<PAGE>
As filed with the Securities and Exchange Commission on March 23, 2000
Registration No. 333-95461
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 4
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
INTRABIOTICS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 2834 94-3200380
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
----------------
1255 Terra Bella Avenue
Mountain View, CA 94043
(650) 526-6800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------
Kenneth J. Kelley
President and Chief Executive Officer
IntraBiotics Pharmaceuticals, Inc.
1255 Terra Bella Avenue
Mountain View, CA 94043
(650) 526-6800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
Copies to:
<TABLE>
<S> <C>
Robert L. Jones Patrick T. Seaver
Laura A. Berezin Charles K. Ruck
COOLEY GODWARD LLP LATHAM & WATKINS
Five Palo Alto Square 650 Town Center Drive
3000 El Camino Real 20(th) Floor
Palo Alto, CA 94306-2155 Costa Mesa, CA 92626
(650) 843-5000 (714) 540-1235
</TABLE>
----------------
Approximate date of proposed sale to the public:
As soon as practicable after the registration statement becomes effective.
----------------
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, as amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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
number 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 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,
check the following box. / /
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, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission becomes effective. This preliminary
prospectus is not an offer to sell these securities nor does it seek offers to
buy these securities in any jurisdiction where the offer or sale is not
permitted.
<PAGE>
Subject to Completion, Dated March 23, 2000
[LOGO]
7,500,000 Shares
Common Stock
This is the initial public offering of IntraBiotics Pharmaceuticals, Inc. and we
are offering 7,500,000 shares of our common stock. We anticipate that the
initial public offering price will be between $13.00 and $15.00 per share. We
have applied to list our common stock on the Nasdaq National Market under the
symbol "IBPI."
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions IntraBiotics
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to 1,125,000
additional shares to cover over-allotments.
Deutsche Banc Alex. Brown
Warburg Dillon Read LLC
SG Cowen
Adams, Harkness & Hill, Inc.
The date of this prospectus is , 2000
<PAGE>
[This graphic will include a figure of the human body with arrows pointing to
the body to indicate the areas targeted by our product programs. Below this is a
chart which briefly describes the clinical use, development stage and
territorial rights for each of our development programs.]
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD
CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD CAREFULLY READ THE
ENTIRE PROSPECTUS, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS, BEFORE
MAKING AN INVESTMENT DECISION.
OUR BUSINESS
IntraBiotics Pharmaceuticals, Inc. develops and intends to commercialize new
antibacterial and antifungal drugs for the prevention or treatment of serious
infectious diseases. We are about to begin expanded human clinical trials to
test for efficacy and safety, known as phase III trials, for our two lead
product candidates, Ramoplanin Oral and Protegrin IB-367 Rinse. We recently
obtained statistically significant data from human clinical trials that test for
preliminary safety and efficacy, known as phase II trials, that indicate each of
these products was well tolerated and support further efficacy trials. Our new
antibiotics may solve medical problems for patients who currently have few or no
satisfactory alternatives. Since these antibiotics kill bacteria and fungi in
new ways, they may be particularly useful in fighting multi-drug resistant
bacteria that cannot be killed with currently available antibiotics. The
increasing incidence of multi-drug resistant bacterial infections has created a
global health care problem, commonly referred to as the antibiotics crisis.
OUR PRODUCT PORTFOLIO
Ramoplanin is an antibacterial drug that selectively kills certain types of
bacteria, including one of the most problematic, multi-drug resistant types,
called vancomycin resistant enterococci, or VRE. This strain of bacteria is
particularly difficult to treat, as it is resistant to the most commonly
prescribed antibiotics, including one of the most powerful, vancomycin. Because
of this resistance, patients with VRE bloodstream infections are twice as likely
to die as patients with infections caused by the non-resistant strain. In
addition, VRE infections are expensive to treat, generating incremental costs
estimated at $86,000 per case. The incidence of this strain of bacteria is
increasing rapidly in U.S. hospitals, creating a significant and widely
acknowledged public health problem.
We are developing Ramoplanin Oral for the elimination of VRE in the
intestines of hospitalized patients to prevent VRE from crossing over into the
bloodstream and causing bloodstream infections. We recently completed a
phase II trial indicating that the drug was well tolerated and was effective in
reducing VRE in the patients' intestines. We are now preparing to start our
phase III trial that, if successful, would demonstrate Ramoplanin Oral's ability
to prevent VRE bloodstream infections. We hold the exclusive rights to this drug
in the U.S. and Canada through licensed patents and trade secrets.
Protegrin IB-367 is a new antibiotic that rapidly kills many types of
bacteria and fungi. We are developing Protegrin IB-367 Rinse for oral mucositis,
a condition characterized by painful mouth ulcers that often form as a side
effect of cancer therapies. Patients often identify oral mucositis as the single
most troublesome side effect of cancer therapy. In severe cases of oral
mucositis, patients may not be able to eat and may have to discontinue or reduce
cancer treatment because of the pain. Oral mucositis often requires additional
patient care, including extended hospitalization, estimated at between $4,500
and $20,000 per case.
We recently completed a phase II trial indicating the drug was well
tolerated, appeared not to be absorbed into the bloodstream from the mouth and
reduced the severity of oral mucositis. To our knowledge, Protegrin IB-367 Rinse
is the first drug in a phase II trial to successfully reduce the severity of
oral mucositis in chemotherapy patients. We are about to begin phase III trials
of
1
<PAGE>
Protegrin IB-367 Rinse that, if successful, will demonstrate a reduction in
severity of oral mucositis in cancer patients receiving chemotherapy or
radiation therapy. We hold exclusive worldwide rights to this drug.
In addition to Ramoplanin Oral and Protegrin IB-367 Rinse, we are about to
begin early stage human clinical testing, known as phase I trials, with two
other clinical uses and formulations of Protegrin IB-367. We have three other
antibiotic compounds for which we have identified nearly final chemical
structures, known as lead candidates. These compounds are in preclinical
laboratory research. Our current product portfolio is presented below.
[CHART]
We plan to fund our product development and commercialization efforts over
the next several years primarily through the sale of equity although we may also
receive revenues from corporate partnerships. To date, we funded our operations
primarily through private equity sales in which we have raised approximately $80
million, as well as $19.8 million in revenue from a prior collaboration
agreement with Pharmacia and Upjohn from which we will not receive any
additional funding.
OUR BUSINESS STRATEGY
We pursue parallel development of product candidates at various stages to
maximize the probability for successful product commercialization. Our
development programs focus on significant unmet medical needs that we believe
provide substantial commercial opportunity and limited competition. We have
in-licensed five antibiotic compounds or technologies, and we intend to continue
to pursue attractive in-licensing opportunities to add breadth and depth to our
research and development portfolio. We are evaluating new formulations and
clinical uses for our product candidates as well.
We plan to market and sell our products, if they receive FDA approval, in
the U.S. through a direct sales force focused on major hospitals. We believe
that a relatively small sales force will initially be effective, as our first
two products target oncology-related indications treated by roughly the same
physician group. This sales force may also be used to market and sell our future
products. We intend to license our foreign product rights to other
pharmaceutical companies to commercialize our products abroad.
2
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by IntraBiotics......... 7,500,000 shares
Common stock to be outstanding upon
completion of this offering................ 28,581,054 shares
Use of proceeds.............................. Clinical trials, development and scale-up of
manufacturing processes by our contract
manufacturers, research and development
activities, acquisition of new technologies
or products, working capital and other
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol....... IBPI
</TABLE>
The number of shares of common stock to be outstanding upon completion of
this offering is based on the number of shares outstanding as of December 31,
1999 and excludes:
- 3,746,896 shares of common stock issuable upon exercise of outstanding
options at a weighted average exercise price of $1.16 per share;
- 677,000 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $9.50 per share; and
- 123,501 shares of common stock available for issuance under our stock plan
as of December 31, 1999, and 5,500,000 additional shares of common stock
that were approved for issuance under stock plans after December 31, 1999.
IntraBiotics effected a 1-for-2 reverse stock split of our common stock on
February 28, 2000.
------------------------
UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES:
- THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED STOCK INTO COMMON
STOCK UPON THE CLOSING OF THIS OFFERING; AND
- NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
3
<PAGE>
Summary Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenues.................................... $ -- $ -- $ 5,507 $ 6,357 $ 7,863
Operating expenses:
Research and development.................. 2,181 4,049 8,103 21,997 26,102
General and administrative................ 682 949 1,960 2,533 6,082
------- ------- ------- -------- --------
Total operating expenses................ 2,863 4,998 10,063 24,530 32,184
------- ------- ------- -------- --------
Operating loss............................ (2,863) (4,998) (4,556) (18,173) (24,321)
Interest income, net........................ 41 182 481 791 1,206
------- ------- ------- -------- --------
Net loss.................................. $(2,822) $(4,816) $(4,075) $(17,382) $(23,115)
======= ======= ======= ======== ========
Basic and diluted net loss per share........ $(14.25) $(11.92) $ (6.39) $ (20.89) $ (21.62)
======= ======= ======= ======== ========
Shares used in computing basic and diluted
net loss per share........................ 198 404 638 832 1,069
======= ======= ======= ======== ========
Pro forma basic and diluted net loss
per share................................. $ (1.27)
========
Shares used in computing pro forma basic and
diluted net loss per share................ 18,172
========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
---------------------------
Actual As Adjusted (1)
-------- ----------------
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments......... $31,429 $128,029
Working capital........................................... 25,743 122,343
Total assets.............................................. 35,958 132,558
Long-term obligations, less current portion............... 1,725 1,725
Deferred stock compensation............................... (12,650) (12,650)
Accumulated deficit....................................... (52,874) (52,874)
Total stockholders' equity................................ 27,914 124,514
</TABLE>
- ------------------------
(1) The as adjusted column reflects the sale of 7,500,000 shares of our common
stock in the public offering at an assumed initial public offering price of
$14.00 per share, after deducting underwriting discounts and commissions and
estimated offering expenses.
We were incorporated in Delaware in 1994. Our executive offices and
laboratories are located at 1255 Terra Bella Avenue, Mountain View, California,
94043. Our telephone number is (650) 526-6800 and our web site is
www.intrabiotics.com. The information on our website is not incorporated into
and is not intended to be a part of this prospectus.
IntraBiotics and the IntraBiotics logo are trademarks of IntraBiotics. All
other trademarks used in this prospectus are the property of their respective
owners.
4
<PAGE>
RISK FACTORS
ANY INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER
WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE
WHETHER TO BUY OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR,
OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD SUFFER
SIGNIFICANTLY. IN ANY SUCH CASE, THE MARKET PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON
STOCK.
Risks Related to Our Business
We expect to continue to incur future operating losses and may never achieve
profitability.
We have never generated revenue from product sales and have incurred
significant net losses in each year since inception. We incurred net losses of
$4.1 million in 1997, $17.4 million in 1998 and $23.1 million in 1999. As of
December 31, 1999, our accumulated deficit was approximately $52.9 million. We
expect to continue to incur substantial additional losses for the foreseeable
future primarily as a result of increases in clinical trial expense costs, and
we may never become profitable. In addition, we expect increases in preclinical
research to identify new product candidates and manufacturing and development
costs to commercialize Ramoplanin and IB-367 Rinse. To date, we have financed
our operations primarily through the private sale of equity securities, funds
received from a terminated collaboration agreement and the proceeds of equipment
financing arrangements. We will receive product revenues only if we complete
clinical trials with respect to one or more products, receive regulatory
approvals and successfully commercialize such products.
We may be forced to raise capital sooner than currently anticipated and if we
fail to obtain the capital necessary to fund our operations, we will be unable
to develop our drug candidates and may have to cease operations.
We believe that the proceeds from this offering, together with our current
cash balances and cash equivalents of approximately $18.9 million, short-term
investments of approximately $12.6 million will be sufficient to meet our
operating and capital requirements for at least the next 12 months. However, we
have based this estimate on assumptions that may prove to be wrong. For the
years ended December 31, 1999 and 1998, net cash used for operating activities
was $24.7 million and $9.3 million, respectively. Our future liquidity and
capital requirements will depend on many factors, including the timing, cost,
extent and results of clinical trials, payments associated with manufacturing
scale-up, the costs and timing of regulatory approvals, costs associated with
researching drug candidates, securing in-licensing opportunities and conducting
preclinical research. We discuss additional factors in more detail in
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Results of Operations."
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, drug candidates or marketing territories. We believe that
additional financing may be required in the future to fund our operations. We do
not know whether additional financing will be available when needed or on
acceptable terms, if at all. If we are unable to raise additional financing when
necessary, we may have to delay some or all of our product development efforts
or be forced to cease operations.
We depend on the outcome of our clinical trials and if they are unsuccessful, we
may not be able to commercialize our products and generate product revenue.
Before obtaining regulatory approvals for the commercial sale of any
products, we must demonstrate through preclinical research and clinical trials
that our drug candidates are safe and
5
<PAGE>
effective for use in humans. We currently have two drug candidates which have
completed phase II clinical trials, Ramoplanin Oral and Protegrin IB-367 Rinse.
If either drug candidate fails to establish safety and efficacy in phase III
clinical trials, we would be unable to obtain regulatory approval from the FDA
or to commercialize the drug candidate, and we will be unable to generate
product revenue. Clinical trials are expensive and time-consuming to conduct,
and the outcome of these trials is uncertain. A number of new drugs have shown
promising results in clinical trials, but subsequently failed to establish
sufficient safety and efficacy data to obtain necessary regulatory approvals. A
number of companies have suffered significant setbacks in advanced clinical
trials, even after promising results in earlier trials.
In addition, if we have delays in clinical trials or the FDA approval
process or if we need to perform more or larger clinical trials, our product
development costs will increase and our ability to generate product revenue will
be delayed.
Our commencement and completion of clinical trials may be delayed by many
factors, including:
- slower than expected rate of patient recruitment;
- inability to adequately obtain data about patients after their treatment;
- inability to manufacture sufficient quantities of materials used for
clinical trials;
- unforeseen safety issues; or
- inability to show efficacy with statistical significance during the
clinical trials.
If the delays are substantial, the increase in product development expenses
could cause our losses to increase and diminish the commercial potential for our
drug products.
If our collaborative partners assisting in our clinical trials fail to
appropriately manage our clinical trials, the trials could be delayed or could
fail.
We have limited experience in conducting and managing clinical trials. We
rely on several contract research organizations including, PharmaNet, Inc.,
Amarex Clinical Research and Axio Research Corporation, to assist us in managing
and monitoring our clinical trials. The FDA may inspect some of our clinical
investigational sites, our collaborative partner's records and our facility and
files to determine if the clinical trials were conducted according to good
clinical practices. If the FDA determines that the trials were not in
compliance, we may be required to repeat the clinical trials. If our contract
research organizations fail to perform under our agreements with them, we may
face delays in completing our clinical trials or failure of our clinical
program.
If our single-source third party manufacturers fail to produce clinical or
commercial quantities of our drug candidates, we may not have sufficient
quantities of our drug candidates to meet demand.
We rely on PolyPeptide Laboratories A/S and Biosearch Italia S.p.A. to
manufacture our bulk drug substances on a commercial scale. While we maintain a
limited inventory of our drug candidates, we depend on these single-source
contract manufacturers to produce each of our products for use in our clinical
trials. Our contract manufacturers have no experience in manufacturing Protegrin
IB-367 or Ramoplanin in quantities sufficient for commercialization and may have
difficulty in scaling up production. If our contract manufacturers are unable or
fail to produce the required quantities of our drug candidates for clinical use
or commercial sale on a timely basis, at commercially reasonable prices and with
sufficient purity, we will not have sufficient quantities of our drug candidates
to complete current and future clinical trials, or to meet commercial demand. In
6
<PAGE>
addition, we currently intend to contract with third parties for the manufacture
of the final formulation. We cannot guarantee that we will be able to contract
with a reliable manufacturer on commercially reasonable terms.
We and our third-party manufacturers are required to register manufacturing
facilities with the FDA and foreign regulatory authorities. If these facilities
become unavailable for any reason or if our contract manufacturers fail to
comply with the FDA's current good manufacturing practices or if our contract
manufacturers terminate their agreements with us, we would have to find an
alternative source for manufacturing our drug candidates. There are, on a
worldwide basis, a limited number of contract facilities in which our drug
candidates can be produced under current good manufacturing practice
regulations. In addition, the manufacturing processes for Protegrin IB-367 and
Ramoplanin are extremely complex and proprietary. If we are unable to continue
having Protegrin IB-367 or Ramoplanin manufactured by our current contract
manufacturers, we do not know if we could engage another contract manufacturer
when needed or on acceptable terms, if at all.
If we fail to obtain FDA approvals for our products, we will be unable to
commercialize our drug candidates.
We do not have a drug candidate approved for sale in the U.S. or any foreign
market. We must obtain approval from the FDA in order to sell our drug
candidates in the U.S. and from foreign regulatory authorities in order to sell
our drug candidates in other countries. We must successfully complete our
phase III clinical trials and demonstrate manufacturing capability before we can
file with the FDA for approval to sell our products. The FDA could require us to
repeat clinical trials as part of the regulatory review process. Delays in
obtaining or failure to obtain regulatory approvals may:
- delay or prevent the successful commercialization of any of our drug
candidates;
- diminish our competitive advantage; and
- defer or decrease our receipt of revenues or royalties.
The regulatory review and approval process is lengthy, expensive and
uncertain. Extensive preclinical and clinical data and supporting information
must be submitted to the FDA for each indication to establish safety and
effectiveness in order to secure FDA approval. We have limited experience in
obtaining such approvals, and cannot be certain when we will receive these
regulatory approvals, if ever.
In addition to initial regulatory approval, our drug candidates will be
subject to extensive and rigorous ongoing domestic and foreign government
regulation, as we discuss in more detail in "Business--Government Regulation."
Any approvals, once obtained, may be withdrawn if compliance with regulatory
requirements is not maintained or safety problems are identified. Failure to
comply with these requirements may subject us to stringent penalties.
Development and commercialization of competitive products could reduce or
prevent sales of our products and reduce revenue.
We may be unable to compete successfully if others develop and commercialize
competitive products that are less expensive, more effective, have fewer side
effects or are easier to administer than our drug candidates. If we are unable
to compete successfully with our drug candidates, physicians may not recommend
and patients may not buy our drugs which would cause our product revenue to
decline.
There are several drugs under development that might compete with Ramoplanin
Oral and Protegrin IB-367 Rinse. To the best of our knowledge, there are no
direct competitors approved or
7
<PAGE>
under development for the prevention of VRE bloodstream infections. However,
there is one approved product for the treatment of VRE infections,
Synercid-Registered Trademark-, and another product,
Zyvox-Registered Trademark-, is currently under review by the FDA. For oral
mucositis, there is one approved device, Radiacare-Registered Trademark-, and
several drugs in early stage clinical trials. These include two growth factors,
keratinocyte growth factor and interleukin-11, as well as a chemoprotective
agent, Ethyol-Registered Trademark-. The companies sponsoring these trials have
successfully commercialized products in the past. In addition, there may be
products under development of which we are unaware for the prevention of VRE
bloodstream infections or the treatment of oral mucositis.
Many of our competitors and related private and public research and academic
institutions have substantially greater experience, 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 drugs, obtaining
regulatory approvals and manufacturing and marketing products. We also compete
with these organizations and other companies for in-licensing opportunities for
future drug candidates and in attracting scientific and management personnel.
If we are unable to adequately protect our intellectual property, we may be
unable to sell our products or to compete effectively.
We rely on a combination of patents, trade secrets and contractual
provisions to protect our intellectual property. If we fail to adequately
protect our intellectual property, other companies or individuals may prevent us
from selling our products or may develop competing products based on our
technology. 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.
We try to protect our proprietary position by filing U.S. and foreign patent
applications related to our proprietary technology, inventions and improvements
that are important to the development of our business. For example, we own or
have rights to 7 patents and 2 pending patent applications in the U.S. However,
the patent position of biopharmaceutical companies involves complex legal and
factual questions. We cannot predict the enforceability or scope of any issued
patents or those that may issue in the future. Patents, if issued, may be
challenged, invalidated or circumvented. Consequently, if any patents that we
own or license from third parties do not provide sufficient protection, our
competitive position would be weakened. Furthermore, others may independently
develop similar technologies or duplicate any technology that we have developed.
In addition, we may not be issued patents for our pending patent applications,
those we may file in the future, or those we may license from third parties.
In addition to patents, we rely on trade secrets and proprietary know-how.
Our contract manufacturers perform the manufacturing processes covered by these
trade secrets. Accordingly, our contract manufacturers and we must maintain
confidentiality. We have confidentiality and proprietary information agreements
with our contract manufacturers and with our employees. 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.
8
<PAGE>
We may be subject to intellectual property litigation which could be costly and
time-consuming.
The biotechnology and pharmaceutical industries have been characterized by
extensive litigation regarding patents and other intellectual property rights.
Although we are not currently party to any lawsuits, third parties may assert
infringement or other intellectual property claims against us. We may have to
pay substantial damages, including treble damages, for past infringement if it
is ultimately determined that our products infringe a third party's proprietary
rights. The defense and prosecution of intellectual property suits, U.S. Patent
and Trademark Office interference proceedings and related legal and
administrative proceedings in the U.S. and internationally are costly and
time-consuming to pursue and their outcome is uncertain. If we become involved
in any of these proceedings, we will incur substantial expense and the efforts
of our technical and management personnel will be significantly diverted. An
adverse determination may result in the invalidation of our patents subject us
to significant liabilities or require us to seek licenses that may not be
available from third parties on satisfactory terms, or at all. Our stock price
could decline based on any public announcements related to litigation or
interference proceedings initiated or threatened against us.
If physicians and patients do not accept our products, we may be unable to
generate significant revenue, if any.
Our drug candidates may not gain market acceptance among physicians,
patients, and the medical community. If any of our drug candidates fail to
achieve market acceptance, we may be unable to successfully market and sell the
product, which would limit our ability to generate revenue. The degree of market
acceptance of any drug candidate depends on a number of factors, including:
- demonstration of clinical efficacy and safety;
- cost-effectiveness;
- convenience and ease of administration;
- potential advantage over alternative treatment methods; and
- marketing and distribution support.
Currently, we have two drug candidates entering phase III clinical trials
and do not have any drug candidate approved by the FDA. Physicians will not
recommend our products until such time as clinical data or other factors
demonstrate the safety and efficacy of our drugs as compared to other
treatments. In practice, competitors may be more effective in marketing their
drugs. Even if the clinical safety and efficacy of our antibiotic products is
established, physicians may elect not to recommend products. For example,
physicians may be reluctant to prescribe widespread use of our products because
of concern about developing bacterial strains which are resistant to our drugs.
If we are unable to establish sales, marketing and distribution capabilities or
enter into agreements with third parties to perform these services, we will be
unable to commercialize our drug products.
We do not currently have marketing, sales or distribution capabilities. For
our initial products, Ramoplanin Oral and IB-367 Rinse, we intend to establish a
direct marketing and sales force in the U.S. and Canada. If we fail to establish
successful marketing and sales capabilities or fail to enter into successful
marketing arrangements with third parties, we would be unable to commercialize
these drug products. We must develop a marketing and sales force with technical
expertise and distribution capabilities to market any of our products directly.
We intend to enter into arrangements
9
<PAGE>
with third parties to market and sell most of our products outside of the U.S.
and Canada. To the extent that we enter into marketing and sales arrangements
with other companies, our revenues will be lower than if we marketed the
products directly.
The failure to recruit and retain key personnel may delay our ability to
complete, develop and commercialize Ramoplanin, IB-367 Rinse and our earlier
stage products.
We are highly dependent on our management and technical staff. Competition
for personnel is intense. If we lose the services of any of our senior
management, we may be delayed in our product development and commercialization
efforts. We do not maintain key person life insurance and do not have employment
agreements with our management and technical staff. In order 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, marketing and finance. We may not be able
to attract and retain personnel on acceptable terms given the competition for
such personnel among biotechnology, pharmaceutical and other companies.
In addition, we rely on consultants to assist us in formulating our research
and clinical development strategy. All of our consultants are employed by other
entities. They may have commitments to, or relationships with, other entities
that may limit their availability to us. The loss of the services of these
personnel may delay our research and development efforts.
Risks Related to This Offering
Directors, executive officers, principal stockholders and affiliated entities
own a significant portion of our capital stock and will have substantial control
over our activities.
Upon completion of this offering, our directors, executive officers,
principal stockholders and affiliated entities will beneficially own, in the
aggregate, approximately 50% of our outstanding common stock. These
stockholders, if acting together, will be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions.
Antitakeover provisions in our charter documents and under Delaware law may make
an acquisition of us more difficult.
Provisions of our certificate of incorporation and bylaws could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our stockholders.
These provisions:
- provide for a classified board of directors of which approximately one
third of the directors will be elected each year;
- allow the authorized number of directors to be changed only by resolution
of the board of directors;
- require that stockholder actions must be effected at a duly called
stockholder meeting and prohibit stockholder action by written consent;
- establish advance notice requirements for nominations to the board of
directors or for proposals that can be acted on at stockholder meetings;
and
- limit who may call stockholder meetings.
In addition, because we are incorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law which may
prohibit large stockholders from
10
<PAGE>
consummating a merger with or acquisition of us. These provisions may prevent a
merger or acquisition that would be attractive to stockholders and could limit
the price that investors would be willing to pay in the future for our common
stock.
If our stockholders sell substantial amounts of our common stock after the
offering, the market price of our common stock may decline.
The number of shares of common stock available for sale in the public market
is limited by restrictions under federal securities law and under lockup
agreements with our underwriters. These lockup agreements restrict some of our
stockholders from disposing of their shares for 180 days after the date of this
prospectus without the prior written consent of Deutsche Bank Securities Inc.
However, Deutsche Bank Securities Inc. may release all or any portion of the
common stock from the restrictions in the lockup agreements. Any sales of
substantial amounts of common stock after the offering, including shares issued
upon the exercise of outstanding options and warrants, may cause the market
price of our common stock to decline. We discuss in detail in "Shares Eligible
For Future Sale" when shares of Common Stock not sold in this offering will be
eligible for sale in the public market.
Our stock price may be volatile, and the value of your investment may decline.
Prior to this offering there has been no public market for our common stock.
An active public market for our stock may not develop or be sustained after the
offering. The initial public offering price will be determined by negotiations
between us and our underwriters and may not be indicative of future market
prices. The market prices for securities of biotechnology companies in general
have been highly volatile and our stock may be subject to volatility. The
following factors, in addition to the other risk factors described in this
section, may have a significant impact on the market price of our common stock:
- announcements of technological innovations or new commercial products by
our competitors or us;
- developments concerning proprietary rights;
- publicity regarding actual or perceived adverse events in our clinical
trials or relating to products under development by our competitors;
- regulatory developments in the U.S. or foreign countries;
- litigation;
- significant short selling in our common stock;
- economic and other external factors; and
- period-to-period fluctuations in our financial results and changes in
analysts' recommendations.
New investors in our common stock will experience immediate and substantial
dilution.
The initial public offering price is substantially higher than the book
value per share of our common stock. This means that investors purchasing stock
in this offering will pay a price that exceeds the value of our assets after
subtracting our liabilities. Investors in this offering will contribute
approximately 56% of the total consideration paid to IntraBiotics in equity
financings but will own only 26% of the shares outstanding, assuming an initial
public offering price of $14.00 per share. Investors purchasing common stock in
the offering will therefore incur immediate dilution in the net tangible book
value per share of common stock as set forth in more detail in "Dilution." In
addition, the number of shares available for issuance under our stock option and
employee stock purchase plans will automatically increase without stockholder
approval. Investors will incur additional dilution upon the exercise of
outstanding stock options and warrants.
11
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
We make many statements in the prospectus under the captions Summary, Risk
Factors, Management's Discussion and Analysis of Financial Condition and Results
of Operations and Business and elsewhere that are forward-looking and are not
based on historical facts. These statements relate to our future plans,
objectives expectations and intentions. We may identify these statements by the
use of words such as believe, expect, will, anticipate, intend and plan and
similar expressions. These forward looking statements involve a number of risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those we discuss in Risk Factors and elsewhere in this prospectus.
These forward-looking statements speak only as of the date of this prospectus,
and we caution you not to rely on these statements without considering the risks
and uncertainties associated with these statements and our business that are
addressed in this prospectus.
These forward-looking statements are included, for example, in the
discussion about:
- our strategy;
- sufficiency of cash resources;
- product development;
- our research and development and other expenses; and
- operational and legal risks.
Given these uncertainties, you should not place undue reliance on such
forward-looking statements. We are not under any duty to update any of the
forward-looking statement after the date of this prospectus to conform these
statements to actual results except as required by law.
Information regarding market and industry statistics contained in the
Summary and Business sections is included based on information available to us
that we believe is accurate. It is generally based on academic and other
publications that are not produced for purposes of securities offerings or
economic analysis. We have not reviewed or included data from all sources and
cannot assure you of the accuracy of the data we have included.
12
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of 7,500,000 shares of common stock we are
offering are estimated to be $96.6 million ($111.2 million if the underwriters'
over-allotment option is exercised in full) assuming an initial public offering
price of $14.00 per share and after deducting the underwriting discounts and
commissions and our estimated offering expenses. We intend to use the net
proceeds of the offering primarily for funding clinical trials and the
development and scale up of manufacturing processes by our contract
manufacturers. The balance of the proceeds, as well as existing cash, will be
used to fund other research and development activities including identification,
testing and acquisition of additional potential in-licensing candidates, further
development of our other programs currently in process, expansion of research
and development capabilities, working capital and other general corporate
purposes. We may also use a portion of the proceeds for the acquisition of, or
investment in, companies, technologies or assets that complement our business.
However, we have no present understandings, commitments or agreements to enter
into any potential acquisitions and investments.
The amount and timing of our actual expenditures will depend on many factors
including the timing, extent, cost and progress of clinical trials, the costs
and success of manufacturing drug substances, and opportunities for in-licensing
technologies and compounds. Until the funds are used as described above, we
intend to invest the net proceeds of the offering in short-term, interest-
bearing, investment grade securities.
DIVIDEND POLICY
The payment of dividends is within the discretion of our board of directors.
Our ability to pay any future dividends will depend on our earnings, operating
and financial condition, projected capital requirements and restrictions under
our credit facilities. In this regard, our term loan and security agreement with
Silicon Valley Bank prohibits the payment of dividends without the consent of
the lender. We have never declared or paid any cash dividends on shares of our
capital stock and do not intend to do so at any time in the foreseeable future.
13
<PAGE>
CAPITALIZATION
The following table sets forth the following information:
- our actual capitalization as of December 31, 1999;
- our pro forma capitalization as of that date after giving effect to the
conversion of all outstanding shares of preferred stock into 19,741,900
shares of common stock upon completion of this offering; and
- our pro forma capitalization as adjusted to reflect the receipt of net
proceeds from our sale of 7,500,000 shares of common stock at an assumed
initial public offering price of $14.00 per share in this offering, less
the underwriting discounts and commissions and estimated offering
expenses.
<TABLE>
<CAPTION>
December 31, 1999
----------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands except share
and per share data)
<S> <C> <C> <C> <C>
Long-term obligations, less current portion.................. $ 1,725 $ 1,725 $ 1,725
-------- -------- --------
Stockholders' equity:
Preferred stock, $0.001 par value; 40,937,873
shares authorized, actual and pro forma,
5,000,000 shares authorized, pro forma as
adjusted: 39,483,873 shares issued and
outstanding, actual; none issued and outstanding
pro forma and pro forma as
adjusted................................................... 79,609 -- --
Common stock, $0.001 par value; 67,500,000 shares
authorized; actual and pro forma; 50,000,000
shares authorized pro forma as adjusted;
1,339,154 shares issued and outstanding, actual;
21,081,054 shares issued and outstanding, pro
forma; and 28,581,054 shares issued and
outstanding, pro forma as
adjusted................................................... 1 21 29
Additional paid-in capital................................... 13,828 93,417 190,009
Deferred stock compensation.................................. (12,650) (12,650) (12,650)
Accumulated deficit.......................................... (52,874) (52,874) (52,874)
-------- -------- --------
Total stockholders' equity................................... 27,914 27,914 124,514
-------- -------- --------
Total capitalization......................................... $ 29,639 $ 29,639 $126,239
======== ======== ========
</TABLE>
The number of shares of common stock referenced above excludes as of
December 31, 1999:
- 3,746,896 shares of common stock issuable upon exercise of outstanding
options at a weighted average exercise price of $1.16 per share.
- 677,000 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $9.50.
- 123,501 shares of common stock available for issuance under our stock plan
as of December 31, 1999, and 5,500,000 additional shares of common stock
that were approved for issuance under stock plans after December 31, 1999.
14
<PAGE>
DILUTION
Our pro forma net tangible book value of the common stock as of
December 31, 1999 was approximately $27.9 million, or approximately $1.32 per
share of common stock assuming conversion of all outstanding preferred stock
into an aggregate of 19,741,900 shares of common stock upon the closing of the
offering. After giving effect to the sale of 7,500,000 shares of common stock in
this offering at an assumed price of $14.00 per share and after deduction of the
underwriting discount and estimated offering expenses, our pro forma net
tangible book value after the offering would have been approximately
$124.5 million, or $4.36 per share.
Pro forma net tangible book value per share before the offering has been
determined by dividing pro forma net tangible book value (total tangible assets
less total liabilities) by the pro forma number of shares of common stock
outstanding at December 31, 1999. The offering will result in an increase in pro
forma as adjusted net tangible book value of $3.04 per share to existing
investors and an immediate dilution of $9.64 per share to new investors, or
approximately 69% of the assumed offering price of $14.00 per share. Dilution is
determined by subtracting pro forma net tangible book value per share after the
offering from the assumed initial public offering price. The following table
illustrates this calculation of per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Pro forma net tangible book value per share as of
December 31, 1999...................................... $1.32
Increase per share attributable to new investors........ 3.04
-----
Pro forma net tangible book value per share after this
offering.................................................. 4.36
------
Dilution per share to new investors......................... $ 9.64
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the differences between the number of shares of common stock issued by
IntraBiotics, the total consideration paid and the average price per share paid
by the existing stockholders and by new investors, before deducting underwriting
discounts and commissions and estimated offering expenses, at an assumed initial
public offering price of $14.00 per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
---------------------- ----------------------- Price Per
Number Percent Amount Percent Share
----------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................... 21,081,054 74% $81,394,000 44% $ 3.86
New investors........................... 7,500,000 26 105,000,000 56 14.00
---------- --- ----------- ---
Total................................... 28,581,054 100% 186,394,000 100%
========== === =========== ===
</TABLE>
These tables do not assume exercise of stock options and warrants
outstanding at December 31, 1999. At December 31, 1999, there were 3,746,896
shares of common stock issuable upon exercise of outstanding stock options at a
weighted average exercise price of $1.16 per share and 677,000 shares of common
stock issuable upon exercise of outstanding warrants at a weighted average
exercise price of $9.50 per share. The pro forma net tangible book value per
share would be $1.54, the dilution per share to new investors would be $9.63
after giving effect to the exercise of the options and warrants outstanding and
exercisable as of December 31, 1999.
15
<PAGE>
SELECTED FINANCIAL DATA
This section presents our historical financial data. You should read
carefully the financial statements included in this prospectus, including the
notes to the financial statements, and Management's Discussion and Analysis of
Financial Condition and Results of Operations. The statement of operations data
for the years ended December 31, 1997, 1998 and 1999 and the balance sheet data
as of December 31, 1998 and 1999 have been 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, 1995 and 1996 and the balance sheet data as of
December 31, 1995, 1996 and 1997 have been derived from financial statements
that have been audited by Ernst & Young LLP, and are not included elsewhere in
this prospectus. Historical results are not necessarily indicative of future
results. See notes to the financial statements for an explanation of the method
used to determine the number of shares used in computing pro forma basic and
diluted net loss per share.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Contract revenue................................... $ -- $ -- $ 3,507 $ 5,357 $ 7,863
License fee and milestone revenue.................. -- -- 2,000 1,000 --
------- ------- ------- -------- --------
Total revenue.................................... -- -- 5,507 6,357 7,863
Operating expenses:
Research and development........................... 2,181 4,049 8,103 21,997 26,102
General and administrative......................... 682 949 1,960 2,533 6,082
------- ------- ------- -------- --------
Total operating expenses......................... 2,863 4,998 10,063 24,530 32,184
------- ------- ------- -------- --------
Operating loss....................................... (2,863) (4,998) (4,556) (18,173) (24,321)
Interest income...................................... 121 243 575 963 1,372
Interest expense..................................... (80) (61) (94) (172) (166)
------- ------- ------- -------- --------
Net loss....................................... $(2,822) $(4,816) $(4,075) $(17,382) $(23,115)
======= ======= ======= ======== ========
Basic and diluted net loss per share................. $(14.25) $(11.92) $ (6.39) $ (20.89) $ (21.62)
======= ======= ======= ======== ========
Shares used in computing basic and diluted net loss
per share.......................................... 198 404 638 832 1,069
======= ======= ======= ======== ========
Pro forma basic and diluted net loss per share....... $ (1.27)
========
Shares used in computing pro forma basic and diluted
net loss per share................................. 18,172
========
</TABLE>
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data(1):
Cash, cash equivalents and short-term investments... $ 1,280 $ 4,713 $ 20,779 $ 29,869 $ 31,429
Working capital..................................... 815 4,252 18,851 21,279 25,743
Total assets........................................ 1,712 5,312 24,987 32,099 35,958
Long-term obligations, less current portion......... 302 407 1,036 867 1,725
Deferred stock compensation......................... -- -- -- (1,145) (12,650)
Accumulated deficit................................. (3,487) (8,302) (12,377) (29,759) (52,874)
Total stockholders' equity.......................... 923 4,410 19,765 22,498 27,914
</TABLE>
- --------------------------
(1) The balance sheet data presented above reflect the effects of net proceeds
from the issuance of convertible preferred stock of $19.4 million,
$20.0 million and $27.5 million in the years ended December 31, 1997, 1998
and 1999, respectively.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ TOGETHER WITH "SELECTED FINANCIAL DATA" AND OUR
FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS.
THIS DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS, UNCERTAINTIES AND ASSUMPTIONS. THE ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY
FACTORS, INCLUDING BUT NOT LIMITED TO THOSE SET FORTH UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
Overview
We are engaged in the development of novel antibiotic drugs for the
prevention or treatment of serious infectious diseases. Since our inception in
January 1994, we have devoted substantially all of our resources to the
acquisition, preclinical research and clinical development of antibiotic
compounds. We currently have two antibiotic drug candidates, Ramoplanin Oral and
Protegrin IB-367 Rinse in late stage clinical development.
Our sole source of revenue has been a development and commercialization
collaboration agreement entered into in October 1997 with Pharmacia & Upjohn
S.p.A for Protegrin IB-367 Rinse. This agreement was terminated by mutual
agreement of the parties in July 1999 with funding continuing through the end of
1999. We will not receive any additional research funding or revenue under this
agreement. The termination of this agreement eliminated a source of cash for the
funding of these development efforts and eliminated the related future contract
revenues. As a result, our net loss is expected to increase for the next several
years as we develop this drug candidate. We do not believe the termination of
this agreement will have a material impact on our ability to continue to fund
our research and development programs from our available resources.
Since our inception, we have been unprofitable and, as of December 31, 1999,
we had an accumulated deficit of approximately $52.9 million. The process of
developing our drugs will require significant additional research and
development, preclinical studies and clinical trials, as well as regulatory
approval and manufacturing and commercialization activities. These activities,
together with our general and administrative expenses, are expected to result in
significant additional operating losses for the foreseeable future. We will
receive revenue from product sales only if we complete clinical trials, obtain
regulatory approvals and successfully commercialize at least one of our drug
candidates.
Results of Operations
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
REVENUE. Revenue increased to $7.9 million for the year ended December 31,
1999, from $6.4 million for the year ended December 31, 1998, and $5.5 million
for the year ended December 31, 1997. To date, all of our revenue has been
generated under the prior agreement with Pharmacia & Upjohn. The increases from
1998 to 1999 and 1997 to 1998 were primarily the result of increased contract
revenue under the terms of this agreement, partially offset by the timing of
license fees and milestone revenue recognized under this agreement. We
recognized a nonrefundable, noncreditable license fee of $2.0 million in 1997
upon execution of the license with Pharmacia & Upjohn. There were no future
performance obligations in connection with the grant of the license. We also
recognized revenue based upon reimbursement of expenses and the number of
full-time equivalent employees working on the Protegrin IB-367 Rinse program. In
1998, we recognized a nonrefundable payment of $1.0 million upon completion of a
development milestone. The contract was terminated in July 1998, and we will not
recognize any additional revenue under this agreement. We do not anticipate any
product revenue in the near future.
17
<PAGE>
RESEARCH AND DEVELOPMENT. Research and development expenses increased to
$26.1 million for the year ended December 31, 1999, from $22.0 million for the
year ended December 31, 1998, and $8.1 million for the year ended December 31,
1997. The increase in 1999 was primarily due to the phase II clinical trials for
Protegrin IB-367 Rinse and Ramoplanin Oral totaling approximately $700,000, an
increase in research and development personnel of approximately $2.0 million and
expenses related to a new facility of approximately $800,000. The research and
development expenses in 1999 also included amortization of $648,000 of deferred
stock compensation in connection with the grant of stock options to officers and
employees.
