 1999, we sold a total of $26.0 million of convertible promissory
notes. The notes were converted into 2,672,020 shares of our common stock at a
conversion price of $10.00 per share concurrent with the IPO.
In May 1999, Glyko, Inc. acquired key assets of the Biochemical Research Reagent
Division of Oxford GlycoSciences Plc. The acquisition was made to increase
Glyko, Inc.'s product offerings and was valued from $1.5 million to $2.1
million, depending on the future sales of the acquired products.
In July 1999, we completed our initial public offering of 4,500,000 shares of
our common stock at $13 per share raising estimated proceeds of $52.9 million.
Concurrent with the IPO, Genzyme purchased $10 million of our common stock
(769,230 shares) at the IPO price of $13.
In August 1999, the underwriters exercised their over-allotment of 675,000
shares at the IPO price of $13 raising estimated net proceed of $8.2 million.
We expect our current funds to last for a period of at least 12 months. Until we
can generate sufficient levels of cash from our operations, we expect to
continue to finance future cash needs through:
. The sale of equity securities
. Equipment-based financing
. Collaborative agreements with corporate partners
We do not expect to generate positive internal cash flow for at least the next
two years because we expect to increase operational expenses and manufacturing
investment for the joint venture and to increase research and development
activities, including:
. Preclinical studies, clinical trials and
regulatory review
. Commercialization of our drug candidates
. Development of manufacturing operations
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. Process development
. Scale-up of manufacturing facilities
. Sales and marketing activities
We anticipate a need for additional financing to fund the future operations of
its business, including the commercialization of our drug candidates currently
under development. We cannot assure you that additional financing will be
obtained or, if obtained, will be available on reasonable terms.
Our future capital requirements will depend on many factors, including, but not
limited to:
. The progress of its research and development
programs
. The progress of preclinical studies and
clinical trials
. The time and cost involved obtaining regulatory
approvals
. Scaling up, installing and validating
manufacturing capacity
. Competing technological and market developments
. Changes and developments in collaborative,
licensing and other relationships
. The development of commercialization activities
and arrangements
. The leasing and build-out of additional
facilities
. The purchase of additional capital equipment
We plan to continue our policy of investing available funds in government
securities and investment grade, interest-bearing securities, primarily with
maturities of one year or less. We do not invest in derivative financial
instruments, as defined by Statement of Financial Accounting Standards No. 119.
Impact of Year 2000
The following constitutes "Year 2000 Readiness Disclosure" under the Year 2000
Information and Readiness Disclosure Act of 1998.
We are aware of the potential problems associated with computer programs and
systems that use only two digits to identify the year in the date field.
Application and system programs may be unable correctly to process date
information for dates after December 31, 1999. This year 2000 defect could cause
the disruption or failure of computer systems. The year 2000 defect could affect
both our internal information technology systems and other functional systems
that use embedded computer programs for control or other purposes. The defect
could also affect the information technology and other functional systems of
suppliers of products and services to us. The defect could affect the overall
economy and have a significant impact on us.
We have formed a team to review and resolve those aspects of the year 2000
problem which are within our direct control and adjust to or influence those
aspects which are not within our direct control. The team has reviewed our
software products (including those under development) and determined that our
software products do not use date data and are year 2000 compliant. Our
biopharmaceutical products do not have any year 2000 exposure. The team has
reviewed the year 2000 compliance status of our major internal information
technology programs and systems used for administrative requirements and
determined that these systems are year 2000 compliant. We have reviewed the
computer systems used to control our analytical instruments and production
equipment. Due to the recent design of our equipment, the embedded computers are
year 2000 compliant. We believe that the expense of
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repairing or replacing any undetected year 2000 defects will not be material. We
believe that we can resolve our significant internal year 2000 compliance issues
before the year 2000 with expenditures that are currently estimated not to be
material. If we do not achieve on a timely basis year 2000 compliance for our
internal systems, our operations and business could be adversely affected.
With respect to our suppliers, we do not currently process orders, payments and
other business communications electronically from computer to computer. However,
if our suppliers' and ultimate customers' own systems are not yet year 2000
compliant, their disruptions could have a significant direct or indirect impact
on our operations and business. The following consequences of the year 2000
problem could disrupt our business:
. Financial institutions may not be able to process checks, accept
deposits, provide records, process wire transfers provide stock
ownership and transfer records or facilitate many other financial
transactions and services.
. Suppliers may not be able to process orders, manufacture products,
deliver in accordance with production schedules, or in general provide
the current level of timely products and services.
. Voice and data communication systems used by us
and our customers and suppliers might be
disrupted.
. Health care suppliers and third-party payors
may be unable to process patient records, add to
or modify the content of their pharmacy
authorizations, accept or make payments, and
handle the many other data requirements of
the modern health care system. The added costs
for back-up systems, for temporary or
emergency fixes and the ongoing requirements to
handle critical functions on a timely basis
combined with the resultant managerial
distractions may delay the review and delay
our introduction of new drugs and therapeutic
practices.
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RISK FACTORS
If we continue to incur operating losses for a period longer than anticipated,
we may be unable to continue our operations.
We are in an early stage of development and have operated at a net loss since we
were formed. Since we began operations in March 1997, we have been engaged
primarily in research and development. We have no sales revenues from any of our
drug products. As of June 30, 1999, we had an accumulated deficit of
approximately $26.5 million. We expect to continue to operate at a net loss at
least through the calendar year 2000. Our future profitability depends on our
receiving regulatory approval of our drug candidates and our ability to
successfully manufacture and market any approved drugs, either by ourselves or
jointly with others. The extent of our future losses and the timing of
profitability are highly uncertain. If we fail to become profitable or are
unable to sustain profitability on a quarterly or annual basis, then we may be
unable to continue our operations.
Because of the relative small size and scale of our wholly-owned subsidiary,
Glyko, Inc., profits from products and services offered by it will be
insufficient to offset the expenses associated with our pharmaceutical business.
As a result, we expect that operating losses will continue and increase for the
foreseeable future.
If we fail to obtain the capital necessary to fund our operations we will be
unable to complete our product development programs.
In the future, we may need to raise substantial additional capital to fund
operations. We cannot be certain that any financing will be available when
needed. If we fail to raise additional financing as we need it, we will have to
delay or terminate our product development programs.
We expect to continue to spend substantial amounts of capital for our operations
for the foreseeable future. Activities which will require additional
expenditures include:
. research and development programs
. preclinical studies and clinical trials
. regulatory processes
. establishment of commercial scale manufacturing
capabilities and
. expansion of sales and marketing activities.
