<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 1999
REGISTRATION NO.
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ABGENIX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2836 94-3248826
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
ABGENIX, INC.
7601 DUMBARTON CIRCLE
FREMONT, CALIFORNIA 94555
(510) 608-6500
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
R. SCOTT GREER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
ABGENIX, INC.
7601 DUMBARTON CIRCLE
FREMONT, CALIFORNIA 94555
(510) 608-6500
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE OF PROCESS)
COPIES TO:
MARIO M. ROSATI, ESQ.
CHRIS F. FENNELL, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time as the selling stockholders may decide.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common stock, $0.0001 par value... 1,146,300 $15.50 $17,767,650 $4,940.00
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based
on the average of the high and low sales price as reported by Nasdaq on
January 13, 1999.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 15, 1999
LOGO
1,146,300 SHARES
COMMON STOCK
The selling stockholders identified in this prospectus are offering
1,146,300 shares of Abgenix, Inc.'s common stock. Abgenix's stock is traded on
the Nasdaq National Market under the symbol "ABGX." The last reported sale price
for the common stock on the Nasdaq National Market on January 14 was $16.00 per
share. We will not receive any of the proceeds from the sale of shares by the
selling stockholders and we are not offering any shares for sale under this
prospectus. See "Plan of Distribution" for a description of sales of the shares
by the selling stockholders.
------------------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------------
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE> 3
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL, AND
SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS
AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF
DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK. IN THIS
PROSPECTUS, REFERENCES TO "ABGENIX," "WE," "US" AND "OUR" REFER TO ABGENIX, INC.
AND ITS SUBSIDIARIES.
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TABLE OF CONTENTS
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PAGE
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Summary..................................................... 3
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements........... 20
Certain Information......................................... 21
Use of Proceeds............................................. 21
Price Range of Common Stock................................. 21
Dividend Policy............................................. 21
Capitalization.............................................. 22
Selected Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 31
Management.................................................. 52
Certain Transactions........................................ 61
Principal and Selling Stockholders.......................... 65
Plan of Distribution........................................ 68
Description of Capital Stock................................ 69
Shares Eligible for Future Sale............................. 71
Legal Matters............................................... 72
Experts..................................................... 72
Where You Can Find Additional Information................... 72
Index to Financial Statements............................... F-1
</TABLE>
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We own Abgenix and the Abgenix logo trademarks. We have rights to use
XenoMouse, a registered trademark of Xenotech, L.P., one of our subsidiaries.
This prospectus also includes trademarks owned by other companies.
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<PAGE> 4
SUMMARY
Because this is only a summary, it does not contain all the information
that may be important to you. You should read the entire prospectus, especially
"Risk Factors" and the Financial Statements and Notes, before deciding to invest
in our common stock.
ABGENIX
We are a biopharmaceutical company that develops and intends to
commercialize antibody therapeutic products for the treatment of a variety of
disease conditions, including transplant-related diseases, inflammatory and
autoimmune disorders, and cancer. We have developed XenoMouse technology, a
proprietary technology which we believe enables quick generation of high
affinity, fully human antibody product candidates to essentially any disease
target appropriate for antibody therapy. We intend to use XenoMouse technology
to build a large and diversified product portfolio that we plan to commercialize
either through corporate collaborations or internal product development
programs.
OUR XENOMOUSE TECHNOLOGY COLLABORATIONS
We have established collaborative arrangements to use our XenoMouse
technology to produce fully human antibodies with eight companies covering at
least 11 antigen targets. Pursuant to these collaborations, we intend to
generate antibody product candidates for the treatment of cancer, inflammation,
transplant rejection, cardiovascular disease and growth factor modulation. Our
collaborative partners include Cell Genesys, Inc., Pfizer Inc., Schering-Plough
Research Institute, Genentech, Inc., Millennium BioTherapeutics, Inc., Research
Corporation Technologies, Centocor, Inc. and AVI BioPharma, Inc. Among our eight
collaborative partners, Pfizer, Genentech and Millennium BioTherapeutics have
each entered into additional collaborations with us specifying additional
antigens for XenoMouse antibody development. The financial terms of our existing
collaborations typically include upfront payments, potential license fees and
milestone payments payable to us by the collaborative partner.
OUR PROPRIETARY PRODUCTS
We also have four antibody product candidates that are under development
internally. Our lead product candidate, ABX-CBL, is an in-licensed mouse
antibody. We are currently conducting a multi-center confirmatory Phase II
clinical trial for ABX-CBL for the treatment of a transplant-related disease
known as graft versus host disease. Once the final report on our Phase II
clinical trial has been completed, we plan to submit the data to the FDA for
approval to commence a Phase III clinical trial for ABX-CBL during 1999. Our
other three product candidates were generated using XenoMouse technology. We
completed a Phase I clinical trial for our fully human antibody product
candidate in psoriasis, ABX-IL8, and began a Phase I/II clinical trial in
November 1998. We are in preclinical development with two other fully human
antibody product candidates: ABX-EGF for use in the treatment of cancer; and
ABX-RB2 for use in the treatment of chronic immunological disorders. We expect
to initiate Phase I clinical trials with ABX-EGF in mid-1999.
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THE OFFERING
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Common stock to be offered by the selling stockholders... 1,146,300 shares
Common stock outstanding after the offering.............. 11,120,293 shares
Use of proceeds.......................................... We will not receive any proceeds from
the sales of common stock by the
selling stockholders. See "Use of
Proceeds."
Nasdaq National Market Symbol............................ ABGX
</TABLE>
Unless otherwise stated, all information contained in this prospectus excludes:
(1) 1,642,186 shares of common stock issuable upon exercise of stock
options at a weighted average exercise price of $2.44 per share
outstanding as of December 31, 1998;
(2) 121,667 shares of common stock issuable upon exercise of warrants with
an exercise price of $6.00 per share outstanding as of December 31,
1998; and
(3) 25,000 shares of common stock issuable pursuant to a license agreement
outstanding as of December 31, 1998.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
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1993 1994 1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Total revenues(1)............. $ 6,600 $ 6,200 $ 6,200 $ 4,719 $ 1,954 $ 1,109 $ 2,008
Operating expenses:
Research and development.... 4,629 7,921 11,879 9,433 11,405 8,787 11,976
General and
administrative............ 1,019 1,955 2,603 2,565 3,525 1,966 2,562
Charge for cross-license and
settlement amount
allocated from Cell
Genesys(2)................ -- -- -- -- 11,250 11,250 --
Equity in losses from the
Xenotech joint venture
(charge for cross-license
and settlement)(2)........ -- -- -- -- 11,250 7,500 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 5,648 9,876 14,482 11,998 37,430 29,503 14,538
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss)....... 952 (3,676) (8,282) (7,279) (35,476) (28,394) (12,530)
Interest income (expense),
net......................... -- -- -- 179 (404) (206) (229)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ 952 $ (3,676) $ (8,282) $ (7,100) $ (35,880) $ (28,600) $ (12,301)
=========== =========== =========== =========== =========== =========== ===========
Net loss per share(3)......... $(46,710.53) $ (1,032.70) $ (2,756.11) $ (3.27)
=========== =========== =========== ===========
Shares used in computing net
loss per share(3)........... 152 34,744 11,102 3,766,615
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
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(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 24,573
Working capital............................................. 17,856
Total assets................................................ 30,781
Long-term debt, less current portion........................ 2,710
Accumulated deficit......................................... (64,775)
Total stockholders' equity.................................. 20,984
</TABLE>
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(1) The statement of operations includes our revenues and expenses as a business
unit within Cell Genesys prior to July 15, 1996. During the years ended
December 31, 1993, 1994, 1995 and 1996, our revenues were derived
principally from Xenotech, L.P. for the development of XenoMouse technology,
which was essentially completed in 1996.
(2) In the year ended December 31, 1997, we incurred an aggregate non-recurring
charge for cross-license and settlement of $22.5 million. This amount
represents an allocation from Cell Genesys of $11.25 million and an entry of
$11.25 million to record the equity in the losses of Xenotech L.P., our
equally owned joint venture with JT America, Inc. The statement of
operations for the nine-month period ended September 30, 1997 excludes the
final amount of $3.75 million that we expensed in December 1997. See Note 6
of Notes to the Financial Statements.
(3) Net loss per share data has not been presented prior to July 15, 1996 as
there were no equity securities outstanding prior to that date.
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RISK FACTORS
An investment in this common stock offering is very risky. You should
carefully consider the following risk factors in addition to the remainder of
this prospectus before purchasing the common stock. This prospectus contains
forward-looking statements that involve risks and uncertainties. Many factors,
including those described below, may cause actual results to differ materially
from anticipated results.
OUR XENOMOUSE TECHNOLOGY MAY NOT PRODUCE SAFE, EFFICACIOUS OR COMMERCIALLY
VIABLE PRODUCTS
Our XenoMouse technology is a new approach to the generation of antibody
therapeutic products. We have not commercialized any antibody products based on
XenoMouse technology. We are not aware of any commercialized, fully human
antibody therapeutic products that have been generated from any technologies
similar to ours. Our antibody product candidates are still at a very early stage
of development. We have begun clinical trials with respect to only one fully
human antibody product candidate, ABX-IL8. We cannot be certain that XenoMouse
technology will generate antibodies against all the antigens to which it is
exposed in an efficient and timely manner, if at all. Furthermore, XenoMouse
technology may not result in any meaningful benefits to our current or potential
collaborative partners or be safe and efficacious for patients. If XenoMouse
technology fails to generate antibody product candidates that lead to the
successful development and commercialization of products, our business,
financial condition and results of operations will be materially adversely
affected. See "Business -- The Abgenix Solution -- XenoMouse Technology."
CLINICAL TRIALS FOR OUR PRODUCT CANDIDATES WILL BE EXPENSIVE AND THEIR OUTCOME
IS UNCERTAIN
Conducting clinical trials is a lengthy, time-consuming and expensive
process. Before obtaining regulatory approvals for the commercial sale of any
products, we must demonstrate through preclinical testing and clinical trials
that our product candidates are safe and effective for use in humans. We will
incur substantial expense for, and devote a significant amount of time to,
preclinical testing and clinical trials.
Historically, the results from preclinical testing and early clinical
trials have often not been predictive of results obtained in later clinical
trials. A number of new drugs and biologics have shown promising results in
clinical trials, but subsequently failed to establish sufficient safety and
efficacy data to obtain necessary regulatory approvals. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations,
which may delay, limit or prevent regulatory approval. In addition, regulatory
delays or rejections may be encountered as a result of many factors, including
changes in regulatory policy during the period of product development.
Only two of our product candidates, ABX-CBL and ABX-IL8, are currently in
clinical trials. Patient follow-up for these clinical trials has been limited.
To date, data obtained from these clinical trials has been insufficient to
demonstrate safety and efficacy under applicable FDA guidelines. As a result,
such data will not support an application for regulatory approval without
further clinical trials. Clinical trials conducted by Abgenix or by third
parties on our behalf may not demonstrate sufficient safety and efficacy to
obtain the requisite regulatory approvals for ABX-CBL, ABX-IL8 or any other
potential product candidates. Regulatory authorities may not permit us to
undertake any additional clinical trials for our product candidates.
In addition, our other product candidates are in preclinical development,
and we have not submitted investigational new drug applications nor begun
clinical trials for such product candidates. Our preclinical or clinical
development efforts may not be successfully completed. We may not file further
investigational new drug applications. Our clinical trials may not commence as
planned.
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<PAGE> 8
Completion of clinical trials may take several years or more. The length of
time generally varies substantially according to the type, complexity, novelty
and intended use of the product candidate. Our commencement and rate of
completion of clinical trials may be delayed by many factors, including:
- inability to manufacture sufficient quantities of materials used for
clinical trials;
- slower than expected rate of patient recruitment;
- inability to adequately follow patients after treatment;
- unforeseen safety issues;
- lack of efficacy during the clinical trials; or
- government or regulatory delays.
We have limited experience in conducting and managing clinical trials. We rely
on third parties, including our collaborative partners, to assist us in managing
and monitoring clinical trials. Our reliance on such third parties may result in
delays in completing, or failing to complete, such trials if they fail to
perform under our agreements with them.
Our product candidates may fail to demonstrate safety and efficacy in
clinical trials. Such failure may delay development of other product candidates,
and hinder our ability to conduct related preclinical testing and clinical
trials. As a result of such failures, we may also be unable to obtain additional
financing. Our business, financial condition and results of operations will be
materially adversely affected by any delays in, or termination of, our clinical
trials.
THE CLINICAL SUCCESS OF ABX-CBL IS UNCERTAIN
We are currently conducting a multi-center confirmatory Phase II trial in
graft versus host disease, or GVHD. As of December 31, 1998, ABX-CBL has been
administered to a total of only 133 patients for GVHD and organ transplant
rejection indications. In our clinical trials, we administered ABX-CBL to only
48 of these patients, and we cannot rely on data obtained from other patients to
support the efficacy of ABX-CBL in an application for regulatory approval. In
addition, our clinical trials are being conducted with patients who have failed
conventional treatments and who are in the most advanced stages of GVHD. During
the course of treatment, these patients can die or suffer adverse medical
effects for reasons that may not be related to ABX-CBL. Such adverse effects may
affect the interpretation of clinical trial results.
We continue to treat patients and collect data from our Phase II clinical
trials. Once the final report on our Phase II clinical trials has been
completed, we plan to submit the data to the FDA for approval to commence a
Phase III clinical trial. We cannot assure you that the results of our Phase II
clinical trials will be favorable. The FDA may require additional clinical
trials before allowing us to commence a Phase III clinical trial. If required,
additional clinical trials will be extensive, expensive and time-consuming. If
ABX-CBL fails to receive regulatory approval, our business, financial condition
and results of operations may be materially adversely affected.
SUCCESSFUL DEVELOPMENT OF OUR PRODUCTS IS UNCERTAIN
Our development of current and future product candidates is subject to the
risks of failure inherent in the development of new pharmaceutical products and
products based on new technologies. These risks include:
- delays in product development, clinical testing or manufacturing;
- unplanned expenditures in product development, clinical testing or
manufacturing;
- failure in clinical trials or failure to receive regulatory approvals;
- emergence of superior or equivalent products;
- inability to manufacture product candidates on a commercial scale;
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<PAGE> 9
- inability to market products due to third-party proprietary rights;
- election by our collaborative partners not to pursue product development;
- failure by our collaborative partners to successfully develop products;
and
- failure to achieve market acceptance.
Because of these risks, our research and development efforts or those of our
collaborative partners may not result in any commercially viable products. If a
significant portion of these development efforts is not successfully completed,
required regulatory approvals are not obtained, or any approved products are not
commercially successful, our business, financial condition and results of
operations will be materially adversely affected. See "Business -- Proprietary
Product Development Programs."
WE ARE AN EARLY STAGE COMPANY
You must evaluate us in light of the uncertainties and complexities present
in an early stage biopharmaceutical company. Our product candidates are in early
stages of development. We will require significant additional investment in
research and development, preclinical testing and clinical trials, regulatory
and sales and marketing activities to commercialize current and future product
candidates. We cannot assure you that such product candidates, if successfully
developed, will generate sufficient or sustainable revenues to enable us to be
profitable.
WE HAVE A HISTORY OF LOSSES
We have incurred net losses in each of the last three years of operation,
including net losses of approximately $8.3 million in 1995, $7.1 million in
1996, and $35.9 million in 1997. We also incurred net losses of approximately
$12.3 million in the nine-month period ended September 30, 1998. As of September
30, 1998, our accumulated deficit was approximately $64.8 million. Our losses
have resulted principally from:
- research and development costs relating to the development of our
XenoMouse technology and antibody product candidates;
- cross-license and settlement costs relating to our patent portfolio; and
- general and administrative costs relating to our operations.
We expect to incur additional operating losses until at least the year 2000
as a result of increases in our research and development costs, including costs
associated with conducting preclinical testing and clinical trials. We expect
that the amount of operating losses will fluctuate significantly from quarter to
quarter as a result of increases or decreases in our research and development
efforts, the execution or termination of collaborative arrangements, or the
initiation, success or failure of clinical trials. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
OUR FUTURE PROFITABILITY IS UNCERTAIN
Prior to June 1996, our business was owned by Cell Genesys and operated as
a business unit. Since that time, we have funded our research and development
activities primarily from contributions from Cell Genesys, private placements of
preferred stock, the initial public offering of our common stock, revenues
generated from our collaborative arrangements, equipment leaseline financings
and loan facilities. We expect that substantially all of our revenues for the
foreseeable future will result from payments under collaborative arrangements.
To date, such payments have been in the form of upfront payments, reimbursement
for research and development expenses and milestone payments, but may include
license fees in the future. Payments under our existing and any future
collaborative arrangements will be subject to significant fluctuation in both
timing and amount. Our revenues may not be indicative of our future performance
or of our ability to continue to achieve such milestones. Our revenues and
results of
8
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operations for any period may also not be comparable to the revenues or results
of operations for any other period. We cannot assure you that we will:
- enter into further collaborative arrangements;
- successfully complete preclinical or clinical trials;
- obtain required regulatory approvals;
- successfully develop, manufacture and market product candidates; or
- generate additional revenues or profitability.
If we fail to achieve any of the above goals, our business, financial condition
and results of operations will be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Proprietary Product Development Programs."
WE WILL NEED TO FIND COLLABORATIVE PARTNERS TO DEVELOP MANY OF OUR PRODUCT
CANDIDATES
Our strategy for the development and commercialization of antibody
therapeutic products depends, in large part, upon the formation of collaborative
arrangements with several collaborative partners. Potential collaborative
partners include pharmaceutical and biotechnology companies, academic
institutions and other entities. We must enter into these collaborations to
successfully develop and commercialize product candidates. Such collaborations
are necessary in order for us to:
- access proprietary antigens for which we can generate fully human
antibody products;
- fund our research and development activities;
- fund preclinical testing, clinical trials and manufacturing;
- seek and obtain regulatory approvals; and
- successfully commercialize existing and future product candidates.
Only a limited number of fully human antibody product candidates have been
generated pursuant to our collaborations. None of these collaborative product
candidates has entered clinical testing and may not result in commercially
successful products. Current or future collaborative arrangements may not be
successful. If we fail to maintain our existing collaborative arrangements or to
enter into additional collaborative arrangements, our business, financial
condition and results of operations will be materially adversely affected.
Our dependence on collaborative arrangements with third parties subjects us
to a number of risks. Such collaborative arrangements may not be on terms
favorable to Abgenix. Agreements with collaborative partners typically allow
partners significant discretion in electing whether to pursue any of the planned
activities. We cannot control the amount and timing of resources our
collaborative partners may devote to the product candidates. Our partners may
not perform their obligations as expected. Business combinations or significant
changes in a collaborative partner's business strategy may adversely affect a
partner's willingness or ability to complete its obligations under the
arrangement. Even if we fulfill our obligations under a collaborative agreement,
our partner can terminate the agreement at any time following proper written
notice. If any collaborative partner were to terminate or breach our agreement
with it, or otherwise fail to complete its obligations in a timely manner, our
business, financial condition and results of operations may be materially
adversely affected. If we are not able to establish further collaborative
arrangements or any or all of our existing collaborative arrangements are
terminated, we may be required to seek new collaborative arrangements or to
undertake product development and commercialization at our own expense. Such an
undertaking may:
- limit the number of product candidates that we will be able to develop
and commercialize;
- reduce the likelihood of successful product introduction;
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- significantly increase our capital requirements; and
- place additional strain on management's time.
Existing or future collaborative partners may pursue alternative
technologies, including those of our competitors. Disputes may arise with
respect to the ownership of rights to any technology or products developed with
any current or future collaborative partner. Lengthy negotiations with potential
new collaborative partners or disagreements between Abgenix and our
collaborative partners may lead to delays or termination in the research,
development or commercialization of product candidates or result in time
consuming and expensive litigation or arbitration. If our collaborative partners
pursue alternative technologies or fail to develop or commercialize successfully
any product candidate to which they have obtained rights from us, our business,
financial condition and results of operations may be materially adversely
affected.
OUR JOINT VENTURE WITH JT AMERICA, INC. MAY LIMIT OUR ABILITY TO DEVELOP PRODUCT
CANDIDATES
In 1991, Cell Genesys and JT America, Inc. formed Xenotech, L.P., an
equally-owned joint venture, to develop genetically modified strains of mice
which can produce fully human monoclonal antibodies, called XenoMouse
technology, and to commercialize products generated from XenoMouse technology.
Upon our organization, Cell Genesys assigned its rights in Xenotech to us.
We must obtain licenses from Xenotech to commercialize antibody products
generated by XenoMouse technology. We have the right to license the use of
XenoMouse technology from Xenotech to develop a certain number of antigen
targets each year. If we have used our yearly allotment of licenses to develop
antigen targets and desire to acquire a license to develop additional antigen
targets, we may have to negotiate with JT America or others to acquire such
rights. Disputes with JT America, or its parent company Japan Tobacco, Inc., may
result in the loss of the right to commercialize a product candidate by either
party. Limits on our ability to acquire additional licenses to develop antigen
targets, or disputes with JT America or Japan Tobacco, will limit our ability to
establish collaborations and fully realize the commercial potential of XenoMouse
technology. See "Business -- Joint Venture With Japan Tobacco."
WE WILL REQUIRE ADDITIONAL FINANCING
We will continue to expend substantial resources for the expansion of
research and development, including costs associated with conducting preclinical
testing and clinical trials. We will be required to expend substantial funds in
the course of completing required additional development, preclinical testing
and clinical trials of and regulatory approval for product candidates. Our
future liquidity and capital requirements will depend on many factors,
including:
- the scope and results of preclinical testing and clinical trials;
- the retention of existing and establishment of further collaborative
arrangements, if any;
- continued scientific progress in our research and development programs;
- the size and complexity of these programs;
- the time and expense involved in obtaining regulatory approvals, if any;
- competing technological and market developments;
- the time and expense of filing and prosecuting patent applications and
enforcing patent claims;
- the cost of establishing manufacturing capabilities, conducting
commercialization activities and arrangements and product in-licensing;
and
- other factors not within our control.
We will need to raise additional funds through public or private financing,
collaborative arrangements or other arrangements. Additional funding may not be
available to us on favorable terms, if at all.
10
<PAGE> 12
Furthermore, any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may involve restrictive covenants.
Collaborative arrangements may require us to relinquish our rights to certain of
our technologies, product candidates or marketing territories. If we fail to
raise additional funds when needed, our business, financial condition and
results of operations will be materially adversely affected.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE
The biotechnology and pharmaceutical industries are highly competitive and
subject to significant and rapid technological change. We are aware of several
pharmaceutical and biotechnology companies that are actively engaged in research
and development in areas related to antibody therapy. These companies have
commenced clinical trials of antibody products or have successfully
commercialized antibody products. Many of these companies are addressing the
same diseases and disease indications as Abgenix or our collaborative partners.
Also, we compete with companies that offer antibody generation services to
companies that have antigens. These competitors have specific expertise or
technology related to antibody development. These companies include GenPharm
International, Inc., a wholly-owned subsidiary of Medarex, Inc., Cambridge
Antibody Technology Group, Inc., Protein Design Labs, Inc. and Morphosys, Inc.
Some of our competitors have received regulatory approval or are developing
or testing product candidates that may compete directly with our product
candidates. Recently, Sangstat Medical Corp. received approval for an organ
transplant rejection product that may compete with ABX-CBL, which is in clinical
trials. We are also aware that several companies, including Genentech, Inc.,
have potential product candidates that may compete with ABX-IL8. Furthermore, we
are aware that ImClone Systems, Inc., Medarex and OSI Pharmaceuticals, Inc. have
potential antibody and small molecule product candidates already in clinical
development that may compete with ABX-EGF, which is in preclinical development.
We may also compete with Japan Tobacco in supplying XenoMouse technology or
antibody product candidates to potential collaborative partners.
Many of these companies and institutions, either alone or together with
their collaborative partners, have substantially greater financial resources and
larger research and development staffs than we do. In addition, many of these
competitors, either alone or together with their collaborative partners, have
significantly greater experience than we do in:
- developing products;
- undertaking preclinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products; and
- manufacturing and marketing products.
Accordingly, our competitors may succeed in obtaining patent protection,
receiving FDA approval or commercializing products before us. If we commence
commercial product sales, we will be competing against companies with greater
marketing and manufacturing capabilities, areas in which we have limited or no
experience.
We also face, and will continue to face, competition from academic
institutions, government agencies and research institutions. There are numerous
competitors working on products to treat each of the diseases for which we are
seeking to develop therapeutic products. In addition, any product candidate that
we successfully develop may compete with existing therapies that have long
histories of safe and effective use. Competition may also arise from:
- other drug development technologies and methods of preventing or reducing
the incidence of disease;
- new small molecules; or
- other classes of therapeutic agents.
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<PAGE> 13
Developments by competitors may render our product candidates or technologies
obsolete or noncompetitive. We face and will continue to face intense
competition from other companies for collaborative arrangements with
pharmaceutical and biotechnology companies for establishing relationships with
academic and research institutions, and for licenses to proprietary technology.
These competitors, either alone or with their collaborative partners, may
succeed in developing technologies or products that are more effective than
ours.
MARKET ACCEPTANCE OF OUR PRODUCTS IS UNCERTAIN
Our product candidates may not gain market acceptance among physicians,
patients, healthcare payors and the medical community. We may not achieve market
acceptance even if clinical trials demonstrate safety and efficacy, and the
necessary regulatory and reimbursement approvals are obtained. The degree of
market acceptance of any product candidates that we develop will depend on a
number of factors, including:
- establishment and demonstration of clinical efficacy and safety;
- cost-effectiveness of our product candidates;
- their potential advantage over alternative treatment methods;
- reimbursement policies of government and third-party payors; and
- marketing and distribution support for our product candidates.
Physicians will not recommend therapies using our products until such time as
clinical data or other factors demonstrate the safety and efficacy of such
procedures as compared to conventional drug and other treatments. Even if the
clinical safety and efficacy of therapies using our antibody products is
established, physicians may elect not to recommend the therapies for any number
of other reasons, including whether the mode of administration of our antibody
products is effective for certain indications. For example, antibody products
are typically administered by infusion or injection, which requires substantial
cost and inconvenience to patients. Our product candidates, if successfully
developed, will compete with a number of drugs and therapies manufactured and
marketed by major pharmaceutical and other biotechnology companies. Our products
may also compete with new products currently under development by others.
Physicians, patients, third-party payors and the medical community may not
accept and utilize any product candidates that Abgenix or our collaborative
partners develop. If our products do not achieve significant market acceptance,
our business, financial condition and results of operations will be materially
adversely affected. See "Business -- Proprietary Product Development Programs,"
"-- Competition," and "-- Pharmaceutical Pricing and Reimbursement."
OUR PATENT POSITION IS UNCERTAIN AND OUR SUCCESS DEPENDS ON OUR PROPRIETARY
RIGHTS
Our success depends in part on our ability to:
- obtain patents;
- protect trade secrets;
- operate without infringing upon the proprietary rights of others; and
- prevent others from infringing on our proprietary rights.
We will be able to protect our proprietary rights from unauthorized use by third
parties only to the extent that our proprietary rights are covered by valid and
enforceable patents or are effectively maintained as trade secrets. While we
have pending patent applications in the United States relating to XenoMouse
technology, no patents have been issued. We try to protect our proprietary
position by filing United States and foreign patent applications related to our
proprietary technology, inventions and improvements that are important to the
development of our business. The patent position of biopharmaceutical companies
involves complex legal and factual questions and, therefore, enforceability
cannot be predicted with
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<PAGE> 14
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
Thus, any patents that we own or license from third parties may not provide any
protection against competitors. Our pending patent applications, those we may
file in the future, or those we may license from third parties, may not result
in patents being issued. Also, patent rights may not provide us with proprietary
protection or competitive advantages against competitors with similar
technology. Furthermore, others may independently develop similar technologies
or duplicate any technology that we have developed. The laws of certain foreign
countries do not protect our intellectual property rights to the same extent as
do the laws of the United States.
In addition to patents, we rely on trade secrets and proprietary know-how.
We seek protection, in part, through confidentiality and proprietary information
agreements. These agreements may not provide meaningful protection or adequate
remedies for our technology in the event of unauthorized use or disclosure of
confidential and proprietary information. The parties may breach such
agreements. Furthermore, our trade secrets may otherwise become known to, or be
independently developed by, our competitors. See "Business -- Intellectual
Property."
WE MAY FACE CHALLENGES FROM THIRD PARTIES REGARDING THE VALIDITY OF OUR PATENTS
AND PROPRIETARY RIGHTS
Research has been conducted for many years in the antibody field. This has
resulted in a substantial number of issued patents and an even larger number of
patent applications. Patent applications in the United States are, in most
cases, maintained in secrecy until patents issue. The publication of discoveries
in the scientific or patent literature frequently occurs substantially later
than the date on which the underlying discoveries were made. Our commercial
success depends significantly on our ability to operate without infringing the
patents and other proprietary rights of third parties. Our technologies may
infringe the patents or violate other proprietary rights of third parties. In
the event of infringement or violation, Abgenix and our collaborative partners
may be prevented from pursuing product development or commercialization. Such a
result will materially adversely affect our business, financial condition and
results of operations.
In March 1997, we entered into a cross-license and settlement agreement
with GenPharm to avoid protracted litigation. Under the cross-license, we
licensed on a non-exclusive basis certain patents, patent applications,
third-party licenses, and inventions pertaining to the development and use of
certain transgenic rodents including mice that produce fully human antibodies
that are integral to our products and business. Our business, financial
condition and results of operations will be materially adversely affected if any
of the parties breaches the cross-license agreement. We have one issued European
patent relating to XenoMouse technology that is currently undergoing opposition
proceedings within the European Patent Office and the outcome of this opposition
is uncertain. See "Business -- Intellectual Property -- Patent Cross-License and
Settlement Agreement with GenPharm."
The biotechnology and pharmaceutical industries have been characterized by
extensive litigation regarding patents and other intellectual property rights.
The defense and prosecution of intellectual property suits, United States Patent
and Trademark Office interference proceedings and related legal and
administrative proceedings in the United States and internationally involve
complex legal and factual questions. As a result, such proceedings are costly
and time-consuming to pursue and their outcome is uncertain. Litigation may be
necessary to:
- enforce our issued and licensed patents;
- protect trade secrets or know-how that we own or license; or
- determine the enforceability, scope and validity of the proprietary
rights of others.
If we become involved in any litigation, interference or other administrative
proceedings, we will incur substantial expense and the efforts of our technical
and management personnel will be significantly diverted. An adverse
determination may subject us to significant liabilities or require us to seek
licenses that may not be available from third parties. We may be restricted or
prevented from manufacturing and
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<PAGE> 15
selling our products, if any, in the event of an adverse determination in a
judicial or administrative proceeding or if we fail to obtain necessary
licenses. Costs associated with these arrangements may be substantial and may
include ongoing royalties. Furthermore, we may not be able to obtain the
necessary licenses on satisfactory terms, if at all. These outcomes will
materially adversely affect our business, financial condition and results of
operations.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATIONS AND WE MAY NOT BE ABLE TO
OBTAIN REGULATORY APPROVALS
Our product candidates under development are subject to extensive and
rigorous domestic government regulation. The FDA regulates, among other things,
the development, testing, manufacture, safety, efficacy, record-keeping,
labeling, storage, approval, advertising, promotion, sale and distribution of
biopharmaceutical products. If our products are marketed abroad, they also are
subject to extensive regulation by foreign governments. None of our product
candidates has been approved for sale in the United States or any foreign
market. The regulatory review and approval process, which includes preclinical
studies and clinical trials of each product candidate, is lengthy, expensive and
uncertain. Securing FDA approval requires the submission of extensive
preclinical and clinical data and supporting information to the FDA for each
indication to establish the product candidates safety and efficacy. For example,
we have not received FDA approval to commence Phase III clinical trials for
ABX-CBL. The approval process takes many years, requires the expenditure of
substantial resources, involves post-marketing surveillance, and may involve
ongoing requirements for post-marketing studies. Delays in obtaining regulatory
approvals may:
- adversely affect the successful commercialization of any drugs that
Abgenix or our collaborative partners develop;
- impose costly procedures on Abgenix or our collaborative partners;
- diminish any competitive advantages that Abgenix or our collaborative
partners may attain; and
- adversely affect our receipt of revenues or royalties.
Certain material changes to an approved product such as manufacturing
changes or additional labeling claims are subject to further FDA review and
approval. Any required approvals, once obtained, may be withdrawn. Compliance
with other regulatory requirements may not be maintained. Further, if we fail to
comply with applicable FDA and other regulatory requirements at any stage during
the regulatory process, Abgenix or our contract manufacturers may be subject to
sanctions, including:
- delays;
- warning letters;
- fines;
- product recalls or seizures;
- injunctions;
- refusal of the FDA to review pending market approval applications or
supplements to approval applications;
- total or partial suspension of production;
- civil penalties;
- withdrawals of previously approved marketing applications; and
- criminal prosecutions.
We expect to rely on our collaborative partners to file investigational new
drug applications and generally direct the regulatory approval process for many
of our products. Our collaborative partners may not be able to conduct clinical
testing or obtain necessary approvals from the FDA or other regulatory
14
<PAGE> 16
authorities for any product candidates. If we fail to obtain required
governmental approvals, our collaborative partners will experience delays in or
be precluded from marketing products developed through our research. In
addition, the commercial use of our products will be limited. Delays and
limitations may materially adversely affect our business, financial condition
and results of operations.
Abgenix and our contract manufacturers also are required to comply with the
applicable FDA current good manufacturing practice regulations. Good
manufacturing practice regulations include requirements relating to quality
control and quality assurance as well as the corresponding maintenance of
records and documentation. Manufacturing facilities are subject to inspection by
the FDA. Such facilities must be approved before we can use them in commercial
manufacturing of our products. Abgenix or our contract manufacturers may not be
able to comply with the applicable good manufacturing practice requirements and
other FDA regulatory requirements. If Abgenix or our contract manufacturers
fails to comply, our business, financial condition and results of operations
will be materially adversely affected. See "Business -- Government Regulation."
WE RELY ON THIRD PARTY MANUFACTURERS AND DO NOT HAVE COMMERCIAL SCALE
MANUFACTURING EXPERIENCE
We lack the resources and capability to manufacture our products on a
commercial scale. While we currently manufacture limited quantities of antibody
products for preclinical testing, we depend on sole source contract
manufacturers to produce ABX-CBL, ABX-IL8 and ABX-EGF under good manufacturing
practice regulations for use in our clinical trials. Each contract manufacturer
has a limited number of facilities in which our product candidates can be
produced. Our contract manufacturers have limited experience in manufacturing
ABX-CBL, ABX-IL8 and ABX-EGF in quantities sufficient for conducting clinical
trials or for commercialization.
There are, on a worldwide basis, a limited number of contract facilities in
which our product candidates can be produced under good manufacturing practice
regulations for use in pharmaceutical drugs. It can also take a substantial
period of time for a contract facility to begin producing antibodies under good
manufacturing practice regulations. Accordingly, we depend on our contract
manufacturers to produce our product candidates under good manufacturing
practice regulations which meet acceptable standards for our clinical trials.
Contract manufacturers often encounter difficulties in scaling up
production, including problems involving production yields, quality control and
quality assurance and shortage of qualified personnel. Our contract
manufacturers may not perform as agreed or may not remain in the contract
manufacturing business for the time required by us to successfully produce and
market our product candidates. If our contract manufacturers fail to deliver the
required quantities of our product candidates for clinical use on a timely basis
and at commercially reasonable prices, and we fail to find a replacement
manufacturer or develop our own manufacturing capabilities, our business,
financial condition and results of operations will be materially adversely
affected.
In addition, Abgenix and our third-party manufacturers are required to
register manufacturing facilities with the FDA and foreign regulatory
authorities. The facilities will then be subject to inspections confirming
compliance with good manufacturing practice requirements established by the FDA
or corresponding foreign regulations. If Abgenix or our third-party
manufacturers fails to maintain compliance with the good manufacturing practice
requirements, our business, financial condition and results of operations will
be materially adversely affected. See "Business -- Manufacturing."
WE DO NOT HAVE MARKETING AND SALES EXPERIENCE
We do not have a marketing, sales or distribution capability. For certain
products, we may establish an internal marketing and sales force. We intend to
enter into arrangements with third parties to market and sell most of our
products. We may not be able to enter into marketing and sales arrangements with
others on acceptable terms, if at all. To the extent that we enter into
marketing and sales arrangements with other companies, our revenues, if any,
will depend on the efforts of others. These efforts may not be
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<PAGE> 17
successful. If we are unable to enter into third-party arrangements, then we
must develop a marketing and sales force, which may need to be substantial in
size, in order to achieve commercial success for any product candidate approved
by the FDA. We may not successfully develop marketing and sales experience or
have sufficient resources to do so. If we do develop such capabilities, we will
compete with other companies that have experienced and well-funded marketing and
sales operations. If we fail to establish successful marketing and sales
capabilities or fail to enter into successful marketing arrangements with third
parties, our business, financial condition and results of operations will be
materially adversely affected.
WE DEPEND ON KEY PERSONNEL AND MUST CONTINUE TO ATTRACT AND RETAIN KEY EMPLOYEES
AND CONSULTANTS
We are highly dependent on the principal members of our scientific and
management staff. If we lose any of these persons, our business, financial
condition and results of operations may be materially adversely affected. For us
to pursue product development, marketing and commercialization plans, we will
need to hire additional qualified scientific personnel to perform research and
development. We will also need to hire personnel with expertise in clinical
testing, government regulation, manufacturing and marketing. Attracting and
retaining qualified personnel will be critical to our success. We may not be
able to attract and retain personnel on acceptable terms given the competition
for such personnel among biotechnology, pharmaceutical and healthcare companies,
universities and non-profit research institutions.
In addition, we rely on members of our Scientific and Medical Advisory
Boards and other consultants to assist us in formulating our research and
development strategy. All of our consultants and the members of our Scientific
and Medical Advisory Boards are employed by other entities. They may have
commitments to, or advisory or consulting agreements with, other entities that
may limit their availability to us. If we lose the services of these personnel,
the achievement of our development objectives may be impeded. Such impediments
may materially adversely affect our business, financial condition and results of
operations. See "Business -- Scientific and Medical Advisory Boards."
CELL GENESYS EXERCISES SIGNIFICANT INFLUENCE OVER US
As of December 31, 1998, Cell Genesys beneficially owns 30.2% of our
outstanding capital stock. As a result, Cell Genesys will have significant
influence over all matters requiring the approval of our stockholders. Such
matters include the election of our Board of Directors and changes in control of
Abgenix. We have entered into a governance agreement with Cell Genesys which
provides that so long as Cell Genesys or a group to which it belongs owns a
specific percentage of our outstanding voting stock, Cell Genesys or the group
shall have the right to nominate a fixed number of directors to serve on our
Board. The details of this arrangement are set forth in the table below:
<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP NUMBER OF DIRECTORS
-------------------- -------------------
<S> <C>
50% or more........................................ 4 out of 7
Less than 50% but greater than 25%................. 3 out of 7
Less than 25% but greater than 15%................. 1 out of 7
</TABLE>
The governance agreement also provides that Cell Genesys and each of our
officers and directors who owns voting stock shall agree to vote for the persons
nominated as set forth above. We may be adversely impacted by the significant
influence which Cell Genesys will have with respect to matters affecting us. See
"Certain Transactions" and "Management -- Board Composition."
DIRECTORS, EXECUTIVE OFFICERS, PRINCIPAL STOCKHOLDERS AND AFFILIATED ENTITIES
OWN A SIGNIFICANT PERCENTAGE OF OUR CAPITAL STOCK
Our directors, executive officers, principal stockholders and affiliated
entities beneficially own, in the aggregate, approximately 43.7% of our
outstanding common stock. These stockholders, if acting together, will be able
to significantly influence all matters requiring approval by our stockholders.
Such matters
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include the election of directors and the approval of mergers or other business
combination transactions. We may be adversely impacted by the control that such
stockholders will have with respect to matters affecting us. See "Principal and
Selling Stockholders."
WE FACE UNCERTAINTY OVER REIMBURSEMENT AND HEALTHCARE REFORM
In both domestic and foreign markets, sales of our product candidates will
depend in part upon the availability of reimbursement from third-party payors.
Such third-party payors include government health administration authorities,
managed care providers, private health insurers and other organizations. These
third-party payors are increasingly challenging the price and examining the cost
effectiveness of medical products and services. In addition, significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products. We may need to conduct post-marketing studies in order to demonstrate
the cost-effectiveness of our products. Such studies may require us to provide a
significant amount of resources. Our product candidates may not be considered
cost-effective. Adequate third-party reimbursement may not be available to
enable us to maintain price levels sufficient to realize an appropriate return
on our investment in product development. Domestic and foreign governments
continue to propose and pass legislation designed to reduce the cost of
healthcare. Accordingly, legislation and regulations affecting the pricing of
pharmaceuticals may change before our proposed products are approved for
marketing. Adoption of such legislation could further limit reimbursement for
pharmaceuticals. If the government and third-party payors fail to provide
adequate coverage and reimbursement rates for our product candidates, the market
acceptance of our products may be adversely affected. If our products do not
receive market acceptance, our business, financial condition and results of
operations will be materially adversely affected.
WE FACE PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE INSURANCE
The use of any of our product candidates in clinical trials, and the sale
of any approved products, may expose us to liability claims resulting from such
use or sale of our products. These claims might be made directly by consumers,
healthcare providers or by pharmaceutical companies or others selling such
products. We may experience financial losses in the future due to product
liability claims. We have obtained limited product liability insurance coverage
for our clinical trials. Our insurance coverage limits are $5.0 million per
occurrence and $5.0 million in the aggregate. We intend to expand our insurance
coverage to include the sale of commercial products if marketing approval is
obtained for product candidates in development. However, insurance coverage is
becoming increasingly expensive. We may not be able to maintain insurance
coverage at a reasonable cost or in sufficient amounts to protect us against
losses. If a successful product liability claim or series of claims is brought
against us for uninsured liabilities or in excess of insured liabilities, our
business, financial condition and results of operations may be materially
adversely affected.
OUR OPERATIONS INVOLVE HAZARDOUS MATERIALS
Our research and manufacturing activities involve the controlled use of
hazardous materials. We cannot eliminate the risk of accidental contamination or
injury from these materials. In the event of an accident or environmental
discharge, we may be held liable for any resulting damages, which may exceed our
financial resources and may materially adversely affect our business, financial
condition and results of operations.
OUR STOCK PRICE IS HIGHLY VOLATILE
The market price of our common stock has been highly volatile and is likely
to continue to be volatile. Factors affecting our stock price include:
- fluctuations in our operating results;
- announcements of technological innovations or new commercial therapeutic
products by us or our competitors;
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- published reports by securities analysts;
- progress with clinical trials;
- governmental regulation;
- changes in reimbursement policies;
- developments in patent or other proprietary rights;
- developments in our relationship with collaborative partners;
- public concern as to the safety and efficacy of our products; and
- general market conditions.
SUBSTANTIAL SALES OF SHARES MAY IMPACT MARKET PRICE OF OUR COMMON STOCK
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, the market
price of our common stock may fall. Such sales also might make it more difficult
for us to sell equity or equity-related securities in the future at a time and
price that we deem appropriate. We have outstanding 11,120,293 shares of common
stock, based upon shares outstanding as of December 31, 1998, and assuming no
exercise of outstanding options or warrants after December 31, 1998. Of these
shares, the 1,146,300 shares sold in this offering, together with the 2,875,000
shares sold in our initial public offering in July 1998 and an additional
2,771,302 shares, subject in certain instances to volume re-sale limitations
under Rule 144, are freely tradable.
The remaining 4,327,691 shares of common stock held by existing
stockholders may not be sold publicly unless they are registered under the
Securities Act of 1933, as amended, or are sold pursuant to Rule 144 or another
exemption from registration. These shares will become eligible for public resale
at various times over a period of less than one year following the completion of
this offering, subject to volume limitations.
The holders of 6,698,052 shares of common stock and 121,667 shares issuable
upon the exercise of warrants will be entitled to certain demand and piggyback
rights with respect to registration of such shares under the Securities Act. If
such holders, exercising the demand registration rights, cause a large number of
securities to be registered and sold in the public market, such sales may have
an adverse effect on the market price for our common stock. If we were to
initiate a registration and include shares held by these holders pursuant to the
exercise of their piggyback registration rights, such sales may have an adverse
effect on our ability to raise capital.
WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS
Our Amended and Restated Certificate of Incorporation and Amended and
Restated Bylaws contain provisions which may discourage takeover attempts,
including transactions in which stockholders might receive a premium for their
shares. This may limit stockholders' ability to approve a transaction that they
may think is in their best interest. Our Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws require that any action required
or permitted to be taken by our stockholders must be taken at a properly called
meeting of stockholders that may be called only by the Board of Directors, the
Chairman of the Board or the President. In addition, the Board of Directors has
the authority, without stockholder action, to fix the rights and preferences of
and issue shares of preferred stock, which may have the effect of delaying or
preventing a change in control. See "Description of Capital Stock -- Preferred
Stock" and "-- Certain Charter and Bylaw Provisions and Delaware Law."
WE DO NOT INTEND TO PAY DIVIDENDS
We intend to retain any future earnings to finance the growth and
development of our business and we do not plan to pay cash dividends in the
foreseeable future.
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WE FACE UNCERTAINTY WITH YEAR 2000 COMPLIANCE
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This may
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to receive supplies from
our venders, or operate our accounting and other internal systems. If our
software vendors are unable to address the Year 2000 compliance of their
products, or should our suppliers' operations be disrupted by the Year 2000
Issue, then our ability to serve collaborative partners and develop products may
be materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus including, without
limitation, statements containing the words "believes," "anticipates," "expects"
and words of similar import, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, or the Reform
Act. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others:
- our XenoMouse technology may not produce safe, efficacious or
commercially viable products;
- clinical trials will be expensive and their outcome is uncertain;
- the clinical success of ABX-CBL is uncertain;
- successful development of our products is uncertain;
- we are an early stage company;
- we have a history of losses;
- our future profitability is uncertain;
- we will need to find collaborative partners to develop many of our
product candidates;
- our joint venture with JT America, Inc. may limit our ability to develop
product candidates;
- we will require additional financing;
- we face intense competition and rapid technological change;
- market acceptance of our products is uncertain;
- our patent position is uncertain and our success depends on our
proprietary rights;
- we may face challenges from third parties regarding the validity of our
patents and proprietary rights;
- we are subject to extensive government regulations and we may not be able
to obtain regulatory approvals;
- we rely on third-party manufacturers and do not have commercial scale
manufacturing experience;
- we do not have marketing and sales experience; and
- other factors referenced in this prospectus.
Certain of these factors are discussed in more detail elsewhere in this
prospectus, including, without limitation, under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." Given these uncertainties, you should not
place undue reliance on such forward-looking statements. We disclaim any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
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CERTAIN INFORMATION
We were incorporated on June 24, 1996, and subsequently on July 15, 1996,
were organized pursuant to a stock purchase and transfer agreement with Cell
Genesys. Our business and operations were started in 1989 by Cell Genesys and
prior to our organization were conducted within Cell Genesys. In 1991, Cell
Genesys and JT Immunotech USA, Inc., the predecessor company to JT America and a
medical subsidiary of Japan Tobacco, formed Xenotech, an equally owned joint
venture, to develop genetically modified strains of mice known as XenoMouse
technology which can produce fully human monoclonal antibodies and to
commercialize products generated from these mice. Upon our organization, Cell
Genesys assigned to us substantially all of its rights in Xenotech.
USE OF PROCEEDS
We will not receive any proceeds from the sales of common stock by the
selling stockholders pursuant to this prospectus.
PRICE RANGE OF COMMON STOCK
Our common stock began trading publicly on the Nasdaq National Market on
July 2, 1998 under the symbol "ABGX." The following table lists quarterly
information on the price range of the common stock based on the high and low
reported last sale prices for our common stock as reported on the Nasdaq
National Market for the periods indicated below. These prices do not include
retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
HIGH LOW
------ -------
<S> <C> <C>
Fiscal 1999:
First Quarter (through January 14, 1999)........ $17.00 $ 15.00
Fiscal 1998:
Fourth Quarter.................................. $18.00 $ 6.00
Third Quarter................................... 9.25 5.375
</TABLE>
As of December 31, 1998, there were approximately 162 holders of record of
the common stock. On January 14, 1999, the last reported sale price on the
Nasdaq National Market for the common stock was $16.00.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently expect to retain our future earnings, if any, for use in the operation
and expansion of our business and do not anticipate paying any cash dividends in
the foreseeable future. Our loan and security agreement prohibits the payment of
dividends without the consent of the lender.
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<PAGE> 23
CAPITALIZATION
The following table sets forth our capitalization at September 30, 1998.
You should read our capitalization information set forth below in conjunction
with our Financial Statements and Notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
------------------
(IN THOUSANDS)
<S> <C>
Long-term debt, less current portion........................ $ 2,710
Stockholders' equity:
Preferred stock, $0.0001 par value; 5,000,000 shares
authorized, none issued and outstanding................ --
Common stock, $0.0001 par value; 50,000,000 shares
authorized, 11,067,620 shares issued and outstanding,
at amount paid in (1).................................. 55,506
Contributions from parent................................. 29,277
Additional paid-in capital................................ 2,296
Deferred compensation..................................... (1,320)
Accumulated deficit....................................... (64,775)
--------
Total stockholders' equity........................ 20,984
--------
Total capitalization.............................. $ 23,694
========
</TABLE>
- ---------------
(1) The number of shares of common stock outstanding at September 30, 1998
excludes:
(a) 1,642,086 shares of common stock issuable upon exercise of options
outstanding as of September 30, 1998, with a weighted average exercise
price of $2.16 per share;
(b) 121,667 shares of common stock issuable upon exercise of warrants
outstanding as of September 30, 1998, with an exercise price of $6.00
per share; and
(c) 25,000 shares of common stock issuable pursuant to the terms of a
license agreement.
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<PAGE> 24
SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
our Financial Statements and Notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus. The statement of operations data for the years ended December 31,
1995, 1996 and 1997, and the balance sheet data as of December 31, 1996 and 1997
are derived from our Financial Statements that have been audited by Ernst &
Young LLP, independent auditors, and are included elsewhere in this prospectus.
The statement of operations data for the years ended December 31, 1993 and 1994
are derived from our Financial Statements audited by Ernst & Young LLP that are
not included in this prospectus. The statement of operations data for the nine
months ended September 30, 1997 and 1998, and the balance sheet data as of
September 30, 1998 are derived from our unaudited financial statements which are
also included elsewhere in this prospectus and which have been prepared on the
same basis as the audited Financial Statements and in our opinion include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of our financial position and results of operations for the
unaudited interim periods. The statement of operations data for the interim
periods are not necessarily indicative of results that may be expected for any
other interim period or for the entire year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------------- -------------------------
1993 1994 1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues:
Revenue under collaborative
agreements from related
parties..................... $ 6,600 $ 6,200 $ 6,200 $ 4,719 $ 1,343 $ 1,109 $ 710
Contract revenue.............. -- -- -- -- 611 -- 1,298
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues(1)....... 6,600 6,200 6,200 4,719 1,954 1,109 2,008
Operating expenses:
Research and development...... 4,629 7,921 11,879 9,433 11,405 8,787 11,976
General and administrative.... 1,019 1,955 2,603 2,565 3,525 1,966 2,562
Charge for cross-license and
settlement -- amount
allocated from Cell
Genesys(2).................. -- -- -- -- 11,250 11,250 --
Equity in losses from the
Xenotech joint venture
(charge for cross-license
and settlement)(2).......... -- -- -- -- 11,250 7,500 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses.............. 5,648 9,876 14,482 11,998 37,430 29,503 14,538
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss)......... 952 (3,676) (8,282) (7,279) (35,476) (28,394) (12,530)
Interest income (expense),
net........................... -- -- -- 179 (404) (206) 229
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)............... $ 952 $ (3,676) $ (8,282) $ (7,100) $ (35,880) $ (28,600) $ (12,301)
=========== =========== =========== =========== =========== =========== ===========
Net loss per share(3)........... $(46,710.53) $ (1,032.70) $ (2,576.11) $ (3.27)
=========== =========== =========== ===========
Shares used in computing net
loss per share(3)............. 152 34,744 11,102 3,766,615
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1996 1997 1998
-------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 10,172 $ 15,321 $ 24,573
Working capital............................................. 5,564 6,637 17,856
Total assets................................................ 14,357 22,084 30,781
Long-term debt, less current portion........................ 1,757 3,979 2,710
Redeemable convertible preferred stock(4)................... 10,150 31,189 --
Accumulated deficit......................................... (16,594) (52,474) (64,775)
Total stockholders' equity (net capital deficiency)......... (2,316) (22,318) 20,984
</TABLE>
- ---------------
(1) Our statement of operations includes our revenues and expenses as a business
unit within Cell Genesys prior to July 15, 1996. During the years ended
December 31, 1993, 1994, 1995 and 1996, our revenues were derived
principally from Xenotech for the development of XenoMouse technology, which
was essentially completed in 1996.
(2) In 1997, we incurred a non-recurring charge for cross-license and settlement
of $22.5 million. This amount represents an allocation from Cell Genesys of
$11.25 million and an entry of $11.25 million to record the equity in the
losses of Xenotech L.P., our equally owned joint venture with JT America,
Inc. The statement of operations for the nine month period ended September
30, 1997 excludes the final amount of $3.75 million that we expensed in
December 1997. See Note 6 of Notes to our Financial Statements.
(3) Net loss per share data has not been presented prior to July 15, 1996 as
there were no equity securities outstanding prior to that date.
(4) In connection with the initial public offering of our common stock in July
1998, each outstanding share of preferred stock was converted into one share
of common stock.
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<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based upon current
expectations that involve risks and uncertainties. When used in this prospectus,
the words "intend," "anticipate," "believe," "estimate," "plan" and "expect" and
similar expressions as they relate to Abgenix are included to identify
forward-looking statements. Our actual results and the timing of certain events
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this prospectus.
BASIS OF FINANCIAL STATEMENT PRESENTATION
Our business and operations commenced in 1989 and were initially conducted
as a business unit of Cell Genesys. On June 24, 1996, we were incorporated and
subsequently on July 15, 1996 were organized pursuant to a stock purchase and
transfer agreement with Cell Genesys. The agreement set forth the terms and
conditions for the transfer of the antibody business unit within Cell Genesys to
us. Our accompanying financial statements include our operations since July 15,
1996, and the revenues and expenses of the Abgenix business unit within Cell
Genesys prior to July 15, 1996. The statements of cash flows do not reflect the
carve out balances before July 15, 1996, as such information would not be
meaningful. Prior to July 15, 1996, specifically identified revenues and
expenses such as research and development attributable to the antibody business
unit were allocated to us from Cell Genesys. General and administrative expenses
were allocated based on our research and development expenses as a percentage of
Cell Genesys' total research and development expenses. From July 16, 1996 to
July 31, 1997, Cell Genesys performed certain general and administrative
functions on our behalf. As of December 31, 1998, Cell Genesys beneficially owns
30.2% of our outstanding capital stock.
OVERVIEW
We are a biopharmaceutical company that develops and intends to
commercialize antibody therapeutic products for the treatment of a variety of
disease conditions, including transplant-related diseases, inflammatory and
autoimmune disorders, and cancer. We have developed XenoMouse technology, a
proprietary technology which we believe enables quick generation of high
affinity, fully human antibody product candidates to essentially any disease
target appropriate for antibody therapy. We intend to use XenoMouse technology
to build a large and diversified product portfolio that we plan to commercialize
either through corporate collaborations or internal product development
programs.
We have established collaborative arrangements to use XenoMouse technology
to produce fully human antibodies with eight companies covering at least 11
antigen targets. Pursuant to these collaborations, we intend to generate
antibody product candidates for the treatment of cancer, inflammation,
transplant rejection, cardiovascular disease and growth factor modulation. Our
collaborative partners include Cell Genesys, Pfizer, Schering-Plough, Genentech,
Millennium BioTherapeutics, Research Corporation Technologies, Centocor and AVI
BioPharma. Among our eight collaborative partners, Pfizer, Genentech and
Millennium BioTherapeutics have each entered into additional collaborations with
us specifying additional antigens for XenoMouse antibody development. We expect
that substantially all of our revenues for the foreseeable future will result
from payments under collaborative arrangements. The terms of the collaboration
arrangements vary, reflecting the value we add to the development of any
particular product candidate. These collaborations typically provide our
collaborative partners with access to XenoMouse technology for the purpose of
generating fully human antibody product candidates to one or more specific
antigen targets provided by the collaborative partner. In most cases, we provide
our mice to collaborative partners who then carry out immunizations with their
specific antigen target. In other cases, we may immunize the mice with the
collaborative partner's antigen target for additional compensation. As an
extension of this concept, we may grant multi-antigen research licenses to
select collaborative partners, allowing them to incorporate XenoMouse technology
into early stages of their antibody product research
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<PAGE> 26
efforts without specifically knowing the antigens that they intend to target for
XenoMouse antibody generation. These collaborative partners will need to execute
product licenses for any antibody product they wish to develop and
commercialize.
The financial terms of our existing collaborations typically include
upfront payments, potential license fees and milestone payments paid to us by
the collaborative partner. Based on our collaborative agreements entered into,
these payments and fees may average approximately $8.0 million per antigen
target. In certain instances, the collaborative partner could make reimbursement
payments to us for research that we conduct on its behalf. Additionally, if a
product receives marketing approval from the FDA or an equivalent foreign
agency, we are entitled to receive royalties on future product sales by the
collaborative partner, if any. Furthermore, the collaborative partner will be
responsible for worldwide manufacturing, product development and marketing of
any product developed through the collaboration.
Our dependence on collaborative and licensing arrangements with third
parties subjects us to a number of risks. Agreements with collaborative partners
typically allow them significant discretion in electing whether to pursue any of
the planned activities. We cannot control the amount and timing of resources our
collaborative partners may devote to the product candidates. Even if we fulfill
our obligations under a collaborative agreement, the collaborative partner can
terminate the agreement at any time following proper written notice. If any
collaborative partner were to terminate or breach its agreement with us, or
otherwise fail to complete its obligations in a timely manner, our business,
financial condition and results of operations may be materially adversely
affected.
We also have four antibody product candidates that are under development
internally. Our lead product candidate, ABX-CBL, is an in-licensed mouse
antibody. We are currently conducting a multi-center confirmatory Phase II
clinical trial for ABX-CBL for the treatment of a transplant-related disease
known as graft versus host disease. Once the final report on the Phase II
clinical trial has been completed, we plan to submit the data to the FDA for
approval to commence a Phase III clinical trial for ABX-CBL during 1999. Our
other three product candidates were generated using XenoMouse technology. We
completed a Phase I clinical trial for our fully human antibody product
candidate in psoriasis, ABX-IL8, and began a Phase I/II clinical trial in
November 1998. We are in preclinical development with two other fully human
antibody product candidates: ABX-EGF for use in the treatment of cancer; and
ABX-RB2 for use in the treatment of chronic immunological disorders. We expect
to initiate Phase I clinical trials with ABX-EGF in mid-1999.
In 1991, Cell Genesys and JT America formed Xenotech, an equally owned
joint venture, to develop XenoMouse technology and to commercialize products
generated from XenoMouse technology. Upon the organization of Abgenix, Cell
Genesys assigned its rights in Xenotech to Abgenix. Xenotech funds its research
and development activities through capital contributions from Abgenix and JT
America, and Abgenix is obligated to fund 50% of all Xenotech expenses. During
1995, 1996 and 1997, Abgenix derived revenues principally from performing
research for Xenotech for the continued development of XenoMouse technology.
During this three-year period, Abgenix recognized aggregate revenues from
Xenotech research in the approximate amount of $12.3 million. The development of
XenoMouse technology was substantially completed in 1996 with modest ongoing
research activities in 1997 and 1998. Therefore, Abgenix does not expect to
recognize significant revenues from research performed on behalf of Xenotech in
the future. Abgenix accounts for its investment in Xenotech under the equity
method of accounting.
Since inception, we have funded our research and development activities
primarily through:
- contributions from Cell Genesys;
- revenues from collaborative arrangements;
- private placements of preferred stock;
- our initial public offering of common stock in July 1998 resulting in net
proceeds of $19.9 million; and
- equipment leaseline financings and loan facilities.
25
<PAGE> 27
We have incurred operating losses in each of the last three years of
operation, including net losses of approximately $8.3 million in 1995, $7.1
million in 1996, $35.9 million in 1997. We also incurred net losses of
approximately $12.3 million in the nine-month period ended September 30, 1998.
As of September 30, 1998, we had an accumulated deficit of approximately $64.8
million. Our losses have resulted principally from costs incurred in performing
research and development for our XenoMouse technology and antibody product
candidates, from the non-recurring cross-license and settlement charge
(described in the next paragraph) and from general and administrative costs
associated with our operations. We expect to incur additional operating losses
until at least the year 2000 as a result of our expenditures for research and
product development, including costs associated with conducting preclinical
testing and clinical trials. We expect the amount of such losses will fluctuate
significantly from quarter to quarter as a result of increases or decreases in
our research and development efforts, the execution or termination of
collaborative arrangements, or the initiation, success or failure of clinical
trials.
In 1994, Cell Genesys and GenPharm and, beginning in 1996, Abgenix, became
involved in litigation primarily related to intellectual property rights
associated with a method for inactivating a mouse's antibody genes and
technology pertaining to transgenic mice capable of producing fully human
antibodies. Rather than endure the cost and business interruption of protracted
litigation, in March 1997, Cell Genesys, along with Abgenix, Xenotech and Japan
Tobacco, signed a comprehensive patent cross-license and settlement agreement
with GenPharm that resolved all related litigation and claims between the
parties. Under the cross-license and settlement agreement, Abgenix has licensed
on a non-exclusive basis certain patents, patent applications, third-party
licenses and inventions pertaining to the development and use of certain
transgenic rodents including mice that produce fully human antibodies. We use
our XenoMouse technology to generate fully human antibody products and have not
licensed the use of, and do not use, any transgenic rodents developed or used by
GenPharm. As initial consideration for the cross-license and settlement
agreement, Cell Genesys issued a note to GenPharm due September 30, 1998 for
$15.0 million payable by Cell Genesys and convertible into shares of Cell
Genesys common stock. Of this note, approximately $3.8 million satisfied certain
of Xenotech's obligations under the agreement. Japan Tobacco also made an
initial payment. During 1997, two patent milestones were achieved by GenPharm,
and Xenotech was obligated to pay $7.5 million for each milestone. Xenotech paid
$7.5 million to satisfy the first milestone and has recorded a payable to
GenPharm for the remaining $7.5 million. We recorded a liability of
approximately $3.8 million in our balance sheet representing our equal share of
the Xenotech obligation. The obligation was paid in November 1998. No additional
payments will accrue under this agreement. We have recognized, as a
non-recurring charge for cross-license and settlement, a total of $22.5 million.
We concluded that the cost of the cross-license and settlement agreement was
properly expensed under Statement of Financial Accounting Standards No. 2,
"Accounting for Research and Development Costs" because the cross-license
received by us from GenPharm is non-exclusive and has no alternative future uses
for us. We also concluded that the $11.3 million was properly allocated from
Cell Genesys because it related to the technology Cell Genesys contributed to
Abgenix upon our organization. We do not have any future financial obligations
under the cross-license and settlement agreement.
In connection with the grant of stock options since our organization on
July 15, 1996, we have recorded aggregate deferred compensation of approximately
$2.3 million through September 30, 1998, representing the difference between the
deemed fair value of the common stock for accounting purposes and the option
exercise price at the date of grant. These amounts are presented as a reduction
of stockholders' equity and are amortized ratably over the vesting period of the
applicable options, generally four years. These valuations resulted in charges
to operations of $528,000 and $448,000 in the year ended December 31, 1997, and
the nine months ended September 30, 1998, respectively.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
Revenue under collaborative agreements from related parties consists of
revenue derived principally from performing research for Xenotech. Revenues from
the Xenotech joint venture are recognized when
26
<PAGE> 28
earned, net of our cash contributions to Xenotech, under the terms of the
related agreements. Research and development funding received in advance under
these agreements is recorded as deferred revenue. Revenues from the achievement
of milestone events are recognized when the milestones have been achieved.
Revenues from Xenotech decreased from $1.1 million in the nine months ended
September 30, 1997 to $0.7 million in the nine months ended September 30, 1998.
Revenues from Xenotech decreased because Xenotech's research related to
developing the genetically modified mice was essentially completed during 1996
with modest ongoing research activities in 1997 and 1998.
Contract revenues of $1.3 million in the nine months ended September 30,
1998 consisted principally of non-refundable signing fees paid in connection
with the execution of collaborative agreements and no future obligations exist
for such agreements. These contract revenues also include fees paid for the
achievement of research milestones under existing collaborative agreements.
Research and development expenses consist primarily of compensation and
other expenses related to research and development personnel, costs associated
with preclinical testing and planned clinical trials of our product candidates
and facilities expenses. Research and development expenses increased from $8.8
million in the nine months ended September 30, 1997 to $12.0 million in the nine
months ended September 30, 1998. The increase in research and development
expenses reflected increased expenses primarily for the manufacture of antibody
products in connection with the preparation for and the initiation of clinical
trials of two of our antibody product candidates under development, ABX-CBL and
ABX-IL8, in addition to the expenses of conducting these trials. We anticipate
that research and development expenses will increase in future periods as it
expands research and development efforts and clinical trials.
General and administrative expenses include compensation and other expenses
related to finance and administrative personnel, professional services expenses
and facilities expenses. General and administrative expenses increased from $2.0
million in the nine months ended September 30, 1997 to $2.6 million in the nine
months ended September 30, 1998. The increase in general and administrative
expenses reflected the hiring of personnel to manage the administrative
functions formerly performed for us by Cell Genesys and increased financing
activity, primarily related to our initial public offering and status as a
public company. We anticipate that general and administrative expenses will
increase in the future as additional personnel are added to support our
operations.
The aggregate nonrecurring charge for cross-license and settlement of $18.8
million in the nine months ended September 30, 1997 relates to the initial
amount of $15.0 million and one additional $3.8 million amount under the
comprehensive patent cross-license and settlement agreement. We recorded the
initial cross-license and settlement amount of $15.0 million in March 1997 and
an additional $3.8 million in September 1997. The remaining $3.8 million of the
aggregate $22.5 million non-recurring charge was recorded in December 1997.
Other income and expenses consist of interest income from cash, cash
equivalents and short-term investments and interest expense incurred in
connection with our equipment leaseline financing and loan facilities. Interest
income increased due to higher average balances of short-term investments and
interest expense declined due to lower average balances of debt.
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
During 1995, 1996 and 1997, we derived revenues principally from performing
research for Xenotech. Revenues from the joint venture are recognized when
earned, net of our cash contributions to Xenotech, under the terms of the
related agreements. Research and development funding received in advance under
these agreements is recorded as deferred revenue. Revenues from the achievement
of milestone events are recognized when the milestones have been achieved.
Revenues from Xenotech decreased from $6.2 million in 1995 to $4.7 million in
1996 and to $1.3 million in 1997. In addition, until July 1995, we did not make
capital contributions to the joint venture and, therefore, we recorded all
proceeds received from Xenotech as revenue. Revenues in 1997 decreased because
Xenotech's research related to developing XenoMouse technology was essentially
completed in 1996.