The increase from 1997 to 1998 was primarily the result of increases in
clinical costs associated with expanding from one to four clinical programs. In
1998, $5.1 million in license fees and milestones were expensed. Of the
$5.1 million in license fees and milestones, $4.0 million is related to
Ramoplanin Oral including $2.0 million for the purchase of license rights to
develop and commercialize the chemical entity in oral dosage forms for
anti-microbial use in the U.S. and Canada. Although the proof of concept for
this chemical entity had been demonstrated in early-stage phase I clinical
trials, significant further work was necessary to develop our product,
Ramoplanin Oral. We were able to start phase II clinical trials shortly after
signing the agreement, triggering a two (2) million dollar milestone payment,
because preliminary safety and efficacy had been demonstrated in the earlier
clinical trials. This product candidate is now entering phase III clinical
trials. The timing of completion of the clinical trials and the
commercialization of the product candidate is uncertain and depends on the rate
of patient enrollment in the trial and the ability to obtain patient data, the
availability of sufficient quantities of the drug to complete the trial, any
development of safety issues during the trial, the ability to demonstrate
efficacy, our ability to fund the trial and the outcome of any FDA review. We
discuss these factors in more detail in "Risk Factors--We depend on the outcome
of our clinical trials and if they are unsuccessful, we may not be able to
commercialize our products and generate product revenue." Additional milestone
payments will be required when phase III trials are initiated and we expect to
make this payment in 2000, also milestone payments will be required when the new
drug application is filed.
We expect that research and development expenses will increase significantly
in the future as new and existing product candidates advance into later stages
of clinical development, in particular phase III clinical trials for Protegrin
IB-367 Rinse and Ramoplanin Oral.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $6.1 million for the year ended December 31, 1999, from $2.5 million for the
year ended December 31, 1998, and $2.0 million for the year ended December 31,
1997. The increase in 1999 was primarily due to increases in finance and
administrative personnel of approximately $600,000, market research expenses
associated with clinical trials for Protegrin IB-367 Rinse and Ramoplanin Oral
of approximately $1.0 million, and expenses related to the new facility of
approximately $400,000. General and administrative expenses in 1999 also
included amortization of $333,000 of deferred stock compensation in connection
with the grant of stock options to officers and employees. We expect that
general and administrative expenses will continue to increase as we build
infrastructure to support our product development efforts, establish our sales
and marketing capabilities and to operate as a public company.
INTEREST INCOME. Interest income increased to $1.4 million for the year
ended December 31, 1999, from $963,000 for the year ended December 31, 1998, and
$575,000 for the year ended December 31, 1997. The increase from 1998 to 1999
was primarily due to increased cash balances resulting from the sale of
preferred stock. The increase from 1997 to 1998 was primarily due to increased
cash balances resulting from the sale of preferred stock, license fee and
milestone payments and contract revenue from the Pharmacia & Upjohn agreement.
18
<PAGE>
INTEREST EXPENSE. Interest expense was $166,000 for the year ended
December 31, 1999, compared to $172,000 for the year ended December 31, 1998,
and $94,000 for the year ended December 31, 1997. Interest expense consists of
interest paid on equipment financing arrangements.
Income Taxes
Since inception, we have incurred operating losses and accordingly have not
recorded a provision for income taxes for any of the periods presented. As of
December 31, 1999, our net operating loss carryforwards for federal and state
income tax purposes were approximately $46.0 million and $23.0 million,
respectively. We also had federal research and development tax credit
carryforwards of approximately $1.0 million. If not utilized, the net operating
loss and credit carryforwards will expire at various dates beginning in 2002
through 2019. Utilization of net operating losses and credits may be subject to
a substantial annual limitation due to ownership change limitations provided by
the Internal Revenue Code of 1986. The annual limitation may result in the
expiration of our net operating loss and credit carryforwards before they can be
used. Please read note 8 of the notes to financial statements for further
information.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
placements of preferred stock and warrants, funds received from our prior
collaboration with Pharmacia & Upjohn and from the proceeds of equipment
financing arrangements. As of December 31, 1999, we had raised aggregate net
proceeds from the sale of preferred stock and warrants of $79.6 million. Prior
to termination of the Pharmacia & Upjohn agreement, we received an aggregate of
$21.4 million in cash payments under this agreement, of which $1.7 million of
unused development funding will be returned to Pharmacia & Upjohn.
Cash, cash equivalents and short-term investments were $31.4 million at
December 31, 1999, compared to $29.9 million at December 31, 1998. Net cash used
for operating activities was $24.7 million and $9.3 million for the years ended
December 31, 1999 and 1998, respectively. The increase from 1998 to 1999
consisted primarily of operating expenses related to conducting clinical trials
and other research, development and administrative activities, and the timing of
cash payments related to these activities. Net cash used for investing
activities was $15.1 million and $597,000 for the years ended December 31, 1999
and 1998, respectively. The increase from 1998 to 1999 was primarily related to
$12.6 million in purchases, net of maturities, of short-term investments and a
$1.9 million increase in capital expenditures in 1999. Net cash provided by
financing activities was $28.8 million and $19.0 million for the years ended
December 31, 1999 and 1998, respectively. This increase was primarily related to
the sale of preferred stock and additional equipment financing received in 1999.
In March 1999, we entered into an equipment financing agreement with GE
Capital, to finance up to $3.0 million of equipment. The term of the loan is
42 months. The interest rate varies according to U.S. Treasury rates. As of
December 31, 1999, we had drawn down a total of approximately $2.0 million at an
average interest rate of 10.0%. We currently have $967,000 available under this
arrangement which can be drawn down on or before February 29, 2000. We
anticipate we will utilize substantially all of this balance.
In addition, we have two prior equipment financing arrangements with
GE Capital with an outstanding balance of $900,000 as of December 31, 1999. We
are currently repaying this amount at an annual average interest rate of 11.0%.
In connection with these equipment financings, we issued a warrant to purchase
54,000 shares of, Series B Preferred Stock, which converts into a warrant to
purchase 27,000 shares of common stock at an exercise price of $2.00 per share
upon
19
<PAGE>
the closing of the offering. This warrant expires in July 2001. We also issued a
warrant to purchase 50,000 shares of Series D Preferred Stock at an exercise
price of $2.50 per share which expires upon this offering.
In August 1999, we entered into a term loan agreement with Silicon Valley
Bank for $5.0 million. As of December 31, 1999, we had not drawn down funds on
the loan arrangement. The loan may be drawn down prior to August 2000 and will
bear interest at the bank's prime rate of interest plus 1.25%. We anticipate
using this loan by August 2000 to fund our in-licensing programs, and ongoing
general corporate needs. This term loan will require us to comply with various
financial covenants, including minimum tangible net worth of $10.0 million and
minimum liquidity of two times the amount outstanding on the loan.
We expect to continue to incur substantial operating losses. We believe that
existing capital resources together with the net proceeds of this offering and
interest income will be sufficient to fund our operations for at least the next
12 months. This forecast is a forward-looking statement that involves risks and
uncertainties, and actual results could vary. Our future capital requirements
will depend on many factors, including:
- the timing, cost, extent and results of clinical trials;
- payments to third parties for manufacturing scale up;
- the costs and timing of regulatory approvals;
- the costs of establishing sales, marketing and distribution capabilities;
- the progress of our research and development activities;
- availability of technology in-licensing opportunities; and
- future opportunities for raising capital.
Until we can generate sufficient cash from our operations, which we do not
expect for the foreseeable future, we expect to finance future cash needs
through private and public financings, including equity financings. We cannot be
certain that additional funding will be available when needed or on favorable
terms. If funding is not available, we may need to delay or curtail our
development and commercialization activities to a significant extent.
Stock Compensation
In connection with the grant of stock options to employees, we recorded
deferred compensation totaling $12.5 million for the year ended December 31,
1999 and $1.2 million for the year ended December 31, 1998, representing the
difference between the exercise price and the deemed fair value of our common
stock for financial reporting purposes on the date those options were granted.
This amount is initially recorded as a component of stockholders' equity and is
being amortized over the vesting period of the individual options. We amortized
deferred stock compensation expense of $981,000 for the year ended December 31,
1999 and $48,000 for the year ended December 31, 1998. At December 31, 1999, we
had a total of $12.7 million remaining to be amortized over the vesting periods
of the stock options.
We expect to amortize deferred stock compensation for options granted as of
December 31, 1999 as follows:
<TABLE>
<CAPTION>
Year Amount
- ---- ------------
<S> <C>
2000............................................. $2.8 million
2001............................................. 2.8 million
2002............................................. 2.7 million
2003............................................. 2.2 million
2004............................................. 1.7 million
2005............................................. 0.5 million
</TABLE>
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In addition, we expect to record additional deferred compensation of
approximately $2.1 million for options granted in January 2000, which will also
be amortized over the vesting periods of these options. Please read note 6 of
the notes to financial statements for more information.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" which provides a comprehensive mechanism
and consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133, as deferred by SFAS 137, is effective for our
fiscal year ended December 31, 2001. SFAS 133 is not anticipated to have an
impact on our results of operations or financial condition when adopted as we do
not currently hold any derivative financial instruments and do not engage in
hedging activities.
Quantitative and Qualitative Disclosure Regarding Market Risk
The primary objective of our investment activities is to preserve our
capital until it is required to fund operations while at the same time
maximizing the income we receive from our investments without significantly
increasing risk. We own financial instruments that are sensitive to market risks
as part of our investment portfolio. To minimize this risk, we maintain a
portfolio of cash equivalents and short-term investments in a variety of
securities, including commercial paper, money market funds, government and
non-government debt securities. The average duration of all our investments in
1999 was less than one year. Due to the short term nature of these investments,
a 10% movement in market interest rates would not have a material impact on the
total fair value of our portfolio as of December 31, 1999.
Year 2000 Compliance
We are not aware of any significant adverse effects of the year 2000 issue
on any of our systems and those of our vendors.
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BUSINESS
IntraBiotics develops and intends to commercialize novel antibacterial and
antifungal drugs for the prevention or treatment of serious infectious diseases.
Our clinical and development programs focus on solving medical problems for
patients who currently have few or no satisfactory alternatives. Because our
drug candidates use novel mechanisms of action to kill bacteria or fungi, we
expect them to be particularly useful in fighting microorganisms that are
resistant to currently available antibiotics. The incidence of multi-drug
resistant bacterial infections is increasing throughout the world, a problem
referred to as the antibiotics crisis. As a result, there is a critical need for
new and effective antibiotic drug therapies.
Our current product portfolio includes two drug candidates, Ramoplanin Oral
and Protegrin IB-367 Rinse, that are about to begin phase III clinical trials.
Ramoplanin Oral is being developed to prevent bloodstream infections caused by
vancomycin resistant enterococci, or VRE. VRE infections are a particular
problem in hospitalized patients, and in many cases, prove fatal. Protegrin
IB-367 Rinse is being developed to treat oral mucositis. Oral mucositis is a
common debilitating side effect of cancer therapy and is characterized by severe
mouth ulcers that often become infected. We recently completed the phase II
clinical trials for both Ramoplanin Oral and Protegrin IB-367 Rinse in which
both drugs were well tolerated and achieved statistically significant clinical
results. In December 1999, we reviewed data and discussed our proposed phase III
protocols with the FDA. We expect to begin the phase III trials for both
products in the first half of 2000.
Antibiotics Overview
Since the discovery of penicillin more than 50 years ago, many types of
antibiotics have been developed to fight microorganisms. Every antibiotic kills
or inhibits bacteria in a specific way. For example, penicillins, cephalosporins
and vancomycin interfere with the bacterial cell's ability to manufacture cell
walls. Erythromycin and tetracyclines stop the production of proteins within the
cell that are needed for the bacteria to grow. Ciprofloxacin interferes with the
cell's replication of DNA necessary for survival of the bacteria.
Until recently, these traditional antibiotics have successfully treated
infectious disease. Over time, bacteria and fungi have grown resistant to
traditional antibiotics, a worldwide phenomenon commonly referred to as the
antibiotics crisis. Bacterial and fungal resistance developed because of the
prolonged exposure of the bacteria and fungi to sub-lethal doses of antibiotics,
allowing them to evolve until the antibiotics are no longer effective.
Microorganisms have developed resistance to antibiotics by:
- blocking the entry of the drug into the cell;
- changing the part of the cell that was the drug's original target;
- creating new ways to metabolize the drug; and
- developing ways to pump the drug out of the bacteria or fungi.
The incidence of antibiotic-resistant bacterial infections is increasing.
For example, one type of bacteria that has demonstrated increased resistance is
enterococcus, a type of bacteria commonly found in the intestines. In 1997, the
Centers for Disease Control and Prevention reported that 23% of all enterococcal
samples from patients in intensive care units were resistant to the antibiotic
vancomycin. This is an alarming increase from 0.4% in 1989. Vancomycin
resistance presents a serious challenge since the enterococci are frequently
also resistant to most other currently available antibiotics. Researchers at The
Johns Hopkins University reported that in 1999, 31% of patients with VRE
bloodstream infections died as a result of their infections.
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There is also an increasing population of patients with impaired immune
systems who are at increased risk of infection. These include the millions of
patients undergoing chemotherapy or radiotherapy to treat cancer, patients
undergoing major surgical or organ transplant procedures, and patients affected
by HIV or other diseases that impair or destroy the patients' immune systems.
These patients often spend significant time in the hospital, where multi-drug
resistant bacteria and fungi are usually found.
The antibiotics crisis was not widely recognized as a significant medical
problem until the 1990s. As a result, until recently, many pharmaceutical
companies believed there was little need for new antibiotics and diverted
research funds to other diseases. The number of antibiotics at all stages of
development decreased in the 1980s with a corresponding decrease in antibiotic
drug approvals. Consequently, at the same time that new, resistant strains of
bacteria began to emerge, development of antibiotics began to decrease.
Our Business Strategy
IntraBiotics is responding to the challenge raised by the antibiotics
crisis. We intend to develop and commercialize antibiotics specifically targeted
for multi-drug resistant microorganisms as well as other organisms that cause
serious diseases.
ACQUIRE PROMISING NEW ANTIBIOTIC CANDIDATES. We believe that in-licensing
is the most cost-effective way to build a diverse portfolio of drug candidates
at various stages of development. This allows us to capitalize on research
conducted and funded by others, including academic research laboratories and
pharmaceutical and biotechnology companies. We believe that our approach saves
substantial time and money and increases the probability of successfully
developing a new antibiotic. We evaluate new in-licensing opportunities by
rigorously screening each product candidate against a diverse set of criteria
that are designed to allow us to assess the economic return against the cost and
probability of success of each development program. Using this evaluation
process, we have identified and in-licensed Ramoplanin and Protegrin technology.
We intend to continue to evaluate and acquire new compounds that have shown
potential for use as antibiotics.
TARGET DRUG CANDIDATES THAT ADDRESS SIGNIFICANT UNMET MEDICAL NEEDS. We
have deliberately chosen to target diseases where the medical need is high and
the current therapy options are limited or non-existent. This increases the
likelihood that successful drug candidates will initially have limited
competition. The lack of existing therapies also allows us to test our drug
candidates against placebos, which permits us to use smaller, less costly and
less time consuming clinical trials compared to non-placebo trials. In addition,
there is great interest in the medical community to participate in the clinical
testing of new drugs for unsolved medical problems. We believe this increased
interest will facilitate enrollment in the clinical trials of our drug
candidates.
UTILIZE THIRD PARTY MANUFACTURERS. We intend to use contract manufacturers
to prepare our drugs instead of developing an internal manufacturing capability.
We have contracted for supply of bulk drug substance for our two lead
candidates. We have not yet selected contract manufacturers for final
formulation of commercial products. By using third party manufacturers, we can
leverage their expertise and capital investment.
DEVELOP MULTIPLE PRODUCT CANDIDATES IN PARALLEL TO OPTIMIZE THE CHANCE OF
SUCCESS DURING THE DRUG DEVELOPMENT PROCESS. We intend to have multiple drug
candidates at various stages of clinical development to improve the chance of
successful development. Historically, we have conducted our two lead programs
roughly in parallel from phase II trials to the beginning of phase III trials.
In
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addition, we have two drug programs which we are pursuing in parallel which are
beginning phase I clinical trials and three programs in preclinical research. We
are constantly evaluating new in-licensing opportunities to add depth and
breadth to our portfolio.
DEVELOP NEW PRODUCTS BASED ON A SINGLE SUCCESSFUL ANTIBIOTIC. Once we have
sufficient indication of clinical safety and efficacy for a drug candidate, we
intend to develop new drug products using different formulations of the same
antibiotic for other clinical uses. We expect this to allow us to leverage our
prior development effort and expense. For example, Protegrin IB-367 Gel is in
development for ventilator-associated pneumonia based on the experience and data
gained from the Protegrin IB-367 Rinse program. The preclinical research, and
clinical development and manufacturing scale-up conducted for Protegrin IB-367
Rinse may allow us to develop the drug for ventilator-associated pneumonia more
quickly and with lower costs.
MARKET AND SELL OUR OWN PRODUCTS IN THE U.S. If we gain approval on our
lead product candidates, we plan to market and sell our products through a
direct sales force in the U.S. and Canada. We believe that a relatively small
sales force of fewer than 100 sales representatives will initially be effective,
as our first two products target oncology-related indications treated by roughly
the same group of physicians. This sales force may also be used to market and
sell our future products. Initially, our plan is to focus our product sales
efforts primarily in hospital settings. In the future, we may target sales in
outpatient settings, as well. We plan to partner with other pharmaceutical
companies to commercialize our products abroad. This will allow us to utilize
their expertise in foreign regulations and existing relationships and avoid the
cost of establishing a foreign sales force.
Our Development Programs
Since our inception six years ago, we have in-licensed five antibiotic
technologies. These include Protegrins from the University of California,
Ramoplanin from Biosearch Italia, antibacterial compounds, the IB-880 series,
and antifungal compounds, IB-863 series, from BioSource Pharm, Inc., and an
antifungal compound, the IB-974 series, from NAEJA Pharmaceuticals, Inc. From
these technologies, we have advanced four product candidates into clinical
trials, including two programs that are entering phase III clinical trials and
two programs entering phase I clinical trials.
[Chart showing the intended clinical uses and territorial rights for the
Company's product portfolio.]
Preclinical research includes laboratory evaluation of product chemistry,
toxicity and formulation, as well as animal studies. Phase I trials usually
involve the initial introduction of an investigational new drug into a limited
number of healthy volunteers to evaluate its safety and dose. Phase II usually
involves trials in a limited patient population to evaluate dose, identify
possible adverse side effects and safety risks and evaluate preliminarily the
efficacy of the drug for specific indications. Phase III trials further assess
clinical efficacy of a drug and further test for safety by using a drug in its
final form in an expanded patient population.
Ramoplanin Oral for Prevention of VRE Infections
DISEASE CHARACTERIZATION
Enterococci are bacteria that typically are found in the intestinal tract of
healthy humans. Under various circumstances, they may cause infections at sites
outside the intestine, including in the bloodstream, urinary tract and surgical
wounds. This species of bacteria is receiving increased medical attention
because many strains of the species have become highly resistant to almost all
antibiotic drugs. Infections caused by VRE are a serious threat to patients
because these infections often cannot be successfully treated with vancomycin or
any other currently available antibiotics.
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Some patients are at greater risk for VRE infection than others. While many
people may carry VRE in their intestines, it is harmless either until the
patient's immune system is weakened or the patient's intestinal tract is
damaged, enabling VRE to cross over into the patient's bloodstream. For example,
patients undergoing cancer treatments, patients who have had solid organ
transplants, patients with AIDS, patients on hemodialysis, and patients in
intensive care units are at an increased risk of developing VRE infections.
In many cases, VRE bloodstream infections prove fatal. According to a study
conducted by the CDC, 36% of patients with VRE bloodstream infections died as a
result of their infection as compared to 16% of those with bloodstream
infections that could be treated with vancomycin.
MARKET OPPORTUNITY FOR RAMOPLANIN ORAL
Since the identification of VRE in 1989, a rapid increase in the incidence
of this strain has occurred in the U.S. The CDC tracks the occurrence of VRE
infections as part of its national surveillance efforts. In 1997, it found that
23% of all enterococcal samples from patients in intensive care units were
vancomycin-resistant, which is an increase from 0.4% in 1989. Some hospitals
have reported rates of vancomycin resistance among specific enterococcal strains
as high as 60%.
There are an estimated 3 million patients hospitalized each year in
intensive care. Based on a 1999 surveillance program, approximately 26% of these
patients are expected to carry VRE bacteria in their intestines. In addition,
based on the medical literature, 14% to 20% of patients with low white blood
cell counts and VRE bacteria in their intestines are expected to develop a VRE
bloodstream infection. Researchers from The Johns Hopkins University have
reported that each treated case of VRE bloodstream infection generates an
average of $86,000 in incremental health care costs. In addition, VRE
bloodstream infections are often fatal. Because of the high economic burden on
our health care system and the severity of the disease, there is substantial
economic and public health interest in the prevention of these infections.
PRODUCT DESCRIPTION
Ramoplanin is a naturally occurring peptide produced by fermentation of a
microorganism. Many microorganisms produce antibiotic compounds to attack other
microorganisms competing for resources in their environment. In the laboratory,
microorganisms can be fermented in carefully controlled conditions to produce
large amounts of these antibiotic compounds such as Ramoplanin.
Ramoplanin kills many types of bacteria by blocking the action of one of the
enzymes needed to make the cell wall. Although many antibiotics block cell wall
production, Ramoplanin is novel because it interferes with a different bacterial
enzyme than other currently available antibiotics. To date, more than
800 bacterial samples have been tested, showing Ramoplanin's uniform ability to
kill bacteria.
In laboratory studies, bacterial resistance to Ramoplanin was not detected
under conditions that might be expected to foster resistance. We believe that
this is due to the different mechanism of action of Ramoplanin on bacterial cell
wall production. We cannot guarantee that certain species of bacteria may not
develop resistance in the future to Ramoplanin.
We are developing Ramoplanin Oral to prevent VRE bloodstream infections in
hospitalized patients. Initially we will focus on patients undergoing
chemotherapy or bone marrow transplants. Ramoplanin is administered as an oral
solution to patients known to have VRE bacteria in their intestinal tracts. By
killing the intestinal VRE bacteria while the patient undergoes chemotherapy or
other procedures that leave the patient at high risk for infection, Ramoplanin
Oral may reduce the overall number of VRE bloodstream infections. In addition to
being very active against VRE,
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Ramoplanin Oral does not appear to be absorbed from the intestines into the
bloodstream. As a result, Ramoplanin Oral will not be developed to treat VRE
bloodstream infections. However, we believe that this lack of absorption makes
it a good candidate for development against other disease-causing bacteria in
the intestines and makes it less likely to have side effects in other parts of
the body.
CLINICAL STUDY RESULTS
Our clinical trials have demonstrated that Ramoplanin Oral can reduce
intestinal levels of VRE by at least 99.9% to undetectable levels. In a recently
completed randomized, double-blind, placebo-controlled phase II clinical trial,
18 of the 20 (90%) patients treated with Ramoplanin Oral had no detectable VRE
bacteria in their intestines after seven days of treatment. All of the patients
treated with placebo had detectable levels of VRE in their intestines after
seven days of treatment. The difference between placebo and Ramoplanin Oral was
highly statistically significant, with a p-value of less than 0.01. This means
that, applying widely-used statistical methods, the chance that these results
occurred by accident is less than 1 in 100. Ramoplanin Oral was well tolerated
by the subjects, and no serious adverse effects related to Ramoplanin Oral were
reported.
In December 1999, we reviewed these data and discussed our proposed phase
III protocol with the FDA. We intend to initiate in the first half of 2000 a
randomized, double-blind, placebo-controlled phase III trial to evaluate
Ramoplanin Oral's ability to prevent VRE infections in cancer patients
undergoing chemotherapy or bone marrow transplantation. In this study, our goal
will be to demonstrate a reduction in VRE bloodstream infections in patients
treated with Ramoplanin Oral, in contrast to the phase II clinical trial which
demonstrated a reduction in VRE levels in the intestines. If our phase III trial
is successful, we will submit the results to the FDA to support regulatory
approval of the product. However, we cannot be certain that Ramoplanin Oral will
prove to be safe or effective in preventing VRE infections, will receive
regulatory approvals, or will be successfully commercialized. The FDA has
granted fast track designation for Ramoplanin Oral. The FDA issues fast track
designation for some drugs under development with the potential to address unmet
medical needs for serious, life-threatening conditions. See "Government
Regulation" for a discussion of the benefits associated with fast track
designation.
Protegrin IB-367 Rinse for Reduction in Severity of Oral Mucositis
DISEASE CHARACTERIZATION
Oral mucositis, a common side effect of chemotherapy and radiation therapy
in cancer patients, is characterized by sores and painful ulcers in the mouth.
Chemotherapy and radiation therapy damage the cells that line the mouth,
allowing the bacteria and fungi normally found inside the mouth to invade tissue
and cause infection. Oral mucositis is often identified by cancer patients as
the single worst side effect of chemotherapy and radiation therapy, causing pain
so severe as to prevent eating and sleeping. Often, patients receive intravenous
nourishment and narcotic painkillers to treat the condition, and in some cases
are forced to interrupt cancer treatment. Oral mucositis also creates a
significant risk of infection elsewhere in the body.
MARKET OPPORTUNITY FOR PROTEGRIN IB-367 RINSE
According to a recent report by the Transplant Registries, there are over
30,000 bone marrow transplants performed annually in the U.S. and Europe
combined. The treatment for certain leukemias and some solid cancers involves
administration of near lethal doses of chemotherapy to maximize eradication of
the cancer. Academic studies report that these very aggressive cancer and bone
marrow transplant treatments cause oral mucositis in approximately 75% of the
patients. Two recent studies by researchers from the International Bone Marrow
Transplant Registry and the
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Department of Oral Medicine at Harvard University have estimated the duration of
hospitalization is increased by two to 11 days for bone marrow transplant
patients who experience oral mucositis. They incur on average an increase of
approximately $20,000 in hospital charges.
In addition, as reported in the National Cancer Data Base, more than 80,000
head and neck cancer patients in the U.S. and Europe are treated with radiation
therapy. Oral mucositis is reported as a side effect in approximately 80% of
these patients. As reported by the International Society for Pharmacoeconomic
Outcomes, management of severe oral mucositis in these patients costs
approximately $4,500 in additional costs per patient. The treatment of oral
mucositis places a high economic burden on our health care system, resulting in
substantial interest for a new treatment option.
PRODUCT DESCRIPTION
Protegrin IB-367 is a synthetic analog of the Protegrin family of antibiotic
peptides found in mammals. Antibiotic peptides with differing structures can be
found in all living creatures, where they form part of the first line of defense
against invading bacteria and fungi. In mammals, antibiotic peptides cover moist
surfaces, such as those in the mouth and in the airways of the lungs, and are
present in the types of white blood cells that engulf and kill invading
microorganisms.
Protegrin IB-367 destroys the cell membranes of bacteria and fungi, thus
damaging the structural integrity of the microorganism. Protegrin's chemical
structure and its mechanism of action are different from traditional
antibiotics. Protegrin IB-367 kills an unusually wide variety of microorganisms,
including bacteria and certain fungi, and is effective against many of the
serious drug resistant, disease causing bacteria. In addition, Protegrin IB-367
kills microorganisms extremely rapidly. We have demonstrated that Protegrin
IB-367 can reduce the number of bacteria in a test tube by at least 100,000-fold
in less than five minutes. In contrast, with traditional antibiotics a treatment
time of between four and 24 hours is needed to obtain a similar reduction in the
number of bacteria.
In preclinical studies we have conducted, bacteria have not become highly
resistant to Protegrin IB-367 under laboratory conditions that cause significant
resistance to traditional antibiotics. We believe that this difference results
from the fact that Protegrin IB-367 targets the cell membrane, a structure that
bacteria cannot readily change, and because Protegrin IB-367 kills
microorganisms extremely rapidly. By comparison, traditional antibiotics target
single enzymes or structures that the bacteria can change more easily.
Traditional antibiotics are also slower to kill or inhibit growth of the
bacteria, allowing the bacteria time to develop resistance mechanisms. We cannot
guarantee that some species of bacteria may not develop resistance in the future
to Protegrin IB-367.
We are developing Protegrin IB-367 Rinse for the reduction in severity of
oral mucositis. Cancer patients who are undergoing aggressive chemotherapy or
radiation treatment will swish Protegrin IB-367 Rinse in their mouths several
times per day while undergoing cancer therapy in an attempt to eliminate the
bacteria and lessen the severity of the ulcers. We believe Protegrin IB-367 is
well suited for the treatment of oral mucositis because it quickly kills the
bacteria and fungi found in the mouth.
CLINICAL STUDY RESULTS
In clinical trials, Protegrin IB-367 Rinse has been well tolerated and does
not appear to be absorbed into the bloodstream. In a recently completed
randomized, double-blind, placebo-controlled phase II clinical trial, Protegrin
IB-367 Rinse reduced the severity of oral mucositis in patients undergoing
chemotherapy. A total of 180 patients were randomized to receive either
Protegrin IB-367 Rinse or a placebo six times a day. Protegrin IB-367 Rinse was
found to reduce the severity of oral mucositis by 22% in the 134 evaluable
patients, a clinically meaningful reduction. These
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results were statistically significant with a p-value of less than 0.05. This
means that, applying widely-used statistical methods, the chance that these
results occurred by accident is less than 1 in 20.
Approximately one half of the patients in this trial started treatment with
Protegrin IB-367 Rinse within three days of the start of their chemotherapy. In
the group of 76 patients who started treatment early with Protegrin IB-367
Rinse, there was a 40% reduction (p = 0.047) in the severity of oral mucositis,
which represents a statistically significant improvement over the patients who
were treated with a placebo. In our phase II trial, there were a large number of
patients who discontinued the trial early while they still had oral mucositis.
They included both patients who were given a placebo as well as those who were
given Protegrin IB-367 Rinse. This prevented us from determining the duration of
their disease and whether Protegrin IB-367 Rinse was able to reduce the length
of time the patients had severe ulcers. In our management of the phase III
trial, we intend to implement several changes that are designed to improve
compliance.
In December 1999, we reviewed this data and discussed our proposed phase III
protocol with the FDA. We intend to initiate two randomized, double-blind,
placebo-controlled phase III trials to further assess its safety and efficacy in
the reduction in severity of oral mucositis in cancer patients receiving either
chemotherapy or radiotherapy.
If our phase III trials are successful, we intend to submit the results to
the FDA to support regulatory approval of the product. However, we cannot be
certain after further study that Protegrin IB-367 will prove to be safe or
effective in reducing the severity of oral mucositis in cancer patients
receiving either chemotherapy or radiotherapy, will receive regulatory
approvals, or will be successfully commercialized.
Protegrin IB-367 Gel for Prevention of Ventilator-Associated Pneumonia
Patients who need mechanical breathing assistance are at risk of developing
pneumonia. Because these patients have ventilator tubes in their mouths and
throats, microorganisms in their saliva can get into their lungs and cause
pneumonia. By killing these bacteria, we believe that we may be able to reduce
the incidence of ventilator-associated pneumonia. There are presently no
therapies approved for the prevention of ventilator-associated pneumonia.
In the U.S., there are approximately 740,000 patients placed on ventilators
each year. The risk of acquiring ventilator-associated pneumonia varies widely
and is based on each patient's condition and length of time on mechanical
ventilation. It is estimated that between 25% and 40% of patients who undergo
mechanical ventilation for more than 48 hours will develop ventilator-associated
pneumonia. Academic sources report that 10% to 15% of patients who have
contracted ventilator-associated pneumonia will die from their pneumonia.
Patients contracting ventilator-associated pneumonia require significant
hospital resources, including prolongation of their hospital stay by an average
of four to 13 days.
Published clinical trials of other antibiotics applied in the mouth have
demonstrated a reduction in the number of patients who develop
ventilator-associated pneumonia. The use of these antibiotics for this
indication is not widespread because of the need to combine several antibiotic
products to achieve the desired effect. Physicians are reluctant to prescribe
these antibiotics to prevent ventilator-associated pneumonia because of the risk
of developing resistant strains of the microorganisms. Protegrin IB-367 kills
most types of bacteria and yeast that are typically found in the mouth very
quickly. To date, there has been little evidence of bacterial resistance
developing to Protegrin IB-367.
A gel form of Protegrin IB-367 is being developed to kill bacteria that
might reside in the mouth. In a phase I clinical trial of Protegrin IB-367 Gel
conducted in healthy volunteers, the number
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of bacteria and fungi found in the mouth one hour after treatment was reduced by
99.9%. An additional phase I trial of Protegrin IB-367 Gel in ventilated
patients evaluating safety and antimicrobial activity is planned for the first
half of 2000. However, we cannot be certain that Protegrin IB-367 Gel will prove
to be safe or effective in the prevention of ventilator-associated pneumonia or
that Protegrin IB-367 Gel will receive regulatory approvals, or will be
successfully commercialized.
Protegrin IB-367 Aerosol for Treatment of Respiratory Infections
Currently available antibiotics have not been effective in treating many of
the most severe forms of respiratory infection, including those associated with
cystic fibrosis. According to the Cystic Fibrosis Registry, cystic fibrosis
afflicts an estimated 23,000 people annually in the U.S. More than 95% of these
patients develop chronic respiratory infections, many of which are fatal. Over
the course of repeated treatments, bacteria colonize in patients' airways and
slowly become resistant to antibiotics. As the airway infection persists, the
patients develop progressive, destructive lung disease. The median survival age
for these patients is 31 years.
We believe Protegrin IB-367 Aerosol, when inhaled into the lung, may be
effective in treating respiratory infections. The initial goal of our clinical
development program is to determine whether Protegrin IB-367 Aerosol can safely
reduce the levels of bacteria in the lungs of patients with cystic fibrosis. We
are currently conducting a phase I trial to evaluate the safety of a single dose
of Protegrin IB-367 Aerosol in cystic fibrosis patients with chronic respiratory
infections. To date, this study has demonstrated that single inhaled doses of
Protegrin IB-367 Aerosol are well tolerated. We cannot be certain that Protegrin
IB-367 Aerosol will prove to be safe or effective in treating respiratory
infections, will receive regulatory approvals, or will be successfully
commercialized.
Our Research Programs
Our research focuses on discovering and developing compounds with novel
chemical structures and mechanisms of antimicrobial activity against bacteria or
fungi. We are also modifying the structure of some existing antibiotics to
improve their toxicity and efficacy profiles. We intend to file patent
applications on these compounds when appropriate. We currently have three
compounds in the preclinical research stage.
IB-880 SERIES
We are conducting a research program focused on a particular class of
antibiotics produced by microbial fermentation. This program is conducted in
collaboration with BioSource Pharm, Inc. We produced synthetic derivatives of
the natural products that have demonstrated efficacy against infections in
animals. We are in the process of further testing to identify a candidate drug
for clinical testing.
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IB-863 SERIES
We are also collaborating with BioSource Pharm, Inc. to identify appropriate
candidates for a new antifungal drug. To date, we have produced proprietary new
drug candidates with improved efficacy and reduced toxicity in animals compared
to other existing antifungals. A patent application has been filed on these new
compounds and further work is ongoing to select the best candidate compound for
preclinical evaluation.
IB-974 SERIES
We are collaborating with NAEJA Pharmaceuticals, Inc. on the development of
novel antifungal compounds that, in laboratory tests, kill a wide variety of
yeasts and other fungi. This new type of compound is chemically distinct from
the two main types of antifungal drugs currently on the market. We are in the
process of identifying appropriate candidates for preclinical testing.
Strategic Relationships
BIOSEARCH ITALIA S.P.A., GERENZANO, ITALY
In May 1998, we entered into a license agreement with Biosearch, under which
we have exclusive rights in the U.S. and Canada to develop and commercialize
products containing certain formulations of Ramoplanin for the treatment or
prevention of human disease. In addition to a licensing fee, we will make
payments to Biosearch upon the occurrence of specific development milestones.
These milestone and licensing fees would total approximately $12 million if all
research and development goals are achieved. We will share clinical data with
Biosearch to assist in registration of products containing Ramoplanin elsewhere
in the world. Biosearch is also responsible for the manufacture of Ramoplanin
and will receive royalties and a manufacturing margin on our sales of products
containing Ramoplanin within the U.S. and Canada. We have rights to manufacture
Ramoplanin or to transfer manufacturing to third parties in the event that
Biosearch ceases or is unable to supply Ramoplanin or if Biosearch's supply
price for Ramoplanin rises above agreed levels. We may terminate the agreement
at will with respect to the U.S. or Canada at any time prior to governmental
approval.
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
In April 1994, we entered a license agreement with The Regents of the
University of California, under which we have exclusive rights, to develop and
commercialize Protegrin-based products. In addition to a licensing fee, we are
obligated to make payments to the Regents upon the occurrence of specific
development milestones. These milestone payments are anticipated to total
$200,000 if all research and development goals are achieved. We will also make
royalty payments to the Regents based on sales of Protegrin-based products.
We may terminate the agreement upon written notice. The Regents may
terminate the agreement if any of the following occur: we fail to use diligent
efforts to develop and commercialize Protegrin-based products, we are unable to
meet certain targets for raising capital or expending resources for development
and commercialization of Protegrin-based products, or we cannot achieve the
commercialization milestones stated in a development plan that we present to the
Regents.
PolyPeptide Laboratories A/S, Hiller /, Denmark
In January 1997, we entered into both a Development Supply Agreement and a
Purchase Supply Agreement with PolyPeptide for the development of manufacturing
processes for Protegrin IB-367 and for the clinical and commercial manufacture
and supply of Protegrin IB-367, as a bulk
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drug substance. Under the Development Supply Agreement, we make payments to
PolyPeptide upon achievement of certain development milestones and upon receipt
of clinical materials. As of December 31, 1999 these payments totalled $2.7
million. Under the Purchase Supply Agreement, we will pay PolyPeptide for set
volumes and at set prices.
The Development Supply Agreement will terminate after certain files relating
to Protegrin IB-367 are ready for submission to the FDA in connection with a new
drug application. PolyPeptide is manufacturing Protegrin IB-367 exclusively for
us. However, we can transfer the manufacturing process to a third party if we
choose.
Manufacturing
We intend to use contract manufacturers to prepare our drugs instead of
developing this capability internally. We have contracted for supply of bulk
drug substance for our two lead candidates. We have not yet selected contract
manufacturers for final formulation for commercialization. By using third party
manufacturers we can leverage their expertise and capital investment.
We have contracted with Biosearch for the manufacture of Ramoplanin.
Biosearch uses proprietary fermentation and purification processes to
manufacture Ramoplanin. Biosearch has improved the fermentation process, and
full-scale fermentation and purification at the proposed commercial
manufacturing site is currently ongoing. See "Strategic Relationships."
We have contracted with PolyPeptide for the manufacture of Protegrin IB-367.
PolyPeptide has manufactured the peptide on a pilot scale to our specifications.
The manufacturing process is now being scaled up at the proposed commercial
facility in advance of the commencement of our phase III clinical trial.
PolyPeptide is an established world leader in peptide manufacturing.
PolyPeptide and Biosearch are our single source suppliers of bulk drug
substance Ramoplanin and Protegrin, respectively. We have long-term supply
agreements in place and we expect to have sufficient capacity to enable
commercialization. If our contract manufacturers are unable or fail to produce
the required quantities of our drug candidates for clinical use on a timely
basis, at commercially reasonable prices, our current and future clinical trials
and our product development efforts will be delayed. If these facilities become
unavailable for any reason, if our contract manufacturers fail to comply with
the FDA's current good manufacturing practices, or if our contract manufacturers
terminate their agreements with us, we would have to find an alternative source
for manufacturing our drug candidates. Contract manufacturers often encounter
difficulties in scaling up production, including problems involving production
yields, quality control and quality assurance and shortage of qualified
personnel. If our contract manufacturers are unable to scale up production to
meet our commercial needs, our revenue may be adversely affected.
Intellectual Property
Pursuant to the agreement relating to Biosearch's manufacture of Ramoplanin,
we have licensed from Biosearch intellectual property providing U.S. and
Canadian development and marketing rights. This intellectual property consists
of trade secret protection of the fermentation and purification process used to
make Ramoplanin and a U.S. patent expiring in 2007 that covers certain aspects
of the fermentation process.
We own two U.S. patents directed to Protegrin IB-367. Together, these
patents contain claims to composition of matter, pharmaceutical compositions and
methods of use, including the treatment or prevention of oral mucositis. These
patents expire in 2015. In addition, we are either the assignee, or the
exclusive licensee, from the University of California of four other U.S. patents
that
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cover related Protegrins. International patent applications and an additional
U.S. patent application covering Protegrin IB-367 and the related Protegrins and
specific methods of use are pending. In addition, we have filed a U.S. patent
application for the IB-863 Series of antifungal compounds.
We cannot guarantee that patents will be issued as a result of any patent
application or that patents that have issued will be sufficient to protect our
technology or products. We cannot predict the enforceability or scope of any
issued patent or those that may issue in the future. Moreover, others may
independently develop similar technologies or duplicate the technology we have
developed. We also rely on trade secrets and proprietary know-how for protection
of certain of our intellectual property. We cannot guarantee that our
confidentiality agreements provide adequate protection or remedies in the event
of unauthorized use or disclosure of our intellectual property. Third parties
may assert infringement or other claims against us. Even if these claims are
without merit, defending a lawsuit takes significant time, may be expensive and
may divert management attention from other business concerns and if
unsuccessful, we may be forced to license the intellectual property or
discontinue sales.