The amount of capital we may need depends on many factors, including:
. The progress, timing and scope of our research
and development programs
. The progress, timing and scope of our
preclinical studies and clinical trials
. The time and cost necessary to obtain
regulatory approvals
. The time and cost necessary to build our
manufacturing facilities and obtain the necessary
regulatory approvals for those facilities
. The time and cost necessary to respond to
technological and market developments
. Any changes made or new developments in our
existing collaborative, licensing and other commercial
relationships
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. Any new collaborative, licensing and other
commercial relationships that we may establish
Moreover, our fixed expenses such as rent, license payments and other
contractual commitments are substantial and will increase in the future. These
fixed expenses will increase because we may enter into:
. additional leases for new facilities and
capital equipment
. additional licenses and collaborative agreements
. additional contracts for consulting,
maintenance and administrative services
. additional expenses associated with being a
public company.
We believe that the net proceeds of our initial public offering, together with
our available cash, cash equivalents, short-term investment securities and
investment income, will be sufficient to meet our operating and capital
requirements through at least the next 12 months. This estimate is based on
assumptions which may prove to be wrong. As a result, we may need additional
financing prior to that time.
If we fail to obtain regulatory approval to commercially manufacture or sell any
of our future drug products, or if approval is delayed, we will be unable to
generate revenue from the sale of our products.
We must obtain regulatory approval to market our products in the U.S. and
foreign jurisdictions.
We must obtain regulatory approval before marketing or selling our future drug
products. In the United States, we must obtain U.S. Food and Drug Administration
(FDA) approval for each drug that we intend to commercialize. The FDA approval
process is typically lengthy and expensive, and approval is never certain.
Products distributed abroad are also subject to foreign government regulation.
None of our drug products has received regulatory approval to be commercially
marketed and sold. If we fail to obtain regulatory approval we will be unable to
market and sell our future drug products. We have several drug products in
various stages of preclinical and clinical development. BM101, our first drug
product, is not expected to be commercially available until at least 2000. Our
other drug product will not be commercially available for at least several more
years. Because of the risks and uncertainties in biopharmaceutical development,
our drug candidates could take a significantly longer time to gain regulatory
approval than we expect or may never gain approval. If regulatory approval is
delayed our management's credibility, the value of our company and our operating
results may be adversely affected.
To obtain regulatory approval to market our products, preclinical studies and
costly and lengthy clinical trials may be required and the results of the
studies and trials are highly uncertain.
As part of the FDA approval process, we must conduct, at our own expense,
preclinical studies on animals and clinical trials on humans on each drug
candidate. We expect the number of preclinical studies and clinical trials that
the FDA will require will vary depending on the drug product, the disease or
condition the drug is being developed to address and regulations applicable to
the particular drug. We may need to perform multiple preclinical studies using
various doses and formulations before we can begin clinical trials, which could
result in delays in our ability to market any of our drug products.
Furthermore, even if we obtain favorable results in preclinical studies on
animals, the results in humans may be different. After we have conducted
preclinical studies in animals we must demonstrate that our drug products are
safe and effective for use on the target human patients in order to receive
regulatory approval for commercial sale. Adverse or inconclusive clinical
results would stop us from filing for regulatory approval of our products.
Additional factors that can cause delay or termination of our clinical trials
include:
. Slow patient enrollment
. Longer treatment time required to demonstrate
efficacy
. Lack of sufficient supplies of the drug
candidate
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. Adverse medical events or side effects in
treated patients
. Lack of effectiveness of the drug candidate
being tested
Typically, if a drug product is intended to treat a chronic disease safety and
efficacy data must be gathered over an extended period of time which ranges from
six months to three years. In addition, clinical trials on humans are typically
conducted in three phases. The FDA generally requires two pivotal clinical
trials that demonstrate substantial evidence of safety and efficacy and
appropriate dosing in a broad patient population at multiple sites to support an
application for regulatory approval. If a drug is intended for the treatment of
a serious or life-threatening condition and the drug demonstrates the potential
to address unmet medical needs for this condition, a single trial may be
sufficient to prove safety and efficacy under the FDA's Modernization Act of
1997.
Our strategy to conduct only one clinical trial on a small number of patients
for products developed to treat genetic disorders may not be sufficient to
obtain regulatory approval.
We believe that our enzyme drug products will be regulated by the FDA as
biologics rather than drugs because they are manufactured by biological
processes. Our strategy for the development of therapeutics for genetic
disorders is to conduct only one clinical trial on a small number of patients,
which would then be the basis for our submission of a biologics license
application (BLA) to the FDA. For example, at the end of October 1998, we
completed a six-month evaluation of ten patients on our first drug candidate
BM101. Because 12-month data will be available, the FDA has requested that we
evaluate data for these patients for the 12-month period rather than the
six-month period which formed the basis of our initial evaluation. In addition
the FDA has also requested that we evaluate this data using other criteria that
may demonstrate that the surrogate endpoints are a predictor of clinical
benefit. We are currently performing this evaluation. We cannot assure you that
this evaluation will support our findings with regard to the primary endpoints
in the clinical trial. If this analysis does not support our findings with
regard to the primary endpoints, or if the surrogate endpoints do not predict a
clinical benefit, it could delay the filing of the biologics license application
and could jeopardize FDA approval of BM101. The FDA may request additional
trials to be conducted. If we have to conduct further clinical trials, whether
for BM101 or other products we develop in the future, it would significantly
increase our expenses and delay marketing of our product. Also, the results of
initial smaller clinical trials could differ from the results obtained from
subsequent more extensive long-term trials. A significant difference in the
results of multiple clinical trials could cause the FDA to require still more
clinical trials which would significantly delay the approval process.
The fast track designation for BM101 may not actually lead to a faster review
process.
Although BM101 has obtained a fast track designation, we cannot guarantee a
faster review process or faster approval compared to the normal FDA procedures.
If BM101 is approved, we will be required to conduct a study after we obtain
approval of BM101 to demonstrate that the primary endpoints used in our single
study are reasonably likely to predict clinical benefits to the patients. If
this post-approval study fails to verify the clinical benefit of BM101 or
demonstrates that BM101 is not safe or effective, our FDA approval can be
withdrawn on an expedited basis. Furthermore, if adverse effects are identified
after marketing, FDA approval may be rapidly revoked and we could not market the
drug.
We will not be able to sell our products if we fail to comply with manufacturing
regulations.