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<PAGE> 29
Contract revenues of $611,000 in 1997 consisted principally of a
nonrefundable signing fee paid in connection with the execution in December 1997
of a collaboration agreement. No future obligations exist for this agreement.
Research and development expenses decreased from $11.9 million in 1995 to
$9.4 million in 1996 and increased to $11.4 million in 1997. The decrease from
1995 to 1996 reflected a decrease of $3.8 million in research activities related
to developing the genetically modified mice for Xenotech, partially offset by an
increase of $1.3 million in costs associated with preclinical development and
testing of our product candidates. The increase in research and development
expenses from 1996 to 1997 reflected increased expenses in connection with
preparation for the initiation of clinical trials of ABX-CBL and ABX-IL8. Most
of the 1997 increase resulted from increased payroll and other personnel
expenses, related laboratory supplies, equipment and facilities expansion.
General and administrative expenses remained relatively unchanged at $2.6
million from 1995 to 1996 and increased to $3.5 million in 1997. The increase in
1997 was primarily attributable to increased personnel levels associated with
the expansion of our operations, increased professional services expenses
associated with negotiation of Abgenix's collaborative arrangements and
increased costs associated with moving to our current facilities.
The aggregate non-recurring charge for cross-license and settlement of
$22.5 million in 1997 resulted from the execution of the comprehensive patent
cross-license and settlement agreement with GenPharm. See "Overview" and Note 6
of Notes to Abgenix's Financial Statements.
Other income and expenses consist of interest income from cash, cash
equivalents and short-term investments and interest expense incurred in
connection with our equipment leaseline financing and loan facilities.
LIQUIDITY AND CAPITAL RESOURCES
Since formation, we have financed our operations primarily through capital
contributions by, and borrowings from Cell Genesys, revenue from collaborative
arrangements, private placements of preferred stock, an initial public offering
of common stock and equipment leaseline financings and loan facilities. Through
September 30, 1998, we received net cash of $75.6 million from financing
activities, consisting principally of approximately $14.3 million from
contributions by Cell Genesys, $31.1 million from private placements of
preferred stock, $19.9 million from our initial public offering in July 1998,
$4.3 million from construction financing, $2.0 million in lease financing, and
$4.0 million borrowed from Cell Genesys and converted to preferred stock. Cell
Genesys is not obligated to provide any future funding to us.
Our net cash used in operating activities was $2.2 million in 1996, $10.2
million in 1997 and $12.5 million from January 1, 1998 to September 30, 1998.
The cash used for operations was primarily to fund research and development
expenses and manufacturing costs related to the development of new products.
As of September 30, 1998, we had cash, cash equivalents and short-term
investments of $24.6 million. We have invested the net proceeds of our initial
public offering in short-term, interest-bearing, investment grade securities. We
have an agreement with a financing company under which we have financed
purchases of about $2.0 million of its laboratory and office equipment. The
lease term is 48 months and bears interest at rates ranging from 12.5% to 13.0%,
which are based on the change in the five year U.S. Treasury rate. We also have
a construction financing line with a bank in the amount of $4.3 million that was
used to finance construction of leasehold improvements at our current facility.
The line matures in January 2001, bears interest at a rate of prime plus one
percent (9.25% at September 30, 1998). As of September 30, 1998, no further
borrowings were available under the construction financing line. We believe our
existing capital resources together with cash generated from collaborative
arrangements will be sufficient to fund our operations at least through fiscal
year 1999.
We plan to continue to expend substantial resources for the expansion of
research and development, including costs associated with conducting preclinical
testing and clinical trials. We may be required to
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<PAGE> 30
expend substantial funds if unforeseen difficulties arise in the course of
completing required additional development of product candidates, manufacturing
of product candidates, performing preclinical testing and clinical trials of
such product candidates, obtaining necessary regulatory approvals or other
aspects of our business. Our future liquidity and capital requirements will
depend on many factors, including:
- continued scientific progress in our research and development programs;
- size and complexity of these programs;
- scope and results of preclinical testing and clinical trials;
- time and expense involved in obtaining regulatory approvals;
- competing technological and market developments;
- establishment of further collaborative arrangements;
- maintaining current collaborations;
- time and expense of filing and prosecuting patent applications and
enforcing patent claims;
- cost of establishing manufacturing capabilities, conducting
commercialization activities and arrangements;
- product in-licensing; and
- other factors not within our control.
We will be required to raise additional funds through public or private
financing, collaborative relationships or other arrangements. There can be no
assurance that such additional funding, if needed, will be available on terms
favorable to us. Furthermore, any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may involve restrictive
covenants. Collaborative arrangements may require us to relinquish its rights to
certain of our technologies, products or marketing territories. Our failure to
raise capital when needed may have a material adverse effect on our business,
financial condition and results of operations.
As of December 31, 1997, we had federal net operating loss carryforwards of
approximately $15.4 million. Our net operating loss carryforwards exclude losses
incurred prior to the organization of Abgenix in July 1996. Further, the amounts
associated with the cross-license and settlement have been expensed for
financial statement accounting purposes and have been capitalized and amortized
over a period of approximately fifteen years for tax purposes. The net operating
loss and credit carryforwards will expire in the years 2011 through 2012, if not
utilized. Utilization of the net operating losses and credits may be subject to
a substantial annual limitation due to the "change in ownership" provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This may
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to receive supplies from
our vendors, or operate our accounting and other internal systems.
Our plan to resolve the Year 2000 Issue is based on a recently completed
assessment of our exposure. All of our time-sensitive software is widely used
and purchased from major vendors, all of whom have announced that their software
is either currently Year 2000-compliant or will be made so with upgrades before
the end of 1999. We have already purchased the Year 2000-compliant upgrade of
our accounting system. We will be testing each of our 60 personal computers over
the next three months and will replace
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<PAGE> 31
or repair those that are non-compliant. In addition, we will be gathering
information about the Year 2000 compliance status of third parties with whom we
have significant relationships to determine the extent to which our operations
are vulnerable to these third parties' failure to solve their own Year 2000
issue. None of our systems interface with those of third parties.
Upgrading the accounting system was already planned in order to acquire the
benefits of its improved features, and was not accelerated by the Year 2000
Issue. We believe that the total cost of our compliance with the Year 2000 Issue
will be less than $50,000.
We believe we have an effective program in place to resolve the Year 2000
Issue in a timely manner. However, should our software vendors be unable to
address the Year 2000 compliance of their products, or should our suppliers'
operations be disrupted by the Year 2000 Issue, then our ability to serve our
collaborative partners and develop products may be materially and adversely
impacted. Our contingency plans for minimizing the impact include increasing
materials used in clinical trials, establishing accounts with alternative
vendors, and temporarily employing manual accounting systems until alternative
systems can be installed.
RECENT ACCOUNTING PRONOUNCEMENTS
We have reviewed all recently issued, but not yet adopted, accounting
standards in order to determine their effects, if any, on our results of
operations or financial position. Based on the review, we believe that none of
these pronouncements will have a significant effect on current or future
earnings, operations or financial position.
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<PAGE> 32
BUSINESS
The following description of our business should be read in conjunction
with the information included elsewhere in this prospectus. The description
contains certain forward-looking statements that involve risks and
uncertainties. When used in this prospectus, the words "intend," "anticipate,"
believe," "estimate," "plan" and "expect" and similar expressions as they relate
to us are included to identify forward-looking statements. Our actual results
could differ materially from the results discussed in the forward-looking
statements as a result of certain of the risk factors set forth below and
elsewhere in this prospectus.
OVERVIEW
We are a biopharmaceutical company that develops and intends to
commercialize antibody therapeutic products for the treatment of a variety of
disease conditions, including transplant-related diseases, inflammatory and
autoimmune disorders, and cancer. We have developed XenoMouse technology, a
proprietary technology which we believe enables quick generation of high
affinity, fully human antibody product candidates to essentially any disease
target appropriate for antibody therapy. We intend to use XenoMouse technology
to build and commercialize a large and diversified product portfolio through the
establishment of corporate collaborations and internal product development
programs.
We have established collaborative arrangements to use our XenoMouse
technology to produce fully human antibodies for eight companies covering at
least 11 antigen targets. Pursuant to these collaborations, we intend to
generate antibody product candidates for the treatment of cancer, inflammation,
transplant rejection, cardiovascular disease and growth factor modulation. Our
collaborative partners include Cell Genesys, Pfizer, Schering-Plough, Genentech,
Millennium BioTherapeutics, Research Corporation Technologies, Centocor and AVI
Biopharma. Among our eight collaborative partners, Pfizer, Genentech and
Millenium BioTherapeutics have each entered into additional collaborations with
us specifying additional antigens for XenoMouse antibody development. The
financial terms of the XenoMouse technology collaborations typically include
upfront payments, potential license fees and milestone payments payable to us by
the collaborative partner.
We also have four antibody product candidates that are under development
internally. Our lead product candidate, ABX-CBL, is an in-licensed mouse
antibody. We are currently conducting a multi-center confirmatory Phase II
clinical trial for ABX-CBL for the treatment of a transplant-related disease
known as graft versus host disease. Once the final report on our Phase II
clinical trial has been completed, we plan to submit the data to the FDA for
approval to commence a Phase III clinical trial for ABX-CBL during 1999. Our
other three antibody product candidates were generated using XenoMouse
technology. We completed a Phase I clinical trial for our fully human antibody
product candidate in psoriasis, ABX-IL8, and began a Phase I/II clinical trial
in November 1998. We are in preclinical development with two other fully human
antibody product candidates: ABX-EGF for use in the treatment of cancer; and
ABX-RB2 for use in the treatment of chronic immunological disorders. We expect
to initiate Phase I clinical trials with ABX-EGF in mid-1999.
BACKGROUND
THE NORMAL ANTIBODY RESPONSE
The human immune system protects the body against a variety of infections
and other illnesses. Specialized cells, which include B cells and T cells, work
in concert with the other components of the immune system to recognize,
neutralize and eliminate from the body numerous foreign substances, infectious
organisms and malignant cells. In particular, B cells generally produce protein
molecules, known as antibodies, which are capable of recognizing substances
potentially harmful to the human body. Such substances are called antigens. Upon
being bound by an antibody, antigens can be neutralized and blocked from
interacting with and causing damage to normal cells. In order to effectively
neutralize or eliminate an antigen without harming normal cells, the immune
system must be able to generate antibodies that bind tightly (i.e., with high
affinity) to one specific antigen (i.e., with specificity).
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All antibodies have a common core structure composed of four subunits, two
identical light (L) chains and two identical heavy (H) chains, named according
to their relative size. The heavy and light chains are assembled within the B
cell to form an antibody molecule which consists of a constant region and a
variable region. As shown in figure one, an antibody molecule may be represented
schematically in the form of a "Y" structure.
[FIGURE 1]
The base of the "Y," together with the part of each arm immediately next to
the base, is called the constant region because its structure tends to be very
similar across all antibodies. In contrast, the variable regions are at the end
of the two arms and are unique to each antibody with respect to their three
dimensional structures and protein sequences. Because variable regions define
the specific binding sites for a variety of antigens, there is a need for
significant structural diversity in this portion of the antibody molecule. Such
diversity is achieved in the body primarily through a unique mode of assembly
involving a complex series of recombination steps for various gene segments of
the variable region, including the V, D and J segments (see figure two shown
below).
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[FIGURE 2]
The human body is repeatedly exposed to a variety of different antigens.
Accordingly, the immune system must be able to generate a diverse repertoire of
antibodies that are capable of recognizing these multiple antigen structures
with a high degree of specificity. The immune system has evolved a two-step
mechanism in order to accomplish this objective. The first step, immune
surveillance, is achieved through the generation of diverse circulating B cells,
each of which assembles different antibody gene segments in a semi-random
fashion to produce and display on its surface a specific antibody. As a result,
a large number of distinct, albeit lower affinity, antibodies are generated in
the circulation so as to recognize essentially any foreign antigen that enters
the body. While capable of recognizing the antigens as foreign, these lower
affinity antibodies are generally incapable of effectively neutralizing them.
This limitation of the immune surveillance process is generally overcome by
the normal immune system in a second step called "affinity maturation."
Triggered by the initial binding to a specific antigen, the small fraction of B
cells that recognize this antigen is then primed by the immune system to
progressively generate antibodies with higher and higher affinity through a
process of repeated mutation and selection. As a result, the reactive antibodies
develop increasingly higher specificity and affinity with the latter being
potentially a hundred to a thousand times higher than those generated in the
previous immune surveillance process. These more specific, higher affinity
antibodies have a greater likelihood of effectively neutralizing or eliminating
the antigen while minimizing the potential of damaging healthy cells.
ANTIBODIES AS PRODUCTS
Recent advances in the technologies for creating and producing antibody
products coupled with a better understanding of how antibodies and the immune
system function in key disease states have led to renewed interest in the
commercial development of antibodies as therapeutic products. According to a
recent survey by the Pharmaceutical Research and Manufacturers of America,
antibodies account for over 20% of all biopharmaceutical products in clinical
development. As of December 31, 1998, we are aware of eight antibody therapeutic
products approved for marketing in the United States for the treatment of a wide
range of medical disorders. These products are Orthoclone, ReoPro, Rituxan,
Zenapax, Herceptin, Synagis, Remicaid and Simulect. These products are currently
being marketed for a wide range of medical disorders such as transplant
rejection, cardiovascular disease, cancer and infectious diseases.
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We believe that, as products, antibodies have several potential clinical
and commercial advantages over traditional therapies. These advantages include
the following:
- faster product development;
- fewer unwanted side effects as a result of high specificity for the
disease target;
- greater patient compliance and higher efficacy as a result of favorable
pharmacokinetics;
- delivery of various payloads, including drugs, radiation and toxins, to
specific disease sites; and
- elicit a desired immune response.
LIMITATIONS OF CURRENT APPROACHES TO DEVELOPMENT OF ANTIBODY PRODUCTS
Despite the early recognition of antibodies as promising therapeutic
agents, most approaches thus far to develop them as products have been met with
a number of commercial and technical limitations. Initial efforts were aimed at
the development of hybridoma cells, which are immortalized mouse antibody-
secreting B cells. Such hybridoma cells are derived from normal mouse B cells
which have been genetically manipulated so that they are capable of reproducing
over an indefinite period of time. They are then cloned to produce a homogeneous
population of identical cells which produce one single type of mouse antibody
capable of recognizing one specific antigen ("monoclonal antibody").
While mouse monoclonal antibodies can be generated to bind to a number of
antigens, they contain mouse protein sequences and tend to be recognized as
foreign by the human immune system. As a result, they are quickly eliminated by
the human body and have to be administered frequently. When patients are
repeatedly treated with mouse antibodies, they will begin to produce antibodies
that effectively neutralize the mouse antibody, a reaction referred to as a
Human Anti-Mouse Antibody, or HAMA, response. In many cases, the HAMA response
prevents the mouse antibodies from having the desired therapeutic effect and may
cause the patient to have an allergic reaction. The potential use of mouse
antibodies is thus best suited to situations where the patient's immune system
is compromised or where only short-term therapy is required. In such settings,
the patient is often incapable of producing antibodies that neutralize the mouse
antibodies or has insufficient time to do so.
Recognizing the limitations of mouse monoclonal antibodies, researchers
have developed a number of approaches to make them appear more human-like to a
patient's immune system. For example, improved forms of mouse antibodies,
referred to as "chimeric" and "humanized" antibodies, are genetically engineered
and assembled from portions of mouse and human antibody gene fragments. While
such chimeric and humanized antibodies are more human-like, they still retain a
varying amount of the mouse antibody protein sequence, and accordingly may
continue to trigger the HAMA response. Additionally, the humanization process
can be expensive and time consuming, requiring at least two months and sometimes
over a year of secondary manipulation after the initial generation of the mouse
antibody. Once the humanization process is complete, the remodeled antibody gene
must then be expressed in a recombinant cell line appropriate for antibody
manufacturing, adding additional time before the production of preclinical and
clinical material can be initiated. In addition, the combination of mouse and
human antibody gene fragments can result in a final antibody product which is
sufficiently different in structure from the original mouse antibody leading to
a decrease in specificity or a loss of affinity.
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[EVOLUTION OF ANTIBODY TECHNOLOGIES GRAPHIC]
HUMAN ANTIBODIES
The HAMA response can potentially be avoided through the generation of
antibody products with fully human protein sequences. Such fully human
antibodies may increase the market acceptance and expand the use of antibody
therapeutics. Several antibody technologies have been developed to produce
antibodies with 100% human protein sequences (see figure three shown above). One
approach to generating human antibodies, called "phage display" technology,
involves the cloning of human antibody genes into bacteriophage, viruses that
infect bacteria, in order to display antibody fragments on the surfaces of
bacteriophage particles. This approach attempts to mimic in vitro the immune
surveillance and affinity maturation processes that occur in the body. Because
phage display technology cannot take advantage of the naturally occurring in
vivo affinity maturation process, the antibody fragments initially isolated by
this approach are typically of moderate affinity. In addition, further genetic
engineering is required to convert the antibody fragments into fully assembled
antibodies and significant manipulation, taking from several months to a year,
may be required to increase their affinities to a level appropriate for human
therapy. Before preclinical or clinical material can be produced, the gene
encoding the antibody derived from phage display technology must, as with a
humanized antibody, be introduced into a recombinant cell line.
Two additional approaches involving the isolation of human immune cells
have been developed to generate human antibodies. One such approach is the
utilization of immunodeficient mice which lack both B and T cells. Human B cells
and other immune tissue are transplanted into these mice which are then
subsequently immunized with target antigens to stimulate the production of human
antibodies. However, this process is generally limited to generating antibodies
only to nonhuman antigens or antigens to which the human B cell donor had
previously responded. Accordingly, this approach may not be suitable for
targeting many key diseases such as cancer, and inflammatory and autoimmune
disorders where antibodies to human antigens may be required for appropriate
therapy. The other approach involves collecting human B cells which have been
producing desired antibodies from patients exposed to a specific virus or
pathogen. As with the previous approach, this process may not be suitable for
targeting diseases where antibodies to human antigens are required, and
therefore is generally limited to infectious disease targets which will be
recognized as foreign by the human immune system.
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THE ABGENIX SOLUTION -- XENOMOUSE TECHNOLOGY
Our approach to generating human antibodies with fully human protein
sequences is to use genetically engineered strains of mice in which mouse
antibody gene expression is suppressed and functionally replaced with human
antibody gene expression, while leaving intact the rest of the mouse immune
system. Rather than engineering each antibody product candidate, these
transgenic mice capitalize on the natural power of the mouse immune system in
surveillance and affinity maturation to produce a broad repertoire of high
affinity antibodies. By introducing human antibody genes into the mouse genome,
transgenic mice with such traits can be bred indefinitely. Importantly, these
transgenic mice are capable of generating human antibodies to human antigens
because the only human products expressed in the mice (and therefore recognized
as "self") are the antibodies themselves. Any other human tissue or protein is
thus recognized as a foreign antigen by the mouse and an immune response will be
mounted. Abnormal production of certain human proteins, such as cytokines and
growth factors or their receptors have been implicated in various human
diseases. Neutralization or elimination of these abnormally produced or
regulated human proteins with the use of human antibodies could ameliorate or
suppress the target disease. Therefore, the ability of these transgenic mice to
generate human antibodies against human antigens could offer an advantage to
drug developers compared with some of the other approaches described previously.
A challenge with this approach, however, has been to introduce enough of the
human antibody genes in appropriate configuration into the mouse genome to
ensure that these mice are capable of recognizing the broad diversity of
antigens relevant for human therapies.
To make our transgenic mice a robust tool capable of consistently
generating high affinity antibodies which can recognize a broad range of
antigens, we equipped the XenoMouse with approximately 80% of the human heavy
chain antibody genes and a significant amount of the human light chain genes. We
believe that the complex assembly of these genes together with their semi-random
pairing allows XenoMouse to recognize a diverse repertoire of antigen
structures. XenoMouse technology further capitalizes on the natural in vivo
affinity maturation process to generate high affinity, fully human antibodies.
In addition, we have developed multiple strains of XenoMouse, each of which is
capable of producing a different class of antibody to perform different
therapeutic functions. We believe that our various XenoMouse strains will
provide maximum flexibility for drug developers in generating antibodies of the
specific type best suited for a given disease indication.
XENOMOUSE TECHNOLOGY ADVANTAGES
We believe that our XenoMouse technology offers the following advantages:
Producing Antibodies With Fully Human Protein Sequences. Our XenoMouse
technology, unlike chimeric and humanization technologies, allows the generation
of antibodies with 100% human protein sequences. Antibodies created using
XenoMouse technology are not expected to cause a HAMA response even when
administered repeatedly to immunocompetent patients. For this reason, antibodies
produced using XenoMouse technology are expected to offer a better safety
profile and to be eliminated less quickly from the human body, reducing the
frequency of dosing.
Generating a Diverse Antibody Response to Essentially Any Disease Target
Appropriate for Antibody Therapy. Because a substantial majority of human
antibody genes has been introduced into XenoMouse, the technology has the
potential to generate high affinity antibodies that recognize more antigen
structures than other transgenic technologies. In addition, through immune
surveillance, XenoMouse technology is expected to be capable of generating
antibodies to almost any medically relevant antigen, human or otherwise. For a
given antigen target, having multiple antibodies to choose from could be
important in selecting the optimal antibody product.
Generating High Affinity Antibodies Which Do Not Require Further
Engineering. XenoMouse technology uses the natural in vivo affinity maturation
process to generate antibody product candidates usually in two to four months.
These antibody product candidates may have affinities as much as a hundred to a
thousand times higher than those seen in phage display. In contrast to
antibodies generated using humanization and phage display technology, XenoMouse
antibodies are produced without the need
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for any subsequent engineering, a process which at times has proven to be
challenging and time consuming. By avoiding the need to further engineer
antibodies, we reduce the risk that an antibody's structure and therefore
functionality will be altered between the initial antibody selected and the
final antibody placed into production.
Enabling More Efficient Product Development. In contrast to humanization or
phage display, which require the cloning of an antibody gene and the generation
of a recombinant cell line, the B cells generated in XenoMouse can be turned
directly into hybridoma cell lines for human antibody production. Therefore, a
supply of monoclonal antibodies can be produced quickly to allow the timely
initiation of preclinical and clinical studies. Furthermore, since XenoMouse
technology can potentially produce multiple product candidates more quickly than
humanization and phage display technology, preclinical testing can be conducted
on several antibodies in parallel to identify the optimal product candidate
which will be tested in clinical trials.
Providing Flexibility in Choosing Manufacturing Processes. Once an antibody
with the desired characteristics has been identified, preclinical material can
be produced either directly from hybridomas or from recombinant cell lines.
Humanized and phage display antibodies, having been engineered, cannot be
produced in hybridomas. In addition to potential time savings, production in
hybridomas avoids the need to license certain third party intellectual property
rights covering the production of antibodies in recombinant cell lines.
ABGENIX STRATEGY
Our objective is to be a leader in the generation, development and
commercialization of novel antibody-based biopharmaceutical products. Key
elements of our strategy to accomplish this objective include the following:
Building a Large and Diversified Product Portfolio. Utilizing our XenoMouse
technology, we intend to build a large and diversified product portfolio,
including a mix of out-licensed and internally developed product candidates. We
are targeting serious medical conditions including: cancer, inflammation,
transplant rejection, cardiovascular disease and growth factor modulation. For
our internal programs, we intend to collaborate with leading academic
researchers and companies involved in the identification and development of
novel antigens. We believe the speed and cost advantages of our technology will
enable us to make cost-effective use of available human and capital resources.
We can thus pursue multiple product candidates in parallel through the
preclinical and early clinical stages before entering into a corporate
collaboration. As a result, we believe we can create, for Abgenix or for
marketing to potential collaborative partners, a package that includes antigen
rights, human antibodies, and preclinical and clinical data.
Leveraging XenoMouse Technology Through Technology Collaborations. We
intend to diversify our product portfolio and generate revenues by licensing
XenoMouse technology to numerous pharmaceutical and biotechnology companies
interested in developing antibody-based products. We expect to enter into
several XenoMouse technology collaborations each year. These agreements
typically allow our collaborative partner to generate fully human antibodies to
one or more specific antigen targets provided by the collaborative partner. In
most cases, we provide our mice to collaborative partners who then carry out
immunizations with their specific antigen target. In other cases, we may
immunize the mice with the collaborative partner's antigen target for additional
compensation. As an extension of this concept, we may grant multi-antigen
research licenses to select collaborative partners, allowing them to incorporate
XenoMouse technology into early stages of their antibody product research
efforts without specifically knowing the antigens that they intend to target for
XenoMouse antibody generation. These collaborative partners would then need to
execute worldwide product licenses for any antibody product they wished to
develop and commercialize.
The financial terms of our XenoMouse technology collaborations typically
include upfront payments, potential license fees and milestone payments plus
royalties on future product sales. We have established collaborative
arrangements with eight corporate partners covering at least 11 antigen targets.
To date, three
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of these collaborative partners have each entered into additional collaborations
specifying additional antigens for XenoMouse antibody development.
Establishing Collaborations for Proprietary Product Candidates. We also
intend to build our product portfolio and generate revenues by licensing
proprietary product candidates. These proprietary product collaborations would
involve antibodies made to antigen targets that we source. We expect to enter
into at least one proprietary product collaboration each year. After generating
antibody product candidates and self funding preclinical and in some cases
clinical activities to determine preliminary safety and efficacy, we intend to
enter into development and commercialization agreements with collaborative
partners for these proprietary product candidates that we created. For some of
our products, we may enter into proprietary product collaborations at the
preclinical or early clinical development stage allowing the collaborative
partner to complete development and to market the product. For other products,
we may develop the product through clinical trials and license the product
candidate to a collaborative partner for marketing.
Current antibody candidates for potential proprietary product
collaborations include ABX-CBL, ABX-IL8, ABX-EGF and ABX-RB2. The financial
terms of these product collaborations could include license fees upon signing,
milestone payments, and reimbursement for research and development activities
that we perform plus royalties on future product sales, if any. Given our
greater investment in creating a proprietary product candidate, we expect that
an arrangement for these product candidates could afford higher payments and
royalty rates than a typical XenoMouse technology collaboration.
PROPRIETARY PRODUCT DEVELOPMENT PROGRAMS
We are currently developing antibody therapeutics for a variety of
indications. The table below sets forth the development status of our product
candidates.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PRODUCT
CANDIDATE INDICATION STATUS(1)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ABX-CBL GVHD Phase II
- ------------------------------------------------------------------------------------------------------------
Psoriasis Phase I/II
ABX-IL8 ----------------------------------------------------------------------------
Other Inflammatory Diseases Preclinical
- ------------------------------------------------------------------------------------------------------------
ABX-EGF EGF-Dependent Cancers Preclinical
- ------------------------------------------------------------------------------------------------------------
Transplant Rejection Preclinical
ABX-RB2 ----------------------------------------------------------------------------
Autoimmune Disease Preclinical
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) "Phase II" indicates efficacy testing in a limited patient population.
"Phase I" indicates safety and proof of concept testing in a limited patient
population and toxicology testing in animal models. "Preclinical" indicates
that the product candidate selected for development has met predetermined
criteria for potency, specificity, manufacturability and pharmacologic
activity in animal and in vitro models.
ABX-CBL
The CBL antigen is selectively expressed on activated immune cells
including T cells, B cells and natural killer cells. To accelerate our
commercialization plans, we obtained an exclusive license to ABX-CBL in February
1997. We believe that a mouse antibody can be utilized to treat GVHD patients
because their immune system is either non-functioning or severely suppressed
and, therefore, no HAMA responses should be generated. We believe ABX-CBL has
the ability to destroy activated immune cells without affecting the rest of the
immune system.
Graft Versus Host Disease. We are developing ABX-CBL to reduce unwanted
immune responses that occur in GVHD. GVHD is a life-threatening complication
that frequently occurs following an
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allogeneic bone marrow transplant ("BMT"). BMTs are used in the treatment of
patients with end stage leukemia, certain other serious cancers and immune
system disorders. An allogeneic BMT procedure involves transferring marrow, the
graft, from a healthy person into an immunosuppressed patient, the host. The
transplant is intended to restore normal circulating immune cells to a patient
whose own immune system is functionally deficient or has been damaged by the
treatment of an underlying disease such as cancer and therefore does not have
the ability to mount a sufficient immune response. Often a portion of the graft
recognizes the host's own cells as foreign, becomes activated and attacks them,
resulting in GVHD. GVHD is graded based on clinical symptoms from I, which is
the mildest form, to IV, which is the most severe form. It typically involves
damage to multiple organ systems, including the skin, liver and intestines. GVHD
causes extreme suffering and is the primary cause of death in allogeneic bone
marrow transplant patients. It is estimated that approximately 12,000 allogeneic
BMTs will be performed worldwide in 1998, and this number has been growing at
about 15% per year. GVHD occurs in approximately 50% of allogeneic BMTs and the
treatment costs for GVHD in the United States are estimated to be about $80,000
per patient. Based on a published clinical study, it is estimated that roughly
50% of patients with GVHD fail to respond to current treatments, which consist
of steroid and other drug treatments to suppress the grafted immune cells. Less
than 15% of steroid-resistant GVHD sufferers survive for more than one year. We
believe that a safer and more effective treatment for GVHD could result in
increased use of BMTs.
Clinical Status. We are currently conducting a multi-center confirmatory
Phase II clinical trial for ABX-CBL for the treatment of steroid-resistant,
grade II/IV GVHD. This trial is studying four escalating intravenous dose
regimens. As of December 31, 1998, we have treated 48 patients, and we have
collected data for 23 patients from the clinical trial sites. This data is
available for efficacy analysis. We continue to treat patients and collect data
from our Phase II clinical trials. Once the final report on the Phase II
clinical trials has been completed, we plan to submit the data to the FDA for
approval to commence a Phase III clinical trial. There can be no assurance that
the results of our clinical trials will be favorable. In addition, the FDA may
require additional clinical trials before allowing us to commence a Phase III
clinical trial. If required, additional clinical trials will be extensive,
expensive and time-consuming.
In four separate clinical studies conducted prior to Abgenix obtaining an
exclusive license to ABX-CBL, a total of 25 patients with GVHD were treated with
the antibody. No safety concerns with ABX-CBL were identified in these studies.
One such trial, which has been published, was conducted on eleven patients at
St. Jude Hospital in Memphis, Tennessee. In this trial, ten patients with
steroid-resistant, Grade III to IV GVHD were treated with daily doses of ABX-CBL
for up to six weeks. The publication reported that five of ten patients had a
complete remission of GVHD, while four of ten had at least a two-grade
improvement in their GVHD score. Only one patient did not respond to the
therapy. Another patient who was treated at St. Jude Hospital after publication
of the study experienced a two-grade improvement in the patient's GVHD score
without adverse side effects. Six additional patients with GVHD were treated at
the University of Wisconsin and Cook-Ft. Worth Hospital. The reports from these
sites indicated that these patients showed similar results to those described in
the published trial conducted at St. Jude Hospital, with four of the six
patients showing at least a two grade improvement in their GVHD score. In
addition, eight other GVHD patients received treatment at Stanford University
and four of the patients were noted to have some improvement in their GVHD
score, despite using a dose of less than one-tenth of that employed at the other
sites. Immune reaction to the mouse antibody was assessed in several patients
and no HAMA response was detected clinically. Furthermore, no adverse clinical
responses consistent with an antibody-induced allergic reaction were observed.
In addition, a number of patients were followed after the conclusion of the
study for as long as one year and no adverse ABX-CBL events were observed. There
can be no assurance that the results of our ABX-CBL clinical trials will
demonstrate the same levels of safety and efficacy as those shown by the
clinical trials completed prior to Abgenix obtaining an exclusive license to
ABX-CBL.
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ABX-IL8
IL-8, an important inflammatory cytokine produced at sites of inflammation,
attracts and activates white blood cells that mediate the inflammation process.
A number of preclinical studies suggest that excess IL-8 may contribute to the
pathology and clinical symptoms associated with certain inflammatory disorders.
Clinical studies have demonstrated significantly increased levels of IL-8 in
plasma or other bodily fluids of patients with certain inflammatory diseases,
including psoriasis, rheumatoid arthritis, reperfusion injury and inflammatory
bowel disease. Antibodies to IL-8 have been shown to block immune cell
infiltration and the associated pathology in animal models of several of these
diseases. Using our XenoMouse technology, we have generated ABX-IL8, a
proprietary fully human monoclonal antibody, that binds to IL-8 with high
affinity. We in-licensed ABX-IL8 from Xenotech in March 1996. In exchange for a
license fee and royalty payments on future product sales, we received an
exclusive license to ABX-IL8 within the United States, its territories and
possessions, Canada and Mexico and a co-exclusive license with Japan Tobacco in
the rest of the world, excluding Japan, Taiwan and South Korea. We are
evaluating ABX-IL8 for possible use in the treatment of psoriasis and rheumatoid
arthritis.
Psoriasis. Psoriasis is a chronic disease that results in plaques, a
thickening and scaling of the skin accompanied by local inflammation. The
disease affects approximately four to five million patients in the United States
and can be debilitating in its most severe form. Approximately 500,000 psoriasis
patients suffer from a severe enough form of the disease to require systemic
therapy with immune suppressants and ultraviolet phototherapy. The risk of
serious adverse side effects associated with these therapies often requires the
patients to alternate these various therapeutic modalities as a precautionary
measure.
Scientific studies have shown that IL-8 concentrations can be elevated by a
factor of 150 in psoriatic plaques when compared to normal tissue. We believe
that IL-8 may promote psoriasis by contributing to three distinct
disease-associated processes. First, IL-8 is produced by a type of skin cell
called keratinocytes, and is a potent growth factor for these skin cells. It may
therefore contribute to the abnormal keratinocyte proliferation in psoriatic
plaques. Second, IL-8 attracts and activates immune cells which contribute to
the inflammation of the psoriatic plaque. Finally, IL-8 promotes angiogenesis
which augments the blood supply necessary for growth of the psoriatic plaque.
Clinical Status. We have completed a Phase I dose-escalating human clinical
trial examining the safety of administering a single intravenous infusion of
five different doses of ABX-IL8 to patients with moderate to severe psoriasis.
There were no serious or unexpected drug-related adverse events. In late 1998,
we initiated a multi-center, multi-dose, dose-escalating study in moderate to
severe psoriasis patients. This study is expected to be completed in the second
half of 1999 and data will be collected from 40 patients at eight sites.
Rheumatoid Arthritis. Rheumatoid arthritis is a chronic disease marked by
inflammation and pain in joints throughout the body. The disease affects over
two million people in the United States. Elevated levels of IL-8 in the synovial
fluid of rheumatoid arthritis patients have been reported to correlate with the
number of infiltrating immune cells. Third-party published studies have reported
that the injection of non-human antibodies to IL-8 into a rabbit model of
rheumatoid arthritis blocked immune cell infiltration and synovial membrane
damage.
Clinical Status. Because of the similarity in the histopathology of the
inflamed joint and that of the psoriatic plaque, we are planning to conduct a
pilot trial with eight patients in rheumatoid arthritis. The planned
commencement of this pilot trial is the first quarter of 1999. ABX-IL8 will be
administered by injection to the inflamed knee joints of arthritis patients who
have undergone a pre-dose biopsy and a high resolution ultrasound scan.
ABX-EGF
Tumor cells that overexpress epidermal growth factor receptors ("EGFr") on
their surface often depend on EGFr's activation for growth. EGFr is
overexpressed in a variety of cancers including lung, breast, ovarian, bladder,
prostate, colorectal, kidney and head and neck. This activation is triggered by
the
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binding to EGFr by EGF or Transforming Growth Factor alpha ("TGFa"), both of
which are expressed by the tumor or by neighboring cells. We believe that
blocking the ability of EGF and TGFa to bind with EGFr may offer a treatment for
certain cancers. ABX-EGF, a fully human monoclonal antibody generated using
XenoMouse technology, binds to EGFr with high affinity and has been shown to
inhibit tumor cell proliferation in vivo and cause eradication of EGF dependent
human tumors established in mouse models. We in-licensed ABX-EGF from Xenotech
in November 1997. In exchange for a license fee and royalty payments on future
product sales, we received an exclusive worldwide license to ABX-EGF. We are
conducting preclinical studies and assessing which tumor types to pursue as
possible targets for treatment with ABX-EGF. Studies have shown that ABX-EGF can
inhibit growth of EGF-dependent human tumors cells in mouse models. ABX-EGF has
also demonstrated the ability to reverse cancer cell growth and cause
eradication of established tumors in mice even when administered after
significant tumor growth has occurred. Furthermore, in these models where tumors
were eradicated, no relapse of the tumor was observed after discontinuation of
the antibody treatment. Based on the results seen to date in preclinical
studies, we plan to initiate clinical trials with ABX-EGF in mid-1999.
ABX-RB2
In certain immunological diseases where chronic administration of a drug
targeting the CBL antigen is desirable, it may be important to use a fully human
antibody to avoid the risk of a HAMA response. Such diseases include organ
transplant rejection, primarily kidney and corneal transplant rejection, as well
as autoimmune disorders.
Using our XenoMouse technology, we have generated ABX-RB2, a fully human
antibody which targets the CBL antigen, and we are conducting preclinical
studies on this product candidate. While no human data is available on ABX-RB2,
several clinical trials have been performed using ABX-CBL prior to Abgenix
obtaining an exclusive license to ABX-CBL, the first generation mouse antibody
to the CBL antigen, for the treatment of kidney and corneal transplant
rejection. Although there can be no assurance that the data observed with
ABX-RB2 in these indications will demonstrate the same degree of efficacy as the
data observed with ABX-CBL, we believe the ABX-CBL studies may assist in the
design of preclinical and clinical protocols for future development of ABX-RB2.
Organ Transplant Rejection. Each year there are approximately 11,000 kidney
transplants in the United States. Depending upon a variety of patient risk
factors, many of these procedures result in the patient's immune system
rejecting the organ. Current therapy for kidney transplant rejection involves
administering steroids or other immune system modulators to suppress the immune
system. These therapies suffer from suboptimal efficacy profiles or dose
limiting toxicities.
Prior to Abgenix obtaining an exclusive license to ABX-CBL, three clinical
trials had been conducted using ABX-CBL for the treatment of kidney transplant
rejection. In two trials conducted at Sendai Shakai Hoken Hospital in Japan,
ABX-CBL was administered intravenously daily for nine days to 41 patients whose
kidney transplant rejections were resistant to steroid therapy. In the first
trial, organ rejection was reversed in 17 of 19 patients. In the second trial,
organ rejection was reversed in a dose-dependent fashion in 18 of the 22
patients treated. A third clinical trial was conducted at the University of
California at Los Angeles. In this study, 13 of the 18 patients had cadaveric
donor transplants. This more refractory population responded to nine days of
ABX-CBL treatment with an overall response rate of 50%. Subset analysis
indicated that of the patients treated prior to severe renal failure, as many as
75% experienced reversal of the kidney rejections. No serious treatment-related
side effects were observed in any of the patients in these three trials.
In addition to the use of ABX-RB2 in kidney transplant rejection, we are
also exploring its potential use in corneal transplantation. In a clinical trial
conducted at the University of California at San Diego prior to Abgenix
obtaining an exclusive license to ABX-CBL, six patients were treated with
ABX-CBL after the onset of rejection and four showed graft preservation. No
serious adverse side effects related to the infusion of ABX-CBL or to an immune
response were observed in any of the six patients.
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Autoimmune Disease. In autoimmune disease, a subset of the patient's immune
cells react abnormally to a natural component of the patient's own tissue.
Because the CBL antigen is selectively expressed on activated immune cells
including T cells, B cells and natural killer cells, we believe that ABX-RB2 may
be effective in treating autoimmune disease. We intend to conduct preclinical
studies in a series of animal models of autoimmune disease, including rheumatoid
arthritis, lupus, multiple sclerosis, and diabetes.
XENOMOUSE TECHNOLOGY COLLABORATIONS
We have entered into multiple XenoMouse technology collaborations with
pharmaceutical and biotechnology companies. To date, we have collaborative
arrangements with eight companies covering at least 11 antigen targets. These
collaborations typically provide our collaborative partners with access to
XenoMouse technology for the purpose of generating fully human antibody product
candidates to one specific antigen target provided by the collaborative partner.
Some of these agreements involve multiple antigen targets. In most cases, we
provide our mice to collaborative partners who carry out immunizations with
their specific antigen target. In other cases, we may do the immunizations for
the collaborative partner and receive additional compensation.
The financial terms of our XenoMouse technology collaborations typically
include upfront payments, potential license fee and milestone payments. Based
upon our current collaborative agreements, these fees and payments may average
approximately $8.0 million per antigen target. In certain instances, the
collaborative partner could make reimbursement payments to Abgenix for research
that we conduct on behalf of such partner. Additionally, if a product receives
marketing approval from the FDA or an equivalent foreign agency, we are entitled
to receive royalties on future product sales by the collaborative partner, if
any. Generally, the collaborative partner is responsible for and bears the costs
of product development, worldwide manufacturing and marketing of product
candidates generated under these collaborations.
Our XenoMouse technology collaborations have similar structures. Our
collaborative partner first enters into a research collaboration agreement. This
agreement permits our collaborative partner to conduct limited research on a
specific antigen using our XenoMouse technology. Our collaborative partner may
then elect to enter into a research license and option agreement. If entered
into, this agreement allows our collaborative partner to conduct additional
research to develop antibody product candidates to a specific antigen target.
Generally, a research license and option agreement does not allow our
collaborative partner to initiate clinical trials with antibody product
candidates. To initiate clinical trials with antibody product candidates to a
specific antigen target, our collaborative partner must exercise the option to
enter into a product license agreement. If our collaborative partner exercises
its product license option, it has the right to conduct all clinical trials and
commercialize antibody product candidates.
Our dependence on collaborative arrangements with third parties subjects us
to a number of risks. Agreements with collaborative partners typically allow
such partners significant discretion in electing whether to pursue any of the
planned activities. We cannot control the amount and timing of resources our
collaborative partners may devote to the product candidates. Even if we fulfill
our obligations under a collaborative agreement, the collaborative partner can
terminate the agreement at any time following proper written notice. If any
collaborative partner were to terminate or breach its agreement with us, or
otherwise fail to complete its obligations in a timely manner, our business,
financial condition and results of operations may be materially adversely
affected.
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Among our eight collaborative partners, Pfizer, Genentech and Millennium
have each entered into additional collaborations specifying additional antigens
for XenoMouse antibody development. The following table lists our collaborations
to date.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
PARTNER FIELD DATE
<S> <C> <C>
- -----------------------------------------------------------------------------------
AVI BioPharma Cancer 1/99
- -----------------------------------------------------------------------------------
Centocor Cardiovascular 12/98
- -----------------------------------------------------------------------------------
Research Corporation Technologies Transplant Rejection 12/98
- -----------------------------------------------------------------------------------
Pfizer Cancer 10/98
Cancer 12/97
- -----------------------------------------------------------------------------------
Millennium Inflammation 9/98
Inflammation 7/98
- -----------------------------------------------------------------------------------
Genentech Growth Factor Modulation 6/98
Cardiovascular 4/98
- -----------------------------------------------------------------------------------
Schering-Plough Inflammation 1/98
- -----------------------------------------------------------------------------------
Cell Genesys Gene Therapy 11/97
- -----------------------------------------------------------------------------------
</TABLE>
AVI BioPharma. In January 1999, we entered into a research license and
option agreement with AVI to generate fully human antibodies to human chorionic
gonadotropin (hCG) for the treatment of various cancers. AVI has reported that a
therapeutic vaccine based on hCG has shown promise in Phase II clinical trials.
AVI, of Portland, Oregon, is a publicly traded biotechnology company.
Centocor. In December 1998, we entered into a research collaboration
agreement with Centocor to generate fully human antibodies to an undisclosed
Centocor antigen in the cardiovascular field. Centocor, of Malvern,
Pennsylvania, is a leading developer and marketer of antibody-based products.
Research Corporation Technologies. In December 1998, we entered into a
binding memorandum of understanding for a research collaboration agreement with
RCT to generate fully human antibodies to CD45rb. Resultant antibody product
candidates could potentially be used in treating organ transplant rejection and
autoimmune disorders. RCT, of Tucson, Arizona, is a corporation involved in
technology transfer between universities and industry. Under the RCT agreement,
we may receive either a percentage of sublicense income received by RCT or
royalty payments on sales of products.
Millennium BioTherapeutics. In July 1998, we entered into a research
collaboration agreement with Millennium BioTherapeutics to generate fully human
antibodies to an antigen target in the field of inflammation. In October 1998,
we entered into a research, license and option agreement with Millennium
BioTherapeutics covering the same antigen target. In September 1998, we entered
into a second research collaboration agreement with Millennium BioTherapeutics
covering a second antigen target in the field of inflammation. Millennium
BioTherapeutics, of Cambridge, Massachusetts, is a leading genomics company.
Genentech. In April 1998, we entered into a research license and option
agreement with Genentech to produce fully human antibodies to antigen target in
the fields of growth factor modulation. In June 1998, Genentech exercised its
option to expand its research collaboration with us to include a second antigen
target in the field of cardiovascular disease. Genentech, of South San
Francisco, California, is a leading biotechnology company with extensive efforts
in antibody-based products.
Schering-Plough. In January 1998, we entered into a research collaboration
agreement with Schering-Plough to generate fully human antibodies to an antigen
target in the field of inflammation. Under this agreement, Schering-Plough is
paying us to perform the immunizations and certain research activities.
Schering-Plough, of Kenilworth, New Jersey, is a leading global pharmaceutical
company.
Pfizer. In December 1997, we entered into a research collaboration
agreement with Pfizer to generate fully human antibodies to an antigen target in
the cancer field. In October 1998, Pfizer exercised its option
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to expand its research collaboration with us to include a second antigen target
in the field of cancer. Pfizer is paying us to perform the immunizations and to
undertake certain research activities. As part of this arrangement, in January
1998 Pfizer purchased 160,000 shares of our series C preferred stock for $1.3
million and received an option to collaborate with us on up to three antigen
targets. These shares converted into 160,000 shares of common stock at our
initial public offering. Pfizer, of Groton, Connecticut, is a leading global
pharmaceutical company.
Cell Genesys. In November 1997, we entered into the gene therapy rights
agreement (the "GTRA") with Cell Genesys. Cell Genesys received certain rights
to commercialize products based on antibodies generated with XenoMouse
technology in the field of gene therapy. Cell Genesys, of Foster City,
California, is a leading gene therapy company.
JOINT VENTURE WITH JAPAN TOBACCO
XENOTECH
In June 1991, Cell Genesys entered into several agreements with JT America
for the purpose of forming an equally owned limited partnership named Xenotech.
In connection with the formation of Xenotech, both Cell Genesys and JT America
contributed cash, and Cell Genesys contributed the exclusive right to certain of
its technology for the research and development of genetically modified strains
of mice that can produce fully human antibodies. Cell Genesys assigned its
rights in Xenotech to Abgenix in connection with the formation of Abgenix. As
part of the Xenotech relationship, Abgenix provides research and development on
behalf of Xenotech in exchange for cash payments. As of December 31, 1998,
Abgenix has made capital contributions to Xenotech of approximately $18.6
million and has received approximately $42.9 million in funding for research
related to the development of XenoMouse technology.
PRODUCT RIGHTS
Under the master research, license and option agreement among Abgenix,
Japan Tobacco and Xenotech (the "MRLOA"), Abgenix and Japan Tobacco have been
provided with colonies of transgenic mice that have been developed for Xenotech
pursuant to Abgenix's research and development efforts on behalf of Xenotech.
Under the MRLOA, Abgenix and Japan Tobacco have the right to use the transgenic
mice for research purposes. The right to commercialize medical products that
incorporate antibodies derived through the use of the transgenic mice can be
licensed from Xenotech by Abgenix and/or Japan Tobacco pursuant to a nomination
process. This process gives Abgenix and Japan Tobacco the right to select a
certain number of antigens per year and receive an option to the commercial
rights in antibodies that bind to the selected antigens. Both Abgenix and Japan
Tobacco are obligated to make royalty payments to Xenotech on revenues derived
from the sale of such antibody products. All payments to Xenotech are then
shared equally by Abgenix and JT America.
During the nomination process, if either Abgenix or Japan Tobacco, but not
both, selects an antigen, the selecting party receives an option to an exclusive
worldwide license. If both Abgenix and Japan Tobacco select the same antigen at
the same time, each party has an option to an exclusive license in its home
territory and a co-exclusive license in the rest of the world. The MRLOA defines
the home territory of Japan Tobacco as Japan, Korea and Taiwan, and the home
territory of Abgenix as North America. In the former case where one party
selects an antigen, the nonselecting party has the opportunity to obtain an
option to an exclusive license to the selected antigen in the nonselecting
party's home territory by exercising its buy-in right within the allotted time.
Each party has a limited number of buy-in rights, and they cannot be exercised
by the nonselecting party if the antigen selected is subject to proprietary
rights of a third party and the third party is unwilling to license its rights
to the antigen to the nonselecting party.
We must obtain licenses from Xenotech to commercialize antibody products
generated by XenoMouse technology. If we have used our yearly allotment of
licenses to develop antigen targets and desire to acquire a license to develop
additional antigen targets, we may have to negotiate with JT America or others
to acquire such rights. Disputes with JT America or its parent company, Japan
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Tobacco, may result in the loss of the right to commercialize a product
candidate by either party. Limits on our ability to acquire additional licenses
to develop antigen targets or disputes with JT America or Japan Tobacco will
limit our ability to establish collaborations and fully realize the commercial
potential of XenoMouse technology.
GENE THERAPY RIGHTS AGREEMENT WITH CELL GENESYS
As stated above, the GTRA provides Cell Genesys with certain rights to
commercialize products based on antibodies generated with XenoMouse technology
in the field of gene therapy. Under the GTRA, Cell Genesys has certain rights to
direct us to make antibodies to two antigens per year. In addition, Cell Genesys
has an option to enter into a license to commercialize antibodies binding to
such antigens in the field of gene therapy. Cell Genesys is obligated to make
certain payments to us for these rights including royalties on future product
sales. The GTRA also prohibits us from granting any third-party licenses for
antibody products based on antigens nominated by us for our own purposes where
the primary field of use is gene therapy. In the case of third-party licenses
granted by us where gene therapy is a secondary field, we are obligated to share
with Cell Genesys a portion of the cash milestone payments and royalties
resulting from any products in the field of gene therapy.
INTELLECTUAL PROPERTY
We will be able to protect our proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
While we have pending patent applications in the United States relating to
XenoMouse technology, no patents have issued. We try to protect our proprietary
position by filing United States and foreign patent applications related to our
proprietary technology, inventions and improvements that are important to the
development of our business. The patent position of biopharmaceutical companies
involves complex legal and factual questions and, therefore, enforceability
cannot be predicted with certainty. Patents, if issued, may be challenged,
invalidated or circumvented. Thus, any patents that we own or license from third
parties may not provide any protection against competitors. Our pending patent
applications, those we may file in the future, or those we may license from
third parties, may not result in patents being issued. Also, patent rights may
not provide us with proprietary protection or competitive advantages against
competitors with similar technology. Furthermore, others may independently
develop similar technologies or duplicate any technology that we have developed.
The laws of certain foreign countries do not protect our intellectual property
rights to the same extent as do the laws of the United States.
In addition to patents, we rely on trade secrets and proprietary know-how.
We seek protection, in part, through confidentiality and proprietary information
agreements. These agreements may not provide meaningful protection or adequate
remedies for our technology in the event of unauthorized use or disclosure of
such information. The parties to these agreements may breach them. Furthermore,
our trade secrets may otherwise become known to, or be independently developed
by, our competitors.
Research has been conducted for many years in the antibody field. This has
resulted in a substantial number of issued patents and an even larger number of
patent applications. Patent applications in the United States are, in most
cases, maintained in secrecy until patents issue. The publication of discoveries
in the scientific or patent literature frequently occurs substantially later
than the date on which the underlying discoveries were made. Our commercial
success depends significantly on our ability to operate without infringing the
patents and other proprietary rights of third parties. Our technologies may
infringe the patents or violate other proprietary rights of third parties. In
the event of infringement or violation, Abgenix and our collaborative partners
may be prevented from pursuing product development or commercialization. Such a
result will materially adversely affect our business, financial condition and
results of operations.
In March 1997, we entered into a cross-license and settlement agreement
with GenPharm to avoid protracted litigation. See "-- Patent Cross-License and
Settlement Agreement with GenPharm." Abgenix
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has one issued European patent relating to XenoMouse technology that is
currently undergoing opposition proceedings within the European Patent Office
and the outcome of this opposition is uncertain.
The biotechnology and pharmaceutical industries have been characterized by
extensive litigation regarding patents and other intellectual property rights.
The defense and prosecution of intellectual property suits, United States Patent
and Trademark Office interference proceedings and related legal and
administrative proceedings in the United States and internationally involve
complex legal and factual questions. As a result, such proceedings are costly
and time-consuming to pursue and their outcome is uncertain. Litigation may be
necessary to:
- enforce our issued and licensed patents;
- protect trade secrets or know-how that we own or license; or
- determine the enforceability, scope and validity of the proprietary
rights of others.
If we become involved in any litigation, interference or other administrative
proceedings, we will incur substantial expense and the efforts of our technical
and management personnel will be significantly diverted. An adverse
determination may subject us to significant liabilities or require us to seek
licenses that may not be available from third parties. We may be restricted or
prevented from manufacturing and selling our products, if any, in the event of
an adverse determination in a judicial or administrative proceeding or if we
fail to obtain necessary licenses. Costs associated with such arrangements may
be substantial and may include ongoing royalties. Furthermore, we may not be
able to obtain the necessary licenses on satisfactory terms, if at all. These
outcomes will materially adversely affect our business, financial condition and
results of operations.
PATENT CROSS-LICENSE AND SETTLEMENT AGREEMENT WITH GENPHARM
In 1994, Cell Genesys and GenPharm and, beginning in 1996, Abgenix became
involved in litigation primarily related to intellectual property rights
associated with a method for inactivating a mouse's antibody genes and
technology pertaining to transgenic mice capable of producing fully human
antibodies. Rather than endure the cost and business interruption of protracted
litigation, in March 1997, Cell Genesys, along with Abgenix, Xenotech and Japan
Tobacco, signed a comprehensive patent cross-license and settlement agreement
with GenPharm that resolved all related litigation and claims between the
parties. Under the cross-license and settlement agreement, Abgenix has licensed
on a non-exclusive basis certain patents, patent applications, third-party
licenses and inventions pertaining to the development and use of certain
transgenic rodents including mice that produce fully human antibodies. We use
our XenoMouse technology to generate fully human antibody products and have not
licensed the use of, and do not use, any transgenic rodents developed or used by
GenPharm. As initial consideration for the cross-license and settlement
agreement, Cell Genesys issued a note to GenPharm due September 30, 1998 for
$15.0 million payable by Cell Genesys and convertible into shares of Cell
Genesys common stock. Of this note, approximately $3.8 million satisfied certain
of Xenotech's obligations under the agreement. Japan Tobacco also made an
initial payment. During 1997, two patent milestones were achieved by GenPharm,
and Xenotech was obligated to pay $7.5 million for each milestone. Xenotech paid
$7.5 million to satisfy the first milestone and has recorded a payable to
GenPharm for the remaining $7.5 million. We recorded a liability of
approximately $3.8 million in our balance sheet representing our equal share of
the Xenotech obligation. The obligation was paid in November 1998. No additional
payments will accrue under this agreement. We have recognized, as a
non-recurring charge for cross-license and settlement, a total of $22.5 million.
We concluded that the cost of the cross-license and settlement agreement was
properly expensed under Statement of Financial Accounting Standards No. 2,
"Accounting for Research and Development Costs" because the cross-license
received by us from GenPharm is non-exclusive and has no alternative future uses
for us. We also concluded that the $11.3 million was properly allocated from
Cell Genesys because it related to the technology Cell Genesys contributed to
Abgenix upon our organization. We do not have any future financial obligations
under the cross-license and settlement agreement.
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GOVERNMENT REGULATION
Our product candidates under development are subject to extensive and
rigorous domestic government regulation. The FDA regulates, among other things,
the development, testing, manufacture, safety, efficacy, record-keeping,
labeling, storage, approval, advertising, promotion, sale and distribution of
biopharmaceutical products. If our products are marketed abroad, they also are
subject to extensive regulation by foreign governments. Non-compliance with
applicable requirements can result in fines, warning letters, recall or seizure
of products, clinical study holds, total or partial suspension of production,
refusal of the government to grant approvals, withdrawal of approval, and civil
and criminal penalties.
Abgenix believes its antibody products will be classified by the FDA as
"biologic products" as opposed to "drug products." The steps ordinarily required
before a biological product may be marketed in the United States include: (1)
preclinical testing; (2) the submission to the FDA of an investigational new
drug application ("IND"), which must become effective before clinical trials may
commence; (3) adequate and well-controlled clinical trials to establish the
safety and efficacy of the biologic; (4) the submission to the FDA of a
Biologics License Application; and (5) FDA approval of the application,
including approval of all product labeling.
Preclinical testing includes laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the potential
safety and efficacy of each product. Preclinical safety tests must be conducted
by laboratories that comply with FDA regulations regarding good laboratory
practices. The results of the preclinical tests together with manufacturing
information and analytical data are submitted to the FDA as part of the IND and
are reviewed by the FDA before the commencement of clinical trials. Unless the
FDA objects to an IND, the IND will become effective 30 days following its
receipt by the FDA. If we submit an IND, our submission may not result in FDA
authorization to commence clinical trials. Also, the lack of an objection by the
FDA does not mean it will ultimately approve an application for marketing
approval. Furthermore, we may encounter problems in clinical trials that cause
us or the FDA to delay, suspend or terminate our trials.
Clinical trials involve the administration of the investigational product
to humans under the supervision of a qualified principal investigator. Clinical
trials must be conducted in accordance with Good Clinical Practices under
protocols submitted to the FDA as part of the IND. In addition, each clinical
trial must be approved and conducted under the auspices of an Institutional
Review Board ("IRB") and with patient informed consent. The IRB will consider,
among other things, ethical factors, the safety of human subjects and the
possibility of liability of the institution conducting the trial.
Clinical trials are conducted in three sequential phases which may overlap.
Phase I clinical trials may be performed in healthy human subjects or, depending
on the disease, in patients. The goal of a Phase I clinical trial is to
establish initial data about safety and tolerance of the biologic agent in
humans. In Phase II clinical trials, evidence is sought about the desired
therapeutic efficacy of a biologic agent in limited studies of patients with the
target disease. Efforts are made to evaluate the effects of various dosages and
to establish an optimal dosage level and dosage schedule. Additional safety data
are also gathered from these studies. The Phase III clinical trial program
consists of expanded, large-scale, multi-center studies of persons who are
susceptible to or have developed the disease. The goal of these studies is to
obtain definitive statistical evidence of the efficacy and safety of the
proposed product and dosage regimen.
Historically, the results from preclinical testing and early clinical
trials have often not been predictive of results obtained in later clinical
trials. A number of new drugs and biologics have shown promising results in
clinical trials, but subsequently failed to establish sufficient safety and
efficacy data to obtain necessary regulatory approvals. Data obtained from
preclinical and clinical activities are susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. In addition, delays or
rejections by regulatory authorities may be encountered as a result of many
factors, including changes in regulatory policy during the period of product
development.
Only two of our product candidates, ABX-CBL and ABX-IL8, are currently in
clinical trials. Patient follow-up for these clinical trials has been limited.
To date, data obtained from these clinical trials has
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been insufficient to demonstrate safety and efficacy under applicable FDA
guidelines. As a result, such data will not support an application for
regulatory approval without further clinical trials. Clinical trials conducted
by Abgenix or by third parties on our behalf may not demonstrate sufficient
safety and efficacy to obtain the requisite regulatory approvals for ABX-CBL,
ABX-IL8 or any other potential product candidates. Regulatory authorities may
not permit us to undertake any additional clinical trials for our product
candidates.
Our other product candidates are still in preclinical development, and we
have not submitted INDs or begun clinical trials for these product candidates.
Our preclinical or clinical development efforts may not be successfully
completed. Further INDs may not be filed. Clinical trials may not commence as
planned.
Completion of clinical trials may take several years or more. The length of
time generally varies substantially according to the type, complexity, novelty
and intended use of the product candidate. Our commencement and rate of
completion of clinical trials may be delayed by many factors, including:
- inability to manufacture sufficient quantities of materials used for
clinical trials;
- slower than expected rate of patient recruitment;
- inability to adequately follow patients after treatment;
- unforeseen safety issues;
- lack of efficacy during the clinical trials; or
- government or regulatory delays.
We have limited experience in conducting and managing clinical trials. We rely
on third parties, including our collaborative partners, to assist us in managing
and monitoring clinical trials. Our reliance on third parties may result in
delays in completing, or failing to complete, clinical trials if they fail to
perform under our agreements with them.
Our product candidates may fail to demonstrate safety and efficacy in
clinical trials. Such failure may delay development of other product candidates,
and hinder our ability to conduct related preclinical testing and clinical
trials. As a result of such failures, we may also be unable to obtain additional
financing. Our business, financial condition and results of operations will be
materially adversely affected by any delays in, or termination of, our clinical
trials.
Abgenix and our contract manufacturers also are required to comply with the
applicable FDA current good manufacturing practice ("cGMP") regulations. cGMP
regulations include requirements relating to quality control and quality
assurance as well as the corresponding maintenance of records and documentation.
Manufacturing facilities are subject to inspection by the FDA. The facilities
must be approved before they can be used in commercial manufacturing of our
products. Abgenix or our contract manufacturers may not be able to comply with
the applicable cGMP requirements and other FDA regulatory requirements. If
Abgenix or our contract manufacturers fails to comply, our business, financial
condition and results of operations will be materially adversely affected.
For clinical investigation and marketing outside the United States, we may
be subject to the regulatory requirements of other countries, which vary from
country to country. The regulatory approval process in other countries includes
requirements similar to those associated with FDA approval set forth above.
COMPETITION
The biotechnology and pharmaceutical industries are highly competitive and
subject to significant and rapid technological change. We are aware of several
pharmaceutical and biotechnology companies that are actively engaged in research
and development in areas related to antibody therapy. These companies have
commenced clinical trials of antibody products or have successfully
commercialized antibody products. Many of these companies are addressing the
same diseases and disease indications as Abgenix or our
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collaborative partners. Also, we compete with companies that offer antibody
generation services to companies that have antigens. These competitors have
specific expertise or technology related to antibody development. These
companies include GenPharm, Cambridge Antibody Technology Group, Inc., Protein
Design Labs, Inc. and Morphosys, Inc.
Some of our competitors have received regulatory approval or are developing
or testing product candidates that may compete directly with our product
candidates. Recently, Sangstat Medical Corp. received approval for an organ
transplant rejection product that may compete with ABX-CBL, which is in clinical
trials. We are also aware that several companies, including Genentech, Inc.,
have potential product candidates that may compete with ABX-IL8. Furthermore, we
are aware that ImClone Systems, Inc., Medarex and OSI Pharmaceuticals, Inc. have
potential antibody and small molecule product candidates already in clinical
development that may compete with ABX-EGF, which is in preclinical development.
We may also compete with Japan Tobacco in supplying XenoMouse technology or
antibody product candidates to potential collaborative partners.
Many of these companies and institutions, either alone or together with
their collaborative partners, have substantially greater financial resources and
larger research and development staffs than we do. In addition, many of these
competitors, either alone or together with their collaborative partners, have
significantly greater experience than we do in:
- developing products;
- undertaking preclinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products; and
- manufacturing and marketing products.
Accordingly, our competitors may succeed in obtaining patent protection,
receiving FDA approval or commercializing products before us. If we commence
commercial product sales, we will be competing against companies with greater
marketing and manufacturing capabilities, areas in which we have limited or no
experience.
We also face, and will continue to face, competition from academic
institutions, government agencies and research institutions. There are numerous
competitors working on products to treat each of the diseases for which we are
seeking to develop therapeutic products. In addition, any product candidate that
we successfully develop may compete with existing therapies that have long
histories of safe and effective use. Competition may also arise from:
- other drug development technologies and methods of preventing or reducing
the incidence of disease;
- new small molecules; or
- other classes of therapeutic agents.
Developments by others may render our product candidates or technologies
obsolete or noncompetitive. We face and will continue to face intense
competition from other companies for collaborative arrangements with
pharmaceutical and biotechnology companies for establishing relationships with
academic and research institutions, and for licenses to proprietary technology.
These competitors, either alone or with their collaborative partners, may
succeed in developing technologies or products that are more effective than
ours.
PHARMACEUTICAL PRICING AND REIMBURSEMENT
In both domestic and foreign markets, sales of our product candidates will
depend in part upon the availability of reimbursement from third-party payors.
Third-party payors include government health administration authorities, managed
care providers, private health insurers and other organizations. These
third-party payors are increasingly challenging the price and examining the
cost-effectiveness of medical
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products and services. In addition, significant uncertainty exists as to the
reimbursement status of newly approved healthcare products. We may need to
conduct post-marketing studies in order to demonstrate the cost-effectiveness of
our products. These studies may require us to provide a significant amount of
resources. Our product candidates may not be considered cost-effective. Adequate
third-party reimbursement may not be available to enable us to maintain price
levels sufficient to realize an appropriate return on our investment in product
development. Domestic and foreign governments continue to propose and pass
legislation designed to reduce the cost of healthcare. Accordingly, legislation
and regulations affecting the pricing of pharmaceuticals may change before our
proposed products are approved for marketing. Adoption of such legislation could
further limit reimbursement for pharmaceuticals. If the government and
third-party payors fail to provide adequate coverage and reimbursement rates for
our product candidates, the market acceptance of our products may be adversely
affected. If our products do not receive market acceptance, our business,
financial condition and results of operations will be materially adversely
affected.
MANUFACTURING
We lack the resources and capability to manufacture our products on a
commercial scale. While we currently manufacture limited quantities of antibody
products for preclinical testing, we depend on sole source contract
manufacturers to produce ABX-CBL, ABX-IL8 and ABX-EGF under cGMP regulations for
use in our clinical trials. Each contract manufacturer has a limited number of
facilities in which our product candidates can be produced. Our contract
manufacturers have limited experience in manufacturing ABX-CBL, ABX-IL8 and
ABX-EGF in quantities sufficient for conducting clinical trials or for
commercialization.
There are, on a worldwide basis, a limited number of contract facilities in
which our product candidates can be produced under cGMP regulations for use in
pharmaceutical drugs. It can also take a substantial period of time for a
contract facility to begin producing antibodies under cGMP regulations.
Accordingly, we depend on our contract manufacturers to produce our product
candidates under cGMP regulations which meets acceptable standards for our
clinical trials.
Contract manufacturers often encounter difficulties in scaling up
production, including problems involving production yields, quality control and
quality assurance and shortage of qualified personnel. Our contract
manufacturers may not perform as agreed or may not remain in the contract
manufacturing business for the time required by us to successfully produce and
market our product candidates. If our contract manufacturers fail to deliver the
required quantities of our product candidates for clinical use on a timely basis
and at commercially reasonable prices, and we fail to find a replacement
manufacturer or develop our own manufacturing capabilities, our business,
financial condition and results of operations will be materially adversely
affected.