Marketing and Sales
We intend to market and sell our two initial products through a direct sales
force in the U.S. and Canada. We believe that a relatively small sales force of
fewer than 100 sales representatives can be used for these products because
prescribing decisions will be made by roughly the same group of physicians,
primarily oncologists. We plan to begin hiring this sales force upon successful
completion of phase III trials. This sales force will initially target the
largest 200 hospitals and cancer centers in the U.S. We cannot guarantee that we
will develop a sales force with the necessary technical expertise and
distribution capabilities.
We are evaluating opportunities to partner with other pharmaceutical
companies to develop and commercialize our products for which we have rights
abroad. We cannot guarantee that we will successfully develop or commercialize
our product candidates, achieve significant market penetration, or generate any
revenues from our products.
Competition
There are no products currently approved for the prevention of VRE
bloodstream infections. However there are products in development and on the
market for the treatment of VRE blood-stream infections. Currently, there is no
FDA approved drug for oral mucositis. Ice chips, local painkillers and narcotics
are often used to reduce the patient's pain. Doctors routinely prescribe
mouthwashes containing traditional antibacterial and antifungal drugs for the
treatment of oral mucositis, although most clinical trials have shown that they
have suboptimal efficacy.
There are two additional means of addressing oral mucositis currently under
development in the pharmaceutical industry: chemoprotection and growth
modulation. Chemoprotection is a strategy to protect the rapidly dividing cells
that line the inside of the mouth from the side effects of the chemotherapy so
that this protective barrier is not destroyed, and microorganisms do not invade
the tissue. The growth modulation strategy seeks to reestablish the protective
barrier in the mouth to keep microorganisms out of the tissue by encouraging the
growth of new cells. These two approaches are currently under development and
can be used together with our antibiotic approach. We believe that these
therapies may be used in combination.
Our competitors include fully integrated pharmaceutical companies and
biotechnology companies. We are aware that several of these companies are
actively engaged in research and development in the areas related to cancer
therapy and antibiotic development, including some companies that address the
same disease indications as we address. Many of these companies have
substantially greater experience, financial and other resources than we do. In
addition, they
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may have greater experience in developing drugs, obtaining regulatory approvals
and manufacturing and marketing products. We cannot guarantee that we can
effectively compete with these other pharmaceutical and biotechnology companies.
We believe the principal bases for competition for our drug candidates are
effectiveness, price and reimbursement status, ease of administration and side
effect profile.
Government Regulation
Governmental authorities in the U.S. and other countries extensively
regulate, among other things, the research, development, testing, manufacture,
labeling, promotion, advertising, distribution, and marketing, of our products.
The FDA regulates drugs, including antibiotics, under the Federal Food, Drug,
and Cosmetic Act and its implementing regulations. Failure to comply with the
applicable U.S. requirements may subject us to administrative or judicial
sanctions, such as FDA refusal to approve pending new drug applications, warning
letters, product recalls, product seizures, total or partial suspension of
production or distribution, injunctions, and/or criminal prosecution.
The steps required before a drug may be marketed in the U.S. include:
- preclinical laboratory tests, animal studies, and formulation studies;
- submission to the FDA of an investigational new drug exemption for human
clinical testing, which must become effective before human clinical trials
may commence;
- adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug for each indication;
- submission to the FDA of a new drug application;
- satisfactory completion of an FDA inspection of the manufacturing facility
or facilities at which the drug is produced to assess compliance with
current good manufacturing practices; and
- FDA review and approval of the new drug application.
Preclinical tests include laboratory evaluation of product chemistry,
toxicity, and formulation, as well as animal studies. The results of the
preclinical tests, together with manufacturing information and analytical data,
are submitted to the FDA as part of an investigational new drug exemption, which
must become effective before human clinical trials may be commenced. An
investigational new drug exemption will automatically become effective 30 days
after receipt by the FDA, unless before that time the FDA raises concerns or
questions about issues such as the conduct of the trials as outlined in the
investigational new drug exemption. In such a case, the investigational new drug
exemption sponsor and the FDA must resolve any outstanding FDA concerns or
questions before clinical trials can proceed. We cannot be sure that submission
of an investigational new drug exemption will result in the FDA allowing
clinical trials to commence.
Clinical trials involve the administration of the investigational drug to
human subjects under the supervision of qualified investigators. Clinical trials
are conducted under protocols detailing the objectives of the study, the
parameters to be used in monitoring safety, and the effectiveness criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the
investigational new drug exemption.
Clinical trials typically are conducted in three sequential phases, but the
phases may overlap or be combined. Each trial must be reviewed and approved by
an independent Institutional Review
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Board before it can begin. Phase I usually involves the initial introduction of
the investigational drug into people to evaluate its safety, dosage tolerance,
pharmacodynamics, and, if possible, to gain an early indication of its
effectiveness. Phase II usually involves trials in a limited patient population
to:
- evaluate dosage tolerance and appropriate dosage;
- identify possible adverse effects and safety risks; and
- evaluate preliminarily the efficacy of the drug for specific indications.
Phase III trials usually further evaluate clinical efficacy and test further
for safety by using the drug in its final form in an expanded patient
population. We cannot guarantee that phase I, phase II, or phase III testing
will be completed successfully within any specified period of time, if at all.
Furthermore, we or the FDA may suspend clinical trials at any time on various
grounds, including a finding that the subjects or patients are being exposed to
an unacceptable health risk.
Assuming successful completion of the required clinical testing, the results
of the preclinical studies and of the clinical studies, together with other
detailed information, including information on the manufacture and composition
of the drug, are submitted to the FDA in the form of a new drug application
requesting approval to market the product for one or more indications. Before
approving a new drug application, the FDA usually will inspect the facility or
the facilities at which the drug is manufactured, and will not approve the
product unless current good manufacturing practices compliance is satisfactory.
If the FDA determines the new drug application and the manufacturing facilities
are acceptable, the FDA will issue an approval letter. If the FDA determines the
new drug application submission or manufacturing facilities are not acceptable,
the FDA will outline the deficiencies in the submission and often will request
additional testing or information. Notwithstanding the submission of any
requested additional information, the FDA ultimately may decide that the new
drug application does not satisfy the regulatory criteria for approval. The
testing and approval process requires substantial time, effort, and financial
resources, and we cannot be sure that any approval will be granted on a timely
basis, if at all. After approval, certain changes to the approved product, such
as adding new indications, manufacturing changes, or additional labeling claims
are subject to further FDA review and approval.
If regulatory approval is obtained, we will be required to comply with a
number of post-approval requirements. For example, as a condition of approval of
the new drug application, the FDA may require postmarketing testing and
surveillance to monitor the drug's safety or efficacy. In addition, holders of
an approved new drug application are required to report certain adverse
reactions, if any, to the FDA, and to comply with certain requirements
concerning advertising and promotional labeling for their products. Also,
quality control and manufacturing procedures must continue to conform to current
good manufacturing practices after approval, and the FDA periodically inspects
manufacturing facilities to assess compliance with current good manufacturing
practices. Accordingly, manufacturers must continue to expend time, money, and
effort in the area of production and quality control to maintain compliance with
current good manufacturing practices.
We use and will continue to use third-party manufacturers to produce our
products in clinical and commercial quantities, and we cannot be sure that
future FDA inspections will not identify compliance issues at our facilities or
at the facilities of our contract manufacturers that may disrupt production or
distribution, or require substantial resources to correct. In addition,
discovery of problems with a product may result in restrictions on a product,
manufacturer, or holder of an approved new drug application, including
withdrawal of the product from the market. Also, new government requirements may
be established that could delay or prevent regulatory approval of our products
under development.
The FDA's fast track program is intended to facilitate the development and
expedite the review of drugs intended for the treatment of serious or
life-threatening diseases and that demonstrate the
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potential to address unmet medical needs for such conditions. Under this
program, the FDA can, for example, review portions of a new drug application for
a fast track product before the entire application is complete, thus potentially
beginning the review process at an earlier time. We have been granted fast track
status for Ramoplanin and we may seek to have some of our other drug candidates
designated as fast track products, with the goal of reducing the development and
review time. We cannot guarantee that the FDA will grant any of our requests for
fast track designation, that any fast track designation would affect the time of
review, or that the FDA will approve the new drug application submitted for any
of our drug candidates, whether or not fast track designation is granted.
Additionally, the FDA approval of a fast track product can include restrictions
on the product's use or distribution (such as permitting use only for specified
medical procedures or limiting distribution to physicians or facilities with
special training or experience). Approval of fast track products can be
conditional with a requirement for additional clinical studies after approval.
FDA procedures also provide priority review of new drug applications
submitted for drugs that, compared to currently marketed products, offer a
significant improvement in the treatment, diagnosis, or prevention of a disease.
The FDA is supposed to review new drug applications that are granted priority
status more quickly than new drug applications given standard status. FDA's
current goal is to act on 90% of priority new drug applications within six
months of receipt. Although the FDA historically has not met such goals, the
agency has made significant improvements in the timeliness of the review
process. We anticipate seeking priority review of Ramoplanin, and may do so with
regard to some of our other drug candidates. We cannot guarantee that the FDA
will grant priority review status in any instance, that priority review status
would affect the review time, or that the FDA will approve the new drug
application submitted for any of our drug candidates, whether or not priority
review status is granted.
Under certain circumstances, the FDA provides periods of marketing
exclusivity for new drugs that are the subject of an approved new drug
application. Ramoplanin and Protegrin IB-367, if approved, may qualify for
marketing exclusivity, which would prevent any competitors from seeking approval
of a generic version until five years (four years, in some cases) after approval
of our product. We cannot be sure, however, that Ramoplanin, Protegrin IB-367 or
any of our other products will qualify for marketing exclusivity. Among other
reasons, until recently, antibiotics were not able to obtain such exclusivity,
and the new law making antibiotics eligible for exclusivity includes a
transition provision that could lead the FDA to conclude that certain of our
antibiotic products are not eligible for marketing exclusivity. Additionally,
even if a product is approved and granted exclusivity, that does not prevent the
approval and marketing of competing products.
Outside the U.S., our ability to market our products will also be contingent
upon receiving marketing authorizations from the appropriate regulatory
authorities. The foreign regulatory approval process includes all the risks
associated with FDA approval described above. The requirements governing conduct
of clinical trials and marketing authorization vary widely from country to
country.
Under a new regulatory system in the European Union, marketing
authorizations may be submitted either under a centralized or decentralized
procedure. The centralized procedure provides for the grant of a single
marketing authorization that is valid for all European Union member states. The
decentralized procedure provides for mutual recognition of national approval
decisions. Under this procedure, the holder of a national marketing
authorization may submit an application to the remaining member states. Within
90 days of receiving the applications and assessment report, each member state
must decide whether to recognize approval.
We plan to choose the appropriate route of European regulatory filing in an
attempt to accomplish the most rapid regulatory approvals. However, the chosen
regulatory strategy may not secure regulatory approvals or approvals of the
chosen product indications. In addition, these
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approvals, if obtained, may take longer than anticipated. We cannot guarantee
that any of our products will prove to be safe or effective, will receive
regulatory approvals, or will be successfully commercialized.
Employees
As of February 25, 2000, we had 94 full-time employees, 72 of whom were
engaged in product development and research activities and 22 of whom were
engaged in general and administrative activities. Many of our current employees
hold post-graduate degrees, including 6 M.D.s and 22 Ph.D.s. Our employees are
not represented by a collective bargaining agreement. We believe our relations
with our employees are good.
Facilities
We are currently leasing three adjacent facilities in Mountain View,
California. These facilities provide approximately 16,000 square feet, 18,000
square feet and 7,000 square feet respectively. The leases on the two larger
facilities, containing laboratory and office space, expire in July 2004. The
lease for the smaller facility expires at the end of 2001. We have signed an
agreement to add two additional facilities in Mountain View, California. These
facilities provide approximately 58,000 and 66,000 square feet. This lease will
expire in 2011. These facilities are adequate for our current requirements.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding our executive officers
and directors as of February 25, 2000.
<TABLE>
<CAPTION>
Name Age Position
- ---- -------- --------
<S> <C> <C>
Kenneth J. Kelley............................ 40 President, Chief Executive Officer, and Director
Karen S. Campbell............................ 45 Vice President, Marketing
John C. Fiddes, Ph.D......................... 48 Vice President, Research and Development
Henry J. Fuchs, M.D.......................... 42 Vice President, Clinical Affairs
Chee-liang Leo Gu, Ph.D...................... 49 Vice President, Pharmaceutical Development
Natalie McClure, Ph.D........................ 47 Vice President, Regulatory Affairs
Sandra J. Wrobel............................. 40 Vice President, Corporate Strategy and Finance
Jane E. Shaw, Ph.D........................... 61 Director, Chairman of the Board
Michael F. Bigham............................ 42 Director
Fritz Buhler, Prof. Dr. med.................. 59 Director
Kathleen D. LaPorte.......................... 38 Director
Gary A. Lyons................................ 48 Director
John M. Padfield, Ph.D....................... 53 Director
Liza Page Nelson............................. 40 Director
Jack S. Remington, M.D....................... 69 Director
</TABLE>
- ------------------------
KENNETH J. KELLEY founded IntraBiotics in 1994 and has served as President,
Chief Executive Officer and Director since our inception. Prior to founding
IntraBiotics, Mr. Kelley co-founded Calydon, a biotechnology company focused on
prostate cancer and has served as a director since its founding in 1994. From
1988 to 1993, Mr. Kelley was a Senior Associate at Institutional Venture
Partners, a venture capital firm. From 1991 to 1992, Mr. Kelley served as Chief
Operating Officer for CV Therapeutics, a cardiovascular biotechnology company.
Mr. Kelley has also held positions at McKinsey & Company, an international
consulting firm, and at Integrated Genetics (now Genzyme, Inc.). Mr. Kelley
holds an M.B.A. degree from Stanford Graduate School of Business and a B.A.
degree in biochemical sciences from Harvard University.
KAREN S. CAMPBELL has served as our Vice President, Marketing since
July 1998. From 1995 to 1998, Ms. Campbell was the Director of Marketing for
Roche Laboratories, a global pharmaceutical company and focused primarily on
building the U.S. Transplant and Autoimmune Diseases business. From 1983 to
1994, Ms. Campbell held various marketing, sales and new product development
positions at Syntex Laboratories Inc., a pharmaceutical company. Ms. Campbell
holds an M.A. degree in Public Administration and a B.A. degree in Political
Science from the University of Delaware.
JOHN C. FIDDES, PH.D., has served as our Vice President, Research and
Development since June 1994. From 1991 to 1994, Dr. Fiddes was Vice President of
Discovery Research at ImmuLogic Pharmaceutical Corporation, a biotechnology
company. Dr. Fiddes conducted postdoctoral research in molecular biology at the
Department of Biochemistry and Biophysics at the University of California, San
Francisco and received a Ph.D. in molecular biology from King's College,
Cambridge University, where he conducted research at the MRC Laboratory for
Molecular Biology. Dr. Fiddes also holds a B.Sc. degree in molecular biology
from the University of Edinburgh in the United Kingdom.
HENRY J. FUCHS, M.D., has served as our Vice President, Clinical Affairs
since October 1996. From 1987 to 1996, Dr. Fuchs held various positions at
Genentech, a biotechnology company,
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where among other things, he had responsibility for the clinical program that
led to the approval for Genentech's Pulmozyme-Registered Trademark-. Dr. Fuchs
was also responsible for the phase III development program that led to the
approval of Herceptin-Registered Trademark- to treat metastatic breast cancer.
Dr. Fuchs received an M.D. degree from George Washington University and a B.A.
degree in biochemical sciences from Harvard University.
CHEE-LIANG LEO GU, PH.D., has served as our Vice President, Pharmaceutical
Development since October 1999. From 1995 to 1999, Dr. Gu served as our Senior
Director of Pharmaceutical Development. Prior to joining IntraBiotics, Dr. Gu
held a series of senior scientific and management positions in pharmaceutical
development and formulation for Syntex Corporation (now Roche Bioscience), a
pharmaceutical company, and served as director in charge of manufacturing and
controls for CellCept-Registered Trademark-. Dr. Gu received his Ph.D. degree in
physical organic chemistry from the University of California, Los Angeles and
his B.S. degree in chemistry from National Taiwan University.
NATALIE L. MCCLURE, PH.D., has served as our Vice President, Regulatory
Affairs since October 1999. Dr. McClure has over 20 years experience in
regulatory affairs. From 1993 to 1999, Dr. McClure held various regulatory
affairs positions including Vice President, Regulatory Affairs and Quality
Assurance for Matrix Pharmaceutical, Inc., a pharmaceutical company.
Dr. McClure has seven chemical publications and patents. Dr. McClure received
her Ph.D. in organic chemistry from Stanford University and her B.S. in
chemistry from the University of Michigan.
SANDRA J. WROBEL has served as our Vice President, Corporate Strategy and
Finance since October 1999. From 1987 to 1999, Ms. Wrobel held various positions
with Strategic Decisions Group (currently Navigant Consulting, Inc.), a
management consulting firm, where most recently she was Senior Managing Director
of its Pharmaceuticals and Life Sciences Strategy Consulting Practice. Prior to
this position, Ms. Wrobel was Managing Director of Strategic Decisions Group's
180-person headquarters office in Menlo Park, CA. While at Strategic Decisions
Group, Ms. Wrobel specialized in corporate strategy development, Research and
Development portfolio management, decision process transformation and
organizational change. Ms. Wrobel received her M.B.A. from the Stanford
University Graduate School of Business and her B.S. in Chemical and Petroleum
Refining Engineering from the Colorado School of Mines.
JANE E. SHAW, PH.D., has served as our Chairman of the Board since August
1996 and a director of the company since May 1996. Dr. Shaw is Chairman and
Chief Executive Officer of AeroGen, Inc., a privately held drug delivery
company. From 1987 to 1994 Dr. Shaw was President and Chief Operating Officer of
ALZA Corporation, a pharmaceutical company, where she held various other senior
management positions after starting her career at ALZA as a research scientist
in 1970. Dr. Shaw is a member of the Board of Directors of Intel Corporation,
McKesson Corporation, Boise Cascade Corporation, and Aviron. She received her
D.Sc. from Worcester Polytechnic Institute in Worcester, Massachusetts, and her
Ph.D. and B.Sc. degrees in Physiology from Birmingham University in the United
Kingdom.
MICHAEL F. BIGHAM has served as a director since October 1996. Mr. Bigham is
currently President and Chief Executive Officer of Coulter
Pharmaceutical, Inc., a publicly-traded biotechnology company focused on
oncology therapeutics. From 1988 to 1996, Mr. Bigham was Executive Vice
President and Chief Financial Officer of Gilead Sciences, Inc., a biotechnology
company. From 1984 to 1988, Mr. Bigham was the co-head of Healthcare Investment
Banking at Hambrecht & Quist, LLC. Mr. Bigham currently serves on the boards of
Datron Systems, Inc. and LJL BioSystems, Inc. Mr. Bigham is a CPA and received
his M.B.A. from Stanford Graduate School of Business and his B.S. degree in
Commerce from the University of Virginia.
FRITZ R. BUHLER, PROF. DR. MED., has served as a director since
December 1998. Prof. Dr. Buhler is currently Vice Chairman of the Board of
International Biomedicine Management Partners Inc. and
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Director of the European Center for Pharmaceutical Medicine at the University
Hospital of Basel in Switzerland. From 1991 to 1995, Prof. Dr. Buhler was
responsible for worldwide clinical research and development at F. Hoffmann-La
Roche Ltd., a pharmaceutical company. From 1987 to 1990, Prof. Dr. Buhler was
head of the Department of Research at the University Hospital of Basel in
Switzerland and did clinical work as a cardiologist at the University Hospitals,
as well as at Columbia University in New York and Harvard University in Boston.
Prof. Dr. Buhler received his M.D. from University of Basel, Switzerland.
KATHLEEN D. LAPORTE has served as a director since January 1994. From
January 1993 to the present, Ms. LaPorte has been affiliated with the Sprout
Group, the venture capital affiliate of Donaldson, Lufkin & Jenrette, and has
served as a general partner since December 1993. From August 1987 to
January 1993 Ms. LaPorte was a principal at Asset Management Company, a venture
capital firm focused on early stage biotechnology investments. Ms. LaPorte
currently serves on the boards of other companies including Lynx Therapeutics
and four privately held companies. She holds a B.S. in Biology from Yale
University and an M.B.A. from Stanford Graduate School of Business.
GARY A. LYONS has served as a director since December 1999. From 1993 to the
present, Mr. Lyons has been President and Chief Executive Officer of Neurocrine
Biosciences, Inc, a biopharmaceutical company. From 1983 to 1993, Mr. Lyons was
affiliated with Genentech and served as Vice President of Business Development
and Vice President of Sales. Mr. Lyons is a member of the Board of Directors of
Vical Inc., a gene delivery biopharmaceutical company. Mr. Lyons holds a B.S. in
Marine Biology from the University of New Hampshire and an M.B.A. from
Northwestern University's J.L. Kellogg Graduate School of Management.
JOHN M. PADFIELD, PH.D., has served as a director since June 1998. From 1999
to the present Dr. Padfield has been the Chief Executive Officer of Nycomed
Amersham Imaging, a diagnostic imaging and biotechnology supply company based in
Buckinghamshire, England and a member of the Board of Directors of Nycomed
Amersham plc, a health care company. From 1994 to the present Dr. Padfield was
Chief Executive Officer of Chiroscience Group plc, an emerging pharmaceutical
company based in Cambridge, England. His is also the past Chairman of the Board
of Directors of the BioIndustry Association in the United Kingdom. From 1979 to
1994 Dr. Padfield was affiliated with Glaxo Holdings plc, where he held board
positions in several subsidiary companies, most recently as Managing Director of
Glaxo Manufacturing Services Ltd. Dr. Padfield has a B.S. and Ph.D. in Pharmacy
from the University of Nottingham, England.
LIZA PAGE NELSON has served as a director since December 1999. From 1998 to
the present Ms. Nelson has been a Managing Director at Investor Growth, Inc., a
private equity investment group that advises Investor AB and its affiliates
(including Investor Guernsey Ltd.) on investments in healthcare and information
technology. Investor AB is an industrial holding company publicly traded in
Stockholm and London. From 1988 to 1998 Ms. Nelson was affiliated with
Pfizer Inc., a pharmaceutical company, where she held a variety of business
development and strategic planning positions including, Senior Director-Business
Development for Pfizer US Pharmaceuticals and Pfizer Health Solutions, Inc.
Ms. Nelson holds a B.A. in Economics from Wesleyan University and an M.B.A. from
Yale University's School of Management.
JACK S. REMINGTON, M.D., has served as a director since October 1996.
Dr. Remington is a nationally recognized authority in the field of infectious
disease medicine, and received the 1996 Bristol Award of the Infectious Disease
Society of America (IDSA). Dr. Remington currently serves as Chairman,
Department of Immunology and Infectious Diseases at the Research Institute of
the Palo Alto Medical Foundation and Professor, Department of Medicine, Division
of Infectious Diseases and Geographic Medicine, Stanford University School of
Medicine. In addition, Dr. Remington consults to leading pharmaceutical
companies with regard to antibiotic research and
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development and serves on numerous editorial boards of medical journals. In the
past, he has served as the President of the Infectious Disease Society of
America. Dr. Remington served his internship and residency at the University of
California, San Francisco, and received his M.D. and B.S. degrees from the
University of Illinois.
Committees of the Board of Directors
Our compensation committee consists of Dr. Shaw, Mr. Bigham and
Dr. Padfield. 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. Shaw, Ms. LaPorte and Ms. Nelson. 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 internal controls.
Board Composition
We currently have nine directors. Upon the closing of this offering the
terms of office of the board of directors will be divided into three classes. As
a result, a portion of our board of directors will be elected each year.
- The class I directors will be Ms. Nelson, Mr. Remington and Mr. Bigham and
their term will expire at the annual meeting of stockholders to be held in
2001.
- The class II directors will be Ms. LaPorte, Mr. Lyons and Dr. Shaw and
their term will expire at the annual meeting of stockholders to be held in
2002.
- The class III directors will be Mr. Kelley, Dr. Padfield and Dr. Buhler
and their term will expire at the annual meetings of stockholders to be
held in 2003.
At each annual meeting of stockholders after the initial classification, the
successors to directors whose term will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. In addition, the authorized number of directors may be
changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This classification of the board of
directors may have the effect of delaying or preventing changes in control or
management of IntraBiotics.
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 IntraBiotics. 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.
Director Compensation
Our directors receive no cash compensation for their services as directors
but are reimbursed for their reasonable expenses in attending board meetings.
All directors are eligible to participate in the 1995 Stock Option Plan and the
2000 Equity Incentive Plan. Employee directors will be eligible to participate
in our 2000 Employee Stock Purchase Plan. See "Employee Benefit Plans" for
additional information relating to these plans.
40
<PAGE>
Executive Compensation
The following table sets forth information concerning the compensation that
we paid during 1999 to our Chief Executive Officer and each of the four other
most highly compensated executive officers that earned more than $100,000 during
1999. These people are referred to as the named executive officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Securities
-------------------- Underlying
Name and Principal Position Salary Bonus Options
- --------------------------- --------- -------- ------------
<S> <C> <C> <C>
Kenneth J. Kelley......................................... $277,083 $50,000 75,000
President, Chief Executive Officer
and Director
Henry J. Fuchs, M.D....................................... 221,667 -- 34,791
Vice President, Clinical Affairs
John C. Fiddes, Ph.D...................................... 205,423 -- 21,875
Vice President, Research
and Development
Karen S. Campbell......................................... 195,417 -- 35,416
Vice President, Marketing
Chee-liang Leo Gu, Ph.D................................... 158,333 -- 57,500
Vice President, Pharmaceutical
Development
</TABLE>
In accordance with the rules of the Commission, the compensation described
in this table does not include medical, group life insurance or other benefits
received by the named executive officers that are available generally to all our
salaried employees and certain perquisites and other personal benefits received
by the named executive officers, which do not exceed the lesser of $50,000 or
10% of any such officer's salary and bonus disclosed in this table.
Option Grants in 1999
The following table sets forth each grant of stock options granted during
1999 to each of the named executive officers.
<TABLE>
<CAPTION>
Potential Realizable
Number of Percent of Value of Assumed
Securities Options Annual Rates of Stock
Total Granted to Price Appreciation for
Underlying Employees Exercise Option Term
Options in Fiscal Price (per Expiration -------------------------
Name Granted Year share) Date 5% 10%
- ---- ----------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Kelley.................. 75,000 3.6% $1.50 6/10/09 $1,597,839 $2,610,930
Henry J. Fuchs, M.D................ 34,791 1.7% 1.50 6/10/09 741,206 1,211,158
John C. Fiddes, Ph.D............... 21,875 1.0% 1.50 6/10/09 466,036 761,521
Karen S. Campbell.................. 35,416 1.7% 1.50 6/10/09 754,521 1,232,916
Chee-liang Leo Gu, Ph.D............ 57,500 2.7% 1.50 9/16/09 1,255,010 2,001,713
</TABLE>
The information regarding stock options granted to named executive officers
as a percentage of total options granted to employees in the fiscal year, as
disclosed in the table is based upon options to purchase an aggregate of
2,098,782 shares of common stock that were granted to all employees as a group,
including the named executive officers, in the fiscal year ended December 31,
1999.
41
<PAGE>
The exercise price per share of each option granted was equal to the fair
market value of the common stock as determined by the board of directors on the
date of the grant.
Potential realizable values are computed by (a) multiplying the number of
shares of common stock subject to a given option by an assumed initial offering
price of $14.00 per share, (b) assuming that the aggregate stock value derived
from that calculation compounds at the annual 5% or 10% rate shown in the table
for the entire ten-year term of the option and (c) subtracting from that result
the aggregate option exercise price. The 5% and 10% assumed annual rates of the
stock price appreciation are mandated by the rules of the Commission and do not
represent our estimate or projection of future common stock prices.
Aggregate Option Exercises in 1999 and Year-end Values at December 31, 1999
The following table sets forth, as to the named executive officers,
information concerning stock options granted during the fiscal year ended
December 31, 1999.
The information regarding the value realized reflects the fair market value
of our common stock underlying the option of date of exercise minus the
aggregate exercise price of the option.
The information regarding the value of unexercised in-the-money options is
based on a value of $14.00 per share, the initial public offering price, minus
the per share exercise price, multiplied by the number of shares underlying the
option.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 1999 December 31, 1999
Acquired on Value -------------------------- ----------------------------
Name Exercise Realized Vested Unvested Exercisable Unexercisable
- ---- ------------ -------- -------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Kelley............... 75,520 $55,624 73,439 376,041 $ 957,832 $4,882,284
Henry J. Fuchs, M.D............. -- -- 92,707 152,084 1,275,294 1,982,093
John C. Fiddes, Ph.D............ -- -- 77,604 134,271 1,067,914 1,750,523
Karen S. Campbell............... -- -- 35,416 100,000 460,408 1,282,292
Chee-liang Leo Gu, Ph.D......... 48,000 63,900 28,092 71,408 379,337 903,513
</TABLE>
Employee Benefit Plans
AMENDED AND RESTATED 1995 STOCK OPTION PLAN
GENERAL. Our board of directors adopted our Amended and Restated 1995 Stock
Option Plan in February 1995, and our stockholders approved it in April 1995.
The stock option plan will terminate as of the effective date of this initial
public offering. The termination of the stock option plan will have no effect on
the options that have been granted thereunder. However, following the
termination of the stock option plan, no new stock options may be granted under
it.
CORPORATE TRANSACTIONS. If we dissolve or liquidate, then stock options
outstanding under the stock option plan will terminate immediately prior to such
event. However, we treat outstanding stock options differently in the following
situations:
- a merger or consolidation in which we are not the surviving corporation;
or
- a sale of substantially all of our property.
In these situations, the surviving corporation may either assume all outstanding
stock options under the stock option plan or substitute other options for the
outstanding options. In addition, in these situations, all outstanding options
held by employees will become immediately vested and exercisable as to one-half
of the then unvested shares subject to such options. Options held by employees
who are officers will become fully vested and exercisable in the event that such
officers
42
<PAGE>
are involuntarily terminated without cause or voluntarily resign for good
reason, in either case within thirteen months following the transaction
described above. If the surviving corporation does not assume or substitute,
then, the options will terminate immediately prior to the occurrence of the
event described above.
STOCK OPTIONS GRANTED. As of December 31, 1999, we had issued 653,157
shares upon the exercise of options under the stock option plan and options to
purchase 3,746,896 shares at a weighted average exercise price of $1.16 were
outstanding.
2000 EQUITY INCENTIVE PLAN
GENERAL. Our board of directors adopted our 2000 Equity Incentive Plan in
January 2000, and our stockholders approved it in February 2000. The 2000 Equity
Incentive Plan is intended to replace and supersede our 1995 Stock Option Plan.
SHARE RESERVE. We have reserved a total of 5,000,000 shares of our common
stock for issuance under the incentive plan. On December 31 of each year
starting with December 31, 2000 and continuing through and including
December 31, 2008, the share reserve will automatically be increased by a number
of shares equal to the LEAST of:
- 5% of our then outstanding shares of common stock on a fully-diluted
basis;
- 2,000,000 shares; or
- a lesser number of shares determined by our board of directors prior to
each anniversary date.
If the recipient of a stock award does not purchase the shares subject to
such stock award before the stock award expires or otherwise terminates, the
shares that are not purchased will again become available for issuance under the
incentive plan.
ADMINISTRATION. The board administers the incentive plan unless it
delegates administration to a committee. The board has the authority to
construe, interpret and amend the incentive plan as well as to determine the
recipients of awards under the incentive plan and the terms of such awards
including the number of shares subject to the awards, the vesting and/or
exercisability of the awards and the exercise price of the awards.
ELIGIBILITY. The board may grant incentive stock options qualified under
Section 422 of the Internal Revenue Code to our employees and to the employees
of our affiliates. The board also may grant nonstatutory stock options, stock
bonuses and restricted stock purchase awards to our employees, directors and
consultants as well as to the employees, directors and consultants of our
affiliates.
OPTION TERMS. The board may grant incentive stock options with an exercise
price of 100% or more of the fair market value of a share of our common stock on
the grant date and nonstatutory stock options with an exercise price as low as
85% of the fair market value of a share on the grant date.
Incentive stock options granted to persons who, at the time of the grant,
own or are deemed to own stock possessing more than 10% of our total combined
voting power or the total combined voting power of one of our affiliates must
have an exercise price of at least 110% of the fair market value of the stock on
the grant date and a term of five or fewer years. For other options, the maximum
term is 10 years.
No employee may receive incentive stock options that exceed the $100,000 per
year fair market value limitation set forth in Section 422(d) of the Internal
Revenue Code. To determine
43
<PAGE>
whether the $100,000 per year limitation has been exceeded, we calculate the
fair market value of the aggregate number of shares under all incentive stock
options granted to an employee that will become exercisable for the first time
during a calendar year. Under the incentive plan, options covering stock in
excess of the $100,000 limitation are automatically converted into nonstatutory
stock options.
The board may provide for exercise periods of any length following an
optionholder's termination of service in individual options. Generally, options
will provide that they terminate three months after the optionholder's service
to us and our affiliates terminates. In the case of an optionholder's disability
or death, the exercise period generally is extended to 12 months or 18 months,
respectively.
The board may provide for the transferability of nonstatutory stock options
but not incentive stock options. However, the optionholder may designate as
beneficiary to exercise either type of option following the optionholder's
death. If the optionholder does not designate a beneficiary, the optionholder's
option rights will pass to his or her heirs by will or the laws of descent and
distribution.
Section 162(m) of the Internal Revenue Code denies a deduction to publicly
held corporations for compensation paid to the corporation's chief executive
officer and its four highest compensated officers in a taxable year to the
extent that the compensation for each such officer exceeds $1,000,000. In order
to qualify options granted under the incentive plan for an exemption for
performance based compensation provided under Section 162(m), no employee may be
granted options under the incentive plan covering an aggregate of more than
1,500,000 shares in any calendar year.
TERMS OF OTHER STOCK AWARDS. The board determines the purchase price of
other stock awards, which may not be less than 85% of the fair market value of
our common stock on the grant date. However, the board may award stock bonuses
in consideration of past services without a cash purchase price. Shares that we
sell or award under the incentive plan may, but need not be, restricted and
subject to a repurchase option in our favor in accordance with a vesting
schedule that the board determines. The board, however, may accelerate the
vesting of such awards.
OTHER PROVISIONS. In the event of certain corporate transactions not
involving our receipt of consideration, such as a merger, consolidation,
reorganization, stock dividend, or stock split, the board will appropriately
adjust the incentive plan and outstanding awards as to the class and the maximum
number of shares subject to the incentive plan and to the Section 162(m) limit.
If we dissolve or liquidate, then outstanding stock awards will terminate
immediately prior to such event. Upon certain change in control transactions,
the surviving corporation may assume all outstanding awards under the incentive
plan or substitute other awards for the outstanding awards. If the surviving
corporation does not assume or substitute, then the awards will accelerate and
will terminate immediately prior to the occurrence of the change in control. In
addition, upon certain change in control transactions, all outstanding awards
held by employees will become immediately vested and exercisable as to one-half
of the then unvested shares subject to such awards. Awards held by employees who
are officers will become fully vested and exercisable in the event that such
officers are involuntarily terminated without cause or voluntarily resign for
good reason, in either case within thirteen months following the change in
control.
STOCK AWARDS GRANTED. No stock awards have been issued under the incentive
plan.
PLAN TERMINATION. The incentive plan will terminate in 2010 unless the
board terminates it sooner.
44
<PAGE>
2000 EMPLOYEE STOCK PURCHASE PLAN
GENERAL. Our board adopted the 2000 Employee Stock Purchase Plan in January
2000, and our stockholders approved it in February 2000.
SHARE RESERVE. We have authorized the issuance of 500,000 shares of our
common stock pursuant to purchase rights granted to eligible employees under the
purchase plan. On December 31 of each year, starting with December 31, 2000, and
continuing through and including December 31, 2008, the share reserve will
automatically be increased by a number of shares equal to the LEAST of:
- 1% of our then outstanding shares of common stock on a fully diluted
basis;
- 500,000 shares; or
- a number of shares to be determined by the Board of Directors.
ELIGIBILITY. The purchase plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code.
The purchase plan provides a means by which eligible employees may purchase our
common stock through payroll deductions. We implement the purchase plan by
offerings of purchase rights to eligible employees. Generally, all of our
full-time employees and full-time employees of our affiliates incorporated in
the United States may participate in offerings under the purchase plan. However,
no employee may participate in the purchase plan if, immediately after we grant
the employee a purchase right, the employee has voting power over 5% or more of
our outstanding capital stock. As of the date hereof, no shares of common stock
had been purchased under the purchase plan.
ADMINISTRATION. Under the purchase plan, the board may specify offerings of
up to 27 months. Unless the board otherwise determines, common stock will be
purchased for accounts of participating employees at a price per share equal to
the lower of:
- 85% of the fair market value of a share on the first day of the offering;
or
- 85% of the fair market value of a share on the purchase date.
For the first offering, which will begin on the effective date of this
initial public offering, we will offer shares registered on a Form S-8
registration statement. The fair market value of the shares on the first date of
this offering will be the price per share at which our shares are first sold to
the public as specified in the final prospectus with respect to our initial
public offering. Otherwise, fair market value generally means the closing sales
price (rounded up where necessary to the nearest whole cent) for such shares (or
the closing bid, if no sales were reported) as quoted on the Nasdaq National
Market on the trading day prior to the relevant determination date, as reported
in THE WALL STREET JOURNAL.
The board may provide that employees who become eligible to participate
after the offering period begins nevertheless may enroll in the offering. These
employees will purchase our stock at the lower of:
- 85% of the fair market value of a share on the day they began
participating in the purchase plan; or
- 85% of the fair market value of a share on the purchase date.
If authorized by the board, participating employees may authorize payroll
deductions of up to 15% of their base compensation for the purchase of stock
under the purchase plan. Generally
45
<PAGE>
employees may end their participation in the offering at any time up to 10 days
before a purchase period ends. Their participation ends automatically on
termination of their employment or loss of full-time status.
OTHER PROVISIONS. The board may grant eligible employees purchase rights
under the purchase plan only if the purchase rights, together with any other
purchase rights granted under other employee stock purchase plans established by
us or by our affiliates, if any, do not permit the employee's rights to purchase
our stock to accrue at a rate which exceeds $25,000 of fair market value of our
stock for each calendar year in which the purchase rights are outstanding.
Upon a change in control, a surviving corporation may assume outstanding
purchase rights or substitute other purchase rights therefor. If the surviving
corporation does not assume or substitute the purchase rights, the offering
period will be shortened and our stock will be purchased for the participants
immediately before the change in control.
401(K) PLAN
We maintain a retirement and deferred savings plan for our U.S. employees.
The retirement and deferred savings plan is intended to qualify as a
tax-qualified plan under Section 401 of the Internal Revenue Code. The
retirement and deferred savings plan provides that each participant may
contribute up to 25% of his or her pre-tax compensation (up to a statutory
limit, which is $10,500 in calendar year 2000). Under the plan, each employee is
fully vested in his or her deferred salary contributions. Employee contributions
are held and invested by the plan's trustee. The retirement and deferred savings
plan also permits us to make discretionary contributions, subject to established
limits and a vesting schedule. To date, we have not made any discretionary
contributions to the retirement and deferred savings plan on behalf of
participating employees.
Limitations on Liability and Indemnification Matters
Our amended and restated certificate of incorporation includes a provision
that eliminates the personal liability of our directors for monetary damages to
the fullest extent permitted by law. Current Delaware law does not permit the
elimination of monetary damages:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; and
- for any transaction from which the director derived an improper personal
benefit.
Our bylaws provide that:
- we must indemnify our directors and officers to the fullest extent
permitted by applicable law, subject to very limited exceptions;
- we may indemnify our other employees and other agents to the same extent
that we indemnify our directors and officers, unless such indemnification
is prohibited by law; and
- we may secure insurance on behalf of any officer, director, employee or
other agent for any liability arising out of his or her actions in such
capacity, regardless of whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, indemnify our
46
<PAGE>
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 us 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.
Currently, there is no pending litigation or proceeding involving any of our
directors, executive officers or employees for which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.
We plan to obtain directors' and officers' liability insurance prior to the
effectiveness of this offering.
47
<PAGE>
CERTAIN TRANSACTIONS
PREFERRED STOCK SALES
In April 1997, we issued and sold an aggregate of 5,714,286 shares of
Series D preferred stock at a price per share of $1.75. These shares currently
convert into common stock at the rate of one share of common stock for each two
shares of Series D preferred stock.
In October 1997, we issued and sold an aggregate of 2,725,000 shares of
Series E preferred stock at a price per share of $2.75. These shares currently
convert into common stock at the rate of one share of common stock for each two
shares of Series E preferred stock.
In October 1997 and May 1998, we issued and sold an aggregate of 750,000
shares of Series F preferred stock at a price per share of $4.00 of which
250,000 shares were issued in exchange for a technology license. These shares
currently convert into common stock at the rate of one share of common stock for
each two shares of Series F preferred stock.
From November 1998 to January 1999, we issued and sold an aggregate of
7,656,981 shares of Series G preferred stock at a price per share of $3.00.
These shares currently convert into common stock at the rate of one share of
common stock for each two shares of Series G preferred stock.