Before we can begin commercially manufacturing our products we must obtain
regulatory approval of our manufacturing facility and process. In addition,
manufacture of our drug products must comply with the FDA's current Good
Manufacturing Practices regulations, commonly known as cGMP. The cGMP
regulations govern quality control and documentation policies and procedures.
Our manufacturing facilities are continuously subject to inspection by the FDA,
the State of California and foreign regulatory authorities, before and after
product approval. Because we are currently in the process of developing the
manufacturing site and process for commercial manufacture of BM101, our facility
has not yet been inspected by any governmental entity. We cannot guarantee that
BioMarin, or any potential third- party manufacturer of our drug products, will
be able to comply with cGMP regulations. Material changes to the manufacturing
processes after approvals have been granted are also subject to review and
approval by the FDA or other regulatory agencies.
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We currently have a contract with Harbor-UCLA Research and Education Institute
to manufacture BM101 in limited quantities for use in preclinical studies and
clinical trials. In order to produce initial commercial requirements for BM101
in our facility we will have to prove that the product manufactured at our
facility is comparable to the clinical trial product produced in the Harbor-
UCLA facility. This will require laboratory testing and may require clinical
trials. We must pass FDA and state inspections and manufacture three process
qualification batches to final specifications under cGMP controls before the
BM101 BLA can be approved. We cannot assure you that we will pass the
inspections in a timely manner, if at all.
If we fail to obtain orphan drug exclusivity for our products, our competitors
may sell products to treat the same conditions and our revenues may be reduced.
As part of our business strategy, we intend to develop drugs that may be
eligible for FDA orphan drug designation. Under the Orphan Drug Act, the FDA may
designate a product as an orphan drug if it is a drug intended to treat a rare
disease or condition, defined as a patient population of less than 200,000. The
company that obtains the first FDA approval for a designated orphan drug for a
given rare disease receives marketing exclusivity for use of that drug for the
stated condition for a period of seven years. However, different drugs can be
approved for the same condition.
Because the extent and scope of patent protection for our drug candidates is
limited, orphan drug designation is particularly important for our products that
are eligible for orphan drug designation. We plan to rely on the exclusivity
period under the orphan drug designation to maintain a competitive position. If
we do not obtain orphan drug exclusivity for any one of our drug products, our
competitors may then sell the same drug to treat the same condition.
We received orphan drug designation from the FDA for BM101 in September 1997. In
February 1999, we received orphan drug designation from the FDA for BM102. Even
if we obtain orphan drug designation, we cannot guarantee that we will be the
first to obtain marketing approval for any orphan indication or that exclusivity
would effectively protect the product from competition. Orphan drug designation
does not shorten the development or FDA review time of a drug so designated nor
give the drug any advantage in the FDA review or approval process.
Because the target patient populations for our products are small we must
achieve significant market share and obtain high per patient prices for our
products to achieve profitability.
Our initial drug candidates target disorders with small patient populations. As
a result, our prices must be high enough to recover our development costs and
achieve profitability. For example, two of our initial drug products in genetic
disorders, BM101 and BM102, target patients with MPS-I and MPS-VI, respectively.
We estimate that there are approximately 3,400 patients with MPS-I and 1,100
patients with MPS-VI in the developed world. We believe that we will need to
market worldwide to achieve significant market share. In addition, we are
developing other drug candidates to treat conditions, such as other genetic
diseases and serious burns, with small patient populations. We cannot be certain
that we will be able to obtain sufficient market share for our drug products at
a price high enough to justify our product development efforts.
If we fail to obtain an adequate level of reimbursement for our drug products by
third-party payors there would be no commercially viable markets for our
products.
The course of treatment for patients with MPS-I using BM101 is expected to be
expensive. We expect patients to need treatment throughout their lifetimes. We
expect that families of patients will not be capable of paying for this
treatment themselves. There will be no commercially viable market for BM101
without reimbursement from third-party payors.
Third-party payors, such as government or private health care insurers,
carefully review and increasingly challenge the price charged for drugs.
Reimbursement rates from private companies vary depending on the third-party
payor, the insurance plan and other factors. Reimbursement systems in
international markets vary significantly by country and by region, and
reimbursement approvals must be obtained on a country-by-country basis. We
cannot be certain that third-party payors will pay for the costs of our drugs
and the courses of treatment. Even if we are able to obtain
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reimbursement from third-party payors, we cannot be certain that reimbursement
rates will be enough to allow us to profit from sales of our drugs.
We currently have no expertise obtaining reimbursement. We expect to rely on the
expertise of our partner Genzyme to obtain reimbursement for BM101. We cannot
predict what the reimbursement rates will be. In addition, we will need to
develop our own reimbursement expertise for future drug candidates unless we
enter into collaborations with other companies with the necessary expertise.
We expect that in the future reimbursement will be increasingly restricted both
in the United States and internationally. The escalating cost of health care has
led to increased pressure on the health care industry to reduce costs.
Governmental and private third-party payors have proposed health care reforms
and cost reductions. A number of federal and state proposals to control the cost
of health care, including the cost of drug treatments have been made in the
United States. In some foreign markets, the government controls the pricing
which would affect the profitability of drugs. Current government regulations
and possible future legislation regarding health care may affect our future
revenues from sales of our drugs and may adversely affect our business and
prospects.
If we are unable to protect our proprietary technology we may not be able to
compete as effectively.
Where appropriate, we seek patent protection for certain aspects of our
technology. Meaningful patent protection may not be available for some of the
enzymes we are developing, including BM101 and BM102. If we must spend
significant time and money protecting our patents, designing around patents held
by others or licensing, for excessively large fees, patents or other proprietary
rights held by others, our business and prospects may be harmed.
The patent positions of biotechnology companies are extremely complex and
uncertain. The scope and extent of patent protection for some of our products
are particularly uncertain because key information on some of the enzymes we are
developing has existed in the public domain for many years. Other parties have
published the structure of the enzymes, the methods for purifying or producing
the enzymes or the methods of treatment. The composition and genetic sequences
of animal and/or human versions of many of our enzymes, including those for
BM101 and BM102, have been published and are in the public domain. The
composition and genetic sequences of other MPS enzymes which we intend to
develop as products have also been published. Publication of this information
may prevent us from obtaining composition of matter patents, which are generally
believed to offer the strongest patent protection. For enzymes with no prospect
of composition of matter patents, we will depend on orphan drug status.