In addition, Abgenix and our third-party manufacturers are required to
register manufacturing facilities with the FDA and foreign regulatory
authorities. The facilities will then be subject to inspections confirming
compliance with good manufacturing practice requirements established by the FDA
or corresponding foreign regulations. If Abgenix or our third-party
manufacturers fail to maintain compliance with the good manufacturing practice
requirements, our business, financial condition and results of operations will
be materially adversely affected.
EMPLOYEES
As of December 31, 1998, we employed 61 persons, of whom 16 hold Ph.D. or
M.D. degrees and 11 hold other advanced degrees. Approximately 49 employees are
engaged in research and development, and 12 support administration, finance,
management information systems and human resources.
Our success will depend in large part upon our ability to attract and
retain employees. We face competition in this regard from other companies,
research and academic institutions, government entities and other organizations.
We believe that we maintain good relations with our employees.
50
<PAGE> 52
FACILITIES
We are currently leasing 52,400 square feet of office and laboratory
facilities in Fremont, California. During 1997, we built out approximately
46,000 square feet of laboratory and office space at the Fremont site. Abgenix
believes this facility, with potential additional build-outs, will meet its
space requirements for research and development and administration for the next
several years. Our lease expires in the year 2007 with options to extend.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
SCIENTIFIC AND MEDICAL ADVISORY BOARDS
We have established Scientific and Medical Advisory Boards to provide
specific expertise in areas of research and development relevant to our
business. The Scientific and Medical Advisory Boards meet periodically with our
scientific and development personnel and management to discuss our present and
long-term research and development activities. Scientific and Medical Advisory
Board members include:
<TABLE>
<S> <C>
Frederick Applebaum, M.D. ................... Director, Clinical Research Division, Fred Hutchinson
Cancer Research Center
Benedict Cosimi, M.D. ....................... Professor of Surgery, Harvard Medical School, and
Chief of Transplant Unit, Massachusetts General
Hospital
Anthony DeFranco, M.D., Ph.D. ............... Professor, Biochemistry and Biophysics, University of
California, San Francisco
John Gallin, M.D. ........................... Director, Warren Grant Magnusen Clinical Center, NIH
Raju S. Kucherlapati, Ph.D. ................. Professor and Chair, Molecular Genetics, Albert
Einstein College of Medicine
Michele Nussenswieg, M.D., Ph.D. ............ Professor, Molecular Immunology, The Rockefeller
University
Matthew Scharff, M.D. ....................... Professor of Medicine, Albert Einstein College of
Medicine
Lee Simon, M.D. ............................. Professor of Medicine, Harvard Medical School
David Yocum, M.D. ........................... Professor of Medicine, University of Arizona Medical
School
</TABLE>
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<PAGE> 53
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth, as of December 31, 1998, certain
information concerning our executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
R. Scott Greer.......................... 40 President, Chief Executive Officer and Director
C. Geoffrey Davis, Ph.D. ............... 47 Vice President, Research
Kurt W. Leutzinger...................... 47 Vice President, Finance and Chief Financial Officer
John A. Lipani, M.D. ................... 58 Vice President, Clinical Development
Raymond M. Withy, Ph.D. ................ 43 Vice President, Corporate Development
Stephen A. Sherwin, M.D.(1)(2).......... 50 Chairman of the Board
M. Kathleen Behrens, Ph.D.(2)........... 46 Director
Raju S. Kucherlapati, Ph.D. ............ 55 Director
Mark B. Logan(1)(2)..................... 60 Director
Joseph E. Maroun........................ 69 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
R. Scott Greer has served as our President and Chief Executive Officer and
as one of our directors since June 1996. He also serves as a director of
Xenotech. From July 1994 to July 1996, Mr. Greer was Senior Vice President of
Corporate Development at Cell Genesys. From April 1991 to July 1994, Mr. Greer
was Vice President of Corporate Development and from April 1991 to September
1993 was Chief Financial Officer of Cell Genesys. From 1986 to 1991, Mr. Greer
held various positions at Genetics Institute, Inc., a biotechnology company,
including Director, Corporate Development. Mr. Greer received a B.A. in
economics from Whitman College and an M.B.A. from Harvard University and is a
certified public accountant.
C. Geoffrey Davis, Ph.D., has served as our Vice President, Research since
June 1996. From January 1995 to June 1996, Dr. Davis was Director of Immunology
at the Xenotech Division of Cell Genesys. From November 1991 to December 1994,
he served at Repligen Corporation, a biotechnology company, first as Principal
Investigator and then as Director of Immunology. Dr. Davis received a B.A. from
Swarthmore College and a Ph.D. in immunology from the University of California,
San Francisco.
Kurt W. Leutzinger has served as our Vice President, Finance and Chief
Financial Officer since July 1997. From June 1987 to July 1997, Mr. Leutzinger
was a Vice President of General Electric Investments and a portfolio manager of
the $27 billion General Electric Pension Fund. There, he was responsible for
private equity investments with a focus on medical technology. He also serves as
a director of C3, Inc. Mr. Leutzinger received a B.A. in economics from
Fairleigh Dickinson University and an M.B.A. in finance from New York University
and is a certified public accountant.
John A. Lipani, M.D., has served as our Vice President, Clinical
Development since April 1997. From 1992 to April 1997, Dr. Lipani was Group
Director of Inflammation and Tissue Repair at SmithKline Beecham Corporation, a
pharmaceutical company. From 1989 to 1992, Dr. Lipani held clinical development
positions at various biopharmaceutical companies, including Immunex Corporation,
Norwich Eaton Pharmaceuticals, Inc. and Centocor, Inc. He received a B.A. from
Villanova University and an M.D. from Tulane Medical School.
Raymond M. Withy, Ph.D., has served as our Vice President, Corporate
Development since June 1996. He also serves as a director of Xenotech. From May
1993 to June 1996, Dr. Withy served in various positions at Cell Genesys, most
recently as Director of Business Development. From 1991 to May 1993, Dr. Withy
was a private consultant to the biotechnology industry in areas of strategic
planning, business
52
<PAGE> 54
development and licensing. From 1984 to 1991, Dr. Withy was an Associate
Director and Senior Scientist at Genzyme Corporation, a biotechnology company.
Dr. Withy received a B.Sc. in chemistry and biochemistry and a Ph.D. in
biochemistry, both from the University of Nottingham.
Stephen A. Sherwin, M.D., has served as our Chairman of the Board since
June 1996. Since March 1990, Dr. Sherwin has served as President, Chief
Executive Officer and a director of Cell Genesys. Since March 1994, he has
served as Chairman of the Board of Cell Genesys. From 1983 to 1990, Dr. Sherwin
held various positions at Genentech, Inc., a biotechnology company, most
recently as Vice President, Clinical Research. Dr. Sherwin currently serves as a
Director of the California Healthcare Institute. Dr. Sherwin received a B.A. in
biology from Yale University and an M.D. from Harvard Medical School.
M. Kathleen Behrens, Ph.D., has served as one of our directors since
December 1997. Dr. Behrens joined Robertson Stephens Investment Management Co.
in 1983 and became a general partner in 1986 and a managing director in 1993. In
1988, Dr. Behrens joined the venture capital group of Robertson Stephens
Investment Management Co. and has helped in the founding of three biotechnology
companies: Mercator Genetics, Inc., Protein Design Laboratories, Inc. and COR
Therapeutics, Inc. Dr. Behrens is currently president and a director of the
National Venture Capital Association. Dr. Behrens received a Ph.D. in
microbiology from the University of California, Davis, where she performed
genetic research for six years.
Raju S. Kucherlapati, Ph.D., has served as one of our directors since June
1996. Dr. Kucherlapati was a founder of Cell Genesys and has served as a
director of Cell Genesys since 1988. Since July 1989, he has been the Saul and
Lola Kramer Professor and the Chairman of the Department of Molecular Genetics
at the Albert Einstein College of Medicine. Dr. Kucherlapati also serves as a
director of Megabios Corp. and Millennium Pharmaceuticals, Inc. Dr. Kucherlapati
received a B.S. in biology from Andhra University in India and a Ph.D. in
genetics from the University of Illinois, Urbana.
Mark B. Logan has served as one of our directors since August 1997. Mr.
Logan has served as Chairman of the Board, President and Chief Executive Officer
of VISX, Incorporated, a medical device company, since November 1994. From
January 1992 to October 1994, he was Chairman of the Board and Chief Executive
Officer of INSMED Pharmaceuticals, Inc., a pharmaceutical company. Previously,
Mr. Logan held several senior management positions at Bausch & Lomb, Inc., a
medical products company, including Senior Vice President, Healthcare and
Consumer Group and also served as a member of its board of directors. Mr. Logan
received a B.A. from Hiram College and a PMD from Harvard Business School.
Joseph E. Maroun has served as one of our directors since July 1996 and has
served as a director of Cell Genesys since June 1995. Mr. Maroun spent 30 years
with Bristol-Myers Squibb, a pharmaceuticals company, serving until his
retirement in 1990, at which time he was President of the International Group,
Senior Vice President of the corporation, and a member of its Policy Committee.
He also headed the U.S.-Japan Pharmaceutical Advisory Group. Mr. Maroun received
a B.A. from the University of Witwaterrand, Johannesburg.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Compensation Committee consists of Dr. Sherwin and Mr. Logan. The
Compensation Committee makes recommendations regarding our various incentive
compensation and benefit plans and determines salaries for our executive
officers and incentive compensation for our employees and consultants.
Our Audit Committee consists of Dr. Sherwin, Mr. Logan and Dr. Behrens. The
Audit Committee makes recommendations to the Board of Directors regarding the
selection of our independent auditors, reviews the results and scope of the
audit and other services provided by our independent auditors and reviews and
evaluates our control functions.
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<PAGE> 55
BOARD COMPOSITION
Our Amended and Restated Bylaws provide that the number of members of our
Board of Directors shall be determined by the Board of Directors. The number of
directors is currently set at seven. All members of our Board of Directors hold
office until the next annual meeting of stockholders or until their successors
are duly elected and qualified. There are no family relationships among any of
our directors, officers or key employees.
We have entered into a governance agreement with Cell Genesys which
provides that so long as Cell Genesys or a group to which it belongs owns a
specific percentage of our outstanding voting stock, Cell Genesys or the group
shall have the right to nominate a fixed number of directors to serve on our
Board. The details of this arrangement are set forth in the table below:
<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP NUMBER OF DIRECTORS
-------------------- -------------------
<S> <C>
50% or more........................................ 4 out of 7
Less than 50% but greater than 25%................. 3 out of 7
Less than 25% but greater than 15%................. 1 out of 7
</TABLE>
The governance agreement also provides that Cell Genesys and each of our
officers and directors who owns voting stock shall agree to vote for the persons
nominated as set forth above. We may be adversely impacted by the significant
influence which Cell Genesys will have with respect to matters affecting us.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our Compensation Committee was, at any time since
our formation, an officer or employee of Abgenix. None of our executive officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of our Board
of Directors or Compensation Committee. See "Certain Transactions" for a
description of transactions between Abgenix and entities affiliated with members
of our Compensation Committee.
DIRECTOR COMPENSATION
Our non-employee directors currently receive $5,000 per year in retainer
plus $1,000 per Board meeting attended as cash compensation for their service as
members of our Board of Directors, and are reimbursed for certain expenses in
connection with attendance at our Board and committee meetings. We provide $500
per meeting as additional compensation for committee participation or special
assignments of the Board of Directors. From time to time, certain of our
directors have received grants of options to purchase shares of our common stock
pursuant to the 1996 Incentive Stock Plan. On June 4, 1997, R. Scott Greer,
Stephen A. Sherwin, Raju S. Kucherlapati and Joseph E. Maroun received options
to purchase 67,500, 10,000, 7,500, and 7,500 shares of our common stock,
respectively, at a per share exercise price of $2.50. On August 8, 1997, Mark B.
Logan received an option to purchase 30,000 shares of our common stock at a per
share exercise price of $4.00. On December 11, 1997, Raju S. Kucherlapati
received an option to purchase 20,000 shares of our common stock at a per share
exercise price of $5.00. There were no other director option grants in 1997. On
February 18, 1998, R. Scott Greer, Stephen A. Sherwin, M. Kathleen Behrens, Raju
S. Kucherlapati, Mark B. Logan and Joseph E. Maroun received options to purchase
40,000, 5,900, 30,000, 4,400, 3,200 and 4,400 shares of our common stock,
respectively, at a per share exercise price of $6.00. On June 15, 1998, Stephen
A. Sherwin received options to purchase 10,000 shares of our common stock at a
per share exercise price of $10.00. Beginning with the 1999 annual meeting of
stockholders, our non-employee directors are eligible to receive
nondiscretionary, automatic grants of options to purchase shares of our common
stock pursuant to the 1998 Director Option Plan. See "Management -- Stock
Plans -- 1998 Director Option Plan" and "Certain Transactions."
54
<PAGE> 56
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us during the years
ended December 31, 1998 and 1997 to our President and Chief Executive Officer
and to our four other most highly compensated executive officers, each of whose
aggregate compensation during our last fiscal year exceeded $100,000 (the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS COMPENSATION
--------------------------- ----------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
R. Scott Greer...................... 1998 $267,120 $ -- 40,000 $ --
President and Chief Executive
Officer 1997 252,000 55,200 67,500 4,112(1)
C. Geoffrey Davis, Ph.D............. 1998 165,350 -- 10,000 --
Vice President, Research 1997 152,250 21,750 25,500 1,974(2)
Kurt W. Leutzinger(3)............... 1998 179,830 -- 12,750 19,638(4)
Vice President, Finance and Chief 1997 81,555 -- 100,000 127,059(5)
Financial Officer
John A. Lipani, M.D.(6)............. 1998 180,147 -- 12,750 607(7)
Vice President, Clinical
Development 1997 131,250 -- 100,000 64,585(8)
Raymond M. Withy, Ph.D.............. 1998 165,350 -- 10,000 --
Vice President, Corporate
Development.................... 1997 152,250 21,750 25,500 --
</TABLE>
- ---------------
(1) Consists of imputed interest income on a loan from Abgenix to Mr. Greer.
(2) Consists of imputed interest income on a loan from Abgenix to Dr. Davis.
(3) Mr. Leutzinger has been our Vice President, Finance and Chief Financial
Officer since July 1997. His 1997 annualized salary was $175,000.
(4) Consists of $18,734 for reimbursement of relocation expenses and $904 for
imputed interest income on a loan from Abgenix to Mr. Leutzinger.
(5) Consists of $126,568 for reimbursement of relocation expenses and $491 for
imputed interest income on a loan from Abgenix to Mr. Leutzinger.
(6) Dr. Lipani has been our Vice President, Clinical Development since April
1997. His 1997 annualized salary was $175,000.
(7) Consists of imputed interest income on a loan from Abgenix to Dr. Lipani.
(8) Consists of $63,232 for reimbursement of relocation expenses and $1,353 for
imputed interest income on a loan from Abgenix to Dr. Lipani.
55
<PAGE> 57
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the year ended December 31, 1998.
All such options were awarded under our 1996 Incentive Stock Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED FOR OPTIONS TERM(4)
OPTIONS IN FISCAL EXERCISE EXPIRATION ---------------------
NAME GRANTED(1) 1998(2) PRICE(3) DATE 5% 10%
---- ---------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
R. Scott Greer................ 40,000 11.3% $6.00 2/17/08 $150,935 $382,498
C. Geoffrey Davis, Ph.D....... 10,000 2.8 6.00 2/17/08 37,734 95,625
Kurt W. Leutzinger............ 12,750 3.6 6.00 2/17/08 48,110 121,921
John A. Lipani, M.D........... 12,750 3.6 6.00 2/17/08 48,110 121,921
Raymond M. Withy, Ph.D........ 10,000 2.8 6.00 2/17/08 37,734 95,625
</TABLE>
- ---------------
(1) The options granted to Mr. Greer and Drs. Davis and Withy became exercisable
as to 1/48th of the option shares on the date of grant and an additional
1/48th of the option shares become exercisable on the first day of each
calendar month thereafter, with full vesting occurring four years after the
date of grant. The options granted to Mr. Leutzinger and Dr. Lipani become
exercisable as to 25% of the option shares one year from the date of grant
and 1/48th of the option shares become exercisable on the first day of each
calendar month thereafter, with full vesting occurring four years after the
date of grant. In each case, vesting is subject to the optionee's continued
relationship with Abgenix. Such options expire ten years from the date of
grant, or earlier upon termination of employment. See "Stock Plans."
(2) Based on an aggregate of 353,551 options granted by Abgenix in the year
ended December 31, 1998 to our employees, non-employee directors of and
consultants, including the Named Executive Officers.
(3) Options were granted at an exercise price equal to the fair market value of
our common stock, as determined by our Board of Directors on the date of
grant.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of our
securities that the actual stock price appreciation over the option term
will be at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of our common stock appreciates over the option
term, no value will be realized from the option grants made to the executive
officers. The potential realizable value is calculated by assuming that the
fair value of our common stock on the date of grant of $6.00 per share
appreciates at the indicated rate for the entire term of the option and that
the option is exercised at the exercise price and sold on the last day of
its term at the appreciated price. The potential realizable value
computation is net of the applicable exercise price, but does not take into
account applicable federal or state income tax consequences and other
expenses of option exercises or sales of appreciated stock.
56
<PAGE> 58
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
number of shares of common stock acquired and the dollar value realized upon
exercise of options during the year ended December 31, 1998 and the number and
value of securities underlying unexercised options held at December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Scott Greer............. 31,875 $207,189 63,744 179,641 $ 940,226 $2,571,888
C. Geoffrey Davis, Ph.D.... -- -- 73,009 62,491 1,109,914 908,211
Kurt W. Leutzinger......... -- -- 38,603 74,147 519,637 986,051
John A. Lipani, M.D........ -- -- 44,853 67,897 684,740 1,010,948
Raymond M. Withy, Ph.D..... 25,416 188,078 37,593 62,491 555,654 908,211
</TABLE>
- ---------------
(1) Value realized reflects the fair market value of our common stock underlying
the option on the date of exercise minus the aggregate exercise price of the
option.
(2) Value of unexercised in-the-money options are based on a value of $16.25 per
share, the closing price of our common stock on December 31, 1998. Amounts
reflected are based on the value of $16.25 per share, minus the per share
exercise price, multiplied by the number of shares underlying the option.
STOCK PLANS
1996 Incentive Stock Plan. As of December 31, 1998, a total of 2,891,250
shares of common stock have been authorized for issuance under our 1996
Incentive Stock Plan (the "1996 Plan"). Under the 1996 Plan, as of December 31,
1998, options to purchase an aggregate of 1,642,187 shares were outstanding,
386,810 shares of common stock had been purchased pursuant to exercises of stock
options and stock purchase rights and 862,253 shares were available for future
grant.
The 1996 Plan provides for the grant of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, nonqualified stock
options and stock purchase rights to our employees, consultants and nonemployee
directors. Incentive stock options may be granted only to employees. The 1996
Plan is administered by the Board of Directors or a committee appointed by the
Board of Directors, which determines the terms of awards granted, including the
exercise price and the number of shares subject to the award and the
exercisability thereof. The exercise price of incentive stock options granted
under the 1996 Plan must be at least equal to the fair market value of our
common stock on the date of grant. However, for any employee holding more than
10% of the voting power of all classes of our stock, the exercise price will be
no less than 110% of the fair market value. The exercise price of nonqualified
stock options is set by the administrator of the 1996 Plan. However, for any
person holding more than 10% of the voting power of all classes of our stock,
the exercise price will be no less than 110% of the fair market value. The
maximum term of options granted under the 1996 Plan is ten years.
An optionee whose relationship with Abgenix or any related corporation
ceases for any reason, other than death or total and permanent disability, may
exercise options in the three-month period following such cessation, or such
other period of time as determined by the administrator, unless such options
terminate or expire sooner, or for nonstatutory stock options, later, by their
terms. The three-month period is extended to twelve months for terminations due
to death or total and permanent disability. In the event of a merger of Abgenix
with or into another corporation, any outstanding options may either by assumed
or an equivalent option may be substituted by the surviving entity or, if such
options are not assumed or substituted, such options shall become exercisable as
to all of the shares subject to the options, including shares as to which they
would not otherwise be exercisable. In the event that options become exercisable
in lieu of assumption or substitution, the Board of Directors shall notify
optionees that all options shall be fully exercisable for a period of 30 days,
after which such options shall terminate.
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<PAGE> 59
None of our employees may be granted, in any fiscal year, options to
purchase more than 750,000 shares, 1,500,000 shares in the case of a new
employee's initial employment with Abgenix. The 1996 Plan will terminate in June
2006, unless sooner terminated by the Board of Directors.
The Board of Directors may also grant stock purchase rights to employees
and consultants under the 1996 Plan. Such grants are made pursuant to a
restricted stock purchase agreement, and the price to be paid for the shares
granted thereunder is determined by the administrator. Abgenix is generally
granted a repurchase option exercisable on the voluntary or involuntary
termination of the purchaser's employment with Abgenix for any reason, including
death or disability. The repurchase price shall be the original purchase price
paid by the purchaser. The repurchase option shall lapse at a rate determined by
the administrator. Once the stock purchase right has been exercised, the
purchaser shall have the rights equivalent to those of a stockholder.
1998 Employee Stock Purchase Plan. We have adopted the 1998 Employee Stock
Purchase Plan, or the Purchase Plan, and have reserved a total of 250,000 shares
of common stock for issuance thereunder. The Purchase Plan also provides for an
annual increase, commencing in 1999, in the number of shares reserved for
issuance under the Purchase Plan equal to the lesser of 250,000, 1% of our
outstanding capitalization or a lesser amount determined by the Board, such that
the maximum number of shares which could be reserved under the Purchase Plan
over its term would be 2,500,000 shares. Under the Purchase Plan, as of December
31, 1998, 14,130 shares were issued and were outstanding, and 235,870 shares
were available for future issuance. The Purchase Plan, which is intended to
qualify under Section 423 of the Code, is administered by our Board of Directors
or by a committee appointed by the Board of Directors.
Under the Purchase Plan, Abgenix withholds a specified percentage, not to
exceed 15%, of each salary payment to participating employees over certain
offering periods. Any employee who is currently employed for at least 20 hours
per week and for at least five consecutive months in a calendar year, either by
Abgenix or by one of our majority-owned subsidiaries, is eligible to participate
in the Purchase Plan. Unless the Board of Directors or the committee determines
otherwise, each offering period will run for 24 months and will be divided into
consecutive purchase periods of approximately six months. The first offering
period and the first purchase period commenced on July 2, 1998. Thereafter, new
24-month offering periods commence every six months on each November 1 and May
1. In the event of a change in control of Abgenix, including a merger of Abgenix
with or into another corporation, or the sale of all or substantially all of our
assets, the offering and purchase periods then in progress will be shortened.
The price of common stock purchased under the Purchase Plan is equal to 85%
of the fair market value of the common stock on the first day of the applicable
offering period or the last day of the applicable purchase period, whichever is
lower. Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically on termination of
employment with Abgenix. The maximum number of shares that a participant may
purchase on the last day of any offering period is determined by dividing the
payroll deductions accumulated during the purchase period by the purchase price.
However, no person may purchase shares under the Purchase Plan to the extent
such person would own 5% or more of the total combined value or voting power of
all classes of our capital stock or of any of our subsidiaries, or to the extent
that such person's rights to purchase stock under all employee stock purchase
plans would exceed $25,000 for any calendar year. The Board of Directors may
amend the Purchase Plan at any time. The Purchase Plan will terminate in March
2008, unless terminated earlier in accordance with the provisions of the
Purchase Plan.
1998 Director Option Plan. We have adopted the 1998 Director Option Plan,
or the Director Plan, and have reserved a total of 250,000 shares of common
stock for issuance thereunder. Each non-employee director who becomes an Abgenix
director after July 2, 1998 will be automatically granted a nonstatutory option
to purchase 30,000 shares of common stock on the date on which such person first
becomes a director. At each annual stockholders meeting beginning with the 1999
Annual Stockholders Meeting, each non-employee director will automatically be
granted a nonstatutory option to purchase 7,500 shares of common stock, 10,000
shares for the Chairman of the Board if a non-employee director. The exercise
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<PAGE> 60
price of options under the Director Plan will be equal to the fair market value
of the common stock on the date of grant. The maximum term of the options
granted under the Director Plan is ten years. Each initial grant under the
Director Plan will vest as to 25% of the shares subject to the option one year
after the date of grant and at a rate of 1/48th of the shares each month
thereafter. Each subsequent grant will vest as to 1/48th of the shares subject
to the option one month after the date of grant and at a rate of 1/48th of the
shares on the last day of each month thereafter. In the event of a merger of
Abgenix with or into another corporation, all outstanding options may either be
assumed or an equivalent option may be substituted by the surviving entity or,
if such options are not assumed or substituted, such options shall become
exercisable as to all of the shares subject to the options, including shares as
to which they would not otherwise be exercisable. In the event that options
become exercisable in lieu of assumption or substitution, the Board of Directors
shall notify optionees that all options shall be fully exercisable for a period
of 30 days, after which such options shall terminate. In the event that a
non-employee director is involuntarily terminated following option assumption,
the option becomes fully vested and exercisable. The Director Plan will
terminate in March 2008, unless terminated earlier in accordance with the
provisions of the Director Plan.
401(K) PLAN
All of our employees who are located in the United States and who work a
minimum of 30 hours per week are eligible to participate in our 401(k)
Retirement Plan (the "401(k) Plan"). Pursuant to the 401(k) Plan, employees may
elect to reduce their current compensation by up to the lesser of 15% of their
annual compensation or the statutorily prescribed annual limit allowable under
Internal Revenue Service Regulations and to have the amount of such reduction
contributed to the 401(k) Plan. The 401(k) Plan permits us, but does not require
us, to make additional matching contributions on behalf of all participants in
the 401(k) Plan. We have not made any contributions to the 401(k) Plan. The
401(k) Plan is intended to qualify under Section 401(k) of the Code so that
contributions to the 401(k) Plan by employees or by Abgenix, and the investment
earnings thereon, are not taxable to employees until withdrawn from the 401(k)
Plan, and that our contributions, if any, will be deductible by us when made.
CHANGE IN CONTROL ARRANGEMENTS
Our Board of Directors has approved a plan which provides that in the event
of a change in control of Abgenix, the options of each Abgenix employee whose
employment is terminated without cause within 24 months of the change in control
will become exercisable in full. For this purpose, a change in control includes:
(i) a person becoming the beneficial owner of 50% or more of our outstanding
voting securities, (ii) certain changes in the composition of our Board of
Directors occurring within a two-year period or (iii) a merger or consolidation
of Abgenix in which Abgenix stockholders immediately before the transaction own
immediately after the transaction less than a majority of the outstanding voting
securities of the surviving entity, or its parent.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
Our Amended and Restated Certificate of Incorporation limits the liability
of directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for (1) any breach of their duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) unlawful payments of
dividends or unlawful stock repurchases or redemptions or (4) any transaction
from which the director derived an improper personal benefit. Such limitation of
liability does not apply to liabilities arising under the federal securities
laws and does not affect the availability of equitable remedies such as
injunctive relief or rescission.
Our Amended and Restated Bylaws provide that we shall indemnify our
directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our Amended and Restated Bylaws covers at
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<PAGE> 61
least negligence and gross negligence on the part of indemnified parties. Our
Amended and Restated Bylaws also permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his
or her actions in such capacity, regardless of whether the Amended and Restated
Bylaws would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our Amended and
Restated Bylaws. These agreements, among other things, indemnify our directors
and executive officers for certain expenses, including attorneys' fees,
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of Abgenix arising
out of such person's services as our director or executive officer, any of our
subsidiaries or any other company or enterprise to which the person provides
services at our request. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
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CERTAIN TRANSACTIONS
OUR INCORPORATION AND ORGANIZATION
Pursuant to the terms of the stock purchase and transfer agreement between
Abgenix and Cell Genesys, we issued 1,691,667 shares of series A senior
convertible preferred stock to Cell Genesys. In exchange for $10 million, and
2,058,333 shares of series 1 subordinated convertible preferred stock to Cell
Genesys. In exchange, Cell Genesys contributed to Abgenix research, development
and manufacturing technology, patents and other intellectual property specific
to the antibody therapy programs to be pursued by Abgenix, including Cell
Genesys' interest in Xenotech, and certain equipment, furniture and fixtures
leased by Cell Genesys. We are responsible for the remaining lease obligations
for such capital equipment which total approximately $30,000 per month. Cell
Genesys also assigned us two notes receivable totaling $150,000.
On July 15, 1996, Abgenix, in exchange for a loan in the principal amount
of up to $4,000,000, issued a convertible promissory note to Cell Genesys that
subsequently was converted into 666,667 shares of series A preferred stock at a
conversion price of $6.00 upon the closing of the series B preferred stock
financing in December 1997. Also, in connection with, and contemporaneous to,
the series B preferred stock financing, the shares of series A senior
convertible preferred stock, and the shares of series 1 subordinated convertible
preferred stock were converted into an aggregate 3,750,000 shares of series A
preferred stock. (See "Preferred Stock Financings").
Simultaneously with the execution of the stock purchase and transfer
agreement, we entered into a governance agreement, tax sharing agreement,
services agreement, and patent assignment agreement with Cell Genesys. In
addition, we entered into an immunization services agreement, gene therapy
agreement, and voting agreement with Cell Genesys. The immunization services
agreement, gene therapy agreement, and voting agreement were superseded by the
gene therapy rights agreement. See "Business -- Gene Therapy Rights Agreement
with Cell Genesys."
The governance agreement with Cell Genesys provides that so long as Cell
Genesys or a group to which it belongs owns a specific percentage of our
outstanding voting stock, Cell Genesys or the group shall have the right to
nominate a fixed number of directors to serve on our Board. The details of this
arrangement are set forth in the table below:
<TABLE>
<CAPTION>
PERCENTAGE OWNERSHIP NUMBER OF DIRECTORS
-------------------- -------------------
<S> <C>
50% or more........................................ 4 out of 7
Less than 50% but greater than 25%................. 3 out of 7
Less than 25% but greater than 15%................. 1 out of 7
</TABLE>
The governance agreement also provides that Cell Genesys and each of our
officers and directors who owns voting stock shall agree to vote for the persons
nominated as set forth above.
The tax sharing agreement provides for the allocation of federal and state
tax liabilities between Abgenix and Cell Genesys. Pursuant to the terms of the
agreement, we will pay to Cell Genesys the federal and state income and
franchise tax liability that we would have owed if Cell Genesys had filed a
separate tax return. If we realize a loss or credit that reduces the
consolidated tax liability of Cell Genesys, then Cell Genesys shall pay us the
amount of the reduction. The agreement shall remain in effect with respect to
any taxable year for which consolidated or combined returns are filed by Cell
Genesys as a common parent corporation and Abgenix is an includable party in
such consolidated return. As of December 31, 1998, Cell Genesys' ownership of
our outstanding capital stock was 30.2%. Therefore, a consolidated tax return
will not be filed for 1998.
Pursuant to the terms of the services agreement, Cell Genesys provided
certain administrative services for a quarterly fee. In fiscal 1997, these fees
totaled $60,000. No fees were incurred in 1998, and Cell Genesys no longer
provides services under this agreement.
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Pursuant to the terms of the patent assignment agreement, Cell Genesys
assigned us all of its rights in and to certain patents and patent applications
related to antibody development.
OTHER TRANSACTIONS WITH CELL GENESYS
On January 23, 1997 and March 27, 1997, we issued two warrants to purchase
an aggregate of 121,667 shares of series A preferred stock (convertible into
121,667 shares of common stock) to Cell Genesys at the exercise price per share
of $6.00 in return for providing guarantees for the Loan and Security Agreement
with Silicon Valley Bank and the Master Lease Agreement with Transamerica
Business Credit Corporation.
In October 1997, Cell Genesys extended a short-term, convertible line of
credit facility to Abgenix. The credit facility terminated in accordance with
its terms, without Abgenix drawing upon the credit facility, upon the closing of
the series B preferred stock financing in December 1997.
In November 1998, Cell Genesys sold the 1,146,300 shares of common stock
offered by this prospectus to the selling stockholders. Pursuant to that sale,
we agreed to register the shares under the Securities Act for resale to the
public. Under the registration rights agreement, we must use reasonable efforts
to cause this registration statement to be declared effective by the Securities
and Exchange Commission as soon as practicable and to keep this registration
statement, or a replacement, continuously effective under the Securities Act
until the earlier of (1) November 18, 2000 or (2) such time as the selling
stockholders have sold all shares offered by this prospectus, or a replacement
prospectus.
BANCBOSTON ROBERTSON STEPHENS RELATIONSHIP
M. Kathleen Behrens, Ph.D., one of our directors, is also a managing
director of Robertson Stephens Investment Management Co. Robertson Stephens
Investment Management Co. was formerly affiliated with BancBoston Robertson
Stephens. BancBoston Robertson Stephens acted as one of our placement agents in
the series B preferred stock financing in December 1997 and as the managing
underwriter for our initial public offering in July 1998. BancBoston Robertson
Stephens received approximately $759,000 in fees for services provided in the
private placement. Also, persons and entities currently or formerly affiliated
with Robertson Stephens Investment Management Co. and BancBoston Robertson
Stephens purchased, in the aggregate, 784,616 shares of the series B preferred
stock for an aggregate purchase price of approximately $5.1 million. BancBoston
Robertson Stephens together with the other underwriters received approximately
$1.6 million in discounts and commissions in connection with its services as the
managing underwriter of our initial public offering. In connection with Cell
Genesys' sale of shares of our common stock to the selling stockholders,
BancBoston Robertson Stephens received approximately $475,000 in fees in
connection with its services as placement agent.
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PREFERRED STOCK FINANCINGS
In connection with the initial public offering of our common stock in July
1998, each outstanding share of preferred stock was converted into one share of
common stock. The following directors and holders of more than 5% of our
outstanding stock purchased the following shares of our preferred stock prior to
the consummation of our initial public offering.
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------
PREFERRED STOCKHOLDER SERIES A SERIES B
--------------------- --------- --------
<S> <C> <C>
Cell Genesys, Inc.(1)....................................... 4,538,334 --
Robertson Stephens Investment Management Co. Entities(2).... -- 769,231
Stephen A. Sherwin, M.D.(3)................................. 4,538,334 --
M. Kathleen Behrens, Ph.D.(4)............................... -- 784,616
Raju Kucherlapati, Ph.D.(5)................................. 4,538,334 10,000
Joseph E. Maroun(6)......................................... 4,538,334 153,846
</TABLE>
- ---------------
(1) Includes 121,667 shares issuable pursuant to outstanding warrants to
purchase series A preferred stock.
(2) Includes 56,280 shares held by Bayview Investors, LTD, 224,145 shares held
by Crossover Fund II, L.P., 67,663 shares held by Crossover Fund IIA, L.P.,
334,079 shares held by Omega Ventures II, L.P., 87,064 shares held by Omega
Ventures II Cayman, L.P. (collectively, the "RSIM Shares"). Each of the
above entities is affiliated with Robertson Stephens Investment Management
Co.
(3) Includes 4,416,667 shares held by Cell Genesys and 121,667 shares issuable
pursuant to outstanding warrants to purchase series A preferred stock
(collectively, the "Cell Genesys Owned Shares"). Dr. Sherwin is an officer,
director and beneficial stockholder of Cell Genesys. As such, he may be
deemed to have voting and dispositive power over the Cell Genesys Owned
Shares. However, Dr. Sherwin disclaims beneficial ownership of the Cell
Genesys Owned Shares except to the extent of his pro rata pecuniary interest
therein.
(4) Includes the RSIM Shares. Dr. Behrens, a managing director of Robertson
Stephens Investment Management Co., disclaims beneficial ownership of the
RSIM Shares except to the extent of her pro rata pecuniary interest therein.
(5) Includes the Cell Genesys Owned Shares. Dr. Kucherlapati is a director and
beneficial stockholder of Cell Genesys. As such, he may be deemed to have
voting power over the Cell Genesys Owned Shares. However, Dr. Kucherlapati
disclaims beneficial ownership of the Cell Genesys Owned Shares except to
the extent of his pro rata pecuniary interest therein.
(6) Includes the Cell Genesys Owned Shares. Mr. Maroun is a director and
beneficial stockholder of Cell Genesys. As such, he may be deemed to have
voting and dispositive power over the Cell Genesys Owned Shares. However,
Mr. Maroun disclaims beneficial ownership of the Cell Genesys Owned Shares
except to the extent of his pro rata pecuniary interest therein.
The selling stockholders and holders of preferred stock are entitled to
certain registration rights with respect to the common stock issued upon
conversion thereof. See "Description of Capital Stock -- Registration Rights of
Certain Holders."
Cell Genesys beneficially owns approximately 30.2% of our outstanding
capital stock. As a result, Cell Genesys will have significant influence over
all matters requiring the approval of our stockholders, including the election
of our Board of Directors. See "Risk Factors -- Cell Genesys Exercises
Significant Influence Over Us."
Three of our directors, Stephen A. Sherwin, M.D., Raju S. Kucherlapati,
Ph.D. and Joseph E. Maroun are also directors of Cell Genesys. Dr. Sherwin is
also the Chairman of the Board and Chief Executive Officer of Cell Genesys.
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<PAGE> 65
TRANSACTIONS WITH EMPLOYEES
On May 27, 1997, John A. Lipani, M.D. our Vice President, Clinical
Development, and Abgenix entered into a relocation loan agreement pursuant to
which we loaned $100,000 to Dr. Lipani in exchange for a promissory note secured
by a deed of trust. No interest accrues on the loan until May 27, 2002. The
outstanding principal balance as of December 31, 1998 was $100,000. In addition,
Dr. Lipani received a $35,000 loan from Abgenix to assist with relocation
expenses. The $35,000 loan, which is evidenced by a promissory note, was
forgiven in April 1998 when Dr. Lipani completed 12 months of employment with
Abgenix.
On December 2, 1992, R. Scott Greer, our President and Chief Executive
Officer, and Cell Genesys entered into a relocation loan agreement pursuant to
which Cell Genesys loaned $100,000 to Mr. Greer in exchange for an interest-free
promissory note secured by shares of Cell Genesys' common stock owned by Mr.
Greer. In June 1996, Cell Genesys assigned its rights under the promissory note
to Abgenix. Mr. Greer repaid the entire loan to Abgenix in September 1997.
On April 21, 1995, C. Geoffrey Davis, Ph.D. our Vice President, Research,
and Cell Genesys entered into a relocation loan agreement pursuant to which Cell
Genesys loaned $30,000 to Dr. Davis in exchange for a promissory note secured by
a deed of trust. No interest accrues on the loan until January 1, 2000. In June
1996, Cell Genesys assigned its rights under the promissory note to Abgenix. As
of December 31, 1998, the outstanding principal balance was $30,000.
On August 26, 1997, Mr. Leutzinger received a $25,000 loan from Abgenix to
assist with relocation expenses. The $25,000 loan, which is evidenced by a full
recourse promissory note, was forgiven in July 1998 when Mr. Leutzinger
completed 12 months of employment with Abgenix. On February 27, 1998, Mr.
Leutzinger and Abgenix entered into a relocation loan agreement pursuant to
which Abgenix loaned $100,000 to Mr. Leutzinger in exchange for a promissory
note secured by a deed of trust. No interest accrues on the loan until June 30,
2003. As of December 31, 1998, the outstanding principal balance of the
promissory note was $100,000.
We have entered into indemnification agreements with each of our directors
and executive officers. See "Management -- Limitations of Liability and
Indemnification Matters."
All future transactions, including any loans from Abgenix to our officers,
directors, principal stockholders or affiliates, will be approved by a majority
of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to Abgenix than could be obtained from unaffiliated third parties.
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<PAGE> 66
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of December 31, 1998, and as
adjusted to reflect the sale of the common stock being offered hereby by (1)
each person, or group of affiliated persons, who is known by us to own
beneficially more than 5% of the common stock, (2) each of our directors, (3)
each of our executive officers, (4) all of our directors and executive officers
as a group and (5) the selling stockholders. Except as otherwise noted, the
persons or entities in this table have sole voting and investing power with
respect to all the shares of common stock owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER SHARES BENEFICIALLY OWNED
OWNED PRIOR TO OFFERING OF AFTER OFFERING
------------------------ SHARES --------------------------
NUMBER PERCENT(1) OFFERED(2) NUMBER PERCENT(1)
---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BENEFICIAL OWNER
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS
Cell Genesys(3)........................... 3,392,034 30.2% -- 3,392,034 30.2%
342 Lakeside Drive
Foster City, CA 94404
Robertson Stephens Investment Management
Co. Entities(4)......................... 907,468 8.2 -- 907,468 8.2
555 California Street, Suite 2500
San Francisco, CA 94104
Joseph E. Maroun(5)....................... 3,569,911 31.7 -- 3,569,911 31.7
Stephen A. Sherwin, M.D.(6)............... 3,464,565 30.6 -- 3,464,565 30.6
Raju S. Kucherlapati, Ph.D.(7)............ 3,432,315 30.4 -- 3,432,315 30.4
M. Kathleen Behrens, Ph.D.(8)............. 932,228 8.4 -- 932,228 8.4
R. Scott Greer(9)......................... 220,588 2.0 -- 220,588 2.0
C. Geoffrey Davis, Ph.D.(10).............. 79,395 * -- 79,395 *
Raymond M. Withy, Ph.D.(11)............... 80,647 * -- 80,647 *
Kurt W. Leutzinger(12).................... 45,737 * -- 45,737 *
John A. Lipani, M.D.(13).................. 51,899 * -- 51,899 *
Mark B. Logan(14)......................... 12,250 * -- 12,250 *
All directors and executive officers as a
group (10 persons)(15).................. 5,105,467 43.7 -- 5,105,467 43.7
SELLING STOCKHOLDERS
Alan Mandell, Trustee of the 1982
Elizabeth Heller Mandell Trust.......... 8,000 * 8,000 -- --
Barrie Ramsay Zesiger..................... 12,000 * 12,000 -- --
City of Milford Pension & Retirement
Fund.................................... 90,000 * 90,000 -- --
City of Stamford Firemen's Pension Fund... 46,000 * 46,000 -- --
Domenic J. Mizio.......................... 17,000 * 17,000 -- --
Fred & Lucy Giampino JTWROS............... 3,000 * 3,000 -- --
Harold & Grace Willens JTWROS............. 5,000 * 5,000 -- --
HBL Charitable Unitrust................... 8,000 * 8,000 -- --
Helen Hunt................................ 8,000 * 8,000 -- --
Lazar Foundation.......................... 8,000 * 8,000 -- --
Mary Ann S. Hamilton Trust for Self....... 10,000 * 10,000 -- --
Morgan Trust Co. of the Bahamas Ltd. as
Trustee U/A/D 11/30/93.................. 16,000 * 16,000 -- --
Murray Capital, L.L.C..................... 8,000 * 8,000 -- --
NFIB Employee Pension Trust............... 22,000 * 22,000 -- --
Norwalk Employees' Pension Plan........... 48,000 * 48,000 -- --
Planned Parenthood of NY.................. 6,000 * 6,000 -- --
Public Employee Retirement System of
Idaho................................... 181,000 1.6 181,000 -- --
Roanoke College........................... 19,000 * 19,000 -- --
State of Oregon PERS/ZCG.................. 546,300 4.9 546,300 -- --
The Ferris Hamilton Family Trust.......... 8,000 * 8,000 -- --
The Jenifer Altman Foundation............. 16,000 * 16,000 -- --
The Meehan Investment Partnership I,
L.P..................................... 8,000 * 8,000 -- --
Van Loben Sels Foundation................. 19,000 * 19,000 -- --
Wells Family L.L.C........................ 24,000 * 24,000 -- --
Wolfson Investment Partners L.P........... 10,000 * 10,000 -- --
</TABLE>
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<PAGE> 67
- ---------------
* Represents beneficial ownership of less than one percent of the common
stock.
(1) Beneficial ownership is determined in accordance with the rules of
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
stockholders named in the table above have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by
them. Percentage of beneficial ownership is based on 11,120,293 shares of
common stock outstanding as of December 31, 1998.
(2) Assumes that the selling stockholders will sell all of their shares of
common stock in this offering.
(3) Consists of 3,270,367 shares and 121,667 shares issuable pursuant to
warrants exercisable within 60 days of December 31, 1998 (the "CG Shares").
(4) Includes 56,280 shares held by Bayview Investors, LTD, 50,000 shares held
by The Robertson Stephens Orphan Fund, L.P., 17,500 shares held by The
Robertson Stephens Orphan Offshore Fund, L.P., 362,545 shares held by
Crossover Fund II, L.P., 334,079 shares held by Omega Ventures II, L.P. and
87,064 shares held by Omega Ventures II Cayman, L.P. (the "Robertson
Stephens Investment Management Co. Shares"). Bayview Investors, LTD, The
Robertson Stephens Orphan Fund, L.P. and the Robertson Stephens Orphan
Offshore Fund, L.P. are affiliated with Robertson Stephens Investment
Management Co. Robertson Stephens Investment Management Co. disclaims
beneficial ownership of the Robertson Stephens Investment Management Co.
Shares except to the extent of its pro rata pecuniary interests therein.
(5) Includes the CG Shares. Also includes 24,031 shares issuable upon exercise
of options exercisable within 60 days of December 31, 1998. Mr. Maroun is a
director and beneficial stockholder of Cell Genesys. As such, he may be
deemed to have voting and dispositive power over the CG Shares. However,
Mr. Maroun disclaims beneficial ownership of the CG Shares except to the
extent of his pro rata pecuniary interest therein based upon his beneficial
ownership of the capital stock of Cell Genesys.
(6) Includes the CG Shares. Also includes, 72,531 shares issuable upon exercise
of options exercisable within 60 days of December 31, 1998. Dr. Sherwin is
an officer, director and beneficial stockholder of Cell Genesys. As such,
he may be deemed to have voting and dispositive power over the CG Shares.
However, Dr. Sherwin disclaims beneficial ownership of the CG Shares except
to the extent of his pro rata pecuniary interest therein based upon his
beneficial ownership of the capital stock of Cell Genesys.
(7) Includes the CG Shares. Also includes, 30,281 shares issuable upon exercise
of options exercisable within 60 days of December 31, 1998. Dr.
Kucherlapati is a director and beneficial stockholder of Cell Genesys. As
such, he may be deemed to have voting and dispositive power over the CG
Shares. However, Dr. Kucherlapati disclaims beneficial ownership of the
shares of the CG Shares except to the extent of his pro rata pecuniary
interest therein based upon his beneficial ownership of the capital stock
of Cell Genesys.
(8) Includes the Robertson Stephens Investment Management Co. Shares. Also
includes 9,375 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998. Dr. Behrens, a managing director of Robertson
Stephens Investment Management Co., disclaims beneficial ownership of the
Robertson Stephens Investment Management Co. Shares except to the extent of
her pro rata pecuniary interests therein.
(9) Includes 80,819 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.
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(10) Includes 79,395 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.
(11) Includes 43,979 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.
(12) Includes 45,649 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.
(13) Includes 51,899 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.
(14) Includes 12,250 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998.
(15) Includes 450,209 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998 and 121,667 shares subject to warrants.
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PLAN OF DISTRIBUTION
In November 1998, Cell Genesys sold the 1,146,300 shares of common stock
offered by this prospectus to the selling stockholders. Pursuant to that sale,
we agreed to register the shares under the Securities Act for resale to the
public. Under the registration rights agreement between Abgenix and the selling
stockholders, we must use reasonable efforts to cause this registration
statement to be declared effective by the Securities and Exchange Commission as
soon as practicable and to keep this registration statement, or a replacement,
continuously effective under the Securities Act until the earlier of (1)
November 18, 2000 or (2) such time as the selling stockholders have sold all
shares offered by this prospectus, or a replacement prospectus.
The sale of all or a portion of the shares of common stock offered hereby
by the selling stockholders may be effected from time to time at prevailing
market prices at the time of such sales, at prices related to such prevailing
prices, at fixed prices that may be changed or at negotiated prices. The selling
stockholders may effect such transactions by selling directly to purchasers in
negotiated transactions, to dealers acting as principals or through one or more
brokers, or any combination of these methods of sale. In addition, shares may be
transferred in connection with the settlement of call options, short sales or
similar transactions that may be effected by the selling stockholders. Dealers
or brokers may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders. The selling stockholders and any
brokers or dealers that participate in the distribution may under certain
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by such brokers or dealers and any
profits realized on the resale of shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act. Abgenix and the
selling stockholders may agree to indemnify such brokers or dealers against
certain liabilities, including liabilities under the Securities Act.
To the extent required under the Securities Act or the rules of the
Securities and Exchange Commission, a supplemental prospectus will be filed,
disclosing (1) the name of any such brokers or dealers, (2) the number of shares
involved, (3) the price at which such shares are to be sold, (4) the commissions
paid or discounts or concessions allowed to such brokers or dealers, where
applicable, (5) that such brokers or dealers did not conduct any investigation
to verify the information set out in this prospectus, as supplemented, and (6)
other facts material to the transaction.
There is no assurance that any of the selling stockholders will sell any or
all of the shares of common stock offered hereby.
Abgenix has agreed to pay the expenses incurred in connection with the
registration of the shares of common stock offered hereby. The selling
stockholders will be responsible for all selling commissions, transfer taxes and
related charges in connection with the offer and sale of such shares.
68
<PAGE> 70
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Amended and Restated Certificate of Incorporation authorizes the
issuance of up to 50,000,000 shares of common stock, $0.0001 par value per share
and authorizes the issuance of 5,000,000 shares of preferred stock, $0.0001 par
value per share, the rights and preferences of which may be established from
time to time by our Board of Directors. As of December 31, 1998, 11,120,293
shares of common stock were issued and outstanding and held by 162 stockholders
and no shares of preferred stock were issued and outstanding.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of Abgenix, holders of common stock would be entitled
to share in our assets remaining after the payment of liabilities and the
satisfaction of any liquidation preference granted to the holders of any
outstanding shares of preferred stock. Holders of common stock have no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by the rights of the holders of shares of any series
of preferred stock which we may designate in the future.
PREFERRED STOCK
Our Board of Directors is authorized, without any further action by the
stockholders, subject to any limitations prescribed by law, from time to time to
issue up to an aggregate of 5,000,000 shares of preferred stock, $0.0001 par
value per share, in one or more series, each of such series to have such rights
and preferences, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be determined by our
Board of Directors. The rights of the holders of common stock will be subject
to, and may be adversely affected by, the rights of holders of any preferred
stock that may be issued in the future. Issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of our outstanding voting stock. We have no present plans to
issue any shares of preferred stock.
WARRANTS AND OTHER OBLIGATIONS TO ISSUE CAPITAL STOCK
As of December 31, 1998, we have two outstanding warrants to purchase an
aggregate of 121,667 shares of common stock at an exercise price of $6.00 per
share. These warrants are currently exercisable in full. One warrant will expire
on January 23, 2000, and the other warrant will expire on March 27, 2000. Also,
as of December 31, 1998, we are obligated to issue 25,000 shares of the common
stock upon the occurrence of certain milestones pursuant to the terms of a
license agreement.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 6,698,052 shares of common stock and 121,667 shares of
common stock issuable upon exercise of outstanding warrants (the "Registrable
Securities") or their transferees are entitled to certain rights with respect to
the registration of such shares under the Securities Act. These rights are
provided under the terms of an agreement (the "Amended and Restated Stockholder
Rights Agreement") between Abgenix and the holders of the Registrable
Securities. The holders of at least 50% of the Registrable Securities may
require, subject to certain limitations in the Amended and Restated Stockholder
Rights Agreement, on two occasions, that we use our best efforts to register the
Registrable Securities for public resale. If we register any of our common stock
either for our own account or for the account of other security holders, other
than in connection
69
<PAGE> 71
with the registration of the shares offered hereby and certain other exceptions,
the holders of Registrable Securities are entitled to include their shares of
common stock in the registration. A holder's right to include shares in an
underwritten registration statement is subject to the right of the underwriters
to limit the number of shares included in the offering, subject to certain
limitations. The holders of Registrable Securities may also require Abgenix, on
no more than two occasions during any 12-month period, to register all or a
portion of their Registrable Securities on Form S-3 when use of such form
becomes available to Abgenix, provided, among other limitations, that the
proposed aggregate selling price, net of underwriting discounts and commissions,
is at least $500,000. All registration expenses will be borne by Abgenix
(subject to certain limitations) and all selling expenses relating to
Registrable Securities must be borne by the holders of the securities being
requested. If such holders, by exercising their demand registration rights,
cause a large number of securities to be registered and sold in the public
market, such sales could have an adverse effect on the market price for our
common stock. If we were to initiate a registration and include Registrable
Securities pursuant to the exercise of piggyback registration rights, the sale
of such Registrable Securities may have an adverse effect on our ability to
raise capital.
The shares offered by the selling stockholders under this prospectus are
entitled to certain rights with respect to the registration of these shares
under the Securities Act. See "Plan of Distribution."
CERTAIN CHARTER AND BYLAW PROVISIONS AND DELAWARE LAW
Certain provisions of our Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws may have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of Abgenix. Such provisions could limit the price that
certain investors might be willing to pay in the future for shares of our common
stock. Certain of these provisions allow Abgenix to issue preferred stock
without any vote or further action by the stockholders, eliminate the right of
stockholders to act by written consent without a meeting and eliminate
cumulative voting in the election of directors. These provisions may make it
more difficult for stockholders to take certain corporate actions and could have
the effect of delaying or preventing a change in control of Abgenix. In
addition, Abgenix is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder, unless:
(1) prior to such date, the Board of Directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; (2) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder; the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding,
for purposes of determining the number of shares outstanding, those shares owned
by persons who are directors and also officers and by employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (3) on or subsequent to such date, the business combination is
approved by the Board of Directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder.
Our Amended and Restated Certificate of Incorporation eliminates the right
of stockholders to call special meetings of stockholders or to act by written
consent without a meeting. The Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws do not provide for cumulative voting in the
election of directors. The authorization of undesignated preferred stock makes
it possible for the Board of Directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
change control of Abgenix. These and other provisions may have the effect of
deferring hostile takeovers or delaying changes in control or management of
Abgenix. The amendment of any of these provisions would require approval by
holders of at least 66 2/3% of the outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services.
70
<PAGE> 72
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of common stock in the public market
following this offering, including shares issued upon exercise of outstanding
options and warrants, could adversely affect market prices prevailing from time
to time and could impair our ability to raise capital through sale of our equity
securities. Sales of substantial amounts of our common stock in the public
market after the restrictions lapse could adversely affect the prevailing market
price and our ability to raise equity capital in the future.
We have outstanding 11,120,293 shares of common stock (based upon shares
outstanding as of December 31, 1998), assuming no exercise of outstanding
options or warrants after December 31, 1998. Of these shares, the 1,146,300
shares sold in this offering will be freely tradable without restriction under
the Securities Act except for any shares purchased by our "affiliates" as that
term is defined in Rule 144 under the Securities Act. In addition, the 2,875,000
shares sold in our initial public offering in July 1998 and an additional
2,771,302 shares, subject in certain instances to volume re-sale limitations
under Rule 144, are freely tradeable.
The remaining 4,327,691 shares of common stock held by existing
stockholders may not be sold publicly unless they are registered under the
Securities Act or are sold pursuant to Rule 144 or another exemption from
registration. These shares will become eligible for public resale at various
times over a period of less than one year following the completion of this
offering, subject to volume limitations.
In connection with our initial public offering, a director and a certain
stockholder who, in the aggregate, hold 71,665 of the shares of common stock
outstanding immediately prior to the completion of this offering entered into
lock-up agreements under which they have agreed not to offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of, or agree to dispose
of, directly or indirectly, any shares of common stock, options or warrants to
acquire shares of common stock or securities exchangeable for or convertible
into common stock owned by them until June 27, 1999, without the prior written
consent of BancBoston Robertson Stephens. Upon expiration of the 360-day lock-up
agreements, all 71,655 of these shares will become eligible for public resale,
subject to volume limitations imposed by Rule 144.
The holders of 6,698,052 shares of our common stock will be entitled to
certain demand and piggyback rights with respect to registration of such shares
under the Securities Act. If such holders exercise the demand registration
rights and cause a large number of securities to be registered and sold in the
public market, such sales may have an adverse effect on the market price for our
common stock. If we were to initiate a registration and include shares held by
such holders pursuant to the exercise of their piggyback registration rights,
such sales may have an adverse effect on our ability to raise capital.
Additionally, 121,667 shares issuable pursuant to warrants will also be entitled
to similar registration rights. The number of shares sold in the public market
could increase if such registration rights are exercised.
On October 23, 1998 we filed a Registration Statement on Form S-8
registering 3,053,819 shares of common stock subject to outstanding options or
reserved for future issuance under our stock plans, thus permitting the resale
of such shares in the public market without restriction under the Securities Act
after expiration of any vesting restrictions. As of December 31, 1998, we are
obligated to issue 25,000 shares of common stock upon the occurrence of certain
milestones pursuant to the terms of a license agreement.
In general, under Rule 144 as currently in effect, a person or persons
whose shares are aggregated, who has beneficially owned shares for at least one
year, including the holding period of any prior owner except an affiliate, is
entitled to sell in "broker's transactions" or to market makers, a number of
shares during any three-month period that does not exceed the greater of (1) one
percent of the number of shares of common stock then outstanding, approximately
111,203 shares currently, or (2) the average weekly trading volume of the common
stock during the four calendar weeks preceding the required filing of a Form 144
with respect to such sale. Sales under Rule 144 are generally subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about Abgenix. Under Rule 144(k), a person who is not
deemed to have been an affiliate of Abgenix at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be sold
for at least two years, is entitled to sell such shares without having to comply
with the manner of sale, public
71
<PAGE> 73
information, volume limitation or notice provisions of Rule 144. Under Rule 701
of the Securities Act, persons who purchase shares upon exercise of options
granted prior to the effective date of our initial public offering are currently
entitled to sell such shares in reliance on Rule 144, without having to comply
with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Abgenix by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. As of December 31, 1998, a certain investment partnership and
members of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
beneficially owned an aggregate of 16,250 shares of common stock of Abgenix.
EXPERTS
The financial statements of Abgenix, Inc. at December 31, 1996 and 1997,
and for each of the three years in the period ended December 31, 1997 appearing
in this prospectus and registration statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Xenotech, L.P. at December 31, 1996 and 1997
and for each of the three years in the period ended December 31, 1997 and for
the period from inception (June 12, 1991) to December 31, 1997, appearing in
this prospectus and registration statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Abgenix has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
common stock offered hereby by the selling stockholders. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules thereto. For further information with respect to
Abgenix and our common stock, reference is made to the registration statement
and the exhibits and schedules filed as a part thereof. Statements contained in
this prospectus as to the contents of any contract or any other document
referred to are not necessarily complete. In each instance, reference is made to
the copy of such contract or document filed as an exhibit to the registration
statement, and each such statement is qualified in all respects by such
reference. Copies of the registration statement, including exhibits and
schedules thereto, may be inspected without charge at the Securities and
Exchange Commission's principal office in Washington, D.C., or obtained at
prescribed rates from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Securities and Exchange Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission. The address of the site is http://www.sec.gov.
Abgenix is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission. Such reports,
proxy statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Suite 1400, Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661; and 13th Floor, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
72
<PAGE> 74
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Abgenix, Inc., Financial Statements
Report of Ernst & Young LLP, Independent Auditors......... F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statement of Changes in Redeemable Convertible Preferred
Stock and Stockholders' Equity (Net Capital
Deficiency)............................................ F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
Xenotech, LP, Financial Statements
Report of Ernst & Young LLP, Independent Auditors......... F-21
Balance Sheets............................................ F-22
Statements of Operations.................................. F-23
Statement of Partners' Capital............................ F-24
Statements of Cash Flows.................................. F-25
Notes to Financial Statements............................. F-26
</TABLE>
F-1
<PAGE> 75
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Abgenix, Inc.
We have audited the accompanying balance sheets of Abgenix, Inc. as of
December 31, 1996 and 1997, and the related statements of operations, changes in
redeemable convertible preferred stock and stockholders' equity (net capital
deficiency), and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Abgenix, Inc. at December
31, 1996 and 1997, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
January 23, 1998
F-2
<PAGE> 76
ABGENIX, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 7,190 $ 4,617 $ 2,283
Short-term investments................................. 2,982 10,704 22,290
Prepaid expenses and other current assets.............. 158 550 370
-------- -------- --------
Total current assets........................... 10,330 15,871 24,943
Property and equipment, net.............................. 3,648 5,776 5,418
Deposits and other assets................................ 379 437 420
-------- -------- --------
$ 14,357 $ 22,084 $ 30,781
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Short-term payable to parent........................... $ 2,429 $ 212 $ 34
Payable to Xenotech for cross-license and settlement
obligation.......................................... -- 3,750 3,750
Accounts payable....................................... -- 426 474
Deferred revenue from related party.................... 376 -- --
Accrued stock issuance costs........................... -- 1,200 --
Other accrued liabilities.............................. 1,961 2,000 1,135
Current portion of long-term debt...................... -- 1,646 1,694
-------- -------- --------
Total current liabilities...................... 4,766 9,234 7,087
Long-term note payable to parent......................... 1,757 -- --
Long-term debt........................................... -- 3,979 2,710
Commitments
Redeemable convertible preferred stock, $0.0001 par
value; 20,000,000 shares authorized, 3,750,000 and
7,263,209 shares issued and outstanding at December 31,
1996 and 1997, and no shares issued and outstanding at
September 30, 1998; at amount paid in; aggregate
redemption and liquidation value of approximately
$45,003 and none at December 31, 1997 and September 30,
1998, respectively..................................... 10,150 31,189 --
Redeemable convertible preferred stock subscription
receivable............................................. -- (2,737) --
Redeemable convertible preferred stock issuable.......... -- 2,737 --
Stockholders' equity (net capital deficiency):
Preferred stock, $0.0001 par value; 5,000,000 shares
authorized; none issued and outstanding............. -- -- --
Common stock, $0.0001 par value; 50,000,000 shares
authorized, 1,192, 233,542 and 11,067,620 shares
issued and outstanding at December 31, 1996 and 1997
and September 30, 1998 respectively, at amount paid
in.................................................. 1 351 55,506
Contributions from parent.............................. 14,277 29,277 29,277
Additional paid-in capital............................. -- 1,776 2,296
Deferred compensation.................................. -- (1,248) (1,320)
Accumulated deficit.................................... (16,594) (52,474) (64,775)
-------- -------- --------
Total stockholders' equity (net capital
deficiency).................................. (2,316) (22,318) 20,984
-------- -------- --------
$ 14,357 $ 22,084 $ 30,781
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 77
ABGENIX, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ------------------------
1995 1996 1997 1997 1998
------- ----------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Revenue under collaborative
agreements from related
parties (net of equity in
losses of Xenotech of
$1,702, $3,866 and $897
for the years ended
December 31, 1995, 1996
and 1997, and $990 and
$520 for the nine months
ended September 30, 1997
and 1998, respectively)... $ 6,200 $ 4,719 $ 1,343 $ 1,109 $ 710
Contract revenue............. -- -- 611 -- 1,298
------- ----------- ---------- ---------- ----------
Total revenues....... 6,200 4,719 1,954 1,109 2,008
Operating expenses:
Research and development..... 11,879 9,433 11,405 8,787 11,976
General and administrative... 2,603 2,565 3,525 1,966 2,562
Charge for cross-license and
settlement amount
allocated from Cell
Genesys................... -- -- 11,250 11,250 --
Equity in losses from the
Xenotech joint venture
(charge for cross-license
and settlement)........... -- -- 11,250 7,500 --
------- ----------- ---------- ---------- ----------
Total operating
expenses........... 14,482 11,998 37,430 29,503 14,538
------- ----------- ---------- ---------- ----------
Operating loss................. (8,282) (7,279) (35,476) (28,394) (12,530)
Other income and expenses:
Interest income.............. -- 203 307 274 657
Interest expense............. -- (24) (711) (480) (428)
------- ----------- ---------- ---------- ----------
Net loss....................... $(8,282) $ (7,100) $ (35,880) $ (28,600) $ (12,301)
======= =========== ========== ========== ==========
Net loss per share............. $(46,710.53) $(1,032.70) $(2,576.11) $ (3.27)
=========== ========== ========== ==========
Shares used in computing net
loss per share............... 152 34,744 11,102 3,766,615
=========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 78
ABGENIX, INC.