In October 1999 we issued and sold an aggregate of 6,250,000 shares of
Series H preferred stock at a price per share of $4.00. In addition, we issued
warrants to purchase an aggregate of 1,250,000 shares of Series H preferred
stock, 1,100,000 of which were issued to Investor (Guernsey) Ltd., at an
exercise price of $5.00 per share. These shares currently convert into common
stock at the rate of one share of common stock for each two shares of Series H
preferred stock.
48
<PAGE>
The following 5% stockholders and stockholders associated with certain of
our officers and directors purchased shares in the financings. Upon the closing
of this offering, the following shares of preferred stock convert into common
stock at the rate of one share of common stock for each two shares of preferred
stock.
<TABLE>
<CAPTION>
Shares of Shares of Shares of Shares of Shares of
Series D Series E Series F Series G Series H
Preferred Preferred Preferred Preferred Preferred Total Aggregate
Purchaser Stock Stock Stock Stock Stock Shares Consideration
- --------- --------- --------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ENTITIES AFFILIATED WITH THE
SPROUT GROUP
Sprout Capital VI, L.P.... 281,803 -- -- -- -- 281,803 $ 493,155
Sprout Capital VII,
L.P...................... 427,791 -- -- -- -- 427,791 $ 748,634
DLJ Capital Corporation... 44,719 -- -- -- -- 44,719 $ 78,258
Sprout CEO Fund, L.P...... 4,969 -- -- -- -- 4,969 $ 8,695
ENTITIES AFFILIATED WITH
SPINNAKER TECHNOLOGIES
Spinnaker Technology Fund,
L.P...................... 2,571,429 459,836 -- -- -- 3,031,265 $ 5,764,550
Spinnaker Technology
Offshore Fund, Ltd....... -- 425,389 -- -- -- 425,389 $ 1,169,820
Spinnaker Founders Fund... -- 1,454,600 -- -- -- 1,454,600 $ 4,000,150
Spinnaker Clipper Fund,
L.P...................... -- 35,175 -- -- -- 35,175 $ 96,731
Lawrence Bowman........... 285,714 -- -- -- -- 285,714 $ 500,000
ENTITIES AFFILIATED WITH
ST. PAUL VENTURE CAPITAL
St. Paul Fire and Marine
Insurance Company........ -- -- -- -- -- -- --
St. Paul Venture Capital
IV LLC................... 114,286 -- -- -- -- 114,286 $ 200,000
New York Life Insurance
Company................... 685,715 -- -- -- -- 685,715 $ 1,200,001
International BM Biomedicine
Holdings Inc.............. -- -- -- 1,833,334 -- 1,833,334 $ 5,500,002
Investor (Guernsey)
Ltd.(1)................... -- -- -- -- 5,500,000 5,500,000 $22,000,000
Beatrice G. Fuchs........... -- -- -- 120,000 -- 120,000 $ 360,000
Darlene & David Bossen...... -- -- -- 33,334 -- 33,334 $ 100,002
</TABLE>
- --------------------------
(1) In connection with this purchase, Investor (Guernsey) Ltd, was issued a
warrant to purchase 1,100,000 shares at an exercise price of $5.00 per
share.
In connection with the above transactions, we entered into agreements with
the investors providing for registration rights with respect to these shares.
The most recent such agreement is an Amended and Restated Investor Rights
Agreement dated October 15, 1999, which restates and incorporates the
registration rights of all investors. For more information regarding this
agreement, see "Description of Capital Stock--Registration Rights."
Ms. LaPorte, our director, is a general partner of Sprout Capital VI, L.P.
and Sprout Capital VII, L.P., funds managed by The Sprout Group, the venture
capital affiliate of Donaldson, Lufkin & Jenrette. Dr. Buhler, our director, is
Vice Chairman of the Board of International Biomedicine
49
<PAGE>
Management Partners Inc. the management company of International BM Biomedicine
Holdings Inc. Ms. Nelson, our director, is a managing director at Investor
Growth Capital, Inc. and advises Investor (Guernsey) Ltd. on investments in
health care and information technology.
Dr. Fuchs, our Vice President, Clinical Affairs, is the son of Beatrice
Fuchs and the son-in-law of Darlene and David Bossen.
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as officers or directors. See "Management--Limitations of
Liability and Indemnification Matters" for more information regarding
indemnification of our officers and directors.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides summary information regarding the beneficial
ownership of our outstanding common stock as of February 25, 2000:
- each person or group who beneficially owns more than 5% of our common
stock;
- each of our directors;
- each of the executive officers named in the Summary Compensation Table;
and
- all of our executive officers and directors as a group.
Beneficial ownership of shares is determined under the rules of the
Securities and Exchange Commission and generally includes any shares over which
a person exercises sole or shared voting or investment power. Except as
indicated by footnote, and subject to applicable community property laws, each
person identified in the table possesses sole voting and investment power with
respect to all shares of common stock held by them. Shares of common stock
subject to options currently exercisable or exercisable within 60 days of
February 25, 2000 and not subject to repurchase as of that date are deemed
outstanding for calculating the percentage of outstanding shares of the person
holding these options, but are not deemed outstanding for calculating the
percentage of any other person. Applicable percentage ownership in the following
table is based on 21,473,480 shares of common stock outstanding as of
February 25, 2000, after giving effect to the conversion of all outstanding
shares of preferred stock into common stock upon the closing of the offerings,
and 28,973,480 shares of common stock outstanding immediately following the
completion of this offering.
Unless otherwise indicated, the address of each of the named individuals is
c/o IntraBiotics Pharmaceuticals, Inc., 1255 Terra Bella Ave., Mountain View,
California 94043.
<TABLE>
<CAPTION>
Percentage of Shares
Outstanding
--------------------------------
Name and Address Shares Before Offering After Offering
- ---------------- --------- --------------- --------------
<S> <C> <C> <C>
Entities affiliated with The Sprout Group (1)........ 3,652,140 17.0% 12.6%
3000 Sand Hill Road, Suite 4-270
Menlo Park, CA 94025
Investor (Guernsey) Ltd. (2)......................... 3,300,000 15.0 11.2
P.O. Box 626
National Westminster House
Le Truchot St. Peter Port
Guernsey Channel Island
GY1 4PW
Entities affiliated with Spinnaker Technology (3).... 2,751,595 12.8 9.5
1875 South Grant Street, Suite 600
San Mateo, CA 94402
Entities affiliated with St. Paul Venture Capital
Inc. (4)........................................... 1,943,971 9.1 6.7
10400 Viking Dr., Suite 550
Eden Prairie, MN 55344
New York Life Insurance Company...................... 1,225,209 5.7 4.2
51 Madison Avenue, Suite 207
New York, NY 10010
Michael F. Bigham (5)................................ 52,101 * *
Fritz Buhler, Prof. Dr. med. (6)..................... 916,667 4.3 3.2
Kenneth J. Kelley (7)................................ 750,792 3.5 2.6
Gary A. Lyons (8).................................... 1,250 * *
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Percentage of Shares
Outstanding
--------------------------------
Name and Address Shares Before Offering After Offering
- ---------------- --------- --------------- --------------
<S> <C> <C> <C>
Kathleen D. LaPorte (1).............................. 3,652,140 17.0 12.6
Liza Page Nelson (2)................................. 3,300,000 15.0 11.2
John M. Padfield, Ph.D. (9).......................... 3,750 * *
Jack S. Remington, M.D. (10)......................... 9,791 * *
Jane E. Shaw, Ph.D. (11)............................. 39,619 * *
Karen S. Campbell (12)............................... 43,750 * *
John C. Fiddes, Ph.D (13)............................ 235,937 1.1 *
Henry J. Fuchs (14).................................. 103,125 * *
Chee-Liang Leo Gu, Ph.D. (15)........................ 97,342 * *
All executive officers and directors as a group
(15 people) (16)................................... 9,207,514 41.1 30.8
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Includes of 2,052,933 shares held by Sprout Capital VII, L.P., 1,352,727
shares held by Sprout Capital VI, L.P., 214,093 shares held by DLJ Capital
Corporation and 23,846 shares held by Sprout CEO Fund, L.P. Also includes
8,541 shares that DLJ Capital Corporation has the right to acquire pursuant
to options exercisable within 60 days of February 25, 2000. DLJ Capital
Corporation is the managing general partner of the Sprout funds.
Ms. LaPorte, a director of IntraBiotics, is a general partner of Sprout
Capital VI, L.P. and Sprout Capital VII, L.P., funds managed by The Sprout
Group. In such capacity, Ms. LaPorte may be deemed to have an indirect
pecuniary interest in an indeterminate portion of the shares beneficially
owned by the Sprout funds and DLJ Capital Corporation. Ms. LaPorte disclaims
beneficial ownership of the shares held by the Sprout funds and DLJ Capital
Corporation within the meaning of Rule 13d-3 under the Securities Act of
1934.
(2) Includes 550,000 shares Investor (Guernsey) Ltd. has the right to acquire
pursuant to an outstanding warrant exercisable within 60 days of
February 25, 2000. The sole stockholder of Investor (Guernsey) Ltd. is
Expibel B.V. Marc Hollander, Guje Holmberg and Claes VonPost are the
managing directors of Expibel B.V. and have voting and dispositive power
over the shares held by Investor (Guernsey) Ltd. Messrs. Hollander and
VonPost and Ms. Holmberg each disclaim beneficial ownership of the shares
held by Investor (Guernsey) Ltd. except to the extent of their pecuniary
interest. Ms. Nelson disclaims beneficial ownership of these shares within
the meaning of Rule 13d-3 under the Securities Act of 1934.
(3) Includes of 1,029,953 shares held by Spinnaker Technology Fund, L.P.,
885,871 shares held by Spinnaker Technology Offshore Fund, Ltd., 675,327
shares held by Spinnaker Founders Fund, 17,587 shares held by Spinnaker
Clipper Fund, L.P. and 142,857 shares held by Lawrence Bowman, president of
Bowman Capital Management. Bowman Capital Management is the fund manager for
the various Spinnaker funds.
(4) Includes of 1,886,828 shares held by St. Paul Fire and Marine Insurance
Company and 57,143 shares held by St. Paul Venture Capital IV LLC. St. Paul
Venture Capital Inc. exercises sole investment and dispositive power of the
shares held by St. Paul Fire and Marine Insurance Company and St. Paul
Venture Capital IV LLC. There is no one single person at St. Paul Venture
Capital Inc. that exercises voting or dispositive power over these shares.
Voting of these shares is conducted by an internal mechanism at St. Paul
Venture Capital Inc., which requires unanimous approval by an investment
committee consisting of at least three of eight executive officers of St.
Paul Venture Inc., one of which is the deal sponsor. The deal sponsor for
IntraBiotics is Ms. Nancey Olsen.
52
<PAGE>
(5) Includes 9,791 shares issuable upon exercise of options exercisable within
60 days of February 25, 2000.
(6) All of these shares are held by International BM Biomedicine Holdings Inc.
Dr. Buhler, a director of IntraBiotics, is Vice Chairman of the Board of
International Biomedicine Management Partners Inc. In such capacity,
Dr. Buhler be deemed to have an indirect interest in an indeterminate
portion of the shares beneficially owned by International BM Biomedicine
Holdings Inc, Dr. Buhler disclaims beneficial ownership of the shares held
by International BM Biomedicine Holdings Inc. within the meaning of
Rule 13d-3 under the Securities Act of 1934.
(7) Includes 94,272 shares issuable upon exercise of options exercisable within
60 days of February 25, 2000. Also includes 10,000 shares held in
irrevocable trusts with an independent trustee for Mr. Kelley's children.
Mr. Kelley disclaims beneficial ownership of the shares held by his
children.
(8) Includes 1,250 shares issuable upon the exercise of options exercisable
within 60 days of February 25, 2000.
(9) Includes 3,750 shares issuable upon exercise of options exercisable within
60 days of February 25, 2000.
(10) Includes 9,791 shares issuable upon exercise of options exercisable within
60 days of February 25, 2000.
(11) Includes 25,333 shares issuable upon exercise of options exercisable within
60 days of February 25, 2000.
(12) Includes 43,750 shares issuable upon exercise of options exercisable within
60 days of February 25, 2000.
(13) Includes 85,937 shares issuable upon exercise of options exercisable within
60 days of February 25, 2000.
(14) Includes 103,125 shares issuable upon exercise of options exercisable
within 60 days of February 25, 2000.
(15) Includes 2,292 shares issuable upon exercise of options exercisable within
60 days of February 25, 2000 and 10,000 shares held in the name of Dr. Gu's
minor children.
(16) See footnotes 1,2 and 5 through 15 above, as applicable.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Authorized and Outstanding Capital Stock
Our authorized capital stock as of December 31, 1999 consisted of 67,500,000
shares of common stock, and 40,937,873 shares of preferred stock. As of
December 31, 1999 our outstanding stock was held of record by a total of 163
stockholders.
Upon the closing of this offering:
- our certificate of incorporation will be amended and restated to provide
for a total of authorized capital consisting of 50,000,000 shares of
common stock and 5,000,000 shares of preferred stock; and
- all shares of preferred stock will convert into common stock, and a total
of 28,581,054 shares of common stock and no shares of preferred stock will
be outstanding, based on the number of shares outstanding as of
December 31, 1999 and assuming no exercise of the underwriters'
over-allotment option, after giving effect to the sale of the common stock
we are offering.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of our stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences that may be applicable to any
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive ratably any dividends out of assets legally
available therefor as our board of directors may from time to time determine.
Upon liquidation, dissolution or winding up of IntraBiotics, holders of our
common stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preference of any then 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.
PREFERRED STOCK
According to our amended and restated certificate of incorporation, our
board of directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock, in one or more
series. Our board shall determine the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of any series. The issuance of preferred stock could diminish voting power of
holders of common stock, and the likelihood that holders of preferred stock will
receive dividend payments and payments upon liquidation may have the effect of
delaying, deferring or preventing a change in control of IntraBiotics, which
could depress the market price of our common stock. We have no present plan to
issue any shares of preferred stock.
Warrants
As of December 31, 1999, we had the following warrants outstanding:
- a warrant to purchase 54,000 shares of Series B preferred stock was
outstanding at an exercise price of $1.00 per share, which expires in
July 2001. Upon the closing of this
54
<PAGE>
offering, the warrant to purchase Series B preferred stock will become
exercisable for common stock at a rate of one share of common stock for
each two shares of Series B preferred stock at an exercise price of $2.00
per share.
- a warrant to purchase 50,000 shares of Series D preferred stock was
outstanding at an exercise price of $2.50 per share, which expires upon
the closing of this offering. Upon the closing of this offering, the
warrant to purchase Series D preferred stock will become exercisable for
common stock at a rate of one share of common stock for each two shares of
Series D preferred stock.
- warrants to purchase an aggregate of 1,250,000 shares of Series H
preferred stock were outstanding at an exercise price of $5.00 per share,
which expire in December 2001. Upon the closing of this offering, the
warrants to purchase Series H preferred stock will become exercisable for
common stock at a rate of one share of common stock for each two shares of
Series H Preferred Stock.
Each of the warrants contain provisions for the adjustment of the exercise
price and the aggregate number of shares issuable upon the exercise of the
warrants in the event of stock dividends, stock splits, reorganizations and
reclassifications and consolidations.
Registration Rights
Upon completion of this offering, holders of an aggregate of 19,603,479
shares of common stock (and warrants to purchase an aggregate of 625,000 shares
of common stock) will be entitled to rights to register these shares under the
Securities Act. These rights are provided under the Amended and Restated
Investor Rights Agreement, dated October 15, 1999. If we propose to register any
of our securities under the Securities Act after this offering, either for our
own account or for the account of others, the holders of these shares are
entitled to notice of the registration and are entitled to include, at our
expense, their shares of common stock in the registration and any related
underwriting, provided, among other conditions, that the underwriters may limit
the number of shares to be included in the registration. In addition, the
holders of these shares may require us, at our expense and on not more than two
occasions at any time beginning six months from the date of the closing of the
offering, to file a registration statement under the Securities Act with respect
to their shares of common stock, and we will be required to use our best efforts
to effect the registration. Further, the holders may require us at our expense
to register their shares on Form S-3 when this form becomes available.
Anti-Takeover Provisions of Delaware Law and Charter Provisions
We are subject to Section 203 of the Delaware General Corporation Law. In
general, the statute prohibits a publicly-held Delaware corporation from
engaging in any business combination with any interested stockholder for
a period of three years following the date that the stockholder became an
interested stockholder unless:
- prior to that date, our board of directors approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder;
- upon consummation of the transaction that 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 those shares owned by persons who are
directors and also officers, and by employee stock plans in which shares
held subject to the plan will be tendered in a tender or exchange offer;
or
55
<PAGE>
- on or subsequent to that date, the business combination is approved by our
board of directors and is authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; and
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Our amended and restated certificate of incorporation requires that upon
completion of this offering, any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by a consent in writing. Additionally, our
certificate of incorporation:
- substantially limits the use of cumulative voting in the election of
directors;
- provides that the authorized number of directors may be changed only by
resolution of our board of directors; and
- authorizes our board of directors to issue blank check preferred stock to
increase the amount of outstanding shares without stockholder approval.
Our amended and restated bylaws provide that candidates for director may be
nominated only by our board of directors or by a stockholder who gives written
notice to us no later than 90 days prior nor earlier than 120 days prior to the
first anniversary of the last annual meeting of stockholders. Our amended and
restated certificate of incorporation and bylaws provide for a classified board
of directors, in which approximately one third of the directors will be elected
each year. Our board of directors may appoint new directors to fill vacancies or
newly created directorships. Our bylaws also limit who may call a special
meeting of stockholders.
Delaware law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control of our management, which could
depress the market price of our common stock.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Securities
Transfer & Trust, Inc.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 28,973,480 shares of common
stock outstanding. Of these shares, the 7,500,000 shares sold in this offering
will be freely tradable without restriction under the Securities Act, unless
purchased by our "affiliates," as that term is defined in Rule 144 under the
Securities Act. A significant number of shares of our stock outstanding prior to
this offering is subject to 180-day lock-up agreements, and may not be sold in
the public market prior the expiration of the lock-up agreements. Deutsche Bank
Securities Inc. may release the shares subject to the lock-up agreements in
whole or in part at any time without prior public notice. However, Deutsche Bank
Securities Inc. has no current plans to effect such a release. Upon the
expiration of the lock-up agreements, approximately 17,243,972 additional shares
will be available for sale in the public market, subject in some cases to
compliance with the volume and other limitations of Rule 144.
<TABLE>
<CAPTION>
Days after Date Shares
of this Prospectus Eligible for Sale Comment
- ------------------ ----------------- -------
<S> <C> <C>
Upon effectiveness........................ 222,476 Freely tradable shares eligible for sale
under Rule 144(k) and not locked-up
90 days................................... 882,032 Shares not locked-up and saleable under
Rules 144 and 701
180 days.................................. 17,243,972 Lock-up released; shares saleable under
Rules 144 and 701
Various dates thereafter.................. 3,125,000 Restricted securities held for one year
or less as of 180 days following
effectiveness
</TABLE>
Rule 144
In general, under Rule 144 a person (or persons whose shares are aggregated)
who has beneficially owned shares for at least one year is entitled to sell
within any three-month period commencing 90 days after the date of this
prospectus a number of shares that does not exceed the greater of
- 1% of the then outstanding shares of our common stock (approximately
289,734 shares immediately after this offering) or
- the average weekly trading volume during the four calendar weeks preceding
such sale, subject to the filing of a Form 144 with respect to the sale.
A person (or persons whose shares are aggregated) who is not deemed to have
been our affiliate at any time during the 90 days immediately preceding the sale
who has beneficially owned his or her shares for at least two years is entitled
to sell these shares pursuant to Rule 144(k) without regard to the limitations
described above. Affiliates must always sell pursuant to Rule 144, even after
the applicable holding periods have been satisfied.
We cannot estimate the number of shares that will be sold under Rule 144, as
this will depend on the market price for our common stock, the personal
circumstances of the sellers and other factors. Prior to this offering, there
has been no public market for our common stock, and there can be no assurance
that a significant public market for our common stock will develop or be
sustained after this offering. Any future sale of substantial amounts of our
common stock in the open market may adversely affect the market price of our
common stock.
57
<PAGE>
Lock-Up Agreements
We and our directors, executive officers and certain of our stockholders
have agreed pursuant to the underwriting agreement and other agreements not to
sell any of our common stock without the prior consent of Deutsche Bank
Securities Inc. until 180 days from the date of this prospectus. Transfers or
dispositions can be made sooner only with the prior written consent of Deutsche
Bank Securities Inc.
Stock Options
We intend to file a registration statement on Form S-8 under the Securities
Act to register shares of our common stock that are subject to outstanding
options or reserved for issuance under our 1995 Stock Option Plan, our 2000
Equity Incentive Plan and our 2000 Employee Stock Purchase Plan 90 days
following the effectiveness of this registration statement, which permits the
resale of these shares by nonaffiliates in the public market without restriction
under the Securities Act.
Rule 701
Any of our employees or consultants who purchased his or her shares pursuant
to a written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to sell their Rule 701
shares without having to comply with the public information, holding period,
volume limitations or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144
holding period restrictions, in each case commencing 90 days after the date of
this prospectus.
Registration Rights
After this offering the holders of 19,603,479 shares of our common stock
will be entitled to certain rights with respect to registration of such shares
under the Securities Act. Registration of these shares under the Securities Act
would result in these shares becoming freely tradable without restriction under
the Securities Act except for shares purchased by affiliates. See "Description
of Capital Stock--Registration Rights."
58
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank
Securities Inc., Warburg Dillon Read LLC, SG Cowen Securities Corporation and
Adams, Harkness & Hill, Inc. have severally agreed to purchase from IntraBiotics
the following respective number of shares of common stock at a public offering
price less the underwriting discounts and commissions set forth on the cover
page of this prospectus:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
- ----------- ---------
<S> <C>
Deutsche Bank Securities Inc................................
Warburg Dillon Read LLC.....................................
SG Cowen Securities Corporation.............................
Adams, Harkness & Hill, Inc.................................
---------
Total................................................... 7,500,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per
share under the public offering price. The underwriters may allow, and these
dealers may re-allow, a concession of not more than $ per share to other
dealers. After the initial public offering, representatives of the underwriters
may change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to 1,125,000
additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the common stock offered
hereby. To the extent that the underwriters exercise this option, each of the
underwriters will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above tables bears
to the total number of shares of common stock offered hereby. We will be
obligated, pursuant to the option, to sell these additional shares of common
stock to the underwriters to the extent the option is exercised. If any
additional shares of common stock are purchased, the underwriters will offer the
additional shares on the same terms as those on which the 7,500,000 shares are
being offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is
59
<PAGE>
currently expected to be approximately 7% of the initial public offering price.
We have agreed to pay the underwriters the following fees, assuming either no
exercise or full exercise by the underwriters of the underwriters'
over-allotment option:
<TABLE>
<CAPTION>
Total Fees
---------------------------------------------
With Full Exercise of
Without Exercise of Over-Allotment
Fee Per Share Over-Allotment Option Option
------------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by IntraBiotics................ $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .
We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers and directors, and certain holders of our stock, have
agreed not to offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could be expected to, result in the
disposition of any shares of our common stock or other securities convertible
into or exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to this offering or
common stock issuable upon exercise of options or warrants held by these persons
for a period of 180 days after the effective date of the registration statement
of which this prospectus is a part without the prior written consent of Deutsche
Bank Securities Inc. This consent may be given at any time without public
notice. We have entered into a similar agreement with the representatives of the
underwriters, except that we may grant options and issue shares under our 1995
Stock Option Plan, and 2000 Equity Incentive Plan and sell shares under our 2000
Employee Stock Purchase Plan. In addition, we can sell up to an aggregate of
1,000,000 shares to strategic and corporate partners and equipment lessors
without such consent. There are no agreements between the representatives and
any of our stockholders or affiliates releasing them from these lock-up
agreements prior to the expiration of the 180-day period.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 375,000 shares for our vendors, employees, family
members of employees, customers and other third parties. The number of shares of
our common stock available for sale to the general public will
60
<PAGE>
be reduced to the extent these reserved shares are purchased. Any reserved
shares that are not purchased by these persons will be offered by the
underwriters to the general public on the same basis as the other shares in this
offering.
Pricing of This Offering
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stage of development of other companies that
we and the representatives of the underwriters believe to be comparable to
our business; and
- estimates of our business potential.
The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
61
<PAGE>
LEGAL MATTERS
Cooley Godward LLP, Palo Alto, California, will provide us with an opinion
as to the validity of the common stock offered under this prospectus. Latham &
Watkins, Costa Mesa, California, will pass upon certain legal matters related to
the offering for the underwriters.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements as of December 31, 1998 and 1999 and for each of the three years in
the period ended December 31, 1999. We have included our financial statements in
this prospectus and elsewhere in the registration statement in reliance on
Ernst & Young LLP's report, given upon their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of
common stock offered under this prospectus. This prospectus does not contain all
of the information in the registration statement and the exhibits and schedule
to the registration statement. For further information with respect to us and
our common stock, we refer you to the registration statement and to the exhibits
and schedule to registration statement. Statements contained in this prospectus
as to the contents of any contract or any other document referred to are not
necessarily complete, and in each instance, we refer you to the copy of the
contract or other document filed as an exhibit to the registration statement.
Each of these statements is qualified in all respects by this reference. You may
inspect a copy of the registration statement without charge at the SEC's
principal office in Washington, D.C., and copies of all or any part of the
registration statement may be obtained from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of fees
prescribed by the SEC. The SEC maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of the Web site
is HTTP://WWW.SEC.GOV. The SEC's toll free investor information service can be
reached at 1-800-SEC-0330. Information contained on our website does not
constitute part of this prospectus.
Upon completion of the offering, we will be subject to the information
reporting requirements of the Securities Exchange Act of 1934, as amended, and
we will file reports, proxy statements and other information with the SEC.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent public accountants and quarterly
reports for the first three fiscal quarters of each fiscal year containing
unaudited interim financial information. Our telephone number is
(650) 526-6800.
62
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statement of Stockholders' Equity........................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
IntraBiotics Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of IntraBiotics
Pharmaceuticals, Inc. as of December 31, 1998 and 1999, and the related
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. 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 IntraBiotics
Pharmaceuticals, Inc. at December 31, 1998 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
Palo Alto, California
January 14, 2000,
except for the second paragraph of Note 1,
as to which the date is
February 28, 2000
F-2
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro forma
stockholders'
December 31, equity to
------------------- December 31,
1998 1999 1999 (Note 1)
-------- -------- -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including restricted deposits
of $350.................................................. $ 29,869 $ 18,862
Short-term investments.................................... -- 12,567
Other current assets...................................... 144 633
-------- --------
Total current assets.................................... 30,013 32,062
Property and equipment, net................................. 2,045 3,828
Other assets................................................ 41 68
-------- --------
Total assets............................................ $ 32,099 $ 35,958
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,773 $ 2,295
Accrued clinical costs.................................... 1,310 916
Other accrued liabilities, principally related to
development milestones in 1998........................... 3,408 535
Amount payable to contract partner........................ -- 1,677
Deferred revenue.......................................... 738 --
Current portion of equipment financing obligations........ 505 896
-------- --------
Total current liabilities............................... 8,734 6,319
Long-term equipment financing obligations................... 867 1,725
Commitments
STOCKHOLDERS' EQUITY:
Preferred stock, at amounts paid in, $0.001 par value:
35,205,892 and 40,937,873 convertible shares authorized at
December 31, 1998 and 1999, 5,000,000 shares of preferred
stock authorized pro forma; 32,388,207 and 39,483,873
shares issued and outstanding at December 31, 1998 and
1999, respectively (aggregate liquidation preference of
$81,245), no shares of preferred stock issued and
outstanding pro forma..................................... 52,152 79,609 $ --
Common stock, $0.001 par value: 60,000,000 and 67,500,000
shares authorized at December 31, 1998 and 1999,
50,000,000 shares authorized pro forma; 1,001,030 and
1,339,154 shares issued and outstanding at December 31,
1998 and 1999, respectively, 21,081,054 shares issued and
outstanding pro forma..................................... 1 1 21
Additional paid-in capital.................................. 1,249 13,828 93,417
Deferred stock compensation................................. (1,145) (12,650) (12,650)
Accumulated deficit......................................... (29,759) (52,874) (52,874)
-------- -------- --------
Total stockholders' equity.............................. 22,498 27,914 $ 27,914
-------- -------- ========
Total liabilities and stockholders' equity................ $ 32,099 $ 35,958
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Contract revenue.......................................... $ 3,507 $ 5,357 $ 7,863
License fee and milestone revenue......................... 2,000 1,000 --
------- -------- --------
Total revenues.............................................. 5,507 6,357 7,863
------- -------- --------
Operating expenses:
Research and development.................................. 8,103 21,997 26,102
General and administrative................................ 1,960 2,533 6,082
------- -------- --------
Total operating expenses.................................... 10,063 24,530 32,184
------- -------- --------
Operating loss.............................................. (4,556) (18,173) (24,321)
Interest income............................................. 575 963 1,372
Interest expense............................................ (94) (172) (166)
------- -------- --------
Net loss.................................................... $(4,075) $(17,382) $(23,115)
======= ======== ========
Basic and diluted net loss per share........................ $ (6.39) $ (20.89) $ (21.62)
======= ======== ========
Shares used to compute basic and diluted net loss per
share..................................................... 638 832 1,069
======= ======== ========
Pro forma basic and diluted net loss per share
(unaudited)............................................... $ (1.27)
========
Shares used to compute pro forma basic and diluted net loss
per share (unaudited)..................................... 18,172
========
</TABLE>
See accompanying notes.
F-4
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Convertible Additional Deferred Total
Preferred Common Paid-In Stock Accumulated Stockholders'
Stock Stock Capital Compensation Deficit Equity
----------- --------- ---------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996......... $12,697 $1 $ 14 $ -- $ (8,302) $ 4,410
Issuance of 17 shares of common stock
upon exercise of options for cash... -- -- 3 -- -- 3
Issuance of 5,714 shares of Series D
convertible preferred stock for cash
(net of issuance costs of $50)...... 9,950 -- -- -- -- 9,950
Issuance of 2,725 shares of Series E
convertible preferred stock for cash
(net of issuance costs of $17)...... 7,477 -- -- -- -- 7,477
Issuance of 500 shares of Series F
convertible preferred stock for
cash................................ 2,000 -- -- -- -- 2,000
Net loss and comprehensive loss....... -- -- -- -- (4,075) (4,075)
------- -- ------- -------- -------- --------
Balances at December 31, 1997......... 32,124 1 17 -- (12,377) 19,765
Issuance of 205 shares of common stock
upon exercise of options for cash... -- -- 39 -- -- 39
Issuance of 250 shares of Series F
convertible preferred stock for
technology license.................. 1,000 -- -- -- -- 1,000
Issuance of 6,811 shares of Series G
convertible preferred stock for cash
(net of issuance costs of $1,406)... 19,028 -- -- -- -- 19,028
Deferred stock compensation........... -- -- 1,193 (1,193) -- --
Amortization of deferred stock
compensation........................ -- -- -- 48 -- 48
Net loss and comprehensive loss....... -- -- -- -- (17,382) (17,382)
------- -- ------- -------- -------- --------
Balances at December 31, 1998......... 52,152 1 1,249 (1,145) (29,759) 22,498
Issuance of 338 shares of common stock
upon exercise of options for cash... -- -- 93 -- -- 93
Issuance of 846 shares of Series G
convertible preferred stock for
cash................................ 2,580 -- -- -- -- 2,580
Issuance of 6,250 shares of Series H
convertible preferred stock and
warrants to purchase 1,250 shares of
Series H convertible preferred stock
for cash (net of issuance costs of
$123)............................... 24,877 -- -- -- -- 24,877
Deferred stock compensation........... -- -- 12,486 (12,486) -- --
Amortization of deferred stock
compensation........................ -- -- -- 981 -- 981
Net loss and comprehensive loss....... -- -- -- -- (23,115) (23,115)
------- -- ------- -------- -------- --------
Balances at December 31, 1999......... $79,609 $1 $13,828 $(12,650) $(52,874) $ 27,914
======= == ======= ======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Operating activities
Net loss.................................................. $(4,075) $(17,382) $(23,115)
Adjustments to reconcile net loss to net cash used in
operating activities:
Preferred stock issued in exchange for technology
license expense........................................ -- 1,000 --
Depreciation and amortization........................... 204 489 740
Amortization of deferred stock compensation............. -- 48 981
Changes in assets and liabilities:
Accounts receivable................................... (2,225) 2,225 --
Other current assets.................................. 1 (111) (489)
Other assets.......................................... -- (28) (27)
Accounts payable...................................... 237 2,316 (478)
Accrued clinical costs................................ 632 678 (394)
Other accrued liabilities............................. 861 2,440 (2,873)
Amount payable to contract partner.................... -- -- 1,677
Deferred revenue...................................... 1,705 (967) (738)
------- -------- --------
Net cash used in operating activities............... (2,660) (9,292) (24,716)
Investing activities
Capital expenditures...................................... (1,589) (597) (2,523)
Purchases of short-term investments....................... -- -- (14,862)
Maturities of short-term investments...................... -- -- 2,295
------- -------- --------
Net cash used in investing activities..................... (1,589) (597) (15,090)
Financing activities
Proceeds from issuance of preferred stock, net of issuance
costs.................................................... 19,427 19,028 27,457
Proceeds from issuance of common stock.................... 3 39 93
Proceeds from equipment financing......................... 1,131 397 2,033
Payments on equipment financing........................... (246) (485) (784)
------- -------- --------
Net cash provided by financing activities............... 20,315 18,979 28,799
------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 16,066 9,090 (11,007)
Cash and cash equivalents at beginning of period............ 4,713 20,779 29,869
------- -------- --------
Cash and cash equivalents at end of period.................. $20,779 $ 29,869 $ 18,862
======= ======== ========
Supplemental disclosure of cash flow information
Interest paid............................................... $ 94 $ 172 $ 166
</TABLE>
See accompanying notes.
F-6
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
IntraBiotics Pharmaceuticals, Inc. ("IntraBiotics" or the "Company"), was
incorporated in the state of Delaware on January 19, 1994. IntraBiotics develops
and intends to commercialize novel antibacterial and antifungal drugs for the
prevention or treatment of serious infectious diseases. The Company has devoted
substantially all of its efforts and resources since incorporation to research
and development related to its antimicrobial products.
REVERSE STOCK SPLIT
On February 28, the Company effected a one-for-two reverse split of its
common stock. All common share and per share amounts have been retroactively
restated to reflect the split in the accompanying financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, including amounts accrued for clinical trial costs. Actual
results could differ from those estimates.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. Cash equivalents and
short-term investments include money market funds, commercial paper, and
government and commercial debt securities. All cash equivalents and short-term
investments are classified as available-for-sale and mature within one year.
Available-for-sale securities are carried at amortized cost, which approximated
fair value at December 31, 1998 and 1999. Material unrealized gains and losses,
if any, are reported in stockholders' equity and included in other comprehensive
loss. Fair value is estimated based on available market information. The cost of
securities sold is based on the specific identification method. For the years
ended December 31, 1998 and 1999, gross realized gains and losses on
available-for-sale securities were immaterial.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments, including cash and cash
equivalents, short-term investments, and equipment financing approximate their
carrying value. The fair value of the equipment financing is estimated using
discounted cash flow analyses, based on the Company's current incremental
borrowing rate for similar types of borrowing arrangements.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation,
which is provided using the straight-line method over the estimated useful lives
of the respective assets, generally three to five years. Leasehold improvements
are depreciated over the terms of the building leases of up to seven years.
F-7
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
REVENUE RECOGNITION
Contract revenue from collaboration research and development reimbursement
funding is recognized as earned, according to the terms of the collaboration
agreement, and is based on contract expenses incurred during the period and the
number of full-time equivalent employees working on the contract. These funds
are generally received in advance and are recorded as deferred revenue until
earned. Revenue related to license fees with noncancelable, nonrefundable terms
and no future performance obligations are recognized upon execution of the
collaboration agreement when collection is assured. Such revenues are deferred
and recognized over the performance period if future performance obligations
exist. Revenue associated with milestones are recognized as earned, based on
completion of development milestones, either upon receipt, or when collection is
assured.
In December 1999 the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101 "Revenue Recognition." The Company is evaluating
the impact of SAB 101 on its financial statements and its future revenue
recognition policy, but does not believe the application of SAB 101 to its
financial statements will result in a material change upon adoption in the first
quarter of 2000.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
Research and development expenses, including direct and allocated expenses,
consist of independent research and development costs, costs associated with
collaborative research and development arrangements, and, in 1998, license fees
related to the acquisition of in-process research and development with no
alternative future use.
STOCK-BASED COMPENSATION
The Company has elected to account for employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"), using an intrinsic value approach to
measure compensation expense, if any. Deferred stock compensation calculated
according to APB 25 is amortized over the vesting period of the options, ranging
from four to six years, on a straight-line basis. Appropriate pro forma net loss
disclosures using a fair value-based method, as provided by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), are also reflected in Note 6. Options issued to
nonemployees are accounted for in accordance with SFAS 123 and EITF Consensus
96 -18 using a fair value approach, and the compensation cost of such options is
subject to remeasurement over their vesting terms, as the options are earned.
COMPREHENSIVE LOSS
As of January 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130"). The
Company's comprehensive loss was not materially different from the net loss for
the years ended December 31, 1997, 1998, and 1999.
F-8
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
NET LOSS PER SHARE
Net loss per share has been computed according to Financial Accounting
Standards Board Statement No. 128, "Earnings Per Share" ("SFAS 128"), which
requires disclosure of basic and diluted earnings per share. Basic and diluted
earnings per share is calculated using the weighted-average number of shares of
common stock outstanding during the period, less shares subject to repurchase.
Diluted earnings per share includes the impact of potentially dilutive
securities. As the Company's potentially dilutive securities (convertible
preferred stock, stock options, and warrants) were antidilutive for all periods,
they were not included in the computation of weighted-average shares used in
computing diluted net loss per share. Pro forma basic and diluted net loss per
common share, as presented in the statements of operations, has been computed
for the year ended December 31, 1999 as described above, and also gives effect
to the conversion of the convertible preferred stock which will automatically
convert to common stock immediately prior to the completion of the Company's
initial public offering (using the if-converted method) from the original date
of issuance.
Following the guidance given by the Securities and Exchange Commission Staff
Accounting Bulletin No. 98, common stock and convertible preferred stock that
has been issued or granted for nominal consideration prior to the anticipated
effective date of the initial public offering must be included in the
calculation of basic and diluted net loss per common share as if these shares
had been outstanding for all periods presented. To date, the Company has not
issued or granted shares for nominal consideration.
The following is a reconciliation of the numerator and denominator of basic
and diluted net loss per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Basic and diluted:
Net loss.................................................. $(4,075) $(17,382) $(23,115)
======= ======== ========
Weighted-average shares of common stock outstanding....... 783 856 1,069
Less: weighted-average shares subject to repurchase....... (145) (24) --
------- -------- --------
Weighted-average shares used in computing basic and
diluted net loss per share............................... 638 832 1,069
======= ======== ========
Basic and diluted net loss per share........................ $ (6.39) $ (20.89) $ (21.62)
======= ======== ========
Pro forma basic and diluted:
Shares used above......................................... 1,069
Pro forma adjustment to reflect weighted-average effect of
assumed conversion of preferred stock from the date of
issuance................................................. 17,103
--------
Total weighted-average shares of common stock outstanding
pro forma................................................. 18,172
========
Basic and diluted pro forma loss per share.................. $ (1.27)
========
</TABLE>
F-9
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The total number of shares excluded from the calculations of diluted net
loss per share, prior to application of the treasury stock method for options,
warrants and convertible preferred stock was 14,147,012, 18,462,550, and
24,165,796 for the years ended December 31, 1997, 1998, and 1999, respectively.
Such securities, had they been dilutive, would have been included in the
computations of diluted net loss per share (see Note 6 for further information
on these securities).
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities" ("SFAS 133"), which establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as "derivatives") and for hedging
activities. SFAS 133 (as deferred by SFAS 137) is effective for the Company's
year ending December 31, 2001. As the Company does not currently hold
derivatives or engage in hedging transactions, there would be no current impact
to the Company's results of operations, financial position, or cash flows upon
the adoption of SFAS 133.
3. COLLABORATION AGREEMENT WITH PHARMACIA & UPJOHN S.p.A.
In October 1997, the Company entered into a collaboration agreement with
Pharmacia & Upjohn S.p.A. ("Pharmacia"), to develop and commercialize the
Company's Protegrin IB-367, on a worldwide basis. The Company was to receive up
to $35,000,000 in research and milestone payments, if specified research and
development goals were achieved, an equity investment, and license fees. A
nonrefundable license fee of $2,000,000 associated with the transfer of
development and commercialization rights to Pharmacia was received and
recognized as revenue in 1997. A nonrefundable development milestone of
$1,000,000 was received and recognized as revenue in 1998.
Pharmacia shared equally with the Company the costs of developing Protegrin
IB-367 for the United States market. Both parties had the right to codevelop,
copromote, and share defined profits and losses in the United States, should
IB-367 result in a marketable drug. Pharmacia had the right to develop and
promote Protegrin IB-367 outside the United States and would pay the Company
royalties on defined profits, if any. The Company recognized research contract
revenues of $3,507,000, $5,357,000, and $7,863,000 in 1997, 1998, and 1999,
respectively, relating to the reimbursement of shared development costs.
In connection with the collaboration, the Company sold to Pharmacia 500,000
shares of Series F preferred stock at $4.00 per share for an aggregate purchase
price of $2,000,000 in 1997.