In addition, our owned and licensed patents and patent applications do not
ensure the protection of our intellectual property for a number of other
reasons:
. We do not know whether our patent applications
will result in actual patents. For example, we may not have developed a
method for treating a disease before others developed similar methods.
. Competitors may interfere with our patent
process in a variety of ways. Competitors may claim that they invented
the claimed invention prior to us. Competitors may also claim that we are
infringing on their patents and therefore cannot practice our technology
as claimed under our patent. Competitors may also contest our patents by
showing the patent examiner that the invention was not original, novel or
was obvious. As a Company, we have no meaningful experience with
competitors interfering with our patents or patent applications.
. Even if we receive a patent, it may not provide much practical
protection. If we receive a patent with a narrow scope, then it will be
easier for competitors to design products that do not infringe on our
patent.
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. Enforcing patents is expensive and may absorb
significant time by our management. In litigation, a competitor could
claim that our issued patents are not valid for a number of reasons. If
the court agrees, we would lose that patent.
In addition, competitors also seek patent protection for their technology. There
are many patents in our field of technology, and we cannot guarantee that we do
not infringe on those patents or that we will not infringe on patents granted in
the future. If a patent holder believes our product infringes on their patent,
the patent holder may sue us even if we have received patent protection for our
technology. If someone else claims we infringe on their technology, we would
face a number of issues, including:
. Defending a lawsuit takes significant time and
can be very expensive.
. If the court decides that our product infringes on the competitor's
patent, we may have to pay substantial damages for past infringement.
. The court may prohibit us from selling or licensing the product unless
the patent holder licenses the patent to us. The patent holder is not
required to grant us a license. If a license is available, we may have to
pay substantial royalties or grant cross-licenses to our patents.
. Redesigning our product so it does not infringe may not be possible
and could require substantial funds and time.
It is also unclear whether our trade secrets will provide useful protection.
While we use reasonable efforts to protect our trade secrets, our employees or
consultants may unintentionally or willfully disclose our information to
competitors. Enforcing a claim that someone else illegally obtained and is using
our trade secrets, like patent litigation, is expensive and time consuming, and
the outcome is unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets. Our competitors may
independently develop equivalent knowledge, methods and know-how.
We may also support and collaborate in research conducted by government
organizations or by universities. We cannot guarantee that we will be able to
acquire any exclusive rights to technology or products derived from these
collaborations. If we do not obtain required licenses or rights, we could
encounter delays in product development while we attempt to design around other
patents or even be prohibited from developing, manufacturing or selling products
requiring these licenses. There is also a risk that disputes may arise as to the
rights to technology or products developed in collaboration with other parties.
If our joint venture with Genzyme were terminated, we could be barred from
commercializing BM101 or our ability to commercialize BM101 would be delayed.
We are relying on Genzyme to apply the expertise it has developed through the
launch and sale of Ceredase(R) and Cerezyme(R) enzymes for Gaucher disease, a
rare genetic disorder, to the marketing of our initial drug product, BM101.
Because it is our initial product, our operations are substantially dependent
upon the development of BM101. We have no experience selling, marketing or
obtaining reimbursement for pharmaceutical products. In addition, without
Genzyme we would be required to pursue foreign regulatory approvals. We have no
experience in seeking foreign regulatory approvals.
We cannot guarantee that Genzyme will devote the resources necessary to
successfully market BM101. In addition, either party may terminate the joint
venture for specified reasons, including if the other party is in material
breach of the agreement or has experienced a change of control or has declared
bankruptcy and also is in breach of the agreement. Either party may also
terminate the agreement upon one year prior written notice for any reason after
the earlier of December 31, 2000 or after the joint venture has received the
FDA's approval of the biologics license
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application for BM101. Furthermore, we may terminate the joint venture if
Genzyme fails to fulfill its contractual obligation to pay us $12.1 in cash upon
the approval of the biologics license application for BM101.
Upon termination of the joint venture one party must buy out the other party's
interest in the joint venture. The party who buys out the other will then also
obtain, exclusively, all rights to BM101 and any related intellectual property
and regulatory approvals.
If the joint venture is terminated by Genzyme for a breach on our part, Genzyme
would be granted, exclusively, all of the rights to BM101 and any related
intellectual property and regulatory approvals and would be obligated to buy out
our interest in the joint venture. We would then effectively be unable to
develop and commercialize BM101. If we terminated the joint venture for a breach
by Genzyme, we would be obligated to buy out Genzyme's interest in the joint
venture and, we would then be granted all of these rights to BM101 exclusively.
While we could then continue to develop BM101, that development would be slowed
because we would have to divert substantial capital to buy out Genzyme's
interest in the joint venture and would then have to search for a new partner to
commercialize the product and to obtain foreign regulatory approvals or to
develop these capabilities ourselves.
If the joint venture is terminated by us without cause, Genzyme would have the
option, exercisable for one year, to immediately buy out our interest in the
joint venture and obtain all rights to BM101 exclusively. If the agreement is
terminated by Genzyme without cause, we would have the option, exercisable for
one year, to immediately buy out Genzyme's interest in the joint venture and
obtain these exclusive rights. In event of termination of the buy out option
without exercise by the non-terminating party as described above, all right and
title to BM101 is to be sold to the highest bidder, with the proceeds to be
split equally between Genzyme and us.
If the joint venture is terminated by us because Genzyme fails to make the $12.1
million payment to us upon FDA approval of the biologics license application for
BM101, we would be obligated to buy Genzyme's interest in the joint venture and
would obtain all rights to BM101 exclusively. If the joint venture is terminated
by either party because the other declared bankruptcy and is also in breach of
the agreement, the terminating party would be obligated to buy out the other and
would obtain all rights to BM101 exclusively. If the joint venture is terminated
by a party because the other party experienced a change of control, the
terminating party shall notify the other party, the offeree, of its intent to
buy out the offeree's interest in the joint venture for a stated amount set by
the terminating party at its discretion. The offeree must then either accept
this offer or agree to buy the terminating party's interest in the joint venture
on those same terms. The party who buys out the other would then have exclusive
rights to BM101.
We cannot assure you that if the joint venture were terminated and if we were
obligated, or given the option, to buy out Genzyme's interest in the joint
venture, and gain exclusive rights to BM101, that we will have sufficient funds
to do so or that we will be able to obtain the financing to do so. If we fail to
buy out Genzyme's interest we may be held in breach of the agreement and may
lose any claim to the rights to BM101 and the related intellectual property and
regulatory approvals. We would then effectively be prohibited from developing
and commercializing the product.