STATEMENT OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
REDEEMABLE
CONVERTIBLE REDEEMABLE
REDEEMABLE PREFERRED CONVERTIBLE
CONVERTIBLE STOCK PREFERRED
PREFERRED SUBSCRIPTION STOCK
STOCK RECEIVABLE ISSUABLE
----------- ------------ -----------
<S> <C> <C> <C>
Balance at December 31, 1994............... $ -- $ -- $ --
Contributions from parent................ -- -- --
Net loss................................. -- -- --
-------- ------- -------
Balance at December 31, 1995............... -- -- --
Contributions from parent................ -- -- --
Issuance of 3,750,000 shares of series A
redeemable convertible preferred stock
to parent for $10,000 cash and
assignment of employee notes totalling
$150 in July 1996...................... 10,150 -- --
Issuance of 1,192 shares of common stock
upon exercise of stock options......... -- -- --
Net loss................................. -- -- --
-------- ------- -------
Balance at December 31, 1996............... 10,150 -- --
Contributions from parent................ -- -- --
Issuance of 2,846,542 shares of series B
redeemable convertible preferred stock
in December 1997 for cash at $6.50 per
share, net of issuance costs of
$1,463................................. 17,039 -- --
Conversion of note payable to parent into
666,667 shares of series A redeemable
convertible preferred stock in December
1997................................... 4,000 -- --
Stock subscription to purchase 421,143
shares of series B redeemable
convertible preferred stock at $6.50
per share in December 1997............. -- (2,737) 2,737
Issuance of 176,756 shares of common
stock upon exercise of stock options... -- -- --
Issuance of 55,594 shares of common stock
upon the exercise of stock purchase
rights................................. -- -- --
Deferred compensation for stock options
issued below deemed fair value......... -- -- --
Amortization of deferred compensation.... -- -- --
Net loss................................. -- -- --
-------- ------- -------
Balance at December 31, 1997............... 31,189 (2,737) 2,737
Issuance of 160,000 shares of series C
redeemable convertible preferred stock
at $8.00 per share (unaudited)......... 1,280 -- --
Issuance of 421,143 shares of series B
redeemable convertible preferred stock
at $6.50 per share, net of issuance
cost of $81 (unaudited)................ 2,656 2,737 (2,737)
Conversion of 7,844,352 shares of series
A, series B and series C redeemable
convertible preferred stock to common
stock (unaudited)...................... (35,125) -- --
Issuance of 2,500,000 shares of common
stock at $8.00 per share upon initial
public offering (net of issuance costs
of $2,863) (unaudited)................. -- -- --
Issuance of 375,000 shares of common
stock at $8.00 per share upon the
exercise of the over-allotment option
granted to the underwriters (net of
issuance costs of $210) (unaudited).... -- -- --
Issuance of 114,726 shares of common
stock upon exercise of stock options
(unaudited)............................ -- -- --
Deferred compensation for stock options
issued below deemed fair value
(unaudited)............................ -- -- --
Amortization of deferred compensation
(unaudited)............................ -- -- --
Net loss (unaudited)..................... -- -- --
-------- ------- -------
Balance at September 30, 1998
(unaudited).............................. $ -- $ -- $ --
======== ======= =======
<CAPTION>
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
---------------------------------------------------------------------------------
TOTAL
STOCKHOLDERS'
CONTRIBUTIONS ADDITIONAL EQUITY (NET
COMMON FROM PAID-IN DEFERRED ACCUMULATED CAPITAL
STOCK PARENT CAPITAL COMPENSATION DEFICIT DEFICIENCY)
------- ------------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994............... $ -- $ 1,212 $ -- $ -- $ (1,212) $ --
Contributions from parent................ -- 8,282 -- -- -- 8,282
Net loss................................. -- -- -- -- (8,282) (8,282)
------- ------- ------ ------- -------- --------
Balance at December 31, 1995............... -- 9,494 -- -- (9,494) --
Contributions from parent................ -- 4,783 -- -- -- 4,783
Issuance of 3,750,000 shares of series A
redeemable convertible preferred stock
to parent for $10,000 cash and
assignment of employee notes totalling
$150 in July 1996...................... -- -- -- -- -- --
Issuance of 1,192 shares of common stock
upon exercise of stock options......... 1 -- -- -- -- 1
Net loss................................. -- -- -- -- (7,100) (7,100)
------- ------- ------ ------- -------- --------
Balance at December 31, 1996............... 1 14,277 -- -- (16,594) (2,316)
Contributions from parent................ -- 15,000 -- -- -- 15,000
Issuance of 2,846,542 shares of series B
redeemable convertible preferred stock
in December 1997 for cash at $6.50 per
share, net of issuance costs of
$1,463................................. -- -- -- -- -- --
Conversion of note payable to parent into
666,667 shares of series A redeemable
convertible preferred stock in December
1997................................... -- -- -- -- -- --
Stock subscription to purchase 421,143
shares of series B redeemable
convertible preferred stock at $6.50
per share in December 1997............. -- -- -- -- -- --
Issuance of 176,756 shares of common
stock upon exercise of stock options... 128 -- -- -- -- 128
Issuance of 55,594 shares of common stock
upon the exercise of stock purchase
rights................................. 222 -- -- -- -- 222
Deferred compensation for stock options
issued below deemed fair value......... -- -- 1,776 (1,776) -- --
Amortization of deferred compensation.... -- -- -- 528 -- 528
Net loss................................. -- -- -- -- (35,880) (35,880)
------- ------- ------ ------- -------- --------
Balance at December 31, 1997............... 351 29,277 1,776 (1,248) (52,474) (22,318)
Issuance of 160,000 shares of series C
redeemable convertible preferred stock
at $8.00 per share (unaudited)......... -- -- -- -- -- --
Issuance of 421,143 shares of series B
redeemable convertible preferred stock
at $6.50 per share, net of issuance
cost of $81 (unaudited)................ -- -- -- -- -- --
Conversion of 7,844,352 shares of series
A, series B and series C redeemable
convertible preferred stock to common
stock (unaudited)...................... 35,125 -- -- -- -- 35,125
Issuance of 2,500,000 shares of common
stock at $8.00 per share upon initial
public offering (net of issuance costs
of $2,863) (unaudited)................. 17,137 -- -- -- -- 17,137
Issuance of 375,000 shares of common
stock at $8.00 per share upon the
exercise of the over-allotment option
granted to the underwriters (net of
issuance costs of $210) (unaudited).... 2,790 -- -- -- -- 2,790
Issuance of 114,726 shares of common
stock upon exercise of stock options
(unaudited)............................ 103 -- -- -- -- 103
Deferred compensation for stock options
issued below deemed fair value
(unaudited)............................ -- -- 520 (520) -- --
Amortization of deferred compensation
(unaudited)............................ -- -- -- 448 -- 448
Net loss (unaudited)..................... -- -- -- -- (12,301) (12,301)
------- ------- ------ ------- -------- --------
Balance at September 30, 1998
(unaudited).............................. $55,506 $29,277 $2,296 $(1,320) $(64,775) $ 20,984
======= ======= ====== ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 79
ABGENIX, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------------
1995 1996 1997 1997 1998
------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................ $(8,282) $(7,100) $(35,880) $(28,600) $(12,301)
Adjustments to reconcile net loss to net cash used by
operating activities:
Equity in losses of Xenotech (including the charge for
cross-license and settlement)....................... -- 3,866 12,147 4,740 520
Depreciation and amortization......................... -- 8 1,489 613 1,347
Charge for cross-license and settlement............... -- -- 11,250 11,250 --
Changes for certain assets and liabilities:
Prepaid expenses and other current assets........... -- (58) (392) (814) 180
Deposits and other assets........................... -- (337) (78) (100) (100)
Short-term payable to parent........................ -- 730 -- (2,429) (178)
Payable to Xenotech for cross-license and settlement
obligation........................................ -- -- -- 3,750 --
Accounts payable.................................... -- -- 426 796 48
Deferred revenue from related parties............... -- 376 (376) (376) --
Accrued stock issuance costs........................ -- -- 1,200 -- (1,200)
Other accrued liabilities........................... -- 345 39 (677) (865)
------- ------- -------- -------- --------
Net cash used in operating activities................... (8,282) (2,170) (10,175) (11,847) (12,549)
------- ------- -------- -------- --------
INVESTING ACTIVITIES
Purchases of short-term investments..................... -- (2,982) (15,505) (4,979) (26,148)
Sales of short-term investments at maturity............. -- -- 7,783 7,961 14,562
Capital expenditures.................................... -- (334) (1,075) (2,613) (527)
Contributions to Xenotech............................... -- (3,864) (4,647) (935) (417)
------- ------- -------- -------- --------
Net cash used in investing activities................... -- (7,180) (13,444) (566) (12,530)
------- ------- -------- -------- --------
FINANCING ACTIVITIES
Net proceeds from issuances of redeemable convertible
preferred stock....................................... -- 10,000 17,039 -- 3,936
Proceeds from issuance of note payable to parent........ -- 1,757 -- -- --
Proceeds from long-term debt............................ -- -- 4,300 8,495 --
Contributions from parent............................... 8,282 4,783 -- -- --
Payments under long-term debt........................... -- -- (643) (333) (1,221)
Net proceeds from issuances of common stock............. -- -- 350 13 20,030
------- ------- -------- -------- --------
Net cash provided in financing activities............... 8,282 16,540 21,046 8,175 22,745
------- ------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents.... -- 7,190 (2,573) (4,238) (2,334)
Cash and cash equivalents at the beginning of the
period................................................ -- -- 7,190 7,190 4,617
------- ------- -------- -------- --------
Cash and cash equivalents at the end of the period...... $ -- $ 7,190 $ 4,617 $ 2,952 $ 2,283
======= ======= ======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest.................. $ -- $ 10 $ 632 $ 480 $ 428
======= ======= ======== ======== ========
NON-CASH INVESTING AND FINANCING ACTIVITIES
Allocation of charges related to the cross-license and
settlement from parent and Xenotech................... $ -- $ -- $ 15,000 $ 15,000 $ --
======= ======= ======== ======== ========
Conversion of note payable to parent.................... $ -- $ -- $ 4,000 $ -- $ --
======= ======= ======== ======== ========
Financed property and equipment acquisitions............ $ -- $ 3,314 $ -- $ -- $ --
======= ======= ======== ======== ========
Assignment of note receivable from Xenotech............. $ -- $ 30 $ -- $ -- $ --
======= ======= ======== ======== ========
Assignment of note receivable from parent............... $ -- $ 150 $ -- $ -- $ --
======= ======= ======== ======== ========
Furniture and equipment acquired under capital lease
financing............................................. $ -- $ -- $ 1,968 $ 1,968 $ --
======= ======= ======== ======== ========
Deferred compensation related to grant of certain stock
options............................................... $ -- $ -- $ 1,776 $ -- $ 520
======= ======= ======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 80
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Abgenix, Inc., a Delaware corporation ("Abgenix" or the "Company"),
develops and intends to license and commercialize antibody therapeutic products
for the prevention and treatment of a variety of disease conditions, including
transplant-related diseases, inflammatory and autoimmune disorders and cancer.
The Company has developed a proprietary technology which it believes enables it
to quickly generate high affinity, fully human antibody product candidates to
essentially any disease target appropriate for antibody therapy. The operations
of Abgenix commenced in 1989 and were initially conducted as a research project
within Cell Genesys, Inc., ("Cell Genesys"). On June 24, 1996, Abgenix was
incorporated and subsequently on July 15, 1996 it was organized pursuant to a
Stock Purchase and Transfer Agreement between the Company and Cell Genesys. The
agreement sets forth the terms and conditions for the transfer of the antibody
business and operations within Cell Genesys to Abgenix.
The accompanying financial statements include the operations of Abgenix
since July 15, 1996, and the revenues and expenses of Abgenix as a research
project within Cell Genesys prior to July 15, 1996. The Company was not a
separate business unit or division within Cell Genesys and, therefore, no
separate accounting records existed for the Company during the period it was
operated as a research project within Cell Genesys. All administrative functions
were handled by Cell Genesys and the costs of operations, while part of Cell
Genesys, were estimated from project cost records and were recorded as
contributions. All assets and liabilities for 1994 and 1995 were combined with
Cell Genesys and it was impractical and not meaningful to carve out the balance
sheets for such periods. As a result, it is not possible to present a detailed
statement of cash flows for the Company for the year ended December 31, 1995.
Prior to July 15, 1996, specifically identified revenues and costs such as
research and development were allocated to Abgenix from Cell Genesys. General
and administrative expenses were allocated based on Abgenix research and
development expense as a percentage of Cell Genesys' total research and
development expenses. From July 16, 1996 to July 31, 1997, Cell Genesys
performed certain general and administrative functions on behalf of Abgenix. The
Company estimates that the general and administrative costs would have been
$500,000 to $1,000,000 higher (unaudited) for each year of operation on a stand-
alone basis. The Company believes the allocation methodology used was
reasonable.
In 1997, the Company incurred an aggregate non-recurring charge for
cross-license and settlement of $22,500,000 which represents an allocation of
$11,250,000 from Cell Genesys and an entry to record the equity in the losses of
an equally owned joint venture with JT America, Inc., a medical subsidiary of
Japan Tobacco, Inc. and the Company ("Xenotech") of $11,250,000 (see Note 6).
INTERIM FINANCIAL INFORMATION
The financial information at September 30, 1998 and for the nine months
ended September 30, 1997 and 1998 is unaudited but includes all adjustments,
consisting only of normal recurring adjustments, which the Company considers
necessary for a fair presentation of the financial position at such date and the
operating results and cash flows for those periods. Results for the nine months
ended September 30, 1998 are not necessarily indicative of results for any other
interim period or for the entire year.
INITIAL PUBLIC OFFERING
In July 1998, the Company completed an initial public offering of 2,500,000
shares of its common stock to the public, at a per share price of $8.00. On July
27, 1998 the Company's underwriters exercised
F-7
<PAGE> 81
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
an option to purchase an additional 375,000 shares of common stock at a price of
$8.00 per share to cover over-allotments. The total cash received by the Company
from the offering was approximately $19.9 million, net of issuance costs. Upon
the closing of the initial public offering, each of the outstanding 7,844,352
shares of convertible redeemable preferred stock was automatically converted
into one share of common stock.
REVENUE RECOGNITION
Revenues related to collaborative research agreements with corporate
partners are recognized ratably over the related funding periods for each
contract. For research funding, the Company is required to perform research
activities as specified in each respective agreement on a best efforts basis,
and the Company is reimbursed based on the fees stipulated in the respective
agreements which approximates cost. Deferred revenue may result when the Company
does not incur the required level of effort during a specific period in
comparison to funds received under the respective contracts. Milestone payments
are recognized pursuant to collaborative agreements upon the achievement of the
specified milestone, where no future obligation to perform exists for that
milestone. Nonrefundable signing fees, under which no future obligation to
perform exists, are recognized when the cash is received. Revenues related to
the Xenotech research agreement are recognized net of the Company's related
contributions to Xenotech.
RESEARCH AND DEVELOPMENT
Research and development expenses, including direct and allocated expenses,
consist of independent research and development costs and costs associated with
sponsored research and development.
NET LOSS PER SHARE
In 1997, the Company adopted Financial Accounting Standards Board Statement
of Financial Accounting Standard No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share is computed using the weighted average number of
common shares outstanding and excludes any dilutive effects of options, warrants
and convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. Potentially dilutive
securities have been excluded from the computation, as their effect is
antidilutive.
Pro forma net loss per share has been computed to give effect to the
automatic conversion of redeemable convertible preferred stock into common stock
at the completion of the Company's initial public offering in July 1998, using
the as-if-converted method, from the original date of issuance.
F-8
<PAGE> 82
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
A reconciliation of shares used in calculation of basic and diluted and pro
forma net loss per share follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ----------------------------
1996 1997 1997 1998
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss........................... $(7,100,000) $(35,880,000) $(28,600,000) $(12,301,000)
=========== ============ ============ ============
Basic and diluted:
Weighted-average shares of common
stock outstanding used in
computing basic and diluted
net loss per share............ 152 34,744 11,102 3,766,615
=========== ============ ============ ============
Basic and diluted net loss per
share............................ $(46,710.53) $ (1,032.70) $ (2,576.11) $ (3.27)
=========== ============ ============ ============
Pro forma:
Shares used in computing basic
and diluted net loss per share
(from above).................. 34,744 11,102 3,766,615
Adjusted to reflect the effect of
the assumed conversion of
preferred stock from the date
of issuance................... 3,858,843 3,750,000 5,280,034
------------ ------------ ------------
Weighted-average shares used in
computing pro forma net loss
per share..................... 3,893,587 3,761,102 9,046,649
============ ============ ============
Pro forma net loss per share....... $ (9.22) $ (7.60) $ (1.36)
============ ============ ============
</TABLE>
Had the Company been in a net income position, diluted earnings per share
would have included the shares used in the computation of pro forma net loss per
share as well as an additional 1,168,906, 1,630,093, and 1,763,753 shares
related to outstanding options and warrants not included above, determined using
the treasury stock method at the estimated average fair value, for the years
ended December 31, 1996 and 1997, and for the nine months ended September 30,
1998, respectively.
Net loss per share has not been presented prior to the Company's
organization on July 15, 1996, as there were no outstanding equity securities
prior to that period.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly-liquid investments purchased with a
maturity from the date of purchase of three months or less to be cash
equivalents; investments with maturities in excess of three months are
considered to be short-term investments.
The Company's investment securities are classified as available-for-sale
and carried at fair value. The Company determines the appropriate classification
of securities at the time of purchase and reevaluates such designation as of
each balance sheet date.
DEPRECIATION AND AMORTIZATION
The Company records property and equipment at cost and provides
depreciation using the straight-line method over the estimated useful lives of
the assets, generally two to five years. Furniture and equipment leased under
capital leases is amortized over the shorter of the useful lives or the lease
term. Amortization of leased assets is included in depreciation and amortization
expense and is combined with accumulated depreciation and amortization of the
Company's owned assets.
F-9
<PAGE> 83
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
OTHER RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS 131"), which
required additional disclosures to be adopted beginning in the first quarter of
1998 and on December 31, 1998, respectively. Under SFAS 130, the Company will be
required to display comprehensive income and its components as part of the
Company's full set of financial statements. SFAS 131 requires that the Company
report financial and descriptive information about its reportable operating
segments. The Company has determined that the impact of adopting SFAS 130 and
SFAS 131 on its future financial statement disclosures is not material.
2. COLLABORATION AGREEMENT WITH XENOTECH
XENOTECH
In 1991, Cell Genesys and JT America, Inc. formed Xenotech to develop
genetically modified strains of mice, which can produce fully human monoclonal
antibodies, and to commercialize products generated from these mice. Upon the
creation of Abgenix, Cell Genesys' rights in the joint venture were assigned to
the Company. Xenotech funds its research, which is generally conducted by
Abgenix, through capital contributions from the partners. The Company paid and
expensed as research and development $350,000, $172,500, $172,500 and $150,000
related to licensing the rights to this technology from Xenotech for the years
ended December 31, 1996 and 1997 and the nine months ended September 30, 1997
and 1998, respectively.
The Company is obligated to pay 50% of all Xenotech's funding requirements.
The Company accounts for its investment in Xenotech under the equity method; 50%
of Xenotech's net losses up to the Company's investment amount. Details are as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -----------------
1995 1996 1997 1997 1998
------ ------ -------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Abgenix's share of Xenotech losses... $2,315 $3,306 $ 12,347 $ 8,315 $520
Losses associated with cross-license
and settlement..................... -- -- (11,250) (7,500) --
Difference due to timing and change
in deferred revenue................ (613) 560 (200) 175 --
------ ------ -------- ------- ----
Equity in losses of Xenotech......... $1,702 $3,866 $ 897 $ 990 $520
====== ====== ======== ======= ====
</TABLE>
The Company recognized revenue of $6,200,000, $4,719,000, $1,343,000,
$1,109,000 and $710,000 for the years ended 1995, 1996 and 1997, and for the
nine months ended September 30, 1997 and 1998, respectively, net of its equity
in the losses of the joint venture related to this revenue.
F-10
<PAGE> 84
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
Summary financial information for Xenotech is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------------
1995 1996 1997 1997 1998
-------- ------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total assets.................. $ 1,357 $ 492 $ 7,569 $ 8,032 $ 7,651
Total liabilities............. 601 59 7,556 7,563 7,589
Total revenues................ 4,747 1,912 272 72 310
Total operating expenses...... (11,926) (8,547) (24,964) (16,712) (1,350)
Net loss...................... (7,129) (6,614) (24,680) (16,631) (1,040)
</TABLE>
3. COLLABORATION AND LICENSE AGREEMENTS
CBL LICENSE AGREEMENT
On February 1, 1997, the Company entered into a license agreement for
exclusive worldwide rights to commercialize ABX-CBL. The Company paid an initial
license fee and is further obligated to pay an annual maintenance fee of
$50,000, to commit at least $1,000,000 annually to the development of ABX-CBL
until ABX-CBL receives regulatory approval in any country and to pay royalties
on potential product sales. The Company is also obligated to issue 25,000 shares
of its common stock upon the submission of a Product License Application for the
first indication of the product.
RESEARCH COLLABORATION AND LICENSE OPTION AGREEMENT WITH PFIZER
In December 1997, Abgenix established a research collaboration with Pfizer
Inc. ("Pfizer"). In connection with the execution of the agreement, Pfizer paid
the Company a fee upon signing and may make additional payments to Abgenix upon
completion of certain research milestones. Additionally, Pfizer has an option to
expand the research collaboration. The agreement expires in December 1999.
Concurrent with the execution of the research collaboration agreement,
Pfizer and Abgenix entered into a license and royalty agreement that grants
Pfizer the option to acquire an exclusive, worldwide license to develop, make,
use and sell antibody products derived from the research collaboration. If
Pfizer chooses to exercise its option to expand the research collaboration,
Abgenix could receive potential license fees and milestone payments of up to
approximately $8,000,000 per antigen upon the completion of certain milestones,
including preclinical and clinical trials and receipt of regulatory approval.
Additionally, if a product receives marketing approval from the FDA or an
equivalent foreign agency, the Company is entitled to receive royalties on
future product sales by Pfizer. Pfizer will be responsible for manufacturing,
product development and marketing of any products developed through this
collaboration.
In January 1998, the Company also entered into a stock purchase agreement
with Pfizer to purchase 160,000 shares of the Company's series C redeemable
convertible preferred stock at $8.00 per share. The shares were automatically
converted to 160,000 shares of the Company's common stock upon the completion of
the Company's initial public offering in July 1998.
In October 1998, Pfizer exercised its option to expand its research
collaboration with the Company to include a second undisclosed antigen target in
the field of cancer and has an option for a third antigen target. After the
exercise of an option by Pfizer, the Company could receive potential license
fees and milestone payments of up to approximately $8,000,000 per antigen upon
the completion of certain milestones, including preclinical and clinical trials
and receipt of regulatory approval. Additionally, if a product receives
marketing approval from the FDA or an equivalent foreign agency, the Company is
F-11
<PAGE> 85
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
entitled to receive royalties on future product sales by Pfizer. Pfizer will be
responsible for manufacturing, product development and marketing of any products
developed through this collaboration.
RESEARCH COLLABORATION WITH SCHERING-PLOUGH
In January 1998, Abgenix established a research collaboration with
Schering-Plough Research Institute ("Schering-Plough"). In connection with the
execution of the agreement, Schering-Plough paid the Company a fee upon signing
and will be obligated to make additional payments to Abgenix upon completion of
the research.
In addition, the agreement provides Schering-Plough with an option, for a
limited time, to enter into a research, option and license agreement that
provides Schering-Plough an option to obtain with an exclusive worldwide license
to develop, make, use and sell antibody products derived from the research
collaboration. If the option is exercised, the research, option and license
agreement may provide Abgenix with up to approximately $8,000,000 in additional
research fees and milestone payments upon the completion of certain milestones,
including preclinical and clinical trials and receipt of regulatory approval.
Additionally, if a product receives marketing approval from the FDA or an
equivalent foreign agency, the Company is entitled to receive royalties on
future product sales by Schering-Plough.
RESEARCH LICENSE AND OPTION AGREEMENT WITH GENENTECH
In April 1998, Abgenix established a research collaboration with Genentech
to develop antibody products for an undisclosed antigen designated by Genentech
in the field of growth factor modulation. In June 1998, the Company and
Genentech expanded their collaboration to include a second undisclosed antigen
in the field of cardiovascular research. Under the research license and option
agreement, as amended, Abgenix will allow Genentech to use XenoMouse technology
to generate fully human antibodies to the antigen targets. Genentech is
obligated to make payments to Abgenix for performance of research activities.
In addition, the agreement provides Genentech with options, for a limited
time, to enter into product license agreements that provide Genentech with an
exclusive worldwide license, with respect to the antigen in the field of growth
factor modulation, and a license, with respect to the antigen in the field of
cardiovascular research, to develop, make, use and sell antibody products
derived from the research collaboration. If an option is exercised, a product
license agreement may provide Abgenix with up to approximately $5,500,000 per
antigen target in license fees and milestone payments to be made upon completion
of certain milestones, including clinical trials and receipt of regulatory
approvals. Additionally, if a product receives marketing approval from the FDA
or an equivalent foreign agency, the Company is entitled to receive royalties on
future product sales by Genentech. Genentech will be responsible for
manufacturing, product development and marketing of any product developed
through the collaboration.
RESEARCH AGREEMENTS WITH MILLENNIUM BIOTHERAPEUTICS
In July 1998 and September 1998, the Company established its first and
second research collaboration with Millennium BioTherapeutics in which
Millennium BioTherapeutics will make payments to the Company for performance of
research activities. The July 1998 research collaboration expired in September
1998. In October 1998, the Company entered into a research license and option
agreement that provides Millennium BioTherapeutics with an option to obtain a
license to develop, make, use and sell antibody products derived from the July
1998 research collaboration. If the option is exercised, the research license
and option agreement may provide Abgenix with up to approximately $7,500,000 in
license fees and milestone payments to be made in the future upon completion of
certain milestones,
F-12
<PAGE> 86
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
including completion of research, clinical trials and the receipt of regulatory
approvals. Additionally, if a product receives marketing approval from the FDA
or equivalent foreign agency, the Company is entitled to receive royalties on
future product sales by Millennium BioTherapeutics.
4. AVAILABLE-FOR-SALE SECURITIES
All of the Company's available-for-sale securities consist of commercial
paper and U.S. government obligations and are classified as short-term
investments. All investments mature within two years. These investments are
carried at market, which approximates cost. There were no significant unrealized
gains or losses related to these investments.
The following is a summary of available-for-sale securities at fair value,
which approximates amortized cost:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Commercial paper................................. $10,093 $12,038
U.S. government obligations...................... -- 2,881
------- -------
Total.................................. $10,093 $14,919
======= =======
</TABLE>
Included in cash and cash equivalents at December 31, 1996 and 1997 are
available-for-sale securities of $7,111,000 and $4,215,000, respectively.
Included in short-term investments at December 31, 1996 and 1997 are
available-for-sale securities of $2,982,000 and $10,704,000, respectively. At
December 31, 1997, the average remaining maturity of the portfolio is less than
12 months.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Furniture, machinery and equipment................. $ 611 $2,188
Leasehold improvements............................. 3,037 4,503
------ ------
3,648 6,691
Less accumulated depreciation and amortization..... -- (915)
------ ------
$3,648 $5,776
====== ======
</TABLE>
The Company did not record any depreciation on assets in 1996 as such
assets were all purchased in the last month of the year. Property and equipment
financed under capital leases was $1,968,000 at December 31, 1997. Accumulated
amortization related to this equipment totaled $383,000 at December 31, 1997.
6. COMMITMENTS
LONG-TERM NOTE PAYABLE TO CELL GENESYS
In July 1996, the Company issued a $4,000,000 Convertible Promissory Note
(the "Note") to Cell Genesys which the Company could draw against in order to
pay for services provided by Cell Genesys. As of December 31, 1996, the Company
had drawn $1,757,000 against the Note. Interest accrued at the rate
F-13
<PAGE> 87
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
of 6.82% per annum on the outstanding principal until July 15, 1997, whereupon
the accrued interest was added to the outstanding principal of the Note. The
entire principal and accrued interest amount was due on or before July 14, 2000.
In December 1997, the Company had drawn $4,000,000 against the Note and Cell
Genesys exercised its option to convert the Note into 666,667 shares of Series A
convertible preferred stock at a conversion price of $6.00 per share. Upon the
completion the Company's initial public offering, these shares were
automatically converted to 666,667 shares of the Company's common stock.
SHORT-TERM PAYABLE TO CELL GENESYS
Until June 30, 1997, the Company reimbursed Cell Genesys for payments made
to third parties on behalf of the Company. At December 31, 1997 and September
30, 1998, the Company owed $212,000 and $34,000 to Cell Genesys for this
reimbursement.
LOAN
On January 24, 1997, the Company secured a loan with a bank in the amount
of $4,300,000 in order to finance tenant improvements on its facility in
Fremont, California. The loan matures in January 2001 and bears an annual
interest rate of prime plus 1.0% (9.5% for the year ended December 31, 1997).
The loan was guaranteed by Cell Genesys until the Company completed its initial
public offering of its common stock in July 1998. The loan is secured by
substantially all tangible and intangible assets of the Company.
CAPITAL LEASE
On March 28, 1997, the Company entered into a lease agreement with a
financing company under which the Company may finance up to $3,000,000 of its
laboratory and office equipment. The lease term is 48 months and was guaranteed
by Cell Genesys until the Company completed an initial public offering of its
common stock in July 1998.
Future principal payments under the loan and minimum payments under the
capital lease are as follows:
<TABLE>
<CAPTION>
CAPITAL TOTAL
LOAN LEASE PAYMENTS
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Year ending December 31,
1998......................................... $ 1,259 $ 594 $ 1,853
1999......................................... 1,259 594 1,853
2000......................................... 1,258 594 1,852
2001......................................... 105 432 537
------- ------ -------
Total................................ 3,881 2,214 6,095
Less amount representing interest.............. -- (470) (470)
------- ------ -------
Present value of future payments............... 3,881 1,744 5,625
Less current portion........................... (1,259) (387) (1,646)
------- ------ -------
Noncurrent portion............................. $ 2,622 $1,357 $ 3,979
======= ====== =======
</TABLE>
The carrying value of the loan approximates fair value at December 31,
1997. The fair value of the loan was estimated using discounted cash flow
analysis, based on the incremental borrowing rates currently available to the
Company for borrowings with similar terms and maturity.
F-14
<PAGE> 88
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
FACILITY LEASE
In October 1996, the Company signed an operating lease commencing February
1, 1997, for its facilities in Fremont, California. The lease expires in January
2007; however, the Company has the option to extend the term through 2016.
Future minimum payments under the noncancelable operating lease at December 31,
1997 are:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year ending December 31,
1998................................................. $ 862
1999................................................. 891
2000................................................. 923
2001................................................. 955
2002................................................. 987
Thereafter............................................. 4,360
------
Total lease payments......................... $8,978
======
</TABLE>
Rent expense was approximately $567,000 for the year ended December 31,
1997.
CHARGE FOR CROSS-LICENSE AND SETTLEMENT
On March 27, 1997, Cell Genesys announced, along with Abgenix, Xenotech and
Japan Tobacco, Inc., that it had signed a comprehensive patent cross-license and
settlement agreement with GenPharm that resolved all related litigation and
claims between the parties. As initial consideration for the cross-license and
settlement agreement, Cell Genesys issued a note to GenPharm due September 30,
1998 for $15,000,000 payable by Cell Genesys and convertible into shares of Cell
Genesys common stock. Of this note, $3,750,000 satisfied certain of Xenotech's
obligations under the agreement. Japan Tobacco also made an initial payment.
During 1997, two patent milestones were achieved and Xenotech was obligated to
pay $7,500,000 for each milestone. Xenotech paid $7,500,000 to satisfy the first
milestone and has recorded a payable to GenPharm for the remaining $7,500,000.
The Company recorded a liability of $3,750,000 in its balance sheet at December
31, 1997, representing its share of the Xenotech obligation, since the joint
venture partners are equally obligated to fund the cash requirements of
Xenotech. The Company made the payment of $3,750,000 in November 1998. No
additional payments will accrue under this agreement.
The Company has recognized as a non-recurring charge for cross-license and
settlement, a total of $22,500,000 ($18,750,000 through September 30, 1997). The
full amount of the cross-license and settlement costs has been recognized in the
Company's statement of operations for the year ended December 31, 1997 because
the Company has determined that the cross-license received by the Company from
GenPharm is non-exclusive and has no alternative future uses for the Company.
Pursuant to Staff Accounting Bulletin 55, Cell Genesys allocated its
portion of the settlement obligation, $11,250,000, to Abgenix since the related
technology was contributed upon formation of Abgenix. The $15,000,000 note
issued by Cell Genesys was recorded as a capital contribution by Abgenix. In
accordance with the joint venture agreement, Abgenix has also recorded an
expense of $11,250,000 representing 50% of the Xenotech expense.
F-15
<PAGE> 89
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
7. STOCKHOLDERS' EQUITY
COMMON STOCK
Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up of
the Company, holders of common stock would be entitled to share in the Company's
assets remaining after the payment of liabilities and the satisfaction of any
liquidation preference granted to the holders of any outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion rights
or other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are, and
the shares of common stock offered by the Company in this offering, when issued
and paid for, will be, fully paid and nonassessable. The rights, preferences and
privileges of the holders of common stock are subject to, and may be adversely
affected by the rights of the holders of shares of any series of preferred
stock, which the Company may designate in the future.
PREFERRED STOCK
The Board of Directors is authorized, without any further action by the
stockholders, subject to any limitations prescribed by law, without stockholder
approval, from time to time to issue up to an aggregate of 5,000,000 shares of
preferred stock, $0.0001 par value per share, in one or more series, each of
such series to have such rights and preferences, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be determined by the Board of Directors. The rights of the
holders of common stock will be subject to, and may be adversely affected by,
the rights of holders of any preferred stock that may be issued in the future.
Issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, a majority of the outstanding voting
stock of the Company. The Company has no present plans to issue any shares of
preferred stock.
WARRANTS
In connection with the loan guaranteed by Cell Genesys in January 1997, the
Company issued a warrant to purchase 71,667 shares of common stock at an
exercise price of $6.00 per share to Cell Genesys. The warrants are exercisable
immediately and expire three years from issuance.
In connection with the loan guaranteed by Cell Genesys in March 1997, the
Company issued a second warrant to purchase 50,000 shares of common stock at an
exercise price of $6.00 per share to Cell Genesys. The terms for exercise and
expiration are the same as the January 1997 warrants.
The fair value of the above warrants was insignificant for accounting
purposes.
1996 INCENTIVE STOCK PLAN
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation," ("SFAS 123") requires use of option valuation models
that were not developed for use in valuing
F-16
<PAGE> 90
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock option equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
The 1996 Incentive Stock Plan (the "Plan") provides for the granting of
options to purchase common stock to employees, outside directors and consultants
of the Company. Stock purchase rights are granted only to employees or
consultants. The Company grants shares of common stock for issuance under the
Plan at no less than the fair value of the stock (at a price determined by the
Board of Directors for nonqualified options and stock purchase rights). Options
granted under the Plan generally have a term of ten years and vest over four
years at the rate of 25% one year from the grant date and 1/48 monthly
thereafter.
Information with respect to the Plan activity is as follows:
<TABLE>
<CAPTION>
SHARES NUMBER OF WEIGHTED
AVAILABLE SHARES AVERAGE
FOR GRANT OUTSTANDING EXERCISE PRICE
---------- ----------- --------------
<S> <C> <C> <C>
Authorized at inception................ 1,600,000 -- --
Options granted below fair value..... (1,185,100) 1,185,100 $0.60
Options exercised.................... -- (1,192) $0.60
Options canceled..................... 15,002 (15,002) $0.60
---------- --------- -----
Balances at December 31, 1996.......... 429,902 1,168,906 $0.60
Authorized............................. 791,250 -- --
Options granted below fair value..... (676,644) 676,644 $2.42
Options exercised.................... -- (232,350) $1.51
Options canceled..................... 104,774 (104,774) $1.11
---------- --------- -----
Balances at December 31, 1997.......... 649,282 1,508,426 $1.24
Authorized (unaudited)................. 500,000 -- --
Options granted (unaudited).......... (294,551) 294,551 $6.46
Options exercised (unaudited)........ -- (114,726) $0.90
Options canceled (unaudited)......... 46,165 (46,165) $2.52
---------- --------- -----
Balances at September 30, 1998......... 900,896 1,642,086 $2.16
========== ========= =====
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$0.60 to $5.00. The following table summarizes information about options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------------------
REMAINING NUMBER OF
EXERCISE NUMBER OF CONTRACTUAL OPTIONS
PRICES OPTIONS LIFE, IN YEARS EXERCISABLE
-------- --------- -------------- -----------
<S> <C> <C> <C>
$0.60................................... 1,089,610 8.66 257,697
$1.00................................... 3,800 9.32 --
$2.50................................... 315,416 9.45 19,921
$4.00................................... 74,800 9.64 5,817
$5.00................................... 24,800 9.95 --
--------- -------
1,508,426 283,435
========= =======
</TABLE>
From inception to December 31, 1997, options to purchase a total of
1,861,744 shares of common stock were granted at prices ranging from $0.60 to
$5.00 per share. Deferred compensation of $1,776,000
F-17
<PAGE> 91
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
was recorded for these option grants based on the deemed fair value of common
stock ranging from $1.20 to $6.50 per share. The Company amortized $528,000 of
this balance during the year ended December 31, 1997. In the first quarter of
1998, the Company granted options to purchase 260,175 shares of common stock at
$6.00 per share for which deferred compensation of approximately $520,000 was
recorded based on the deemed fair value of common stock at $8.00 per share.
During the second and third quarters of 1998, the Company granted an additional
34,376 options to purchase shares of common stock at prices ranging from $5.00
to $10.00 per share. No deferred compensation expense was recorded as the
options were granted at the then current market price of the stock on the date
of the grant.
PRO FORMA INFORMATION
Pro forma information regarding net loss and net loss per share is required
by SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following assumptions for 1996 and 1997,
respectively: risk-free interest rate of 6.65% and 6.46%; no dividend yield in
1996 or 1997; volatility factor of 0.68 and 0.67; and an expected life of the
option of five years in 1996 and 1997. These same assumptions were applied in
the determination of the option values related to stock options granted to
non-employees, which value has been recorded in the financial statements.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
The weighted-average fair value of options granted during the years ended
December 31, 1996 and 1997 were $0.87 and $3.00 per share. All options were
granted at exercise prices below the deemed fair value of the underlying common
stock. The following table illustrates what net loss would have been had the
Company accounted for its stock-based awards under the provisions of SFAS 123.
Pro forma amounts may not be representative of future years.
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
(IN THOUSANDS,
<CAPTION>
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Net loss:
As reported................................. $(7,100) $(35,880)
Pro forma................................... $(7,190) $(36,103)
Net loss per share:
As reported................................. $ (1.89) $ (9.22)
Pro forma................................... $ (1.92) $ (9.27)
</TABLE>
STOCK PLANS
In March 1998, the board of directors adopted the 1998 Employee Stock
Purchase Plan, the 1998 Director Option Plan and approved the amended and
restated 1996 Incentive Stock Plan, subject to stockholder approval. An
additional 500,000 shares of common stock have been reserved for issuance
F-18
<PAGE> 92
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
under the amended and restated 1996 Incentive Stock Plan and 250,000 shares of
common stock have been reserved under both the 1998 Employee Stock Purchase Plan
and the 1998 Director Option Plan.
The Employee Stock Purchase Plan also provides for an annual increase,
commencing in 1999, in the number of shares reserved for issuance under the
Employee Stock Purchase Plan equal to the lesser of 250,000, 1% of the Company's
outstanding capitalization or a lesser amount determined by the Board, such that
the maximum number of shares which could be reserved under the Employee Stock
Purchase Plan over its term would be 2,500,000 shares.
8. OTHER RELATED PARTY TRANSACTIONS
Through July 31, 1997, pursuant to the terms of the Service Agreement with
Cell Genesys, Cell Genesys provided Abgenix certain administrative services. In
addition, beginning July 15, 1996, the Company leased equipment from Cell
Genesys on a month-to-month basis pursuant to the Stock Purchase and Transfer
Agreement. Total fees incurred under the Services Agreement and the Stock
Purchase and Transfer Agreement were approximately $1,816,000, $825,000, $78,000
and $287,000 in 1996, 1997, and the nine months ended September 30, 1997 and
1998, respectively. The Company chose to draw down on its Promissory Note with
Cell Genesys in order to pay for the fees incurred through December 1997. In
December 1997, the entire principal amount of the Promissory Note was converted
into preferred stock, which subsequently was automatically converted to common
stock upon the completion the Company's initial public offering of its common
stock.
In addition, the Company had an agreement with Cell Genesys under which the
Company provided immunization services as requested by Cell Genesys. Under this
agreement, the Company recognized revenue of $100,375 and $111,000 in 1996 and
1997, respectively.
On December 31, 1996, the Company purchased Xenotech's remaining laboratory
equipment. The Company paid $154,360, which approximated net book value at the
time of purchase.
In July 1996, the Company assumed from Cell Genesys a $100,000 loan issued
to a Director and officer. The loan did not bear interest and was evidenced by a
promissory note secured by the common stock of Cell Genesys owned by the
Director and officer. The note was repaid in September 1997.
In May 1997, the Company granted a 10-year loan for $100,000 to an officer
of the Company. Interest is accrued per annum at 6.6% beginning May 2002. The
loan is payable in five equal installments beginning June 2003.
On February 27, 1998, the Chief Financial Officer and the Company entered
into a Relocation Loan Agreement pursuant to which Abgenix loaned $100,000 to
the Chief Financial Officer in exchange for a promissory note secured by a deed
of trust. No interest accrues on the loan until June 30, 2003.
9. INCOME TAXES
As of December 31, 1997, the Company had federal net operating loss
carryforwards of approximately $15,400,000. The Company also had federal
research and development tax credit carryforwards of approximately $220,000 as
of December 31, 1997. The Company's net operating loss carryforwards exclude
losses incurred prior to the organization of Abgenix in July 1996. Further, the
amounts associated with the cross-license and settlement have been expensed for
financial statement accounting purposes and have been capitalized and will be
amortized over a period of approximately fifteen years for tax purposes. The net
operating loss and credit carryforwards will expire in the years 2011 through
2012, if not utilized.
F-19
<PAGE> 93
ABGENIX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Significant components of the Company's deferred tax assets for federal and
state income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
----- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............... $ 700 $ 5,400
Research credit carryforwards.................. 100 400
Capitalized research and development........... 100 200
Capitalized cross-license and settlement....... -- 8,000
Other, net..................................... -- 400
----- --------
Net deferred tax assets.......................... 900 14,400
Valuation allowance.............................. (900) (14,400)
----- --------
Total.................................. $ -- $ --
===== ========
</TABLE>
The net valuation allowance increased by $900,000 during the year ended
December 31, 1996. Deferred tax assets relate primarily to net operating loss
carryforwards and to the capitalization of the cross-license and settlement
agreement.
10. SUBSEQUENT EVENTS (UNAUDITED)
TECHNOLOGY AGREEMENT WITH AVI
In January 1999, the Company entered into a XenoMouse technology agreement
with AVI BioPharma ("AVI") to generate fully human antibodies to human chorionic
gonadotropin (hCG) for the treatment of various cancers. AVI, of Portland,
Oregon, is a publicly traded biotechnology company.
TECHNOLOGY AGREEMENT WITH CENTOCOR
In December 1998, the Company entered into a XenoMouse technology agreement
with Centocor to generate fully human antibodies to an undisclosed Centocor
antigen in the cardiovascular field. Centocor, of Malvern, Pennsylvania, is a
developer and marketer of antibody-based products.
TECHNOLOGY AGREEMENT WITH RCT
In December 1998, the Company entered into a XenoMouse technology agreement
with Research Corporation Technologies ("RCT") to generate fully human
antibodies to CD45rb. Resultant antibody product candidates could potentially be
used in treating organ transplant rejection and autoimmune disorders. RCT, of
Tucson, Arizona, is a corporation involved in technology transfer between
universities and industry. Under the RCT agreement, Abgenix may receive the
greater of pre-set minimum license fees, milestone and royalty payments or a
percentage of sublicense income received by RCT.
F-20
<PAGE> 94
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Xenotech, LP
We have audited the accompanying balance sheets of Xenotech, LP (a
development stage enterprise) as of December 31, 1996 and 1997, and the related
statements of operations, partners' capital and cash flows for each of the three
years in the period ended December 31, 1997 and for the period from inception
(June 12, 1991) to December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Xenotech, LP (a development
stage enterprise) at December 31, 1996 and 1997 and the results of its
operations and its cash flows for each of the three years ended December 31,
1997 and for the period from inception (June 12, 1991) to December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
January 23, 1998
F-21
<PAGE> 95
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Cash..................................................... $ 292 $ 58 $ 20
Short-term investments................................... -- 3,750 3,895
Prepaid expenses and other current assets................ 200 11 3,736
Receivable from partner.................................. -- 3,750 --
-------- -------- --------
Total current assets........................... $ 492 $ 7,569 $ 7,651
======== ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities...................................... $ 59 $ 56 $ 89
Payable related to cross-license and settlement
agreement.............................................. -- 7,500 7,500
-------- -------- --------
Total current liabilities...................... 59 7,556 7,589
Partners' capital:
Paid-in capital........................................ 36,486 60,746 61,836
Deficit accumulated during the development stage....... (36,053) (60,733) (61,774)
-------- -------- --------
Total partners' capital........................ 433 13 62
-------- -------- --------
Total liabilities and partners' capital........ $ 492 $ 7,569 $ 7,651
======== ======== ========
</TABLE>
See accompanying notes.
F-22
<PAGE> 96
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED INCEPTION
YEAR ENDED DECEMBER 31, SEPTEMBER 30, (JUNE 12, 1991)
---------------------------- ------------------ SEPTEMBER 30,
1995 1996 1997 1997 1998 1998
------- ------- -------- -------- ------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Research and license revenues
from partners................... $ 4,747 $ 1,912 $ 272 $ 72 $ 310 $ 10,614
Expenses:
Research and development........ 11,270 8,240 2,396 1,668 1,273 48,382
General and administrative...... 656 307 98 64 78 1,717
Cross-license and settlement
expense...................... -- -- 22,470 14,980 -- 22,470
------- ------- -------- -------- ------- --------
Total expenses.......... 11,926 8,547 24,964 16,712 1,351 72,569
Interest income................... 50 21 12 9 -- 181
------- ------- -------- -------- ------- --------
Net loss.......................... $(7,129) $(6,614) $(24,680) $(16,631) $(1,041) $(61,774)
======= ======= ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-23
<PAGE> 97
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
LIMITED PARTNERS
------------------------ TOTAL
GENERAL JAPAN PARTNERS'
PARTNER TOBACCO INC. ABGENIX CAPITAL
------- ------------ -------- ---------
<S> <C> <C> <C> <C>
Capital contributed at inception............... $ 60 $ 4,750 $ -- $ 4,810
Capital distribution of interest income........ -- -- (34) (34)
Net loss....................................... (47) (4,705) 32 (4,720)
----- -------- -------- --------
Balance at December 31, 1991..................... 13 45 (2) 56
Capital contributed............................ 130 5,500 -- 5,630
Capital distribution of interest income........ -- -- (1) (1)
Net loss....................................... (55) (5,481) 4 (5,532)
----- -------- -------- --------
Balance at December 31, 1992..................... 88 64 1 153
Capital contributed............................ 12 6,800 700 7,512
Net loss....................................... (75) (6,770) (607) (7,452)
----- -------- -------- --------
Balance at December 31, 1993..................... 25 94 94 213
Capital contributed............................ 40 5,000 -- 5,040
Net loss....................................... (47) (4,780) 220 (4,607)
----- -------- -------- --------
Balance at December 31, 1994..................... 18 314 314 646
Capital contributed............................ 72 4,833 2,333 7,238
Net loss....................................... (71) (4,779) (2,279) (7,129)
----- -------- -------- --------
Balance at December 31, 1995..................... 19 368 368 755
Capital contributed............................ 63 3,114 3,115 6,292
Net loss....................................... (66) (3,274) (3,274) (6,614)
----- -------- -------- --------
Balance at December 31, 1996..................... 16 208 209 433
Capital contributed............................ 230 12,015 12,015 24,260
Net loss....................................... (246) (12,217) (12,217) (24,680)
----- -------- -------- --------
Balance at December 31, 1997..................... -- 6 7 13
Capital contributed (unaudited)................ 10 540 540 1,090
Net loss (unaudited)........................... (10) (515) (516) (1,041)
----- -------- -------- --------
Balance at September 30, 1998 (unaudited)........ $ -- $ 31 $ 31 $ 62
===== ======== ======== ========
</TABLE>
See accompanying notes.
F-24
<PAGE> 98
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS ENDED INCEPTION
YEAR ENDED DECEMBER 31, SEPTEMBER 30, (JUNE 12, 1991)
---------------------------- ------------------ SEPTEMBER 30,
1995 1996 1997 1997 1998 1998
------- ------- -------- -------- ------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss.......................... $(7,129) $(6,614) $(24,680) $(16,631) $(1,041) $(61,774)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Charge for cross-license and
settlement................... -- -- 7,485 3,735 -- 7,485
Depreciation and amortization
expense...................... 71 74 8 8 -- 326
Changes in certain assets and
liabilities:
Decrease (increase) in prepaid
and other current assets..... (109) 108 181 112 (3,725) (3,736)
Decrease (increase) in
receivable from partner...... (30) 30 (3,750) (7,500) 3,750 --
Increase (decrease) in accrued
liabilities.................. 292 (298) (3) 4 33 89
Decrease in deferred revenue.... (1,650) (250) -- -- -- --
Increase in payable for
cross-license settlement..... -- -- 7,500 7,500 -- 7,500
------- ------- -------- -------- ------- --------
Net cash used in operating
activities...................... (8,555) (6,950) (13,259) (12,772) (983) (50,110)
------- ------- -------- -------- ------- --------
CASH USED IN INVESTING ACTIVITIES
Capital expenditures.............. (62) -- -- -- -- (325)
Purchases of short-term
investments..................... -- -- (3,750) -- (145) (3,895)
------- ------- -------- -------- ------- --------
Net cash used by investing
activities...................... (62) -- (3,750) -- (145) (4,220)
------- ------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Capital contributions............. 7,237 6,292 16,775 12,932 1,090 54,350
------- ------- -------- -------- ------- --------
Net increase (decrease) in cash... (1,380) (658) (234) 160 (38) 20
Cash at beginning of period....... 2,330 950 292 292 58 --
------- ------- -------- -------- ------- --------
Cash at end of period............. $ 950 $ 292 $ 58 $ 452 $ 20 $ 20
======= ======= ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-25
<PAGE> 99
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
1. ORGANIZATION AND BUSINESS
Xenotech, LP, a California limited partnership and a development stage
enterprise (the "Partnership"), was organized on June 12, 1991 pursuant to a
Limited Partnership Agreement between Xenotech, Inc. (the "General Partner"),
Cell Genesys, Inc. ("Cell Genesys") and JT Immunotech USA, Inc., the predecessor
company of JT America, Inc. and a medical subsidiary of Japan Tobacco, Inc. ("JT
America"), (the "Limited Partners"), to develop genetically modified strains of
mice which can produce fully human monoclonal antibodies, and to commercialize
products generated therefrom. On July 15, 1996, Cell Genesys transferred its
partnership interest to its subsidiary, Abgenix Inc. ("Abgenix").
The General Partner must make cash contributions as necessary to maintain a
minimum capital balance of 1% of the total positive capital account balances for
the Partnership. Since July 1995, net losses are allocated 49.5% to Abgenix,
49.5% to JT America and 1% to the General Partner. Prior to July 1995, operating
expenses were allocated 99% to JT America and 1% to the General Partner until JT
America had been allocated, on a cumulative basis, partnership losses and
deductions in an amount equal to the sum of JT America's total research support
capital contributions and 50% of JT America's initial capital contribution.
Since 1992, interest income has been allocated 49.5% to Abgenix, 49.5% to JT
America and 1% to the General Partner. No allocation of expenses and losses
shall create a deficit in the Limited Partners' capital accounts. Such item, to
the extent it would increase or create such a deficit, shall be allocated 100%
to the General Partner. Cash distributions are generally to be made in
accordance with the percentage interests.
See related discussion in Note 3 -- Related Party Transactions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Research revenues from partners or their affiliates are recorded when
earned as defined under the terms of the respective collaboration agreements.
Payments received in advance under these agreements are recorded as deferred
revenue until earned (see Notes 3 and 4).
DEPRECIATION
The Partnership depreciates equipment using the straight-line method over
the estimated useful lives of the assets, generally four years.
INCOME TAXES
The financial statements include no provision for income taxes as
Partnership income or loss is reported in the Partners' separate income tax
returns.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-26
<PAGE> 100
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
INTERIM FINANCIAL INFORMATION
The financial information at September 30, 1998 and for the nine months
ended September 30, 1997 and 1998 is unaudited but includes all adjustments,
consisting only of normal recurring adjustments, which the Partnership considers
necessary for a fair presentation of the financial position at such date and the
operating results and cash flows for those periods. Results for the nine months
ended September 30, 1998 are not necessarily indicative of results for any other
interim period or for the entire year.
3. RELATED PARTY TRANSACTIONS
Abgenix provides contract research and development services to the
Partnership to develop genetically modified strains of mice, which can produce
human monoclonal antibodies pursuant to a collaboration agreement under which
Abgenix receives certain minimum payments. During the years ended 1995, 1996 and
1997 and the quarters ended September 30, 1997 and 1998, the Partnership paid
Abgenix $5,300,000, $1,200,000, $2,300,000, $1,634,000 and $1,230,000,
respectively ($42,430,000 for the period from inception to September 30, 1998)
to perform research.
In January 1994, the Partnership, Abgenix and JT America executed an
agreement creating the Xenotech Division within Abgenix to conduct ongoing
preclinical research of human monoclonal antibodies derived from the genetically
modified strains of mice. Abgenix and Japan Tobacco, Inc. ("Japan Tobacco"), the
indirect parent company of JT America, are providing significant funding to the
Partnership for research funding and in consideration of the Partnership
granting marketing rights for specified products in certain territories to
Abgenix and Japan Tobacco (see Note 4). The Partnership reimbursed Abgenix for
the costs of the operation of the Xenotech Division. During 1995 and 1996, the
Partnership recognized expenses of $5,500,000 and $5,500,000, respectively
($13,300,000 for the period from inception to December 31, 1997) which were paid
to Abgenix for the costs of operating the Xenotech Division.
Pursuant to an agreement dated June 28, 1996, the Xenotech Division was
terminated as of December 31, 1996. In conjunction with this agreement, Xenotech
paid Abgenix $1,200,000 to satisfy Xenotech's obligations under the Xenotech
Division Research Agreement. In addition, Abgenix purchased Xenotech's capital
equipment at net book value, and was assigned Xenotech's note receivable, which
was reflected as a reduction of capital contributions.
4. RESEARCH REVENUES
The Partnership recorded research and license revenues of $4,700,000,
$1,900,000 and $272,000 for the years ended December 31, 1995, 1996 and 1997,
respectively. For the nine months ended September 30, 1997 and 1998 the amounts
recorded were $72,000 and $310,000, respectively. The research revenues were
derived from research payments made by Japan Tobacco and Abgenix. Of research
payments made by Japan Tobacco and Abgenix, $250,000 was deferred revenue at
December 31, 1995.
5. CROSS-LICENSE AND SETTLEMENT AGREEMENT
On March 27, 1997, Cell Genesys announced, along with Abgenix, Xenotech and
Japan Tobacco, that it had signed a comprehensive patent cross-license and
settlement agreement with GenPharm, International, Inc. ("GenPharm"), a
subsidiary of Medarex, Inc., that resolved all related litigation and claims
between the parties. As initial consideration for the cross-license and
settlement agreement, Cell Genesys issued a note to GenPharm due September 30,
1998 for $15,000,000 payable by Cell Genesys and
F-27
<PAGE> 101
XENOTECH, LP
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION PERTAINING TO THE PERIODS ENDED
SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED)
convertible into shares of Cell Genesys common stock. Of this note, $3,750,000
satisfied certain of Xenotech's obligations under the agreement. Japan Tobacco
also made an initial payment. During 1997, two patent milestones were achieved
and Xenotech was obligated to pay $7,500,000 for each milestone. Xenotech paid
$7,500,000 to satisfy the first milestone and recorded a payable to GenPharm for
the remaining $7,500,000, which was paid in November 1998. No additional
payments will accrue under this agreement. Xenotech has recognized as a
non-recurring charge for cross-license and settlement, a total of $22,500,000.
F-28
<PAGE> 102
DESCRIPTION OF GRAPHICS
PAGE 32:
HEADER: "ANTIBODY STRUCTURE"
This illustration shows a Y-shaped antibody structure composed of two
"Heavy Chains" and two "Light Chains." The heavy chains form the base and
branches of the "Y," while the shorter light chains only run parallel to the
arms of the "Y." A legend indicates that shaded areas represent "Constant
Domain," and unshaded areas represent "Variable Domain." The top halves of the
light chains are unshaded, while the remainder is shaded. The upper tips of the
heavy chains are unshaded, while the remainder is shaded.
PAGE 33:
Four gene segments, represented by numerically labeled squares within
rectangles, are labeled "DNA before recombination (heavy chain)." One arrow
from a particular section of each of the four segments points toward a combined
segment and demonstrates how recombination produces an antibody gene. The
"Antibody gene assembled by recombination" is represented by a rectangle
containing four numerically labeled squares. An arrow leads from this antibody
gene to a Y-shaped antibody, labeled "Antibody heavy chain produced by gene."
PAGE 35:
HEADER: "EVOLUTION OF ANTIBODY TECHNOLOGIES"
This diagram depicts four Y-shaped figures, extending horizontally across
the page, which represent antibodies produced by four alternate methods. From
left to right, the figures are labeled "Ordinary Mouse," "Chimeric,"
"Humanized" and "XenoMouse," with arrows connecting the labels. A legend
indicates that shaded areas represent mouse protein while unshaded areas
represent human protein. The left-most Y-shaped figure is entirely shaded and
below is labeled "100% Mouse Protein." The next figure from the left is
unshaded with a thick shaded stripe on each upper arm of the "Y" and below is
labeled "34% mouse protein." The following figure from the left is unshaded
with three small shaded stripes on each upper arm of the "Y" and below is
labeled "10% mouse protein." The right-most figure is completely unshaded and
below is labeled "Human."
<PAGE> 103
LOGO
<PAGE> 104
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by Abgenix in
connection with the registration of the common stock hereunder. All of the
amounts shown are estimates except for the SEC registration fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
-----------
<S> <C>
SEC Registration Fee........................................ $ 4,940.00
Blue Sky Qualification Fees and Expenses.................... 5,000.00
Printing and Engraving Expenses............................. 150,000.00
Legal Fees and Expenses..................................... 150,000.00
Accounting Fees and Expenses................................ 75,000.00
Transfer Agent and Registrar Fees and Expenses.............. 10,000.00
Miscellaneous Expenses...................................... 105,060.00
-----------
Total............................................. $500,000.00
===========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Our Amended and Restated Certificate of Incorporation and our
Amended and Restated Bylaws provide for indemnification of our directors,
officers, employees and other agents to the extent and under the circumstances
permitted by the Delaware General Corporation Law. We have also entered into
agreements with our directors and executive officers that require Abgenix among
other things to indemnify them against certain liabilities that may arise by
reason of their status or service as directors and executive officers to the
fullest extent permitted by Delaware law. We have also purchased directors and
officers liability insurance, which provides coverage against certain
liabilities including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since our incorporation (June 24, 1996), we have issued and sold the
following unregistered securities:
(1) On July 15, 1996, we issued 1,691,667 shares of series A senior
convertible preferred stock to Cell Genesys in exchange for $10.0 million.
(2) On July 15, 1996, we issued 2,058,333 shares of series 1
subordinated convertible preferred stock to Cell Genesys, and in exchange,
Cell Genesys contributed research, development and manufacturing
technology, as well as patents and other intellectual property specific to
the antibody therapy programs to be pursued by Abgenix, including Cell
Genesys' interest in its joint venture with Japan Tobacco.
(3) On July 15, 1996, Abgenix, in exchange for a loan in the principal
amount of up to $4,000,000, issued a convertible promissory note to Cell
Genesys convertible at an exercise price per share of $6.00 into up to
666,667 shares of series A convertible preferred stock.
(4) From July 15, 1996 to October 22, 1998, we granted options to
purchase 2,156,295 shares of common stock to employees, directors and
consultants under the 1996 Plan at exercise prices ranging from $0.60 to
$10.00 per share. Of the 2,156,295 shares granted, 1,622,008 remain
outstanding,
II-1
<PAGE> 105
349,023 shares of common stock have been purchased pursuant to exercises of
stock options or stock purchase rights under the 1996 Plan and 185,264
shares have been canceled and returned to the 1996 Plan.
(5) On January 23, 1997 and March 27, 1997, we issued two warrants to
purchase an aggregate of 121,667 shares of series A senior convertible
preferred stock (convertible into 121,667 shares of common stock) to Cell
Genesys with a weighted average exercise price per share of $6.00.
(6) On December 23, 1997, we issued 3,267,685 shares of series B
preferred stock to 29 accredited or institutional purchasers at a purchase
price per share of $6.50. In connection with and contemporaneous to this
transaction the 1,691,667 shares of series A senior convertible preferred
stock, the 2,058,333 shares of series 1 subordinated convertible preferred
stock and the $4,000,000 convertible promissory note issued to Cell
Genesys, described above, were all converted into an aggregate 4,416,667
shares of series A convertible preferred stock.
(7) On January 12, 1998, we issued 160,000 shares of series C
preferred stock to Pfizer at a per share purchase price of $8.00. This
issuance was in connection with a collaborative arrangement entered into
between Abgenix and Pfizer.
The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder, or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving any public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationship with Abgenix, to
information about Abgenix.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
3.1(1) Amended and Restated Certificate of Incorporation of
Abgenix, as currently in effect.
3.2(1) Amended and Restated Bylaws of Abgenix, as currently in
effect.
4.1(1) Specimen Common Stock Certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1(1) Form of Indemnification Agreement between Abgenix and each
of its directors and officers.
10.2(1) 1996 Incentive Stock Plan and form of agreement thereunder.
10.3(1) 1998 Employee Stock Purchase Plan and form of agreement
thereunder.
10.4(1) 1998 Director Option Plan and form of agreement thereunder.
10.5(1) Warrant dated January 23, 1997 exercisable for shares of
Series A Preferred Stock.
10.6(1) Warrant dated March 27, 1997 exercisable for shares of
Series A Preferred Stock.
10.7(3) Joint Venture Agreement dated June 12, 1991 between Cell
Genesys and JT Immunotech USA Inc.
10.7A(6) Amendment No. 1 dated January 1, 1994 to Joint Venture
Agreement.
10.7B(9) Amendment No. 2 dated June 28, 1996 to Joint Venture
Agreement.
10.8(3) Collaboration Agreement dated June 12, 1991 among Cell
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.
</TABLE>
II-2
<PAGE> 106
<TABLE>
<C> <S>
10.8A(5) Amendment No. 1 dated June 30, 1993 to Collaboration
Agreement.
10.8B(13) Amendment No. 2 dated January 1, 1994 to Collaboration
Agreement.
10.8C(7) Amendment No. 3 dated July 1, 1995 to Collaboration
Agreement.
10.8D(9) Amendment No. 4 dated June 28, 1996 to Collaboration
Agreement.
10.8E(2) Amendment No. 5 dated November 1997 to Collaboration
Agreement.
10.9(3) Limited Partnership Agreement dated June 12, 1991 among Cell
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.
10.9A(6) Amendment No. 2 dated January 1, 1994 to Limited Partnership
Agreement.
10.9B(8) Amendment No. 3 dated July 1, 1995 to Limited Partnership
Agreement.
10.9C(10) Amendment No. 4 dated June 28, 1996 to Limited Partnership
Agreement.
10.10(4) Field License dated June 12, 1991 among Cell Genesys, JT
Immunotech USA Inc. and Xenotech, L.P.
10.10A(10) Amendment No. 1 dated March 22, 1996 to Field License.
10.10B(10) Amendment No. 2 dated June 28, 1996 to Field License.
10.11(3) Expanded Field License dated June 12, 1991 among Cell
Genesys, JT Immunotech USA Inc. and Xenotech, L.P.
10.11A(10) Amendment No. 1 dated June 28, 1996 to Expanded Field
License.
10.12(2) Amended and Restated Anti-IL-8 License Agreement dated March
19, 1996 among Xenotech, L.P., Cell Genesys and Japan
Tobacco Inc.
10.13(9) Master Research License and Option Agreement dated June 28,
1996 among Cell Genesys, Japan Tobacco Inc. and Xenotech,
L.P.
10.13A(2) Amendment No. 1 dated November 1997 to the Master Research
License and Option Agreement.
10.14(2) Stock Purchase and Transfer Agreement dated July 15, 1996 by
and between Cell Genesys and Abgenix.
10.15(1) Governance Agreement dated July 15, 1996 between Cell
Genesys and Abgenix.
10.15A(1) Amendment No. 1 dated October 13, 1997 to the Governance
Agreement.
10.15B(1) Amendment No. 2 dated December 22, 1997 to the Governance
Agreement.
10.16(1) Tax Sharing Agreement dated July 15, 1996 between Cell
Genesys and Abgenix.
10.17(2) Gene Therapy Rights Agreement effective as of November 1,
1997 between Abgenix and Cell Genesys.
10.18(2) Patent Assignment Agreement dated July 15, 1996 by Cell
Genesys in favor of Abgenix.
10.19(11) Lease Agreement dated July 31, 1996 between John Arrillaga,
Trustee, or his Successor Trustee, UTA dated 7/20/77
(Arrillaga Family Trust) as amended, and Richard T. Peery,
Trustee, or his Successor Trustee, UTA dated 7/20/77
(Richard T. Peery Separate Property Trust) as amended, and
Abgenix.
10.20(1) Loan and Security Agreement dated January 23, 1997 between
Silicon Valley Bank and Abgenix.
10.21(1) Master Lease Agreement dated March 27, 1997 between
Transamerica Business Credit Corporation and Abgenix.
10.22(2) License Agreement dated February 1, 1997 between Ronald J.
Billing, Ph.D. and Abgenix.
10.23(12) Release and Settlement Agreement dated March 26, 1997 among
Cell Genesys, Abgenix, Xenotech, L.P., Japan Tobacco Inc.
and GenPharm International, Inc.
</TABLE>
II-3
<PAGE> 107
<TABLE>
<C> <S>
10.24(12) Cross License Agreement effective as of March 26, 1997,
among Cell Genesys, Abgenix, Xenotech, L.P., Japan Tobacco
Inc. and GenPharm International, Inc.
10.25(12) Interference Settlement Procedure Agreement, effective as of
March 26, 1997, among Cell Genesys, Abgenix, Xenotech, L.P.,
Japan Tobacco Inc. and GenPharm International, Inc.
10.26(2) Agreement dated March 26, 1997 among Xenotech, L.P.,
Xenotech, Inc., Cell Genesys, Abgenix, Japan Tobacco Inc.
and JT Immunotech USA Inc.
10.27(2) Collaborative Research Agreement dated December 22, 1997
between Pfizer, Inc. and Abgenix.
+10.27A Amendment No. 1 dated May 26, 1998 to Collaborative Research
Agreement between Abgenix and Pfizer, Inc.
+10.27B Amendment No. 2 dated October 22, 1998 to Collaborative
Research Agreement between Abgenix and Pfizer, Inc.
10.28(1) Amended and Restated Stockholder Rights Agreement dated
January 12, 1998 among Abgenix and certain holders of
Abgenix's capital stock.
10.29(2) Collaborative Research Agreement effective as of January 28,
1998 between Schering-Plough Research Institute and Abgenix.
10.30(1) Excerpts from the Minutes of a Meeting of the Board of
Directors of Abgenix, dated October 23, 1996.
10.31(1) Excerpts from the Minutes of a Meeting of the Board of
Directors of Abgenix, dated October 22, 1997.
10.32(2) Exclusive Worldwide Product License dated November 1997
between Xenotech, L.P. and Abgenix.
10.33(2) Research License and Option Agreement effective as of April
6, 1998 between Abgenix and Genentech, Inc.
10.33A(2) Amendment No. 1 effective as of June 18, 1998 to Research
License and Option Agreement between Abgenix and Genentech,
Inc.
10.34(14) Research Collaboration Agreement dated July 15, 1998 between
Millennium BioTherapeutics, Inc. and Abgenix.
+10.35 Research Collaboration Agreement dated September 29, 1998
between Millennium BioTherapeutics, Inc. and Abgenix.
10.35A Amendment No. 1 effective as of November 29, 1998 to the
Research Collaboration Agreement between Millennium
BioTherapeutics, Inc. and Abgenix.
+10.36 Research License and Option Agreement dated October 30, 1998
between Millennium BioTherapeutics, Inc. and Abgenix.
*+10.37 Research Collaboration Agreement dated December 22, 1998
between Centocor, Inc. and Abgenix.
+10.38 Memorandum of Understanding between Research Corporation
Technologies, Inc. and Abgenix.
10.39(15) Registration Rights Agreement dated November 18, 1998
between the selling stockholders and Abgenix.
+10.40 Research License and Option Agreement dated January 4, 1999
between AVI BioPharma, Inc. and Abgenix.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (see Exhibit 5.1).
24.1 Power of Attorney (see page II-7).
</TABLE>
II-4
<PAGE> 108
- ---------------
* To be filed by amendment.
+ Confidential treatment requested for portions of these exhibits. Omitted
portions have been filed separately with the Commission.