The Company mutually agreed with Pharmacia in July 1999 to terminate the
agreement with funding through December 31, 1999. As a result of the
termination, the Company has retained global rights to Protegrin IB-367.
Pharmacia has no further obligations to pay future milestones or development
expenses, or to purchase additional shares of common stock subsequent to the
termination. Approximately $1.7 million of unused development funding will be
returned to Pharmacia.
F-10
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1998 1999
----------- -----------
<S> <C> <C>
Machinery and equipment........................... $1,802 $ 2,753
Furniture and fixtures............................ 116 320
Construction in progress.......................... 34 --
Leasehold improvements............................ 970 2,372
------ -------
2,922 5,445
Less accumulated depreciation and amortization.... (877) (1,617)
------ -------
Property and equipment, net....................... $2,045 $ 3,828
====== =======
</TABLE>
5. LEASE COMMITMENTS AND EQUIPMENT FINANCING ARRANGEMENTS
The Company leases its facilities under operating lease agreements which
expire in December 2001 and July 2004. At December 31, 1999, the Company has
made available letters of credit for $350,000 in connection with these leases.
Total rent expense for the years ended December 31, 1997, 1998, and 1999 was
approximately $342,000, $502,000, and $786,000, respectively.
The Company has financed an aggregate of $2,251,000 and $4,284,000 at
December 31, 1998 and 1999, respectively, of property and equipment purchases
with borrowings under equipment financing agreements. The loans are secured by
the related assets. The total availability under the equipment financing
agreements was $5,500,000, of which $967,000 remains available through
February 29, 2000 and $249,000 expired unused. The interest rates applicable to
the obligations range from 9.9% to 13.7% at December 31, 1999, and the weighted
average interest rate during 1998 was 10.9% and in 1999 was 10.4%. The carrying
value of the obligations approximates fair value based on a discounted cash flow
analysis using the Company's incremental borrowing rate for similar obligations.
At December 31, 1999, future minimum lease payments under operating leases
and principal payments under the equipment financing arrangements are as follows
(in thousands):
<TABLE>
<CAPTION>
Operating Financing
Leases Arrangements
--------- ------------
<S> <C> <C>
2000................................................ $1,050 $ 896
2001................................................ 838 822
2002................................................ 860 764
2003................................................ 873 139
2004................................................ 462 --
------ ------
Total minimum payments required..................... $4,083 2,621
======
Less current portion................................ (896)
------
Long-term portion................................... $1,725
======
</TABLE>
F-11
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. LEASE COMMITMENTS AND EQUIPMENT FINANCING ARRANGEMENTS (Continued)
In August 1999, the Company entered into a term loan agreement with Silicon
Valley Bank for $5,000,000. The loan agreement has a revolving draw period
expiring in August 2000, and bears interest at prime plus 1.25%. Interest-only
payments are due until August 2000, and thereafter principal and interest is
payable thereafter over four years. The term loan also includes various
financial covenents and a restriction on paying dividends. No amounts had been
drawn under this arrangement at December 31, 1999.
6. STOCKHOLDERS' EQUITY
COMMON STOCK RESERVED FOR FUTURE ISSUANCE
Shares of common stock of the Company reserved for future issuance at
December 31, 1999 were as follows:
<TABLE>
<S> <C>
Conversion of convertible preferred stock................... 19,741,900
Stock option plan........................................... 3,870,397
Warrants.................................................... 677,000
----------
24,289,297
==========
</TABLE>
CONVERTIBLE PREFERRED STOCK
The Company is authorized to issue 40,937,873 shares of convertible
preferred stock at December 31, 1999. Each share of convertible preferred stock
has voting rights equal to shares of common stock on an "if-converted" basis.
The convertible preferred stock authorized, issued and outstanding at
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Shares Issued Aggregate
Shares and Liquidation
Authorized Outstanding Preference
----------- ------------- -----------
(In
thousands)
<S> <C> <C> <C>
Series A.............................. 821,429 821,429 $ 411
Series B.............................. 5,803,996 5,749,996 4,025
Series C.............................. 9,816,181 9,816,181 8,344
Series D.............................. 5,764,286 5,714,286 10,000
Series E.............................. 2,725,000 2,725,000 7,494
Series F.............................. 750,000 750,000 3,000
Series G.............................. 7,656,981 7,656,981 22,971
Series H.............................. 7,600,000 6,250,000 25,000
---------- ---------- -------
40,937,873 39,483,873 $81,245
========== ========== =======
</TABLE>
Series A, B, C, D, E, F, G, and H stockholders are entitled to noncumulative
quarterly dividends, when and as declared by the board of directors, at the rate
of $0.04, $0.06, $0.07, $0.15, $0.23, $0.35, $0.25, and $0.35 per share,
respectively (as adjusted for any stock dividends, combinations, or splits with
respect to such shares). No dividends have been declared or paid by the Company.
F-12
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. STOCKHOLDERS' EQUITY (Continued)
In the event of a liquidation or winding up of the Company, holders of
Series A, B, C, D, E, F, G, and H stockholders are entitled to a liquidation
preference of $0.50, $0.70, $0.85, $1.75, $2.75, $4.00, $3.00, and $4.00 per
share, respectively, plus all declared but unpaid dividends. After payment has
been made to the preferred stockholders, the remaining assets of the Company
legally available for distribution, if any, shall be distributed ratably to the
holders of the common stock and preferred stock on an if-converted basis.
Each two shares of preferred stock are convertible at any time at the option
of the holder into one share of common stock adjusted, if applicable, for unpaid
dividends, stock splits, combinations, and certain other events. Conversion of
the preferred stock into common stock is automatic at the earlier of an initial
public offering in excess of $25,000,000 at an offering price of not less than
$12.00 per share (subsequently reduced to $10.00 per share in January 2000), or
the election by more than 66 2/3% of the shares held by the preferred
stockholders, voting together as a class.
At the election of the holders of at least 50% of the outstanding preferred
stock, the Company shall file a registration statement with an aggregate
offering price to the public in excess of $3,000,000.
Prior to an initial public offering, certain preferred stockholders have the
right of first refusal with respect to certain future issuances of preferred or
common stock.
WARRANTS
In July 1995 and October 1997, the Company issued warrants to purchase
54,000 and 50,000 shares of the Company's Series B and D preferred stock at
exercise prices of $1.00 and $2.50 per share, respectively. These warrants were
issued in connection with an equipment financing agreement. The 1995 warrants
expire on the earlier of July 2001 or the sale of substantially all of the
Company's assets. The 1997 warrants expire on the earlier of October 2003 or the
closing of the Company's initial public offering, the merger of the Company with
or into another corporation and the sale of substantially all of the Company's
assets. The value assigned to these warrants was not material.
In October 1999, the Company issued warrants to purchase 1,250,000 shares of
the Company's Series H preferred stock at an exercise price of $5.00 per share.
These warrants were issued in connection with the Series H preferred stock
financing, and expire on December 31, 2001. The value of these warrants is
included with the Series H preferred stock issued on that date.
Through December 31, 1999, no warrants have been exercised.
1995 INCENTIVE STOCK PLAN
The 1995 Incentive Stock Plan (the "Plan") was amended and restated in 1999
and allows the granting of options for up to 4,523,554 shares of common stock to
employees, consultants, and directors.
Stock options granted under the Plan may be either incentive stock options
or nonstatutory stock options. Incentive stock options may be granted to
employees with exercise prices of no less than the fair value and nonstatutory
options not less than 85% of the fair value of the common stock on the date of
grant, as determined by the board of directors. All options are to have a term
F-13
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. STOCKHOLDERS' EQUITY (Continued)
not greater than 10 years from the date of grant. The board of directors shall
determine the time or times during the term when the options may be exercised
and the number of shares for which an option may be granted. Options generally
vest ratably over a period ranging from four to six years.
A summary of the Company's stock option activity and related information
follows:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------
Weighted-
Number of Average
Shares Exercise Price
--------- --------------
<S> <C> <C>
Balance at December 31, 1996....................... 935,575 $0.17
Granted.......................................... 527,650 $0.45
Exercised........................................ (17,446) $0.19
Canceled......................................... (14,194) $0.27
---------
Balance at December 31, 1997....................... 1,431,585 $0.27
Granted.......................................... 1,128,800 $0.99
Exercised........................................ (205,253) $0.19
Canceled......................................... (138,650) $0.53
---------
Balance at December 31, 1998....................... 2,216,482 $0.63
Granted.......................................... 2,160,782 $1.54
Exercised........................................ (338,124) $0.27
Canceled......................................... (292,244) $0.92
---------
Balance at December 31, 1999....................... 3,746,896 $1.16
=========
</TABLE>
At December 31, 1997, 1998, and 1999, options to purchase 520,298, 690,253,
and 818,569 shares, respectively, of common stock were exercisable. The
following tables summarize information about options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------- -------------------------------------
Weighted-
Average Weighted- Weighted-
Range of Number of Remaining Average Exercise Number of Average Exercise
Exercise Price Shares Contractual Life Price Shares Price
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(Years)
<S> <C> <C> <C> <C> <C>
$0.10-$0.90 765,207 6.4 $0.31 570,900 $0.28
$1.00-$1.00 1,210,907 8.5 $1.00 194,590 $1.00
$1.50-$1.50 1,276,182 9.6 $1.50 51,258 $1.50
$2.00-$2.00 494,600 10.0 $2.00 1,821 $2.00
----------------- -----------------
3,746,896 8.6 $1.16 818,569 $0.53
================= =================
</TABLE>
The weighted-average fair value of options granted during 1997, 1998, and
1999 was $0.05, $0.09, and $5.50, respectively.
F-14
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. STOCKHOLDERS' EQUITY (Continued)
Pro forma information regarding net income (loss) 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 the minimum value method with
the following weighted-average assumptions:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1997 1998 1999
-------- -------- ---------
<S> <C> <C> <C>
Risk-free interest rates....................... 6.5% 5.0% 5.5%
Dividend yield................................. -- -- --
Expected life of option........................ 4 years 4 years 4.5 years
</TABLE>
Pro forma net loss information applying the minimum value method to the
Company's stock options granted in 1997, 1998, and 1999 is as follows. Future
pro forma net income (loss) results may be materially different from actual
amounts reported.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss--as reported......................... $(4,075) $(17,382) $(23,115)
Net loss--pro forma........................... $(4,096) $(17,429) $(25,172)
Basic and diluted net loss per share--as
reported.................................... $ (6.39) $ (20.89) $ (21.62)
Basic and diluted net loss per share--pro
forma....................................... $ (6.42) $ (20.95) $ (23.55)
</TABLE>
During the years ended December 31, 1998 and 1999, in connection with the
grant of certain stock options to employees and officers, the Company recorded
deferred stock compensation of $1,193,000 and $12,486,000, respectively,
representing the difference between the exercise price and the deemed fair value
of the Company's common stock for financial reporting purposes on the date such
stock options were granted. The deemed fair value of the common stock was
determined based on an analysis of key events and milestones in our research and
development programs, including progress with clinical studies and FDA
regulatory matters, and the closing of preferred stock financings. The weighted
average deemed fair value of the common stock associated with stock options
granted during the years ended December 31, 1998 and 1999 and for January 2000
was $2.11, $7.66 and $10.40 (unaudited) per share, respectively. Deferred
compensation is included as a component of stockholders' equity and is being
amortized to expense on a straight-line basis over the vesting period of the
options, ranging from four to six years. During the years ended December 31,
1998 and 1999, the Company recorded amortization of deferred stock compensation
expense of approximately $48,000 and $981,000, respectively. Additional deferred
compensation of approximately $2,100,000 (unaudited) is expected to be recorded
based on the deemed fair value of common stock options granted to employees
during January 2000.
7. LICENSING, RESEARCH, AND TECHNOLOGY CONTRACTS
The Company has entered into agreements with academic institutions under
which it obtained certain licenses to technology under development. In exchange
for the licenses, the Company made certain payments, and agreed to pay the
institutions additional amounts and specified royalties upon the occurrence of
certain events. The academic institutions may terminate the agreements upon the
occurrence of certain events.
F-15
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
7. LICENSING, RESEARCH, AND TECHNOLOGY CONTRACTS (Continued)
From 1994 to 1997, the Company entered into a series of agreements with The
Regents of the University of California under which it obtained certain licenses
to its protegrin technology under development. In consideration for the license,
the Company has made certain payments totaling $75,000, and agreed to pay The
Regents of the University of California additional amounts and specified
royalties upon occurrence of certain events related to the development of the
technology. These events include commencement of clinical trials, drug
approvals, and product sales.
In January 1997, the Company entered into an agreement with PolyPeptide
Laboratories A/S to develop a manufacturing process for its drug substance
Protegrin IB-367 and was obligated to pay up to $2,895,000 based upon
achievement of certain development milestones. The Company also entered into a
related purchase and supply agreement with PolyPeptide. For the years ended
December 31, 1997, 1998, and 1999, the Company has incurred milestone payments
of approximately $910,000, $1,025,000 and $760,000, respectively, under the
agreement, which were charged to research and development expense.
During 1998, the Company recorded $2,000,000 in license fee expense in
connection with the purchase of rights from Biosearch Italia S.P.A to develop
and commercialize Ramoplanin, which was a phase I clinical-stage product
candidate. At the date of the agreement, the full scientific feasibility of the
product candidate had not been established. The Company is responsible for the
development of the licensed product. Biosearch Italia has agreed to manufacture
all Company bulk product requirements for development and commercialization at
an agreed to transfer price and royalty percentage, although the Company has the
ability to elect to manufacture the product. The purchase price, which was
expensed as in-process research and development as the rights had no alternative
future use, consisted of the issuance of 250,000 shares of Series F preferred
stock at $4.00 per share and $1,000,000 in cash. In 1998, the Company incurred a
milestone of $2,000,000 for the commencement of the phase II clinical trial. The
Company may pay up to an additional $12,000,000 in license fees and milestone
payments, if specified research and development goals are reached. The goals
that will result in additional payments include commencement of clinical trials,
drug approvals, and product sales. The Company expects to expense any of such
future payments made prior to receipt of FDA marketing approval as research and
development expense, and payments made upon or after FDA approval are expected
to be capitalized and amortized over the applicable benefit period.
8. INCOME TAXES
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $46,000,000 and $23,000,000, respectively.
The Company also had federal research and development tax credit carryforwards
of approximately $1,000,000. The net operating loss and credit carryforwards
will expire at various dates beginning on 2002 through 2019, 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.
F-16
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. INCOME TAXES (Continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting and the amount
used for income tax purposes. Significant components of the Company's deferred
tax assets for federal and state income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1999
----------- --------
<S> <C> <C>
Net operating loss carryforwards..................... $ 11,000 $ 17,300
Research credits..................................... 1,100 1,300
Capitalized research and development................. 500 1,200
Intangible assets.................................... -- 1,500
Other................................................ -- (200)
-------- --------
Total deferred tax assets............................ 12,600 21,100
Valuation allowance.................................. (12,600) (21,100)
-------- --------
Net deferred tax assets.............................. $ -- $ --
======== ========
</TABLE>
Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by $2,000,000, $7,400,000 and $8,500,000 during the years ended
December 31, 1997, 1998 and 1999, respectively.
9. EVENTS SUBSEQUENT TO THE DATE OF INDEPENDENT AUDITORS' REPORT
PUBLIC OFFERING
In January 2000, the board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
8,625,000 shares of its common stock in connection with a proposed initial
public offering. If the offering is consummated under the terms currently
anticipated, the convertible preferred stock outstanding as of the closing date
will be converted into shares of the Company's common stock. The pro forma
stockholders' equity in the accompanying balance sheet as of December 31, 1999
reflects conversion of the outstanding preferred stock into 19,741,900 shares of
common stock.
2000 EQUITY INCENTIVE PLAN
In January 2000, the board adopted the 2000 Equity Incentive Plan (the
"equity incentive plan") which was approved by stockholders in February 2000.
The aggregate number of shares that may be issued pursuant to stock awards
granted under the equity incentive plan is 5,000,000 shares. On December 31 of
each year, beginning on December 31, 2000, through December 31, 2008, the
authorized shares will automatically be increased by a number of shares equal to
the lesser of:
- 5% of the then outstanding shares of common stock on a fully-diluted
basis;
- 2,000,000 shares; or
- a lesser number of shares determined by the board of directors prior to
each anniversary date.
F-17
<PAGE>
INTRABIOTICS PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
9. EVENTS SUBSEQUENT TO THE DATE OF INDEPENDENT AUDITORS' REPORT (Continued)
2000 EMPLOYEE STOCK PURCHASE PLAN
In January 2000, the board adopted the 2000 Employee Stock Purchase Plan
(the "purchase plan"), which was approved by stockholders in February 2000,
authorizing the issuance of 500,000 shares of common stock pursuant to purchase
rights granted to employees.
On December 31 of each year, starting with December 31, 2000 through
December 31, 2008, the share reserve will automatically be increased by a number
of shares equal to the lesser of:
- 1% of the then outstanding shares of common stock on a fully diluted
basis;
- 500,000 shares; or
- a lesser number of shares to be determined by the board of directors.
The purchase plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended. As of the date hereof, no shares of common stock have been purchased
under the purchase plan.
The purchase plan permits eligible employees to purchase common stock at a
discount, but only through payroll deductions, during defined offering periods.
The price at which stock is purchased under the purchase plan is equal to 85% of
the fair market value of the common stock on the first or last day of the
offering period, whichever is lower. The initial offering period will commence
on the effective date of the offering.
FACILITIES LEASE AGREEMENT
In February 2000, the Company entered into a lease agreement for two
additional facilities. This lease expires in 2011, and the Company has the right
to extend the term for an additional period of 5 years. Future minimum payments
under the lease are $1,047,000 in 2000 and $3,366,000 in 2001. Payments in
future years range from $4,620,000 per year in 2002 to $5,952,000 per year in
2011.
F-18
<PAGE>
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide information different from that contained in
this prospectus. We 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 our common stock.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Summary................................... 1
Risk Factors.............................. 5
Special Note Regarding Forward-Looking
Statements and Industry Data............ 12
Use of Proceeds........................... 13
Dividend Policy........................... 13
Capitalization............................ 14
Dilution.................................. 15
Selected Financial Data................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 17
Business.................................. 22
Management................................ 37
Certain Transactions...................... 48
Principal Stockholders.................... 51
Description of Capital Stock.............. 54
Shares Eligible for Future Sale........... 57
Underwriting.............................. 59
Legal Matters............................. 62
Experts................................... 62
Where You Can Find Additional
Information............................. 62
Index to Financial Statements............. F-1
</TABLE>
Until , 2000 (25 days after the date of this prospectus), all dealers
that buy, sell or trade in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. Dealers are also
obligated to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
[LOGO]
7,500,000 Shares
Common Stock
Deutsche Banc Alex. Brown
Warburg Dillon Read LLC
SG Cowen
Adams, Harkness & Hill, Inc.
Prospectus
, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discounts payable by us, in connection with the sale of common
stock being registered. All amounts are estimates except the SEC registration
fee, the NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee........................................ $ 34,155
NASD filing fee............................................. 13,438
Nasdaq National Market listing fee.......................... 95,000
Blue Sky Fees and expenses.................................. 5,000
Transfer Agent and Registrar fees........................... 10,000
Accounting fees and expenses................................ 250,000
Legal fees and expenses..................................... 450,000
Printing and engraving costs................................ 165,000
Miscellaneous expenses...................................... 27,407
----------
Total..................................................... $1,050,000
==========
</TABLE>
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
- for any breach of duty of loyalty to us or to our stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- for unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and officers and may indemnify our employees and
agents to the fullest extent permitted by Delaware law. We believe that
indemnification under our amended and restated certificate of incorporation
covers negligence and gross negligence on the part of indemnified parties.
We have entered into indemnification agreements with each of our directors
and officers. These agreements, among other things, require us to indemnify each
director and officer 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 IntraBiotics
Pharmaceuticals, Inc., arising out of the person's services as our director or
officer, any subsidiary of ours or any other company or enterprise to which the
person provides services at our request.
The underwriting agreement (Exhibit 1.1) will provide for indemnification by
the underwriters of IntraBiotics Pharmaceuticals, Inc., our directors, our
officers who sign the registration statement, and our controlling persons for
some liabilities, including liabilities arising under the Securities Act.
II-1
<PAGE>
Item 15. RECENT SALES OF UNREGISTERED SECURITIES
The following table sets forth information regarding all securities sold by
the Registrant since January 1, 1997:
1. In April 1997, we issued and sold 5,714,286 shares of Series D preferred
stock, each two of which will convert into one share of common stock upon
completion of this offering, at $1.75 per share to 17 accredited investors,
787,854 of which were sold to two of our executive officers and/or directors
(and related entities).
2. In October 1997, we issued a warrant to purchase 50,000 shares of Series D
preferred stock, which will convert into a warrant to purchase shares of
common stock upon the completion of this offering, to one accredited
investor, at an exercise price of $2.50 per share.
3. In October 1997, we issued and sold 2,725,000 shares of Series E preferred
stock, each two of which will convert into one share of common stock upon
completion of this offering, at $2.75 per share to five accredited
investors.
4. In October 1997 and May 1998, we issued and sold 500,000 and 250,000 shares
of Series F preferred stock, respectively, each two of which will convert
into one share of common stock upon completion of this offering, at $4.00
per share to two accredited investors.
5. In November 1998, December 1998 and January 1999, we issued and sold
6,197,315, 614,000 and 845,666 shares of Series G preferred stock,
respectively, each two of which will convert into one share of common stock
upon completion of this offering, at $3.00 per share to 62 accredited
investors, 1,833,334 of which were sold to one of our executive officers
and/or directors (and related entities).
6. In October 1999, we issued and sold 6,250,000 shares of Series H preferred
stock, each two of which will convert into one share of common stock upon
completion of this offering, at $4.00 per share to four accredited
investors, 5,500,000 of which were sold to one of our executive officers
and/or directors (and related entities).
7. In October 1999, we issued warrants to purchase an aggregate of 1,250,000
shares of Series H preferred stock, which will convert into warrants to
purchase shares of common stock upon the completion of this offering, to
four accredited investors, at an exercise price of $5.00 per share. One
warrant to purchase 1,100,000 shares was issued to one of our executive
officers/directors (and related entities).
8. Between January 1, 1997 and February 25, 2000, we granted options to
purchase an aggregate of 4,152,982 shares of common stock at exercise prices
ranging from $0.20 to $4.00 per share with a weighted exercise price of
$1.45 per share.
The sales and issuances of common stock made pursuant to the exercise of
stock options granted under the 1995 Incentive Stock Plan to our officers,
directors, employees and consultants as described in paragraph (8) above were
made in reliance on Rule 701 promulgated under the Securities Act.
The sales and issuances of securities in the transactions described in
paragraphs (1) through (7) above were made in reliance of Rule 506 of
Regulation D promulgated under the Securities Act. These sales were made without
general solicitation or advertising. Each purchaser was a sophisticated investor
with access to all relevant information necessary to evaluate the investment and
represented to the Registrant that the shares were being acquired for
investment.
II-2
<PAGE>
Item 16. (A) EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
Exhibit
Number Description
- ----------------------- ------------------------------------------------------------
1.1+ Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation, as
currently in effect.
3.2+ Form of Certificate of Amendment of Certificate of
Incorporation.
3.3+ Form of Amended and Restated Certificate of Incorporation,
to be filed prior to the closing of this offering.
3.4+ Form of Amended and Restated Certificate of Incorporation,
to be filed upon the closing of this offering.
3.5+ Bylaws, as currently in effect.
3.6+ Form of Bylaws to be effective upon the closing of this
offering.
4.1+ Specimen Common Stock Certificate.
4.2+ Amended and Restated Investor Rights Agreement, dated
October 15, 1999.
5.1+ Opinion of Cooley Godward LLP.
10.1+ Form of Indemnity Agreement.
10.2+ Amended and Restated 1995 Stock Option Plan and related
documents.
10.3+ 2000 Equity Incentive Plan and related documents.
10.4++ Purchase Supply Agreement by and between IntraBiotics and
Polypeptide dated January 3, 1997.
10.5++ Development Supply Agreement by and between IntraBiotics and
Polypeptide dated January 3, 1997 and Amendment dated
July 1, 1997.
10.6++ Second Amendment to the License Agreement by and
IntraBiotics and The Regents of the University of California
dated June 12, 1996.
10.7++ Third Amendment to the License Agreement by and between
IntraBiotics and The Regents of the University of California
dated September 16, 1997.
10.8++ License and Supply Agreement by and between IntraBiotics and
Biosearch Italia S.p.A. dated May 8, 1998.
10.9+ 2000 Employee Stock Purchase Plan and related documents.
10.10+ Lease by and between IntraBiotics and 1245 Terra Bella
Partners dated April 30, 1997.
10.11+ Standard Industrial/Commercial Single Tenant Lease by and
between IntraBiotics and Clint S. Carter and Esther Carter
Family Trust dated July 31, 1998 and First Amendment to
Standard Industrial/Commercial Single Tenant Lease by and
between IntraBiotics and Clint S. Carter and Esther Carter
Family Trust dated August 12, 1998.
10.12+ Financing Agreement by and between IntraBiotics and G.E.
Capital Equipment dated March 15, 1999.
10.13+ Loan and Security Agreement by and between IntraBiotics and
Silicon Valley Bank dated August 25, 1999.
10.14+ Warrant to Purchase Series H Preferred Stock dated October
15, 1999 to Investor (Guernsey) Ltd.
10.15+ Warrant to Purchase Series H Preferred Stock dated
October 15, 1999 to Vulcan Ventures, Inc.
10.16+ Warrant to Purchase Series H Preferred Stock dated
October 15, 1999 to New England Partners Capital, Inc.
10.17+ Warrant to Purchase Series H Preferred Stock dated
October 15, 1999 to Jonathan Reingold.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
10.18+ Warrant to Purchase Series D Preferred Stock dated
October 10, 1997 to Lease Management Services, Inc.
10.19+ Warrant to Purchase Series B Preferred Stock dated July 20,
1995 to Lease Management, Inc.
10.20+ Lease Agreement by and between IntraBiotics and
EOP-Shoreline Technology Park, LLC dated February 7, 2000
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2+ Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1+ Power of Attorney (contained on signature page).
27.1+ Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Previously filed.
++ Confidential treatment requested with respect to certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
(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
The registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1993, as amended, the
Registrant has caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Mountain View, State
of California on the 22(nd) day of March, 2000.
<TABLE>
<S> <C> <C>
INTRABIOTICS PHARMACEUTICALS INC.
By: /s/ KENNETH J. KELLEY
-----------------------------------------
Kenneth J. Kelley
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
/s/ KENNETH J. KELLEY President, Chief Executive Officer
-------------------------------------- and Director (Principal March 22, 2000
Kenneth J. Kelley Executive Officer)
/s/ RUSSELL L. HUGHES
-------------------------------------- Controller (Principal Financial March 22, 2000
Russell L. Hughes and Accounting Officer)
*
-------------------------------------- Director March 22, 2000
Jane E. Shaw
*
-------------------------------------- Director March 22, 2000
Michael F. Bigham
*
-------------------------------------- Director March 22, 2000
Fritz Buhler
*
-------------------------------------- Director March 22, 2000
Gary A. Lyons
*
-------------------------------------- Director March 22, 2000
Kathleen D. LaPorte
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
*
-------------------------------------- Director March 22, 2000
Liza Page Nelson
*
-------------------------------------- Director March 22, 2000
John M. Padfield
*
-------------------------------------- Director March 22, 2000
Jack S. Remington
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ KENNETH J. KELLEY
--------------------------------------
Attorney-in-fact
</TABLE>
II-6
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
- --------------------- -----------
<S> <C>
1.1+ Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation, as
currently in effect.
3.2+ Form of Certificate of Amendment of Certificate of
Incorporation.
3.3+ Form of Amended and Restated Certificate of Incorporation,
to be filed prior to the closing of this offering.
3.4+ Form of Amended and Restated Certificate of Incorporation,
to be filed upon the closing of this offering.
3.5+ Bylaws, as currently in effect.
3.6+ Form of Bylaws to be effective upon the closing of this
offering.
4.1+ Specimen Common Stock Certificate.
4.2+ Amended and Restated Investor Rights Agreement, dated
October 15, 1999.
5.1+ Opinion of Cooley Godward LLP.
10.1+ Form of Indemnity Agreement.
10.2+ Amended and Restated 1995 Stock Option Plan and related
documents.
10.3+ 2000 Equity Incentive Plan and related documents.
10.4++ Purchase Supply Agreement by and between IntraBiotics and
Polypeptide dated January 3, 1997.
10.5++ Development Supply Agreement by and between IntraBiotics and
Polypeptide dated January 3, 1997 and Amendment dated
July 1, 1997.
10.6++ Second Amendment to the License Agreement by and
IntraBiotics and The Regents of the University of California
dated June 12, 1996.
10.7++ Third Amendment to the License Agreement by and between
IntraBiotics and The Regents of the University of California
dated September 16, 1997.
10.8++ License and Supply Agreement by and between IntraBiotics and
Biosearch Italia S.p.A. dated May 8, 1998.
10.9+ 2000 Employee Stock Purchase Plan and related documents.
10.10+ Lease by and between IntraBiotics and 1245 Terra Bella
Partners dated April 30, 1997.
10.11+ Standard Industrial/Commercial Single Tenant Lease by and
between IntraBiotics and Clint S. Carter and Esther Carter
Family Trust dated July 31, 1998 and First Amendment to
Standard Industrial/Commercial Single Tenant Lease by and
between IntraBiotics and Clint S. Carter and Esther Carter
Family Trust dated August 12, 1998.
10.12+ Financing Agreement by and between IntraBiotics and G.E.
Capital Equipment dated March 15, 1999.
10.13+ Loan and Security Agreement by and between IntraBiotics and
Silicon Valley Bank dated August 25, 1999.
10.14+ Warrant to Purchase Series H Preferred Stock dated October
15, 1999 to Investor (Guernsey) Ltd.
10.15+ Warrant to Purchase Series H Preferred Stock dated
October 15, 1999 to Vulcan Ventures, Inc.
10.16+ Warrant to Purchase Series H Preferred Stock dated
October 15, 1999 to New England Partners Capital, Inc.
10.17+ Warrant to Purchase Series H Preferred Stock dated
October 15, 1999 to Jonathan Reingold.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.18+ Warrant to Purchase Series D Preferred Stock dated
October 10, 1997 to Lease Management Services, Inc.
10.19+ Warrant to Purchase Series B Preferred Stock dated July 20,
1995 to Lease Management, Inc.
10.20+ Lease Agreement by and between IntraBiotics and
EOP-Shoreline Technology Park, LLC dated February 7, 2000
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2+ Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1+ Power of Attorney (contained on signature page).
27.1+ Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
+ Previously filed.
++ Confidential treatment requested with respect to certain portions of this
exhibit. Omitted portions have been filed separately with the Securities and
Exchange Commission.
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.4
PURCHASE/SUPPLY AGREEMENT
REGARDING
IB-367
BETWEEN
FERRING PEPTIDE PRODUCTION AB
P.O. BOX 30047, SOLDATTORPSVAGEN 5
S-20061 MALMO
SWEDEN
AND
POLYPEPTIDE LABORATORIES A/S
HERREDSVEJEN 2
3400 HILLER0D
DENMARK
JOINTLY REFERRED TO AS "POLYPEPTIDE"
AND
INTRABIOTICS PHARMACEUTICALS, INC.
816 KIFER ROAD
SUNNYVALE
CALIFORNIA 94086
USA
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
1.
<PAGE>
This Agreement is entered into on the 3rd day of January, 1997,
between POLYPEPTIDE LABORATORIES A/S, a Danish company incorporated under the
laws of Denmark, with its registered offices at Herredsvejen 2,3400 Hillerod,
Denmark and FERRING PEPTIDE PRODUCTION AB, a Swedish company incorporated
under the laws of Sweden, with its registered office at Soldattorpsvagen 5,
S-20061 Malmo, Sweden (hereinafter jointly referred to as POLYPEPTIDE), and
INTRABIOTICS PHARMACEUTICALS, INC., a company incorporated in the state of
Delaware under the laws of the United States, with its registered offices at
816 Kifer Road, Sunnyvale, California 94086, USA (hereinafter referred to as
INTRABIOTICS).
WHEREAS, the parties now wish to enter into a long-term business
relationship under which POLYPEPTIDE will supply to INTRABIOTICS the Drug
Substance IB-367 hereafter referred to as the "Product" for marketing
world-wide. Therefore the parties agree on the following:
As used herein, each of the following defined terms shall have the
meaning specified:
"Affiliate" of a Party shall mean an entity: (i) in which at least 50
per cent of the voting shares or other means of control of such entity are owned
or controlled by such Party, or (ii) which owns or controls at least 50 per cent
of the voting shares of such Party, or (iii) in which at least 50 per cent of
such ownership or control is owned or controlled by an entity owning or
controlling at least 50 per cent of the voting shares of such Party.
"cGMP" shall mean the current good manufacturing practices regulations
now set forth in Part 211 of Title 21 of the U.S. Code of Federal Regulations,
as hereafter revised and amended.
"Product" shall mean the compound as described in the Specification
manufactured according to the process developed under the Development Supply
Agreement entered into between INTRABIOTICS and POLYPEPTIDE on the date hereof.
"Specification" shall mean the specifications set forth in Annex 1 to
this Agreement as may be modified from time to time as directed by IntraBiotics.
"Party" shall mean INTRABIOTICS or POLYPEPTIDE and, when used in the
plural, shall mean INTRABIOTICS and POLYPEPTIDE.
"Manufacturing Cost" shall mean, for each gram of Product
manufactured, the cost to POLYPEPTIDE for [ * ] relating to the manufacture
of Product, and other costs to manufacture Product under current generally
accepted accounting principles, all such costs and charges to be calculated
on the basis consistently applied to all other products manufactured by
POLYPEPTIDE at the facility or facilities used to manufacture Product.
1. SUPPLY ARRANGEMENT
This entire agreement is conditional upon:
- INTRABIOTICS deciding to use the Process developed under the
Development Supply Agreement entered into between INTRABIOTICS
and POLYPEPTIDE on the date hereof for producing the Product for
commercial sale.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE>
- INTRABIOTICS notifying POLYPEPTIDE on its decision to produce the
Product for commercial sales with the lead times stated in clause
3.1.
Given that these conditions are fulfilled POLYPEPTIDE shall supply to
INTRABIOTICS and its sublicensees and distributors bulk quantities of the
Product made in accordance with the Specification. The supply of the Product is
made to INTRABIOTICS in accordance with Annex 2, Purchase/Supply Schedules,
which shall be provided by INTRABIOTICS to POLYPEPTIDE according to clause 3.2
and 3.3, and the individual purchase orders placed by INTRABIOTICS consistent
herewithwhereby the actual delivery dates are defined.
2. PURCHASE/SUPPLY
Under this Agreement and subject to POLYPEPTIDE's ability to supply,
INTRABIOTICS is obliged to purchase at least [ * ] per cent of its world-wide
needs of the Product on an annual basis from POLYPEPTIDE. If INTRABIOTICS
licenses the Product to a third party it shall in good faith attempt to obtain
for the benefit of POLYPEPTIDE a purchase/supply agreement between the licensee
and POLYPEPTIDE on substantially the same terms as this Agreement.
If INTRABIOTICS licenses the Product to a third party and such third
party does not enter into a purchase/supply agreement with POLYPEPTIDE and as a
consequence the purchases made by INTRABIOTICS under this Agreement come to an
end or are significantly reduced (a significant reduction for this purpose being
a reduction of [ * ]% within any [ * ] period as compared to the preceding
[ * ]) then:
(a) In the case that the purchases are significantly reduced
INTRABIOTICS shall honour existing purchase orders on the scheduled dates and
shall within [ * ] of the occurrence of the significant reduction in
purchases, purchase a proportional part (corresponding to the percentage
reduction in purchases) of existing stocks of finished inventory of Product
produced on the basis of INTRABIOTICS Purchase/Supply Schedules in accordance
with clause 3 at the then established price according to clause 4. [ * ] sole
option, [ * ] shall within [ * ] of the occurrence of the significant
reduction in purchases, either purchase a proportional part (corresponding to
the percentage reduction in purchases) of the inventory of raw materials
purchased and intermediates produced on the basis of INTRABIOTICS
Purchase/Supply Schedules in accordance with clause 3 at a price equal to
[ * ], or request POLYPEPTIDE to complete the manufacture of such raw
materials and intermediates into finished inventory of Product which
INTRABIOTICS will purchase at the then established price according to clause
4.
(b) In the case that the purchases come to an end INTRABIOTICS
shall honour existing purchase orders on the scheduled dates and shall within
[ * ] of the last existing purchase order being delivered purchase all
existing stocks of finished inventory of Product produced on the basis of
INTRABIOTICS Purchase/Supply Schedules in accordance with clause 3 at the
then established price according to clause 4. At INTRABIOTICS sole option,
INTRABIOTICS shall within [ * ] of the last existing purchase order being
delivered either purchase all of the inventory of raw materials purchased and
intermediates produced on the basis of INTRABIOTICS Purchase/Supply Schedules
in accordance with Clause 3 at a price equal to
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3.
<PAGE>
[* ], or request POLYPEPTIDE to complete the manufacture of such raw materials
and intermediates into finished inventory of Product which INTRABIOTICS will
purchase at the then established price according to clause 4.
3. PURCHASE/SUPPLY SCHEDULES
Following the completion of Phase II clinical studies INTRABIOTICS
shall advise POLYPEPTIDE of its estimate of the market potential of the Product
to assist POLYPEPTIDE in its long term planning. Such estimates are indicative
only and shall be non-binding on the Parties.
3.1 For quantities of Product to be delivered during the first
year of commercial supply of the Product the following shall apply:
(a) For quantities up to [ * ] the purchase order from
INTRABIOTICS shall be given [ * ] in advance.
(b) For quantities in excess of [ * ] and up to [ * ]
purchase orders shall be given at least [ * ] in advance.
(c) For quantities between [ * ] purchase orders shall be
given at least [ * ] in advance.
(d) For quantities above [ * ] purchase orders shall be
given at least [ * ] in advance.
3.2 From the first anniversary of the first delivery of the
Product hereunder and onwards INTRABIOTICS shall by [ * ] of each calendar year
render to POLYPEPTIDE newly revised Purchase/Supply Schedules. Each
Purchase/Supply Schedule will be for the following [ * ] months.
POLYPEPTIDE is obliged to supply the Product according to INTRABIOTICS'
purchase order provided that such purchase order is placed [ * ] prior to the
requested delivery date. If INTRABIOTICS places orders for quantities in any
calendar quarter exceeding [ * ] of the quantities purchased in the previous
calendar quarter then POLYPEPTIDE will use its best efforts to deliver the
additional quantities within a reasonable period of time.
With respect to each Purchase/Supply Schedule in effect from time to
time INTRABIOTICS is obliged to purchase at least [ * ] of the volume of the
first [ * ] of such Purchase/Supply Schedule.
3.3 The supply and forecasting procedure outlined above in clause
3.2 shall govern annual supplies of Product up to [ * ]. For annual supplies
above [ * ] the Parties shall negotiate in good faith a new supply and
forecasting procedure to replace 3.2.
In the event that the Parties fail to agree a new procedure, clause 3.2
shall remain in force and govern the supply of up to [ * ] of Product per year.
INTRABIOTICS in addition may place additional binding purchase orders at least
[ * ] in advance of the requested delivery date for such
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4.
<PAGE>
additional supplies of Product provided that such additional supplies are within
the volumes in the Purchase/Supply Schedules in effect from time to time and
provided that the purchase orders for any given calendar [ * ] period do not
exceed the preceding calendar [ * ] period by more than [ * ]. POLYPEPTIDE shall
accept such purchase orders.
3.4 If at any time POLYPEPTIDE shall be unable to supply
Product to INTRABIOTICS (other than as excused hereunder by virtue of force
majeure) then this shall be considered a material breach of this Agreement.
In addition, if POLYPEPTIDE shall be unable to supply or POLYPEPTIDE
terminates this Agreement other than pursuant to clause 9.2, POLYPEPTIDE
shall grant to INTRABIOTICS the [ * ] right to manufacture the Product under
[ * ], and shall promptly disclose and transfer to INTRABIOTICS at [ * ],
such information as INTRABIOTICS shall reasonably require in order to make
such Product or have such Product made on its behalf. Upon request by
INTRABIOTICS, POLYPEPTIDE shall further provide to INTRABIOTICS at [ * ]
assistance from and access to appropriate POLYPEPTIDE personnel as reasonably
required to facilitate the establishment of a reliable source of supply of
materials to INTRABIOTICS with a minimum of "down-time".
4. PRICES
4.1 The price per delivery shall be based on the total quantity
to be purchased by INTRABIOTICS for the 12 months' period in question
according to the Purchase/Supply Schedule. For the period from the signature
of this agreement until December 31, 1998 the prices shall be calculated
pursuant to the following scale:
<TABLE>
<CAPTION>
VOLUME BAND
[ * ] PRICE USD PER [ * ]
<S> <C> <C>
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
</TABLE>
4.2 The prices stated in clause 4.1 are based on the following two
basic assumptions: (i) that the cyclization of the linear peptide to form the
Product through the formation of the two disulfide bridges has a yield of at
least [ * ] as measured by [ * ] with [ * ] at [ * ], and (ii) the Specification
is as set out in Annex 1 upon signing this Agreement.