Termination of the joint venture where we retain the rights to BM101 could cause
us significant delays in product launch in the United States, difficulties in
obtaining third-party reimbursement and delays or failure to obtain foreign
regulatory approval, any of which could hurt our business and results of
operations. Since Genzyme funds 50% of the joint venture's operating expenses,
the termination of the joint venture would double our financial burden and
reduce the funds available to us for other product programs.
If we are unable to manufacture our drug products in sufficient quantities and
at acceptable cost, we may be unable to meet demand for our products and lose
potential revenues.
We have no experience manufacturing drug products in volumes that will be
necessary to support commercial sales. Our unproven manufacturing process may
not meet initial expectations as to schedule, reproducibility,
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yields, purity, costs, quality, and other measurements of performance.
Improvements in manufacturing processes typically are very difficult to achieve
and are often very expensive. We cannot know with any certainty how long it
might take to make improvements if it became necessary to do so. If we contract
for manufacturing services with an unproven process, our contractor is subject
to the same uncertainties, high standards and regulatory controls.
If we are unable to establish and maintain commercial scale manufacturing within
our planned time and cost parameters, sales of our products and our financial
performance will be adversely affected.
We may encounter problems with any of the following if we attempt to increase
the scale or size of manufacturing:
. Design, construction and qualification of manufacturing facilities
that meet regulatory requirements
. Production yields
. Purity
. Quality control and assurance
. Shortages of qualified personnel
. Compliance with FDA regulations
We are developing a total of 31,000 square feet of space at two facilities, one
in Novato and one in Torrance, for the manufacture of BM101. The construction
and qualification of these facilities may take longer than planned and the
actual construction costs of these facilities may be higher than those which we
have budgeted. We expect that the manufacturing process of all of our new
products, including BM102, will also require lengthy development time before we
can begin manufacturing them in commercial quantity. Even if we can establish
this capacity, we cannot be certain that manufacturing costs will be
commercially reasonable, especially if reimbursement is substantially lower than
expected.
In order to achieve our product cost targets we must develop efficient
manufacturing processes either by
. improving the colonies of cells which have a common genetic make-up,
or cell lines,
. improving the processes licensed from others, or
. developing a recombinant cell line and production processes.
A recombinant cell line is a cell line with foreign DNA inserted which is used
to produce a protein that it would not have otherwise produced and related
purification. The development of a stable, high production cell line for any
given enzyme is risky, expensive and unpredictable and may not yield adequate
results. In addition, the development of protein purification processes is
difficult and may not produce the high purity required with acceptable yield and
costs. If we are not able to develop efficient manufacturing processes, the
investment in manufacturing capacity sufficient to satisfy market demand will be
much greater and will place heavy financial demands upon us. If we do not
achieve our manufacturing cost targets, we will have lower margins and reduced
profitability in commercial production and greater losses in manufacturing
start-up phases.
If we are unable to increase our marketing and distribution capabilities or to
enter into agreements with third parties to do so, our ability to generate
revenues will be diminished.
If we cannot increase our marketing capabilities either by developing our sales
and marketing organization or by entering into agreements with others, we may be
unable to successfully sell our products. If we are unable to effectively sell
our drug products, our ability to generate revenues will be diminished.
21
<PAGE>
To increase our distribution and marketing for both our drug candidates and our
Glyko, Inc. products, we will have to increase our current sales force and/or
enter into third-party marketing and distribution agreements. We cannot
guarantee that we will be able to hire in a timely manner, the qualified sales
and marketing personnel we need if at all. Nor can we guarantee that we will be
able to enter into any marketing or distribution agreements on acceptable terms,
if at all. If we cannot increase our marketing capabilities as we intend, either
by increasing our sales force or entering into agreements with third parties,
sales of our products may be adversely affected.
We have recently entered into a joint venture with Genzyme where Genzyme will be
responsible for marketing and distributing BM101. We cannot guarantee that we
will be able to establish sales and distribution capabilities or that BioMarin,
the joint venture or any future collaborators will successfully sell any of our
drug candidates.
If we fail to compete successfully, our revenues and operating results will be
adversely affected.
Our competitors may develop, manufacture and market products that are more
effective or less expensive than ours. They may also obtain regulatory approvals
for their products faster than we can obtain them, including orphan drug
designation, or commercialize their products before we do. If our competitors
successfully commercialize a product which treats a given rare genetic disease
before we do, we will effectively be precluded from developing a product to
treat that disease because the patient populations of the rare genetic diseases
are so small. These companies also compete with us to attract qualified
personnel and parties for acquisitions, joint ventures or other collaborations.
They also compete with us to attract academic research institutions as partners
and to license these institution's proprietary technology. If our competitors
successfully enter into partnering arrangements or license agreements with
academic research institutions, we will then be precluded from pursuing those
specific opportunities. Since each of these opportunities is unique, we may not
be able to find a substitute. Several pharmaceutical and biotechnology companies
have already established themselves in the field of enzyme therapeutics,
including Genzyme, our joint venture partner. These companies have already begun
many drug development programs, some of which may target diseases that we are
also targeting, and have already entered into partnering and licensing
arrangements with academic research institutions, reducing the pool of available
opportunities.
Universities and public and private research institutions are also competitors.
While these organizations primarily have educational objectives, they may
develop proprietary technology and acquire patents that we may need for the
development of our drug products. We will attempt to license this proprietary
technology, if available. These licenses may not be available to us on
acceptable terms, if at all. We also directly compete with a number of these
organizations to recruit personnel, especially scientists and technicians.
We believe that established technologies provided by other companies, such as
laboratory and testing services firms compete with Glyko Inc.'s products and
services. For example, Glyko, Inc.'s FACE Imaging System competes with
alternative carbohydrate analytical technologies, including capillary
electrophoresis, high-pressure liquid chromatography, mass spectrometry and
nuclear magnetic resonance spectrometry. These competitive technologies have
established customer bases and are more widely used and accepted by scientific
and technical personnel because they can be used for non-carbohydrate
applications. Companies competing with Glyko, Inc. may have greater financial,
manufacturing and marketing resources and experience.
If we fail to manage our growth or fail to recruit and retain personnel, our
product development programs may be delayed.
Our rapid growth has strained our managerial, operational, financial and other
resources. We expect this growth to continue. We recently entered into a joint
venture with Genzyme. If we receive FDA approval to market BM101, the joint
venture will be required to devote additional resources to support the
commercialization of BM101.