(1) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-49415).
(2) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-49415), portions of which
have been granted confidential treatment.
(3) Incorporated by reference to the same exhibit filed with Cell Genesys'
Registration Statement on Form S-1 (File No. 33-46452), portions of which
have been granted confidential treatment.
(4) Incorporated by reference to the same exhibit filed with Cell Genesys'
Registration Statement on Form S-1 (File No. 33-46452).
(5) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, portions
of which have been granted confidential treatment.
(6) Incorporated by reference to the same exhibit filed with Cell Genesys'
Annual Report on Form 10-K for the year ended December 31, 1993, portions
of which have been granted confidential treatment.
(7) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, portions
of which have been granted confidential treatment.
(8) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
(9) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, portions
of which have been granted confidential treatment.
(10) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
(11) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly report on Form 10-Q for the quarter ended September 30, 1996.
(12) Incorporated by reference to the same exhibit filed with Cell Genesys'
Annual Report on Form 10-K for the year ended December 31, 1996, as
amended, portions of which have been granted confidential treatment.
(13) Incorporated by reference to the same exhibit filed with Cell Genesys'
Annual Report on Form 10-K for the year ended December 31, 1993.
(14) Incorporated by reference to the same exhibit filed with Abgenix's Current
Report on Form 8-K filed with the Commission on July 17, 1998, portions of
which have been granted confidential treatment.
(15) Incorporated by reference to the same exhibit filed with Abgenix's Current
Report on Form 8-K filed with the Commission on November 24, 1998.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
Insofar as indemnification by Abgenix for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Abgenix, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Abgenix of expenses incurred or paid by a director, officer or controlling
person of Abgenix in the successful defense of any action, suit or proceeding)
is asserted by a
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<PAGE> 109
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by Abgenix is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We hereby undertake:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of a registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by Abgenix pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared
effective.
(d) That, for purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(e) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Abgenix has duly caused this Registration Statement on Form S-1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Fremont, State of California, on the 14th day of January, 1999.
ABGENIX, INC.
By: /s/ R. SCOTT GREER
------------------------------------
R. Scott Greer
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints R. Scott Greer and Kurt
Leutzinger, and each one of them, acting individually and without the other, as
his attorney-in-fact, each with full power of substitution, for him in any and
all capacities, to sign any and all amendments to this Registration Statement
(including post-effective amendments), and to sign any registration statement
for the same offering covered by this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) promulgated under the Securities
Act of 1933, and all post-effective amendments thereto, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ R. SCOTT GREER President, Chief Executive January 14, 1999
- -------------------------------------------------------- Officer and Director
R. Scott Greer (Principal Executive
Officer)
/s/ KURT W. LEUTZINGER Vice President, Finance and January 14, 1999
- -------------------------------------------------------- Chief Financial Officer
Kurt W. Leutzinger (Principal Financial and
Accounting Officer)
Chairman of the Board January , 1999
- --------------------------------------------------------
Stephen A. Sherwin, M.D.
/s/ M. KATHLEEN BEHRENS, PH.D. Director January 14, 1999
- --------------------------------------------------------
M. Kathleen Behrens, Ph.D.
/s/ RAJU S. KUCHERLAPATI, PH.D. Director January 14, 1999
- --------------------------------------------------------
Raju S. Kucherlapati, Ph.D.
/s/ MARK B. LOGAN Director January 14, 1999
- --------------------------------------------------------
Mark B. Logan
/s/ JOSEPH E. MAROUN Director January 14, 1999
- --------------------------------------------------------
Joseph E. Maroun
</TABLE>
II-7
<PAGE> 111
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
3.1(1) Amended and Restated Certificate of Incorporation of
Abgenix, as currently in effect.
3.2(1) Amended and Restated Bylaws of Abgenix, as currently in
effect.
4.1(1) Specimen Common Stock Certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1(1) Form of Indemnification Agreement between Abgenix and each
of its directors and officers.
10.2(1) 1996 Incentive Stock Plan and form of agreement thereunder.
10.3(1) 1998 Employee Stock Purchase Plan and form of agreement
thereunder.
10.4(1) 1998 Director Option Plan and form of agreement thereunder.
10.5(1) Warrant dated January 23, 1997 exercisable for shares of
Series A Preferred Stock.
10.6(1) Warrant dated March 27, 1997 exercisable for shares of
Series A Preferred Stock.
10.7(3) Joint Venture Agreement dated June 12, 1991 between Cell
Genesys and JT Immunotech USA Inc.
10.7A(6) Amendment No. 1 dated January 1, 1994 to Joint Venture
Agreement.
10.7B(9) Amendment No. 2 dated June 28, 1996 to Joint Venture
Agreement.
10.8(3) Collaboration Agreement dated June 12, 1991 among Cell
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.
10.8A(5) Amendment No. 1 dated June 30, 1993 to Collaboration
Agreement.
10.8B(13) Amendment No. 2 dated January 1, 1994 to Collaboration
Agreement.
10.8C(7) Amendment No. 3 dated July 1, 1995 to Collaboration
Agreement.
10.8D(9) Amendment No. 4 dated June 28, 1996 to Collaboration
Agreement.
10.8E(2) Amendment No. 5 dated November 1997 to Collaboration
Agreement.
10.9(3) Limited Partnership Agreement dated June 12, 1991 among Cell
Genesys, Xenotech, Inc. and JT Immunotech USA Inc.
10.9A(6) Amendment No. 2 dated January 1, 1994 to Limited Partnership
Agreement.
10.9B(8) Amendment No. 3 dated July 1, 1995 to Limited Partnership
Agreement.
10.9C(10) Amendment No. 4 dated June 28, 1996 to Limited Partnership
Agreement.
10.10(4) Field License dated June 12, 1991 among Cell Genesys, JT
Immunotech USA Inc. and Xenotech, L.P.
10.10A(10) Amendment No. 1 dated March 22, 1996 to Field License.
10.10B(10) Amendment No. 2 dated June 28, 1996 to Field License.
10.11(3) Expanded Field License dated June 12, 1991 among Cell
Genesys, JT Immunotech USA Inc. and Xenotech, L.P.
10.11A(10) Amendment No. 1 dated June 28, 1996 to Expanded Field
License.
10.12(2) Amended and Restated Anti-IL-8 License Agreement dated March
19, 1996 among Xenotech, L.P., Cell Genesys and Japan
Tobacco Inc.
10.13(9) Master Research License and Option Agreement dated June 28,
1996 among Cell Genesys, Japan Tobacco Inc. and Xenotech,
L.P.
10.13A(2) Amendment No. 1 dated November 1997 to the Master Research
License and Option Agreement.
10.14(2) Stock Purchase and Transfer Agreement dated July 15, 1996 by
and between Cell Genesys and Abgenix.
</TABLE>
II-8
<PAGE> 112
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
10.15(1) Governance Agreement dated July 15, 1996 between Cell
Genesys and Abgenix.
10.15A(1) Amendment No. 1 dated October 13, 1997 to the Governance
Agreement.
10.15B(1) Amendment No. 2 dated December 22, 1997 to the Governance
Agreement.
10.16(1) Tax Sharing Agreement dated July 15, 1996 between Cell
Genesys and Abgenix.
10.17(2) Gene Therapy Rights Agreement effective as of November 1,
1997 between Abgenix and Cell Genesys.
10.18(2) Patent Assignment Agreement dated July 15, 1996 by Cell
Genesys in favor of Abgenix.
10.19(11) Lease Agreement dated July 31, 1996 between John Arrillaga,
Trustee, or his Successor Trustee, UTA dated 7/20/77
(Arrillaga Family Trust) as amended, and Richard T. Peery,
Trustee, or his Successor Trustee, UTA dated 7/20/77
(Richard T. Peery Separate Property Trust) as amended, and
Abgenix.
10.20(1) Loan and Security Agreement dated January 23, 1997 between
Silicon Valley Bank and Abgenix.
10.21(1) Master Lease Agreement dated March 27, 1997 between
Transamerica Business Credit Corporation and Abgenix.
10.22(2) License Agreement dated February 1, 1997 between Ronald J.
Billing, Ph.D. and Abgenix.
10.23(12) Release and Settlement Agreement dated March 26, 1997 among
Cell Genesys, Abgenix, Xenotech, L.P., Japan Tobacco Inc.
and GenPharm International, Inc.
10.24(12) Cross License Agreement effective as of March 26, 1997,
among Cell Genesys, Abgenix, Xenotech, L.P., Japan Tobacco
Inc. and GenPharm International, Inc.
10.25(12) Interference Settlement Procedure Agreement, effective as of
March 26, 1997, among Cell Genesys, Abgenix, Xenotech, L.P.,
Japan Tobacco Inc. and GenPharm International, Inc.
10.26(2) Agreement dated March 26, 1997 among Xenotech, L.P.,
Xenotech, Inc., Cell Genesys, Abgenix, Japan Tobacco Inc.
and JT Immunotech USA Inc.
10.27(2) Collaborative Research Agreement dated December 22, 1997
between Pfizer, Inc. and Abgenix.
+10.27A Amendment No. 1 dated May 26, 1998 to Collaborative Research
Agreement between Abgenix and Pfizer, Inc.
+10.27B Amendment No. 2 dated October 22, 1998 to Collaborative
Research Agreement between Abgenix and Pfizer, Inc.
10.28(1) Amended and Restated Stockholder Rights Agreement dated
January 12, 1998 among Abgenix and certain holders of
Abgenix's capital stock.
10.29(2) Collaborative Research Agreement effective as of January 28,
1998 between Schering-Plough Research Institute and Abgenix.
10.30(1) Excerpts from the Minutes of a Meeting of the Board of
Directors of Abgenix, dated October 23, 1996.
10.31(1) Excerpts from the Minutes of a Meeting of the Board of
Directors of Abgenix, dated October 22, 1997.
10.32(2) Exclusive Worldwide Product License dated November 1997
between Xenotech, L.P. and Abgenix.
10.33(2) Research License and Option Agreement effective as of April
6, 1998 between Abgenix and Genentech, Inc.
10.33A(2) Amendment No. 1 effective as of June 18, 1998 to Research
License and Option Agreement between Abgenix and Genentech,
Inc.
</TABLE>
II-9
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
10.34(14) Research Collaboration Agreement dated July 15, 1998 between
Millennium BioTherapeutics, Inc. and Abgenix.
+10.35 Research Collaboration Agreement dated September 29, 1998
between Millennium BioTherapeutics, Inc. and Abgenix.
10.35A Amendment No. 1 effective as of November 29, 1998 to the
Research Collaboration Agreement between Millennium
BioTherapeutics, Inc. and Abgenix.
+10.36 Research License and Option Agreement dated October 30, 1998
between Millennium BioTherapeutics, Inc. and Abgenix.
*+10.37 Research Collaboration Agreement dated December 22, 1998
between Centocor, Inc. and Abgenix.
+10.38 Memorandum of Understanding between Research Corporation
Technologies, Inc. and Abgenix.
10.39(15) Registration Rights Agreement dated November 18, 1998
between the selling stockholders and Abgenix.
+10.40 Research License and Option Agreement dated January 4, 1999
between AVI BioPharma, Inc. and Abgenix
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (see exhibit 5.1).
24.1 Power of Attorney (see page II-7).
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment requested for portions of these exhibits. Omitted
portions have been filed separately with the Commission.
(1) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-49415).
(2) Incorporated by reference to the same exhibit filed with Abgenix's
Registration Statement on Form S-1 (File No. 333-49415), portions of which
have been granted confidential treatment.
(3) Incorporated by reference to the same exhibit filed with Cell Genesys'
Registration Statement on Form S-1 (File No. 33-46452), portions of which
have been granted confidential treatment.
(4) Incorporated by reference to the same exhibit filed with Cell Genesys'
Registration Statement on Form S-1 (File No. 33-46452).
(5) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993, portions
of which have been granted confidential treatment.
(6) Incorporated by reference to the same exhibit filed with Cell Genesys'
Annual Report on Form 10-K for the year ended December 31, 1993, portions
of which have been granted confidential treatment.
(7) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, portions
of which have been granted confidential treatment.
(8) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
(9) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, portions
of which have been granted confidential treatment.
(10) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
II-10
<PAGE> 114
(11) Incorporated by reference to the same exhibit filed with Cell Genesys'
Quarterly report on Form 10-Q for the quarter ended September 30, 1996.
(12) Incorporated by reference to the same exhibit filed with Cell Genesys'
Annual Report on Form 10-K for the year ended December 31, 1996, as
amended, portions of which have been granted confidential treatment.
(13) Incorporated by reference to the same exhibit filed with Cell Genesys'
Annual Report on Form 10-K for the year ended December 31, 1993.
(14) Incorporated by reference to the same exhibit filed with Abgenix's Current
Report on Form 8-K filed with the Commission on July 17, 1998, portions of
which have been granted confidential treatment.
(15) Incorporated by reference to the same exhibit filed with Abgenix's Current
Report on Form 8-K filed with the Commission on November 24, 1998.
II-11
<PAGE> 1
EXHIBIT 5.1
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD]
JANUARY 15, 1999
Abgenix, Inc.
7601 Dumbarton Circle
Fremont, CA 94555
RE: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have examined the Registration Statement of Form S-1 to be filed by you
with the Securities and Exchange Commission (the "Commission") on or about
January 15, 1999 (as such may be further amended or supplemented, the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 1,146,300 shares of your Common Stock,
par value $0.0001 per share (the "Shares"), all of which are authorized and
have been previously issued. The Shares are to be offered by the selling
stockholders for sale to the public as described in the Registration
Statement. As your counsel in connection with this transaction, we have
examined the proceedings proposed to be taken by you in connection with the
sale of the Shares.
Based on the foregoing, it is our opinion that, upon conclusion of the
proceedings being taken or contemplated to be taken prior to the sale of the
Shares and upon completion of the proceedings taken in order to permit such
transactions to be carried out in accordance with the securities laws of
various states where required, the Shares, when sold in the manner described in
the Registration Statement, will be legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
which has been approved by us, as such may be further amended or supplemented.
Sincerely,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE> 1
EXHIBIT 10.27A
[Pfizer Letterhead]
May 26, 1998
GEORGE M. MILNE, JR., PH.D.
President
Dr. Scott Greer
President
Abgenix, Inc.
7601 Dumbarton Circle
Fremont, CA 94555
Dear Dr. Greer,
Pursuant to our recent discussions, Pfizer and Abgenix agree to amend the
Research Plan for Event C, described in Section 3.1.1 of the Collaborative
Research Agreement, for the [*] Target Antigen as described below:
The deliverables required in order for Abgenix to achieve a payment at the
completion of Event C are deleted. The required deliverables for Event C are
replaced by the following:
(a) Abgenix will deliver to Pfizer [*];
(b) Abgenix will carry out [*];
(c) Abgenix will carry out [*];
(d) Abgenix will send to Pfizer [*];
(e) Abgenix will send to Pfizer [*];
(f) Abgenix will send to Pfizer [*];
(g) Abgenix will provide for Pfizer data [*];
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 2
(h) Abgenix will perform [*];
(i) Abgenix will provide [*];
Compensation for the work described above will be [*] as described in Section
3.1.1, in replacement of the same payment described in Section 3.1.1 in the
Collaborative Research Agreement.
In addition, in accordance with Section 3.2.3, Pfizer has requested additional
work from Abgenix, not included in the Research Plan. Abgenix has agreed to
accept such additional work, and to include it in the Research Plan, according
to the following deliverables and payment schedule:
(a) [*]
(b) [*]
All other terms and conditions apply and shall remain of full force and effect.
If you agree with this amendment, please sign this letter and return one
original to my attention.
Sincerely yours,
/s/ George M. Milne, Jr.
George M. Milne, Jr.
ABGENIX, INC.
By: /s/ R. Scott Greer
--------------------------
Title: CEO
------------------------
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-2-
<PAGE> 1
EXHIBIT 10.27B
[PFIZER LETTERHEAD]
GEORGE M. MILNE, JR., PH.D.
October 22, 1998 President
Mr. Scott Greer
President
Abgenix, Inc.
7601 Dumbarton Circle
Fremont, CA 94555
Dear Mr. Greer,
Further to our recent discussions, Pfizer Inc ("Pfizer") and Abgenix, Inc.
("Abgenix") agree to amend the Collaborative Research Agreement of December 22,
1997 ("1997 Agreement"), to exercise Pfizer's first option to generate
XenoMouseTM antibodies against a second Target Antigen, [*], pursuant to
Section 9.6 of the 1997 Agreement. A Research Plan will be adopted by the
parties in accordance with Section 9.6. Pfizer will fund the [*] Research
Program under the terms set forth in Section 3 of the 1997 Agreement and in the
Letter Amendment to the 1997 Agreement dated May 26, 1998, as appropriate,
according to their terms.
All other terms and conditions of the 1997 Agreement shall remain unchanged and
in full force and effect. Please sign both copies of this Letter Amendment to
the 1997 Agreement and return one original to [*] at the above address.
Sincerely,
/s/ George M. Milne, Jr.
George M. Milne, Jr.
Agreed:
ABGENIX INC.
By: /s/ R. Scott Greer
------------------------
Title: President & CEO
---------------------
Date: 10/23/98
----------------------
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 1
EXHIBIT 10.35
RESEARCH COLLABORATION AGREEMENT
[*]
THIS RESEARCH COLLABORATION AGREEMENT dated as of September 29, 1998
(this "Agreement"), is entered into between ABGENIX, INC., a Delaware
corporation ("Abgenix"), having a place of business at 7601 Dumbarton Circle,
Fremont, California 94555, and MILLENNIUM BIOTHERAPEUTICS, INC., a Delaware
corporation ("MBio"), having a place of business at 620 Memorial Drive,
Cambridge, Massachusetts 02139, with respect to the following facts:
WHEREAS, Abgenix and MBio are interested in negotiating a research
license and option agreement (the "Research License and Option Agreement")
regarding the generation of human monoclonal antibodies to [*] (the "Antigen")
where the antibodies to the Antigen are generated through the use of certain
Abgenix technology; and
WHEREAS, in connection with, and during the conduct of, such
negotiations, the parties desire to conduct a research program pursuant to which
(a) MBio will immunize, with the Antigen, certain of Abgenix's transgenic mice
which are capable of producing human antibodies when immunized with antigen (the
"XenoMouse(TM) Animals") provided by Abgenix to MBio and will generate
antibodies therefrom, (b) MBio will conduct certain analyses and
characterizations of such antibodies, and (c) the parties will review and
analyze the data and results of such research activities.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement, the terms defined in
this Section 1 shall have the respective meanings set forth below:
"Abgenix Materials" shall mean, collectively, (a) the
XenoMouse Animals and other materials specified in Exhibit A hereto, as well as
any derivatives, progeny, modifications or improvements thereto developed,
created, synthesized or designed therefrom, and any genetic material
therefrom;and (b) any XenoMouse Animals immunized with the Antigen; provided,
however, the Abgenix materials shall not include Research Materials and
Inventions.
"Confidential Information" shall mean, with respect to a
party, all information of any kind whatsoever (including without limitation,
compilations, data, formulae, models, patent disclosures, procedures, processes,
projections, protocols, results of experimentation and testing, specifications,
strategies and techniques), and all tangible and intangible embodiments thereof
of any kind whatsoever (including without limitation, apparatus, biological or
chemical materials, animals, cells, compositions, documents, drawings,
machinery, patent applications, records, reports), which is owned or controlled
by such party and is disclosed by such party to the receiving party and is
marked, identified as or otherwise acknowledged to be confidential at the time
of disclosure to the receiving party. Notwithstanding the foregoing,
Confidential Information of a party shall not include information which the
receiving party can establish by written documenta-
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-1-
<PAGE> 2
tion (a) to have been publicly known prior to disclosure of such information by
the disclosing party to the receiving party, (b) to have become publicly known,
without fault on the part of the receiving party, subsequent to disclosure of
such information by the disclosing party to the receiving party, (c) to have
been received by the receiving party at any time from a source, other than the
disclosing party, rightfully having possession of and the right to disclose such
information free of confidentiality obligations, (d) to have been otherwise
known by the receiving party free of confidentiality obligations prior to
disclosure of such information by the disclosing party to the receiving party,
or (e) to have been independently developed by employees or agents of the
receiving party without access to or use of such information disclosed by the
disclosing party to the receiving party. The parties acknowledge that the
foregoing exceptions shall be narrowly construed and that the obligations
imposed upon each party under Section 6 below shall be relieved solely with
respect to such Confidential Information of the disclosing party which falls
within the above exceptions and not with respect to related portions, other
combinations, or characteristics of the Confidential Information of the
disclosing party including, without limitation, advantages, operability,
specific purposes, uses and the like.
"Materials" shall mean, collectively, the Abgenix Materials
and the Research Materials and Inventions.
"Research" shall mean the interim research program described
in Exhibit B hereto.
"Research Materials and Inventions" shall mean [*] which
results from the performance of the Research by MBio.
"Xenotech" shall mean Xenotech L.P., a California limited
partnership.
2. Research.
a. Abgenix shall transfer to MBio the XenoMouse Animals and
other materials specified in Exhibit A hereto for the sole purpose of performing
the Research. MBio shall use the Abgenix Materials for the sole purpose of
performing the Research, at its address listed above, under commercially and
scientifically reasonable containment conditions, and not for any commercial,
business or other use or purpose without the prior express written consent of
Abgenix. MBio shall not transfer or provide access to the Abgenix Materials
transferred to it by Abgenix hereunder to any other person or entity or to any
location other than its address set forth above,
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-2-
<PAGE> 3
without the prior express written consent of Abgenix (which consent may be
conditioned inter alia upon such person or entity duly executing and delivering
Abgenix's standard form of material transfer agreement therefor); provided,
however, that MBio shall have the right to transfer the Research Materials and
Inventions to Abgenix. MBio shall limit access to the Abgenix Materials to those
of its employees working on its premises, to the extent such access is
reasonably necessary in connection with its activities as expressly authorized
by this Agreement.
b. MBio shall conduct the Research under the direct
supervision of [*], who shall be the primary contact for MBio regarding the
Research. [*]
3. Further Restrictions on Use and Control over the XenoMouse Animals.
Abgenix is willing to transfer the XenoMouse Animals to MBio solely on the terms
and conditions contained in this Agreement. The XenoMouse Animals contain
technology and intellectual property which has been licensed to Abgenix under
specific terms and conditions set forth in certain licensing agreements with
third parties, including without limitation Xenotech. The transfer of the
XenoMouse Animals and the use of XenoMouse Animals by MBio is made expressly
subject to the following terms and conditions:
a. all XenoMouse Animals transferred to MBio shall be the sole
property of Abgenix, and the transfer of physical possession to MBio, and/or
possession or use by MBio of XenoMouse Animals shall not be, nor be construed
as, a sale, lease, offer to sell or lease, or other transfer of title to or any
interest in any XenoMouse Animals;
b. all XenoMouse Animals shall remain in the control of MBio,
and MBio shall not (and shall not attempt or purport to) transfer the XenoMouse
Animals to any third party, without the prior express written consent of Abgenix
(which may be conditioned inter alia upon such third party duly executing and
delivering Abgenix's standard form of material transfer agreement therefor);
c. MBio shall not directly or indirectly use or attempt to use
the XenoMouse Animals or any derivatives, information or biological or chemical
materials derived from, based upon or related thereto to reproduce, generate,
create or produce, through breeding, reverse-engineering, genetic manipulation
or otherwise, the XenoMouse Animals or other transgenic mice or other transgenic
animals;
d. the XenoMouse Animals shall be delivered to MBio solely for
the purpose of immunizing the XenoMouse Animals with the Antigen as specified in
Exhibit B, and MBio shall not use the XenoMouse Animals for any purpose other
than immunizing the XenoMouse Animals with the Antigen and subsequent use of
such immunized XenoMouse Animals as reasonably necessary solely for purposes of
conducting the Research;
e. MBio shall not (and shall not attempt or purport to)
transfer, assign, sell, have sold, lease, offer to sell or lease, otherwise
transfer title to, or otherwise distribute or license, sublicense or otherwise
commercialize or exploit, any XenoMouse Animals or any interest in any XenoMouse
Animals;
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-3-
<PAGE> 4
f. MBio shall not directly or indirectly use the XenoMouse
Animals to make or use antibodies to [*];
g. Other than Research Materials and Inventions as defined in
Section 1 and as provided in Section 7(b) of this Agreement, Abgenix shall own
all right, title and interest in and to all discoveries, inventions, materials,
products, derivatives, know-how and information (whether or not patentable),
together with all patent rights and other intellectual property rights therein,
which are conceived, made, created or developed by MBio (and any of its agents
or employees) through any use of the XenoMouse Animals which is not in
accordance with the terms and conditions set forth in this Agreement; and
h. Xenotech shall be a third-party beneficiary of the
obligations and commitments by MBio set forth in items (a) through (f) above.
4. Reports. MBio shall keep Abgenix informed of all uses made of the
Abgenix Materials provided to it. MBio shall provide Abgenix [*].
5. Publication. Unless otherwise agreed to in writing by Abgenix or
otherwise provided in Section 6 below, neither party shall have the right to
disclose to third parties, or to otherwise publish, the Research Materials and
Inventions, the reports described in Section 4 above (or any data or information
contained therein), or the source data and information described in Section 4
above.
6. Confidentiality.
a. During the term of this Agreement and for a period of five
(5) years following the expiration or earlier termination hereof, each party
shall maintain in confidence the Confidential Information of the other party,
and shall not disclose, use or grant the use of the Confidential Information of
the other party except on a need-to-know basis to such party's directors,
officers and employees, and to such party's consultants working on such party's
premises, to the extent such disclosure is reasonably necessary in connection
with such party's activities as expressly authorized by this Agreement. To the
extent that disclosure to any person is authorized by this Agreement, prior to
disclosure, a party shall obtain written agreement of such person to hold in
confidence and not disclose, use or grant the use of the Confidential
Information of the other party except as expressly permitted under this
Agreement. Each party shall notify the other party promptly upon discovery of
any unauthorized use or disclosure of the other party's Confidential
Information. Upon the expiration or earlier termination of this Agreement, each
party shall return to the other party all tangible items regarding the
Confidential Information of the other party and all copies thereof; provided,
however, that each party shall have the right to retain one (1) copy for its
legal files for the sole purpose of determining its obligations hereunder.
b. Notwithstanding anything to the contrary in this Agreement,
for purposes of this Agreement, the Abgenix Materials and all oral or written
communications received by MBio regarding the Abgenix Materials are, and shall
remain, Confidential Information of [*].
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-4-
<PAGE> 5
c. Notwithstanding anything to the contrary in this Agreement,
for purposes of this Agreement, the Research Materials and Inventions and all
oral or written communications received by MBio regarding the Research Materials
and Inventions are, and shall remain, Confidential Information of [*].
d. Neither party shall disclose any terms or conditions of
this Agreement to any third party without the prior consent of the other party;
provided, however, that a party may disclose the terms or conditions of this
Agreement, (i) on a need-to-know basis to its affiliated companies including,
but not limited to, for MBio, Millennium Pharmaceuticals, Inc., Millennium
Information, Inc., Millennium Predictive Medicine, Inc., plus any future
affiliated companies that own a majority of the stock of MBio or that MBio owns
a majority of the stock thereof and for Abgenix, Xenotech L.P. plus any future
affiliated companies that own a majority of the stock of Abgenix or that Abgenix
owns a majority of the stock thereof) and to its/their legal and financial
advisors to the extent such disclosure is reasonably necessary in connection
with such party's activities as expressly permitted by this Agreement, (ii) to a
third party in connection with (A) an equity investment in such party by a third
party, (B) a merger, consolidation or similar transaction entered into by such
party, or (C) the sale of all or substantially all of the assets of such party,
and (iii) as may, in the reasonable opinion of such party's counsel, be required
by applicable law, regulation or court order, including without limitation, a
disclosure in connection with such party's filing of a registration statement or
other filing with the United States Securities and Exchange Commission (in which
event such party will first consult with the other party with respect to such
disclosure). Notwithstanding the foregoing, prior to execution of this Agreement
Abgenix and MBio shall agree upon the substance of information that can be used
to describe the terms of this transaction, and each party may disclose such
information, as modified by written agreement of Abgenix and MBio from time to
time, without the consent of the other.
e. The confidentiality obligations under this Section 6 shall
not apply to the extent that a party is required to disclose Confidential
Information of the other party by applicable law, regulation or order of a
governmental agency or a court of competent jurisdiction; provided, however,
that such party shall provide written notice thereof to the other party and
sufficient opportunity to object to any such disclosure or to request
confidential treatment thereof.
7. Ownership and Control of Materials.
a. All right, title and interest to the Abgenix Materials and
all patent rights and other intellectual property rights therein shall belong
[*]. MBio shall not (and shall not attempt or purport to) transfer, assign,
sell, have sold, lease, offer to sell or lease, otherwise transfer title to, or
otherwise distribute or license, sublicense or otherwise commercialize or
exploit, any Abgenix Materials, unless Abgenix otherwise expressly agrees in
writing. Promptly upon the earlier of (i) completion of the Research or (ii) the
expiration or termination of this Agreement, MBio shall destroy or return to
Abgenix all remaining Abgenix Materials (as Abgenix shall direct), unless
Abgenix otherwise expressly agrees in writing prior to such completion,
expiration or termination. MBio shall not (and shall not attempt or purport to)
file or prosecute in any country any patent application which claims or purports
to claim the Abgenix Materials or any use thereof, without the prior express
written consent of Abgenix.
b. Unless the parties otherwise expressly agree in writing,
all right, title and interest to all the Research Materials and Inventions and
all patent rights and other intellectual
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property rights therein shall belong [*]. MBio shall use the Research Materials
and Inventions, at is address listed above, for the sole purposes of performing
the Research, [*]. Neither party shall transfer or provide access to the
Research Materials and Inventions to any third party or to any location other
than its address set forth above, without the prior express written consent of
the other party. Neither party shall (and neither party shall attempt or purport
to) transfer, assign, sell, have sold, lease, offer to sell or lease, otherwise
transfer title to, or otherwise distribute or license, sublicense or otherwise
commercialize or exploit, any Research Materials and Inventions (or any products
derived thereof), unless the other party otherwise expressly agrees in writing.
Promptly upon the expiration or earlier termination of the term of this
Agreement, each party shall destroy all remaining Research Materials and
Inventions, unless the parties otherwise expressly agree in writing prior to
such expiration or termination. Neither party shall (and neither party shall
attempt or purport to) file or prosecute in any country any patent application
which claims or purports to claim the Research Materials and Inventions or any
use thereof unless and until the parties duly execute and deliver the Research
License and Option Agreement in accordance with Section 12 below, without the
prior express written consent of the other party.
8. No Warranty. The Materials are being provided for research purposes
only solely to facilitate the Research. THE MATERIALS ARE BEING SUPPLIED "AS
IS," WITH NO WARRANTIES, EXPRESS OR IMPLIED, AND ABGENIX EXPRESSLY DISCLAIMS ANY
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT.
9. Care in Use of the Materials. The parties acknowledge that the
Materials are experimental in nature and may have unknown characteristics. Each
party agrees to use prudence and reasonable care in the use, handling, storage,
transportation, disposition, and containment of the Materials provided by the
other party. MBio shall not administer the Materials to humans, or file or
submit any regulatory application or other submission to obtain approval
therefor, under any circumstances.
10. Indemnification. MBio shall indemnify and hold harmless Abgenix
from and against all losses, liabilities, damages and expenses (including
reasonable attorneys' fees and costs) resulting from any claims, demands,
actions or other proceedings by any third party arising from (i) the material
breach of any representation, warranty or covenant by MBio under this Agreement,
(ii) the performance of the Research by MBio, (iii) any use, handling or storage
by MBio of the Abgenix Materials, (iv) any use, handling or storage by MBio of
the Research Materials and Inventions, or (v) any use by MBio of the
Confidential Information of Abgenix. Abgenix shall indemnify and hold harmless
MBio from and against all losses, liabilities, damages and expenses (including
reasonable attorneys' fees and costs) resulting from any claims, demands,
actions or other proceedings by any third party arising from any use by Abgenix
of the Confidential Information of MBio.
11. Compliance with Laws. MBio shall use the Materials in compliance
with all applicable laws, guidelines and regulations which are applicable to the
Materials or the use thereof, including without limitation any biosafety
procedures and all safety precautions accompanying the Materials.
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12. Negotiation of Research License and Option Agreement.
a. During the term of this Agreement, the parties shall
negotiate in good faith, and attempt to reach mutual agreement upon and enter
into, the Research License and Option Agreement. The Research License and Option
Agreement, if entered into between the parties, shall include the terms set
forth on Exhibit C and shall include such other terms and conditions as the
parties mutually agree, including, but not limited to, provisions relating to
intellectual property, confidentiality, publication, representations and
warranties of each party, diligence, indemnification and reporting. During the
term of this Agreement, Abgenix will not engage in negotiations with any third
party, or enter into any agreements with any third party, regarding a
collaboration, license or commercialization of human monoclonal antibodies,
generated through the use of the XenoMouse technology, to Antigen.
b. The obligations of Abgenix relating to the negotiations
described above or the Research License and Option Agreement are limited to the
extent that Abgenix has, and hereafter will have, the right to grant licenses
and other rights to the XenoMouse Animals and related technology. However,
Abgenix represents and warrants to MBio that it has no present knowledge of any
reason that it does not have the right to grant licenses and other rights to the
XenoMouse Animals to MBio, consistent with the terms and conditions of this
Agreement and the terms contemplated under Exhibit C hereto.
13. No Conflict. Each party represents that this Agreement does not,
and during the term of this Agreement will not, conflict with any other right or
obligation provided under any other agreement or obligation that such party has
with any third party.
14. Term of Agreement. This Agreement shall remain in effect for sixty
(60) days from the date of this Agreement, or such other date as the parties
mutually agree upon in writing. Upon the expiration of this Agreement, Sections
2(a) (other than the first sentence thereof), 3, 5, 6, 7 and 10 shall survive.
15. Assignment. MBio shall not assign its rights or obligations under
this Agreement, in whole or in part, by operation of law or otherwise, without
the prior express written consent of the Abgenix; provided, however, that MBio
may, without such consent, assign this Agreement and its rights and obligations
hereunder in connection with the transfer or sale of all or substantially all of
its business, or in the event of its merger or consolidation or change in
control or similar transaction. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. Any purported assignment in
violation of this Section 15 shall be void.
16. Waivers and Amendments. No change, modification, extension,
termination or waiver of this Agreement, or any of the provisions herein
contained, shall be valid unless made in writing and signed by duly authorized
representatives of the parties.
17. General. This Agreement contains the entire agreement between the
parties regarding the subject matter of this Agreement and supersedes any
previous understandings, representations, acknowledgements, commitments or
agreements, oral or written, regarding such subject matter. This Agreement shall
be governed by and construed under laws of the State of California, without
regard to its conflicts of laws principles.
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IN WITNESS THEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first set forth above.
ABGENIX, INC. MILLENNIUM BIOTHERAPEUTICS, INC.
By: /s/ Raymond M. Withy By: /s/ John Maraganore
---------------------------- ------------------------------------
(Signature) (Signature)
Raymond M. Withy, Ph.D. John Maraganore, Ph.D.
Vice President, Vice President,
Corporate Development General Manager
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Exhibit A
Abgenix Materials
[*]
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Exhibit B
Research Program
[*]
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Exhibit C
Key Terms of the Research License and Option Agreement
I. Option to Obtain a Product License
MBio would have the right to acquire an exclusive option (the "Option")
to enter into an exclusive license to develop and commercialize
licensed products pursuant to a license agreement (the "Product License
Agreement"), in the form of Abgenix's standard form of product license
agreement. MBio would have the right to acquire the Option on or before
July 31, 1999, by giving express written notice to Abgenix thereof and
paying to Abgenix the [*].
II. Product License Agreement
If MBio timely acquires the Option, MBio would have the right to
exercise the Option on or before February 28, 2000. MBio would have the
right to exercise the Option by executing the Product License Agreement
and paying to Abgenix [*]. MBio would not have the right to file an IND
with the FDA in the United States (or its equivalent with the governing
health authority of any country) for a licensed product, or to
otherwise commence human clinical trials of a licensed product, unless
and until MBio has exercised such option.
III. Development Milestones
[*]
IV. Royalties on Worldwide Net Sales
SCENARIO A: [*]
(i) MBIO would pay to Abgenix [*]
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[*]
(ii) MBIO would pay to Abgenix [*]
[*]
[*]
In both (i) and (ii) above, [*]
SCENARIO B: [*]
In the event MBio [*]
MBio would pay to Abgenix [*]
V. [*]
[*]
VI. Other: Terms and Conditions
The Research License and Option Agreement, if entered into between the
parties, shall include the terms set forth on this Exhibit C and shall
include such other terms and conditions as the parties mutually agree,
including, but not limited to, provisions relating to intellectual
property, confidentiality, publication, representations and warranties
of each party, diligence, indemnification and reporting.
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EXHIBIT 10.35A
[ABGENIX LOGO]
[ABGENIX LETTERHEAD]
Via Facsimile
Ms. Polly Ross Ribatt
Manager, Corporate Development
MILLENNIUM BIOTHERAPEUTICS
620 Memorial Drive
Cambridge, MA 02139
Re: Amendment No. 1 to Research Collaboration Agreement
Dear Polly:
The purpose of this letter is to evidence the below-referenced amendments
to that certain Research Collaboration Agreement ("RCA"), dated as of September
29, 1998, between Abgenix, Inc. ("ABX") and Millennium BioTherapeutics, Inc.
("MBIO").
First, ABX and MBIO agree that the effective date of this amendment is
November 29, 1998.
Second, ABX and MBIO agree to amend Section 14 of the RCA to read in its
entirety as follows:
This Agreement shall remain in effect until July 31, 1999, or such
other date as the parties mutually agree upon in writing. Upon the
expiration of this Agreement, Sections 2(a) (other than the first sentence
thereof), 3, 5, 6, 7 and 10 shall survive.
ABX and MBIO agree that all other terms of the RCA remain the same and in
full force and effect.
<PAGE> 2
To signify MBIO's agreement with the foregoing, please so indicate by
having an authorized representative of MBIO sign this letter in the space
provided below and returning it to Christopher A. Hare, Esq. via facsimile
((510) 608-6511).
Sincerely,
/s/ RAYMOND M. WITHY
-------------------------------------
Raymond M. Withy, Ph.D.
Vice President, Corporate Development
Agreed and Acknowledged:
MILLENNIUM BIOTHERAPEUTICS, INC.
By: /s/ RON LINDSAY
---------------------------
Its.: Ron Lindsay, VP of
Pre-Clinical Development
---------------------------
Date: 1/14/99
---------------------------
<PAGE> 1
EXHIBIT 10.36
Execution Copy
RESEARCH LICENSE AND OPTION AGREEMENT
This Research License and Option Agreement (this "Agreement"),
effective as of October 30, 1998 (the "Effective Date"), is made by and between
Abgenix, Inc., a Delaware corporation ("ABX"), and Millennium BioTherapeutics,
Inc., a Delaware corporation ("MBio").
RECITALS
A. ABX has rights in certain technology regarding certain strains of
XenoMouse(TM) Animals (as defined below) that are capable of producing human
antibodies upon immunization with antigens;
B. MBio desires to generate human antibodies to the antigen
[*];
C. MBio has immunized XenoMouse Animals with [*] pursuant to
that certain Research Collaboration Agreement between MBio and ABX effective as
of July 15, 1998 (the "RCA"); and
D. ABX is willing to grant to MBio, and MBio desires to obtain, a
license to use XenoMouse Animals solely for immunization with [*] for
research purposes, as described below and on the terms and conditions set forth
herein;
E. ABX additionally is willing to grant to MBio, and MBio desires to
obtain, an option to obtain the Antigen Product License (as defined below) on
the terms and conditions set forth herein.
NOW THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms set forth in this Article
shall have the meanings set forth below:
1.1 "Affiliate" shall mean any entity which controls, is controlled by
or is under common control with ABX, MBio or a Sublicensee. An entity shall be
regarded as in control of another entity if it owns or controls at least fifty
percent (50%) of the shares of the subject entity entitled to vote in the
election of directors (or, in the case of an entity that is not a corporation,
for the election of the corresponding managing authority).
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1.2 "Antibody" shall mean a composition comprising a whole antibody or
fragment thereof, said antibody or fragment having been derived in whole or part
from the XenoMouse Animals provided by ABX to MBio pursuant to the RCA or this
Agreement, or having been derived from nucleotide sequences encoding, or amino
acid sequences of, such an antibody or fragment.
1.3 "Antibody Cells" shall mean all cells that contain, express, or
secrete (a) Antibodies or (b) Genetic Materials that encode Antibodies.
1.4 "Antigen" shall mean [*]
1.5 "Antigen Product License" shall mean a license, in the form
attached hereto as Exhibit A, to be granted by ABX to MBio pursuant to Section
3.3 of this Agreement.
1.6 "Confidential Information" shall mean, with respect to a party, all
information of any kind whatsoever (including without limitation, compilations,
data, formulae, models, patent disclosures, procedures, processes, projections,
protocols, results of experimentation and testing, specifications, strategies
and techniques), and all tangible and intangible embodiments thereof of any kind
whatsoever (including without limitation, apparatus, biological or chemical
materials, animals, cells, compositions, documents, drawings, machinery, patent
applications, records, reports), which is owned or controlled by such party and
is disclosed by such party to the receiving party and is marked, identified as
or otherwise acknowledged to be confidential at the time of disclosure to the
receiving party. Notwithstanding the foregoing, Confidential Information of a
party shall not include information which the receiving party can establish by
written documentation (a) to have been publicly known prior to disclosure of
such information by the disclosing party to the receiving party, (b) to have
become publicly known, without fault on the part of the receiving party,
subsequent to disclosure of such information by the disclosing party to the
receiving party, (c) to have been received by the receiving party at any time
from a source, other than the disclosing party, rightfully having possession of
and the right to disclose such information free of confidentiality obligations,
(d) to have been otherwise known by the receiving party free of confidentiality
obligations prior to disclosure of such information by the disclosing party to
the receiving party, or (e) to have been independently developed by employees or
agents of the receiving party without access to or use of such information
disclosed by the disclosing party to the receiving party. The parties
acknowledge that the foregoing exceptions shall be narrowly construed and that
the obligations imposed upon each party under Section 5 below shall be relieved
solely with respect to such Confidential Information of the disclosing party
which falls within the above exceptions and not with respect to related
portions, other combinations, or characteristics of the Confidential Information
of the disclosing party including, without limitation, advantages, operability,
specific purposes, uses and the like.
1.7 "Derived" or "derived" shall mean obtained, developed, created,
synthesized, designed, derived or resulting from, based upon or otherwise
generated.
1.8 "Field" shall mean the use of Products for human therapeutic,
preventative
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(prophylactic) and diagnostic medical purposes.
1.9 "Genetic Material" shall mean a nucleotide sequence, including DNA,
RNA and complementary and reverse complementary nucleotide sequences thereto,
whether coding or noncoding and whether intact or a fragment.
1.10 "GenPharm Cross License Agreement" shall mean that certain Cross
License Agreement entered into by and between ABX, JTI, XT, Cell Genesys, Inc.,
and GenPharm International, Inc. effective as of March 26, 1997, as the same may
be amended from time to time.
1.11 "IND" shall mean an Investigational New Drug application filed
with FDA, or any similar filing with any foreign regulatory authority, to
commence human clinical testing of any Product in any country.
1.12 "JTI" shall mean Japan Tobacco Inc., a Japanese corporation.
1.13 "Licensed Technology" shall mean ABX Patent Rights, ABX Know-How
and [*]; provided, however, that Licensed Technology shall not include Excluded
Technology.
1.13.1 "ABX Patent Rights" shall mean (i) the patents and
patent applications listed on Exhibit B hereto and any foreign counterparts
thereto; (ii) the patent applications which claim Joint Materials as defined in
Section 2.1.4(B) or Joint Intellectual Property as defined in Section 4.4; (iii)
all patents that have issued or in the future issue from any of the foregoing
patent applications, including without limitation utility, model and design
patents and certificates of invention; and (iv) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patents and patent applications.
1.13.2 "ABX Know-How" shall mean information discovered,
developed or acquired by ABX prior to the Effective Date regarding methods and
techniques of immunizing the XenoMouse Animals to the Antigen which is disclosed
by ABX to MBio pursuant to this Agreement or the RCA. All ABX Know-How shall be
treated as "Confidential Information" of ABX under Article 5 of this Agreement.
1.13.3 "ABX In-License" shall mean a license, sublicense or
other agreement under which ABX acquired rights to the ABX Patent Rights or the
ABX Know-How.
1.13.4 [*]
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[*]
1.13.5 "Excluded Technology" shall mean any intellectual
property or technology of ABX in or to (i) all antigens other than the Antigen,
including without limitation: (A) compositions of such antigens or of Genetic
Materials encoding such antigens; (B) uses of such antigens; (C) antibodies or
other compositions that bind to such antigens, Genetic Materials encoding such
antibodies or compositions, and cells that express, secrete, or contain such
antibodies, Genetic Materials, or compositions; and (D) uses of such antibodies,
Genetic Materials or compositions; (ii) methods to discover novel antigens;
(iii) methods of using antigens other than to create antibodies; and (iv) ABX
Intellectual Property as defined in Section 4.5.
1.14 "Option" shall have the meaning set forth in Section 3.1.1 below.
1.15 "Product" shall mean any product comprising (i) an Antibody which
binds to the Antigen or (ii) Genetic Material encoding such an Antibody wherein,
in respect of each Product, said Genetic Material does not encode multiple
antibodies.
1.16 [*] shall mean the [*] below.
1.17 "Research Field" shall mean the immunization of XenoMouse Animals
with the Antigen and the use of XenoMouse Animals that are so immunized and
materials derived from XenoMouse Animals that are so immunized, in each case
solely for the creation, identification, analysis, research, and preclinical
development of Products for use in the Field. For purposes of clarification, but
without limitation, the Research Field shall not include (i) the creation,
breeding or development of mice or any transgenic animals, (ii) use in humans of
materials derived in whole or part from the XenoMouse Animals (including without
limitation Products), (iii) use of XenoMouse Animals or materials derived in
whole or part from XenoMouse Animals (including without limitation Products) for
screening or other research, or for any purpose other than the creation,
identification, analysis, research and development of Products for use in the
Field, or (iv) the transfer, sale, lease, offer for sale or lease, or other
transfer of title to or an interest in XenoMouse Animals or any materials
derived in whole or part from the XenoMouse Animals (including without
limitation Products).
1.18 "XenoMouse" and "XenoMouse Animals" shall mean one or more
transgenic mice provided by ABX to MBio for immunization with the Antigen under
either this Agreement or the RCA.
1.19 "Xenotech Agreement" shall mean that certain Master Research
License and Option Agreement entered into by and among XT, JTI and Cell Genesys,
Inc. effective as of June 28, 1996, and subsequently assigned to ABX by Cell
Genesys, Inc., as the same may be amended from time to time.
1.20 "XT" shall mean Xenotech, L.P., a California limited partnership.
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1.21 "XT-ABX Product License" shall mean a license granted from XT to
ABX pursuant to the terms of the Xenotech Agreement permitting ABX to
commercialize certain Products in one or more territories.
2. SUPPLY OF MICE AND MATERIALS; RESEARCH LICENSE
2.1 Supply of XenoMouse Animals.
2.1.1 XenoMouse Animals. Subject to the terms and conditions
of this Agreement, including those set forth in Section 2.2 below, on or before
the Effective Date, ABX has provided to MBio, solely for use in creating
Antibodies to the Antigen for use in the Research Field, XenoMouse Animals
pursuant to the RCA.
2.1.2 Research. Except as the parties may otherwise agree,
MBio shall be responsible for conducting all research activities involved in the
Research Field, including without limitation immunizations of XenoMouse Animals
with the Antigen, screening of antibodies generated from such immunizations, and
creation of hybridoma cells that produce antibodies to the Antigen.
2.1.3 Payments. MBio shall pay to ABX [*] on December 20,
1998.
2.1.4 Ownership of Materials and Data.
A. ABX Materials. Subject to Section 2.1.4(B)
below, ABX owns and shall own (i) any and all XenoMouse Animals and XenoMouse
Animals immunized with the Antigen and any and all materials derived therefrom
(including without limitation fragments, derivatives, progeny, modifications or
improvements thereto, and derivatives thereof) [*] (the "ABX Materials").
B. Joint Materials. Notwithstanding anything to
the contrary in Section 2.1.4(A), it is understood and agreed that ABX and MBio
own and shall jointly own [*]
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[*] relating to Products resulting from the parties' use of the XenoMouse
Animals or Products in connection with the RCA, this Agreement or the Antigen
Product License (if entered into by the parties) (the "Joint Materials").
C. MBio Materials. Subject to Sections 2.1.4(A)
and 2.1.4(B), MBio owns and shall own [*]
D. Determinations Regarding Materials. In the
event of any good faith dispute between the parties with respect to the proper
categorization of materials under Section 2.1.4(A) through (C), above, the
parties shall attempt to resolve such dispute, first by thirty (30) days'
amicable negotiations, then by referral of the dispute (for thirty (30) days'
additional negotiation) to the chief patent lawyers (or their nominees) of each
party, and then, if not resolved, to the chief executive officers of each party.
If, thirty (30) days after referral to the chief executive officers, the parties
continue to have a good faith dispute as to the proper categorization of the
above-referenced materials, such materials shall be Joint Materials, provided
that such categorization shall not cause a breach of, or a right to terminate,
any ABX In-License.
E. Transfer of Materials. The transfer of physical
possession of any materials owned by, and the physical possession and use of
such materials and/or data by, MBio of ABX, as the case may be, shall not be
(nor be construed as) a sale, lease, offer to sell or lease, or other transfer
of title of such materials and/or data to MBio or ABX, as the case may be.
2.2 Supply of XenoMouse Animals and Materials; Material Transfer Terms.
All XenoMouse Animals, and all materials derived in whole or part from XenoMouse
Animals (including without limitation Products), provided by ABX to MBio are
provided solely for use in accordance with, and subject to, the following terms
and conditions:
(a) all XenoMouse Animals transferred to MBio shall be the
sole property of ABX, and the transfer of physical possession to MBio, and/or
possession or use by MBio, of XenoMouse Animals shall not be, nor be construed
as, a sale, lease, offer to sell or lease, or other transfer of title to any
XenoMouse Animals;
(b) all XenoMouse Animals and all materials derived in whole
or part from the XenoMouse Animals (including without limitation Products) shall
remain in the control of MBio and shall not be transferred to MBio's Affiliates
or Sublicensees or any other party (other than ABX), [*]
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[*]
(c) MBio shall not directly or indirectly use or attempt to
use the XenoMouse Animals, or any materials derived in whole or part from the
XenoMouse Animals (including without limitation Products) to reproduce the
XenoMouse Animals or to generate or produce by any means XenoMouse Animals or
other transgenic mice or other transgenic animals;
(d) The XenoMouse Animals shall be delivered to MBio solely
for the purpose of immunizing the XenoMouse Animals with the Antigen, and MBio
shall not use the XenoMouse Animals, or any materials derived in whole or part
from the XenoMouse Animals (including without limitation Products), for any
purpose other than (i) immunizing the XenoMouse Animals with the Antigen, and
(ii) subsequent use of such immunized XenoMouse Animals and materials derived
therefrom (including without limitation Products) as reasonably necessary for
creation, manufacture, use, identification, and commercialization of Products
pursuant to the Antigen Product License (if entered into by the parties);
(e) MBio shall not sell, have sold, lease, offer to sell or
lease, otherwise transfer title to (i) any XenoMouse Animals, (ii) cells derived
in whole or part from the XenoMouse Animals (including without limitation
hybridomas), or (iii) except as provided in (f) below, any other materials
derived in whole or part from the XenoMouse Animals (including without
limitation Products);
(f) MBio shall not sell, have sold, lease, offer to sell or
lease, otherwise transfer title to, or otherwise distribute, clinically develop,
or commercialize any Product without obtaining the Antigen Product License from
ABX with respect to such Product;
(g) MBio shall not use the XenoMouse Animals to make or use
antibodies to any antigen other than the Antigen (including without limitation
to [*];
(h) Upon expiration or termination of this Agreement for any
reason, MBio shall destroy (or return to ABX) each XenoMouse Animal and certify
such destruction as directed by ABX, within ten (10) days after such expiration
or termination, except as otherwise provided in the Antigen Product License (if
entered into by the parties);
(i) ABX shall own all right, title and interest in and to all
inventions and intellectual property (whether patentable or nonpatentable) made
or created by MBio (and any of its agents or employees) through any use of the
XenoMouse Animals (and/or materials derived in
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whole or part from the XenoMouse Animals) which is not in accordance with the
terms and conditions set forth in this Article 2;
(j) The XenoMouse Animals shall be the property of ABX, and
the transfer of physical possession of any such materials to, and the physical
possession of such materials by, MBio shall not be (nor be construed as) a sale,
lease, offer to sell or lease, or other transfer of title of such materials to
MBio;
(k) No implied licenses or rights are conveyed to MBio or ABX
hereunder. MBio shall only be authorized regarding the use of XenoMouse Animals
and the manufacture, research use, and (if permitted under the Antigen Product
License, if entered into by the parties) commercial exploitation of materials
derived in whole or part from the XenoMouse Animals (including without
limitation Products) solely as expressly provided hereunder or under the Antigen
Product License (if entered into by the parties);
(l) MBio shall only use the XenoMouse Animals and materials
derived in whole or part from the XenoMouse Animals (including without
limitation Products) in compliance with all applicable national, state, and
local laws and regulations, including all applicable National Institutes of
Health guidelines. Such materials will not be used in humans, except as
otherwise expressly set forth in the Antigen Product License (if entered into by
the parties). MBio acknowledges that the XenoMouse Animals, and all materials
derived in whole or part from the XenoMouse Animals, are experimental in nature
and may have unknown characteristics and therefore shall use prudence and
reasonable care in the use, handling, storage, transportation, disposition and
containment of such materials and all derivatives thereof;
(m) Unless otherwise agreed by ABX in advance in writing, all
XenoMouse Animals delivered to MBio shall be delivered to MBio's animal facility
in Cambridge Massachusetts, [*] and such XenoMouse Animals shall not leave such
facility (except for return of XenoMouse Animals to ABX or upon destruction of
the XenoMouse Animals by MBio); and
(n) XT shall be a third-party beneficiary of the commitments
by MBio set forth in items (a) through (g) above.
2.3 Research License.
(a) Subject to the terms and conditions of this Agreement, ABX
hereby grants to MBio a nonexclusive license (or sublicense, as the case may be)
under the Licensed Technology, with the limited right to grant sublicenses only
as provided under Section 2.3(b) below, (i) to use the XenoMouse Animals
provided by ABX solely for use in the Research Field, (ii) to make and use (but
not to transfer, sell, lease, offer to sell or lease, or otherwise transfer
title to) Antibody Cells that secrete or express Antibodies to the Antigen
solely for use in the Research Field, and (iii) to make and use (but not to
transfer, sell, lease, offer to sell or lease, or otherwise transfer title to)
Products solely for research and development of such Products for use in the
Research Field. MBio shall not use the Licensed Technology or any materials
derived in whole or in part from the XenoMouse Animals (including without
limitation Products) for any
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other purpose other than those uses expressly licensed under this Section 2.3 or
as otherwise expressly set forth in the Antigen Product License (if entered into
by the parties). The rights and (sub)license granted under this Section 2.3
shall terminate upon the earlier of (i) such time as MBio and ABX execute the
Antigen Product License and (ii) November 30, 1999.
(b) MBio shall have the right to [*]
(c) MBio shall have the right to contract with MBio Affiliates
[*] to perform certain tasks (e.g., without limitation, pathology studies) in
support of MBio's activities under this Agreement; provided, however, that (i)
such contract shall expressly exclude the use of the XenoMouse Animals; (ii)
such contract shall permit the transfer only of Antibodies, Genetic Materials
and Antibody Cells to such contractor; (iii) such contractor shall expressly
agree to be bound by the terms and conditions (including without limitation the
ownership, exclusivity, confidentiality and indemnification provisions) of this
Agreement to the extent applicable to the contracted services; and (iv) MBio
remains obligated for such contractor's performance hereunder.
2.4 Limitation. Notwithstanding any other provision of this Agreement,
in no event shall MBio (i) file, or authorize any third party to file, an IND
with respect to a Product or (ii) initiate, or authorize any third party to
initiate, clinical trials in humans with respect to a Product or otherwise
utilize or introduce in any way a Product into humans (or sell, or authorize any
third party to sell, a Product), unless and until MBio has entered into the
Antigen Product License for such Product in accordance with Section 3.5 below.
2.5 Exclusivity.
(a) During the term of this Agreement and the term of the
Antigen Product License (if entered into by the parties), MBio shall not use in
clinical trials, sell or commercialize any other antibody or fragment thereof
that binds to the Antigen, or enter into any agreement with any third party
regarding the clinical development, sale or commercialization of such antibodies
or fragments, without prior written approval of ABX. Notwithstanding the
foregoing,
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MBio shall not be precluded from (i) conducting, or collaborating or contracting
with a third party to conduct, early-stage or preclinical studies with respect
to any other antibody or fragment thereof that binds to the Antigen, or (ii)
clinically developing, selling or commercializing any antibodies or fragments
thereof whose principal binding affinity is to, and mode of action is through,
an antigen other than the Antigen, regardless of whether such antibodies or
fragments also bind to the Antigen, or from entering into any agreement with any
third party regarding the clinical development, sale or commercialization of
such antibodies or fragments.
(b) During the term of this Agreement and the term of the
Antigen Product License (if entered into by the parties), except as provided in
Section 3.2.4 below, ABX shall not (i) develop or sell any antibody or fragment
thereof that binds to the Antigen, or enter into any agreement with any third
party for the creation, research or development of such antibodies or fragments
thereof, or (ii) option, license or otherwise transfer rights of any kind
whatsoever, whether for research or commercial purposes, to any third party,
which would enable such third party to develop or sell any antibody or fragment
thereof that binds to the Antigen, without prior written approval of MBio.
Notwithstanding the foregoing, ABX shall not be precluded from clinically
developing, selling or commercializing any antibodies or fragments thereof whose
principal binding affinity is to, and mode of action is through, an antigen
other than the Antigen, regardless of whether such antibodies or fragments also
bind to the Antigen, or from entering into any agreement with any third party
regarding the clinical development, sale or commercialization of such antibodies
or fragments.
2.6 Reports. MBio agrees to keep ABX reasonably informed as to its
research activities hereunder. [*]
3. OPTION TO OBTAIN ANTIGEN PRODUCT LICENSE
3.1 Option. Subject to the terms and conditions set forth in this
Agreement, ABX hereby grants to MBio an option (the "Option") to execute, and to
have ABX execute, the Antigen Product License, which Option may be exercised by
MBio pursuant to the procedures set forth in this Article 3 on or before
November 30, 1999.
3.2 Exercise of Option.
3.2.1 Exercise. To exercise the Option, on or before the date
set forth in Section 3.1 above, MBio shall give ABX irrevocable written notice
(the "Exercise Notice") stating that MBio desires that ABX obtain the XT-ABX
Product License for the Antigen and grant to MBio the Antigen Product License.
MBio's exercise of the Option shall be effective upon receipt by ABX of the
Exercise Notice. In the event that ABX has not received the Exercise Notice on
or before the date set forth in Section 3.1 above, the Option shall immediately
terminate.
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3.2.2 Obtaining the XT-ABX Product License for the Antigen.
Following MBio's exercise of the Option, ABX shall exercise its option under the
Xenotech Agreement and shall obtain the XT-ABX Product License for the Antigen.
Upon execution of the XT-ABX Product License, MBio and ABX shall execute the
Antigen Product License, and MBio shall pay to ABX the license fee set forth in
Section 3.1 of the Antigen Product License.
3.2.3 Definition of Antigen. ABX shall establish as the
definition of the Antigen under the Xenotech Agreement the same definition of
the Antigen as is established under this Agreement (or such other definition
which does not materially lessen the rights granted to MBio under this Agreement
and under the Antigen Product License (if executed by the parties).
3.2.4 Use by ABX. If MBio does not exercise its Option on or
before the date set forth in Section 3.1 above, or if MBIO does not promptly
thereafter enter into the Antigen Product License, ABX shall be entitled, in its
sole discretion, to exercise ABX's rights under the Xenotech Agreement and enter
into the XT-ABX Product License related to the Antigen on its own behalf or on
behalf of a third party [*], and shall not be obligated to enter into the
Antigen Product License with MBio; provided, however, [*]
3.3 Execution of Antigen Product License. At such time as ABX enters
into the XT-ABX Product License with respect to the Antigen as described in
Section 3.2.2, MBio and ABX shall promptly execute the Antigen Product License.
3.4 [*]
3.4.1 Subject to Section 3.4.2, [*]. Subject to Section 3.4.2,
[*]
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[*]
3.4.2 Notwithstanding Section 3.4.1, [*]
4. INTELLECTUAL PROPERTY
4.1 Existing MBio Intellectual Property. MBio owns and shall own all
right, title and interest in and to inventions made, conceived, reduced to
practice and otherwise developed by MBio prior to the Effective Date of the RCA
and all intellectual property thereto.
4.2 Existing ABX Intellectual Property. ABX owns and shall own all
right, title and interest in and to inventions made, conceived, reduced to
practice and otherwise developed by ABX prior to the Effective Date of the RCA
and all intellectual property thereto.
4.3 MBio Intellectual Property. Except as otherwise provided in
Sections 4.4 and 4.5 below, MBio shall own all right, title and interest in and
to inventions made, conceived, reduced to practice, or otherwise developed
solely by MBio pursuant to the RCA, this Agreement or the Antigen Product
License (if entered into by the parties) and all intellectual property thereto
(the "MBio Intellectual Property").
4.4 Joint Intellectual Property. Except as otherwise provided in
Section 2.1.4 or 2.2(i) above, MBio and ABX shall jointly own all right, title
and interest in and to (a) all inventions made jointly by ABX and MBio personnel
under the RCA, this Agreement or the Antigen Product License (if entered into by
the parties), and all intellectual property thereto, and (b) all inventions,
solely or jointly made, conceived, reduced to practice, or otherwise developed
by, or under the authority of, MBio and/or ABX in the course of performing
research or development work under the RCA, this Agreement or the Antigen
Product License (if entered into by the parties) regarding the Joint Materials
and/or the Antibody Cells that contain, express, or secrete Antibodies that bind
to the Antigen or Genetic Materials that encode such Antibodies, and all
intellectual property thereto (all of the foregoing, collectively, the "Joint
Intellectual Property"). Nothing in this Section 4.4 shall convey, or be
construed to convey, title in or to the biological materials themselves
embodying any such jointly-owned inventions or intellectual property to MBio or
ABX, as the case may be.
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4.5 ABX Intellectual Property. Except as otherwise provided in Section
4.4 above, ABX shall own all right, title and interest in and to (a) all
inventions made, conceived, reduced to practice, or otherwise developed solely
by ABX pursuant to the RCA, this Agreement or the Antigen Product License (if
entered into by the parties) and all intellectual property thereto, and (b) all
inventions made, conceived, reduced to practice or otherwise developed jointly
or solely by MBio and/or ABX using XenoMouse Animals or related to ABX Materials
whether derived in whole or part from XenoMouse Animals and all intellectual
property rights thereto (all of the foregoing, collectively, the "ABX
Intellectual Property").
4.6 Determinations Regarding Intellectual Property. In the event of any
good faith dispute between the parties with respect to the proper categorization
of intellectual property under Sections 4.1 through 4.5 above, the parties shall
attempt to resolve such dispute, first by thirty (30) days' amicable
negotiations, then by referral of the dispute (for thirty (30) days' additional
negotiation) to the chief patent lawyers (or their nominees) of each party, and
then, if not resolved, to the chief executive officers of each party. If, thirty
(30) days after referral to the chief executive officers, the parties continue
to have a good faith dispute as to the proper categorization of the
above-referenced intellectual property, such intellectual property shall be
Joint Intellectual Property, provided that such categorization shall not cause a
breach of, or a right to terminate, any ABX In-License.
4.7 Assignment and Disclosure of Inventions. MBio and ABX shall cause
each employee, agent, or independent contractor that conducts research pursuant
to the RCA, this Agreement or the Antigen Product License (if entered into by
the parties) using the XenoMouse Animals, or any materials derived in whole or
part, from the XenoMouse Animals (including without limitation the Products), to
promptly disclose to ABX or MBio, as the case may be, and appropriately assign
any and all rights in and to, inventions made, conceived, reduced to practice,
or otherwise developed by, or under the authority of, MBio or ABX hereunder.
MBio and ABX agree to maintain records in sufficient detail and in good
scientific manner appropriate for patent purposes and so as to properly reflect
all work done and results achieved in performing its rights and obligations
hereunder, and agrees to respond to reasonable requests from MBio or ABX, as the
case may be, for information based upon such records.
4.8 Prosecution and Maintenance of Patents.
4.8.1 ABX. ABX shall have the sole right and responsibility
(but not the obligation), at its expense, to file, prosecute and maintain all
patent applications within (and to conduct any interferences, oppositions, or
reexaminations on, and to request any reissues or patent term extensions of):
(i) the ABX Patent Rights, other than those patent applications that claim Joint
Intellectual Property; (ii) the [*]; and (iii) the ABX Intellectual Property.
4.8.2 MBio. MBio shall have the sole right and responsibility
(but not the obligation), at its expense, to file, prosecute and maintain all
patent applications (and to conduct any interferences, oppositions, or
reexaminations thereon, and to request any reissues or patent term extensions
thereof) within the MBio Intellectual Property.
4.8.3 Joint. Except as otherwise set forth in the Antigen
Product License (if
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entered into by the parties), MBio shall have the first right and responsibility
(but not the obligation), at its expense, to file, prosecute and maintain all
patent applications (and to conduct any interferences, oppositions, or
reexaminations thereon, and to request any reissues or patent term extensions
thereof) within the Joint Intellectual Property. MBio shall: (i) provide ABX
with any patent application filed hereunder by MBio promptly prior to filing and
receive and incorporate reasonable comments by ABX thereon; (ii) provide ABX
with any patent application filed hereunder by MBio promptly after such filing;
(iii) provide ABX promptly with copies of all substantive communications
received from or filed in patent office(s) with respect to such filings and
receive and incorporate reasonable comments by ABX thereon; (iv) notify ABX of
any interference, opposition, reexamination request, nullity proceeding, appeal
or other interparty action and review it with the ABX as reasonably requested;
and (v) a reasonable time prior to taking or failing to take any action that
would substantially affect the scope of validity of rights under such patent
applications or patents thereon (including substantially narrowing or canceling
any claim without reserving the right to file a continuing or divisional
application, abandoning any patent or not filing or perfecting the filing of any
patent application), provide ABX with notice of such proposed action so that ABX
has a reasonable opportunity to review and make comments. ABX shall assist MBio
upon request and at MBio's sole expense, and to the extent commercially
reasonable, in preparing, filing or maintaining the patent applications and
patents claiming Joint Intellectual Property. If MBio fails to undertake the
filing of a patent application (or continuing or divisional application) within
ninety (90) days after a written request from ABX to do so, or if MBio
discontinues the prosecution or maintenance of a patent application or a patent,
ABX at its expense may, in its discretion, undertake such filing, prosecution or
maintenance thereof, in which case such patent application and patent thereon
shall be solely owned by ABX.