When the commercial scale-up process is defined the parties shall
review any change in price in the light of the then calculated Manufacturing
Cost based on the then current Specification and process. Provided that the
cyclization yield is still at least [ * ] and there have been no changes to the
Specification affecting Manufacturing Cost, then the price formula as outlined
in clause 4.3 shall be applicable to the prices listed in clause 4.1. If either
of the two basic
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5.
<PAGE>
assumptions have changed and it can be demonstrated that these changes have
increased or decreased the Manufacturing Cost of the Product then the parties
shall negotiate appropriate changes in the prices listed in clause 4.1. In the
event that the Parties are unable to reach agreement on a revised price within
[ * ] of starting negotiations then, upon notice from either Party, [ * ].
4.3 Every [ * ] thereafter the prices shall be negotiated and
approved by the parties for the forthcoming [ * ] period. These negotiations
will end no later than 1 month before the beginning of the forthcoming [ * ]
period. The negotiations on the price shall take into consideration increases or
decreases in the costs of [ * ], and the interest of both parties to optimise
the overall profitability. The adjusted price applies to all deliveries in the
following [ * ] period. In the event that the exchange rate between the Danish
Kroner and US Dollar fluctuates more than [ * ] in the intervening period
between [ * ] price reviews, the Parties shall review, within [ * ] of such
fluctuation being identified by either Party, the effect of such currency
fluctuation on costs and revenues and prices in accordance with this clause.
4.4 If the parties cannot agree an a new price and POLYPEPTIDE's
Manufacturing Cost within the same Volume Band above has increased, the former
agreed price shall be changed for the next [ * ] period by an amount
corresponding to the change of the lower of [ * ] for the preceding [ * ],
published by the US Department of Commerce, or the [ * ] over the preceding
[ * ].
If the parties cannot agree on a new price and POLYPEPTIDE's
Manufacturing Cost within the same Volume Band above has decreased, the former
agreed price shall be decreased for the next [ * ] period by an amount
corresponding to [ * ] percent of [ * ].
4.5 If at any time after the scale-up Process has been defined,
cf. clause 4.2, INTRABIOTICS shall modify the Specification and it can be
demonstrated that such modifications have increased or decreased the
Manufacturing Cost of the Product, then the Parties shall negotiate appropriate
changes in the then current prices. In the event that the Parties are unable to
reach agreement on a revised price within [ * ] of starting negotiations then,
upon notice from either Party, [ * ].
4.6 If during a given [ * ] period INTRABIOTICS has obtained
supplies of the Product at prices based on a Purchase/Supply Schedule which
INTRABIOTICS has not been able to fulfil, or has purchased quantities in excess
of the quantities on which the prices have been based, INTRABIOTICS' [ * ] for
the [ * ] period in question shall be adjusted accordingly in the following
[ * ]. Any amount owed by INTRABIOTICS to POLYPEPTIDE due to such adjustment
shall be paid no later than [ * ] after the beginning of the next [ * ] period.
Any amount owed by POLYPEPTIDE to INTRABIOTICS shall be [ * ].
5. PAYMENTS
5.1 The Product shall be invoiced at shipment to INTRABIOTICS in
US dollars ("USD").
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6.
<PAGE>
5.2 Payments shall be made by INTRABIOTICS to POLYPEPTIDE at the
latest [ * ] from date of invoice. Date of invoice shall not precede date of
shipment of the Product together with information necessary to verify acceptable
quality and conformance to all applicable specifications for each batch
manufactured by POLYPEPTIDE.
6. DELIVERY AND ORDERING OF THE PRODUCT
6.1 POLYPEPTIDE shall deliver to INTRABIOTICS all the Product in a
timely fashion, subject to the requirements of this Agreement and individual
purchase orders. Based on the Purchase/Supply Schedule INTRABIOTICS shall give
to POLYPEPTIDE confirmed purchase orders at least [ * ] prior to the requested
delivery date unless otherwise stated in this Agreement and POLYPEPTIDE shall
deliver the Product no later than the requested delivery date provided such
purchase orders are in keeping with the most recently revised Purchase/Supply
Schedule as outlined in clause 3.1, 3.2 and 3.3. All Product shall be shipped to
INTRABIOTICS by POLYPEPTIDE at least [ * ] before the Product's date of
reanalysis according to the Specification.
6.2 The Product is to be shipped [ * ], as that term is generally
understood in accordance with "Incoterms". POLYPEPTIDE shall package materials
for shipment in accordance with the Specification and all applicable laws, as
supplemented (to the extent not inconsistent therewith) by POLYPEPTIDE's then
current standard operating practices. POLYPEPTIDE shall split shipments upon the
reasonable request of INTRABIOTICS.
POLYPEPTIDE shall provide shipping documentation in accordance with
that requested in INTRABIOTICS' purchase order, as well as (in advance if
possible): (i) a certificate of analysis, (ii) batch record, and (iii) such
other documentation relating to the Product as INTRABIOTICS may reasonably
request in writing from time to time, for each production lot included in the
shipment.
6.3 In the event of loss or damaged shipment hereunder subject to
clause 6.4 POLYPEPTIDE shall use its reasonable best efforts to replace said
shipment within [ * ] of notification of loss or damage by INTRABIOTICS.
6.4 (a) INTRABIOTICS shall be deemed to have accepted
delivery of Product supplied hereunder unless INTRABIOTICS shall have notified
POLYPEPTIDE of any non-conformity in respect of a shipment within [ * ]
following INTRABIOTICS' receipt of same.
(b) Any claim of nonconformity hereunder shall be
accompanied by a report of analysis of the allegedly nonconforming material
prepared by or on behalf of INTRABIOTICS. If POLYPEPTIDE confirms INTRABIOTICS'
claim of nonconformity, POLYPEPTIDE shall replace the nonconforming goods with
conforming goods within [ * ] and refund the entire purchase price of the
nonconforming goods to INTRABIOTICS within [ * ]. INTRABIOTICS shall pay for the
replacement conforming goods within [ * ] of receipt. Pursuant to written
directions from POLYPEPTIDE, INTRABIOTICS shall either return the nonconforming
goods to POLYPEPTIDE, or destroy same, [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7.
<PAGE>
(c) In case of disagreement between the parties regarding
the conformity or nonconformity of a delivery of the Product, the parties shall
refer the matter for review and/or analysis and final settlement to an
independent expert laboratory to be agreed by both of them. The costs of such
expertise and analysis shall [ * ].
7. POLYPEPTIDE MANUFACTURING FACILITIES
7.1 POLYPEPTIDE represents and warrants that it will maintain
suitable manufacturing facilities and equipment for manufacturing of the Product
pursuant to this Agreement.
7.2 POLYPEPTIDE will comply with the requirements set forth by
relevant governmental authorities for POLYPEPTIDE's facilities for manufacture
of the Product for use in human pharmaceuticals. Relevant governmental
authorities include but is not limited to the regulatory authorities of the
United States of America, the European Union, other European states, and Japan.
7.3 [ * ] shall maintain and regularly update the DMF as necessary
to comply with applicable laws and regulations and to accurately reflect its
then current manufacturing procedures. [ * ] shall have the [ * ] right to
reference and otherwise use or direct the use of the DMF; provided, however,
that INTRABIOTICS shall be free, in its sole discretion, to [ * ]. [ * ] shall
not abandon or otherwise fail to maintain the DMF without first offering to
assign the DMF to [ * ].
7.4 Product supplied by POLYPEPTIDE to INTRABIOTICS shall be
manufactured, stored, and shipped by POLYPEPTIDE in compliance with all
applicable laws and regulations, including cGMP regulations, in accordance with
the master batch record maintained by POLYPEPTIDE, the DMF submitted by
POLYPEPTIDE, and the Specification. POLYPEPTIDE shall be free to change its
manufacturing specification or manufacturing directions with respect to the
Product only with the prior consent of INTRABIOTICS. Such consent shall not be
unreasonably withheld.
7.5 POLYPEPTIDE shall perform or cause to be performed all quality control tests
and assays on raw and packaging materials and intermediates used in preparing
and shipping Product hereunder, all in a manner consistent with the
Specification and with POLYPEPTIDE'S reasonable internal quality control
procedures. POLYPEPTIDE shall retain records pertaining to such testing and, to
the extent required by law or as reasonably required by INTRABIOTICS in order to
prepare for or defend against litigation brought by third parties, POLYPEPTIDE
shall provide INTRABIOTICS and its licensees with access to and copies of such
batch records and file samples.
7.6 POLYPEPTIDE shall notify INTRABIOTICS promptly of any
correspondence to or from, or inspections by, relevant governmental authorities
relating to the Product or the manufacture thereof and shall promptly provide
copies of such correspondence or reports of such inspections. This includes any
FDA form 483 in the form that would be available under the
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8.
<PAGE>
Freedom of Information Act or other equivalent forms from another relevant
regulatory authority.
7.7 POLYPEPTIDE shall promptly inform INTRABIOTICS of any
complaint or inquiry of which it becomes aware which raise potentially serious
quality, health, safety or regulatory concerns regarding the Product.
7.8 Should the relevant governmental authorities, for reasons for
which POLYPEPTIDE bears the responsibility, withdraw the approval of manufacture
of the Product for use in human pharmaceuticals and as a consequence thereof
demand that the Product delivered under this agreement may not be used by
INTRABIOTICS in its products. INTRABIOTICS shall have the right to terminate
this agreement in accordance with Clause 9 and shall have the rights described
in clause 3.4, and POLYPEPTIDE shall [ * ] within [ * ] of receipt of the stock.
Apart therefrom neither party shall incur any liability towards the other party.
INTRABIOTICS shall either return the Product still in stock at INTRABIOTICS to
POLYPEPTIDE or destroy same, each at [ * ].
7.9 INTRABIOTICS has the right to authorise a representative to
inspect POLYPEPTIDE's premises used for the production of the Product. Before an
inspection takes place INTRABIOTICS shall reveal the full identity of its
authorised representative to POLYPEPTIDE, who shall accept the representative,
unless it has objectively valid reasons for not doing so. Inspections shall take
place at INTRABIOTICS' own costs and shall not limit POLYPEPTIDE's
responsibility for the manufacture of the Product. For this purpose,
INTRABIOTICS' authorised representative shall be granted, upon previous request,
access during business hours, to the part of POLYPEPTIDE's premises where the
Product is manufactured.
8. OWNERSHIP OF INTELLECTUAL PROPERTY
8.1 INTRABIOTICS shall own and will have the exclusive rights
to use all Process-specific and Product-specific know-how ("KNOW-HOW") and
will own all patentable inventions ("INVENTIONS") relating to the Product
made by POLYPEPTIDE or its external advisors in the course of this Agreement.
All patent costs will be paid by INTRABIOTICS and INTRABIOTICS will direct
all patent prosecution. In order to secure these rights for INTRABIOTICS,
POLYPEPTIDE will ensure that the KNOW-HOW is kept confidential and execute
such documents, including but not limited to invention disclosure and
assignment agreements with its employees and advisors, as are necessary for
INTRABIOTICS to obtain ownership of INVENTIONS. POLYPEPTIDE will supply to
INTRABIOTICS reports including copies of significant data relating to the
KNOW-HOW and INVENTIONS when relevant. POLYPEPTIDE is entitled to make use of
any KNOW-HOW and INVENTIONS for other products than the Product without payment
of any compensation to INTRABIOTICS.
8.2 The DMF on the Product based on the facilities, technology, and
knowledge of POLYPEPTIDE is the property of [ * ], which is only permitted to
make use of the DMF for [ * ].
9. TERM AND TERMINATION OF THIS AGREEMENT
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
9.
<PAGE>
9.1 This Agreement shall have an initial term of five (5) full
calendar years following the first supplies of the Product hereunder and
shall then automatically renew for three (3) years' periods unless
POLYPEPTIDE terminates with thirty six (36) months' written notice, or
INTRABIOTICS terminates with twenty four (24) months' written notice given
prior to the commencement of any such renewal period.
9.2 Each contract party shall be entitled to terminate the
present contract without notice in the event of material breaches of contract
by the other party or if bankruptcy or composition proceedings are opened on
the estate of the other party. Notice of termination for a material breach of
contract shall only be admissible if the other party was requested to rectify
the contract impediment within 30 (thirty) days' period of grace without any
response being forthcoming from the other party. Notice may only be served
within one month after the end of the aforesaid limit.
10. LIABILITY
10.1 INTRABIOTICS shall indemnify, defend and hold POLYPEPTIDE and
its agents, employees and directors (the "POLYPEPTIDE Indemnitees") harmless
from and against any and all liability, damage, loss, cost or expense (including
reasonable attorneys' fees) arising out of third party claims or suits resulting
from the use, sale or promotion of Product or a product containing Product by
INTRABIOTICS, its sublicensees, distributors or agents, except to the extent
that such claims or suits result from negligence or intentional misconduct of
POLYPEPTIDE or a POLYPEPTIDE Indemnitee in the manufacture of the Product. Upon
assertion of such claim or suit, the POLYPEPTIDE Indemnitees shall promptly
notify INTRABIOTICS thereof and INTRABIOTICS shall appoint counsel reasonably
acceptable to the POLYPEPTIDE Indemnitees to represent the POLYPEPTIDE
Indemnitees with respect to any claim or suit for which indemnification is
sought. The POLYPEPTIDE Indemnitees shall not settle any such claim or suit
without the prior written consent of INTRABIOTICS, unless they shall have first
waived their rights to indemnification hereunder.
10.2 POLYPEPTIDE shall indemnify, defend and hold INTRABIOTICS
and its agents, employees and directors (the "INTRABIOTICS Indemnitees")
harmless from and against any and all liability, damage, loss, cost or
expense (including reasonable attorneys' fees) arising out of third party
claims or suits resulting from negligence or intentional misconduct in the
manufacture of Product by POLYPEPTIDE, except to the extent such claims or
suits result from the negligence or wilful misconduct of INTRABIOTICS or an
INTRABIOTICS Indemnitee. Upon assertion of such claim or suit, the
INTRABIOTICS Indemnitees shall promptly notify POLYPEPTIDE thereof and
POLYPEPTIDE shall appoint counsel reasonably acceptable to the INTRABIOTICS
Indemnitees to represent the INTRABIOTICS Indemnitees with respect to any
claim or suit for which indemnification is sought. The INTRABIOTICS
Indemnitees shall not settle any such claim or suit without the prior written
consent of POLYPEPTIDE, unless they shall have first waived their rights to
indemnification hereunder.
10.3 In no event shall either Party be liable to the other for
incidental or consequential damages or for punitive damages us a result of any
breach of this Agreement.
11. ASSIGNMENT/TRANSFER
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
10 .
<PAGE>
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
party shall assign its rights and obligations under this Agreement without first
obtaining the written consent of the other parties, which consent shall not be
unreasonably withheld. Each of the parties may assign its rights and obligations
to an Affiliate provided that the assigning party shall guarantee its
Affiliate's performance and obligations under this Agreement, or to any
successor by virtue of a merger or acquisition of substantially the entire
business to which this Agreement relates or in the case of INTRABIOTICS to a
licensee of the Product, without consent, but upon notice to the other party.
12. FORCE MAJEURE
Neither party is liable for failing to perform or having delayed the
performance of its obligation under this agreement, if the performance is
delayed or precluded by circumstances beyond its control, including but not
limited to fire, flood, war, strike, lock-out, failure or shortage of public
utilities due to governmental decrees, orders or legislation and court
injunctions.
The party, whose performance is delayed or precluded, shall immediately
inform the other party of the circumstances preventing the performance.
In the event that the circumstances preventing the performance
continue for more than 60 days, each party will have a right to cancel the
Agreement and neither of the parties will have a right to reimbursement or to
any claim for damages as a result of the cancellation of the Agreement.
In the event that POLYPEPTIDE's ability to supply Product in whole or
in part to INTRABIOTICS is restricted by factors beyond its control and this
Agreement is not terminated, POLYPEPTIDE shall treat and supply INTRABIOTICS in
the same equitable manner as all of POLYPEPTIDES other major customers.
13. OTHER PROVISIONS
13.1 All amendments and changes to the present Agreement must be
made in writing and signed by both Parties in order to be valid.
13.2 Except as expressly provided herein, nothing in this Agreement
is intended or shall be deemed to constitute a partnership, agency or
employer-employee relationship between the Parties. Neither Party shall have the
right to incur any debts or make any commitments for the other.
13.3 If individual provisions of the present Agreement are wholly
or partially in breach of cogent law or if they are or become invalid for any
other reason, the validity of the other provisions shall not be affected
thereby. The present Agreement shall if necessary be amended by a valid
provision which comes as close as possible to the original intention of the
parties.
13.4 Except as otherwise required by law, neither Party shall make
any public disclosure as to the terms or existence of this Agreement without the
prior written consent of the
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
11.
<PAGE>
other. Notwithstanding this clause, INTRABIOTICS may publish that such an
agreement has been entered into between the parties subject to pre-approval
by POLYPEPTIDE of the wording.
13.5 THE PARTIES EXPRESSLY DISCLAIM ALL WARRANTIES, EXPRESSED OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD PARTY PATENTS, UNLESS
OTHERWISE EXPRESSLY PROVIDED FOR IN THIS AGREEMENT.
13.6 INTRABIOTICS and POLYPEPTIDE each represents and warrants to
the other that, as of the Effective Date: (i) it is free to enter this
Agreement; (ii) in so doing it will not violate any other agreement to which it
is a party; (iii) it is a corporation duly organised and validly existing under
the laws of the jurisdiction indicated above and, by virtue of such
jurisdiction's laws, is in good standing as a domestic corporation of such
jurisdiction; and (iv) it is qualified to do business in all jurisdictions in
which qualification is necessary in order to perform its obligations hereunder.
13.7 All disputes between the parties relating to this Agreement,
including its interpretation that cannot be settled amicably by the parties,
shall be settled by binding arbitration in the state of the defending party in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration carried out hereunder shall apply to the exclusion
of regular legal means, provided that the rights of the Parties in urgent
situations in which time is of the essence to obtain proper remedies in courts
of law or equity shall remain unimpaired.
14. APPLICABLE LAW AND JURISDICTION
All matters arising under or related to the Agreement shall be governed
by and construed under and pursuant to the laws of the State of California
without regard to conflict of laws principles.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorised officers as of the day and year
first above written, each copy of which shall for all purposes be deemed to be
original.
POLYPEPTIDE LABORATORIES A/S INTRABIOTICS PHARMACEUTICALS, INC.
/s/ Erik Lorentsen /s/ Thomas Shepherd
- --------------------------------- -------------------------------------
Erik Lorentsen Thomas Shepherd
General Manager Vice President Corporate Development
FERRING PEPTIDE PRODUCTION AB
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
12.
<PAGE>
/s/ Anders J. Andersen
- ---------------------------------
Anders J. Andersen
General Manager
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
13.
<PAGE>
ANNEX 1
SPECIFICATION
TABLE OF CONTENTS:
Pages 1 and 2 INTRABIOTICS QUALITY SPECIFICATION No.: [ * ]
Page 3 - Storage
- Shipment
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
14.
<PAGE>
INTRABIOTICS QUALITY SPECIFICATION
QA ISSUED COPY
SPECIFICATION NO., [ * ]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
MATERIAL:
IB-367-03 FOR INFORMATION ONLY
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATE EFFECTIVE: SUPERCEDES: PAGE:
Nov 26, 1996 [ * ] 1 of 2
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
AUTHOR: DEPT.: DATE:
/s/ MISSING SIGNATURE Analytical Development 11/26/96
- ----------------------------------------------------------------------------------------------------------------------
APPROVED: DEPT.: DATE:
/s/ MISSING SIGNATURE Quality Assurance 11/26/96
- ----------------------------------------------------------------------------------------------------------------------
APPROVED: DEPT.: DATE:
/s/ MISSING SIGNATURE Pharmaceutical Development 11/26/96
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
DESCRIPTION:
L-Arginylglycylglycyl-L-leucyl-L-cystinyl-L-tryosyl-L-cystinyl-L-arginylglycl-
L-arginyl-L-phenylalanyl-L-cystinyl-L-valyl-L-cystinyl-L-valylglycl-L-
argininamide hydrochloride, cyclic (5-14),(7-12)-bisdisulfide
H(2)N-RGGLCYCRGRFCVCVGR-CONH(2)
IB-367-03
C(78)H(126)N(30)O(18)S(4) x-HCl-y H2O
Mol. Wt.: 1900.3 amu (anhydrous free base)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TEST SPECIFICATION METHOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
2. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
3. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
4. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
5. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
IntraBiotics Pharmaceuticals, Inc.
816 Kifer Road
Sunnyvale, CA 94086
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
15.
<PAGE>
INTRABIOTICS QUALITY SPECIFICATION
QA ISSUED COPY
SPECIFICATION NO., [ * ]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
MATERIAL:
IB-367-03 FOR INFORMATION ONLY
- ----------------------------------------------------------------------------------------------------------------------
DATE EFFECTIVE: SUPERCEDES: PAGE:
<S> <C> <C>
Nov 26, 1996 [ * ] 2 of 2
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TEST SPECIFICATION METHOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
7. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
8. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
9. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
10. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
11. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
12. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
13. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
14. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
IntraBiotics Pharmaceuticals, Inc.
816 Kifer Road
Sunnyvale, CA 94086
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
16.
<PAGE>
ANNEX 1
SPECIFICATION
STORAGE: Store at recommended storage conditions. [ * ].
SHIPMENT: the [ * ].
NB. The storage container and shipping conditions may be modified in the future
once the proper stability data are available.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
17.
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.5
DEVELOPMENT SUPPLY AGREEMENT
regarding
IB-367
between
Ferring Peptide Production AB
P.O. Box 30047, Soldattorpsvagen 5
S-20061 Malmo
Sweden
and
Polypeptide Laboratories A/S
Herredsvejen 2
3400 Hillerod
Denmark
and
IntraBiotics Pharmaceuticals, Inc.
816 Kifer Road
Sunnyvale
California 94086
USA
<PAGE>
THIS AGREEMENT is entered into on the 3rd day of January, 1997, between
POLYPEPTIDE LABORATORIES A/S, a Danish company incorporated under the laws of
Denmark, with its registered offices at Herredsvejen 2, 3400 Hillerod, Denmark
and FERRING PEPTIDE PRODUCTION AB, a Swedish company incorporated under the laws
of Sweden, with its registered office at Soldattorpsvagen 5, S-20061 Malmo,
Sweden (hereinafter jointly referred to as POLYPEPTIDE), and INTRABIOTICS
PHARMACEUTICALS, INC., a company incorporated in the state of Delaware under the
laws of the United States, with its registered offices at 816 Kifer Road,
Sunnyvale, California 94086, USA (hereinafter referred to as INTRABIOTICS).
RECITALS
WHEREAS, POLYPEPTIDE has developed or acquired patented and
non-patented inventions, manufacturing and testing practices and procedures, and
know-how, relating to the manufacture and testing of peptides, and owns
production facilities for large scale manufacturing of pharmaceutical peptides;
WHEREAS, INTRABIOTICS has the priority rights to IB-367 (hereinafter
referred to as "Product"), the specification of which is described in Annex 1
(the "Specification");
WHEREAS, INTRABIOTICS desires to have POLYPEPTIDE develop a [ * ]
manufacturing process for the Product and to enter into a Supply Agreement with
POLYPEPTIDE for the manufacture and supply of IB-367 for commercial use,
NOW THEREFORE, the parties hereto agree as follows:
As used herein, "Affiliate" or a Party shall mean an entity: (i) in
which at least 50 percent of the voting share or other means of control of such
entity are owned or controlled by such Party, or (ii) which owns or controls at
least 50 percent of the voting shares of such Party, or (iii) in which at least
50 percent of such ownership or control is owned or controlled by an entity
owning or controlling at least 50 percent of the voting shares of such Party.
AGREEMENT
1. DEVELOPMENT PROJECT
1.1 POLYPEPTIDE will develop a commercial scale solution phase
manufacturing process which will yield Product according to the Specification
contained in Annex 1 (the "Specification"). The Specification of the Product may
be changed from time to time as directed by INTRABIOTICS. Significant changes to
the Specification may result in cost and timing changes to the project. The
parties will negotiate in good faith and make only those necessary changes of
the Time Schedule and/or the Compensation payable to POLYPEPTIDE which are a
direct consequence of the change in the Specification.
1.2 POLYPEPTIDE will conduct the development project in four phases and
in accordance with the Time Schedule set out in the project plan (Annex 2). Each
phase will have a number of milestones as described in Annex 3.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
1.
<PAGE>
1.3 PHASE I; will consist of development of the strategy and the
method for large scale manufacture of the Product, with a solution phase
process ("Process"). In the course of Phase I, POLYPEPTIDE will produce [ * ]
of Product, whereof [ * ] shall be delivered to INTRABIOTICS and the
remaining [ * ] shall be used by POLYPEPTIDE for for further analytical non
GMP development and as a reference standard. Phase I will be completed [ * ]
based on signing of this agreement on or before 3 January 1997.
1.4 PHASE II; will consist of development and validation of the
analytical methods necessary for production and release of the Product,
preparing of the necessary documentation (including specifications for raw
materials or intermediates, batch records and in-process controls) and
scaling up of the Process. In the course of scaling up the Process
POLYPEPTIDE shall deliver to INTRABIOTICS [ * ] Product for clinical trials.
The production of the Product in Phase II will be in accordance with the cGMP
guidelines of clause 6.1. The Product for clinical trials shall be delivered
in the amount of [ * ] in [ * ]. Furthermore POLYPEPTIDE will prepare and
maintain Drug Master Files ("DMF") for the purpose of the IND filing of the
Product. Stability trials, (as supportive data), will be conducted by
POLYPEPTIDE with Product manufactured in this Phase II.
1.5 PHASE III; will consist of production and delivery of at least
[ * ]manufactured in [ * ] consecutive conforming batches of at least [ * ]
each utilising the final production process for registration [ * ]. The exact
batch sizes to be mutually agreed upon between the parties but in the absence
of agreement, the batch size shall be [ * ]. [ * ]. POLYPEPTIDE will with
regard to technology and equipment be able to scale up the batch size to at
least [ * ] for later commercial use.
1.6 PHASE IV; will consist of stability tests in accordance with the
Specification and the then current ICH guidelines and the compilation of the
DMF for registration purpose.
1.7 INTRABIOTICS will provide to POLYPEPTIDE existing analytical
methods for testing the Product and a reference sample. POLYPEPTIDE shall use
the analytical methods as outlined in the Specification subject to
modifications to be agreed during the project.
2. COMPENSATION
INTRABIOTICS will pay POLYPEPTIDE upon completion of each milestone as
agreed and set out in Annex 3. The total sum for each phase amounts to:
<TABLE>
<S> <C> <C>
Phase I USD [ * ]
Phase II USD [ * ]
Phase III USD [ * ] (based on delivery of [ * ] of the Product)
Phase IV USD [ * ]
</TABLE>
Payments under this Development Supply Agreement will be made by wire
transfer within 30 days from the date of completion of the respective milestone
and upon receipt of a corresponding invoice to an account indicated by
POLYPEPTIDE.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE>
3. REPORTS AND VISITS
During each phase of the development project, POLYPEPTIDE, will make a
monthly status report to INTRABIOTICS by fax with originals by mail (Att.:
Senior Director of Pharmaceutical Development). On a quarterly basis a meeting
will be conducted between the parties to discuss the progress of the development
project. Upon reasonable notice, POLYPEPTIDE will receive visitors from
INTRABIOTICS or another company authorised by INTRABIOTICS to discuss with them
any issue which may arise in connection with the development project.
4. DELAYS OF THE DEVELOPMENT PROJECT
4.1 POLYPEPTIDE acknowledges that in light of the time schedule of the
clinical trial and Product registration, timely completion of the development
project is of essential importance to INTRABIOTICS and POLYPEPTIDE shall use its
best efforts to complete the project according to the Time Schedule in Annex 2.
4.2 If any unforeseen problem arises which may delay the completion of
a phase, POLYPEPTIDE will promptly inform INTRABIOTICS of such problem and
provide its best estimate for the completion of the affected development phase.
If necessary, POLYPEPTIDE will employ [ * ] outside specialists (subject to
confidentiality undertakings pursuant to Section 10) and do its best to overcome
the problem and achieve the timely completion of the development project.
5. OWNERSHIP OF INTELLECTUAL PROPERTY
5.1 INTRABIOTICS shall own and will have exclusive rights to use all
Process-specific and Product-specific know-how ("KNOW-HOW") and will own all
patentable inventions ("INVENTIONS") relating to the Product made by
POLYPEPTIDE or its external advisors in the course of the development
project. All patent costs will be paid by INTRABIOTICS and INTRABIOTICS will
direct all patent prosecution. In order to secure these rights for
INTRABIOTICS, POLYPEPTIDE will ensure that the KNOW-HOW is kept confidential,
and execute such documents, including but not limited to invention disclosure
and assignment agreements with its employees and advisors, as are necessary
for INTRABIOTICS to obtain ownership of INVENTIONS. POLYPEPTIDE will supply
to INTRABIOTICS reports including copies of significant data relating to the
KNOW-HOW and INVENTIONS on a quarterly basis. Such reports shall also detail
process development status and process scale up status. POLYPEPTIDE is
entitled to make use of any KNOW-HOW and INVENTIONS for other products than
the Product without payment of any compensations to INTRABIOTICS.
5.2 The DMF developed based on the facilities, technology and knowledge
of POLYPEPTIDE is the property of [ * ], which is only permitted to make use of
the DMF [ * ].
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3.
<PAGE>
6. PRODUCTION, CGMP AND QUALITY CONTROL
6.1 GMP PRODUCTION:
POLYPEPTIDE will manufacture the Product in phases [ * ] of the
development project according to current Good Manufacturing Practice guidelines
("cGMP") as described in the Code of Federal Regulations, Title 21, Part 211 (21
CFR 211) as applicable to Bulk Pharmaceutical Chemicals. Furthermore, [ * ] will
authorise the United States Food and Drug Administration ("FDA") and any other
regulatory agency around the world to review the Drug Master File in support of
the Product registration applications. [ * ] reserves the right to review the
DMF prior to its submission to the FDA. If during the course of this contract
POLYPEPTIDE is inspected by FDA, it will promptly inform INTRABIOTICS that such
inspection has taken place and supply a copy of any FDA Form 483, in the form
that would be available under the Freedom of Information Act, and all other
documentation applicable to the manufacturing of the Product.
6.2 ACTIVE DRUG SUBSTANCE
(a) POLYPEPTIDE will procure, test, and release the necessary
raw material ingredients for the manufacturing of each batch/lot of bulk drug
substance according to the Specification.
(b) Certificates of Analysis, copies of Batch Records for
manufacturing, and all Release Documents for items supplied to INTRABIOTICS must
be submitted prior to the receipt of the materials at INTRABIOTICS or its
designee, unless an alternative procedure has been agreed in writing between the
parties.
6.3 TESTING
(a) POLYPEPTIDE is responsible for [ * ]. Testing shall
conform to the Specification and current specifications in the United States
Pharmacopoeia ("USP") or the National Formulary (NF), or the European
Pharmacopoeia if available and/or internal specifications. INTRABIOTICS reserves
the right to review and approve all such specifications prior to their use in
the production of intermediates or bulk drug substance. Such approval shall not
be unreasonably withheld.
(b) POLYPEPTIDE and INTRABIOTICS agree that in the event of
unresolved inter-laboratory differences, a mutually agreed upon independent
testing facility shall resolve said discrepancies.
(c) All testing laboratories shall have an acceptable retest
and re-sampling procedure on file which is consistent with the Specification and
meets current cGMP laboratory guidelines.
(d) The testing laboratory shall be equipped with sufficient
equipment which is maintained in a calibration program adequate to perform
required testing.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4.
<PAGE>
(e) All methods used to evaluate and release drug substance
shall be validated for use or conform to [ * ]. All validation procedures
shall be in accordance with ICH guidelines.
(f) POLYPEPTIDE will conduct and furnish the appropriate
inspection, testing and release documents for the following items as part of the
batch record, or minimally reference these documents in the batch record:
- [ * ]
- [ * ]
- [ * ]
- [ * ]
- [ * ]
- [ * ].
6.4 LABELLING
(a) POLYPEPTIDE shall label each container of bulk drug
substance according to the Specification including manufacturer name, name of
product, product code, storage temperature, expiration date (if available),
and quantity and number of containers. Each container will carry a caution
statement as required by the applicable regulations in the country of
shipping, transit and destination. INTRABIOTICS reserves the right to review
and approve the master sample of the bulk drug container labels prior to
their use.
(b) Each container will contain a status label such as "IN
QUARANTINE" or "RELEASED" etc.
(c) Copies of labels used to label the bulk container will be
kept as part of the batch record.
6.5 POLYPEPTIDE will maintain reserve samples for each lot of bulk
drug substance sufficient to complete all Certificate of Analysis testing
[ * ]times. Reserve samples shall be stored at the temperature recommended in
the Specification, or if no recommendation, at [ * ]. Samples to be stored by
POLYPEPTIDE for 10 (ten) years unless otherwise agreed between the parties
in writing.
6.6 LOT INFORMATION:
(a) POLYPEPTIDE will provide a copy of all information and
records relating to the batch/lot (e.g., expected lot size, yield,
manufacturing deviations or rework).
(b) INTRABIOTICS will have the right to review and/or audit
all batch records and test and release data prior to acceptance of the material.
(c) Changes to manufacturing parameters or specifications that
may impact the quality or integrity of the Product shall be subject to review
and approval by the INTRABIOTICS QA/QC unit prior to shipment to INTRABIOTICS.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5.
<PAGE>
6.7 MASTER BATCH RECORDS:
(a) POLYPEPTIDE will prepare Master Batch Records to include
directions in sufficient detail to manufacture the bulk drug substance under
cGMP guidelines. INTRABIOTICS reserves the right to review and approve the
Master Batch Records prior to their use in the production of intermediates or
bulk drug substance.
(b) POLYPEPTIDE will notify INTRABIOTICS of proposed
changes to the Master Batch Record in advance of the proposed implementation.
A verbal telephone call outlining significant changes to responsible person
is acceptable, but shall be confirmed in writing; telefax transmission is
acceptable. INTRABIOTICS acceptance or rejection of the proposed changes will
be provided in writing before implementation; telefax transmission is
acceptable.
(c) INTRABIOTICS shall be notified about proposed
deviations in a timely manner. INTRABIOTICS will respond to proposed
deviations in writing; telefax transmission is acceptable.
(d) Master Batch Record changes shall be finalised in typed
written format and approved in writing by representatives of both POLYPEPTIDE
and INTRABIOTICS.
6.8 MANUFACTURING:
(a) POLYPEPTIDE will provide qualified labour to manufacture
the Product according to approved Master Batch Records, and in full compliance
with the Specification and cGMP rules and regulations. Training records for all
labour utilised shall be made available for INTRABIOTICS' review upon written
requested.
(b) Upon request of INTRABIOTICS, POLYPEPTIDE will allow to
have a QA audit of the production operation while in process and a complete
review of all documentation pertaining to the manufacture and test of the
Product. Regular audits of POLYPEPTIDES cGMP compliance status will also be
allowed with adequate advance notice. INTRABIOTICS reserves the right to retain
third party auditors to perform these audits if necessary.
6.9 STORAGE:
(a) POLYPEPTIDE will store the bulk drug Product according
to the Specification, at no cost for INTRABIOTICS for up to two (2) months
after release to INTRABIOTICS.
6.10 SHIPMENT:
(a) POLYPEPTIDE will furnish the shipping containers according
to the Specification.
(b) POLYPEPTIDE will use its best efforts to deliver the
Product within [ * ] of release.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6.
<PAGE>
(c) POLYPEPTIDE may at the request of INTRABIOTICS prepare one
set of pre-delivery samples to INTRABIOTICS or INTRABIOTICS' designated party.
(d) INTRABIOTICS will communicate to POLYPEPTIDE the shipping
address in writing at least 30 days prior to the delivery date.
(e) All shipments must be sent to the above address by
overnight courier (24 hours delivery) under [ * ] (Incoterms 1990) delivery
terms unless otherwise agreed.
6.11 The responsibility of each of the parties concerning Quality
Assurance and Quality Control matters is specified in Annex 4.
6.12 (a) INTRABIOTICS shall be deemed to have accepted delivery of
Product supplied hereunder unless INTRABIOTICS shall have notified POLYPEPTIDE
of any non-conformity in respect of a shipment within [ * ] following
INTRABIOTICS' receipt of same.
(b) Any claim of nonconformity hereunder shall be accompanied
by a report of analysis of the allegedly nonconforming material prepared by or
on behalf of INTRABIOTICS. If POLYPEPTIDE confirms INTRABIOTICS' claim, of
nonconformity, POLYPEPTIDE shall within [ * ] from POLYPEPTIDES confirmation of
nonconformity replace the nonconforming goods with conforming goods to
INTRABIOTICS. Pursuant to written directions from POLYPEPTIDE, INTRABIOTICS
shall either return the nonconforming goods to POLYPEPTIDE, or destroy same,
each [ * ].
(c) In case of disagreement between the parties regarding the
conformity or nonconformity of a delivery of the Product, the parties shall
refer the matter for review and/or analysis and final settlement to an
independent expert laboratory to be agreed by both of them. The costs of such
expertise and analysis shall be [ * ].
7. COMMERCIAL PURCHASE AND SUPPLY
If INTRABIOTICS decides to use the Process for producing the Product
for commercial sale, INTRABIOTICS agrees to use POLYPEPTIDE as the primary
supplier of the Product under the terms of the Purchase/Supply Agreement entered
into on the date hereof ("Purchase/Supply Agreement").
8. EFFECTIVE DATE, EXPIRATION AND TERMINATION
8.1 This Agreement becomes effective on the day of signature.
8.2 This Agreement will expire 180 days after POLYPEPTIDE notifies
INTRABIOTICS that the DMF is ready for submission to FDA for registration
purposes provided that POLYPEPTIDE will complete any ongoing work required
for registration. In case INTRABIOTICS after expiration of this Agreement
decides not to continue the registration process of the Product INTRABIOTICS
shall immediately notify POLYPEPTIDE and POLYPEPTIDE shall have no obligation
to continue any such ongoing work for registration.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7.
<PAGE>
8.3 In case INTRABIOTICS is in need of further Product after the
completion of this agreement but before the approval by the United States Food
and Drug Administration such Product shall be delivered by POLYPEPTIDE under the
terms of this agreement, [ * ].
8.4 Each party may terminate this Agreement by written notice if the
other party is breaching materials terms of this Agreement and does not remedy
such breach within [ * ] after receiving written notice specifying the breach
from the non-breaching party.
8.5 If POLYPEPTIDE has not met the [ * ] or if commercial, clinical, or
toxicological data presented by documentation show that further progress on the
development project cannot be commercially justified by INTRABIOTICS,
INTRABIOTICS may terminate this Agreement by written notice effective [ * ] from
the date of receipt by POLYPEPTIDE. In this event, INTRABIOTICS will pay to
POLYPEPTIDE [ * ] plus all costs [ * ].
8.6 Clauses 5.1, 5.2, 6.1, 6.5, 7, 8.3, 10 and 11 will survive the
expiration or termination of this agreement.
9. WARRANTIES
POLYPEPTIDE warrants that it has the necessary permits, facilities,
knowledge, specialists, and personnel for the manufacture of the Product
(including the scale-up) pursuant to the terms of this Agreement, including that
POLYPEPTIDE is registered with the US FDA as a manufacturer of bulk substances.
POLYPEPTIDE warrants that all Product supplied to INTRABIOTICS pursuant
to this Agreement shall be manufactured, stored and shipped in accordance with
the applicable Specifications and Master Batch Record and in compliance with all
applicable laws and regulations, including cGMP regulations.
10. CONFIDENTIALITY
This Clause shall replace any prior confidentiality agreement entered
into between the parties INTRABIOTICS and POLYPEPTIDE concerning IB-367.
10.1 Both POLYPEPTIDE and INTRABIOTICS mutually acknowledge and
recognise the valuable and proprietary nature of POLYPEPTIDE Confidential
Information and INTRABIOTICS Confidential Information and agree that the
Confidential Information of the other party shall remain confidential
throughout the term of this Agreement, and until 5 years after its
termination. In this regard, the parties agree to receive and maintain the
Confidential Information of the other party in confidence and to refrain from
any use thereof, in whole or in part, except for the express purposes
authorised by this Agreement.
10.2 In recognition of the proprietary nature and value of the
Confidential Information and the likelihood of loss of business by the other
party in the event of unauthorised disclosure of its Confidential Information,
the parties agree that the obligations of the Paragraph shall continue unabated
regardless of termination of this Agreement for any reason.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8.
<PAGE>
10.3 INTRABIOTICS and POLYPEPTIDE may disclose such Confidential
Information of the other party as is necessary or appropriate in order to have
qualified employees act hereunder. However, no disclosure shall be made without
taking suitable steps to assure that such employee is bound under the
confidentiality requirements at least equal in scope to those of this Agreement.
All reasonable steps shall be taken to assure that the disclosure of the
Confidential Information of the other party to any employee will be limited to
those having a need to know to fulfil the terms and conditions of this
Agreement. Further the receiving party will take all reasonable steps to assure
that its employees will maintain the confidential nature of the other's
Confidential Information. In case external resources are being used, the
provisions for employees also apply for such external resources.