To manage expansion effectively, we need to continue to develop and improve our
operating and financial systems, sales and marketing capabilities. We cannot
guarantee that our systems, procedures or controls will be adequate to support
our operations or that our management will be able to manage successfully future
market opportunities or our relationships with customers and other third
parties.
22
<PAGE>
Our future growth and success depend on our ability to recruit, retain, manage
and motivate our employees. The loss of key scientific, technical and managerial
personnel may delay our product development programs. Any harm to our research
and development programs would harm our business and prospects.
Because of the specialized scientific nature of our business, we rely heavily on
our ability to attract and retain qualified scientific, technical and managerial
personnel. In particular, the loss of Grant W. Denison, Jr., Chairman and Chief
Executive Officer, John C. Klock, M.D., President and Secretary or Christopher
M. Starr, Ph.D., Vice President for Research and Development would be
detrimental to us. While each of these individuals is party to an employment
agreement with us, which includes financial incentives for each of them to
remain employed with us, these agreements each terminate in June 2000 and we
cannot guarantee that any of them will remain employed with us beyond that time.
In addition, these agreements do not restrict their ability to compete with us
after their employment is terminated. The competition for qualified personnel in
the biopharmaceutical field is intense. We cannot be certain that we will
continue to attract and retain qualified personnel necessary for the development
of our business.
If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities.
We are exposed to the potential product liability risks inherent in the testing,
manufacturing and marketing of human drug treatments. We currently do not
maintain insurance against product liability lawsuits. The joint venture with
Genzyme maintains clinical liability insurance for BM101 which covers clinical
trials of that product, since their inception. Although we intend to obtain
product liability insurance before for our clinical trials of BM102 and shortly
before initiating clinical trials for our other products, we cannot be certain
that we will be able to obtain adequate insurance coverage. In addition, we may
be subject to claims in connection with our current clinical trials for BM101
for which current insurance coverage is not adequate. We cannot be certain that
if BM101 receives FDA approval, the product liability insurance the joint
venture will need to obtain in connection with the commercial sales of BM101
will be available at a reasonable cost. In addition, we cannot be certain that
we can successfully defend any product liability lawsuit brought against us. If
we are the subject of a successful product liability claim which exceeds the
limits of any insurance coverage we may obtain, we may incur substantial
liabilities which would adversely affect our earnings and financial condition.
If we experience any problems with Year 2000 compliance our operations may be
disrupted.
The following is intended to constitute "Year 2000 Readiness Disclosure" under
the Year 2000 Information and Readiness Disclosure Act of 1998.
Beginning in the year 2000, the date fields coded in certain software products
and computer systems will need to accept four digit entries in order to
distinguish 21st century dates from 20th century dates (commonly known as the
year 2000 problem). It is not clear what potential problems may arise as the
biopharmaceutical industry, and other industries, try to resolve this year 2000
problem.
It is possible that our currently installed computer systems, software products
or other business systems, or those of our suppliers or service providers,
working either alone or in conjunction with other software or systems, will not
accept input of, store, manipulate and output dates for the years 1999, 2000 or
subsequent years without error or interruption. We have formed a team to review
and resolve those aspects of the year 2000 problem that are within our direct
control and adjust to or influence those aspects that are not within our direct
control. The team has reviewed our software products, including those under
development, and determined that our software products do not use date data and
are year 2000 compliant. Our biopharmaceutical products do not have any year
2000 exposure. Based on representations from our vendors, the team has reviewed
the year 2000 compliance status of our major internal information technology
programs and systems used for administrative requirements and determined that
they are year 2000 compliant.
Some risks associated with the year 2000 problem are beyond our ability to
control, including the extent to which our suppliers and service providers can
address the year 2000 problem. The failure by a third party to adequately
address the year 2000 issue could have an adverse effect on their operations,
which could have an adverse effect on us. We are assessing the possible effects
on our operations of the possible failure of our key suppliers and providers,
contractors and collaborators to identify and remedy potential year 2000
problems.
23
<PAGE>
Our stock price may be volatile and your investment in our stock could suffer a
decline in value.
Prior to our initial public offering effective July 23, 1999, there has been no
public market for our common stock. The initial public offering price was
negotiated among the underwriters and us and may not be indicative of prices
that will prevail in the trading markets after the offering. Our valuation and
the initial public offering stock price have no meaningful relationship to
current or historical earnings, asset values, book value or any other criteria
of value. The market price of the common stock will fluctuate and may be higher
or lower than the initial public offering price due to factors including:
. Progress of BM101 and our other lead drug candidates through the
regulatory process, especially BM101 regulutory actions in the United
States
. Results of clinical trials, announcements of technological
innovations or new products by us or our competitors
. Government regulatory action affecting our drug candidates or our
competitors' drug candidates in both the United States and foreign
countries
. Developments or disputes concerning patent or proprietary rights
. General market conditions for emerging growth and biopharmaceutical
companies
. Economic conditions in the United States or abroad
. Actual or anticipated fluctuations in our operating results
. Broad market fluctuations may cause the market price of our common
stock to fluctuate
. Changes in financial estimates by securities analysts
In addition, the value of our common stock may fluctuate because it is listed on
both the Nasdaq National Market and the Swiss Exchange. We cannot be certain
what effect, if any, the dual listing will have on the price of our stock in
either market. Listing on both exchanges may increase stock price volatility due
to:
. trading in different time zones
. different ability to buy or sell our stock
. different trading volume
In the past, following periods of large price declines in the public market
price of a company's securities, securities class action litigation has often
been initiated against that company. Litigation of this type could result in
substantial costs and diversion of management's attention and resources, which
would hurt our business. Any adverse determination in litigation could also
subject us to significant liabilities.
If our officers, directors and largest stockholder elect to act together they
may be able to control our management and operations, acting in their best
interests and not necessarily those of other stockholders.
Our directors and officers control approximately 10.8% of the outstanding shares
of our common stock. Glyko Biomedical owns 32.7% of the outstanding shares of
capital stock. Three of six Glyko Biomedical directors are officers or directors
of BioMarin. As a result, due to their concentration of stock ownership,
directors and officers,
24
<PAGE>
together with Glyko Biomedical if they act together, may be able to otherwise
control our management and operations, and may be able to prevail on all matters
requiring a stockholder vote including:
. The election of all directors
. The amendment of charter documents or the approval of a merger, sale
of assets or other major corporate transactions
. The defeat of any non-negotiated takeover attempt that might
otherwise benefit the public stockholders
Anti-takeover provisions in our charter documents and under Delaware law may
make an acquisition of us, which may be beneficial to our stockholders, more
difficult.