4.9 Enforcement of Patents. MBio shall use good faith efforts to
enforce the patent rights within the Joint Intellectual Property, and to consult
with ABX both prior to and during said enforcement. ABX shall reasonably
cooperate with MBio, upon request by MBio and at the sole expense of MBio, in
taking any action to enforce such patent rights. All monies recovered upon the
final judgment or settlement of any such action shall be used first to reimburse
the costs and expenses (including reasonable attorneys' fees) of MBio and ABX,
with the remainder for the account of the party or parties that undertake such
actions to the extent of their financial participation therein. To the extent
that damages are awarded for lost sales or lost profits from the sale of
Products, such damages shall be allocated among the parties taking into account
royalties that would have been payable to ABX on the sale of such Products. ABX
shall use efforts consistent with prudent business judgment to enforce the
patent rights within the ABX Patent Rights that are licensed to MBio hereunder,
or would be licensed to MBio under the XT-ABX Product License Agreement, if
entered into by the parties, and to consult with MBio both prior to and during
said enforcement. MBio shall reasonably cooperate with ABX, upon request by ABX
and at the sole expense of ABX, in taking any action to enforce such patent
rights. ABX shall be entitled to all monies recovered upon the final judgment or
settlement of any such action.
4.10 Grant-Back. It is the intent of the parties that this Agreement
shall not restrict ABX's freedom to operate regarding the practice and
commercialization of the Licensed Technology (including without limitation
XenoMouse Animals and cells, genetic material, and antibodies generated or
derived from XenoMouse Animals), except as expressly set forth herein regarding
the Antigen. Accordingly, in the event that any patent owned or controlled by
MBio that
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directly arises from use of the XenoMouse Animals that has application other
than for the manufacture, use, sale, offer for sale or import of Products, MBio
hereby grants to ABX a royalty-free, perpetual, irrevocable license, with the
right to grant and authorize sublicenses, under all such patents for all fields
of use other than the manufacture, use, sale, offer for sale or import of
Products.
4.11 Covenant Not to Sue. During the term of this Agreement and the
Antigen Product License (if entered into by the parties), ABX shall not enforce
against MBio or its Affiliates any issued patent which (a) is owned by ABX or
its Affiliate, or is licensed to ABX or its Affiliate with the right to enforce
(without an obligation to pay royalties or other amounts to any other Person),
(b) covers XenoMouse Animals, and (c) would be infringed by the conduct of
research and development in the Research Field, or by the manufacture, use or
sale of Products in the Field, to the extent permitted under this Agreement or
the Antigen Product License (if entered into by the parties).
5. CONFIDENTIALITY
5.1 Confidentiality. For purposes of this Agreement, (i) the ABX
Materials and all written and oral communications related thereto are and shall
remain the Confidential Information of ABX, (ii) the MBio Materials and all
written and oral communications related thereto are and shall remain the
Confidential Information of MBio, and (iii) the Joint Materials and all written
and oral communications related thereto are and shall remain the joint
Confidential Information of ABX and MBio. Except as expressly provided herein,
MBio and ABX each shall keep completely confidential and shall not publish or
otherwise disclose and shall not use for any purpose any Confidential
Information of the other, whether or not furnished to it by the other party
pursuant to this Agreement (including, without limitation, know-how) until the
later of (i) ten (10) years from the Effective Date or (ii) five (5) years
following the expiration or termination of this Agreement.
5.2 Disclosure to Third Parties. Notwithstanding Section 5.1 above,
each party may disclose Confidential Information regarding the Joint Materials
and Joint Intellectual Property to permitted sublicensees and contractors
hereunder, provided that such sublicensee or contractor agrees in writing to be
bound the confidentiality and non-use obligations of this Agreement.
5.3 Permitted Disclosure. Notwithstanding Section 5.1 above, each party
may nevertheless disclose the other party's Confidential Information to the
extent such disclosure is required by applicable law, regulation or court order,
provided that if a party is required by law to make any such disclosure of the
other party's Confidential Information, other than pursuant to a confidentiality
agreement, it will give reasonable advance notice to the other party of such
disclosure requirement and will use efforts consistent with prudent business
judgment to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or confidentiality agreements or
otherwise). It is understood that the expiration of MBio's obligations under
Section 5.1 above shall not be deemed to limit MBio's obligations under Section
2.2 above.
5.4 Terms of Agreement. Neither party shall disclose any terms or
conditions of this
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Agreement to any third party without the prior consent of the other party;
provided, however, that a party may disclose the terms or conditions of this
Agreement, (i) on a need-to-know basis to its Affiliates including, but not
limited to, for MBio, Millennium Pharmaceuticals, Inc., Millennium Information,
Inc., Millennium Predictive Medicine, Inc., plus any future Affiliates that own
a majority of the stock of MBio or that MBio owns a majority of the stock
thereof (and any affiliated companies that own a majority of the stock of
Millennium Pharmaceuticals, Inc. or that Millennium Pharmaceuticals, Inc. owns a
majority of the stock thereof), and for ABX, Xenotech L.P. plus any future
Affiliates that own a majority of the stock of ABX or that ABX owns a majority
of the stock thereof) and to its/their legal and financial advisors to the
extent such disclosure is reasonably necessary in connection with such party's
activities as expressly permitted by this Agreement, (ii) to a third party in
connection with (A) an equity investment in such party by a third party, (B) a
merger, consolidation or similar transaction entered into by such party, or (C)
the sale of all or substantially all of the assets of such party, and (iii) as
may, in the reasonable opinion of such party's counsel, be required by
applicable law, regulation or court order, including without limitation, a
disclosure in connection with such party's filing of a registration statement or
other filing with the United States Securities and Exchange Commission (in which
event such party will first consult with the other party with respect to such
disclosure). Notwithstanding the foregoing, prior to execution of this Agreement
ABX and MBio shall agree upon the substance of information that can be used to
describe the terms of this transaction, and each party may disclose such
information, as modified by written agreement of ABX and MBio from time to time,
without the consent of the other.
6. INDEMNIFICATION
6.1 MBio. MBio shall indemnify and hold harmless ABX, and its
directors, officers, employees and agents, from and against all losses,
liabilities, damages and expenses, including reasonable attorneys' fees and
costs (collectively, "Liabilities"), resulting from any claims, demands, actions
or other proceedings by any third party arising from (i) the material breach of
any representation, warranty or covenant by MBio under this Agreement, (ii) the
performance of the Research by MBio, (iii) any use, handling or storage by MBio
of the ABX Materials, the Joint Materials, or Products, or (iv) any use by MBio
of the Confidential Information of ABX; provided, however, that MBio shall not
be obligated to indemnify or hold harmless ABX for such Liabilities to the
extent that such Liabilities arise from (a) the gross negligence or willful
misconduct of ABX, or (b) the misappropriation by ABX of the trade secrets or
other proprietary information of a Third Party.
6.2 ABX. ABX shall indemnify and hold harmless MBio, and its directors,
officers, employees and agents, from and against all Liabilities resulting from
any claims, demands, actions or other proceedings by any third party arising
from (i) the material breach of any representation, warranty or covenant by ABX
under this Agreement, or (ii) any use by ABX of the Confidential Information of
MBio; provided, however, that ABX shall not be obligated to indemnify or hold
harmless MBio for such Liabilities to the extent that such Liabilities arise
from (a) the gross negligence or willful misconduct of MBio, or (b) the
misappropriation by MBio of the trade secrets or other proprietary information
of a Third Party.
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6.3 Procedure. If a party (an "Indemnitee") intends to claim
indemnification under this Article 6, it shall promptly notify the indemnifying
party (the "Indemnitor") in writing of any claim, demand, action or other
proceeding for which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall have the right to participate in, and, to the extent the
Indemnitor so desires, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the Indemnitor, if representation of such Indemnitee by the counsel retained by
the Indemnitor would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other party represented by such
counsel in such proceeding. The indemnity agreement in this Article 6 shall not
apply to amounts paid in settlement of any claim, demand, action or other
proceeding if such settlement is effected without the consent of the Indemnitor,
which consent shall not be withheld or delayed unreasonably. The failure to
deliver written notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnitor of any liability to the Indemnitee under
this Article 6, but the omission so to deliver written notice to the Indemnitor
shall not relieve it of any liability that it may have to any party claiming
indemnification otherwise than under this Article 6. The party claiming
indemnification under this Article 6, its employees and agents, shall reasonably
cooperate with the Indemnitor and its legal representatives in the investigation
of any claim, demand, action or other proceeding covered by this
indemnification.
7. REPRESENTATIONS AND WARRANTIES
7.1 ABX.
7.1.1 ABX represents and warrants that: (i) it has the full
right, power and authority to enter into this Agreement and to grant the rights
and licenses hereunder; (ii) to the knowledge of ABX, there are no existing or
threatened actions, suits or claims pending with respect to the subject matter
hereof or the right of ABX to enter into and perform its obligations under this
Agreement; (iii) it has taken all necessary action on its part to authorize the
execution and delivery of this Agreement and the performance of its obligations
hereunder; (iv) this Agreement has been duly executed and delivered on behalf of
it, and constitutes a legal, valid, binding obligation, enforceable against it
in accordance with the terms hereof; and (v) the execution and delivery of this
Agreement and the performance of its obligations hereunder do not conflict with
or violate any requirement of applicable laws or regulations and do not conflict
with, or constitute a default under, any contractual obligation of it.
7.1.2 ABX further represents and warrants that:
(i) on or before the Effective Date, it has provided to MBio
complete copies of all applicable ABX In-Licenses (including without limitation
the GenPharm Cross License Agreement) setting forth all applicable rights,
limitations and restrictions described in Section 9.9 below (it being understood
that the financial terms have been redacted from some or all such copies);
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(ii) based upon information provided to ABX by MBio concerning
MBio's intellectual property rights in the Antigen, and to the best of ABX's
knowledge (without the obligation to perform due diligence), (a) ABX has the
right to obtain from XT an XT-ABX Product License with respect to the Antigen
that is an "Exclusive Worldwide Product License" (as defined in the Xenotech
Agreement and in the form attached thereto as an exhibit); (b) the license or
sublicense to be granted to ABX pursuant to such XT-ABX Product License with
respect to the Antigen shall be exclusive even as to XT; and (c) JTI does not
have the right under the Xenotech Agreement to obtain an "Exclusive Home
Territory Product License" or a "Co-Exclusive Worldwide Product License" (as
these are defined in the Xenotech Agreement and attached thereto as exhibits)
with respect to the Antigen, or any other right or license under the Licensed
Technology to develop, make and have made, use, sell, lease, offer to sell or
lease, import, export, otherwise transfer physical possession of or otherwise
transfer title to Products for use in the Field; except, in each case, with
respect to the research license set forth in Article 3 of the Xenotech
Agreement;
(iii) ABX has nominated the Antigen under [*] the
Xenotech Agreement as required under the Xenotech Agreement to obtain the right
to acquire an "Exclusive World Wide Product License" under the Xenotech
Agreement with respect to the Antigen; and
(iv) the XT-ABX Product License to be executed by XT and ABX
will be substantially identical (i.e., other than with respect to the effective
date thereof and the definition of the antigen under such agreement) to the form
agreement attached to this Agreement as Exhibit D (it being understood that the
financial terms may be redacted from such form agreement).
7.1.3 Upon execution of the XT-ABX Product License with
respect to the Antigen, ABX shall provide MBio with a copy of such
fully-executed XT-ABX Product License (it being understood that the financial
terms may be redacted from such copy). At any time during the term of this
Agreement or the Antigen Product License (if entered into by the parties) at the
request of MBio, ABX shall discuss with MBio ABX's interpretation of material
terms and conditions of the applicable ABX In-Licenses, including, without
limitation, the form of agreement attached to this Agreement as Exhibit D, the
XT-ABX Product License, and any limitations on ABX's right to further transfer
or grant licenses or sublicenses to MBio to any and all rights to technology
within the scope of the ABX Patent Rights and/or ABX Know-How under any ABX
In-License.
7.2 MBio. MBio represents and warrants that: (i) it has the full right,
power and authority to enter into this Agreement; (ii) to the knowledge of MBio,
there are no existing or threatened actions, suits or claims pending with
respect to the subject matter hereof or the right of MBio to enter into and
perform its obligations under this Agreement; (iii) it has taken all necessary
action on its part to authorize the execution and delivery of this Agreement and
the performance of its obligations hereunder; (iv) this Agreement has been duly
executed and delivered on behalf of it, and constitutes a legal, valid, binding
obligation, enforceable against it in accordance with the terms hereof; (v) the
execution and delivery of this Agreement and the performance of its obligations
hereunder do not conflict with or violate any requirement of applicable laws or
regulations and do not conflict with, or constitute a default under, any
contractual obligation of it; and (vi) it will not take any action, or fail to
take any action, under this Agreement or the Antigen Product License, if entered
into by the parties, that will cause a breach of the GenPharm Cross License
Agreement, the
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Xenotech Agreement or the XT-ABX Product License.
7.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, ABX AND MBIO MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY
KIND REGARDING ABX MATERIALS, MBIO MATERIALS, JOINT MATERIALS, PRODUCTS OR
LICENSED TECHNOLOGY, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, AND VALIDITY OF TECHNOLOGY OR PATENT CLAIMS, ISSUED OR PENDING.
ALL XENOMOUSE ANIMALS AND MATERIALS DERIVED IN WHOLE OR PART FROM XENOMOUSE
ANIMALS PROVIDED TO MBIO PURSUANT TO THIS AGREEMENT ARE PROVIDED "AS IS," AND
ABX SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH RESPECT TO SUCH XENOMOUSE
ANIMALS AND MATERIALS DERIVED IN WHOLE OR PART FROM XENOMOUSE ANIMALS.
8. TERM; TERMINATION
8.1 Term. This Agreement shall commence on the Effective Date and,
unless earlier terminated pursuant to the other provisions of this Article 8,
shall continue in effect until December 31, 1999.
8.2 Termination by MBio. MBio may terminate this Agreement at any time
upon ninety (90) days written notice to ABX.
8.3 Breach. In the event that a party shall have materially breached or
defaulted in the performance of any of its material obligations hereunder, and
such breach or default shall have continued for thirty (30) days after written
notice of such breach was provided to the breaching party by the nonbreaching
party, the nonbreaching party shall have the right at its option to terminate
this Agreement effective at the end of such thirty-day period unless the
breaching party has cured any such breach or default prior to the expiration of
the thirty-day period.
8.4 Effect of Termination; Accrued Rights and Survival of Terms.
Termination or expiration of this Agreement for any reason shall be without
prejudice to any rights which shall have accrued to the benefit of a party prior
to such termination or expiration. Without limiting the foregoing, Articles 4, 5
and 6 and Sections 2.2 and 7.3 of this Agreement shall survive any expiration or
termination of this Agreement.
9. MISCELLANEOUS PROVISIONS
9.1 Governing Laws. This Agreement shall be governed by, interpreted
and construed in accordance with the laws of the State of California, without
regard to conflicts of law principles.
9.2 Waiver. It is agreed that no waiver by a party hereto of any breach
or default of any
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of the covenants or agreements herein set forth shall be deemed a waiver as to
any subsequent and/or similar breach or default.
9.3 Assignments. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated, in whole or part, by either party
without the prior written consent of the other; provided, however, that either
party may, without the written consent of the other, assign this Agreement and
its rights and delegate its obligations hereunder in connection with the
transfer or sale of all or substantially all of its business, or in the event of
its merger, consolidation, change in control or similar transaction. Any
permitted assignee shall assume all obligations of its assignor under this
Agreement. Any purported assignment in violation of this Section 9.3 shall be
void. Notwithstanding the foregoing, except as otherwise provided under Section
2.2(b) above, ABX shall not be obligated without its consent to send XenoMouse
Animals to any party other than MBio, nor shall MBio have the right to transfer
XenoMouse Animals to any other party without ABX's prior written consent. The
terms and conditions of this Agreement shall be binding upon and inure to the
benefit of the permitted successors and assigns of the parties.
9.4 Independent Contractors. The relationship of the parties hereto is
that of independent contractors. The parties hereto are not deemed to be agents,
partners or joint venturers of the others for any purpose as a result of this
Agreement or the transactions contemplated thereby.
9.5 Further Actions. Each party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
9.6 Notices. All requests and notices required or permitted to be given
to the parties hereto shall be given in writing, shall expressly reference the
section(s) of this Agreement to which they pertain, and shall be delivered to
the other party, effective on receipt, at the appropriate address as set forth
below or to such other addresses as may be designated in writing by the parties
from time to time during the term of this Agreement.
Millennium BioTherapeutics, Inc.:
Millennium BioTherapeutics, Inc.
620 Memorial Drive
Cambridge, Massachusetts 02139
Telecopier: 617-374-7653
Attn: General Manager
Abgenix, Inc.:
Abgenix, Inc.
7601 Dumbarton Circle
Fremont, California 94555
Attn: President
with a copy to:
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Pillsbury Madison & Sutro LLP
101 West Broadway, Suite 1800
San Diego, California 92101
Attn: Mark R. Wicker
9.7 Force Majeure. Nonperformance of a party (other than for the
payment of money) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to perform
is beyond the reasonable control and not caused by the negligence, intentional
conduct or misconduct of the nonperforming party.
9.8 No Consequential Damages. IN NO EVENT SHALL A PARTY HERETO BE
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION
LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 9.8 IS
INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF
EITHER PARTY.
9.9 Third Party Rights. Notwithstanding anything to the contrary in
this Agreement, the grant of rights by ABX under this Agreement shall be subject
to and limited in all respects by the terms of the applicable ABX In-License(s)
pursuant to which ABX acquired any Licensed Technology, and all rights or
sublicenses granted under this Agreement shall be limited to the extent that ABX
may grant such rights and sublicenses under such ABX In-Licenses. Additionally,
and without limiting the foregoing, the rights granted to MBio hereunder,
including without limitation any grant of "exclusive" rights, shall be subject
to the rights granted to or retained by GenPharm under the GenPharm Cross
License Agreement.
9.10 Complete Agreement. It is understood and agreed by the parties
that this Agreement constitutes the entire agreement, both written and oral,
among the parties with respect to the subject matter hereof, and that all prior
agreements respecting the subject matter hereof, either written or oral,
expressed or implied, shall be abrogated, canceled, and are null and void and of
no effect, including, without limitation, the RCA. No amendment or change hereof
or addition hereto shall be effective or binding on the parties hereto unless
reduced to writing and executed by the respective duly authorized
representatives of the parties.
9.11 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and together shall be deemed to be
one and the same agreement.
9.12 Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are included merely for convenience of
reference only and shall not affect its meaning or interpretation.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written, each copy of which shall for all purposes be deemed to be
an original.
ABGENIX, INC. MILLENNIUM BIOTHERAPEUTICS, INC.
By: /s/ R. Scott Greer By: /s/ John Maraganore
------------------------------ -------------------------------------
Printed Name: R. Scott Greer Printed Name: John Maraganore
-------------------- ---------------------------
Title: Presdent & CEO Title: VP & General Manager
--------------------------- ----------------------------------
Date: 11/6/98 Date: 11/6/98
---------------------------- ----------------------------------
MILLENNIUM PHARMACEUTICALS, INC. hereby acknowledges and
agrees to be bound by the terms and conditions of this
Agreement to the extent applicable to the facilities used
and services performed pursuant to Section 2.2(b) above.
MILLENNIUM PHARMACEUTICALS, INC.
By: /s/ Gary A. Cohn
--------------------------------------
Printed Name: Gary A. Cohn
----------------------------
Title: Assoc. General Counsel
Corporate and Transactions
-----------------------------------
Date: 11/6/98
-------------------------------------
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EXHIBIT A
FORM OF PRODUCT LICENSE AGREEMENT
THIS PRODUCT LICENSE AGREEMENT (the "Agreement") effective the ____ day
of ________, ____ (the "Effective Date"), is made by and between ABGENIX, INC.,
a Delaware corporation ("ABX"), and MILLENNIUM BIOTHERAPEUTICS, INC. a Delaware
corporation ("MBio").
RECITALS
MBio and ABX have entered into the Research License and Option
Agreement (as defined below), pursuant to which MBio has certain rights to
acquire a license under the Licensed Technology (as defined below); and MBio has
exercised its rights under the Research License and Option Agreement to acquire
from ABX a license or sublicense, as the case may be, under the Licensed
Technology to commercialize Products (as defined below) in the Field (as defined
below) on the terms and conditions herein.
NOW, THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:
1. DEFINITIONS.
For purposes of this Agreement, the terms set forth in this Article
shall have the meanings set forth below. Any capitalized term used in this
Agreement, that not defined below in this Article 1, shall have the meaning as
set forth in the Research License and Option Agreement.
1.1 "Affiliate" shall mean any entity which controls, is controlled by
or is under common control with ABX, MBio or a Sublicensee. An entity shall be
regarded as in control of another entity if it owns or controls at least fifty
percent (50%) of the shares of the subject entity entitled to vote in the
election of directors (or, in the case of an entity that is not a corporation,
for the election of the corresponding managing authority).
1.2 "Antibody" shall mean a composition comprising a whole antibody or
fragment thereof, said antibody or fragment having been derived in whole or part
from the XenoMouse Animals provided by ABX to MBio pursuant to the RCA or the
Research License and Option Agreement, or having been derived from nucleotide
sequences encoding, or amino acid sequences of, such an antibody or fragment.
1.3 "Confidential Information" shall mean, with respect to a party, all
information of any kind whatsoever (including without limitation, compilations,
data, formulae, models, patent
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disclosures, procedures, processes, projections, protocols, results of
experimentation and testing, specifications, strategies and techniques), and all
tangible and intangible embodiments thereof of any kind whatsoever (including
without limitation, apparatus, biological or chemical materials, animals, cells,
compositions, documents, drawings, machinery, patent applications, records,
reports), which is owned or controlled by such party and is disclosed by such
party to the receiving party and is marked, identified as or otherwise
acknowledged to be confidential at the time of disclosure to the receiving
party. Notwithstanding the foregoing, Confidential Information of a party shall
not include information which the receiving party can establish by written
documentation (a) to have been publicly known prior to disclosure of such
information by the disclosing party to the receiving party, (b) to have become
publicly known, without fault on the part of the receiving party, subsequent to
disclosure of such information by the disclosing party to the receiving party,
(c) to have been received by the receiving party at any time from a source,
other than the disclosing party, rightfully having possession of and the right
to disclose such information free of confidentiality obligations, (d) to have
been otherwise known by the receiving party free of confidentiality obligations
prior to disclosure of such information by the disclosing party to the receiving
party, or (e) to have been independently developed by employees or agents of the
receiving party without access to or use of such information disclosed by the
disclosing party to the receiving party. The parties acknowledge that the
foregoing exceptions shall be narrowly construed and that the obligations
imposed upon each party under Section 5 below shall be relieved solely with
respect to such Confidential Information of the disclosing party which falls
within the above exceptions and not with respect to related portions, other
combinations, or characteristics of the Confidential Information of the
disclosing party including, without limitation, advantages, operability,
specific purposes, uses and the like.
1.4 "Core Third Party Patents" shall mean an issued, unexpired patent
that is owned or controlled by a third party (other than ABX, MBio, a
Sublicensee, or an Affiliate of either MBio or its Sublicensee) and is not
licensed to ABX, MBio, a Sublicensee, or Affiliates of ABX or MBio, that has not
been invalidated in a final unappealed or unappealable judgment by a court of
competent jurisdiction, which patent covers XenoMouse Animals and which patent
would be infringed by the sale of Products but for ABX or MBio, as the case may
be, obtaining a royalty-bearing license under such patent (other than pursuant
to this Agreement) in order to commercialize Products in the Field under this
Agreement.
1.5 "Field" shall mean the use of Products for human therapeutic,
preventative (prophylactic) and diagnostic medical purposes.
1.6 "Genetic Material" shall mean a nucleotide sequence, including DNA,
RNA, and complementary and reverse complementary nucleotide sequences thereto,
whether coding or noncoding and whether intact or a fragment.
1.7 "GenPharm Cross License Agreement" shall mean that certain Cross
License Agreement entered into by and between ABX, JTI, XT, Cell Genesys, Inc.,
and GenPharm International, Inc. effective as of March 26, 1997, as the same may
be amended from time to time.
1.8 "IND" shall mean an Investigational New Drug application filed with
FDA, or
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any similar filing with any foreign regulatory authority, to commence human
clinical testing of any Product in any country in the Territory.
1.9 "JTI" shall mean Japan Tobacco Inc., a Japanese corporation
1.10 "Licensed Technology" shall mean ABX Patent Rights, ABX Know-How
and [*]; provided, however, that Licensed Technology shall not include Excluded
Technology.
1.10.1 "ABX Patent Rights" shall mean (i) the patents and
patent applications listed on Attachment A hereto and any foreign counterparts
thereto; (ii) the patent applications which claim Joint Intellectual Property as
defined in Section 4.4 of the Research License and Option Agreement; (iii) all
patents that have issued or in the future issue from any of the foregoing patent
applications, including without limitation utility, model and design patents and
certificates of invention; and (iv) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patents and patent applications.
1.10.2 "ABX Know-How" shall mean information discovered,
developed or acquired by ABX prior to the Effective Date of the Research License
and Option Agreement regarding methods and techniques of immunizing the
XenoMouse Animals to the Product Antigen which is disclosed by ABX to MBio
pursuant to the RCA, the Research License and Option Agreement or this
Agreement. All ABX Know-How shall be treated as "Confidential Information" of
ABX under Article 7 of this Agreement.
1.10.3 "ABX In-License" shall mean a license, sublicense or
other agreement under which ABX acquired rights to the ABX Patent Rights or the
ABX Know-How.
1.10.4 [*]
1.10.5 "Excluded Technology" shall mean any intellectual
property or technology of ABX in or to (i) all antigens other than the Product
Antigen, including without limitation: (A) compositions of such antigens or of
Genetic Materials encoding such antigens; (B) uses of such antigens; (C)
antibodies or other compositions that bind to such antigens, Genetic Materials
encoding such antibodies or compositions, and cells that contain, express, or
secrete such antibodies, genetic materials, or compositions; and (D) uses of
such antibodies, Genetic Materials, or compositions; (ii) methods to discover
novel antigens; (iii) methods of using antigens other than to create antibodies;
and (iv) the ABX Intellectual Property.
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1.11 "Net Sales" shall mean [*]
1.11.1 "MBio Net Sales" shall mean the Net Sales of MBio and
its Affiliates.
1.11.2 "Sublicensee Net Sales" shall mean the Net Sales of
Sublicensees.
1.12 "Patent Claim" shall mean a claim of a pending patent application
or issued and unexpired patent included within the Licensed Technology which has
not been held unenforceable or invalid by a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal and which has not been admitted to be invalid or unenforceable
through reissue, disclaimer or otherwise.
1.13 "Product" shall mean any product comprising (i) an Antibody that
binds to the Product Antigen or (ii) Genetic Material encoding such an Antibody
wherein, in respect of each Product, said Genetic Material does not encode
multiple antibodies.
1.14 "Product Antigen" shall mean [*]. As used in this Agreement,
[*]
1.15 "RCA" shall mean that certain Research Collaboration Agreement
between MBio and ABX effective as of July 15, 1998.
1.16 "Research License and Option Agreement" shall mean that certain
Research License and Option Agreement entered into by and between ABX and MBio
effective as of October 30, 1998, as the same may be amended from time to time.
1.17 "Sublicensee" shall mean a third party (other than an Affiliate)
that is granted a sublicense under the Licensed Technology to both make and sell
Products. "Sublicensee" shall also include a third party (other than an
Affiliate) that is granted the right to distribute Product, provided that such
third party is responsible for marketing and promotion of Product within the
applicable territory. As used herein, a "Sublicense" shall mean an agreement or
arrangement pursuant to which such a sublicense or distribution right has been
granted.
1.18 "Territory" shall mean all the countries of the world.
1.19 "XenoMouse" and "XenoMouse Animals" shall mean one or more
transgenic
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mice provided by ABX to MBio for immunization with the Product Antigen under the
RCA or the Research License and Option Agreement.
1.20 "Xenotech Agreement" shall mean that certain Master Research
License and Option Agreement entered into by JTI, XT and Cell Genesys, Inc.
effective as of June 28, 1996, and subsequently assigned to ABX by Cell Genesys,
Inc., as the same may be amended from time to time.
1.21 "XT" shall mean Xenotech, L.P., a California limited partnership.
1.22 "XT-ABX Product License" shall mean a license granted from XT to
ABX pursuant to the terms of the Xenotech Agreement permitting ABX to
commercialize certain products in one or more territories.
2. LICENSE GRANT
2.1 Grant of Rights. Subject to the terms and conditions of this
Agreement, ABX hereby grants to MBio an exclusive license or sublicense, as the
case may be, under the Licensed Technology, to make and have made Product
anywhere in the world and to use, sell, lease, offer to sell or lease, import,
export, otherwise transfer physical possession of or otherwise transfer title to
Product for use in the Field in the Territory and for no other purpose.
2.2 Sublicenses. MBio may grant a Sublicense under Section 2.1 to an
Affiliate or other third party; provided, however, that (i) any such Sublicense
shall be subject and subordinate to the terms and conditions of this Agreement;
(ii) any such Sublicensee shall agree in writing to be bound by the terms and
conditions of this Agreement; (iii) MBio shall remain responsible for any such
Sublicensee's performance hereunder and for all payments due to ABX hereunder
with respect to Net Sales of Products by any such Sublicensee; and (iv) MBio
shall provide ABX with a copy of each such sublicense agreement promptly after
execution of the same (provided that the financial terms may be redacted
therefrom). Notwithstanding the foregoing, MBio shall in no event have the right
to Sublicense any right under this Agreement in or to a XenoMouse Animal or
other transgenic animal covered by the Licensed Technology.
2.3 No Other Rights. No rights other than those expressly set forth in
this Agreement are granted to MBio hereunder, and no additional rights shall be
deemed granted to MBio by implication, estoppel or otherwise. Without limiting
the foregoing, the rights of MBio under this Agreement are subject and
subordinate in all respects to the provisions of Section 2.2 of the Research
License and Option Agreement.
3. CONSIDERATION.
3.1 License Fee. Within fifteen (15) days after the Effective Date,
MBio shall pay to ABX [*]
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3.2 Milestone Payments.
3.2.1 Amounts. Within thirty (30) days following the first
achievement by MBio (or any of its Affiliates or Sublicensees) of each the
following milestones with respect to each Product licensed under this Agreement,
on a Product-by-Product basis, MBio shall pay to ABX [*]
<TABLE>
<CAPTION>
Milestone Payment
--------- -------
<S> <C>
A [*]
B [*]
C [*]
D [*]
</TABLE>
3.2.2 Terminology. As used herein, [*].
In the event milestone D above is met, and at such time either one or both of
milestones A or B have not been met, the payment for all such unmet milestone
payments shall then be due.
3.3 Royalties. MBio shall notify ABX of the date of commercial
introduction of each Product into each country in the Territory, which shall
mean, on a country-by-country basis in the Territory, the date of first
commercial sale (other than for purposes of obtaining regulatory approval) of
such Product by MBio, its Affiliate or any Sublicensee to an unaffiliated third
party in such country (with respect to each Product in each country,
hereinafter, the "Royalty Commencement Date").
3.3.1 MBio Net Sales. In consideration of the license
granted herein, MBio shall pay to ABX a royalty on MBio Net Sales as follows:
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[*]
3.3.2 Sublicensee Net Sales. In consideration of the license
granted herein, MBio shall pay to ABX a royalty on Sublicensee Net Sales equal
to [*]
Notwithstanding anything to the contrary in this Agreement (other than as
provided in Section 3.6.3 below), the royalty amount payable to ABX under this
Section 3.3.2 with respect to Sublicensee Net Sales for any Product in any
country shall [*] of Sublicensee Net Sales of such Product in such country;
provided, further, that if the royalty increase pursuant of Section 3.3.3 also
applies, the royalty amount payable to ABX under this Section 3.3.2 with respect
to Sublicensee Net Sales for such Product in such country shall [*]
3.3.3 Use of [*]. The applicable royalty rates set forth in
Sections 3.3.1 and 3.3.2 above for sales of a Product in a given country shall
be [*] of Net Sales of such Product if (a) there is a Patent Claim within the
[*] in the country where such Products are made or sold and which would be
infringed by making or selling such Product in such country, or (b) the Product
utilizes or is based on, derived from, or produced using, [*] or any know-how
thereof.
3.3.4 Length of Term of Royalty Obligations. MBio's
obligation to pay royalties on Net Sales of each Product under this Agreement
shall commence on a country-by-country basis on the Royalty Commencement Date
for such Product in such country as defined in Section 3.3 above, and continue
thereafter for such Product on a country-by-country basis until the later of
[*]
3.3.5 Royalty Payable Only Once. The obligation to pay
royalties shall be imposed only once with respect to the same unit of Product
sold by MBio, its Affiliates or
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Sublicensee; provided, however, if a unit of Product is sold by MBio or its
Affiliates to a Sublicensee for resale, then the royalty shall be imposed on the
resale of such unit of Product by such Sublicensee.
3.3.6 Third Party Royalty Offset.
(a) In the event that MBio believes, in its reasonable and
good faith belief, that in order for it to be able to manufacture and sell a
Product hereunder in a commercially feasible manner it must utilize technology
that is covered by a "Recombinant Expression Patent," and MBio does so utilize
such technology and does enter in to a license agreement under such Recombinant
Expression Patent with a non-Affiliate third party, and is obligated to pay a
running royalty thereunder in accordance with the sale of such Product under
such license, MBio may offset [*] of any running royalty payments made by MBio
to such third party on sales of such Product in a particular county, against the
royalty amounts due to ABX under this Section 3.3 on Net Sales of such Product
in such county; provided, however, that the royalty amount payable to ABX under
this Section 3.3 with respect to such Net Sales for such Product in such country
shall not be reduced pursuant to this Section 3.3.3 to an amount below [*] of
Net Sales of such Product.
(b) For purposes of this Section 3.3.6, such "Recombinant
Expression Patent" shall mean an issued, unexpired patent that is owned or
controlled by a third party (other than ABX, a Sublicensee, or an Affiliate of
either MBio or its Sublicensee) that has not been invalidated in a final
unappealed or unappealable judgment by a court of competent jurisdiction, which
patent covers the expression of Antibodies from recombinant cell lines in which
a recombinant Antibody Cell that produces Product is generated through the
cointroduction into a cell of Genetic Materials encoding heavy chain
immunoglobulin genes and light chain immunoglobulin genes and which patent would
be infringed by the sale of Products but for MBio's obtaining a royalty-bearing
license under such patent (other than pursuant to this Agreement) in order to
commercialize Products in the Field under this Agreement.
3.4 Discounting. If MBio or its Affiliate or Sublicensee sells any
Product to a third party who also purchases other products or services from
MBio, its Affiliate or Sublicensee, MBio agrees not to, and requires its
Affiliate and Sublicensee not to, discount the sales price of the Products to a
greater degree than MBio, its Affiliate or Sublicensee, respectively, generally
discounts the price of its other products to such customer.
3.5 Royalties To Be Paid By ABX. It is understood that, subject to the
terms and conditions of this Agreement, including without limitation MBio's
payment of royalties as set forth herein, ABX will be responsible to make the
royalty payments to third parties as set forth in Attachment C in respect of Net
Sales of Products in accordance with this Agreement, and that MBio may not
offset such payments under Section 3.3.3.
3.6 Core Third Party Patents.
3.6.1 Procedure. If either party becomes aware of any Core
Third Party Patent during the term of this Agreement, or any pending patent
application that would be a Core
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Third Party Patent if issued, such party shall promptly notify the other party
and, except to the extent that such party is prohibited under a duty of
confidentiality from disclosing such information, provide a reasonably detailed
summary of its knowledge regarding such patent or patent application (including,
by way of example and without limitation, the identity of the person that owns
or controls such patent, the subject matter of the patent or application, and
any available information about terms offered or asked with respect to licenses
under such patents). ABX shall have the first right to negotiate with any third
party for a license under any Core Third Party Patent; provided, however, that
neither ABX nor MBio (nor its Sublicensees) shall be obligated to negotiate for,
or obtain, such a license; provided, further, that if ABX elects not to
negotiate for such a license it shall promptly notify MBio of such election, and
MBio shall thereafter be free to negotiate such a license on its own behalf.
3.6.2 Royalty Payments. If ABX enters into a license under
any Core Third Party Patent, such patent shall be sublicensed to MBio hereunder
if, and only to the extent, MBio elects to take a Sublicense to such patent
under the terms negotiated by ABX; provided, however, subject to Section 3.6.3
below, MBio shall pay to ABX the royalties (if any) owed by ABX under such Core
Third Party Patent for the Net Sales of Products in the Territory by MBio and
its Sublicensees in addition to any other royalties payable to ABX under Section
3.3. The parties hereto agree to discuss and negotiate in good faith regarding
the manner in which the licensing fees, milestones, and up-front payments (if
any) owed by ABX under such license may be shared between the parties hereto.
3.6.3 Royalty Offset. MBio may offset [*] of any royalty
payments made by MBio pursuant to Section 3.6.2 above, either to ABX or to a
third party in consideration for a license under any Core Third Party Patent on
sales of a particular Product in a particular county, against the other royalty
amounts due to ABX under Section 3.3 on Net Sales of such Product in such
county; provided, however, that the royalty amount payable to ABX under Section
3.3 with respect to such Net Sales for such Product in such country shall not be
reduced pursuant to this Section 3.6.3 to an amount below [*] of Net Sales of
such Product in such country; provided, further, that if the royalty increase
pursuant of Section 3.3.3 also applies, the royalty amount payable to ABX under
this Section 3.3 with respect to such Net Sales for such Product in such country
shall not be reduced pursuant to this Section 3.6.3 to an amount below [*] of
Net Sales of such Product in such country. Any deduction hereunder, or portion
thereof, that is rendered not usable pursuant to deduction limitations set forth
above may be carried forward for use in a future royalty payment period, which
deduction carry-forwards shall not result in royalty payments lower than the
foregoing minimum royalty payments.
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4. ACCOUNTING AND RECORDS.
4.1 Royalty Reports; Payments, Invoices. After the first commercial
sale of Product on which royalties are required to be paid by MBio under Article
3 above, MBio agrees to make [*] written reports to ABX within [*] after the end
of each [*], stating in each such report [*]. These reports may be combined with
reports due under Section 5.4. Concurrently with the making of such reports,
MBio shall pay to ABX all amounts payable pursuant to Article 3 above. All
payments to ABX hereunder shall be made in U.S. Dollars to a bank account
designated by ABX.
4.2 Records; Inspection. MBio shall keep (and cause its Affiliates and
Sublicensees to keep) complete, true and accurate books of account and records
for the purpose of determining the royalty amounts payable to ABX under this
Agreement. Such books and records shall be kept at the principal place of
business of MBio or its Affiliates or Sublicensees, as the case may be, for at
least three years following the end of the calendar quarter to which they
pertain. Such records of MBio or its Affiliates will be open for inspection
during such three-year period by representatives of ABX (which representatives
may also represent XT) for the purpose of verifying the royalty statements. MBio
shall require each of its Sublicensees to maintain similar books and records and
to open such records for inspection during the same three-year period by a
representative of MBio reasonably satisfactory to ABX on behalf of, and as
required by, ABX for the purpose of verifying the royalty statements. All such
inspections may be made no more than once each calendar year at reasonable times
mutually agreed by MBio and ABX. The representative of ABX will be obliged to
execute a reasonable confidentiality agreement prior to commencing any such
inspection. Inspections conducted under this Section 4.2 shall be at the expense
of ABX, unless a variation or error producing an increase exceeding [*] of the
amount stated for any period is established in the course of any such
inspection, whereupon all costs relating to the audit of such period will
be paid by MBio.
4.3 Payment Method. All payments due hereunder shall be made in U.S.
dollars, and shall be made by bank wire transfer in immediately available funds
to an account designated by ABX.
4.4 Currency Conversion. If any currency conversion shall be required
in connection with the calculation of royalties hereunder, such conversion shall
be made using the selling exchange rate for conversion of the foreign currency
into U.S. Dollars, quoted for current transactions reported in The Wall Street
Journal for the last business day of the calendar quarter to which such payment
pertains.
4.5 Late Payments. Any payments due from MBio that are not paid on the
date such payments are due under this Agreement shall bear interest at the
lesser of (i) the prime rate as reported by the Bank of America in San
Francisco, California on the date such payment is due, [*], or (ii) the maximum
rate permitted by applicable law, in each case calculated on the number of days
such payment is delinquent. This Section 4.5 shall in no way limit any other
remedies available to any party.
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4.6 Withholding Taxes. All payments required to be made pursuant to
Article 3 hereof shall be without deduction or withholding for or on account of
any taxes or similar governmental charge imposed by a jurisdiction, such taxes
being referred to herein as "Withholding Taxes." Withholding Taxes shall be the
sole responsibility of the withholding party. The withholding party shall
provide a certificate evidencing payment of any Withholding Taxes hereunder.
5. DILIGENCE.
5.1 General. [*]
5.2 Filing of IND. Without limiting Section 5.1 above, MBio, its
Affiliate or Sublicensee shall file an IND with the U.S. FDA for one or more
Products under this Agreement [*]; provided, however, if MBio, its Affiliate or
Sublicensee has failed to file an IND with the U.S. FDA for one or more Products
under this Agreement [*], such failure shall not constitute a material breach
under Section 10.2 below if, and (except as provided below) for so long as,
MBio, its Affiliate or Sublicensee then uses and thereafter continues to use its
best efforts to file an IND with the U.S. FDA for one or more Products under
this Agreement [*]; provided, further, in any event, MBio, its Affiliate or
Sublicensee shall file an IND with the U.S. FDA for one or more Products under
this Agreement [*] of the date of the XT-ABX Product License regarding the
Product Antigen. After the filing of an IND for a Product, MBio, its Affiliate
or Sublicensee shall be required to have an active IND and to be actively and
diligently conducting clinical trials in pursuit of regulatory approval for the
Product in the United States until such Product may be sold commercially in the
United States.
5.3 Failure to Meet Due Diligence Obligation. If the diligence
requirements set forth in Section 5.1 and 5.2 are not met by MBio (or its
Sublicensees), ABX shall have the right to terminate this Agreement pursuant to
Section 9.2 below; provided, however, with respect to a default under Section
5.1 or 5.2 above, the notice and cure period under Section 9.2 below shall be
extended from thirty (30) to ninety (90) days.
5.4 Research and Development Reports. MBio agrees to keep ABX
reasonably informed as to the research, development and commercialization of
Products hereunder. [*]
5.5 No Conflicts.
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5.5.1 Other Products. During the term of this Agreement,
MBio shall not directly or indirectly sell or commercialize for human medical
use, or conduct human clinical development toward the human medical use of any
product (other than the Products licensed hereunder), incorporating (i) an
antibody, antibody fragment or amino acid sequence derived from an antibody, in
each case which binds to the Product Antigen or (ii) Genetic Material encoding
such any such composition.
5.5.2 Discounting. In the event that MBio or its Affiliates
sells Product to a third party who also purchases other products or services
from MBio or its Affiliate, and MBio or its Affiliates discounts the purchase
price of the Product to a greater degree than MBio or its Affiliate,
respectively, generally discounts the price of their other products to such
customer, then in such case the Net Sales for the sale of Products to such third
party shall be deemed to equal the arm's length price that third parties would
generally pay for the Product alone when not purchasing any other product or
service from MBio or its Affiliate. For purposes of this provision "discounting"
includes establishing the list price at a lower-than-normal level.
5.6 Gene Therapy Applications. MBio's intention as of the Effective
Date is to commercialize a Product hereunder for an application other than Gene
Therapy before commercializing a Product hereunder for a Gene Therapy
application. It is understood, however, that MBio may or may not also intend to
develop and sell Products for use in Gene Therapy, and that such Gene Therapy
application may ultimately be commercialized before a Product is commercialized
hereunder for a non-Gene Therapy application. As used herein, "Gene Therapy"
shall mean [*]
6. INTELLECTUAL PROPERTY.
6.1 Prosecution. Subject to Sections 6.2 and 6.6, ABX or its licensor,
as they may agree, shall have the right to control the preparing, filing,
prosecuting and maintaining of patents
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and patent applications worldwide within the Licensed Technology and conducting
any interferences, oppositions, reexaminations, or requesting reissues or patent
term extensions with respect to the Licensed Technology.
6.2 Joint Intellectual Property. Notwithstanding anything to the
contrary in this Article 6, MBio shall have the sole right and responsibility
(but not the obligation), at its expense, to file, prosecute, maintain and
enforce all patent applications (and to conduct any interferences, oppositions,
or reexaminations thereon, and to request any reissues or patent term extensions
thereof) that claim the Joint Intellectual Property (as defined in Section 4.4
of the Research License and Option Agreement) in accordance with the terms and
conditions of Article 4 of the Research License and Option Agreement.
6.3 Enforcement. Subject to Section 6.2 and 6.6, in the event that MBio
becomes aware that any Licensed Technology necessary for the practice of the
license granted herein is infringed or misappropriated by a third party or is
subject to a declaratory judgment action arising from such infringement in each
case with respect to a composition that binds to the Product Antigen and is
competitive with Products hereunder (an "Infringement") MBio shall promptly
notify ABX. As between MBio, its Sublicensees and ABX, ABX shall have the
exclusive right at its expense to bring an enforcement proceeding, or defend any
declaratory judgment action, involving any Licensed Technology with respect to
an Infringement. ABX shall keep MBio reasonably informed of the progress of such
claim, suit or proceeding with respect to an Infringement involving enforcement
or defense of the Licensed Technology. Any recovery received by ABX as a result
of any such claim, suit or proceeding shall be used first to reimburse ABX for
all expenses (including attorneys, and professional fees) incurred in connection
with such claim, suit or proceeding, and the remaining amount (if any) retained
by ABX, after paying amounts ABX is obligated to pay to third parties in respect
of such amount pursuant to applicable ABX In-Licenses shall be divided, to the
extent that the recovery expressly represents lost profits on sales of Product
within the Field because of the Infringement, in equal shares between ABX and
MBio. Notwithstanding the foregoing, if ABX notifies MBio that it does not
desire to pursue an enforcement action, or defend a declaratory judgment action,
with respect to a substantial and continuing Infringement, then to the extent
such action involves a Product Composition Claim MBio may at its expense bring
or defend such action in consultation with ABX; provided, however, that (i) ABX
shall have the right to join such proceeding at any time at its own expense,
(ii) MBio shall not admit the invalidity or unenforceability of any patent
rights within the Licensed Technology without ABX's prior written consent, and
(iii) if ABX does not join the action, any recovery obtained by MBio shall be
used first to reimburse MBio for all expenses (including attorneys, and
professional fees) incurred in connection with such claim, suit or proceeding,
and the remaining amount (if any) retained by MBio after reimbursing ABX for any
amounts ABX is obligated to pay to third parties in respect of such amount
pursuant to applicable ABX In-Licenses shall be divided evenly between ABX and
MBio.
6.4 Infringement Claims. Subject to Section 6.6, if the production,
sale or use of Product pursuant to this Agreement results in any claim, suit or
proceeding alleging patent infringement against MBio (or its Affiliates or
Sublicensees), MBio shall promptly notify ABX thereof in writing setting forth
the facts of such claim in reasonable detail. MBio shall keep
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ABX reasonably informed of all material developments in connection with any such
claim, suit or proceeding as it relates to the Licensed Technology.
Notwithstanding the above, MBio shall not admit the invalidity of any patent
within the Licensed Technology without written consent from ABX.
6.5 Patent Marking. MBio agrees to mark and have its Affiliates and all
Sublicensees mark all Products sold pursuant to this Agreement in accordance
with the applicable statutes or regulations in the country or countries of
manufacture and sale thereof.
6.6 Limitation. Notwithstanding any other provision in this Article 6,
the parties acknowledge and understand that (i) ABX shall not be obligated to
prepare, file, prosecute, and maintain patents and patent applications, or to
bring or pursue enforcement proceedings or defend declaratory judgment actions
regarding the Licensed Technology if, and to the extent that, ABX is not
entitled to do so under one or more ABX In-Licenses, and (ii) any rights
conveyed under this Article 6 permitting MBio to prepare, file, prosecute and
maintain certain patents and patent applications, or to bring and pursue
enforcement proceedings, or defend declaratory judgment actions, regarding the
Licensed Technology, shall be subject to all applicable ABX In-Licenses, and are
conveyed only to the extent permitted under such agreements.
7. CONFIDENTIALITY.
7.1 Confidentiality. Except as expressly provided herein, MBio and ABX
each shall keep completely confidential and shall not publish or otherwise
disclose and shall not use for any purpose any Confidential Information of the
other, whether or not furnished to it by the other party pursuant to this
Agreement (including, without limitation, know-how) until the later of (i) ten
(10) years from the Effective Date or (ii) five (5) years following the
expiration or termination of this Agreement.
7.2 Permitted Disclosure. Notwithstanding Section 7.1 above, each party
may nevertheless disclose the other party's Confidential Information to the
extent such disclosure is required by applicable law, regulation or court order,
provided that if a party is required by law to make any such disclosure of the
other party's Confidential Information, other than pursuant to a confidentiality
agreement, it will give reasonable advance notice to the other party of such
disclosure requirement and will use efforts consistent with prudent business
judgment to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or confidentiality agreements or
otherwise). It is understood that the expiration of MBio's obligations under
Section 7.1 above shall not be deemed to limit MBio's obligations under Section
2.2 of the Research License and Option Agreement.
7.3 Terms of Agreement. Neither party shall disclose any terms or
conditions of this Agreement to any third party without the prior consent of the
other party; provided, however, that a party may disclose the terms or
conditions of this Agreement, (i) on a need-to-know basis to its Affiliates
including, but not limited to, for MBio, Millennium Pharmaceuticals, Inc.,
Millennium Information, Inc., Millennium Predictive Medicine, Inc., plus any
future Affiliates that own a majority of the stock of MBio or that MBio owns a
majority of the stock thereof (and
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any affiliated companies that own a majority of the stock of Millennium
Pharmaceuticals, Inc. or that Millennium Pharmaceuticals, Inc. owns a majority
of the stock thereof), and for Abgenix, Xenotech L.P. plus any future Affiliates
that own a majority of the stock of Abgenix or that Abgenix owns a majority of
the stock thereof) and to its/their legal and financial advisors to the extent
such disclosure is reasonably necessary in connection with such party's
activities as expressly permitted by this Agreement, (ii) to a third party in
connection with (A) an equity investment in such party by a third party, (B) a
merger, consolidation or similar transaction entered into by such party, or (C)
the sale of all or substantially all of the assets of such party, and (iii) as
may, in the reasonable opinion of such party's counsel, be required by
applicable law, regulation or court order, including without limitation, a
disclosure in connection with such party's filing of a registration statement or
other filing with the United States Securities and Exchange Commission (in which
event such party will first consult with the other party with respect to such
disclosure). Notwithstanding the foregoing, prior to execution of this Agreement
Abgenix and MBio shall agree upon the substance of information that can be used
to describe the terms of this transaction, and each party may disclose such
information, as modified by written agreement of Abgenix and MBio from time to
time, without the consent of the other.
8. INDEMNIFICATION
8.1 MBio. MBio shall indemnify and hold harmless ABX, and its
directors, officers, employees and agents, from and against all losses,
liabilities, damages and expenses, including reasonable attorneys' fees and
costs (collectively, "Liabilities"), resulting from any claims, demands, actions
or other proceedings by any third party arising from (i) the material breach of
any representation, warranty or covenant by MBio under this Agreement, (ii) the
manufacture, use, sale, handling or storage by MBio, its Affiliates or
Sublicensees of the Products (without regard to the foregoing entities' culpable
conduct), or (iii) any use by MBio, its Affiliates or Sublicensees of the
Confidential Information of ABX; provided, however, that MBio shall not be
obligated to indemnify or hold harmless ABX for such Liabilities to the extent
that such Liabilities arise from (a) the gross negligence or willful misconduct
of ABX, or (b) the misappropriation by ABX of the trade secrets or other
proprietary information of a Third Party.
8.2 ABX. ABX shall indemnify and hold harmless MBio, and its directors,
officers, employees and agents, from and against all Liabilities resulting from
any claims, demands, actions or other proceedings by any third party arising
from (i) the material breach of any representation, warranty or covenant by ABX
under this Agreement, or (ii) any use by ABX of the Confidential Information of
MBio; provided, however, that ABX shall not be obligated to indemnify or hold
harmless MBio for such Liabilities to the extent that such Liabilities arise
from (a) the gross negligence or willful misconduct of MBio, or (b) the
misappropriation by MBio of the trade secrets or other proprietary information
of a Third Party.
8.3 Procedure. If a party (an "Indemnitee") intends to claim
indemnification under this Article 8, it shall promptly notify the indemnifying
party (the "Indemnitor") in writing of any claim, demand, action or other
proceeding for which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall have the right to participate in, and, to the extent the
Indemnitor so desires, to assume the defense thereof with counsel mutually
satisfactory to the
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parties; provided, however, that an Indemnitee shall have the right to retain
its own counsel, with the fees and expenses to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceeding. The indemnity agreement in this Article 8 shall not apply to amounts
paid in settlement of any claim, demand, action or other proceeding if such
settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld or delayed unreasonably. The failure to deliver written
notice to the Indemnitor within a reasonable time after the commencement of any
such action, if prejudicial to its ability to defend such action, shall relieve
such Indemnitor of any liability to the Indemnitee under this Article 8, but the
omission so to deliver written notice to the Indemnitor shall not relieve it of
any liability that it may have to any party claiming indemnification otherwise
than under this Article 8. The party claiming indemnification under this Article
8, its employees and agents, shall reasonably cooperate with the Indemnitor and
its legal representatives in the investigation of any claim, demand, action or
other proceeding covered by this indemnification.
8.4 Insurance. MBio shall secure and maintain (a) general liability
insurance at all times during the term of this Agreement, and (b) product
liability insurance at all times commencing upon the initiation of any human
clinical trials of Products by MBio, its Affiliate or Sublicensee, in each case
with respect to the development, manufacture and sales of Products in such
amount as MBio customarily maintains with respect to the development,
manufacture and sale of its other products. ABX shall be named as an additional
insured on any such MBio product liability insurance policies. MBio shall
maintain such insurance for so long as it continues to develop, manufacture or
sell any Products, and thereafter for so long as MBio customarily maintains
insurance for itself covering the development, manufacture and sale of its other
products.
9. REPRESENTATIONS AND WARRANTIES.
9.1 ABX.
9.1.1 ABX represents and warrants that: (i) it has the full
right, power and authority to enter into this Agreement and to grant the rights
and licenses hereunder; (ii) to the knowledge of ABX, there are no existing or
threatened actions, suits or claims pending with respect to the subject matter
hereof or the right of ABX to enter into and perform its obligations under this
Agreement; (iii) it has taken all necessary action on its part to authorize the
execution and delivery of this Agreement and the performance of its obligations
hereunder; (iv) this Agreement has been duly executed and delivered on behalf of
it, and constitutes a legal, valid, binding obligation, enforceable against it
in accordance with the terms hereof; and (v) the execution and delivery of this
Agreement and the performance of its obligations hereunder do not conflict with
or violate any requirement of applicable laws or regulations and do not conflict
with, or constitute a default under, any contractual obligation of it.
9.1.2 ABX further represents and warrants that:
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(i) on or before the Effective Date, it has provided to MBio
complete copies of all applicable ABX In-Licenses (including without limitation
the GenPharm Cross License Agreement) setting forth all applicable rights,
limitations and restrictions described in Section 10.10 below (it being
understood that the financial terms have been redacted from some or all such
copies);
(ii) based upon information provided to ABX by MBio
concerning MBio's intellectual property rights in the Antigen, and to the best
of ABX's knowledge (without the obligation to perform due diligence), (a) ABX
has obtained from XT an XT-ABX Product License with respect to the Antigen that
is an "Exclusive Worldwide Product License" (as defined in the Xenotech
Agreement and in the form attached thereto as an exhibit); (b) the license or
sublicense granted to ABX pursuant to such XT-ABX Product License with respect
to the Antigen shall be exclusive even as to XT; and (c) JTI does not have the
right under the Xenotech Agreement to obtain an "Exclusive Home Territory
Product License" or a "Co-Exclusive Worldwide Product License" (as these are
defined in the Xenotech Agreement and attached thereto as exhibits) with respect
to the Antigen, or any other right or license under the Licensed Technology to
develop, make and have made, use, sell, lease, offer to sell or lease, import,
export, otherwise transfer physical possession of or otherwise transfer title to
Products for use in the Field; except, in each case, with respect to the
research license set forth in Article 3 of the Xenotech Agreement;
(iii) ABX has nominated the Antigen under [*] the
Xenotech Agreement and taken all other actions as required under the Xenotech
Agreement to obtain an "Exclusive World Wide Product License" under the Xenotech
Agreement with respect to the Antigen; and
(iv) the XT-ABX Product License which has been executed by
XT and ABX is substantially identical (i.e., other than with respect to the
effective date thereof and the definition of the antigen under such agreement)
to the form agreement attached to the Research License and Option Agreement as
Exhibit D (it being understood that the financial terms may be redacted from
such form agreement).
9.1.3 ABX has provided MBio with a copy of such
fully-executed XT-ABX Product License (it being understood that the financial
terms may have been redacted from such copy). At any time during the term of
this Agreement at the request of MBio, ABX shall discuss with MBio ABX's
interpretation of material terms and conditions of the applicable ABX
In-Licenses, including, without limitation, the XT-ABX Product License and any
limitations on ABX's right to further transfer or grant licenses or sublicenses
to MBio to any and all rights to technology within the scope of the ABX Patent
Rights and/or ABX Know-How under any ABX In-License.
9.2 MBio. MBio represents and warrants that: (i) it has the full right,
power and authority to enter into this Agreement; (ii) to the knowledge of MBio,
there are no existing or threatened actions, suits or claims pending with
respect to the subject matter hereof or the right of MBio to enter into and
perform its obligations under this Agreement; (iii) it has taken all necessary
action on its part to authorize the execution and delivery of this Agreement and
the
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performance of its obligations hereunder; (iv) this Agreement has been duly
executed and delivered on behalf of it, and constitutes a legal, valid, binding
obligation, enforceable against it in accordance with the terms hereof; (v) the
execution and delivery of this Agreement and the performance of its obligations
hereunder do not conflict with or violate any requirement of applicable laws or
regulations and do not conflict with, or constitute a default under, any
contractual obligation of it; and (vi) it will not take any action, or fail to
take any action, under this Agreement that will cause a breach of the GenPharm
Cross License Agreement, the Xenotech Agreement or the Product License.
9.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF
ANY KIND REGARDING ABX MATERIALS, PRODUCTS OR THE LICENSED TECHNOLOGY, EITHER
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, AND VALIDITY
OF TECHNOLOGY OR PATENT CLAIMS, ISSUED OR PENDING. ALL XENOMOUSE ANIMALS AND
MATERIALS DERIVED IN WHOLE OR PART FROM XENOMOUSE ANIMALS PROVIDED TO MBio
PURSUANT TO THIS AGREEMENT ARE PROVIDED "AS IS," AND ABX SPECIFICALLY DISCLAIMS
ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT WITH RESPECT TO SUCH XENOMOUSE ANIMALS AND MATERIALS DERIVED IN
WHOLE OR PART FROM XENOMOUSE ANIMALS.
9.4 Effect of Representations and Warranties. It is understood that if
the representations and warranties under this Article 9 are not true and
accurate and a party incurs liabilities, costs or other expenses as a result of
such falsity, the party at fault shall indemnify, defend and hold the injured
party harmless from and against any such liabilities, costs or expenses
incurred, provided that the party at fault receives prompt notice of any claim
against the injured party resulting from or related to such falsity and the sole
right to control the defense or settlement thereof.
10. TERM AND TERMINATION.
10.1 Term. The term of this Agreement shall commence on the Effective
Date and, unless earlier terminated as provided in this Article 10, shall
continue in full force and effect on a Product-by-Product and country-by-country
basis until the expiration of all royalty obligations pursuant to this Agreement
for such Product in such country. Following the expiration, but not earlier
termination, of this Agreement on a Product-by-Product and country-by-country
basis, MBio shall have a fully-paid up, perpetual, non-exclusive license under
the ABX Know-How solely to commercialize such Product in such country.
10.2 Termination for Breach. In the event that a party shall have
materially breached or defaulted in the performance of any of its material
obligations hereunder, and such breach or default shall have continued for
thirty (30) days after written notice of such breach was provided to the
breaching party by the nonbreaching party, the non-breaching party shall have
the right at
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its option to terminate this Agreement effective at the end of such thirty-day
period unless the breaching party has cured any such breach or default prior to
the expiration of the thirty-day period.
10.3 Termination by MBio. MBio may terminate this Agreement and the
license granted herein at any time, by providing ABX ninety (90) days written
notice.
10.4 Termination for Insolvency. Either party may terminate this
Agreement if the other becomes the subject of a voluntary or involuntary
petition in bankruptcy or any proceeding relating to insolvency, receivership,
liquidation, or dissolution, and such petition or proceeding is not dismissed
with prejudice within sixty (60) days after filing.
10.5 Effect of Termination.
10.5.1 Accrued Obligations. Termination of this Agreement
for any reason shall not release either party hereto from any liability which at
the time of such termination has already accrued to the other party or which is
attributable to a period prior to such termination, nor preclude either party
from pursuing any rights and remedies it may have hereunder or at law or in
equity which accrued are based upon events occurring prior to such termination.
10.5.2 Stock in Hand; Sublicenses. In the event this
Agreement is terminated for any reason, MBio and its Affiliates and Sublicensees
shall have the right to sell or otherwise dispose (consistent with all
applicable regulations and law and subject to Articles 3 and 4 of this
Agreement) of the stock of any Product subject to this Agreement then on hand.
Upon termination of this Agreement by ABX for any reason, any sublicense granted
by MBio hereunder shall survive, provided that upon request by ABX, such
Sublicensee promptly agrees in writing to be bound by the applicable terms of
this Agreement.
10.5.3 Research License and Option Agreement. This Agreement
is independent of, and shall not be affected by, the expiration or termination
of the Research License and Option Agreement; provided that notwithstanding the
foregoing, any breach by MBio of the surviving provisions of the Research
License and Option Agreement shall be a breach of this Agreement.
10.5.4 Survival. Articles 3, 4, 7, 8 and 11 and Section 9.3
shall survive the expiration and any termination of this Agreement for any
reason.
11. MISCELLANEOUS.
11.1 Governing Laws. This Agreement shall be governed by, interpreted
and construed in accordance with the laws of the State of California, without
regard to conflicts of law principles.
11.2 Waiver. It is agreed that no waiver by any party hereto of any
breach or default of any of the covenants or agreements herein set forth shall
be deemed a waiver as to any
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subsequent and/or similar breach or default.
11.3 Assignments. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated, in whole or part, by either party
without the prior written consent of the other; provided, however, that either
party may, without the written consent of the other, assign this Agreement and
its rights and delegate its obligations hereunder (i) to any Affiliate of such
party, or (ii) in connection with the transfer or sale of all or substantially
all of its business, or in the event of its merger, consolidation, change in
control or similar transaction. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. Any purported assignment in
violation of this Section 11.3 shall be void.
11.4 Independent Contractors. The relationship of the parties hereto is
that of independent contractors. The parties hereto are not deemed to be agents,
partners or joint venturers of the others for any purpose as a result of this
Agreement or the transactions contemplated thereby.
11.5 Further Actions. Each party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
11.6 Notices. All requests and notices required or permitted to be
given to the parties hereto shall be given in writing, shall expressly reference
the section(s) of this Agreement to which they pertain, and shall be delivered
to the other party, effective on receipt, at the appropriate address as set
forth below or to such other addresses as may be designated in writing by the
parties from time to time during the term of this Agreement.
Millennium Biotherapeutics, Inc.:
Millennium Biotherapeutics, Inc.
620 Memorial Drive
Cambridge, Massachusetts 02139
Telecopier: 617-374-7653
Attn: General Manager
Abgenix, Inc.:
Abgenix, Inc.
7601 Dumbarton Circle
Fremont, California 94555
Attn: President
with a copy to:
Pillsbury Madison & Sutro LLP
101 West Broadway, Suite 1800
San Diego, California 92101
Attn: Mark R. Wicker
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11.7 No Implied Licenses. Only licenses and rights granted expressly
herein shall be of legal force and effect. No license or other right shall be
created hereunder by implication, estoppel or otherwise.
11.8 Export Laws. Notwithstanding anything to the contrary contained
herein, all obligations of ABX and MBio are subject to prior compliance with
United States export regulations and such other United States laws and
regulations as may be applicable, and to obtaining all necessary approvals
required by the applicable agencies of the government of the United States. MBio
shall be responsible for obtaining such approvals, and shall use efforts
consistent with prudent business judgment to obtain such approvals. ABX agrees
to cooperate reasonably with MBio and provide reasonable assistance to MBio as
may be reasonably necessary to obtain any required approvals.
11.9 Third Party Rights. Notwithstanding anything to the contrary in
this Agreement, the grant of rights by ABX under this Agreement shall be subject
to and limited in all respects by the terms of the applicable ABX In-License(s)
pursuant to which ABX acquired any Licensed Technology, and all rights or
sublicenses granted under this Agreement shall be limited to the extent that ABX
may grant such rights and sublicenses under such ABX In-Licenses. Additionally,
and without limiting the foregoing, the rights granted to MBio hereunder,
including without limitation any grant of "exclusive" rights, shall be subject
to the rights granted to or retained by GenPharm under the GenPharm Cross
License Agreement.
11.10 Force Majeure. Nonperformance of any party (other than for the
payment of money) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to
perform, is beyond the reasonable control and not caused by the negligence,
intentional conduct or misconduct of the nonperforming party.
11.11 Complete Agreement. It is understood and agreed between ABX and
MBio that this Agreement constitutes the entire agreement, both written and
oral, between the parties with respect to the subject matter hereof, and that
all prior agreements respecting the subject matter hereof, either written or
oral, expressed or implied, shall be abrogated, canceled, and are null and void
and of no effect. No amendment or change hereof or addition hereto shall be
effective or binding on either of the parties hereto unless reduced to writing
and executed by the respective duly authorized representatives of ABX and MBio.
11.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and both together shall be
deemed to be one and the same agreement.
11.13 Headings. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are included merely for convenience
of reference only and shall not affect its meaning or interpretation.
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IN WITNESS WHEREOF, the parties have executed this Agreement, through
their respective officers hereunto duly authorized, as of the day and year first
above written.
ABGENIX, INC. MILLENNIUM BIOTHERAPEUTICS, INC.
By: ____________________________ By: _____________________________
Printed Name: __________________ Printed Name: ___________________
Title: _________________________ Title: __________________________
Date: __________________________ Date: ___________________________
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ATTACHMENT A
ABX PATENT RIGHTS
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ATTACHMENT B
ABX EXPRESSION TECHNOLOGY
24
<PAGE> 47
ATTACHMENT C
ABX IN-LICENSES
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<PAGE> 48
EXHIBIT B
I. PURSUANT TO THE MRLOA
A. Any (i) of the patent applications listed in the following Table:
[*]
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and patents issuing thereon, (ii) continuations, divisionals,
reexamination certificates, reissues, or extensions thereof, and
(iii) any foreign counterparts issued or issuing on any of (i)
or (ii) above.