10.4 Neither party shall be obligated or required to maintain in
confidence any information, even though deemed by the disclosing party to be its
Confidential Information, for which it can be demonstrated by competent
documentary evidence that it was:
(a) In the public knowledge prior to the earliest disclosure
made between the parties at any time, whether before, during or after the
effective date of this Agreement; or
(b) In the possession of the receiving party without binder of
secrecy prior to the earliest disclosure made between the parties at any time,
whether during or before the effective date of this Agreement; or
(c) While originally Confidential Information, subsequently is
received without binder of secrecy from a third party who is free to disclose
the information, as of the date of such third party disclosure; or
(d) While originally Confidential Information, and
subsequently becomes part of the public knowledge through no fault of the
receiving party; or
(e) Independently developed by the receiving party's employees
or agents provided that those employees or agents had no access to any
corresponding Confidential Information of the disclosing party received
hereunder.
10.5 The parties may disclose Confidential Information pursuant to an
order of a competent court or administrative agency, provided that the party
subject to such order has informed the other party thereof, and has used
reasonable efforts to limit the scope of the disclosure and to obtain
confidential treatment by the court or administrative agency of Confidential
Information disclosed pursuant to such order.
10.6 INTRABIOTICS may disclose Confidential Information to potential
and established licensees of the Product, potential and established investors in
INTRABIOTICS, and to other relevant business partners under a separate
confidentiality agreement. However, no disclosure shall be made without taking
suitable steps to assure that such receiving party is bound under the
confidentiality requirements at least equal in scope to those of this Agreement.
10.7 The parties may disclose Confidential Information to the United
States Food and Drug Administration or such other relevant regulatory agency
world-wide in the course of seeking regulatory approval for the Product.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
9.
<PAGE>
11. PRODUCT LIABILITY AND INDEMNIFICATIONS
11.1 INTRABIOTICS shall indemnify, defend and hold POLYPEPTIDE and its
agents, employees and directors (the "POLYPEPTIDE Indemnitees") harmless from
and against any and all liability, damage, loss, cost or expense (including
reasonable attorneys' fees) arising out of third party claims or suits resulting
from the use, sale or promotion of Product or a product containing Product by
INTRABIOTICS, its sublicensees, distributors or agents, except to the extent
that such claims or suits result from negligence or intentional misconduct of
POLYPEPTIDE or a POLYPEPTIDE Indemnitee in the manufacture of the Product. Upon
assertion of such claim or suit, the POLYPEPTIDE Indemnitees shall promptly
notify INTRABIOTICS thereof and INTRABIOTICS shall appoint counsel reasonably
acceptable to the POLYPEPTIDE Indemnitees to represent the POLYPEPTIDE
Indemnitees with respect to any claim or suit for which indemnification is
sought. The POLYPEPTIDE Indemnitees shall not settle any such claim or suit
without the prior written consent of INTRABIOTICS, unless they shall have first
waived their rights to indemnification hereunder.
11.2 POLYPEPTIDE shall indemnify, defend and hold INTRABIOTICS and its
agents, employees and directors (the "INTRABIOTICS Indemnitees") harmless from
and against any and all liability, damage, loss, cost or expense (including
reasonable attorneys' fees) arising out of third party claims or suits resulting
from negligence or intentional misconduct in the manufacture of Product by
POLYPEPTIDE, except to the extent such claims or suits result from the
negligence or willful misconduct of INTRABIOTICS or an INTRABIOTICS Indemnitee.
Upon assertion of such claim or suit, the INTRABIOTICS Indemnitees shall
promptly notify POLYPEPTIDE thereof and POLYPEPTIDE shall appoint counsel
reasonably acceptable to the INTRABIOTICS Indemnitees to represent the
INTRABIOTICS Indemnitees with respect to any claim or suit for which
indemnification is sought. The INTRABIOTICS Indemnitees shall not settle any
such claim or suit without the prior written consent of POLYPEPTIDE, unless they
shall have first waived their rights to indemnification hereunder.
11.3 In no event shall either Party be liable to the other for
incidental or consequential damages or for punitive damages as a result of any
breach of this Agreement.
12. FORCE MAJEURE
12.1 Neither party is liable for failing to perform or having delayed
the performance of its obligation under this agreement, if the performance is
delayed or precluded by circumstances beyond its control, including but not
limited to fire, flood, war, strike, lock-out, failure or shortage of public
utilities due to governmental decrees, orders or legislation and court
injunctions.
The party, whose performance is delayed or precluded, shall immediately
inform the other party of the circumstances preventing the performance.
In the event that the circumstances preventing the performance continue
for more than [ * ], each party will have a right to cancel the Agreement and
neither of the parties will have a right to reimbursement or to any claim for
damages as a result of the cancellation of the Agreement.
13. ASSIGNMENT
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
10.
<PAGE>
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Neither
party shall assign its rights and obligations under this Agreement without first
obtaining the written consent of the other parties, which consent shall not be
unreasonably withheld. Each of the parties may assign its rights and obligations
to an Affiliate provided that the assigning party shall guarantee its
Affiliate's performance and obligations under this Agreement, or to any
successor by virtue of a merger or acquisition of substantially the entire
business to which this Agreement relates or in the case of INTRABIOTICS to a
licensee of the Product, without the consent, but upon notice to the other
party.
14. SEVERABILITY
Should any provision or part of this agreement be held invalid,
illegal, or unenforceable in whole or in part by any court of competent
jurisdiction, this Agreement is deemed modified to the extent necessary to make
it valid and enforceable and the Agreement as thus modified shall be in force to
give effect to the intention of the parties to the extent possible.
15. APPLICABLE LAW AND JURISDICTION
All matters arising under or related to the Agreement shall be governed
by and construed under and pursuant to the laws of the State of California
without regard to conflict of laws principles.
16. ARBITRATION
All disputes between the parties relating to this Agreement, including
its interpretation that cannot be settled amicably by the parties, shall be
settled by binding arbitration in the state/country of the defending party in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration carried out hereunder shall apply to the exclusion
of regular legal means, provided that the rights of the Parties in urgent
situations in which time is of the essence to obtain proper remedies in court of
law or equity shall remain unimpaired.
17. PUBLISHING OF THIS AGREEMENT
Except as otherwise required by law, neither Party shall make any
public disclosure as to the terms or existence of this Agreement without the
prior written consent of the other. Notwithstanding this clause, INTRABIOTICS
may publish that such an agreement has been entered into between the Parties
subject to pre-approval by POLYPEPTIDE of the wording.
18. COMPLETE AGREEMENT
The provisions contained in this agreement and its appendices and the
Purchase/Supply Agreement set out the entire agreement between the parties
with respect to the subject matter of this agreement and shall supersede all
previous communication, representations or agreements with respect to the same
subject and may not be amended except by an instrument in writing signed by or
on behalf of the parties.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
11.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorised officers as of the day and year
first above written, each copy of which shall for all purposes be deemed to be
original.
POLYPEPTIDE LABORATORIES A/S INTRABIOTICS PHARMACEUTICALS INC.
/s/ Erik Lorentsen /s/ Thomas Shepherd
- ------------------------------------- -------------------------------------
Erik Lorentsen Thomas Shepherd
General Manager Vice President Corporate; Development
FERRING PEPTIDE PRODUCTION AB
/s/ Anders J. Andersen
- ------------------------------------
Anders J. Andersen
General Manager
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
12.
<PAGE>
ANNEX 1
SPECIFICATION
TABLE OF CONTENTS:
PAGES 1 AND 2 INTRABIOTICS QUALITY SPECIFICATION NO.: [ * ]
PAGE 3 - STORAGE
- SHIPMENT
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
INTRABIOTICS QUALITY SPECIFICATION
QA ISSUED COPY
SPECIFICATION NO.: [ * ]
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
MATERIAL: FOR INFORMATION ONLY
IB-367-03
- ----------------------------------------------------------------------------------------------------------------------
DATE EFFECTIVE: SUPERCEDES: PAGE:
NOV 26 1996 [ * ] 1 of 2
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
AUTHOR: DEPT.: DATE:
/s/ Jodi L. Fausnaugh Analytical Development 11/26/96
- ----------------------------------------------------------------------------------------------------------------------
APPROVED: DEPT.: DATE:
/s/ William R. Trilsch Quality Assurance 11/26/96
- ----------------------------------------------------------------------------------------------------------------------
APPROVED: DEPT.: DATE:
/s/ Leo Gu Pharmaceutical Development 11-26-96
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION:
L-Arginylglycylglycyl-L-leucyl-L-cysnnyl-L-tyrosyl-L-cystinyl-L-arginylglycyl-L-arginyl-L-phenylalanyl-L-cystinyl-L-valyl-
L-cystinyl-L-valylglycyl-L-arginamide hydrochloride, cycle (5--14),(7--12)-bisdisulfide
H2N-RGGLCYCRGRFCYCVGR-CONH2
IB-367-03
C(78)H(126)N(30)O(18)S(4) x HCl y H(2)O
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TEST SPECIFICATION METHOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
2. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
3. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
4. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
5. [ * ] [ * ] [ * ]
- ---------------------------------------- --------------------------------------------------------- -------------------
</TABLE>
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
INTRABIOTICS QUALITY SPECIFICATION
QA ISSUED COPY
SPECIFICATION NO.: [ * ]
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
MATERIAL: FOR INFORMATION ONLY
IB-367-03
- ----------------------------------------------------------------------------------------------------------------------
DATE EFFECTIVE: SUPERCEDES: PAGE:
NOV 26 1996 [ * ] 2 of 2
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TEST SPECIFICATION METHOD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
7. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
8. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
9. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
10. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
11. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
12. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
13. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
14. [ * ] [ * ] [ * ]
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
ANNEX 1
SPECIFICATION
STORAGE: Store at recommended storage conditions. [ * ].
SHIPMENT: [ * ].
NB. The storage container and shipping conditions may be modified in the future
once the proper stability data are available.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
ANNEX 2
[ * ]
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
ANNEX 3
MILESTONES AND MILESTONE PAYMENTS
1st Milestone [ * ]
Payment of [ * ] will be effected by completion of [ * ] in the Time
Schedule meaning the completion of the development of [ * ].
POLYPEPTIDE will at the first milestone supply a small sample of the
Product (non GMP) together with a written method for the manufacture of
[ * ] of the Product. [ * ]
2nd Milestone [ * ]
Is reached after the completion of [ * ], meaning completion of [ * ]
including the delivery of [ * ] of the Product to INTRABIOTICS. [ * ]
3rd Milestone [ * ]
After the completion of the [ * ] and the [ * ] for the Product [ * ]
4th Milestone [ * ]
After the completion of [ * ], meaning completion [ * ] including the
development of the [ * ] the Product. [ * ]
5th Milestone [ * ]
After the completion of [ * ] including the supply of [ * ]
6th, 7th, 8th, 9th Milestone [ * ]
After each [ * ] according to [ * ] and upon receiving [ * ]
10th Milestone [ * ]
After [ * ] with the written notification from [ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE>
ANNEX3, PAGE 2 OF 2
ANNEX 3
MILESTONE AND MILESTONE PAYMENTS
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
ANNEX 4
MATRIX OF RESPONSIBILITY OF THE PARTIES CONCERNING
QUALITY ASSURANCE AND QUALITY CONTROL
Product:IB-367
<TABLE>
<CAPTION>
RESPONSIBLE FOR POLYPEPTIDE INTRABIOTICS
<S> <C> <C>
Quality control specification for the ingredients [ * ] [ * ]
Test method for the ingredients [ * ] [ * ]
Validation of the test methods for the ingredients [ * ] [ * ]
Inspection and release of the ingredients [ * ] [ * ]
Retention of reference sample of the ingredients [ * ] [ * ]
Route of synthesis [ * ] [ * ]
Manufacturing method [ * ] [ * ]
Manufacturing of the Product including in-process controls [ * ] [ * ]
Quality control specification for the in-process control [ * ] [ * ]
Test methods for the in-process control [ * ] [ * ]
Validation of the manufacturing process [ * ] [ * ]
Quality control specification for the Product [ * ] [ * ]
Test method for the product [ * ] [ * ]
Validation of the test method for the Product [ * ] [ * ]
Release of Product
[ * ] [ * ]
Acceptance of Product by INTRABIOTICS
</TABLE>
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
<TABLE>
<CAPTION>
ANNEX 4 CONTINUED POLYPEPTIDE INTRABIOTICS
RESPONSIBLE FOR
<S> <C> <C>
Retention of reference sample of the Product [ * ] [ * ]
Retention of batch manufacturing records for the Product [ * ] [ * ]
Retention of quality control records for the Product [ * ] [ * ]
Stability conformance [ * ] [ * ]
a) Stability conformance and evaluation of results [ * ] [ * ]
b) Stability testing [ * ] [ * ]
Complaints [ * ] [ * ]
a) Investigation [ * ] [ * ]
b) Action and filing [ * ] [ * ]
copy*-INTRABIOTICS will received a copy of each completed batch manufacturing record.
</TABLE>
Contact person regarding Quality Assurance and Control
POLYPEPTIDE:
Goran Kvist, Director QA & QC
This is an integral part of the Development Supply Agreement between the
Parties.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE>
AMENDMENT TO DEVELOPMENT SUPPLY AGREEMENT
This Amendment is made and is effective this first day of July 1997, (the
"Effective Date") by and between Polypeptide Laboratories A/S, a Danish company
incorporated under the laws of Denmark, with its registered offices at
Herredsvejen 2, 3400 Hillerod, Denmark and Ferring Peptide Product AB, a Swedish
company incorporated under the laws of Sweden, with its registered office a
Soldattorpsvaegen 5, S-20062 Malmo, Sweden (hereinafter jointly referred to as
POLYPEPTIDE), and IntraBiotics Pharmaceuticals, Inc., a company incorporated in
the state of Delaware under the laws of the United States, with its registered
office at 816 Kifer Road, Sunnyvale, California 94086, USA (hereinafter referred
to as INTRABIOTICS) and amends the Development Supply Agreement between the
parties dated January 3, 1997 (hereinafter referred to as the Development
Agreement).
WHEREAS, this amendment to the Development Agreement has become necessary as a
result of INTRABIOTICS request for additional supply from POLYPEPTIDE of [ * ]
of IB-367 peptide;
Now therefore, the parties agree to amend the Development Agreement as follows:
AMENDMENT 1.
A new annex 2 and annex 3 have been appended to this Amendment and these annexes
supersede and replace the original annex 2 and annex 3 of the Development
Agreement.
AMENDMENT 2.
Clause 1.4 of the Development Agreement is superseded and replaced by the
following new clause:
1.4 Phase II; will consist of development and validation of the
analytical methods necessary for production and release of the Product,
preparing of the necessary documentation (including specifications of raw
materials or intermediates, batch records and in-process controls) and
scaling up of the Process. In the course of scaling up the Process
POLYPEPTIDE shall deliver to INTRABIOTICS [ * ] Product for non-clinical
studies (task 11 of Annex 2) and [ * ] Product for clinical trials (task 13
of Annex 2). The [ * ] will be manufactured in accordance with the cGMP
guidelines cf. Clause 6.1. The [ * ] will be delivered in the amount of [ * ]
in [ * ] and the [ * ] will be delivered in the amount of [ * ] in [ * ].
Furthermore, POLYPEPTIDE will prepare and maintain Drug Master Files ("DMF")
for the purpose of the IND filing of the Product. Stability trials, (as
supportive data), will be conducted by POLYPEPTIDE with Product manufactured
in this Phase II.
AMENDMENT 3.
Clause 2 of the Development Agreement, entitled Compensation, is superseded and
replaced by the following new clause:
2. IntraBiotics will pay POLYPEPTIDE upon completion of each milestone as
agreed and set out in Annex 3. The total sum for each phase amounts to:
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
1.
<PAGE>
Phase I USD [ * ]
Phase II USD [ * ]
Phase III USD [ * ](based on delivery of 1,500g of the Product)
Phase IV USD [ * ]
Payments under this Development Supply Agreement will be made by wire transfer
within 30 days from the date of completion of the respective milestone and upon
receipt of a corresponding invoice to an account indicated by POLYPEPTIDE.
END OF AMENDMENTS.
The remainder of the Development Agreement will remain in full force and effect.
As advance consideration for the production of [ * ] of [ * ] Product included
in [ * ] INTRABIOTICS shall pay to POLYPEPTIDE a non-refundable fee of [ * ]
within [ * ] of the effective date of this letter of amendment. This sum is
described in Annex 3 of the Development Agreement as being due in [ * ].
IN WITNESS WHEREOF, the parties have caused this letter of amendment 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
original.
POLYPEPTIDE LABORATORIES A/S INTRABIOTICS PHARMACEUTICALS, INC.
/s/ Erik Lorentsen /s/ Thomas Shepherd
- -------------------------------------- --------------------------------------
Erik Lorentsen Thomas Shepherd
General Manager Vice President Corporate Development
FERRING PEPTIDE PRODUCTION AB
/s/ Anders J. Andersen
- --------------------------------------
Anders J. Andersen
General Manager
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
2.
<PAGE>
ANNEX 2
[ * ]
[ * ]
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
1.
<PAGE>
ANNEX 3
(JUNE 1997)
Task numbers refer to the project plan dated 10-06-1997.
1st Milestone [ * ]
Payment of [ * ] will be effected by completion of [ * ] in the Time
Schedule meaning the completion of the development of [ * ].
POLYPEPTIDE will at the first milestone supply a small sample of the
produce (non GMP) together with a written method for the manufacture of
[ * ] of the Product [ * ].
2a Milestone [ * ]
Is reached after completion of [ * ], meaning completion of [ * ]
including the delivery of [ * ] of the Product to IntraBiotics. [ * ].
2b Milestone [ * ]
At delivery of [ * ], Product to IntraBiotics, [ * ].
3a Milestone [ * ]
After having signed and approved [ * ], for the Product [ * ].
3b Milestone [ * ].
After completion of [ * ] part of [ * ].
4th Milestone [ * ].
After the completion of [ * ], meaning the completion [ * ] including
the development of the [ * ] the Product [ * ].
5th Milestone [ * ].
After the completion of [ * ] including the supply of [ * ].
6th, 7th, 8th, 9th Milestone [ * ].
After each [ * ] according to [ * ] and upon receiving [ * ].
10th Milestone[ * ].
After [ * ] with the written notification from [ * ].
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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ANNEX 2, PAGE 2 OF 2
ANNEX 3
MILESTONE AND MILESTONE PAYMENTS
[ * ]
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.6
SECOND AMENDMENT TO
LICENSE AGREEMENT
M940121
(UNMARKED)
THIS AMENDMENT is made and is effective this 12th day of June 1996,
(the "Effective Date") by and between THE REGENTS OF THE UNIVERSITY OF
CALIFORNIA, a California corporation having its corporate offices located at 300
Lakeside Drive, 22nd Floor, Oakland, California 94612-3550, acting through its
offices located at Box 951525, 1106 Ueberroth Bldg, Los Angeles, California
90095-1525, hereinafter referred to as "The Regents," and INTRABIOTICS
PHARMACEUTICALS, INC., a Delaware corporation having a principal place of
business at 816 Kifer Road, Sunnyvale, CA 94086, hereinafter referred to as
"IntraBiotics," and amends License Agreement No. M940121, dated April 22, 1994,
and the First Amendment to License Agreement M940121, dated July 31, 1995.
RECITALS
WHEREAS, This second amendment to License Agreement No. M940121 has
become necessary as a result of new inventions having been made at IntraBiotics
over the past year or so ("IBP Inventions"), which inventions are complementary
both to inventions made at UCLA during the same time period [ * ] and to other
inventions licensed under this Agreement, (collectively, "UCLA Inventions");
WHEREAS, IntraBiotics and The Regents wish to combine the subject
matter of IBP Inventions with relevant subject matter of UCLA Inventions in
joint patent applications, in order to strengthen the patent rights that the
parties expect will cover Licensed Products; and
WHEREAS, IntraBiotics anticipates making additional inventions that
will support claims in the joint patent applications, and, because of certain
patent provisions governing the filing of continuation-in-part applications, it
is to the advantage of both parties that IntraBiotics is a sole owner of the
joint patent applications; and
WHEREAS, The Regents agrees to assign its undivided ownership interest
in such joint patent applications to IntraBiotics, so that patent rights
covering Licensed Products are strengthened; and
WHEREAS, The Regents and IntraBiotics agree that the patent rights
covering Licensed Products are further strengthened if the patent application
under Regents' Patent Rights that describes the inventions in [ * ] is
abandoned, and that such inventions are covered in the joint patent applications
described above; and
WHEREAS, as a result of IntraBiotics' contribution to strengthen and
broaden patent rights covering Licensed Products, The Regents agrees that for
Licensed Products covered only
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by the joint patent applications and continuation-in-part applications thereof,
IntraBiotics may pay royalties to The Regents that are [ * ] the royalties due
for Licensed Products covered by Regents' Patent Rights; and
WHEREAS, the UCLA Inventions were developed with United States
Government funds, and The Regents will grant to the U.S. Government royalty-free
nonexclusive licenses to patent rights covering the UCLA Inventions, as required
under 35 U.S.C. Section 201-212; and
WHEREAS, In this Amendment, additions to the original Agreement dated
April 22, 1994 will be underlined, as shown, and deletions will be, as shown, in
a marked version of the Amendment, and an unmarked version of the Amendment will
also be executed by the parties, and the amendments to Appendix A that were made
in The First Amendment to License Agreement M940121 on July 3l, 1995 is further
amended in this Second Amendment to License Agreement No. M940121.
NOW, THEREFORE, the parties agree to amend License Agreement No.
M940121 as follows.:
1. DEFINITIONS
1.1 "REGENTS' PATENT RIGHTS" means patent rights to any subject matter
claimed in or covered by the patents and applications listed in Appendix A; any
continuing applications thereof including divisions and continuation-in-part
applications, but only to the extent that such continuation-in-part applications
have claims directed to subject matter enabled and described in the patent
applications named above; any patents issuing on said applications or continuing
applications including reissues and reexaminations; and any corresponding
foreign patents or patent applications; all of which will be automatically
incorporated in and added to Appendix A attached to this Agreement and made a
part hereof.
1.2 "JOINT PATENT RIGHTS" means patent rights to any subject matter
claimed in or covered by the patents and applications listed in Appendix B; any
continuing applications thereof including divisions and continuation-in-part
applications; any patents issuing on said applications or continuing
applications including reissues and reexaminations; and any corresponding
foreign patents or patent applications; all of which will be automatically
incorporated in and added to Appendix B attached to this Agreement and made a
part hereof.
1.3 "LICENSED PRODUCT" means any article, composition, apparatus,
substance, chemical, or any other material covered by Regents' Patent Rights or
Joint Patent Rights, or whose manufacture, use or sale would constitute an
infringement of any claim within Regents' Patent Rights or Joint Patent Rights,
or any service, article, composition, apparatus, chemical, substance, or any
other material made, used, or sold for use with or by a Licensed Method.
1.4 "LICENSED METHOD" means any process or method which is covered by
Regents' Patent Rights or Joint Patent Rights or whose use or practice would
constitute an infringement of any claim within Regents' Patent Rights or Joint
Patent Rights.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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1.5 "FIELD" means medical applications, including all human
pharmaceutical (including, therapeutic, prophylactic, disinfectant and
preservative), diagnostic and veterinary uses, but specifically excludes [ * ]
uses that are not medically related.
1.6 "AFFILIATE" means any company or other legal entity other than
IntraBiotics in whatever country organized, controlling, controlled by or under
common control with IntraBiotics. The term "control" means possession, direct or
indirect, of the powers to direct or cause the direction of the management and
policies of IntraBiotics, whether through the ownership of voting securities, by
contract or otherwise.
1.7 "FIRST COMMERCIAL SALE" means the first sale of any Licensed
Product by IntraBiotics or its Affiliates, following approval of its marketing
by the appropriate governmental agency for the country in which the sale is to
be made, and when governmental approval is not required, the first sale in that
country.
1.8 "NET SALES" means the total amount received by IntraBiotics or its
Affiliates from the sale or distribution of Licensed Products less the sum of
the following deductions where applicable: cash, trade, or quantity discounts
(including Medicaid and other government mandated rebates); sales, use, tariff,
import/export duties or other excise taxes imposed upon particular sales;
transportation charges and allowances or credits to customers because of
rejections or returns. Sales between or among IntraBiotics and its Affiliates or
sublicensees shall be excluded from the computation of Net Sales, except where
such Affiliates or sublicensees are end users, but Net Sales shall include the
subsequent final sales to third parties by such Affiliates or sublicensees.
1.9 "SUBLICENSE" is defined in Paragraph 4.1.
1.10 "SUBLICENSEE" means any third party sublicensed by IntraBiotics to
make, have made, use or sell one or more Licensed Products or to practice one or
more Licensed Methods.
1.11 "SUBLICENSING INCOME" means consideration received by IntraBiotics
under or on account of Sublicenses, such consideration to include payments such
as license issue fees, license maintenance fees, and milestone payments, but
specifically to exclude equity purchase or royalties on sale or distribution of
Licensed Products or the practice of Licensed Methods. Income received by
IntraBiotics as payment or reimbursement for research costs or expenses
conducted by or for IntraBiotics, including costs or expenses associated with
materials, equipment, clinical testing or otherwise, shall not be included in
the definition of Sublicensing Income hereunder.
2. GRANT
2.1 The Regents hereby grants to IntraBiotics an exclusive license (the
"License") under Regents' Patent Rights, in jurisdictions where Regents' Patent
Rights exist, to make, have made, use and sell Licensed Products in the Field
and to practice Licensed Methods.
2.2 The Regents hereby assigns to IntraBiotics its undivided interest
in Joint Patent Rights (the "Assignment").
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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2.3 The License and the Assignment shall be subject to any overriding
obligations to the United States federal government under 35 U.S.C.
Section 201-212.
2.4 The Regents expressly reserves the right to use Regents' Patent
Rights and Joint Patent Rights and associated technology for educational,
research and clinical purposes and for any other non-commercial purpose that is
not inconsistent with the rights granted to IntraBiotics hereunder.
3. INTRABIOTICS CONFIDENTIAL INFORMATION
3.1 During the term of this Agreement, it is contemplated that
IntraBiotics will disclose to The Regents proprietary and confidential
technology, inventions, technical and business information and the like which
are owned or controlled by IntraBiotics or which IntraBiotics is obligated to
maintain in confidence and which is designated in writing by IntraBiotics prior
to disclosure to The Regents as confidential ("IntraBiotics' Confidential
Information"). The Regents agrees to retain such IntraBiotics' Confidential
Information in confidence and not to disclose any such IntraBiotics'
Confidential Information to a third party without the prior written consent of
IntraBiotics and to use such IntraBiotics' Confidential Information only for the
purposes of this Agreement. But The Regents need only use the same degree of
care which it uses with its own information of like character.
3.2 The obligation of confidentiality under paragraph 3.1 will not
apply to IntraBiotics' Confidential Information which:
(a) was known to The Regents or generally known to the public
prior to its disclosure hereunder; or,
(b) subsequently becomes known to the public by some means
other than a breach of this Agreement, including publication and/or laying open
to inspection of any patent applications or patents; or,
(c) is subsequently disclosed to The Regents by a third party
having a lawful right to make such disclosure.
3.3 The Regents shall be permitted to disclose IntraBiotics'
Confidential Information if required under the California Public Records Act or
if otherwise required by law; provided, however that The Regents shall give
IntraBiotics thirty (30) days advance notice, where possible, of any such
required disclosure of IntraBiotics' Confidential Information.
3.4 The obligations of The Regents under this Article 3 shall remain in
effect during the term of this Agreement or for five (5) years from the date of
IntraBiotics' disclosure to The Regents of IntraBiotics' Confidential
Information, whichever is longer.
4. SUBLICENSEES
4.1 The Regents also grants to IntraBiotics the right to issue
exclusive or nonexclusive sublicenses ("Sublicenses") to third parties to make,
have made, use and sell
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Licensed Products and to practice Licensed Methods in the Field in any
jurisdiction under which IntraBiotics has exclusive rights under this Agreement.
All such Sublicenses shall be subject to the rights of The Regents under this
Agreement, with the exception that Sublicensees need not pay the license issue
fee provided for in Article 5, or patent costs provided for in Article 8. To the
extent that IntraBiotics licenses third parties to make, have made, use and sell
Licensed Products and to practice Licensed Methods that are covered solely by
Joint Patent Rights, for the purposes of this Agreement, such licenses shall be
considered Sublicenses. To the extent applicable, Sublicenses shall also be
subject to the rights of the United States federal government under 35 U.S.C.
Section 201-212.
4.2 IntraBiotics shall pay to The Regents, upon the Net Sales of
Licensed Products sold or disposed of by Sublicensees, an earned royalty equal
to [ * ] of the royalties received by IntraBiotics from its Sublicensees for
products covered by Regents' Patent Rights, and an earned royalty equal to [ * ]
for products covered solely by Joint Patent Rights.
4.3 IntraBiotics shall pay to The Regents [ * ] of all Sublicensing
Income. Such payments shall be made quarterly in accordance with the payment
schedule described in paragraph 10.3.
4.4 IntraBiotics shall provide to The Regents a copy of each Sublicense
granted by IntraBiotics and a copy of all information submitted to IntraBiotics
by Sublicensees relevant to the computation of the payments due from
IntraBiotics to The Regents under this Article 4.
4.5 IntraBiotics shall use its best efforts to write its sublicense
agreements so that upon termination of this Agreement for any reason, all
outstanding Sublicenses will be assigned to The Regents and will remain in full
force and effect under the same terms and conditions with The Regents as the
licensor thereunder in the stead of IntraBiotics, but the duties of The Regents
under such assigned Sublicenses shall not be greater than the duties of The
Regents under this Agreement.
5. CONSIDERATION
5.1 In consideration for the License, IntraBiotics agrees to pay to
The Regents a license issue fee of fifty thousand dollars ($50,000) according
to the following schedule: [ * ]within thirty (30) days of [ * ] This fee is
[ * ] an advance against royalties.
5.2 For the first Licensed Product to reach the milestones indicated
below, IntraBiotics will pay to The Regents the following payments, or, at
the option of The Regents and provided that such stock is not publicly
traded, IntraBiotics will grant to The Regents preferred stock in
IntraBiotics equal in value to the below mentioned figures as determined by
IntraBiotics' most recent sale, in an arms length transaction, of the same
class of stock to its private investors, within thirty (30) days of reaching
the milestones:
(a) [ * ] upon the filing of an [ * ]; and
(b) [ * ] either upon the [ * ], or upon filing an [ * ],
whichever comes first; and
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(c) [ * ] upon [ * ].
6. ROYALTIES
6.1 For Licensed Products covered by Regents' Patent Rights,
IntraBiotics shall pay to The Regents for sale of such Licensed Products in the
Field sold by IntraBiotics or its Affiliates, an earned royalty of [ * ].
6.2 The royalties payable pursuant to Paragraph 6.1 (and not those
payable under Paragraph 4.2) shall be reduced (but in no event to less than
[ * ]) by amounts equal to [ * ] the sum of royalties, if any, payable to third
parties with respect to Net Sales of Licensed Products, unless such third party
royalties result from a combination package as described below, in which case no
third party deductions shall be allowed hereunder.
6.3 For Licensed Products covered by Joint Patent Rights but not
covered by Regents' Patent Rights, IntraBiotics shall pay to The Regents for
sale of such Licensed Products in the Field sold by IntraBiotics or its
Affiliates, an earned royalty of [ * ].
6.4 In the event a Licensed Product is sold in a combination package
with one or more other products not covered by Regents' Patent Rights or Joint
Patent Rights, or is sold as part of a single product containing such other
products, for purposes of calculating earned royalties on such package, Net
Sales will be calculated by multiplying the Net Sales of such package by the
fraction A/(A+B), where A is the gross selling price of the Licensed Products
when sold separately and B is the gross selling price of the other products(s)
when sold separately. In no event will the Net Sales of the Licensed Product in
such a combination package be less than the Net Sales of the Licensed Product
when sold separately. In the event that the Licensed Products are sold in a
combination package and there have been no separate sales of a Licensed Product
but there have been separate sales of the other product(s) in the combination
package, Net Sales shall be the difference between the gross selling price of
the combination package and that of the other product(s), irrespective of how
IntraBiotics may invoice the selling price of such combination package. In the
event that neither the Licensed Product nor the other product or products
contained in a combination package have had separate sales, Net Sales will be
calculated by multiplying the Net Sales of the combination product by the
fraction A/(A+B), where A is the fully burdened manufacturing cost of the
Licensed Product and B is the fully burdened manufacturing cost of other
products contained in a combination package.
6.5 Paragraphs 1.1, 1.2, 1.3, 1.4 and 1.5 define Regents' Patent
Rights, Joint Patent Rights, Licensed Products, Licensed Methods and the
Field so that royalties shall be payable on a country by country basis on
products covered by pending patent applications and issued patents. If
patents have not issued before the First Commercial Sale, earned royalties on
the sale of Licensed Products shall accrue for seventeen (17) years or, when
patent(s) are extended under the Drug Price Competition and Patent Term
Restoration Act of 1984 or by other acts of law, for seventeen years plus the
term of the extension. If patents have issued before the First Commercial
Sale, earned royalties on the sale of Licensed Products shall accrue for [ * ]
, respectively. The term of earned royalties due The Regents on the sale of
Licensed Products covered under Regents' Patent Rights shall be
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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independent of the term of earned royalties due The Regents on the sale of
Licensed Products covered under Joint Patent Rights.
6.6 Royalties accruing to The Regents shall be paid to The Regents on a
quarterly basis. Each such payment will be for royalties which accrued within
the most recently completed calendar quarter and payment shall be made by
IntraBiotics within [ * ] of the end of such calendar quarter.
6.7 All monies due The Regents shall be payable in United States funds
collectible in Los Angeles, California. When Licensed Products are sold for
monies other than United States dollars, the earned royalties will first be
determined in the foreign currency of the country in which such Licensed
Products were sold and then converted into equivalent United States funds. The
exchange rate will be that established by the Bank of America in San Francisco,
California on the last day of the reporting period.
6.8 Any tax for the account of The Regents required to be withheld by
IntraBiotics under the laws of any foreign country shall be promptly paid by
IntraBiotics for and on behalf of The Regents to the appropriate governmental
authority, and IntraBiotics shall use its best efforts to furnish The Regents
with proof of payment of such tax. All payments made by IntraBiotics in
fulfillment of The Regents' tax liability in any particular country shall be
credited against earned royalties or fees due The Regents for that country.
6.9 If at any time legal restrictions prevent the prompt remittance of
part or all royalties by IntraBiotics with respect to any country where a
Licensed Product is sold, IntraBiotics shall have the right and option to make
such payments by depositing the amount thereof in local currency to The Regents'
account in a bank or other depository in such country. If after [ * ] of
good-faith efforts by The Regents to recover the monies, the royalties still
cannot be returned to the United States, and if IntraBiotics has been able to
recover its revenues from Net Sales of Licensed Products, IntraBiotics will be
responsible for payment in the United States.
6.10 In the event that any patent or any claim thereof included within
the Regents' Patent Rights or Joint Patent Rights shall be held invalid or
unenforceable in a final decision by a court of competent jurisdiction from
which no appeal has or can be taken, all obligation to pay royalties based on
such patent or claim or any claim patentably indistinct therefrom shall cease as
of the date of such final decision. IntraBiotics shall not, however, be relieved
from paying any royalties that accrued before such decision or that are based on
another patent or claim not involved in such decision.
6.11 In the event that no patents covering Licensed Products or
Licensed Methods have issued in a country after six (6) years from the
Effective Date, the royalty obligations under paragraph 6.1 and paragraph 6.3
shall cease in such country until such time as patents covering Licensed
Products and Licensed Methods do issue, after which time The Regents shall
notify IntraBiotics, and IntraBiotics' payment obligations shall be resumed
as of the issue date of the patents.
7. DUE DILIGENCE
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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7.1 Upon the execution of this Agreement, IntraBiotics, shall
diligently proceed with the development, manufacture and sale (collectively
referred to as "commercialization") of Licensed Products and shall earnestly and
diligently endeavor to market the same within a reasonable time after execution
of this Agreement and in quantities sufficient to meet the market demands
therefor.
7.2 IntraBiotics shall present to The Regents within [ * ] from the
Effective Date, a Product Development Plan describing its proposed plans and its
estimated timetable for the commercialization of Licensed Products. The Product
Development Plan will be maintained confidential pursuant to Article 3, and may
be revised from time to time in good faith by IntraBiotics. The Regents must
approve any such revision but shall approve such revision if IntraBiotics has
demonstrated best efforts to execute the previous Product Development Plan.
7.3 If IntraBiotics is unable to complete or perform any of the
following with respect to the commercialization of Licensed Products:
(a) within [ * ] from the date of the original Agreement,
April 22, 1994, raise at least [ * ] in capital for the ongoing operations of
IntraBiotics;
(b) in the first [ * ] from the date of the original
Agreement, April 22, 1994, apply a cumulative amount of resources of at least
[ * ] toward the development and commercialization of Licensed Products;
(c) in each year following the [ * ] from the date of the
original Agreement, April 22, 1994, apply an amount of resources of at least
[ * ], or [ * ] of IntraBiotics' cumulative expenditures for research or
development, including manufacturing scale-up, clinical or related expenses
during the same period, whichever is less, toward the development and
commercialization of Licensed Products;
(d) meet the commercialization milestones as stated in the
Product Development Plan; then The Regents shall have the right and option to
terminate this Agreement. This right, if exercised by The Regents, supersedes
the rights granted in Article 2 (Grant).
7.4 To exercise its right to terminate this Agreement under Paragraph
7.3, The Regents shall give IntraBiotics written notice of the deficiency.
IntraBiotics thereafter shall have [ * ] to cure the deficiency, or to present
to The Regents a plan to cure the deficiency, or to request arbitration. If The
Regents has not received a written request for arbitration, or satisfactory
tangible evidence that the deficiency has been cured by the end of the [ * ]
period, or a plan for curing the deficiency that, in the sole judgement of The
Regents is acceptable to The Regents, then The Regents may, at its option,
terminate this Agreement, amend the grant in Paragraph 2.1 to nonexclusive, or
limit the Field to exclude areas for which IntraBiotics has failed to meet any
of the above terms by giving written notice to IntraBiotics. These notices shall
be subject to Article 20 (Notices).
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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7.5 IntraBiotics shall endeavor to obtain all necessary governmental
approvals for the commercialization of Licensed Products.
7.6 IntraBiotics shall have the sole discretion for making all
decisions as to how to commercialize Licensed Products.
8. PATENT FILING, PROSECUTION AND MAINTENANCE
8.1 The Regents shall file, prosecute and maintain the patents and
applications comprising Regents' Patent Rights. Such patents shall be held in
the name of The Regents and shall be obtained with counsel of The Regents'
choice. The Regents shall provide IntraBiotics with copies of each patent
application, office action, response to office action, request for terminal
disclaimer, and request for reissue or reexamination of any patent or patent
application under Regents' Patent Rights. The Regents will give due
consideration to any comments or suggestions by IntraBiotics related to patent
prosecution, and The Regents will not unreasonably deny a request by
IntraBiotics to change patent counsel. The Regents shall be able to take action
to preserve rights and minimize costs whether or not IntraBiotics has commented.
8.2 All reasonable costs incurred beginning on [ * ] and during the
term of this Agreement in the preparation, filing, prosecution and maintenance
of patent applications and patents in Regents' Patent Rights shall be borne by
IntraBiotics.
8.3 IntraBiotics shall have the right to request patent protection on
the Inventions in foreign countries if available and if it so desires.
IntraBiotics must notify The Regents within [ * ] of the filing of the
corresponding United States application of its decision to obtain foreign
patents. This notice concerning foreign filing shall be in writing, must
identify the countries desired, and reaffirm IntraBiotics' obligation to
underwrite the costs thereof. The absence of such a notice from IntraBiotics to
The Regents shall be considered an election not to secure foreign rights.
8.4 If IntraBiotics elects not to secure foreign patent rights, The
Regents shall have the right to file patent applications at its own expense in
any country in which IntraBiotics has not elected to secure patent rights, and
such applications and resultant patents shall not be subject to this Agreement.
8.5 IntraBiotics' obligation to underwrite and to pay all United States
and foreign patent costs shall continue for so long as this Agreement remains in
effect; provided, however, that IntraBiotics may terminate its obligations with
respect to any given patent application or patent upon [ * ] written notice to
The Regents. The Regents will use its best efforts to curtail patent costs
chargeable to IntraBiotics under this Agreement after such a notice is received
from IntraBiotics. The Regents may continue prosecution and/or maintenance of
such application(s) or patent(s) at its sole discretion and expense, and
IntraBiotics shall have no further rights or licenses thereunder.
8.6 The Regents shall use its best efforts to not allow any Regents'
Patent Rights for which IntraBiotics is licensed and is underwriting the costs
of to lapse or become abandoned
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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without IntraBiotics authorization or reasonable notice, except for the filing
of continuations, divisionals, etc. The Regents shall notify IntraBiotics [ * ]
prior to the proposed abandonment. Within [ * ] after receipt of such notice,
IntraBiotics must, in writing, either (a) concur in the abandonment or (b) elect
to assume responsibility for the prosecution and maintenance of all Patent
Rights that The Regents proposes to abandon. Lack of written response to The
Regents within [ * ] shall be deemed to constitute concurrence.
8.7 IntraBiotics shall file, prosecute and maintain the patents and
applications comprising Joint Patent Rights. Such patents shall be held in the
name of IntraBiotics and shall be obtained with counsel of IntraBiotics choice.