BioMarin is incorporated in Delaware. Certain anti-takeover provisions of
Delaware law and our charter documents may make a change in control of BioMarin
more difficult, even if a change in control would be beneficial to the
stockholders. Our anti-takeover provisions include provisions in the certificate
of incorporation providing that stockholders' meetings may only be called by the
board of directors and a provision in the bylaws providing that the stockholders
may not take action by written consent. Additionally, our board of directors
have the authority to issue 1,000,000 shares of preferred stock and to determine
the terms of those shares of stock without any further action by the
stockholders. The rights of holders of our common stock are subject to the
rights of the holders of any preferred stock that may be issued. The issuance of
preferred stock, could make it more difficult for a third party to acquire a
majority of the outstanding voting stock of BioMarin. Delaware law also
prohibits corporations from engaging in a business combination with any holders
of 15% or more of their capital stock until the holder has held the stock for
three years unless, among other possibilities, the board of directors approves
the transaction. The board of directors may use these provisions to prevent
changes in the management and control of our company. Also, under applicable
Delaware law, our board of directors may adopt additional anti-takeover measures
in the future.
Item 3. Quantitative and Qualitative Disclosure about
Market Risk.
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment portfolio. The Company places its
investments with high credit issuers and by policy limits the amount of credit
exposure to any one issuer. As stated in its policy, the Company will improve
the safety and likelihood of preservation of its invested funds by limiting
default risk and market risk. The Company has no investments denominated in
foreign country currencies and therefore is not subject to foreign exchange
risk.
The Company mitigates default risk by investing in high credit quality
securities and by positioning its portfolio to respond appropriately to a
significant reduction in a credit rating of any investment issuer or guarantor.
The portfolio includes only marketable securities with active secondary or
resales markets to ensure portfolio liquidity.
The table below presents the carrying value for the Company's investment
portfolio. The carrying value approximates fair value at June 30, 1999.
Investment portfolio:
Carrying value
(in $ thousands)
----------------
Cash equivalents................................... $17,244*
Certificates of deposit............................ 254
Total............................................$17,498
* Includes $15,838 of United States agency securities.
25
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities and Uses of Proceeds.
ISSUANCES OF UNREGISTERD SECURITES
During the period covered by this report, registrant issued the following
unregistered securities:
From April 1 to June 30, 1999, registrant granted options to purchase 544,700
shares of common stock to officers, directors, employees and consultants in
reliance on Rule 701 promulgated under the Securities Act or in reliance on the
exemption from the regulation requirements provided by Section 4(2) of the
Securities Act.
During the period from April 1, to June 30, 1999, options to purchase 6,877
shares of common stock were exercised in reliance on Rule 701 promulgated under
the Securities Act or in reliance on the exemption from the registration
requirements provided by Section 4(2) of the Securities Act.
On April 13, 1999, registrant sold $26 million worth of notes convertible into
registrants common stock, according to their terms, in reliance on the exemption
from registration requirements provided by Regulation D and Regulation S
promulgated under the Securities Act.
USES OF PROCEEDS
The effective date of registrant's Registration Statement on Form S-1 was July
22, 1999. The offering commenced on July 23, 1999 and concluded on August 25,
1999. All of the securities registered under the Registration Statement were
sold in the offering. The global co-coordinators of the offering were Bank J.
Vontobel & Co. AG and U.S. Bancorp Piper Jaffray Inc. The Registration Statement
covered the sale of 4,500,000 shares of registrant's Common Stock, par value
$0.001 per share, as well as the sale of an additional 675,000 shares of
registrant's Common Stock upon the exercise by the underwriters of their
over-allotment option. The aggregate offering price of the number of shares
registered in the offering was $67,275,000. A total of 5,175,000 shares were
sold in the offering, the aggregate price of which was $67,275,000.
As of September 1, 1999, the expenses incurred by registrant in connection with
the issuance and distribution of the securities registered (including
underwriters' discounts and commissions) are estimated at :$6.2 million. No
direct or indirect payments for these expenses were made to registrant's
directors, officers or persons owning 10% or more of registrant's outstanding
equity securities. After deducting these expenses, registrant's net proceeds
from the offering are estimated at: $61.1 million.
Because the offering had not occurred during the period covered by this report,
registrant had not yet, as of June 30, 1999, either received or spent any of the
proceeds from the offering.
Item 3. Defaults upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
26
<PAGE>
Item 5. Other Information.
Registrant has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the period that the registrant was
required to file such reports. The registrant has been subject to such filing
requirements for less than 90 days, however.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this report
See Exhibit Index attached hereto.
(b) Reports on Form 8K
No reports were filed on Form 8-K during the six months ended June
30, 1999.
27
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BIOMARIN PHARMACEUTICAL INC.
Dated: September 2, 1999 By: \s\ Raymond W. Anderson
- ------------------------ -------------------------------------------
Raymond W. Anderson
Chief Financial Officer and
V.P. Finance and Administration
28
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
--------- -----------------------
1.1 Form of Underwriting Agreement is incorporated herein by reference to
the Registration Statement on Form S-1 filed on July 21, 1999.
2.1 Share Exchange Agreement with Glyko Biomedical, Ltd. is incorporated
herein by reference to the Registration Statement on Form S-1 filed on May 4,
1999.
3.1A Amended and Restated Certificate of Incorporation of BioMarin
Pharmaceutical Inc., a Delaware Corporation, as filed on March 22, 1999 is
incorporated herein by reference to the Registration Statement on Form S-1 filed
on May 4, 1999.
3.1B(1) Form of Amended and Restated Certificate of Incorporation of
BioMarin Pharmaceutical Inc., a Delaware Corporation is incorporated herein by
reference to the Registration Statement on Form S-1 filed on July 6, 1999.
3.2 Amended and Restated Bylaws of BioMarin Pharmaceutical Inc., a Delaware
corporation is incorporated herein by reference to the Registration Statement on
Form S-1 filed on July 6, 1999.
4.1 Form of Amended and Restated Registration Rights Agreement, by and
among the Company and the investors named therein is incorporated herein by
reference to the Registration Statement on Form S-1 filed on May 4, 1999.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati is incorporated herein by
reference to the Registration Statement on Form S-1 filed on July 21, 1999.
10.1 Form of Indemnification Agreement for directors and officers is
incorporated herein by reference to the Registration Statement on Form S-1 filed
on May 4, 1999.