B. Pursuant to the License Agreement by and between the [*]
[*]
C. Pursuant to the Agreement between the [*]
[*]
D. Pursuant to the Material Transfer and License Agreement by and
between [*]
[*]
E. Pursuant to Agreements between [*]
[*]
II. PURSUANT TO THE GENPHARM CROSS LICENSE
A. [*] (i) any continuations, continuations-in-part, patents of
addition, divisionals, reexamination certificates, reissues or
extensions, including supplemental protection certificates
thereof, (ii) any patents issuing from such application or
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the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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upon an application under (i), and (iii) foreign counterparts
applied for, issued, or issuing on such application or any of
(i) or (ii).
B. [*] including (i) any continuations, continuations-in-part,
patents of addition, divisionals, reexamination certificates,
reissues or extensions, including supplemental protection
certificates thereof, (ii) any patents issuing from such
application or upon an application under (i), and (iii) foreign
counterparts applied for, issued, or issuing on such application
or any of (i) or (ii).
C. Pursuant to a License Agreement dated [*]
[*]
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the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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EXHIBIT C
[*]
Any (i) of the patents or patent applications listed in the following
Table:
[*]
(ii) all patents that have issued or in the future issue from any of the
foregoing patent applications, including without limitation utility, model and
design patents and certificates of invention; and (iii) all divisionals,
continuations, continuations-in-part, reissues, renewals, extensions or
additions to any such patents and patent applications and patents issuing
thereon, and (iv) any foreign counterparts issued or issuing on any of (i),
(ii), or (iii) above.
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the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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EXHIBIT D FORM OF ABX-XT PRODUCT LICENSE
THIS PRODUCT LICENSE AGREEMENT (the "Agreement") effective the ____ day
of ____________, _____, is made by and between XENOTECH, L.P., a California
limited partnership ("XT"), and ABGENIX, INC., a Delaware corporation ("ABX")
("Licensee").
RECITALS
XT desires to grant to Licensee and Licensee desires to acquire from XT
an exclusive worldwide license or sublicense, as the case may be, under the
Licensed Technology to commercialize Products, on the terms and conditions
herein.
NOW, THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:
1. DEFINITIONS.
For purposes of this Agreement, the terms set forth in this Article
shall have the meanings set forth below.
1.1 "ABX" shall mean Abgenix, Inc.
1.2 "Affiliate" shall mean any entity which controls, is
controlled by or is under common control with any one of ABX, JTI or XT. An
entity shall be regarded as in control of another entity if it owns or controls
at least fifty percent (50%) of the shares of the subject entity entitled to
vote in the election of directors (or, in the case of an entity that is not a
corporation, for the election of the corresponding managing authority);
provided, however, XT shall not be an Affiliate of ABX or JTI under this
Agreement and XT shall not be considered controlled by ABX or JTI for purposes
of determining Affiliates of ABX or JTI.
1.3 "Antibody" shall mean a composition comprising a whole
antibody or a fragment thereof, said antibody or fragment having been derived
from the Licensed Technology and/or generated from the Mice or the Future
Generation Mice or having been derived from nucleotide sequences encoding, or
amino acid sequences of, such an antibody or fragment.
1.4 "Antibody Product" shall mean any product comprising an
Antibody or Genetic Material encoding an Antibody wherein, in respect of each
Antibody Product, said Genetic Material does not encode multiple Antibodies.
1.5 "Antibody-Secreting Cell" shall mean a cell that secretes an
Antibody, except where such cell is part of a mammal.
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1.6 "Antigen Technology" shall mean (i) all U.S. patent
applications and patents listed on Schedule 1 and patents issuing on such patent
applications owned by or licensed to XT which relate to the Product Antigen, in
each case to the extent XT has the right to license or sublicense the same; (ii)
any continuations, divisionals, reexaminations, reissues or extensions of any of
(i) above; (iii) any foreign counterparts issued or issuing on any of (i) or
(ii) above; and (iv) materials as set forth in Schedule 1.
1.7 "CGI" shall mean Cell Genesys, Inc.
1.8 "Effective Date" shall mean the date this Agreement is
executed by XT and Licensee.
1.9 "Future Generation Mice" shall have the meaning defined in
the Master Research License and Option Agreement, as amended.
1.10 "Genetic Material" shall mean a nucleotide sequence,
including DNA, RNA, and complementary and reverse complementary nucleotide
sequences thereto, whether coding or noncoding and whether intact or a fragment.
1.11 "GenPharm Cross License" shall mean that certain Cross
License Agreement, effective as of March 26, 1997, entered into by and among the
parties, GenPharm International, Inc. ("GenPharm") and the other parties named
therein, as the same may be amended from time to time.
1.12 "IND" shall mean an Investigational New Drug Exemption for a
Product, as defined in the U.S. Food, Drug and Cosmetic Act and the regulations
promulgated thereunder, or its non-U.S. equivalent.
1.13 "JTI" shall mean Japan Tobacco Inc.
1.14 "License Fee" shall have the meaning set forth in Article 3
hereof.
1.15 "Licensed Field" shall mean all human medical uses.
1.16 "Licensed Technology" shall mean the Antigen Technology, the
XenoMouse(TM) Technology, and XT-Controlled Rights.
1.17 "Master Research License and Option Agreement" shall mean
that certain Master Research License and Option Agreement entered into by CGI,
JTI and XT as of June 28, 1996 (and subsequently assigned by CGI to ABX), as it
may be amended.
1.18 "Mice" shall have the meaning defined in the Master Research
License and Option Agreement, as amended.
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1.19 "Net Sales" shall mean [Redacted]
1.20 "Product" and "Products" shall mean one or more Antibody
Products which incorporate (i) an Antibody which binds to the Product Antigen or
(ii) Genetic Material encoding such an Antibody wherein said Genetic Material
does not encode multiple antibodies.
1.21 "Product Antigen" shall mean ____________________.
1.22 "Sublicensee" shall mean a third party that is not an
Affiliate (provided, however, that CGI may be a Sublicensee of ABX, whether or
not CGI is an Affiliate of ABX) to whom Licensee has granted a sublicense under
the Licensed Technology to make, use and/or sell Products to the extent of the
rights of Licensee therein. "Sublicensee" shall also include a third party to
whom Licensee has granted the right to distribute Products under the Licensed
Technology to the extent of the rights of Licensee therein, provided that such
third party is responsible for the marketing and promotion of Products within
the applicable country.
1.23 "Territory" shall mean all the countries of the world.
1.24 "Transgenic Product" shall mean any product constituting (i)
Mice or Future Generation Mice, (ii) Genetic Material from Mice or Future
Generation Mice, or (iii) an Antibody-Secreting Cell.
1.25 "Universal Receptor Product" shall mean a substance that is
developed utilizing both (i) an Antibody and (ii) Universal Receptor Technology.
1.26 "Universal Receptor Technology" shall mean technology for
universal receptors [*] As used herein: (i) "universal receptor" shall mean a
receptor [*]
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the omitted portions.
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1.27 "Valid Claim" shall mean a claim of a pending or issued, and
unexpired patent included within the Licensed Technology, which has not been
held unenforceable, unpatentable or invalid by a court or other governmental
agency of competent jurisdiction, and which has not been admitted to be invalid
or unenforceable through reissue, disclaimer or otherwise.
1.28 "XenoMouse(TM) Technology" shall mean (i) all U.S. patent
applications and patents listed on Schedule 2 and patents issuing on such
applications; (ii) any continuations, divisionals, reexaminations, reissues or
extensions of any of (i) above; (iii) any foreign counterparts issued or issuing
on any of (i) or (ii) above; and (iv) the Mice (as such term is defined in the
Master Research License and Option Agreement) and other materials as set forth
on Schedule 2.
1.29 "XT-Controlled Rights" shall mean all rights to patents or
technology that are licensed to XT pursuant to the agreements listed on Schedule
4 or any other license or similar agreement granting XT rights to patents or
technology (each such agreement an "XT In-License"), to the extent that XT has
the right under the terms of the applicable XT In-License to further license or
sublicense such rights during the Term of this Agreement.
1.30 "XT In-License" shall have the meaning set forth in Section
1.29, above.
2. LICENSE GRANT; USE OF MICE BY THIRD PARTIES.
2.1 Subject to the terms and conditions of this Agreement, XT
hereby grants to Licensee an exclusive license or sublicense, as the case may
be, under the Licensed Technology, to make and have made Products anywhere in
the world and to use, sell, lease, offer to sell or lease, import, export,
otherwise transfer physical possession of or otherwise transfer title to such
Products in the Licensed Field in the Territory. Such license or sublicense
shall be exclusive even as to XT, and shall include the exclusive right to grant
and authorize sublicenses for exploitation worldwide; provided, however, that
Licensee may not, under this license, grant sublicenses to any rights to the
Mice except as provided in Section 2.2 of this Agreement.
2.2 In connection with the grant of a sublicense under this
Agreement to a third party, and notwithstanding any provision to the contrary in
the Master Research License and Option Agreement or any Material Transfer
Agreement entered into between the parties under Sections 2.1, 2.2 or 2.3 of the
Master Research License and Option Agreement, Licensee shall have the right to
grant a sublicense to use Mice and Future Generation Mice transferred to the
third party pursuant to the terms of Section 2.7 of the Master Research License
and Option Agreement, and Transgenic Products other then Mice or Future
Generation Mice, to research, develop, make, have made, use, import, export,
sell, lease, offer to sell or lease or otherwise distribute or commercialize
Products, with the proviso that the sublicense described in this Section 2.2
shall not exceed the Licensee's rights conferred in accordance with the Master
Research License and Option Agreement or this Product License.
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2.3 It is understood and agreed that, as to all XT-Controlled
Rights, the grant of rights under this Article 2 shall be subject in all
respects to the applicable XT In-License(s) pursuant to which such XT-Controlled
Rights were granted to XT.
3. LICENSE FEE.
Licensee shall pay to XT within thirty days of the Effective Date a
license fee of [Redacted].
4. ROYALTIES.
4.1 Royalty Rates. In consideration for the license and rights
granted herein, Licensee agrees to pay to XT royalties [Redacted].
4.2 Royalty Offsets. In the event that (i) Licensee, its
Affiliate or Sublicensee is required to pay a non-Affiliate third party amounts
with respect to Products under agreements for patent rights or other
technologies which Licensee, its Affiliate or Sublicensee, in its reasonable
judgment, determines are necessary or desirable to license or acquire with
respect to such Products (excluding any such payments made to Licensee by its
Affiliates), or (ii) any reimbursement payments are due to XT pursuant to
Section 5.1 below, then Licensee may deduct the aggregate of any such amounts
from any royalty amount owing to XT for the sale of such Products pursuant to
Section 4.1 above; provided, however, that payments from Licensee to a third
party that is an Affiliate, or was an Affiliate at any time within two (2) years
prior to the Effective Date, may not be offset under this Section 4.2.
Notwithstanding the foregoing provisions of this Section 4.2, in no event shall
the royalties due to XT pursuant to Section 4.1 above be so reduced to less than
[*] of the amount that would otherwise be due to XT thereunder. [*]
4.3 Single Royalty; Non-Royalty Sales. Only one royalty shall be
payable with respect to any Product, regardless of how many claims or patents
within the Licensed Technology cover such Product. In addition, no royalty shall
be payable under this Article 4 with respect to sales of Products among Licensee
and its Affiliates and/or Sublicensees and their Affiliates or for use in
research and/or development or clinical trials.
4.4 No Patent Protection. Royalties shall be payable at the rates
specified in Section 4.1 or 4.2 above only with respect to sales of Products
that would infringe a Valid Claim in the country in which such Products are
sold. In the event that such Products are not covered by a Valid Claim in such
country, XT shall be paid a royalty on such sales in accordance with this
Article 4, but the royalty due XT with respect to Net Sales in such country will
equal [*] of the royalty set forth in Section 4.1 or as it may be offset under
Section 4.2.
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the omitted portions.
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4.5 Combination Products. In the event that a Product is sold in
combination as a single product with another product or component, Net Sales
from such combination sales for purposes of calculating the amounts due under
this Article 4 shall be calculated by multiplying the Net Sales of that
combination by the fraction A/(A + B), where A is the gross selling price of the
Product sold separately and B is the gross selling price of the other product
sold separately. In the event that no such separate sales are made in the same
quarter by Licensee, Net Sales for royalty determination shall be as reasonably
allocated by Licensee, between such Product and such other product, based upon
their relative importance and proprietary protection.
4.6 Termination of Royalties. Royalties under Section 4.1, 4.2,
or 4.4 will be due until the later of (i) ten years from the first commercial
sale of Products in any country or (ii) on a country-by-country basis, the
expiration of the last-to-expire patent within the Licensed Technology covering
the Products in such country.
5. THIRD PARTY ROYALTIES.
5.1 Royalties Payable by XT. XT will be responsible for the
payment of any royalties, license fees and milestone and/or other payments due
to third parties under licenses or similar agreements entered into by XT
necessary to allow the manufacture, use or sale of Products. Licensee shall
reimburse XT for any royalties paid by XT to third parties under licenses or
similar agreements covering Products necessary to allow the manufacture, use or
sale or other exploitation of Products anywhere in the world. Licensee shall
continue any such reimbursement payments to XT until XT's obligation to pay
royalties to a third party under any license covering Products expires or
terminates. XT agrees not to enter into any license or similar agreement after
the Effective Date which would obligate Licensee to make any payments under this
Section 5.1 without the prior written consent of Licensee.
5.2 Royalties Payable by Licensee. Xenotech shall have no
responsibility under the terms of this Agreement for the payment of any
royalties, license fees or milestone or other payments due to third parties
under licenses or similar agreements entered into by Licensee, its Affiliates,
or its Sublicensees to allow the manufacture, use or sale of Products.
6. ACCOUNTING AND RECORDS.
6.1 Royalty Reports and Payments. After the first commercial sale
of Products on which royalties are required, Licensee agrees to make quarterly
written reports to XT within eighty days after the end of each calendar quarter,
stating in each such report the number, description, and aggregate Net Sales of
Products sold during the calendar quarter upon which a royalty is payable under
Article 4 above. Concurrently with the making of such reports, Licensee shall
pay to XT royalties at the applicable rate specified in Section 4.1, 4.2 or 4.4
above and all royalties payable pursuant to Section 5.1 above, and any
adjustment to Net Sales for a prior period in accordance with the definition of
Net Sales
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in Section 1.11 hereof. All payments to XT hereunder shall be made in U.S.
Dollars to a bank account designated by XT.
6.2 Early Third Party License Payments. If XT is obligated to pay
royalties to a third party prior to ninety days after the end of the calendar
quarter, XT shall so notify Licensee and Licensee shall provide the reports and
payments set forth in Section 6.1 above not later than ten days before the date
such payments are due to the third party. Up to thirty-five days before such
payments are due, XT may provide Licensee with an invoice by facsimile setting
forth the royalties XT must pay third parties with respect to Licensee's
activities in the Territory in the preceding quarter, and Licensee shall pay
such invoices within thirty days of receipt of such invoice.
6.3 Records; Inspection. Licensee shall keep (and cause its
Affiliates and Sublicensees to keep) complete, true and accurate books of
account and records for the purpose of determining the royalty amounts payable
to XT under this Agreement. Such books and records shall be kept at the
principal place of business of Licensee or its Affiliates or Sublicensees, as
the case may be, for at least three years following the end of the calendar
quarter to which they pertain. Such records of Licensee or its Affiliates will
be open for inspection during such three-year period by a representative of XT
for the purpose of verifying the royalty statements. Licensee shall require each
of its Sublicensees to maintain similar books and records and to open such
records for inspection during the same three-year period by a representative of
Licensee reasonably satisfactory to XT on behalf of, and as required by, XT for
the purpose of verifying the royalty statements. All such inspections may be
made no more than once each calendar year, at reasonable times mutually agreed
by XT and Licensee. The XT representative will be obliged to execute a
reasonable confidentiality agreement prior to commencing any such inspection.
Inspections conducted under this Section 6.3 shall be at the expense of XT,
unless a variation or error producing an increase exceeding [Redacted] of the
amount stated for the period covered by the inspection is established in the
course of any such inspection, whereupon all costs relating thereto will be paid
by Licensee. Upon the expiration of three years following the end of any fiscal
year, the calculation of royalties payable with respect to such year shall be
binding and conclusive, and Licensee shall be released from any liability or
accountability with respect to royalties for such year.
6.4 Currency Conversion. If any currency conversion shall be
required in connection with the calculation of royalties hereunder, such
conversion shall be made using the selling exchange rate for conversion of the
foreign currency into U.S. Dollars, quoted for current transactions reported in
The Wall Street Journal for the last business day of the calendar quarter to
which such payment pertains.
6.5 Late Payments. Any payments due from Licensee that are not
paid on the date such payments are due under this Agreement shall bear interest
to the extent permitted by applicable law at the prime rate as reported by the
Bank of America in San Francisco, California on the date such payment is due,
plus an additional [Redacted], calculated on the number of days such payment is
delinquent. This Section 6.5 shall in no way limit any other remedies available
to any party.
6.6 Withholding Taxes.
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6.6.1 Unless immediately reimbursable under Section 6.6.2
below, all payments required to be made pursuant to Articles 3, 4 and 5 hereof
shall be without deduction or withholding for or on account of any taxes (other
than taxes imposed on or measured by net income) or similar governmental charge
imposed by a jurisdiction. Such taxes are referred to herein as "Withholding
Taxes" and such Withholding Taxes shall be the sole responsibility of the
withholding party. The withholding party shall provide a certificate evidencing
payment of any Withholding Taxes hereunder.
6.6.2 XT agrees to elect to claim a tax credit for
Withholding Taxes with respect to which it is entitled so to elect, and further
agrees not to amend such election for the full carry-forward period with respect
to such credit. At the time that XT realizes a reduction in U.S. tax liability
by actually utilizing the Withholding Taxes as a credit against regular U.S. tax
liability (determined on a "first-in-first-out" basis pro rata with other
available foreign tax credits), then the amount of such reduction attributable
to such credit shall immediately be reimbursed to the withholding party. For
these purposes, a reduction in U.S. tax liability shall include both a direct
reduction in XT's own tax liability and a reduction in the U.S. tax liability of
any of its partners.
6.7 Tax Indemnity. Except as provided in Section 6.6, each party
(the "Tax Indemnitor") shall indemnify and hold harmless the other party hereto
(each a "Tax Indemnitee") from and against any tax or similar governmental
charge assessed solely because of this Agreement with respect to and directly
attributable to the income or the assets of the Tax Indemnitor. In the event
that any governmental agency shall make a claim against a party hereto which
could give rise to an indemnity hereunder, such potential Tax Indemnitee shall
give reasonably prompt notice to the potential Tax Indemnitor of the assertion
of such claim. If the transmission of such notice is unreasonably deferred and
has a material, adverse affect on the ability of the potential Tax Indemnitor to
challenge such claim, such potential Tax Indemnitor shall be released from
liability hereunder. The Tax Indemnitor alone shall (at its own expense) control
the defense or compromise of any such claim. The Tax Indemnitee shall execute
any documents required to enable Tax Indemnitor to defend such claim, provide
any information necessary therefor, and cooperate with Tax Indemnitor in such
defense.
6.8 XT Tax Indemnity. XT shall indemnify and hold harmless
Licensee and its Affiliates from and against any increase to its country of
incorporation income tax liability directly attributable to a positive
adjustment to the amount of gross receipts (an "Adjustment") reported or
reportable by such party from the income, including the royalty income, received
from Licensee on Covered Products. The amount payable hereunder shall be equal
to the difference between (a) the product of (i) the amount of the Adjustment,
and (ii) the highest combined marginal corporate tax rate in the country of
incorporation in effect for the taxable year for which such Adjustment is made,
and (b) the reduction in the party's foreign tax liability, which for purposes
of this Agreement shall be equal to the product of (i) the amount of any
correlative adjustment to its foreign taxable income, and (ii) the highest
combined marginal foreign corporate tax rate in effect for the taxable year for
which the correlative adjustment is made. No indemnification payment shall be
required hereunder until comprehensive efforts to obtain a correlative
adjustment to Licensee's or its Affiliates', as the case may be, taxable income
in a foreign state (which may include, for example invoking competent authority
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provisions under the U.S. Japanese Income Tax Treaty (if applicable) or other
applicable bilateral tax treaty) have, to the extent reasonable to do so, been
exhausted.
7. RESEARCH AND DEVELOPMENT.
7.1 Funding and Conduct. Licensee shall independently furnish and
be responsible for funding and conducting all of its preclinical and clinical
research and development of Products, at its own expense.
7.2 Biomaterials. In the case of Previously Selected Antigens as
defined in the Master Research License and Option Agreement, at the reasonable
request of Licensee, XT shall make available as part of the license granted
hereunder to Licensee [*]. Such hybridomas, reagents and materials, as well as
the related data thus made available will be used only by Licensee and its
Affiliates and Sublicensees and manufacturing subcontractors.
8. DUE DILIGENCE.
8.1 Reasonable Commercial Efforts; IND Milestone.
8.1.1 Licensee agrees to use commercially reasonable
efforts consistent with prudent business judgment to commercialize Products, by
the filing of an IND by Licensee, or its Affiliate or Sublicensee, in the United
States or Japan within such period of time as may be agreed upon by the parties
after good faith negotiations taking into account factors relating to the
Product Antigen or, if no such period is agreed upon, three years from the
Effective Date.
8.1.2 Notwithstanding the foregoing, Licensee shall be
required actively and continuously to pursue the filing of an IND by Licensee,
or its Affiliate or Sublicensee, as soon as practicable after the Effective Date
using reasonable commercial efforts consistent with prudent business judgment.
After filing of an IND, Licensee, or its Affiliate or Sublicensee, shall be
required to have an active IND and to be actively conducting clinical trials in
pursuit of regulatory approval for the Products in the United States or Japan.
8.2 Failure to Meet Due Diligence Obligation.
8.2.1 If the diligence requirements set forth in Section
8.1 are not met by Licensee (or its Affiliates or Sublicensees) in the United
States or in Japan, Licensee's rights hereunder shall terminate upon written
notice by XT to Licensee and subject to Sections 8.3, 8.4 and 13.3 below.
8.2.2 Notwithstanding Section 8.2.1, the license granted
hereunder to Licensee shall not terminate by reason of a delay in meeting the
IND milestone set forth in Section 8.1.1, to the
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extent that prudent business judgment, based on circumstances outside of
Licensee's reasonable control, reasonably justifies such delay.
8.3 Dispute Resolution. In the event that a dispute arises
whether the diligence requirements in Article 8 have been met or circumstances
exist which Licensee believes justifies a failure on its part to meet such
obligation, the parties will attempt to resolve any dispute by mutual agreement
during a period of 30 days following Licensee's receipt of the notice under
Section 8.2.1.
8.4 Arbitration. In the event that the parties are unable to
resolve such dispute pursuant to Section 8.3 above, such dispute shall be
settled between XT and Licensee by binding arbitration as set forth in Section
14.12. If the arbitrator determines that the party acted in good faith, but
failed to meet its obligations under Section 8.1 above, the license granted to
such party shall not terminate unless the nonperforming party fails to cure such
non-performance within a reasonable period of time, as determined by the
arbitrator.
9. PATENTS.
9.1 XenoMouse Technology.
(a) XT or its licensor, as they may agree, shall have
responsibility for preparing, filing, prosecuting and maintaining patents and
patent applications worldwide relating to the XenoMouse Technology and
conducting any interferences, oppositions, reexaminations, or requesting
reissues or patent term extensions with respect to the XenoMouse Technology. XT
shall keep Licensee reasonably informed as to the status of such patent matters,
including without limitation, by providing Licensee the opportunity to review
and comment on any substantive documents which will be filed in any patent
office, and providing Licensee copies of any substantive documents received by
XT from such patent offices including notice of all interferences,
reexaminations, oppositions or requests for patent term extensions. Licensee
shall cooperate with and assist XT in connection with such activities, at XT's
request and expense.
(b) In the event that Licensee becomes aware that any
XenoMouse Technology necessary for the practice of the license granted herein is
infringed or misappropriated by a third party or is subject to a declaratory
judgment action arising from such infringement, Licensee shall promptly notify
XT and XT shall thereafter promptly notify the owner of such intellectual
property. XT or its licensor, as they may agree, shall have the exclusive right
to enforce, or defend any declaratory judgment action, at its expense, involving
any XenoMouse Technology. In such event, XT shall keep Licensee reasonably
informed of the progress of any such claim, suit or proceeding. Any recovery
received by XT as a result of any such claim, suit or proceeding shall be used
first to reimburse XT for all expenses (including attorneys, and professional
fees) incurred in connection with such claim, suit or proceeding, and the
remainder divided [*] between XT and Licensee, only to the extent that such
recovery is related to the Products.
9.2 Antigen Technology.
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9.2.1 Licensee shall, at its expense, have the initial
worldwide responsibility for preparing, filing, prosecuting and maintaining
patent applications and conducting any interferences, oppositions,
reexaminations, or requesting reissues or patent term extensions with respect to
Antigen Technology, except to the extent XT may not have the right to do so.
Licensee shall give XT the opportunity to review the status of all such pending
patent applications and actions and shall keep XT fully informed of the progress
of such applications and actions, including, without limitation, by promptly
providing XT with copies of all substantive worldwide correspondence sent to and
received from patent offices, and providing notice of all interferences,
reexaminations, oppositions or requests for patent term extensions. In the event
that Licensee declines or fails to prepare, file, prosecute or maintain such
patent applications or patents or take such other actions, relating to the
Products in any country, it shall promptly and in no event later than ninety
days prior to any filing deadline, provide notice to XT. XT shall have the right
to assume such responsibilities at its own expense, using counsel of its choice.
9.2.2 In the event that Licensee becomes aware that any
Antigen Technology is infringed or misappropriated by a third party in any
country of the world, or is subject to a declaratory judgment action arising
from such infringement in any country, Licensee shall promptly notify XT and XT
shall thereafter promptly notify the owner of such intellectual property.
Licensee shall have the exclusive right to enforce, or defend any declaratory
judgment action, in any country of the world, at its expense, involving any
Antigen Technology. In such event, Licensee shall keep XT reasonably informed of
the progress of any such claim, suit or proceeding. Any recovery by Licensee
received as a result of any such claim, suit or proceeding shall be used first
to reimburse Licensee for all expenses (including attorneys, and professional
fees) incurred in connection with such claim, suit or proceeding, and the
remainder divided [*] between Licensee and XT.
9.3 Infringement Claims. If the production, sale or use of
Products pursuant to this Agreement results in any claim, suit or proceeding
alleging patent infringement against Licensee (or its Affiliates or
Sublicensees), Licensee shall promptly notify XT thereof in writing setting
forth the facts of such claim in reasonable detail. Except where (i) the claim
is determined pursuant to Article 10 of the Master Research License and Option
Agreement to involve Core Technology (as defined therein) or (ii) the claim
involves Additional Technology as defined in the Technology Exchange Agreement
among CGI, JTI and XT dated March 22, 1996 (and subsequently assigned by CGI to
ABX), as it may be amended from time to time, Licensee shall have the exclusive
right to defend and control the defense of any such claim, suit or proceeding,
at its own expense, using counsel of its choice. Licensee shall keep XT
reasonably informed of all material developments in connection with any such
claim, suit or proceeding as it relates to the Licensed Technology, Licensee
shall have the right to deduct any damages and expenses (including attorneys'
and professional fees) against any amounts due, or which may become due, to XT
pursuant to this Agreement. Notwithstanding the above, Licensee shall not be
able to settle any such claim, suit or proceeding that involves any admission of
the invalidity of the Licensed Technology.
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9.4 Patent Marking. Licensee agrees to mark and have its
Affiliates and Sublicensees mark all Products sold pursuant to this Agreement in
accordance with the applicable statutes or regulations in the country or
countries of manufacture and sale thereof.
10. CONFIDENTIALITY.
10.1 Confidential Information. Except as expressly provided
herein, the parties agree that, for the term of this Agreement and for five
years thereafter, the receiving party shall keep completely confidential and
shall not publish or otherwise disclose and shall not use for any purpose any
information furnished to it by another party hereto pursuant to this Agreement
except to the extent that it can be established by the receiving party by
competent proof that such information:
(a) was already known to the receiving party, other than
under an obligation of confidentiality, at the time of disclosure;
(b) was generally available to the public or otherwise
part of the public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or
(d) was subsequently lawfully disclosed to the receiving
party by a person other than a party or developed by the receiving party without
reference to any information or materials disclosed by the disclosing party.
10.2 Permitted Disclosures. Notwithstanding Sections 10.1 above
and 14.16 below, each party hereto may disclose the other party's information to
the extent such disclosure is reasonably necessary in filing or prosecuting
patent applications, prosecuting or defending litigation, complying with
applicable governmental regulations or otherwise submitting information to tax
or other governmental authorities, making a permitted sublicense or other
exercise of its rights hereunder or conducting clinical trials, provided that if
a party is required to make any such disclosure of the other party's secret or
confidential information, other than pursuant to a confidentiality agreement, it
will give reasonable advance notice to the latter party of such disclosure
requirement and, save to the extent inappropriate in the case of patent
applications, will use efforts consistent with prudent business judgment to
secure confidential treatment of such information prior to its disclosure
(whether through protective orders or otherwise). Notwithstanding the foregoing,
XT shall not disclose to third parties, clinical data or regulatory filings
received from Licensee except as agreed in writing by Licensee.
11. SUBLICENSES.
Pursuant to Article 2 herein, Licensee will have the right to grant and
authorize sublicenses to third parties; provided, however, the Licensee shall
remain responsible for any payments due XT for Net
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Sales of Products by any Sublicensee. Licensee may retain any amounts received
from Sublicensees in excess of the amounts owed to XT pursuant to Articles 4 and
5. Any sublicense granted by Licensee pursuant to this Agreement shall provide
that the Sublicensee will be subject to the applicable terms of this Agreement.
Licensee shall provide XT with a copy of relevant portions of each sublicense
agreement, as reasonably required by XT.
12. REPRESENTATIONS AND WARRANTIES.
12.1 XT. XT represents and warrants that:
(i) it has the full right and authority to enter into this
Agreement and grant the rights and licenses granted herein;
(ii) it has not previously granted and will not grant any
rights inconsistent or in conflict with the rights and licenses granted to
Licensee herein;
(iii) there are no existing or threatened actions, suits
or claims pending against XT with respect to the Licensed Technology or the
right of XT to enter into and perform its obligations under this Agreement;
(iv) it has not previously granted, and will not grant
during the term of this Agreement, any right, license or interest in and to the
Licensed Technology, or any portion thereof, with respect to the Products, or
their manufacture or use;
(v) Schedule 3 hereto sets forth all royalties, license
fees, milestone payments and similar payments due to third parties for which
Licensee is obligated to reimburse XT under Section 5.1 above as of the
Effective Date; and
(vi) the Licensed Technology is all the technology owned
by or licensed to XT as of the Effective Date.
12.2 Licensee. Licensee represents and warrants that:
(i) it has the full right and authority to enter into this
Agreement,
(ii) to its knowledge, there are no existing or threatened
actions, suits or claims pending with respect to the subject matter hereof or
the right of Licensee to enter into and perform its obligations under this
Agreement; and
(iii) it has not entered and during the term of this
Agreement will not enter any other agreement inconsistent or in conflict with
this Agreement.
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12.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, XT MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF LICENSED
TECHNOLOGY CLAIMS, ISSUED OR PENDING.
12.4 Effect of Representations and Warranties. It is understood
that if the representations and warranties under this Article 12 are not true
and accurate and a party incurs liabilities, costs or other expenses as a result
of such falsity, the party at fault shall indemnify, defend and hold the injured
party harmless from and against any such liabilities, costs or expenses
incurred, provided that the party at fault receives prompt notice of any claim
against the injured party resulting from or related to such falsity and the sole
right to control the defense or settlement thereof.
13. TERM AND TERMINATION.
13.1 Effectiveness. This Agreement shall become effective as of
the Effective Date and the license rights granted by XT under Article 2 above
shall be in full force and effect as of such date.
13.2 Term. Unless earlier terminated pursuant to the other
provisions of this Article 13, this Agreement shall continue in full force and
effect until the later of
(i) the expiration of the last to expire patent within the
Licensed Technology claiming Products; or
(ii) the twentieth anniversary of the Effective Date.
The licenses granted under Article 2 shall survive the expiration (but not an
earlier termination) of this Agreement; provided that such licenses shall in
such event become nonexclusive.
13.3 Termination for Breach. Either party to this Agreement may
terminate this Agreement in the event the other party shall have materially
breached or defaulted in the performance of any of its material obligations
hereunder, and such shall have continued for sixty days after written notice
thereof was provided to the breaching party by the nonbreaching party that
terminates the Agreement as to such party. Any termination shall become
effective at the end of such sixty day period unless the breaching party has
cured any such breach or default prior to the expiration of the sixty day
period. However, if the party alleged to be in breach of this Agreement disputes
such breach within such sixty day period, the non-breaching party shall not have
the right to terminate this Agreement unless it has been determined by an
arbitration proceeding in accordance with Section 14.12 below that this
Agreement was materially breached, and the breaching party fails to cure such
breach within thirty days following the final decision of the arbitrators or
such other time as directed by the arbitrators.
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13.4 Other Termination Rights. Licensee may terminate this Agreement and
the license granted herein, in its entirety or as to any particular patent
within the Licensed Technology in a particular country, at any time, by
providing XT ninety-days written notice. In the event of termination as to a
particular country, the subject patent in such country shall cease to be within
the Licensed Technology for all purposes of this Agreement.
13.5 Effect of Termination.
13.5.1 Termination of this Agreement for any reason shall not
release either party hereto from any liability which at the time of such
termination has already accrued to the other party or which is attributable to a
period prior to such termination.
13.5.2 In the event this Agreement is terminated for any reason,
Licensee and its Affiliates and Sublicensees shall have the right to sell or
otherwise dispose of the stock of any Products subject to this Agreement then on
hand. Upon termination of this Agreement by XT for any reason, any sublicense
granted by Licensee hereunder shall survive, provided that upon request by XT,
such Sublicensee promptly agrees in writing to be bound by the applicable terms
of this Agreement.
13.5.3 This Agreement, including, without limitation, any
licenses or sublicenses granted pursuant to this Agreement, shall survive any
dissolution, liquidation or acquisition of XT. Such licenses shall remain in
full force and effect even after any distribution, following dissolution, of the
intellectual property owned or licensed to XT, to any entity. Any transfer of
such intellectual property prior to or following dissolution shall be subject to
the licenses granted herein.
13.5.4 This Agreement, including the license granted in Article
2, is independent of, and shall not be affected by, any breach or termination of
the Master Research License and Option Agreement or any other agreement between
the parties or their Affiliates. In the event of the termination of the Master
Research License and Option Agreement, the rights and obligations of the parties
hereto under Article 12 thereof shall be deemed to be part of this Agreement.
13.5.5 Sections 6.3, 6.5, 6.6, 6.7 and 6.8 and Articles 10, 12,
13 and 14 shall survive the expiration and any termination of this Agreement for
any reason.
14. MISCELLANEOUS.
14.1 Governing Laws. This Agreement shall be interpreted and
construed in accordance with the laws of the State of California, without regard
to conflicts of law principles.
14.2 Waiver. It is agreed that no waiver by any party hereto of
any breach or default of any of the covenants or agreements herein set forth
shall be deemed a waiver as to any subsequent and/or similar breach or default.
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14.3 Assignment. This Agreement and the license granted hereunder
may not be assigned by Licensee to any third party without the written consent
of XT, and XT may not assign this Agreement to a third party without the consent
of Licensee; except any party may assign this Agreement without such consent to
(a) an Affiliate (provided that such Affiliate is two-thirds or greater owned
directly or indirectly) or (b) an entity that acquires substantially all of the
assets of the monoclonal antibody business segment of the assigning party. The
terms and conditions of this Agreement shall be binding on and inure to the
benefit of the permitted successors and assigns of the parties.
14.4 Independent Contractors. The relationship of the parties
hereto is that of independent contractors. The parties hereto are not deemed to
be agents, partners or joint venturers of the others for any purpose as a result
of this Agreement or the transactions contemplated thereby.
14.5 Compliance with Laws. In exercising their rights under this
license, the parties shall fully comply with the requirements of any and all
applicable laws, regulations, rules and orders of any governmental body having
jurisdiction over the exercise of rights under this license.
14.6 No Implied Obligations. Except as expressly provided in
Article 8 above, nothing in this Agreement shall be deemed to require Licensee
to exploit the Licensed Technology nor to prevent Licensee from commercializing
products similar to or competitive with any Products, in addition to or in lieu
of such Products.
14.7 Notices. Any notice required or permitted to be given to the
parties hereto shall be given in writing and shall be deemed to have been
properly given if delivered in person or when received if mailed by first class
certified mail to the other party at the appropriate address as set forth below
or to such other addresses as may be designated in writing by the parties from
time to time during the term of this Agreement.
XT: Xenotech, L.P.
322 Lakeside Drive
Foster City, California 94404
Attn: Chief Financial Officer
Japan Tobacco Inc.: Japan Tobacco Inc.
JT Building
2-1 Toranomon 2-chome
Minato-ku, Tokyo 105
Japan
Attn: Vice President
Pharmaceutical Division
with a copy to: JT America Inc.
1825 South Grant Street, Suite 220
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San Mateo, CA 94402
Attn: President
and to: Gilbert, Segall and Young LLP
430 Park Avenue
New York, NY 10022
Attn: Neal N. Beaton, Esq.
Abgenix, Inc.: Abgenix, Inc.
7601 Dumbarton Circle
Fremont, California 94555
Attn: President
with a copy to: Wilson Sonsini Goodrich &
Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attn: Kenneth A. Clark, Esq.
14.8 Export Laws. Notwithstanding anything to the contrary
contained herein, all obligations of XT and Licensee are subject to prior
compliance with United States [and Japanese]** export regulations and such other
United States [and Japanese]** laws and regulations as may be applicable, and to
obtaining all necessary approvals required by the applicable agencies of the
government of the United States [and Japan].** Licensee shall use efforts
consistent with prudent business judgment to obtain such approvals. XT shall
cooperate with Licensee and shall provide assistance to Licensee as reasonably
necessary to obtain any required approvals.
14.9 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision and the parties shall discuss in good faith
appropriate revised arrangements.
14.10 Force Majeure. Nonperformance of any party (except for
payment obligations) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to
perform, is beyond the reasonable control and not caused by the negligence,
intentional conduct or misconduct of the nonperforming party.
14.11 No Consequential Damages. IN NO EVENT SHALL ANY PARTY
HERETO BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF
THIS AGREEMENT OR THE EXERCISE OF RIGHTS HEREUNDER.
14.12 Dispute Resolution; Arbitration. The parties will attempt
to resolve any dispute under this Agreement by mutual agreement, and, if
required, there shall be a face-to-face meeting
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between senior executives of the parties. Any dispute under this Agreement which
is not settled after such meeting, shall be finally settled by binding
arbitration, conducted in accordance with the Rules of Arbitration of the
International Chamber of Commerce by three arbitrators appointed in accordance
with said rules. The arbitration proceedings and all pleadings and written
evidence shall be in the English language. Any written evidence originally in a
language other than English shall be submitted in English translation
accompanied by the original or a true copy thereof. The costs of the
arbitration, including administrative and arbitrators' fees, shall be shared
equally by the parties. Each party shall bear its own costs and attorneys' and
witness' fees. The prevailing party in any arbitration, as determined by the
arbitration panel, shall be entitled to an award against the other party in the
amount of the prevailing party's costs and reasonable attorneys, fees. The
arbitration shall be held in [San Francisco, California]* [Tokyo, Japan, if
initiated by XT against Licensee and in San Francisco, California, if initiated
by Licensee against XT].** A disputed performance or suspended performances
pending the resolution of the arbitration must be completed within thirty days
following the final decision of the arbitrators. Any arbitration shall be
completed within six months from the filing of notice of a request for such
arbitration.
14.13 Complete Agreement. It is understood and agreed between XT
and Licensee that this Agreement constitutes the entire agreement, both written
and oral, between the parties with respect to the subject matter hereof, and
that all prior agreements respecting the subject matter hereof, either written
or oral, expressed or implied, shall be abrogated, canceled, and are null and
void and of no effect. No amendment or change hereof or addition hereto shall be
effective or binding on either of the parties hereto unless reduced to writing
and executed by the respective duly authorized representatives of XT and
Licensee.
14.14 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both together
shall be deemed to be one and the same agreement.
14.15 Headings. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are included merely for convenience
of reference only and shall not affect its meaning or interpretation.
14.16 Nondisclosure. Except as provided in Article 10, each of
the parties hereto agrees not to disclose to any third party the terms of this
Agreement without the prior written consent of each other party hereto, except
to advisors, investors, licensees, sublicensees and others on a need to know
basis under circumstances that reasonably ensure the confidentiality thereof, or
to the extent required by law; provided, however, that the royalty rate
specified in Section 4.1 of this executed Product License shall be redacted
before the terms of this executed Product License are disclosed to potential
licensees and sublicensees. Without limitation upon any provision of this
Agreement, each of the parties hereto shall be responsible for the observance by
its employees, consultants and contractors of the foregoing confidentiality
obligations.
14.17 Conformity with GenPharm Cross-License. The rights and
licenses granted to Licensee hereunder shall be subject to the GenPharm Cross
License, and to the extent that this
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Agreement purports to grant greater rights to Licensee than is permitted under
the GenPharm Cross License, such rights shall be granted only to the extent
permitted under the GenPharm Cross License, and the terms of the GenPharm Cross
License shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement, through
their respective officers hereunto duly authorized, as of the day and year first
above written.
XENOTECH, INC. (as General LICENSEE
Partner of XENOTECH, L.P.)
By: ____________________________ By: _____________________________
Name: __________________________ Name: ___________________________
Title: _________________________ Title: __________________________
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EXHIBIT 10.38
MEMORANDUM OF UNDERSTANDING
BETWEEN RESEARCH CORPORATION TECHNOLOGIES AND ABGENIX, INC.
Research Corporation Technologies, Inc. ("RCT") and Abgenix, Inc.
("Abgenix") desire to enter a business arrangement to commercialize antibodies
binding to CD45 [*] for the treatment of transplant rejection, autoimmune
disorders and other inflammatory disorders. RCT owns a patent portfolio
protecting these antibodies. Collectively, the antibodies, data relating to the
development work conducted by RCT or RCT contractors, know-how related to the
antibodies and the patents are referred to as the "CD45 Technology." RCT has
developed the CD45 Technology through pre-clinical studies and now desires to
find a partner to advance the CD45 Technology to the clinic. Abgenix possesses
expertise in developing human therapeutic antibodies and also owns or has rights
to technologies capable of creating fully human antibodies. This human antibody
technology involves proprietary genetically engineered animals (mice), know-how
and a related patent portfolio collectively referred to as the "XenoMouse
Technology."
SECTION 1. Confidentiality and Prior Agreements. To date, RCT and
Abgenix have been subject to that Confidential Disclosure Agreement between RCT
and Abgenix effective June 16, 1997. RCT and Abgenix agree that inquiries and
information related to this MOU will be subject to the terms of that
Confidential Disclosure Agreement. [*] Any research by either RCT or Abgenix
involving both XenoMice and the CD45 Technology will continue to be governed by
these agreements until they are superseded by legally binding agreements based
on the Commercialization terms contained in this MOU.
SECTION 2. Good Faith. RCT and Abgenix agree to use the
Commercialization Terms outlined in SECTION 3 below as a basis for the
negotiation of binding agreements, and further agree to negotiate in good faith
regarding any changes that may be made to final binding agreements.
SECTION 3. Commercialization Terms.
1. RCT is continuing in its effort to advance the development of the
CD45 Technology through preclinical studies. To that end, RCT intends to
actively seek a third party licensee or strategic pharmaceutical development
partner ("Partner") to complete clinical development and sell a pharmaceutical
product based on the CD45 Technology. RCT intends to find a Partner prior to
filing of an IND for a lead product; however, RCT may elect to file an IND and
conduct an initial clinical trial in order to attract a Partner.
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2. RCT will contract with Abgenix to generate fully human antibodies
to CD45RB using the XenoMouse Technology ("Abgenix Contract"). The Abgenix
Contract shall provide a plan of research and development (the "Research Plan")
[*]. The Research Plan for the Abgenix Contract is further outlined below.
RESEARCH PLAN FOR ABGENIX CONTRACT
Goal: Utilizing the XenoMouse Technology, [*]
a. Both Abgenix and RCT will [*]
b. [*]
c. [*]
d. Abgenix will [*]
e. Abgenix will [*]
f. Abgenix will [*]
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g. Abgenix will produce [*] that satisfy the criteria set forth in
the Goal. As an alternative, RCT and Abgenix may elect to produce [*] should
this strategy better satisfy the Goal.
3. Abgenix will grant RCT an option (the "Abgenix Option") to acquire an
exclusive worldwide license (with rights to sublicense to a Partner) to the
XenoMouse Technology for making, using and selling the CD45 isoform antibodies
that are the subject of RCT's patent rights or know-how, and all improvement
inventions, know-how and data that results from the Abgenix Contract ("Abgenix
License"). The Abgenix License shall also grant RCT the right to conduct (on its
own or through a sublicensee such as a Partner) human clinical studies for
commercial or regulatory purposes. [*]
Key financial terms of the Abgenix License are as follows:
RCT shall pay Abgenix [*] of all Sublicense Revenues received by RCT
from the Partner, but no less than [*] of the net sales by the Partner of
products made and sold utilizing the rights granted under the Abgenix
Technology. Sublicense Revenues shall include license fees, milestone payments,
shares of equity, research/development reimbursement payments and royalties.
Should RCT be unable to secure a partner that will itself make and sell
human pharmaceutical products based on the CD45 Technology and using the
XenoMouse Technology, RCT may elect to directly (or through a related entity
"Newco", as described below) make and sell such human pharmaceutical products.
If RCT so elects, RCT (or Newco) shall make the following payments to Abgenix:
<TABLE>
<S> <C>
(I) [*]
(II) [*]
(III) [*]
(IV) [*]
(VI) [*]
</TABLE>
* The payment will not be made if RCT (or Newco) should notify Abgenix
that [*]. In such a case, RCT (or Newco) will forfeit rights to manufacture and
sell human pharmaceutical products; however, RCT (or Newco) will continue to
enjoy the rights granted under the Abgenix Option and Abgenix License to grant
sublicenses to sell human pharmaceutical products under the Abgenix License to a
Partner.
4. To facilitate the commercialization of the CD45 Technology and file
an IND if needed, RCT may create a new entity, Newco, to develop and
commercialize the CD45 Technology. RCT would give Newco worldwide exclusive
rights to commercialize the CD45 Technology through
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a license (RCT License). Concurrently with the grant of the RCT License, RCT
would assign the Abgenix Option (or Abgenix License if converted), the Abgenix
Contract and related obligations from both agreements to Newco. Newco, with
management assistance from RCT, [*] while developing the CD45 Technology toward
and possibly into clinical trials. Should Newco [*], it may elect to directly
make and sell human pharmaceutical products under the RCT License and Abgenix
License as long as Newco has made all required payments to Abgenix in Section
3.3 above.
5. At any time during the development of the CD45 Technology by RCT or
Newco, Abgenix is free to enter business discussions with RCT or Newco to
acquire a sublicense to the CD45 Technology as the Partner. [*]
SECTION 4. Binding Effect. RCT and Abgenix agree that the Abgenix
Contract, the Abgenix Option, the Abgenix License and any related agreements
shall include, as appropriate, the terms and conditions set forth in this MOU,
and will not be changed without consent of RCT and Abgenix.
RESEARCH CORPORATION TECHNOLOGIES, INC.
By: /s/ Gary M. Munsinger
-----------------------------------
Gary M. Munsinger, President
ABGENIX, INC.
By: /s/ R. Scott Greer
-----------------------------------
R. Scott Greer, President and CEO
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EXHIBIT 10.40
RESEARCH LICENSE AND OPTION AGREEMENT
THIS RESEARCH LICENSE AND OPTION AGREEMENT (this "Agreement"), effective
as of January 4, 1999 (the "Effective Date"), is made by and between ABGENIX,
INC., a Delaware corporation ("ABX"), having a place of business at 7601
Dumbarton Circle, Fremont, California 94555, and AVI BIOPHARMA, INC., an Oregon
corporation ("AVI"), having a place of business at One SW Columbia Street, Suite
1105, Portland, Oregon 97258, with respect to the following facts:
RECITALS
WHEREAS, ABX has rights in certain XenoMouse(TM) Animals (as defined
below) that are capable of producing human antibodies when immunized with an
antigen.
WHEREAS, AVI desires to generate human antibodies to the Antigen (as
defined below).
WHEREAS, AVI has immunized XenoMouse Animals with the Antigen pursuant
to the Research Collaboration Agreement (as defined below).
WHEREAS, ABX is willing to grant to AVI, and AVI desires to obtain, a
license to use XenoMouse Animals solely for immunization with the Antigen for
research purposes, as described below and on the terms and conditions set forth
herein.
WHEREAS, ABX additionally is willing to offer to AVI the opportunity to
obtain an exclusive option to enter into the AVI Product License Agreement (as
defined below) on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth below, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms set forth in this Article 1
shall have the respective meanings set forth below:
1.1 "ABX In-License" shall mean a license, sublicense or other agreement
under which ABX acquired rights to the ABX Patent Rights or ABX Know-How.
1.2 "ABX Inventions" shall mean, collectively, all inventions,
discoveries, data, information, methods, techniques, technology and other
results, whether or not patentable (other than Materials), that are made,
conceived, reduced to practice or otherwise derived from the parties' use of the
ABX Materials; provided, however, that the ABX Inventions shall exclude the
Research Program Inventions.
1.3 "ABX Know-How" shall mean, collectively, all inventions,
discoveries, data,
<PAGE> 2
information, methods, techniques, technology and other results, whether or not
patentable but which are not generally known, regarding (a) methods and
techniques of immunizing the XenoMouse Animals to the Antigen, which are
disclosed by ABX to AVI pursuant to the Research Collaboration Agreement, this
Agreement or the AVI Product License Agreement (if entered into by the parties),
or (b) ABX Materials and ABX Inventions. All ABX Know-How shall be Confidential
Information of ABX.
1.4 "ABX Materials" shall mean, collectively, (a) all XenoMouse Animals,
including all XenoMouse Animals immunized with the Antigen, and all other
materials specified in Exhibit A to the Research Collaboration Agreement; [*];
provided, however, that the ABX Materials shall exclude the Research Program
Materials. All ABX Materials shall be Confidential Information of ABX.
1.5 "ABX Patent Rights" shall mean, collectively, (a) all patents and
patent applications listed on Exhibit B and any foreign counterparts claiming
priority thereof; (b) all patent applications heretofore or hereafter filed in
any country which claim ABX Materials delivered to AVI or ABX Inventions; (c)
all patents that have issued or in the future issue from any of the foregoing
patent applications, including without limitation utility, model and design
patents and certificates of invention; and (d) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patents and patent applications.
1.6 "Affiliate" shall mean, with respect to any person or entity, any
other person or entity which controls, is controlled by or is under common
control with such person or entity. A person or entity shall be regarded as in
control of another entity if it owns or controls at least fifty percent (50%) of
the equity securities of the subject entity entitled to vote in the election of
directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority).
1.7 "Antibody" shall mean a composition comprising (a) a whole antibody,
or any fragment thereof, derived from the XenoMouse Animals, or (b) a whole
antibody, or any fragment thereof, which is derived from a whole antibody, or
any fragment thereof, which itself is derived from the XenoMouse Animals (or
from the nucleotide sequences that encode, or amino acid sequences of, a whole
antibody, or any fragment thereof, derived from the XenoMouse Animals).
1.8 "Antibody Cells" shall mean all cells that contain, express, or
secrete antibodies, genetic materials that encode antibodies.
1.9 "Antigen" shall mean (beta) human chorionic gonadotropin
((beta)HCG).
1.10 "AVI Inventions" shall mean, collectively, all inventions,
discoveries, data,
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information, methods, techniques, technology and other results, whether or not
patentable (other than Materials), solely regarding the Antigen, or the use
thereof, that are made, conceived, reduced to practice or otherwise derived from
the research or development work conducted pursuant to and in accordance with
the Research Collaboration Agreement, this Agreement or the AVI Product License
Agreement (if entered into by the parties); provided, however, that the AVI
Inventions shall exclude the ABX Inventions and the Research Program Inventions.
1.11 "AVI Know-How" shall mean, collectively, all inventions,
discoveries, data, information, methods, techniques, technology and other
results, whether or not patentable but which are not generally known, regarding
(a) the Antigen which are disclosed by AVI to ABX pursuant to the Research
Collaboration Agreement, this Agreement or the AVI Product License Agreement (if
entered into by the parties), and (b) AVI Materials and AVI Inventions. All AVI
Know-How shall be Confidential Information of AVI.
1.12 "AVI Materials" shall mean, collectively, (a) the Antigen, and (b)
all reagents, samples and other chemical or biological materials solely
regarding the Antigen resulting from the parties' use of the Antigen; provided,
however, that the AVI Materials shall exclude the Research Program Materials.
All AVI Materials shall be Confidential Information of AVI.
1.13 "AVI Patent Rights" shall mean, collectively, (a) all patent
applications heretofore or hereafter filed in any country which claim AVI
Materials or AVI Inventions; (b) all patents that have issued or in the future
issue from any of the foregoing patent applications, including without
limitation utility, model and design patents and certificates of invention; and
(c) all divisionals, continuations, continuations-in-part, reissues, renewals,
extensions or additions to any such patents and patent applications.
1.14 "AVI Product License Agreement" shall mean a license agreement
between ABX and AVI in the form attached hereto as Exhibit C (subject to the
provisions of Section 3.2.3).
1.15 "Confidential Information" shall mean, with respect to a party, all
information of any kind whatsoever (including without limitation, compilations,
data, formulae, models, patent disclosures, procedures, processes, projections,
protocols, results of experimentation and testing, specifications, strategies
and techniques), and all tangible and intangible embodiments thereof of any kind
whatsoever (including without limitation, apparatus, biological or chemical
materials, animals, cells, compositions, documents, drawings, machinery, patent
applications, records, reports), which is owned or controlled by such party, is
disclosed by such party to the other party pursuant to the Research
Collaboration Agreement or this Agreement, and (if disclosed in writing or other
tangible medium) is marked or identified as confidential at the time of
disclosure to the receiving party or (if otherwise disclosed) is identified as
confidential at the time of disclosure to the receiving party and described as
such in writing within thirty (30) days after such disclosure. Notwithstanding
the foregoing, Confidential Information of a party shall not include information
which the receiving party can establish by written documentation (a) to have
been publicly known prior to disclosure of such information by the disclosing
party to the receiving party, (b) to have become publicly known, without fault
on the part of the receiving party, subsequent to disclosure of such information
by the disclosing party to the receiving party, (c) to have been received by the
receiving party at any time from a source, other than the disclosing party,
rightfully having possession of and the right to disclose such information free
of confidentiality obligations, (d) to have been otherwise known by the
receiving party free of confidentiality obligations prior to
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disclosure of such information by the disclosing party to the receiving party,
or (e) to have been independently developed by employees or agents of the
receiving party without access to or use of such information disclosed by the
disclosing party to the receiving party. The parties acknowledge that the
foregoing exceptions shall be narrowly construed and that the obligations
imposed upon each party under Section 5 below shall be relieved solely with
respect to such Confidential Information of the disclosing party which falls
within the above exceptions and not with respect to related portions, other
combinations, or characteristics of the Confidential Information of the
disclosing party including, without limitation, advantages, operability,
specific purposes, uses and the like.
1.16 "Derived" or "derived" shall mean obtained, developed, created,
synthesized, designed, derived or resulting from, based upon or otherwise
generated (whether directly or indirectly, or in whole or in part).
1.17 "Excluded Technology" shall mean, collectively, (a) all patent
rights, know-how or other intellectual property rights or technology of ABX in
or to (i) all antigens other than the Antigen, including without limitation (A)
compositions of such antigens or of Genetic Materials that encode such antigens;
(B) uses of such antigens; (C) antibodies or other compositions that bind to
such antigens, Genetic Materials that encode such antibodies or compositions,
and Antibody Cells that express, secrete, or contain such antibodies, Genetic
Materials or compositions; and (D) uses of such antibodies, Genetic Materials or
compositions; (ii) methods to discover novel antigens; and (iii) methods of
using antigens other than to create antibodies; (b)(i) all patent applications
heretofore or hereafter filed in any country which claim ABX Materials (except
for those described in clause (a) of Section 1.4 above) or ABX Inventions; (ii)
all patents that have issued or in the future issue from any of the foregoing
patent applications, including without limitation utility, model and design
patents and certificates of invention; and (iii) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patents and patent applications; and (c) inventions, discoveries, data,
information, methods, techniques, technology and other results, whether or not
patentable but which are not generally known, regarding ABX Materials (except
for those described in clause (a) of Section 1.4 above) and ABX Inventions.
1.18 "Field" shall mean the use of Products for human medical purposes.
1.19 "Genetic Material" shall mean a nucleotide sequence, including DNA,
RNA and complementary and reverse complementary nucleotide sequences thereto,
whether coding or noncoding and whether intact or a fragment.
1.20 "GenPharm Cross License Agreement" shall mean that certain Cross
License Agreement entered into by and between ABX, JTI, XT, Cell Genesys, Inc.,
and GenPharm International, Inc., effective as of March 26, 1997, as the same
may be amended from time to time.
1.21 "IND" shall mean an Investigational New Drug application filed with
Food and Drug Administration in the United States, or any similar filing with
any foreign regulatory authority, to commence human clinical testing of any
Product in any country in the Territory.
1.22 "Inventions" shall mean, collectively, the ABX Inventions, the AVI
Inventions and the Research Program Inventions.
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1.23 "JTI" shall mean Japan Tobacco Inc., a Japanese corporation.
1.24 "Licensed Technology" shall mean ABX's rights in the ABX Patent
Rights, ABX Know-How, Research Program Patent Rights and Research Program
Know-How; provided, however, that the Licensed Technology (a) is all to the
extent and only to the extent that ABX has the right to grant (sub)licenses
thereunder (including without limitation to the extent permitted under the
applicable ABX In-Licenses); (b) is expressly subject to the ABX In-Licenses;
and (c) shall exclude the Excluded Technology.
1.25 "Materials" shall mean, collectively, the ABX Materials, the AVI
Materials and the Research Program Materials.
1.26 "Option" shall have the meaning set forth in Section 3.1.1 below.
1.27 "Product" shall mean any product comprising (a) an Antibody which
binds to the Antigen, or (b) Genetic Material that encodes such an Antibody
wherein, in respect of each Product, said Genetic Material does not encode
multiple antibodies.
1.28 "Research Collaboration Agreement" shall mean the Research
Collaboration Agreement effective as of October 2, 1998, between ABX and AVI.
1.29 "Research Field" shall mean the immunization of XenoMouse Animals
with the Antigen and the use of XenoMouse Animals that are so immunized and
materials derived from XenoMouse Animals that are so immunized, in each case
solely for the creation, identification, analysis, research, characterization
and preclinical development of Products for use in the Field.
1.30 "Research Program Inventions" shall mean, collectively, all
inventions, discoveries, data, information, methods, techniques, technology and
other results, whether or not patentable (other than Materials), regarding the
Research Program Materials, or the use thereof, that are made, conceived,
reduced to practice or otherwise derived from the research or development work
conducted pursuant to and in accordance with the Research Collaboration
Agreement, this Agreement or the AVI Product License Agreement (if entered into
by the parties).
1.31 "Research Program Know-How" shall mean, collectively, all
inventions, discoveries, data, information, methods, techniques, technology and
other results, whether or not patentable but which are not generally known,
regarding Research Program Materials and Research Program Inventions. All
Research Program Know-How shall be Confidential Information of ABX.
1.32 "Research Program Materials" shall mean, collectively, [*]; in each
case that are made, conceived, reduced to practice or otherwise derived from the
research or development work conducted pursuant to and in accordance with the
Research Collaboration Agreement, this Agreement or the AVI Product License
Agreement (if entered into by the parties). All Research Program Materials shall
be Confidential Information of [*].
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1.33 "Research Program Patent Rights" shall mean, collectively, (a) all
patent applications heretofore or hereafter filed in any country which claim
Research Program Materials or Research Program Inventions; (b) all patents that
have issued or in the future issue from any of the foregoing patent
applications, including without limitation utility, model and design patents and
certificates of invention; and (c) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patents and patent applications.
1.34 "XenoMouse Animals" shall mean one or more sterile male transgenic
mice provided by ABX to AVI for immunization with the Antigen under either the
Research Collaboration Agreement or this Agreement.
1.35 "XT" shall mean Xenotech, L.P., a California limited partnership.
1.36 "XT Master Research and License Agreement" shall mean that certain
Master Research License and Option Agreement entered into by and among XT, JTI
and Cell Genesys, Inc. effective as of June 28, 1996, and subsequently assigned
to ABX by Cell Genesys, Inc., as the same may be amended from time to time.
1.37 "XT Product License" shall mean a license granted from XT to ABX
pursuant to the terms of the XT Master Research and License Agreement permitting
ABX to commercialize, or to provide rights to a third party to commercialize,
certain Products in one or more territories.
2. ABX MATERIALS AND RESEARCH LICENSE
2.1 Supply of ABX Materials.
2.1.1 Supply. Subject to the terms and conditions of this
Agreement, including those set forth in Section 2.2 below, on or before the
Effective Date, ABX shall have provided to AVI, solely for use in creating
Antibodies to the Antigen for use in the Research Field, the sterilized male
XenoMouse Animals and other ABX Materials described in Exhibit A to the Research
Collaboration Agreement.
2.1.2 Research. Except as the parties otherwise expressly agree
in writing, AVI shall be responsible for conducting all activities under this
Agreement in the Research Field, including without limitation immunization of
XenoMouse Animals with the Antigen, screening of Antibodies generated from such
immunizations, and creation of Antibody Cells that contain, express, or secrete
Antibodies to the Antigen.
2.1.3 Ownership of Materials. [*] shall solely own all right
title and interest in and to the ABX Materials and Research Program Materials
and all intellectual property rights therein and thereto. [*] shall solely own
all right title and interest in and to the AVI Materials and all intellectual
property rights therein and thereto. The transfer of physical possession of any
Materials owned by, and the physical possession and use of any Materials by, AVI
or ABX, as the case may be, shall not be (nor be construed as) a sale, lease,
offer to sell or lease, or other transfer of title of such Materials to AVI or
ABX, as the case may be.
2.1.4 Use of ABX Materials. Except as otherwise expressly
provided in the AVI Product License Agreement (if entered into by the parties),
all XenoMouse Animals and other ABX
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Materials are for use by AVI solely to perform research in the Research Field as
permitted pursuant to Section 2.3(a). AVI shall limit access to the ABX
Materials to those of its employees working on its premises, to the extent such
access is reasonably necessary in connection with its activities as expressly
authorized by this Agreement.
2.2 Material Transfer Terms. Except as otherwise expressly permitted by
the license grant in Section 2.1.1 of the AVI Product License Agreement (if
entered into by the parties), AVI's right to use the XenoMouse Animals and other
ABX Materials are subject to the following terms and conditions:
(a) All XenoMouse Animals transferred to AVI shall be the sole
property of ABX, and the transfer of physical possession to AVI, and/or
possession or use by AVI, of XenoMouse Animals shall not be, nor be construed
as, a sale, lease, offer to sell or lease, or other transfer of title to or any
interest in any XenoMouse Animals;
(b) All XenoMouse Animals and all materials derived from the
XenoMouse Animals (including without limitation Products) shall remain in the
control of AVI, and AVI shall not (and shall not attempt or purport to) transfer
the XenoMouse Animals or any materials derived from the XenoMouse Animals
(including without limitation Products) to any third party (other than ABX),
without the prior express written consent of ABX (which may be conditioned inter
alia upon such other third party duly executing and delivering ABX's standard
form of material transfer agreement therefor);
(c) AVI shall not directly or indirectly use or attempt to use
the XenoMouse Animals, or any information or biological or chemical materials
derived from the XenoMouse Animals (including without limitation Products), to
reproduce, generate, create or produce, through breeding, reverse-engineering,
genetic manipulation or otherwise, the XenoMouse Animals or other transgenic
mice or other transgenic animals;
(d) The XenoMouse Animals shall be delivered to AVI solely for
the purpose of immunizing the XenoMouse Animals with the Antigen, and AVI shall
not use the XenoMouse Animals, or any materials derived from the XenoMouse
Animals (including without limitation Products), for screening or any purpose
other than immunizing the XenoMouse Animals with the Antigen pursuant to the
Research Collaboration Agreement and conducting research in the Research Field
as permitted pursuant to Section 2.4(a);
(e) AVI shall not (and shall not attempt or purport to) assign,
sell, have sold, lease, offer to sell or lease, distribute, license, sublicense
or otherwise transfer title to or an interest in, or clinically develop,
commercialize or otherwise exploit any XenoMouse Animals or any materials
derived from the XenoMouse Animals (including without limitation Products);
(f) AVI shall not use the XenoMouse Animals to make or use
antibodies to any antigen other than the Antigen (including without limitation
to [*]);
(g) Upon expiration or termination of this Agreement for any
reason, AVI shall destroy and certify such destruction (or return to ABX as
directed by ABX) each XenoMouse Animal, all ABX Materials and all Research
Program Materials within ten (10) days after such expiration or termination;
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(h) Upon expiration or termination of this Agreement for any
reason, AVI shall not (and shall not attempt or purport to) assign, sell, have
sold, lease, offer to sell or lease, distribute, license, sublicense or
otherwise transfer title to or an interest in, or clinically develop,
commercialize or otherwise exploit the Research Program Materials, Research
Program Inventions, Research Program Patent Rights or Research Program Know-How
for any purpose whatsoever, and shall not (and shall not attempt or purport to)
grant to any third party any right or license to do any of the foregoing;
(i) Notwithstanding anything to the contrary in this Agreement,
ABX shall own all right, title and interest in and to all materials, inventions,
discoveries, data, information, methods, techniques, technology and other
results (whether patentable or nonpatentable), and all intellectual property
rights therein and thereto, made or created by AVI (and any of its agents or
employees) through any use of the XenoMouse Animals and/or materials derived
from the XenoMouse Animals (including without limitation Products), which use is
not in accordance with the terms and conditions set forth in this Article 2;
(j) AVI shall only use the XenoMouse Animals and all materials
derived from the XenoMouse Animals (including without limitation Products) in
compliance with all applicable national, state, and local laws and regulations,
including all applicable National Institutes of Health guidelines. AVI
acknowledges that the XenoMouse Animals, and all materials derived from the
XenoMouse Animals (including without limitation Products), are experimental in
nature and may have unknown characteristics. AVI shall use prudence and
reasonable care in the use, handling, storage, transportation, disposition and
containment of the XenoMouse Animals and all materials derived from the
XenoMouse Animals (including without limitation Products), and shall not use any
such materials in humans;
(k) Unless otherwise agreed by ABX in advance in writing, all
XenoMouse Animals delivered to AVI shall be delivered to AVI's facilities
located at its address set forth above, and such XenoMouse Animals shall not
leave such facility (except for return of XenoMouse Animals to ABX or upon
destruction of the XenoMouse Animals by AVI); and
(l) XT shall be a third-party beneficiary of the commitments by
AVI set forth in items (a) through (f) above.