10.2 1997 Stock Plan, as amended on December 22, 1998, and forms of
agreements thereunder is incorporated herein by reference to the Registration
Statement on Form S-1 filed on May 4, 1999.
10..3 1998 Director Option Plan and forms of agreements thereunder is
incorporated herein by reference to the Registration Statement on Form S-1 filed
on May 4, 1999.
10.4 1998 Employee Stock Purchase Plan and forms of agreements thereunder
is incorporated herein by reference to the Registration Statement on Form S-1
filed on May 4, 1999.
10.5 Amended and Restated Founder's Stock Purchase Agreement with Dr. John
C. Klock dated as of October 1, 1997 with exhibits is incorporated herein by
reference to the Registration Statement on Form S-1 filed on May 4, 1999.
10.6 Amended and Restated Founder's Stock Purchase Agreement with Grant W.
Denison, Jr. dated as of October 1, 1997 with exhibits is incorporated herein by
reference to the Registration Statement on Form S-1 filed on May 4, 1999.
10.7 Amended and Restated Founder's Stock Purchase Agreement with Dr.
Christopher M. Starr dated as of October 1, 1997 with exhibits is incorporated
herein by reference to the Registration Statement on Form S- 1 filed on May 4,
1999.
10.8 Employment Agreement with Dr. John C. Klock dated June 26, 1997, as
amended is incorporated herein by reference to the Registration Statement on
Form S-1 filed on June 14, 1999.
10.9 Employment Agreement with Grant W. Denison, Jr. dated June 26, 1997,
as amended is incorporated herein by reference to the Registration Statement on
Form S-1 filed on May 4, 1999.
10.10 Employment Agreement with Dr. Christopher M. Starr dated June 26,
1997, as amended is incorporated herein by reference to the Registration
Statement on Form S-1 filed on May 4, 1999.
10.11 Employment Agreement with Raymond W. Anderson dated June 22, 1998, as
amended is incorporated herein by reference to the Registration Statement on
Form S-1 filed on May 4, 1999.
10.12 Employment Agreement with Stuart J. Swiedler, M.D., Ph.D., dated May
29, 1998, as amended is incorporated herein by reference to the Registration
Statement on Form S-1 filed on May 4, 1999.
29
<PAGE>
Exhibit
Number Description of Document
------- -----------------------
10.13 Employment Agreement with Emil Kakkis, M.D., Ph.D., dated June 30,
1998, as amended is incorporated herein by reference to the Registration
Statement on Form S-1 filed on May 4, 1999.
10.14 Employment Agreement between Brian K. Brandley, Ph.D and Glyko, Inc.
dated February 22, 1998, as amended is incorporated herein by reference to the
Registration Statement on Form S-1 filed on May 4, 1999.
10.15 License Agreement with Glyko Biomedical, Ltd. dated June 26, 1997
with exhibits attached is incorporated herein by reference to the Registration
Statement on Form S-1 filed on May 4 1999.
10.16(2) Option Agreement with W.R. Grace & Co. dated as of May 1, 1998 is
incorporated herein by reference to the Registration Statement on Form S-1 filed
on June 14, 1999.
10.17(2) Grant Terms and Conditions Agreement with Harbor-UCLA Research and
Education Institute dated April 1, 1997, as amended is incorporated herein by
reference to the Registration Statement on Form S-1 filed on June 14, 1999.
10.18(2) License Agreement with Women's and Children's Hospital, Adelaide,
Australia dated August 14, 1998 is incorporated herein by reference to the
Registration Statement on Form S-1 filed on July 21, 1999.
10.19 Lease Agreement dated May 18, 1998 for 371 Bel Marin Keys Boulevard,
as amended is incorporated herein by reference to the Registration Statement on
Form S-1 filed on May 4, 1999.
10.20 Standard NNN Lease dated June 25, 1998 for 46 Galli Drive is
incorporated herein by reference to the Registration Statement on Form S-1 filed
on May 4, 1999.
10.21 Standard Industrial Commercial Single-Tenant Lease dated May 29, 1998
for 110 Digital Drive, as amended is incorporated herein by reference to the
Registration Statement on Form S-1 filed on May 4, 1999.
10.22 Sublease dated June 24, 1998 for 1123 West Carson Street is
incorporated herein by reference to the Registration Statement on Form S-1 filed
on May 4, 1999.
10.23 Commercial Lease and Deposit Receipt with Glyko, Inc. for 11 Pimentel
Court and 13 Pimentel Court, dated December 23, 1996 is incorporated herein by
reference to the Registration Statement on Form S-1 filed on May 4, 1999.
10.24 Collaboration Agreement with Genzyme Corporation dated September 4,
1998 is incorporated herein by reference to the Registration Statement on Form
S-1 filed on July 21, 1999.
10.25 Purchase Agreement with Genzyme Corporation dated September 4, 1998
is incorporated herein by reference to the Registration Statement on Form S-1
filed on May 4, 1999.
10.26 Subscription Agreement with Genzyme dated September 4, 1998 is
incorporated herein by reference to the Registration Statement on Form S-1 filed
on May 4, 1999.
10.27 Form of Convertible Note Purchase Agreement dated as of April 12,
1999 with form of convertible promissory note is incorporated herein by
reference to the Registration Statement on Form S-1 filed on May 4, 1999.
10.28 Astro License Agreement dated December 18, 1990 among Glyko, Inc.,
Astromed, Ltd., and Astroscan, Ltd. is incorporated herein by reference to the
Registration Statement on Form S-1 filed on June 14, 1999.
10.29 Glycomed License Agreement dated December 18, 1990 between Glyko,
Inc., and Glycomed, Inc. is incorporated herein by reference to the Registration
Statement on Form S-1 filed on June 14, 1999.
10.30 Operating Agreement with Genzyme Corporation is incorporated herein
by reference to the Registration Statement on Form S-1 filed on July 6, 1999.
21.1 List of Subsidiaries is incorporated herein by reference to the
Registration Statement on Form S-1 filed on May 4, 1999.
23.1 Consent of Independent Public Accountants is incorporated herein by
reference to the Registration Statement on Form S-1 filed on July 21, 1999.
23.2 Consent of Counsel (included in Exhibit 5.1) is incorporated herein by
reference to the Registration Statement on Form S-1 filed on July 21, 1999.
24.1 Power of Attorney is incorporated herein by reference to the
Registration Statement on Form S-1 filed on May 4, 1999.
27.1 Financial Data Schedule (available in EDGAR format only).
30
<PAGE>
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