2.3 Research License.
(a) Subject to the terms and conditions of this Agreement, ABX
hereby grants to AVI a nonexclusive license (or sublicense, as the case may be)
under the Licensed Technology, without right to grant sublicenses, (i) to use
the XenoMouse Animals provided by ABX solely for use in the Research Field, (ii)
to make and use (but not to transfer, sell, lease, offer to sell or lease, or
otherwise transfer title to or an interest in) Antibody Cells that contain,
express, or secrete Antibodies to the Antigen solely for use in the Research
Field, and (iii) to make and use (but not to transfer, sell, lease, offer to
sell or lease, or otherwise transfer title to or an interest in) Products solely
for research and development of such Products in the Research Field. AVI shall
not use the Licensed Technology or any materials derived from the XenoMouse
Animals (including without limitation Products) for any other purpose other than
those uses expressly licensed under this Section 2.3(a).
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(b) The license granted under Section 2.3(a) shall terminate upon
the earlier of (i) the date on which ABX duly executes and delivers the AVI
Product License Agreement in accordance with the provisions of Section 3.2.3,
and (ii) the date of the expiration or earlier termination of this Agreement.
(c) No implied licenses or rights are conveyed to AVI hereunder.
AVI shall only be authorized regarding the research use of XenoMouse Animals and
the research use of materials derived from the XenoMouse Animals (including
without limitation Products) solely as expressly provided in this Article 2.
2.4 Limitation. Notwithstanding any other provision of this Agreement,
in no event shall AVI (a) file, or authorize any third party to file, an IND
with respect to a Product or (b) initiate, or authorize any third party to
initiate, clinical trials in humans with respect to a Product or otherwise
utilize or introduce in any way a Product into humans (or sell, or authorize any
third party to sell, a Product).
2.5 Exclusivity. During the term of this Agreement, AVI shall not
develop or sell any other human, humanized or chimeric antibody or fragment
thereof that binds to the Antigen, or enter into any agreement with any third
party for the creation, research, characterization, development or
commercialization of such antibodies or fragments thereof, without prior express
written consent of ABX.
2.6 Reports. AVI shall keep (or cause to be kept) complete and accurate
records of its research activities under this Agreement. AVI shall maintain (or
cause to be maintained) such records in sufficient detail, and in accordance
with good scientific practices. AVI shall keep ABX fully informed as to its
research activities hereunder. Without limiting the foregoing, within thirty
(30) days of the end of each calendar quarter, AVI shall provide to ABX a
reasonably detailed written report regarding such research activities and the
status thereof (including a description of all potentially patentable Research
Program Inventions).
3. OPTION TO OBTAIN AVI PRODUCT LICENSE AGREEMENT
3.1 Option. Subject to the terms and conditions set forth in this
Agreement, ABX hereby grants to AVI the exclusive option (the "Option"),
exercisable for a period (the "Option Period") of one (1) year from the date of
the Research Collaboration Agreement, to enter into the AVI Product License
Agreement pursuant to the procedures set forth in this Article 3.
3.2 Exercise of Option.
3.2.1 Exercise. The Option may be exercised, at any time during
the Option Period, by AVI (a) giving ABX express written notice (the "Exercise
Notice") stating that AVI desires that ABX obtain the XT Product License for the
Antigen and that the parties enter into the AVI Product License Agreement, and
(b) paying to ABX the [*] option exercise fee (the "Exercise Fee") [*]. If ABX
has not received the Exercise Notice and the Exercise Fee on or before the
expiration of the Option Period, this Agreement immediately shall terminate. The
Exercise Fee shall be paid in U.S. dollars, and shall be made by bank wire
transfer in immediately available
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funds to an account designed by ABX.
3.2.2 XT Product License. Following AVI's exercise of the Option,
ABX shall exercise its option under the XT Master Research and License Agreement
to obtain the XT Product License for the Antigen. ABX shall notify AVI at such
time as ABX has obtained the XT Product License for the Antigen.
3.2.3 AVI Product License Agreement. Within ten (10) days after
AVI's receipt of notice that ABX has obtained the XT Product License for the
Antigen, AVI shall duly execute and deliver the AVI Product License Agreement
and shall pay to ABX the license fee set forth in Section 3.1 of the AVI Product
License Agreement. Upon ABX's timely receipt of such duly executed and delivered
AVI Product License Agreement and license fee, ABX shall duly execute and
deliver the AVI Product License Agreement. If AVI fails to timely duly execute
and deliver the AVI Product License Agreement, and to pay to ABX the license fee
set forth in Section 3.1 of the AVI Product License Agreement, as set forth
above, then (a) ABX shall have no further obligation to AVI regarding the AVI
Product License Agreement, and (b) ABX shall be entitled, in its sole
discretion, to exercise ABX's rights under the XT Master Research and License
Agreement and enter into the XT Product License for the Antigen on its own
behalf or on behalf of a third party without further obligation to AVI.
3.3 Definition of Antigen. ABX shall use good faith efforts to cause the
definition of the Antigen under the XT Product License (as established in
accordance with the XT Master Research and License Agreement) to be the same as
the definition of the Antigen under this Agreement; provided, however, that the
precise definition of the Antigen defining the rights licensed to ABX under the
XT Product License (and the definition in the corresponding AVI Product License
Agreement) shall be as established in accordance with the XT Master Research and
License Agreement.
4. INVENTIONS AND INTELLECTUAL PROPERTY RIGHTS
4.1 Ownership. [*] shall solely own all right title and interest in and
to the ABX Inventions and Research Program Inventions and all intellectual
property rights therein and thereto. [*] shall solely own all right title and
interest in and to the AVI Inventions and all intellectual property rights
therein and thereto. The transfer of physical possession of any Inventions owned
by, and the physical possession and use of any Inventions by, AVI or ABX, as the
case may be, shall not be (nor be construed as) a sale, lease, offer to sell or
lease, or other transfer of title of such Inventions to AVI or ABX, as the case
may be.
4.2 Assignment and Disclosure of Inventions. AVI and ABX shall cause
each employee, agent, or independent contractor that conducts research pursuant
to the Research Collaboration Agreement or this Agreement promptly disclose to
the other party, and appropriately assign in accordance with this Agreement any
and all right, title and interest in and to any Inventions and all intellectual
property rights therein and thereto. AVI and ABX shall maintain records in
sufficient detail and in good scientific manner appropriate for patent purposes
and so as to properly reflect all work done and results achieved in performing
its rights and obligations hereunder, and agrees to respond to reasonable
requests from AVI or ABX, as the case may be, for information based upon such
records.
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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4.3 Prosecution and Maintenance of Patent Rights.
4.3.1 AVI Patent Rights. AVI shall have the sole right and
responsibility (but not the obligation), at its expense, to prepare, file,
prosecute and maintain all patent applications and patents (and to conduct any
interferences, oppositions, or reexaminations thereon, and to request any
reissues or patent term extensions thereof) within the AVI Patent Rights.
4.3.2 Research Program Patent Rights. Except as otherwise set
forth in the Antigen Product License (if entered into by the parties), AVI shall
have the first right and responsibility (but not the obligation), at its
expense, to prepare, file, prosecute and maintain all patent applications and
patents (and to conduct any interferences, oppositions, or reexaminations
thereon, and to request any reissues or patent term extensions thereof) within
the Research Program Patent Rights. AVI shall: (i) provide ABX with a copy of
any patent application proposed to be filed hereunder by AVI promptly prior to
filing and receive and incorporate reasonable comments by ABX thereon; (ii)
provide ABX with any patent application filed hereunder by AVI promptly after
such filing; (iii) provide ABX promptly with copies of all substantive
communications received from or filed in patent office(s) with respect to such
filings and receive and incorporate reasonable comments by ABX thereon; (iv)
notify ABX of any interference, opposition, reexamination request, nullity
proceeding, appeal or other interparty action and review it with the ABX as
reasonably requested; and (v) a reasonable time prior to taking or failing to
take any action that would substantially affect the scope of validity of rights
under such patent applications or patents (including substantially narrowing or
canceling any claim without reserving the right to file a continuing or
divisional application, abandoning any patent or not filing or perfecting the
filing of any patent application), provide ABX with notice of such proposed
action so that ABX has a reasonable opportunity to review and make comments. ABX
shall assist AVI upon request and at AVI's sole expense, and to the extent
commercially reasonable, in preparing, filing or maintaining the patent
applications and patents claiming Research Program. If AVI fails to undertake
the preparation and filing of a patent application (or continuing or divisional
application) within ninety (90) days after a written request from ABX to do so,
or if AVI discontinues the prosecution or maintenance of a patent application or
a patent, ABX at its expense may, in its discretion, undertake such preparation,
filing, prosecution or maintenance thereof, in which case such patent
application and patent thereon shall be excluded from the Licensed Technology.
4.4 Enforcement of Patent Rights.
4.4.1 ABX Patent Rights. ABX shall have the sole right and
responsibility (but not the obligation), at its expense, to enforce the ABX
Patent Rights.
4.4.2 AVI Patent Rights. AVI shall have the sole right and
responsibility (but not the obligation), at its expense, to enforce the AVI
Patent Rights.
4.4.3 Research Program Patent Rights.
(a) ABX shall have the sole right and responsibility (but not the
obligation), at its expense, to enforce the Research Program Patent Rights. AVI
shall assist ABX, upon request and at ABX's sole expense, and to the extent
commercially reasonable, in enforcing the Research Program Patent Rights.
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<PAGE> 12
(b) If ABX fails to abate an infringement of the Research Program
Patent Rights, or to file an action to abate such infringement, within ninety
(90) days after a written request from AVI to do so, or if ABX discontinues the
prosecution of any such action after filing without abating such infringement,
AVI at its expense may, in its discretion, undertake such action as it
determines appropriate to enforce such Research Program Patent Rights against
such infringer. In such case, ABX shall reasonably assist AVI, upon request and
at AVI's sole expense, and to the extent commercially reasonable, in taking any
action to enforce such Research Program Patent Rights against such infringer.
(c) All monies recovered upon the final judgment or settlement of
any such action shall be used (i) first, to reimburse the costs and expenses
(including reasonable attorneys' fees and costs) of AVI and ABX, (ii) second (to
the extent that damages are awarded for lost sales or lost profits from the sale
of Products), to ABX taking into account the royalties that would have been
payable to ABX on the sale of such Products, and (iii) the remainder to the
account of the party or parties that undertake such actions to the extent of
their financial participation therein.
4.5 Grant-Back. It is the intent of the parties that this Agreement
shall not restrict ABX's freedom to operate regarding the practice and
commercialization of the Licensed Technology (including without limitation
XenoMouse Animals and cells, genetic material, and antibodies derived from
XenoMouse Animals), except as expressly set forth herein regarding the Antigen.
Accordingly, in the event that any patent owned or controlled by AVI that
directly arises from use of the XenoMouse Animals that has application other
than for the manufacture, use, sale, offer for sale or import of Products, AVI
hereby grants to ABX a royalty-free, perpetual, irrevocable license in the
Territory, with the right to grant and authorize sublicenses, under all such
patents for all fields of use other than the manufacture, use, sale, offer for
sale or import of Products.
5. CONFIDENTIALITY
5.1 Confidentiality. Except as expressly provided herein, AVI and ABX
each shall keep completely confidential and shall not publish or otherwise
disclose and shall not use for any purpose any Confidential Information of the
other until the date five (5) years following the expiration or termination of
this Agreement.
5.2 Permitted Disclosure. Notwithstanding Section 5.1 above, each party
may nevertheless disclose the other party's Confidential Information to the
extent such disclosure is required by applicable law, regulation or court order,
provided that if a party is so required to make any such disclosure of the other
party's Confidential Information, other than pursuant to a confidentiality
agreement, it will give reasonable advance notice to the other party of such
disclosure requirement and will use efforts consistent with prudent business
judgment to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or confidentiality agreements or
otherwise). The expiration of AVI's obligations under Section 5.1 above shall
not limit AVI's obligations under Section 2.2 above.
5.3 Terms of Agreement. Neither party shall disclose any terms or
conditions of this Agreement to any third party without the prior consent of the
other party; provided, however, that a party may disclose the terms or
conditions of this Agreement, (i) on a need-to-know basis to its
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legal and financial advisors to the extent such disclosure is reasonably
necessary in connection with such party's activities as expressly permitted by
this Agreement, (ii) to a third party in connection with (A) an equity
investment in such party by a third party, (B) a merger, consolidation or
similar transaction entered into by such party, or (C) the sale of all or
substantially all of the assets of such party, and (iii) as may, in the
reasonable opinion of such party's counsel, be required by applicable law,
regulation or court order, including without limitation, a disclosure in
connection with such party's filing of a registration statement or other filing
with the United States Securities and Exchange Commission (in which event such
party will first consult with the other party with respect to such disclosure).
Notwithstanding the foregoing, prior to execution of this Agreement, ABX and AVI
shall agree upon the substance of information that can be used to describe the
terms of this transaction, and each party may disclose such information, as
modified by written agreement of ABX and AVI from time to time, without the
consent of the other.
6. INDEMNIFICATION
6.1 AVI. AVI shall indemnify and hold harmless ABX, and its directors,
officers, employees and agents, from and against all losses, liabilities,
damages and expenses, including reasonable attorneys' fees and costs
(collectively, "Liabilities"), resulting from any claims, demands, actions or
other proceedings by any third party arising from (i) the material breach of any
representation, warranty or covenant by AVI under this Agreement, (ii) the use
by AVI of the Licensed Technology, (iii) any use, handling or storage by AVI of
Materials or Products, or (iv) any use by AVI of the Confidential Information of
ABX; provided, however, that AVI shall not be obligated to indemnify or hold
harmless ABX for such Liabilities to the extent that such Liabilities arise from
the gross negligence or willful misconduct of ABX.
6.2 ABX. ABX shall indemnify and hold harmless AVI, and its directors,
officers, employees and agents, from and against all Liabilities resulting from
any claims, demands, actions or other proceedings by any third party arising
from (i) the material breach of any representation, warranty or covenant by ABX
under this Agreement , or (ii) any use by ABX of the Confidential Information of
AVI; provided, however, that ABX shall not be obligated to indemnify or hold
harmless AVI for such Liabilities to the extent that such Liabilities arise from
the gross negligence or willful misconduct of AVI.
6.3 Procedure. If a party (an "Indemnitee") intends to claim
indemnification under this Article 6, it shall promptly notify the indemnifying
party (the "Indemnitor") in writing of any claim, demand, action or other
proceeding for which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall have the right to participate in, and, to the extent the
Indemnitor so desires, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the Indemnitor, if representation of such Indemnitee by the counsel retained by
the Indemnitor would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other party represented by such
counsel in such proceeding. The indemnity agreement in this Article 6 shall not
apply to amounts paid in settlement of any claim, demand, action or other
proceeding if such settlement is effected without the consent of the Indemnitor,
which consent shall not be withheld or delayed unreasonably. The failure to
deliver written notice to
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<PAGE> 14
the Indemnitor within a reasonable time after the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 6, but the
omission so to deliver written notice to the Indemnitor shall not relieve it of
any liability that it may have to any party claiming indemnification otherwise
than under this Article 6. The party claiming indemnification under this Article
6, its employees and agents, shall reasonably cooperate with the Indemnitor and
its legal representatives in the investigation of any claim, demand, action or
other proceeding covered by this indemnification.
7. REPRESENTATIONS AND WARRANTIES
7.1 ABX. ABX represents and warrants that: (i) it has the power and
authority to enter into this Agreement; (ii) to the knowledge of ABX, there are
no existing or threatened actions, suits or claims pending with respect to the
subject matter hereof or the right of ABX to enter into and perform its
obligations under this Agreement; (iii) it has taken all necessary action on its
part to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder; (iv) this Agreement has been duly
executed and delivered on behalf of it, and constitutes a legal, valid, binding
obligation, enforceable against it in accordance with the terms hereof; and (v)
the execution and delivery of this Agreement and the performance of its
obligations hereunder do not conflict with or violate any requirement of
applicable laws or regulations and do not conflict with, or constitute a default
under, any contractual obligation of it.
7.2 AVI. AVI represents and warrants that: (i) it has the power and
authority to enter into this Agreement; (ii) to the knowledge of AVI, there are
no existing or threatened actions, suits or claims pending with respect to the
subject matter hereof or the right of AVI to enter into and perform its
obligations under this Agreement; (iii) it has taken all necessary action on its
part to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder; (iv) this Agreement has been duly
executed and delivered on behalf of it, and constitutes a legal, valid, binding
obligation, enforceable against it in accordance with the terms hereof; (v) the
execution and delivery of this Agreement and the performance of its obligations
hereunder do not conflict with or violate any requirement of applicable laws or
regulations and do not conflict with, or constitute a default under, any
contractual obligation of it; and (vi) it will not knowingly take any action, or
fail to take any action, under this Agreement that will cause a breach of the
GenPharm Cross License Agreement or the XT Master Research and License
Agreement.
7.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, ABX MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND
REGARDING THE MATERIALS, PRODUCTS OR LICENSED TECHNOLOGY, EITHER EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, AND VALIDITY OF TECHNOLOGY OR PATENT
CLAIMS, ISSUED OR PENDING. ALL XENOMOUSE ANIMALS AND OTHER MATERIALS PROVIDED TO
AVI PURSUANT TO THE RESEARCH COLLABORATION AGREEMENT OR THIS AGREEMENT ARE
PROVIDED "AS IS."
8. TERM; TERMINATION
8.1 Term. This Agreement shall commence on the Effective Date and,
unless earlier terminated pursuant to Article 3 above or this Article 8, shall
continue in effect until October 1, 1999.
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8.2 Termination for Breach. In the event that a party shall have
materially breached or defaulted in the performance of any of its material
obligations hereunder, and such breach or default shall have continued for
thirty (30) days after written notice of such breach was provided to the
breaching party by the nonbreaching party, the nonbreaching party shall have the
right at its option to terminate this Agreement effective at the end of such
thirty (30) day period.
8.3 Termination by AVI. AVI may terminate this Agreement at any time
upon ninety (90) days written notice to ABX.
8.4 Effect of Termination; Accrued Rights and Survival of Terms.
Termination or expiration of this Agreement for any reason shall be without
prejudice to any rights which shall have accrued to the benefit of a party prior
to such termination or expiration. Without limiting the foregoing, Articles 4, 5
and 6 and Sections 2.2 and 7.3 of this Agreement shall survive any expiration or
termination of this Agreement.
9. MISCELLANEOUS PROVISIONS
9.1 Governing Laws. This Agreement shall be governed by, interpreted and
construed in accordance with the laws of the State of California, without regard
to conflicts of law principles.
9.2 Waiver. No waiver by a party hereto of any breach or default of any
of the covenants or agreements herein set forth shall be deemed a waiver as to
any subsequent and/or similar breach or default.
9.3 Assignment. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated, in whole or part, by either party
without the prior express written consent of the other; provided, however, that
either party may, without the written consent of the other, assign this
Agreement and its rights and delegate its obligations hereunder in connection
with the transfer or sale of all or substantially all of its business, or in the
event of its merger, consolidation, change in control or similar transaction.
Any permitted assignee shall assume all obligations of its assignor under this
Agreement. Any purported assignment in violation of this Section 9.3 shall be
void. Notwithstanding the foregoing, ABX shall not be obligated without its
consent to send XenoMouse Animals to any party other than AVI, nor shall AVI
have the right to transfer XenoMouse Animals to any other party without ABX's
prior written consent. The terms and conditions of this Agreement shall be
binding upon and inure to the benefit of the permitted successors and assigns of
the parties.
9.4 Independent Contractors. The relationship of the parties hereto is
that of independent contractors. The parties hereto are not deemed to be agents,
partners or joint venturers of the others for any purpose as a result of this
Agreement or the transactions contemplated thereby.
9.5 Further Actions. Each party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
9.6 Notices. All requests and notices required or permitted to be given
to the parties hereto shall be given in writing, shall expressly reference the
section(s) of this Agreement to which they pertain, and shall be delivered to
the other party, effective on receipt, at the appropriate address
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<PAGE> 16
as set forth below or to such other addresses as may be designated in writing by
the parties from time to time during the term of this Agreement.
If to ABX:
Abgenix, Inc.
7601 Dumbarton Circle
Fremont, California 94555
Attn: President
with a copy to:
Pillsbury Madison & Sutro LLP
101 West Broadway, Suite 1800
San Diego, California 92101
Attn: Mark R. Wicker
If to AVI:
AVI BioPharma, Inc.
One SW Columbia Street, Suite 1105
Portland, Oregon 97258
Attn: President
9.7 No Implied Licenses. Only licenses and rights granted expressly
herein shall be of legal force and effect. No license or other right shall be
created hereunder by implication, estoppel or otherwise.
9.8 Force Majeure. Nonperformance of a party (other than for the payment
of money) shall be excused to the extent that performance is rendered impossible
by strike, fire, earthquake, flood, governmental acts or orders or restrictions,
failure of suppliers, or any other reason where failure to perform is beyond the
reasonable control and not caused by the negligence, intentional conduct or
misconduct of the nonperforming party.
9.9 No Consequential Damages. IN NO EVENT SHALL A PARTY HERETO BE LIABLE
FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT
OR THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION LOST
PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF
ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 9.9 IS INTENDED TO LIMIT OR
RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY.
9.10 Third Party Rights. Notwithstanding anything to the contrary in
this Agreement, the grant of rights by ABX under this Agreement shall be subject
to and limited in all respects by the terms of the applicable ABX In-License(s)
pursuant to which ABX acquired any Licensed Technology, and all rights or
sublicenses granted under this Agreement shall be limited to the extent that ABX
may grant such rights and sublicenses under such ABX In-Licenses. Additionally,
and without limiting the foregoing, the rights granted to AVI hereunder,
including without
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<PAGE> 17
limitation any grant of "exclusive" rights, shall be subject to the rights
granted to or retained by GenPharm under the GenPharm Cross License Agreement.
9.11 Complete Agreement. This Agreement constitutes the entire
agreement, both written and oral, among the parties with respect to the subject
matter hereof, and that all prior representations, understandings and agreements
regarding the subject matter hereof, either written or oral, expressed or
implied, shall be abrogated, canceled, and are null and void and of no effect,
including, without limitation, the Research Collaboration Agreement (except for
those provisions of the Research Collaboration Agreement that expressly survive
pursuant to the terms thereof, including without limitation Sections 2(a) (other
than the first sentence thereof), 3, 5, 6, 7 and 10 thereof). No amendment or
change hereof or addition hereto shall be effective or binding on the parties
unless reduced to writing and executed by the respective duly authorized
representatives of the parties.
9.12 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and together shall be deemed to be
one and the same agreement.
9.13 Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are included merely for convenience of
reference only and shall not affect its meaning or interpretation.
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<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.
ABGENIX, INC.
By: /s/ Raymond M. Withy
-------------------------------------
(Signature)
Raymond M. Withy, Ph.D.
-------------------------------------
(Printed Name)
Vice President, Corporate Development
-------------------------------------
(Title)
AVI BIOPHARMA, INC.
By: /s/ Denis R. Burger
-------------------------------------
(Signature)
Denis R. Burger, Ph.D.
-------------------------------------
(Printed Name)
Chief Executive Officer
-------------------------------------
(Title)
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<PAGE> 19
EXHIBIT A
ABX Materials and Information
[*]
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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EXHIBIT B
ABX PATENT RIGHTS
I. Pursuant to the XT Master Research and License Agreement
A. Any (i) of the patent applications listed in the following Table:
[*]
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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<PAGE> 21
[*]
and patents issuing thereon, (ii) continuations, divisionals,
reexamination certificates, reissues, or extensions thereof, and
(iii) any foreign counterparts issued or issuing on any of (i)
or (ii) above.
B. Pursuant to the License Agreement by and between [*]
C. Pursuant to the Agreement between [*]
D. Pursuant to the Material Transfer and License Agreement by and
between [*]
E. Pursuant to Agreements between [*]
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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[*]
II. Pursuant to the GenPharm Cross License Agreement
A. [*], including (i) any continuations, continuations-in-part,
patents of addition, divisionals, reexamination certificates,
reissues or extensions, including supplemental protection
certificates thereof, (ii) any patents issuing from such
application or upon an application under (i), and (iii) foreign
counterparts applied for, issued, or issuing on such application
or any of (i) or (ii).
B. [*], including (i) any continuations, continuations-in-part,
patents of addition, divisionals, reexamination certificates,
reissues or extensions, including supplemental protection
certificates thereof, (ii) any patents issuing from such
application or upon an application under (i), and (iii) foreign
counterparts applied for, issued, or issuing on such application
or any of (i) or (ii).
C. Pursuant to a License Agreement [*]
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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EXHIBIT C
PRODUCT LICENSE AGREEMENT
THIS PRODUCT LICENSE AGREEMENT (this "Agreement"), effective as of
_____, 1999 (the "Effective Date"), is made by and between ABGENIX, INC., a
Delaware corporation ("ABX"), having a place of business at 7601 Dumbarton
Circle, Fremont, California 94555, and AVI BIOPHARMA, INC., an Oregon
corporation ("AVI"), having a place of business at One SW Columbia Street, Suite
1105, Portland, Oregon 97258, with respect to the following facts:
RECITALS
WHEREAS, AVI and ABX have entered into the Research License and Option
Agreement (as defined below).
WHEREAS, AVI has exercised rights under the Research License and Option
Agreement to acquire from ABX a license or sublicense, as the case may be, under
the Licensed Technology to commercialize Products (as defined below) in the
Field (as defined below) on the terms and conditions herein.
NOW, THEREFORE, for and in consideration of the covenants, conditions,
and undertakings hereinafter set forth, it is agreed by and between the parties
as follows:
1. DEFINITIONS.
For purposes of this Agreement, the terms set forth in this Article
shall have the meanings set forth below. Any capitalized term used, but not
defined, in this Agreement shall have the respective meanings set forth in the
Research License and Option Agreement.
1.1 "ABX Know-How" shall mean, collectively, all inventions,
discoveries, data, information, methods, techniques, technology and other
results, whether or not patentable but which are not generally known, regarding
(a) methods and techniques of immunizing the XenoMouse(TM) Animals to the
Antigen which are disclosed by ABX to AVI pursuant to the Research Collaboration
Agreement, the Research License and Option Agreement or this Agreement, and (b)
ABX Materials and ABX Inventions. All ABX Know-How shall be Confidential
Information of ABX.
1.2 "ABX Patent Rights" shall mean, collectively, (a) all patents and
patent applications listed on Attachment A and any foreign counterparts claiming
priority thereof; (b) all patent applications heretofore or hereafter filed in
any country which claim ABX Materials delivered to AVI or ABX Inventions; (c)
all patents that have issued or in the future issue from any of the foregoing
patent applications, including without limitation utility, model and design
patents and certificates of invention; and (d) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patents and patent applications.
<PAGE> 24
1.3 "Affiliate" shall mean, with respect to any person or entity, any
other person or entity which controls, is controlled by or is under common
control with such person or entity. A person or entity shall be regarded as in
control of another entity if it owns or controls at least fifty percent (50%) of
the equity securities of the subject entity entitled to vote in the election of
directors (or, in the case of an entity that is not a corporation, for the
election of the corresponding managing authority).
1.4 "Antibody" shall mean a composition comprising (a) a whole antibody,
or any fragment thereof, derived from the XenoMouse Animals, or (b) a whole
antibody, or any fragment thereof, which is derived from a whole antibody, or
any fragment thereof, which itself is derived from the XenoMouse Animals (or
from the nucleotide sequences that encode, or amino acid sequences of, a whole
antibody, or any fragment thereof, derived from the XenoMouse Animals).
1.5 "Antigen" shall mean (beta) human chorionic gonadotropin
((beta)HCG).
1.6 "Confidential Information" shall mean, with respect to a party, all
information of any kind whatsoever (including without limitation, compilations,
data, formulae, models, patent disclosures, procedures, processes, projections,
protocols, results of experimentation and testing, specifications, strategies
and techniques), and all tangible and intangible embodiments thereof of any kind
whatsoever (including without limitation, apparatus, biological or chemical
materials, animals, cells, compositions, documents, drawings, machinery, patent
applications, records, reports), which is owned or controlled by such party, is
disclosed by such party to the other party and (if disclosed in writing or other
tangible medium) is marked or identified as confidential at the time of
disclosure to the receiving party or (if otherwise disclosed) is identified as
confidential at the time of disclosure to the receiving party and described as
such in writing within thirty (30) days after such disclosure. Notwithstanding
the foregoing, Confidential Information of a party shall not include information
which the receiving party can establish by written documentation (a) to have
been publicly known prior to disclosure of such information by the disclosing
party to the receiving party, (b) to have become publicly known, without fault
on the part of the receiving party, subsequent to disclosure of such information
by the disclosing party to the receiving party, (c) to have been received by the
receiving party at any time from a source, other than the disclosing party,
rightfully having possession of and the right to disclose such information free
of confidentiality obligations, (d) to have been otherwise known by the
receiving party free of confidentiality obligations prior to disclosure of such
information by the disclosing party to the receiving party, or (e) to have been
independently developed by employees or agents of the receiving party without
access to or use of such information disclosed by the disclosing party to the
receiving party. The parties acknowledge that the foregoing exceptions shall be
narrowly construed and that the obligations imposed upon each party under
Section 7 below shall be relieved solely with respect to such Confidential
Information of the disclosing party which falls within the above exceptions and
not with respect to related portions, other combinations, or characteristics of
the Confidential Information of the disclosing party including, without
limitation, advantages, operability, specific purposes, uses and the like.
1.7 "Derived" or "derived" shall mean obtained, developed, created,
synthesized, designed, derived or resulting from, based upon or otherwise
generated (whether directly or indirectly, or in whole or in part).
1.8 "Excluded Technology" shall mean, collectively, (a) all patent
rights, know-how
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<PAGE> 25
or other intellectual property rights or technology of ABX in or to (i) all
antigens other than the Antigen, including without limitation (A) compositions
of such antigens or of Genetic Materials that encode such antigens; (B) uses of
such antigens; (C) antibodies or other compositions that bind to such antigens,
Genetic Materials that encode such antibodies or compositions, and Antibody
Cells that express, secrete, or contain such antibodies, Genetic Materials or
compositions; and (D) uses of such antibodies, Genetic Materials or
compositions; (ii) methods to discover novel antigens; and (iii) methods of
using antigens other than to create antibodies; (b)(i) all patent applications
heretofore or hereafter filed in any country which claim ABX Materials (except
for those described in clause (a) of Section 1.4 of the Research License and
Option Agreement) or ABX Inventions; (ii) all patents that have issued or in the
future issue from any of the foregoing patent applications, including without
limitation utility, model and design patents and certificates of invention; and
(iii) all divisionals, continuations, continuations-in-part, reissues, renewals,
extensions or additions to any such patents and patent applications; and (c)
inventions, discoveries, data, information, methods, techniques, technology and
other results, whether or not patentable but which are not generally known,
regarding ABX Materials (except for those described in clause (a) of Section 1.4
of the Research License and Option Agreement) and ABX Inventions.
1.9 "Field" shall mean the use of Products for human medical purposes.
1.10 "Genetic Material" shall mean a nucleotide sequence, including DNA,
RNA, and complementary and reverse complementary nucleotide sequences thereto,
whether coding or noncoding and whether intact or a fragment.
1.11 "GenPharm Cross License Agreement" shall mean that certain Cross
License Agreement entered into by and between ABX, JTI, XT, Cell Genesys, Inc.,
and GenPharm International, Inc. effective as of March 26, 1997, as the same may
be amended from time to time.
1.12 "IND" shall mean an Investigational New Drug application filed with
Food and Drug Administration in the United States, or any similar filing with
any foreign regulatory authority, to commence human clinical testing of any
Product in any country in the Territory.
1.13 "JTI" shall mean Japan Tobacco Inc., a Japanese corporation
1.14 "Licensed Technology" shall mean ABX's rights in the ABX Patent
Rights, ABX Know-How, Research Program Patent Rights and Research Program
Know-How; provided, however, that the Licensed Technology (a) is all to the
extent and only to the extent that ABX has the right to grant (sub)licenses
thereunder (including without limitation to the extent permitted under the
applicable ABX In-Licenses); (b) is expressly subject to the ABX In-Licenses;
and (c) shall exclude the Excluded Technology.
1.15 "Net Sales" shall mean [*]. Net Sales shall not include [*]
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[*] In the event that a Product is sold in combination as a single product with
another product or component, Net Sales from such combination sales for purposes
of calculating the amount due under this Agreement shall be calculated by [*]
1.16 "Patent Claim" shall mean a claim of a pending patent application
or issued and unexpired patent included within the Licensed Technology which has
not been held unenforceable or invalid by a court or other governmental agency
of competent jurisdiction, unappealable or unappealed within the time allowed
for appeal and which has not been admitted to be invalid or unenforceable
through reissue, disclaimer or otherwise.
1.17 "Product" shall mean any product comprising (a) an Antibody which
binds to the Antigen, or (b) Genetic Material that encodes such an Antibody
wherein, in respect of each Product, said Genetic Material does not encode
multiple antibodies.
1.18 "Research Collaboration Agreement" shall mean that certain Research
Collaboration Agreement effective as of October 2, 1998, by and between ABX and
AVI.
1.19 "Research License and Option Agreement" shall mean that certain
Research License and Option Agreement effective as of January 4, 1999 by and
between ABX and AVI.
1.20 "Research Program Know-How" shall mean, collectively, all
inventions, discoveries, data, information, methods, techniques, technology and
other results, whether or not patentable but which are not generally known,
regarding Research Program Materials and Research Program Inventions. All
Research Program Know-How shall be Confidential Information of ABX.
1.21 "Research Program Patent Rights" shall mean, collectively, (a) all
patent applications heretofore or hereafter filed in any country which claim
Research Program Materials or Research Program Inventions; (b) all patents that
have issued or in the future issue from any of the foregoing patent
applications, including without limitation utility, model and design patents and
certificates of invention; and (c) all divisionals, continuations,
continuations-in-part, reissues, renewals, extensions or additions to any such
patents and patent applications.
1.22 "Sublicensee" shall mean a third party (other than an Affiliate)
that is granted a sublicense under the Licensed Technology to both make and sell
Products. "Sublicensee" shall also include a third party (other than an
Affiliate) that is granted the right to distribute Product, provided that such
third party is responsible for marketing and promotion of Product within the
applicable territory. As used herein, a "Sublicense" shall mean an agreement or
arrangement pursuant to which such a sublicense or distribution right has been
granted.
1.23 "Territory" shall mean all the countries of the world.
1.24 "XenoMouse" and "XenoMouse Animals" shall mean one or more sterile
male
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transgenic mice provided by ABX to AVI for immunization with the Antigen under
the Research Collaboration Agreement or the Research License and Option
Agreement.
1.25 "XT" shall mean Xenotech, L.P., a California limited partnership.
1.26 "XT Master Research and License Agreement" shall mean that certain
Master Research License and Option Agreement entered into by and among JTI, XT
and Cell Genesys, Inc. effective as of June 28, 1996, and subsequently assigned
to ABX by Cell Genesys, Inc., as the same may be amended from time to time.
1.27 "XT Product License" shall mean a license granted from XT to ABX
pursuant to the terms of the XT Master Research and License Agreement permitting
ABX to commercialize, or to provide rights to a third party to commercialize,
certain Products in one or more territories.
2. LICENSE GRANT
2.1 Grant of Rights.
2.1.1 Subject to the terms and conditions of this Agreement, ABX
hereby grants to AVI an exclusive license or sublicense, as the case may be,
under the Licensed Technology, to make and have made Product anywhere in the
world and to use, sell, lease, offer to sell or lease, import, export, otherwise
transfer physical possession of or otherwise transfer title to Product for use
in the Field in the Territory.
2.1.2 The license granted under Section 2.1.1 above is expressly
subject to the terms and conditions of Section 2.2 of the Research License and
Option Agreement (other than the provisions of subsections (g), (h) and (i)
thereof).
2.2 Sublicenses. AVI may grant Sublicenses under Section 2.1 above. AVI
shall provide ABX with a copy of each such Sublicense promptly after executing
the same; provided, however, that AVI shall have the right to redact any
confidential financial terms from the copy provided to ABX. Any such Sublicense
shall be subject and subordinate to the terms and conditions of this Agreement,
and AVI shall remain responsible for all payments due to ABX hereunder with
respect to Net Sales of Products by any such Sublicensee or its Affiliates.
Notwithstanding the foregoing, AVI shall not have the right to Sublicense any
right under this Agreement in or to a XenoMouse Animal or other transgenic
animal covered by the Licensed Technology.
2.3 No Other Rights. No rights other than those expressly set forth in
this Agreement are granted to AVI hereunder, and no additional rights shall be
deemed granted to AVI by implication, estoppel or otherwise. Without limiting
the foregoing, the rights of AVI under this Agreement are subject and
subordinate in all respects to the provisions of Section 2.2 of the Research
License and Option Agreement (other than the provisions of subsections (g), (h)
and (i) thereof).
3. CONSIDERATION.
3.1 Milestone Payments.
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3.1.1 Amounts. Within thirty (30) days following the achievement
by AVI (or any of its Affiliates or Sublicensees) of each the following
milestones, AVI shall give written notice thereof to ABX and shall pay to ABX
[*]
3.1.2 Terminology. As used herein, [*]. In the event milestone D
above is met, and at such time either one or both of milestones A or B have not
been met, the payment for all such unmet milestone payments shall then be due.
3.2 Royalties.
3.2.1 Royalty Commencement Date. AVI shall notify ABX of the
date of commercial introduction of each Product into each country in the
Territory, which shall mean, on a country-by-country basis in the Territory, the
date of first commercial sale (other than for purposes of obtaining regulatory
approval) of such Product by AVI, its Affiliate or any Sublicensee to an
unaffiliated third party in such country (with respect to each Product in each
country, hereinafter, the "Royalty Commencement Date").
3.2.2 Royalty Rate. In consideration of the license granted
herein, AVI shall pay to ABX a running royalty of [*]
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[*]
3.2.3 Length of Term of Royalty Obligations. AVI's obligation to
pay royalties on Net Sales of each Product under this Agreement shall commence
on a country-by-country basis on the Royalty Commencement Date for such Product
in such country and continue thereafter for such Product on a country-by-country
basis until (a) if, as of the Royalty Commencement Date for such Product in such
country, there exists a Patent Claim in the country where such Product is made,
used or sold that covers (i) AVI's manufacture, use or sale of such Product or
(ii) XenoMouse Animals or their use, such date as no such Patent Claim exists in
the country where such Product is made, used or sold, or (b) otherwise, ten (10)
years after the Royalty Commencement Date for such Product in such country.
3.3 Discounting. If AVI or its Affiliate or Sublicensee sells any
Product to a third party who also purchases other products or services from AVI,
its Affiliate or Sublicensee, AVI agrees not to, and requires its Affiliate and
Sublicensee not to, discount the sales price of the Products to a greater degree
than AVI, its Affiliate or Sublicensee, respectively, generally discounts the
price of its other products to such customer.
3.4 Royalties To Be Paid By ABX. It is understood that, subject to the
terms and conditions of this Agreement, including without limitation AVI's
payment of royalties as set forth herein, ABX will be responsible to make the
royalty payments to third parties as set forth in Attachment B hereto in respect
of Net Sales of Products in accordance with this Agreement.
4. ACCOUNTING AND RECORDS.
4.1 Royalty Reports; Payments, Invoices. After the first commercial sale
of Product on which royalties are required to be paid by AVI under Article 3
above, AVI agrees to make quarterly written reports to ABX within thirty (30)
days after the end of each calendar quarter, stating in each such report the
number, description, and aggregate Net Sales of Product sold during the calendar
quarter upon which a royalty is payable under Article 3 above. These reports may
be combined with reports due under Section 5.4. Concurrently with the making of
such reports, AVI shall pay to ABX all amounts payable pursuant to Article 3
above. All payments to ABX hereunder shall be made in U.S. Dollars to a bank
account designated by ABX.
4.2 Records; Inspection. AVI shall keep (and cause its Affiliates and
Sublicensees to keep) complete, true and accurate books of account and records
for the purpose of determining the royalty amounts payable to ABX under this
Agreement. Such books and records shall be kept at the principal place of
business of AVI or its Affiliates or Sublicensees, as the case may be, for at
least three years following the end of the calendar quarter to which they
pertain. Such records of AVI or its Affiliates will be open for inspection
during such three-year period by representatives of ABX (which representatives
may also represent XT) for the purpose of verifying the royalty statements. AVI
shall require each of its Sublicensees to maintain similar books and records and
to open such records for inspection during the same three-year period by a
representative of AVI reasonably satisfactory to ABX on behalf of, and as
required by, ABX for the purpose of verifying the royalty statements. All such
inspections may be made no more than once each calendar year at reasonable times
mutually agreed by AVI and ABX. The representative of ABX will be obliged to
execute a reasonable confidentiality agreement prior to commencing any such
inspection. Inspections conducted under this Section 4.2 shall be at the expense
of ABX, unless a variation or
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error producing an increase [*] of the amount stated for any period is
established in the course of any such inspection, whereupon all costs relating
to the audit of such period will be paid by AVI.
4.3 Payment Method. All payments due hereunder shall be made in U.S.
dollars, and shall be made by bank wire transfer in immediately available funds
to an account designed by ABX.
4.4 Currency Conversion. If any currency conversion shall be required in
connection with the calculation of royalties hereunder, such conversion shall be
made using the selling exchange rate for conversion of the foreign currency into
U.S. Dollars, quoted for current transactions reported in The Wall Street
Journal for the last business day of the calendar quarter to which such payment
pertains.
4.5 Late Payments. Any payments due from AVI that are not paid on the
date such payments are due under this Agreement shall bear interest at the
lesser of (i) the prime rate as reported by the Bank of America in San
Francisco, California on the date such payment is due, plus an additional [*],
or (ii) the maximum rate permitted by applicable law, in each case
calculated on the number of days such payment is delinquent. This Section 4.5
shall in no way limit any other remedies available to any party.
4.6 Withholding Taxes. All payments required to be made pursuant to
Article 3 hereof shall be without deduction or withholding for or on account of
any taxes or similar governmental charge imposed by a jurisdiction, such taxes
being referred to herein as "Withholding Taxes." Withholding Taxes shall be the
sole responsibility of the withholding party. The withholding party shall
provide a certificate evidencing payment of any Withholding Taxes hereunder.
5. DILIGENCE.
5.1 General. AVI shall use its diligent efforts to actively research,
develop and obtain regulatory approvals to market in major markets throughout
the world at least one Product hereunder as expeditiously as possible, and
following such approval to maximize Net Sales of such Product.
5.2 Filing of IND. Without limiting Section 5.1 above, AVI or its
Sublicensee shall file an IND with the U.S. FDA for one or more Products under
this Agreement [*]; provided, however, prior to the expiration of such [*], if
AVI requests in writing that ABX extend such time period, and provides ABX with
reasonably satisfactory evidence that AVI has diligently endeavored to file such
an IND within such [*], and pays to ABX the [*], then ABX shall extend such time
period for an additional [*]. If AVI pays such extension fee to ABX as set forth
above, AVI shall have the right to [*]. After the filing of an IND for a
Product, AVI, or its Sublicensee, shall be required to have an active IND and to
be actively and diligently conducting clinical trials in pursuit of regulatory
approval
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for the Product in the United States until such Product may be sold commercially
in the United States.
5.3 Failure to Meet Due Diligence Obligation. If the diligence
requirements set forth in Section 5.1 and 5.2 are not met by AVI (or its
Sublicensees), ABX shall have the right to terminate this Agreement pursuant to
Section 9.2 below.
5.4 Research and Development Reports. AVI shall keep (or cause to be
kept) complete and accurate records of its research, development and
commercialization activities under this Agreement. AVI shall maintain (or cause
to be maintained) such records in sufficient detail, and in accordance with good
scientific practices. AVI shall keep ABX fully informed as to its research,
development and commercialization activities hereunder. Without limiting the
foregoing, within thirty (30) days of the end of each calendar quarter, AVI
shall provide to ABX a reasonably detailed written report regarding such
research, development and commercialization activities and the status thereof.
5.5 No Conflicts.
5.5.1 Other Products. During the term of this Agreement, AVI
shall not directly or indirectly sell or commercialize for human medical use, or
conduct research or development toward the human medical use of any product
(other than the Products), comprising (a) a human, humanized, or chimeric
antibody, human, humanized, or chimeric antibody fragment or amino acid sequence
derived from a human, humanized or chimeric antibody, in each case which binds
to the Antigen, (b) Genetic Material that encodes such any such composition, or
(c) any other chemical or biological material derived by AVI from XenoMouse
Animals immunized with the Antigen strictly in accordance with the terms and
conditions of the Research Collaboration Agreement, the Research License and
Option Agreement or this Agreement.
5.5.2 Discounting. In the event that AVI or its Affiliates sells
Product to a third party who also purchases other products or services from AVI
or its Affiliate, and AVI or its Affiliates discounts the purchase price of the
Product to a greater degree than AVI or its Affiliate, respectively, generally
discounts the price of their other products to such customer, then in such case
the Net Sales for the sale of Products to such third party shall be deemed to
equal the arm's length price that third parties would generally pay for the
Product alone when not purchasing any other product or service from AVI or its
Affiliate. For purposes of this provision "discounting" includes establishing
the list price at a lower-than-normal level.
5.6 Gene Therapy Applications. AVI's intention as of the Effective Date
is to commercialize a Product hereunder for an application other than Gene
Therapy before commercializing a Product hereunder for a Gene Therapy
application. It is understood, however, that AVI may or may not also intend to
develop and sell Products for use in Gene Therapy, and that such Gene Therapy
application may ultimately be commercialized before a Product is commercialized
hereunder for a non-Gene Therapy application. As used herein, "Gene Therapy"
shall mean [*]
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[*]
6. INTELLECTUAL PROPERTY.
6.1 Licensed Technology. Subject to Sections 6.2 and 6.6, ABX or its
licensor, as they may agree, shall have the right to control the preparing,
filing, prosecuting and maintaining of patents and patent applications worldwide
within the Licensed Technology (other than the Research Program Patent Rights)
and conducting any interferences, oppositions, reexaminations, or requesting
reissues or patent term extensions with respect to patents and patent
applications worldwide within the Licensed Technology (other than the Research
Program Patent Rights).
6.2 Research Program Patent Rights. Notwithstanding anything to the
contrary in this Article 6, AVI shall have the right and responsibility (but not
the obligation), at AVI's expense, to file, prosecute, maintain and enforce all
patent applications and patents (and to conduct any interferences, oppositions,
or reexaminations thereon, and to request any reissues or patent term extensions
thereof) within the Research Program Patent Rights in accordance with and
subject to the terms and conditions of Article 4 of the Research License and
Option Agreement.
6.3 Enforcement. Subject to Section 6.2 and 6.6, in the event that AVI
becomes aware that any Licensed Technology necessary for the practice of the
license granted herein is infringed or misappropriated by a third party or is
subject to a declaratory judgment action arising from such infringement in each
case with respect to a composition that binds to the Antigen and is competitive
with Products hereunder (an "Infringement"), AVI shall promptly notify ABX. As
between AVI, its Sublicensees and ABX, ABX shall have the exclusive right at its
expense to bring an enforcement proceeding, or defend any declaratory judgment
action, involving any Licensed Technology with respect to an Infringement. ABX
shall keep AVI reasonably informed of the progress of such claim, suit or
proceeding with respect to an Infringement involving enforcement or defense of
the Licensed Technology. Any recovery received by ABX as a result of any such
claim, suit or proceeding shall be used first to reimburse ABX for all expenses
(including attorneys, and professional fees) incurred in connection with such
claim, suit or proceeding, and the remaining amount (if any) retained by ABX,
after paying amounts ABX is obligated to pay to third parties in respect of such
amount pursuant to applicable ABX In-Licenses shall be divided, to the extent
that the recovery expressly represents lost profits on sales of Product within
the Field because of the Infringement, in equal shares between ABX and AVI.
Notwithstanding the foregoing, if ABX notifies AVI that it does not desire to
pursue an enforcement action, or defend a declaratory judgment action, with
respect to a substantial and continuing Infringement, then, to the extent such
action involves a Product composition of matter claim, AVI may at its expense
bring or defend
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such action in consultation with ABX; provided, however, that (i) ABX shall have
the right to join such proceeding at any time at its own expense, (ii) AVI shall
not admit the invalidity or unenforceability of any patent rights within the
Licensed Technology without ABX's prior written consent, and (iii) if ABX does
not join the action, any recovery obtained by AVI shall be used first to
reimburse AVI for all expenses (including attorneys, and professional fees)
incurred in connection with such claim, suit or proceeding, and the remaining
amount (if any) retained by AVI after reimbursing ABX for any amounts ABX is
obligated to pay to third parties in respect of such amount pursuant to
applicable ABX In-Licenses shall be divided evenly between ABX and AVI.
6.4 Infringement Claims. Subject to Section 6.6, if the production, sale
or use of Product pursuant to this Agreement results in any claim, suit or
proceeding alleging patent infringement against AVI (or its Affiliates or
Sublicensees), AVI shall promptly notify ABX thereof in writing setting forth
the facts of such claim in reasonable detail. AVI shall keep ABX reasonably
informed of all material developments in connection with any such claim, suit or
proceeding as it relates to the Licensed Technology. Notwithstanding the above,
AVI shall not admit the invalidity of any patent within the Licensed Technology
without written consent from ABX.
6.5 Patent Marking. AVI agrees to mark and have its Affiliates and all
Sublicensees mark all Products sold pursuant to this Agreement in accordance
with the applicable statutes or regulations in the country or countries of
manufacture and sale thereof.
6.6 Limitation. Notwithstanding any other provision in this Article 6,
the parties acknowledge and understand that (i) ABX shall not be obligated to
prepare, file, prosecute, and maintain patents and patent applications, or to
bring or pursue enforcement proceedings or defend declaratory judgment actions
regarding the Licensed Technology if, and to the extent that, ABX is not
entitled to do so under one or more ABX In-Licenses, and (ii) any rights
conveyed under this Article 6 permitting AVI to prepare, file, prosecute and
maintain certain patents and patent applications, or to bring and pursue
enforcement proceedings, or defend declaratory judgment actions, regarding the
Licensed Technology, shall be subject to all applicable ABX In-Licenses, and are
conveyed only to the extent permitted under such agreements.
7. CONFIDENTIALITY.
7.1 Confidentiality. Except as expressly provided herein, AVI and ABX
each shall keep completely confidential and shall not publish or otherwise
disclose and shall not use for any purpose any Confidential Information of the
other until the date five (5) years following the expiration or termination of
this Agreement.
7.2 Permitted Disclosure. Notwithstanding Section 7.1 above, each party
may nevertheless disclose the other party's Confidential Information to the
extent such disclosure is required by applicable law, regulation or court order,
provided that if a party is so required to make any such disclosure of the other
party's Confidential Information, other than pursuant to a confidentiality
agreement, it will give reasonable advance notice to the other party of such
disclosure requirement and will use efforts consistent with prudent business
judgment to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or confidentiality agreements or
otherwise). The expiration of AVI's obligations under Section 7.1 above shall
not be deemed to limit AVI's obligations under Section 2.2 of the Research
License and
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Option Agreement.
7.3 Terms of Agreement. Neither party shall disclose any terms or
conditions of this Agreement to any third party without the prior consent of the
other party; provided, however, that a party may disclose the terms or
conditions of this Agreement, (i) on a need-to-know basis to its legal and
financial advisors to the extent such disclosure is reasonably necessary in
connection with such party's activities as expressly permitted by this
Agreement, (ii) to a third party in connection with (A) an equity investment in
such party by a third party, (B) a merger, consolidation or similar transaction
entered into by such party, or (C) the sale of all or substantially all of the
assets of such party, and (iii) as may, in the reasonable opinion of such
party's counsel, be required by applicable law, regulation or court order,
including without limitation, a disclosure in connection with such party's
filing of a registration statement or other filing with the United States
Securities and Exchange Commission (in which event such party will first consult
with the other party with respect to such disclosure). Notwithstanding the
foregoing, prior to execution of this Agreement, the parties shall agree upon
the substance of information that can be used to describe the terms of this
transaction, and each party may disclose such information, as modified by
written agreement of Abgenix and AVI from time to time, without the consent of
the other. Additionally, notwithstanding the foregoing, ABX shall have the right
in its sole discretion to disclose (a) the identity of the Antigen upon filing
of an IND for a Product, and (b) the achievement of each milestone described in
Section 3.1 above, the grant of regulatory approval of each Product in each
country and the market launch of each Product in each country, in each case upon
the occurrence of the same.
8. INDEMNIFICATION.
8.1 AVI. AVI shall indemnify and hold harmless ABX, and its directors,
officers, employees and agents, from and against all losses, liabilities,
damages and expenses, including reasonable attorneys' fees and costs
(collectively, "Liabilities"), resulting from any claims, demands, actions or
other proceedings by any third party arising from (i) the material breach of any
representation, warranty or covenant by AVI under this Agreement, (ii) the
manufacture, use, sale, handling or storage by AVI, its Affiliates or
Sublicensees of the Products (without regard to culpable conduct), or (iii) any
use by AVI, its Affiliates or Sublicensees of the Confidential Information of
ABX; provided, however, that AVI shall not be obligated to indemnify or hold
harmless ABX for such Liabilities to the extent that such Liabilities arise from
the gross negligence or willful misconduct of ABX.
8.2 ABX. ABX shall indemnify and hold harmless AVI, and its directors,
officers, employees and agents, from and against all Liabilities resulting from
any claims, demands, actions or other proceedings by any third party arising
from (i) the material breach of any representation, warranty or covenant by ABX
under this Agreement, or (ii) any use by ABX of the Confidential Information of
AVI; provided, however, that ABX shall not be obligated to indemnify or hold
harmless AVI for such Liabilities to the extent that such Liabilities arise from
the gross negligence or willful misconduct of AVI.
8.3 Procedure. If a party (an "Indemnitee") intends to claim
indemnification under this Article 8, it shall promptly notify the indemnifying
party (the "Indemnitor") in writing of any claim, demand, action or other
proceeding for which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall have the right to participate in, and, to the extent the
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Indemnitor so desires, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the Indemnitor, if representation of such Indemnitee by the counsel retained by
the Indemnitor would be inappropriate due to actual or potential differing
interests between such Indemnitee and any other party represented by such
counsel in such proceeding. The indemnity agreement in this Article 8 shall not
apply to amounts paid in settlement of any claim, demand, action or other
proceeding if such settlement is effected without the consent of the Indemnitor,
which consent shall not be withheld or delayed unreasonably. The failure to
deliver written notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnitor of any liability to the Indemnitee under
this Article 8, but the omission so to deliver written notice to the Indemnitor
shall not relieve it of any liability that it may have to any party claiming
indemnification otherwise than under this Article 8. The party claiming
indemnification under this Article 8, its employees and agents, shall reasonably
cooperate with the Indemnitor and its legal representatives in the investigation
of any claim, demand, action or other proceeding covered by this
indemnification.
8.4 Insurance. AVI shall maintain insurance, including product liability
insurance, with respect to development, manufacture and sales of Products in
such amount as AVI customarily maintains with respect to the development,
manufacture and sale of its other products. ABX shall be named as an additional
insured on any such AVI policies. AVI shall maintain such insurance for so long
as it continues to develop, manufacture or sell any Products, and thereafter for
so long as AVI customarily maintains insurance for itself covering the
development, manufacture and sale of its other products.
9. REPRESENTATIONS AND WARRANTIES.
9.1 ABX. ABX represents and warrants that: (i) it has the power and
authority to enter into this Agreement; (ii) to the knowledge of ABX, there are
no existing or threatened actions, suits or claims pending with respect to the
subject matter hereof or the right of ABX to enter into and perform its
obligations under this Agreement; (iii) it has taken all necessary action on its
part to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder; (iv) this Agreement has been duly
executed and delivered on behalf of it, and constitutes a legal, valid, binding
obligation, enforceable against it in accordance with the terms hereof; and (v)
the execution and delivery of this Agreement and the performance of its
obligations hereunder do not conflict with or violate any requirement of
applicable laws or regulations and do not conflict with, or constitute a default
under, any contractual obligation of it.
9.2 AVI. AVI represents and warrants that: (i) it has the power and
authority to enter into this Agreement; (ii) to the knowledge of AVI, there are
no existing or threatened actions, suits or claims pending with respect to the
subject matter hereof or the right of AVI to enter into and perform its
obligations under this Agreement; (iii) it has taken all necessary action on its
part to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder; (iv) this Agreement has been duly
executed and delivered on behalf of it, and constitutes a legal, valid, binding
obligation, enforceable against it in accordance with the terms hereof; (v) the
execution and delivery of this Agreement and the performance of its obligations
hereunder do not conflict with or violate any requirement of applicable laws or
regulations and do not conflict with, or constitute a default under, any
contractual obligation of it; and (vi) it will not take any action, or
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fail to take any action, under this Agreement that will cause a breach of the
GenPharm Cross License Agreement, the XT Master Research and License Agreement
or the XT Product License.
9.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, ABX MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND
REGARDING ABX MATERIALS, PRODUCTS OR THE LICENSED TECHNOLOGY, EITHER EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, AND VALIDITY OF TECHNOLOGY OR PATENT
CLAIMS, ISSUED OR PENDING. ALL XENOMOUSE ANIMALS AND OTHER MATERIALS PROVIDED TO
AVI PURSUANT TO THE RESEARCH COLLABORATION AGREEMENT OR THE RESEARCH LICENSE AND
OPTION AGREEMENT ARE PROVIDED "AS IS."
10. TERM AND TERMINATION.
10.1 Term. The term of this Agreement shall commence on the Effective
Date and, unless earlier terminated as provided in this Article 10, shall
continue in full force and effect on a Product-by-Product and country-by-country
basis until the expiration of all royalty obligations pursuant to this Agreement
for such Product in such country. Following the expiration, but not earlier
termination, of this Agreement on a Product-by-Product and country-by-country
basis, AVI shall have a fully-paid up, perpetual, non-exclusive license under
the ABX Know-How solely to commercialize such Product in such country.
10.2 Termination for Breach. In the event that a party shall have
materially breached or defaulted in the performance of any of its material
obligations hereunder, and such breach or default shall have continued for
thirty (30) days after written notice of such breach was provided to the
breaching party by the nonbreaching party, the nonbreaching party shall have the
right at its option to terminate this Agreement effective at the end of such
thirty (30) day period.
10.3 Termination by AVI. AVI may terminate this Agreement and the
license granted herein at any time, by providing ABX ninety (90) days written
notice.
10.4 Effect of Termination.
10.4.1 Accrued Obligations. Termination of this Agreement for
any reason shall not release either party hereto from any liability which at the
time of such termination has already accrued to the other party or which is
attributable to a period prior to such termination, nor preclude either party
from pursuing any rights and remedies it may have hereunder or at law or in
equity which accrued are based upon events occurring prior to such termination.
10.4.2 Stock in Hand; Sublicenses. In the event this Agreement
is terminated for any reason, AVI and its Affiliates and Sublicensees shall have
the right to sell or otherwise dispose (consistent with all applicable
regulations and law and subject to Articles 3 and 4 of this Agreement) of the
stock of any Product subject to this Agreement then on hand. Upon termination of
this Agreement by ABX for any reason, any sublicense granted by AVI hereunder
shall survive, provided that upon request by ABX, such Sublicensee promptly
agrees in writing to be bound by the applicable terms of this Agreement.
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10.4.3 Survival. The provisions of Articles 3, 4, 7, 8 and 11
and Section 9.3 shall survive the expiration and any termination of this
Agreement for any reason.
11. MISCELLANEOUS.
11.1 Governing Laws. This Agreement shall be governed by, interpreted
and construed in accordance with the laws of the State of California, without
regard to conflicts of law principles.
11.2 Waiver. No waiver by any party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent and/or similar breach or default.
11.3 Assignments. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated, in whole or part, by either party
without the prior express written consent of the other; provided, however, that
either party may, without the written consent of the other, assign this
Agreement and its rights and delegate its obligations hereunder in connection
with the transfer or sale of all or substantially all of its business, or in the
event of its merger, consolidation, change in control or similar transaction.
Any permitted assignee shall assume all obligations of its assignor under this
Agreement. Any purported assignment in violation of this Section 11.3 shall be
void. Notwithstanding the foregoing, ABX shall not be obligated without its
consent to send XenoMouse Animals to any party other than AVI, nor shall AVI
have the right to transfer XenoMouse Animals to any other party without ABX's
prior written consent. The terms and conditions of this Agreement shall be
binding upon and inure to the benefit of the permitted successors and assigns of
the parties.
11.4 Independent Contractors. The relationship of the parties hereto is
that of independent contractors. The parties hereto are not deemed to be agents,
partners or joint venturers of the others for any purpose as a result of this
Agreement or the transactions contemplated thereby.
11.5 Further Actions. Each party agrees to execute, acknowledge and
deliver such further instruments and to do all such other acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
11.6 Notices. All requests and notices required or permitted to be given
to the parties hereto shall be given in writing, shall expressly reference the
section(s) of this Agreement to which they pertain, and shall be delivered to
the other party, effective on receipt, at the appropriate address as set forth
below or to such other addresses as may be designated in writing by the parties
from time to time during the term of this Agreement.
If to ABX:
Abgenix, Inc.
7601 Dumbarton Circle
Fremont, California 94555
Attn: President
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with a copy to:
Pillsbury Madison & Sutro LLP
101 West Broadway, Suite 1800
San Diego, California 92101
Attn: Mark R. Wicker
If to AVI:
AVI BioPharma, Inc.
One SW Columbia Street, Suite 1105
Portland, Oregon 97258
Attn: President
11.7 No Implied Licenses. Only licenses and rights granted expressly
herein shall be of legal force and effect. No license or other right shall be
created hereunder by implication, estoppel or otherwise.
11.8 Export Laws. Notwithstanding anything to the contrary contained
herein, all obligations of ABX and AVI are subject to prior compliance with
United States export regulations and such other United States laws and
regulations as may be applicable, and to obtaining all necessary approvals
required by the applicable agencies of the government of the United States. AVI
shall be responsible for obtaining such approvals, and shall use efforts
consistent with prudent business judgment to obtain such approvals. ABX agrees
to cooperate reasonably with AVI and provide reasonable assistance to AVI as may
be reasonably necessary to obtain any required approvals.
11.9 Force Majeure. Nonperformance of a party (other than for the
payment of money) shall be excused to the extent that performance is rendered
impossible by strike, fire, earthquake, flood, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to
perform, is beyond the reasonable control and not caused by the negligence,
intentional conduct or misconduct of the nonperforming party.
11.10 No Consequential Damages. IN NO EVENT SHALL A PARTY HERETO BE
LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING WITHOUT LIMITATION
LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT,
REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 11.10 IS
INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF
EITHER PARTY.
11.11 Third Party Rights. Notwithstanding anything to the contrary in
this Agreement, the grant of rights by ABX under this Agreement shall be subject
to and limited in all respects by the terms of the applicable ABX In-License(s)
pursuant to which ABX acquired any Licensed Technology, and all rights or
sublicenses granted under this Agreement shall be limited to the extent that ABX
may grant such rights and sublicenses under such ABX In-Licenses. Additionally,
and without limiting the foregoing, the rights granted to AVI hereunder,
including without
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<PAGE> 39
limitation any grant of "exclusive" rights, shall be subject to the rights
granted to or retained by GenPharm under the GenPharm Cross License Agreement.
11.12 Complete Agreement. This Agreement constitutes the entire
agreement, both written and oral, between the parties with respect to the
subject matter hereof, and that all prior representations, understandings and
agreements regarding the subject matter hereof, either written or oral,
expressed or implied, shall be abrogated, canceled, and are null and void and of
no effect, including without limitation the Research Collaboration Agreement
(except for those provisions of the Research Collaboration Agreement that
expressly survive pursuant to the terms thereof (including without limitation
Sections 2(a) (other than the first sentence thereof), 3, 5, 6, 7, and 10
thereof) and the Research License and Option Agreement (except for those
provisions of the Research License and Option Agreement that either (a)
expressly survive pursuant to the terms thereof (including without limitation
Sections 4, 5, 6, 2.2 and 7.3 thereof), or (b) are expressly referenced in this
Agreement). No amendment or change hereof or addition hereto shall be effective
or binding on either of the parties hereto unless reduced to writing and
executed by the respective duly authorized representatives of ABX and AVI.
11.13 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and both together shall be deemed to
be one and the same agreement.
11.14 Headings. The captions to the several Articles and Sections hereof
are not a part of this Agreement, but are included merely for convenience of
reference only and shall not affect its meaning or interpretation.
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<PAGE> 40
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of the day and year
first above written.
ABGENIX, INC.
By:
(Signature)
Raymond M. Withy, Ph.D.
-------------------------------------
(Printed Name)
Vice President, Corporate Development
-------------------------------------
(Title)
AVI BIOPHARMA, INC.
By:
(Signature)
Denis R. Burger, Ph.D.
-------------------------------------
(Printed Name)
Chief Executive Officer
-------------------------------------
(Title)
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<PAGE> 41
ATTACHMENT A
ABX PATENT RIGHTS
I. Pursuant to the XT Master Research and License Agreement
A. Any (i) of the patent applications listed in the following Table:
[*]
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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<PAGE> 42
[*]
and patents issuing thereon, (ii) continuations, divisionals,
reexamination certificates, reissues, or extensions thereof, and
(iii) any foreign counterparts issued or issuing on any of (i)
or (ii) above.
B. Pursuant to the License Agreement by and between the [*]
C. Pursuant to the Agreement between the [*]
D. Pursuant to the Material Transfer and License Agreement by and
between [*]
E. Pursuant to Agreements between [*]
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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<PAGE> 43
[*]
II. Pursuant to the GenPharm Cross License Agreement
A. [*], including (i) any continuations, continuations-in-part,
patents of addition, divisionals, reexamination certificates,
reissues or extensions, including supplemental protection
certificates thereof, (ii) any patents issuing from such
application or upon an application under (i), and (iii) foreign
counterparts applied for, issued, or issuing on such application
or any of (i) or (ii).
B. [*], including (i) any continuations, continuations-in-part,
patents of addition, divisionals, reexamination certificates,
reissues or extensions, including supplemental protection
certificates thereof, (ii) any patents issuing from such
application or upon an application under (i), and (iii) foreign
counterparts applied for, issued, or issuing on such application
or any of (i) or (ii).
C. Pursuant to a License Agreement [*]
- ------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
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<PAGE> 44
ATTACHMENT B
ABX IN-LICENSES
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our reports dated January 23,
1998 in the Registration Statement (Form S-1) and related Prospectus of Abgenix,
Inc. for the registration of 1,146,300 shares of its common stock.
Ernst & Young LLP
Palo Alto, California
January 14, 1999