IntraBiotics shall provide The Regents with copies of each patent application,
office action, response to office action, request for terminal disclaimer, and
request for reissue or reexamination of any patent or patent application under
Joint Patent Rights, in sufficient time for The Regents to consider such
documents and provide comments to IntraBiotics. IntraBiotics will give due
consideration to any comments or suggestions by The Regents related to patent
prosecution, and will accommodate The Regents' request to add claims in
prosecution, if such claims would strengthen or broaden patent coverage under
Joint Patent Rights.
8.8 IntraBiotics shall use [ * ] efforts to not allow any Joint Patent
Rights to lapse or become abandoned without The Regent's authorization or
reasonable notice, except for the filing of continuations, divisionals, etc.
IntraBiotics shall notify The Regents [ * ] prior to the proposed abandonment.
Within [ * ] after receipt of such notice, The Regents' must, in writing, either
(a) concur in the abandonment or (b) elect to assume responsibility for the
prosecution and maintenance of all Joint Patent Rights that IntraBiotics
proposes to abandon. Lack of written response to IntraBiotics within [ * ] shall
be deemed to constitute concurrence.
8.9 If IntraBiotics elects not to secure foreign patent rights under
Joint Patent Rights, The Regents shall have the right to direct IntraBiotics to
file patent applications at the Regents' expense in any country in which
IntraBiotics has not elected to secure patent rights, but such applications and
resultant patents are still owned by IntraBiotics and shall be subject to this
Agreement.
8.10 The Regents shall cooperate with IntraBiotics in applying for an
extension of the term of any patent included within Regents' Patent Rights or
Joint Patent Rights, if appropriate under the Drug Price Competition and Patent
Term Restoration Act of 1984. IntraBiotics shall prepare all such documents, and
The Regents agree to execute such documents and to take such additional action
as IntraBiotics may reasonably request in connection therewith.
8.11 IntraBiotics shall have the continuing responsibility to notify
The Regents if IntraBiotics or any of its Sublicensees or Affiliates is not a
small entity (as defined by the United States Patent and Trademark Office) under
the provisions of 35 USC 41 (h).
9. PATENT INFRINGEMENT
9.1 In the event that either party learns of the substantial
infringement in the Field of any patent in Regents' Patent Rights or Joint
Patent Rights, that party shall so inform other party
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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in writing and shall provide reasonable evidence of such infringement. Both
parties to this Agreement agree that during the period and in a jurisdiction
where IntraBiotics has exclusive rights under this Agreement, neither party will
notify a third party of the infringement of any of Regents' Patent Rights
without first obtaining consent of the other party, which consent shall not be
unreasonably denied. Both parties shall use their best efforts in cooperation
with each other to terminate such infringement without litigation.
9.2 After notification of The Regents as described in Paragraph 9.1,
IntraBiotics may take legal action against the infringement of Joint Patent
Rights. In the case of Regents' Patent Rights, IntraBiotics may request that The
Regents take legal action against the infringement of Regents' Patent Rights in
the Field. Such request shall be made in writing and shall include reasonable
evidence of such infringement and damages to IntraBiotics. If the infringing
activity has not been abated within [ * ] following the effective date of such
request, The Regents shall have the right to (a) commence suit on its own
account or (b) refuse to participate in such suit. The Regents shall give notice
of its election in writing to IntraBiotics by the end of the [ * ] after
receiving notice of such request from IntraBiotics. IntraBiotics may thereafter
bring suit for patent infringement in its own name, if and only if The Regents
elects not to commence suit and if the infringement occurred during the period
and in a jurisdiction where IntraBiotics possesses exclusive rights under this
Agreement. However, in the event IntraBiotics elects to bring suit in accordance
with this paragraph, The Regents may thereafter join such suit at its own
expense. In the case where only Joint Patent Rights are infringed, The Regents
must have the consent of IntraBiotics in order to join such suit. IntraBiotics
shall have the right to join any such litigation brought by The Regents at
IntraBiotics' cost and expense and with counsel of IntraBiotics' choice.
9.3 Such legal action as is decided upon shall be at the expense of
the party on account of whom suit is brought and, with the exception of
Paragraph 9.5 herein, all recoveries recovered thereby shall belong to such
party; provided, however, that legal action brought jointly by The Regents
and IntraBiotics and fully participated in by both shall be at the joint
expense of the parties and all recoveries shall be shared jointly by them in
proportion to the share of expense paid by each party.
9.4 Each party agrees to cooperate with the other in litigation
proceedings instituted hereunder but at the expense of the party on account of
whom suit is brought. Such litigation shall be controlled by the party bringing
the suit, except that The Regents may be represented by counsel of its choice
pursuant to The Regents' determination in any suit brought by IntraBiotics.
9.5 In the event that IntraBiotics alone shall undertake the
enforcement and/or defense of any Regents' Patent Rights or Joint Patent
Rights by litigation, any recovery of damages by IntraBiotics for any such
suit shall be applied first toward any unreimbursed expenses and legal fees
of IntraBiotics relating to the suit. The balance remaining from any such
recovery shall be retained by IntraBiotics and IntraBiotics shall pay The
Regents three times the applicable royalty on such balance.
10. PROGRESS AND ROYALTY REPORTS
10.1 Commencing on July 1, 1994, IntraBiotics shall submit to The
Regents semi-annual progress response covering IntraBiotics' activities related
to the development and testing of all Licensed Products and the obtaining of the
governmental approvals necessary for marketing. These progress reports shall be
made for each Licensed Product until the First
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Commercial Sale and shall be marked confidential and maintained confidentially
in accordance with Article 3.
10.2 IntraBiotics also agrees to report to The Regents in its
immediately subsequent progress and royalty report the date of First Commercial
Sale.
10.3 After the First Commercial Sale of a Licensed Product,
IntraBiotics will make quarterly royalty reports to The Regents on or before
each [ * ] of each year (i.e., within [ * ] from the end of each calendar
quarter). Each such royalty report will cover IntraBiotics' most recently
completed calendar quarter and will show: (a) the [ * ] of Licensed Products
sold by IntraBiotics during the most recently completed calendar quarter, (b)
the number of each type of Licensed Product sold; and (c) the royalties payable
hereunder with respect to such.
11. BOOKS AND RECORDS
11.1 IntraBiotics shall keep books and records accurately showing
all Licensed Products manufactured, used, and/or sold under the terms of this
Agreement. Such books and records shall be preserved for at least five (5)
years from the date of the royalty payment to which they pertain and shall be
open to inspection by representatives or agents of The Regents at reasonable
times.
11.2 The fees and expenses of The Regents' representatives performing
such an examination shall be borne by The Regents. However, if an error in
royalties favoring IntraBiotics of more than [ * ] of the total royalties due
for any year is discovered, then the fees and expenses of the representatives
shall be borne by IntraBiotics.
12. LIFE OF THE AGREEMENT
12.1 Unless otherwise terminated by operation of law or by acts of
the parties in accordance with the terms of this Agreement, this Agreement
shall be in force from the Effective Date recited on page one and shall
remain in effect for the life of the last-to-expire patent in Regents' Patent
Rights; or until the last patent application licensed under this Agreement is
abandoned and no patent in Regents' Patent Rights ever issues, or for
seventeen (17) years from the First Commercial Sale, whichever occurs first,
after which time IntraBiotics shall have a fully paid up, royalty-free
license to Regents' Patent Rights to make, have made, use and sell Licensed
Products and to practice Licensed Methods in the Field.
Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement shall
be in force from the Effective Date recited on page one and shall remain in
effect for the life of the last-to-expire patent in Joint Patent Rights; or
until the last patent application licensed under this Agreement is abandoned
and no patent in Joint Patent Rights ever issues, or for seventeen (17) years
from the First Commercial Sale, whichever occurs first, after which time
IntraBiotics shall have unrestricted, irrevocable ownership of Joint Patent
Rights.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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12.2 Upon termination of this Agreement, IntraBiotics shall have no
further right to make, use or sell Licensed Products except as provided for in
Article 15 (Disposition of Licensed Products on Hand Upon Termination).
12.3 Any termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
Article 11 Books and Records
Article 15 Disposition of Licensed Products on Hand upon Termination
Article 17 Use of Names and Trademarks
Article 19 Indemnification
Article 24 Failure to Perform.
13. TERMINATION BY THE REGENTS
13.1 If IntraBiotics violates or fails to perform any material term or
covenant of this Agreement, then The Regents may give written notice of such
default ("Notice of Default") to IntraBiotics. If IntraBiotics fails to repair
such default within [ * ] after the effective date of the Notice of Default, The
Regents shall have the right to terminate this Agreement and the license of
Regents' Patent Rights by a second written notice ("Notice of Termination") to
IntraBiotics. In the case where IntraBiotics' default relates to its obligations
with respect to Joint Patent Rights, IntraBiotics shall have [ * ] following the
Notice of Default to cure the deficiency, or to present to The Regents a plan to
cure the deficiency, or to request arbitration. If a Notice of Termination is
sent to IntraBiotics, this Agreement shall automatically terminate on the
effective date of such notice. Such termination shall not relieve IntraBiotics
of its obligation to pay any royalty or license fees owing at the time of such
termination and shall not impair any accrued right of The Regents. These notices
shall be subject to Article 20 (Notices).
13.2 In the event of termination by The Regents for failure to meet the
requirements of Article 7 (Due Diligence) or in the event of bankruptcy,
IntraBiotics shall [ * ] The Regents its [ * ]. Where termination as a result of
a breach or default under Paragraph 13.1 is solely due to IntraBiotics' failure
to pay fees or royalties (or in the event of an unresolved dispute over such
payments), the remedy for such breach or default shall not include IntraBiotics'
[ * ] the Regents.
14. TERMINATION BY INTRABIOTICS
14.1 IntraBiotics shall have the right at any time to terminate this
Agreement in whole or as to any portion of Regents' Patent Rights or Joint
Patent Rights by giving notice in writing to The Regents. In the event of
termination by IntraBiotics under this Paragraph 14.1, IntraBiotics shall [ * ]
The Regents [ * ]. Such notice of termination shall be subject to Article 20
(Notices) and shall be effective [ * ] after the effective date of such notice.
14.2 Any termination pursuant to Paragraph 14.1 shall not relieve
IntraBiotics of any obligation or liability accrued hereunder prior to such
termination or rescind anything done by IntraBiotics or any payments made to The
Regents hereunder prior to the time such termination
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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becomes effective, and such termination shall not affect in any manner any
rights of The Regents arising under this Agreement prior to such termination.
15. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION
Upon termination of this Agreement, IntraBiotics shall have the right
to dispose of all previously made or partially made Licensed Products, but no
more, within a period of [ * ]; provided, however, that the sale of such
Licensed Products shall be subject to the terms of this Agreement including, but
not limited to, the payment of royalties at the rate and at the time provided
herein and the rendering of reports.
16. PATENT MARKING
16.1 IntraBiotics agrees to mark all Licensed Products made, used or
sold under the terms of this Agreement, or their containers, in accordance with
the applicable patent marking laws.
17. USE OF NAMES AND TRADEMARKS
17.1 Nothing contained in this Agreement shall be construed as
conferring any right to use in advertising, publicity, or other promotional
activities any name, trade name, trademark, or other designation of either party
hereto or either party's employees (including contraction, abbreviation or
simulation of any of the foregoing). Unless required by law, the use of the
name, "The Regents of the University of California" or the name of any campus of
the University of California is expressly prohibited.
18. LIMITED WARRANTY
18.1 The Regents warrants to IntraBiotics that it has the lawful right
to grant this license.
18.2 This License and the associated Inventions are provided WITHOUT
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY
THAT THE LICENSED PRODUCTS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY
RIGHT.
18.3 IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF
THE INVENTION, OR, OR LICENSED PRODUCTS OR THE USE OR THE PRACTICE OF LICENSED
METHODS.
18.4 Nothing in this Agreement shall be construed as:
(a) a warranty or representation by The Regents as to the
validity or scope of any Regents' Patent Rights or Joint Patent Rights; or,
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(b) a warranty or representation that anything made, used,
sold or otherwise disposed of under any license granted in this Agreement is or
will be free from infringement of patents of third parties; or,
(c) an obligation to bring or prosecute actions or suits
against third parties for patent infringement except as provided in Article 7
(Patent Infringement); or,
(d) conferring by implication, estoppel or otherwise any
license or rights under any patents of The Regents other than Regents' Patent
Rights or Joint Patent Rights as defined herein, regardless of whether such
patents are dominant or subordinate to Regents' Patent Rights or Joint Patent
Rights; or,
(e) an obligation to furnish any know-how not provided in
Regents' Patent Rights or Joint Patent Rights.
19. INDEMNIFICATION
19.1 IntraBiotics agrees to indemnify, hold harmless and defend The
Regents, its officers, employees, and agents; and the inventors of the patents
and patent applications in Regents' Patent Rights and The Regents' inventors
named in Joint Patent Rights from and against any and all liability from third
parties, including all claims, suits, losses, damages, costs, fees, and expenses
resulting from or arising out of exercise of this license of Regents' Patent
Rights and this assignment of Joint Patent Rights.
19.2 IntraBiotics, at its sole cost and expense, shall insure its
activities in connection with the work under this Agreement and obtain, keep in
force and maintain Comprehensive or Commercial Form General Liability Insurance
(contractual liability included) with limits as follows:
(a) each occurrence $1,000,000
(b) products/completed operations aggregate $1,000,000
(c) personal and advertising injury $1,000,000
(d) general aggregate (commercial form only) $1,000,000
19.3 It should be expressly understood, however, that the coverages and
limits referred to under Paragraph 19.2 shall not in any way limit the liability
of IntraBiotics. Upon written request, IntraBiotics shall furnish The Regents
with certificates of insurance evidencing compliance with all requirements.
IntraBiotics shall not be required to insure its activities relative to the
products' liability risks until commencing use of Licensed Products in human
subjects. Such insurance shall:
(a) provide for thirty (30) day advance written notice to The
Regents of any modification;
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(b) indicate that The Regents of the University of California
has been endorsed as an Insured under the coverages referred to under Paragraph
19.2; and
(c) include a provision that the coverages will be primary and
will not participate with nor will be excess over any valid and collective
insurance or program of self-insurance carried or maintained by The Regents.
20. NOTICES
20.1 Any notice or payment required to be given to either party shall
be deemed to have been properly given and to be effective (a) on the date of
delivery if delivered in person or (b) five (5) days after mailing if mailed by
first-class certified mail, postage paid, to the respective addresses given
below, or to such other address designated by written notice.
For IntraBiotics: INTRABIOTICS PHARMACEUTICALS CORPORATION
816 Kifer Road
Sunnyvale, CA 94086
Attention: Mr. Kenneth J. Kelley
Chairman and President
For The Regents: THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
Business Research Partnerships
1106 Ueberroth Building
University of California, Los Angeles
Box 951525
Los Angeles, California 90095-1525
Attention: Mr. Christopher T. Moulding
Licensing Associate
21. ASSIGNABILITY
21.1 This Agreement is binding upon and shall inure to the benefit of
The Regents, its successors and assigns, but shall be personal to IntraBiotics
and assignable by IntraBiotics only with [ * ] prior notification to The Regents
and provided that the rights and obligations due The Regents under this
Agreement are not reduced by any such assignment.
22. LATE PAYMENTS
22.1 In the event royalty payments or fees are not received by The
Regents when due, IntraBiotics shall pay to The Regents interest charges at a
rate per annum of [ * ] simple interest calculated from the date payment was due
until actually received by The Regents.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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23. WAIVER
23.1 It is agreed that no waiver by either 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.
24. FAILURE TO PERFORM
24.1 In the event of a failure of performance due under the terms of
this Agreement and if it becomes necessary for either party to undertake legal
action against the other on account thereof, then the prevailing party shall be
entitled to reasonable attorney's fees in addition to costs and necessary
disbursements.
25. GOVERNING LAWS
THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or
patent application shall be governed by the applicable laws of the country of
such patent or patent application.
26. FOREIGN GOVERNMENT APPROVAL OR REGISTRATION
26.1 If this Agreement or any associated transaction is required by the
law of any nation to be either approved or registered with any governmental
agency, IntraBiotics shall assume all legal obligations to do so.
27. EXPORT CONTROL LAWS
27.1 IntraBiotics shall observe all applicable United States and
foreign laws with respect to the transfer of Licensed Products and related
technical data to foreign countries, including, without limitation, the
International Traffic in Arms Regulations (ITAR) and the Expert Administration
Regulations.
28. PREFERENCE FOR UNITED STATES INDUSTRY
28.1 Because this Agreement grants an exclusive right to a particular
use of the Inventions, IntraBiotics agrees that any products embodying these
Inventions or produced through the use thereof will be manufactured in the
United States to the extent required by 35 U.S.C. ss.201-212.
29. FORCE MAJEURE
29.1 The parties to this Agreement shall be excused from any
performance required hereunder if such performance is rendered impossible or
unfeasible due to any catastrophe or other major event beyond their reasonable
control, including, without limitation, war, riot, and insurrection; laws,
proclamations, edicts, ordinances or regulations; strikes, lockouts or other
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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serious labor disputes; and floods, fires, earthquakes, explosions, or other
natural disasters. When such events have abated, the parties' respective
obligations hereunder shall resume.
30. ARBITRATION
30.1 At the request of either party, any controversy or claim arising
out of or relating to the diligence provisions or the provisions of paragraph
13.1 of this Agreement related to arbitration shall be settled by arbitration
conducted in Los Angeles, California in accordance with the then current
Licensing Agreement Arbitration Rules of the American Arbitration Association.
Judgment upon the award rendered by the Arbitrator(s) shall be binding on the
parties and may be entered by either party in the court or forum, state or
federal, having jurisdiction.
31. MISCELLANEOUS
31.1 The headings of the several sections are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
31.2 This Agreement will not be binding upon the parties until it has
been signed below on behalf of each party, in which event, it shall be effective
as of the dated recited on page one.
31.3 No amendment or modification hereof shall be valid or binding upon
the parties unless made in writing and signed on behalf of each party.
31.4 This Agreement embodies the entire understanding of the parties
and shall supersede all previous communications, representations or
understandings, either oral or written, between the parties relating to the
subject matter hereof, except for the Secrecy Agreement dated October 18, 1993,
which shall continue to the extent it is not inconsistent with this Agreement.
31.5 If any provisions contained in this Agreement are or become
invalid, are ruled illegal by any court of competent jurisdiction or are deemed
unenforceable under then current applicable law from time to time in effect
during the term hereof, it is the intention of the parties that the remainder of
this Agreement shall not be affected thereby, provided that a party's rights
under this Agreement are not materially affected. It is further the intention of
the parties that in lieu of each such provision which is invalid, illegal, or
unenforceable, there be substituted or added as part of this Agreement a
provision which shall be as similar as possible in economic and business
objectives as intended by the parties to such invalid, illegal or unenforceable,
provision, but shall be valid, legal and enforceable.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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IN WITNESS WHEREOF, both The Regents and IntraBiotics have executed
this Agreement, in duplicate originals, by their respective officers hereunto
duly authorized, on the day and year hereinafter written.
<TABLE>
<CAPTION>
INTRABIOTICS PHARMACEUTICALS, INC. THE REGENTS OF THE UNIVERSITY
OF CALIFORNIA
<S> <C>
By: /s/ Kenneth J. Kelley By: /s/ Christopher T. Moulding
------------------------------------------------ ------------------------------------------------
Name: Kenneth J. Kelley Name: Christopher T. Moulding
---------------------------------------------- ----------------------------------------------
Title: President and CEO Title: Licensing Associate
---------------------------------------------- ----------------------------------------------
Date: June 12, 1996 Date: June 5, 1996
---------------------------------------------- ----------------------------------------------
</TABLE>
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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APPENDIX A
REGENTS' PATENT RIGHTS
UPDATED MAY 28, 1996
[ * ].
[ * ].
[ * ].
[ * ] .
[ * ].
[ * ].
[ * ].
[ * ].
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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REGENTS' PATENT RIGHTS
DOCKET FORMAT
<TABLE>
<CAPTION>
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
CASE NO. DOCKET NO. FILE DATE SERIAL NO. PATENT NO. ISSUE DATE COMMENTS
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
US RIGHTS
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
[ * ] [ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
[ * ] [ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
[ * ] [ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
[ * ] [ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
[ * ] [ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
[ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
[ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
[ * ] [ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
FOREIGN RIGHTS
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
[ * ] [ * ] [ * ] [ * ] [ * ]
- ----------------------- -------------- ----------- -------------- -------------- ------------- ------------------------------
</TABLE>
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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APPENDIX B
JOINT PATENT RIGHTS
UPDATED MAY 23, 1996
[ * ].
Appendix A and Appendix B will be changed and replaced within a few weeks after
execution of this 2nd Amendment, to reflect the actual patent documents
contained in Regents' Patent Rights and Joint Patent Rights.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND IS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.8
LICENSE AND SUPPLY AGREEMENT
INTRABIOTICS PHARMACEUTICALS, INC.
AND
BIOSEARCH ITALIA S.P.A.
MAY 8, 1998
<PAGE>
LICENSE AND SUPPLY AGREEMENT
THIS LICENSE AND SUPPLY AGREEMENT (the "Agreement") is made effective
as of the 8th day of May, 1998 (the "Effective Date") by and between
INTRABIOTICS PHARMACEUTICALS, INC., a Delaware corporation having its principal
place of business at 1245 Terra Bella Avenue, Mountain View, California, USA
94043 ("IntraBiotics") and BIOSEARCH ITALIA, S.P.A. an Italian corporation with
its principal place of business at via Lepetit, 34, 21040 Gerenzano, Italy
("BioSearch"). IntraBiotics and BioSearch are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."
RECITALS
A. IntraBiotics is a biotechnology company interested in the
development of products useful for the treatment of infectious diseases or
conditions, and BioSearch is a pharmaceutical company interested in the
identification and development of naturally produced compounds useful for the
treatment of infectious disease, and the commercialization of products based
upon such compounds in Europe.
B. BioSearch discovered and is developing a proprietary compound,
Ramoplanin, that is believed to be useful for the treatment and prevention of
infectious diseases or conditions.
C. BioSearch is currently conducting clinical trials in Europe of [ * ]
formulation of Ramoplanin for the treatment or prevention of [*], and is also
developing a [*] formulation of Ramoplanin for the treatment of [*].
D. IntraBiotics desires to develop and commercialize formulations of
Ramoplanin other than [*] formulations for the treatment or prevention of
infectious diseases and conditions in the United States and Canada (including
the territories and possessions of each such country).
ARTICLE 1
DEFINITIONS
The following terms shall have the following meanings as used in this Agreement:
1.1 "AFFILIATE" means an entity that, directly or indirectly, through
one or more intermediaries, controls, is controlled by or is under common
control with BioSearch or IntraBiotics.
1.2 "BIOSEARCH KNOW-HOW" means Information which (i) BioSearch
discloses to IntraBiotics under this Agreement and (ii) is within the Control of
BioSearch. Notwithstanding anything herein to the contrary, BioSearch Know-how
shall exclude BioSearch Patents.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
1.
<PAGE>
1.3 "BIOSEARCH PATENT" means a Patent which covers the discovery,
evaluation, manufacture, use, sale, offer for sale and/or importation of
Licensed Products within the Field, which Patent is owned or Controlled by
BioSearch, including without limitation BioSearch's interest in any Joint
Patents.
1.4 "BULK LICENSED COMPOUND" means the bulk form of the Licensed
Compound used to manufacture Licensed Products under this Agreement.
1.5 "COMMERCIALIZATION" shall mean all activities undertaken by
IntraBiotics relating to the manufacture and sale of Licensed Product in the
Territory, including advertising, education, marketing, distribution and
post-approval product support clinical studies conducted after Regulatory
Approval of a Licensed Product for a particular indication.
1.6 "CONTROL" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with any Third Party.
1.7 "COST OF GOODS SOLD" means the aggregate of the cost to BioSearch
of [*] expenses reasonably incurred in connection with the above.
1.8 "DEVELOPMENT" means all activities relating to obtaining Regulatory
Approval of a Licensed Product, Licensed Product delivery systems and new
indications thereof and all activities relating to developing the ability to
manufacture the same.
1.9 "DRUG APPROVAL APPLICATION" means an application for Regulatory
Approval required before commercial sale or use of a Licensed Product as a drug
in a regulatory jurisdiction.
1.10 "EXCLUDED FORMULATIONS" means the formulations of the Licensed
Compound suitable solely for (i) [*] delivery of the Licensed Compound, (ii)
[*].
1.11 "FIELD" means the treatment or prevention of any human disease.
1.12 "IND" (OR "INVESTIGATIONAL NEW DRUG APPLICATION") means an
application as defined in the United States Food, Drug and Cosmetic Act and
applicable regulations promulgated thereunder to the United States Food and Drug
Administration (the "FDA"), or the equivalent application to the equivalent
agency in jurisdictions outside the United States, the filing of which is
necessary to commence clinical testing of Licensed Products in humans.
1.13 "INFORMATION" means (i) techniques and data within the Field,
including inventions, practices, methods, knowledge, know-how, skill,
experience, test data including pharmacological, toxicological and clinical test
data, analytical and quality control data or descriptions and (ii) compounds,
compositions of matter, assays and biological materials within the Field.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE>
1.14 "INTRABIOTICS KNOW-HOW" means Information which (i) IntraBiotics
discloses to BioSearch under this Agreement and (ii) is within the Control of
IntraBiotics. Notwithstanding anything herein to the contrary, IntraBiotics
Know-how shall exclude IntraBiotics Patents.
1.15 "INTRABIOTICS PATENT" means a Patent which covers the manufacture,
use, sale, offer for sale and/or import of Licensed Products within the Field,
which Patent is owned or Controlled by IntraBiotics, including IntraBiotics'
interest in any Joint Patents.
1.16 "JOINT PATENT" shall have the meaning set forth in Section 10.3.
1.17 "KNOW-HOW" means BioSearch Know-how and/or IntraBiotics Know-how.
1.18 "LICENSED COMPOUND" means the compound known as Ramoplanin, which
was the subject of the Original IND.
1.19 "LICENSED PRODUCT" means any product including or incorporating
any formulation of the Licensed Compound other than an Excluded Formulation.
1.20 "NET SALES" means the amount invoiced for sales of a Licensed
Product in final dosage form by IntraBiotics, its Affiliates or its sublicensees
to a Third Party end user, less (i) discounts, including cash discounts, or
rebates (including government-mandated rebates), retroactive price reductions or
allowances actually allowed or granted from the billed amount, (ii) credits or
allowances actually granted upon claims, rejections or returns of such Licensed
Products, including recalls, (iii) freight, postage, shipping and insurance
charges paid for delivery of Licensed Product, to the extent billed, and (iv)
taxes, duties or other governmental charges levied on or measured by the billing
amount when included in billing, as adjusted for rebates and refunds.
In the event a Party is receiving royalties under this Agreement from
any Licensed Product sold in the form of a combination product containing one or
more active ingredients in addition to the Licensed Compound, Net Sales for such
combination product will be calculated by multiplying actual [*], as determined
by market prices of such portions if separately priced and sold, or if not so
priced and sold, as determined by mutual agreement of the parties. As used
herein, the term "active ingredient" does not include ingredients the primary
effect of which is the enhancement of drug delivery, even if such ingredients
have pharmacological activity.
1.21 "ORIGINAL IND" means IND number [*], which [*] filed for [*]
formulation of Ramoplanin with [*] and which was subsequently withdrawn on [*].
1.22 "OTHER LICENSEE" means any Third Party to which BioSearch has
granted a license under the BioSearch Patents and BioSearch Know-how for the
development or commercialization of Licensed Products or other products
containing the Licensed Compound.
1.23 "PATENT" means (i) valid and enforceable patents, re-examinations,
reissues, renewals, extensions, term restorations and foreign counterparts
thereof, and (ii) pending (at any
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3.
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time during the term of this Agreement) applications for United States patents
and foreign counterparts thereof.
1.24 "PHASE II CLINICAL TRIALS" means those trials on sufficient
numbers of patients that are designed to establish safety and assess the
biological activity of a drug for its intended use, and to define warnings,
precautions and adverse reactions that are associated with the drug in the to be
prescribed dosage range.
1.25 "PHASE III CLINICAL TRIALS" means those trials on sufficient
numbers of patients that are designed to establish that a drug is safe and
efficacious for its intended use, and to define warnings, precautions and
adverse reactions that are associated with the drug in the to be prescribed
dosage range, and supporting Regulatory Approval of such drug.
1.26 "PHASE III MILESTONE REPORT" means the report containing an
analysis of the Phase III Clinical Trial of a Licensed Product in the Territory
and an analysis of reported adverse experiences from such trial.
1.27 "REGULATORY APPROVAL" means any approvals (including pricing and
reimbursement approvals, if appropriate), product and/or establishment licenses,
registrations or authorizations of any federal, state or local regulatory
agency, department, bureau or other governmental entity, necessary for the
manufacture, use, storage, import, export or sale of Licensed Products in a
regulatory jurisdiction.
1.28 "SUPPLY PRICE" shall have the meaning set forth in Section 8.2.
1.29 "TERRITORY" means the United States and Canada and the territories
and possessions of each of the foregoing countries.
1.30 "THIRD PARTY" means any entity other than BioSearch or
IntraBiotics or their Affiliates.
1.31 "TRANSFER PRICE" shall have the meaning set forth in Section 7.9.
1.32 "VALID CLAIM" means a claim of (a) an issued patent, which claim
has not lapsed, been cancelled, or become abandoned and which claim has not been
declared invalid or unenforceable by a court of competent jurisdiction in a
decision from which no appeal has or can be taken, or (b) a patent application,
so long as such application is being prosecuted and the claim in question has
not been abandoned by the owner of the application (with the period of presumed
validity of a pending application not to exceed [*] years in countries).
ARTICLE 2
DEVELOPMENT
2.1 GENERAL. IntraBiotics shall be responsible for the Development of
Licensed Products in the Field and in the Territory, with support from BioSearch
as provided in this
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4.
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Agreement. Development of products including the Licensed Compound (including
without limitation Licensed Products) outside of the Territory, development of
products other than Licensed Products including the Licensed Compound in the
Field and in the Territory, and development of products including the Licensed
Compound (including without limitation Licensed Products) outside the Field and
in the Territory shall be conducted by BioSearch and/or the Other Licensees, if
any, outside the scope of this Agreement. However, in order to avoid the
duplication of cost and effort, and to optimize the results of worldwide
Development of Licensed Products, the Parties agree to exchange information
regarding their respective activities related to the Development of Licensed
Products as provided in this Agreement. In particular, the Parties intend to
exchange information regarding the clinical and non-clinical testing of products
including the Licensed Compound (including without limitation Licensed Products)
for indications in the Field.
2.2 DEVELOPMENT OF LICENSED PRODUCTS BY INTRABIOTICS.
(a) INTRABIOTICS COMMITMENT. IntraBiotics shall have the
right to utilize all relevant non-clinical and clinical data received from
BioSearch prior to the Effective Date and during the term of this Agreement
pursuant to Sections 2.3 and 2.4 for purposes of obtaining Regulatory
Approval of Licensed Products in the Field and in the Territory. IntraBiotics
hereby agrees to conduct, at its sole expense, all additional non-clinical
and clinical Development necessary to obtain Regulatory Approvals for
Licensed Products in the Field and in the Territory. IntraBiotics shall not
have any obligation to Develop Licensed Products for any particular
indication but may, at its option, develop Licensed Products for any
indication in the Field.
(b) DILIGENCE. IntraBiotics shall work diligently, consistent
with accepted business practices and legal requirements, to develop Licensed
Products in the Field and in the Territory.
(c) DELIVERY OF INFORMATION. IntraBiotics will provide to
BioSearch its Information regarding the Development of Licensed Products in the
Field, as set forth in Section 2.4, for use in development and commercialization
of products by BioSearch and, subject to Section 2.6, any Other Licensees
outside of the Territory. BioSearch and, subject to Section 2.6, any Other
Licensees shall be permitted to use and reference all such Information regarding
Development of Licensed Products in (i) any Drug Approval Application filed
outside the Territory and (ii) any Drug Approval Application filed within the
Territory with respect to either Licensed Products outside the Field, or
products other than Licensed Products that contain the Licensed Compound within
the Field. Notwithstanding the foregoing, BioSearch agrees that it shall treat
all Information provided by IntraBiotics pursuant to this Section 2.2(c) as
Confidential Information subject to the terms of Article 9.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5.
<PAGE>
(d) REGULATORY MATTERS.
(i) COMPLIANCE WITH REGULATIONS. IntraBiotics shall
conduct its efforts hereunder in compliance with all applicable regulatory
requirements.
(ii) DRUG APPROVAL APPLICATIONS. IntraBiotics
shall be responsible for preparing and filing Drug Approval Applications and
seeking Regulatory Approvals for Licensed Products in the Field and in the
Territory, including preparing all reports necessary for filing a Drug
Approval Application for Licensed Products in the Territory. IntraBiotics
shall be responsible for prosecuting all such Drug Approval Applications, and
BioSearch and, subject to Section 2.6, any Other Licensees shall have the
right of cross reference with respect thereto. In connection with all Drug
Approval Applications being prosecuted by IntraBiotics hereunder,
IntraBiotics agrees to provide BioSearch with a copy of all filings to
regulatory agencies that it makes hereunder. IntraBiotics shall provide to
BioSearch reports regarding the status of each pending and proposed Drug
Approval Application in the Territory within thirty (30) days after each June
30th and December 31st during the term of this Agreement. In the event that
any regulatory agency threatens or initiates any action to remove a Licensed
Product from the market in the Territory, IntraBiotics shall promptly notify
BioSearch of such communication.
2.3 DEVELOPMENT OBLIGATIONS OF BIOSEARCH.
(a) ACCESS TO BIOSEARCH AND OTHER LICENSEE INFORMATION.
(i) BioSearch has, prior to the Effective Date,
provided IntraBiotics a copy of the Original IND. BioSearch will comply with all
steps necessary to allow IntraBiotics to use the information contained in the
Original IND to file another IND for Licensed Products, including, if necessary,
[*] to the Original IND to IntraBiotics, provided that in the event [*] any
necessary rights of reference or access to the Original IND in connection with
BioSearch's development of the Excluded Formulations within the Territory.
(ii) BioSearch will, as soon as possible after the
Effective Date, provide IntraBiotics copies of all regulatory filings and the
results of all clinical and non-clinical testing of Licensed Products under the
control of or performed by BioSearch or any Other Licensees prior to the
Effective Date, to the extent that BioSearch is not restricted from providing
any such information that is owned or Controlled by such Other Licensees and to
the extent that such filings or information has not already been provided to
IntraBiotics.
(iii) During the term of this Agreement, BioSearch
will provide to IntraBiotics all Information in its possession regarding
Licensed Products in the Field (including Information it receives from any Other
Licensees without restrictions on disclosure of such Information), as such
Information becomes available, for use in IntraBiotics' Development efforts.
IntraBiotics shall be permitted to use and reference all BioSearch and any Other
Licensee reports provided to IntraBiotics pursuant to this Agreement in any Drug
Approval Application for Licensed Products in the Territory. Notwithstanding the
foregoing, IntraBiotics
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6.
<PAGE>
agrees that it shall treat all Information provided by BioSearch or any Other
Licensee pursuant to this Section 2.3 as Confidential Information, subject to
the terms of Article 9.
(b) TECHNICAL ASSISTANCE. BioSearch shall provide reasonable
technical assistance to IntraBiotics for Development of Licensed Products.
(c) SUPPLY OF CLINICAL MATERIALS. BioSearch shall use [*]
efforts to supply, or cause to be supplied amounts of Bulk Licensed Compound
sufficient for IntraBiotics to obtain Regulatory Approval of Licensed Products
in the Field and in the Territory as set forth in Article 7.
(d) SCALE UP OF MANUFACTURING PROCESS. BioSearch shall use
diligent efforts to scale up its manufacturing process for Bulk Licensed
Compound, at BioSearch's sole expense.
2.4 REPORTS; PROJECT LEADERS. Each Party shall provide to the other
Party reports summarizing such Party's development (including scale-up of the
manufacturing process for Bulk Licensed Compound performed pursuant to Sections
2.3 and 7.3) and commercialization of products containing the Licensed Compound.
Such reports will be provided by each Party within [*] after the end of each
calendar quarter and shall summarize such Party's efforts during the previous
quarter. Additionally, each Party shall, within [*] after the Effective Date,
appoint a project leader to facilitate transfer of information regarding the
Licensed Compound and Licensed Products to the other Party. The project leaders
shall meet on a quarterly basis, and each Party may send one or more additional
representatives to each such meeting. Each Party shall bear all costs incurred
by its project leader and other representative(s) with respect to their
attendance of such meetings. The site of the project leader meetings shall
alternate between IntraBiotics' facility in Mountain View, California and
BioSearch's facility in Gerenzano, Italy.
2.5 ADVERSE EVENT REPORTING. Each Party agrees to report to the other,
immediately upon receipt of the information by such Party, any serious adverse
event which is reported to occur in connection with the use of a Licensed
Product or the Licensed Compound. Each Party agrees to provide to the other
copies of all reports that are made to regulatory authorities concerning
material safety, efficacy or quality matters with respect to any Licensed
Product or the Licensed Compound. Prior to the first Regulatory Approval for a
product containing a Licensed Compound anywhere in the world, the Parties shall
agree on a formal adverse event reporting protocol to conform with the
respective regulatory obligations of IntraBiotics, BioSearch, and any Other
Licensees throughout the world.
2.6 OTHER LICENSEES.
(a) BioSearch agrees to [*] from any Other Licensees
permission for BioSearch to provide to IntraBiotics any information that, if
such information were owned or Controlled by BioSearch, would be Information
that BioSearch must provide to IntraBiotics pursuant to Section 2.3, and shall
endeavor to [*] as provided in Section 5.7(c). BioSearch will require the Other
Licensees to provide to IntraBiotics, either directly or through BioSearch, all
information owned or
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7.
<PAGE>
Controlled by such Other Licensee that, if such information were owned or
Controlled by BioSearch, would be Information that BioSearch must provided to
IntraBiotics pursuant to Section 2.5. BioSearch may provide any Information it
receives from IntraBiotics pursuant to Section 2.5 to the Other Licensees, if
any, and may grant to Other Licensees a sublicense under the license granted to
BioSearch in Section 5.4 with respect to Information BioSearch receives from
IntraBiotics pursuant to Section 2.5.
(b) BioSearch shall not provide any Information it receives
from IntraBiotics pursuant to this Article 2 (other than Information relating to
adverse events provided by IntraBiotics pursuant to Section 2.5) to any Other
Licensee unless and until (i) such Other Licensee permits BioSearch to provide
to IntraBiotics any and all information owned or Controlled by such Other
Licensee that, if such information were owned or Controlled by BioSearch, would
be Information that BioSearch must provide to IntraBiotics pursuant to Section
2.3, and (ii) such Other Licensee has paid to IntraBiotics an amount equal to
[*]. BioSearch may not grant to any Other Licensee a sublicense under the
license granted to BioSearch in Section 5.4 with respect to Information
disclosed to it by IntraBiotics pursuant to this Article 2 (other than
Information relating to adverse events provided by IntraBiotics pursuant to
Section 2.5) to any Other Licensee that does not allow BioSearch to provide to
IntraBiotics information of such Other Licensee as provided in this Section 2.6,
and any such Other Licensee shall not have a right of reference as provided in
2.2.
ARTICLE 3
EXCLUSIVITY
3.1 DEVELOPMENT OF LICENSED COMPOUNDS BY BIOSEARCH. The Parties
recognize that the Licensed Compound may be useful both within and outside of
the Field. In this regard, the Parties agree as follows:
(a) BioSearch, its Affiliates and other sublicensees shall not
develop or commercialize the Licensed Compound in any formulation other than an
Excluded Formulation in the Territory for use in the Field during the term of
this Agreement.
(b) BioSearch, its Affiliates and other sublicensees may
develop and commercialize the Licensed Compound in any formulation for any use
outside of the Territory, and in any Excluded Formulation for any use in the
Field and in the Territory during the term of this Agreement.
ARTICLE 4
LICENSING FEE; MILESTONE PAYMENTS
4.1 LICENSING FEE. As partial payment for the patent licenses
granted by BioSearch pursuant to Article 5 of this Agreement, IntraBiotics
shall (i) pay to BioSearch, within three (3) days after the Effective Date,
one million dollars ($1,000,000) and (ii) issue to BioSearch, within ten (10)
days after the Effective Date,
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8.
<PAGE>
250,000 shares of IntraBiotics Series F Preferred Stock pursuant to a stock
purchase agreement substantially in the form provided by IntraBiotics to
BioSearch prior to the Effective Date.
4.2 MILESTONE PAYMENTS. IntraBiotics or its sublicensee shall make
the following milestone payments to BioSearch within sixty (60) business days
after the first achievement of each of the following milestones with respect
to Licensed Products in the Field and in the Territory. Any grant by
IntraBiotics of a sublicense to a Third Party as permitted in Section 5.5
shall not affect BioSearch's right to receive milestone payments as provided
in this Section 4.2. IntraBiotics shall remain responsible for the payments
due to BioSearch pursuant to this Section 4.2 in the event it grants any such
sublicense. The following amounts are nonrefundable and noncreditable.
<TABLE>
<CAPTION>
MILESTONE PAYMENT
------------------------------------------------------------------ ------------------------------
<S> <C>
(i) Commencement of the Phase II Clinical Trials in the United States $[ *]
(ii) Commencement of the Phase III Clinical Trials in the United $[ *]
States
(iii) Filing of the first NDA for a Licensed Product in the United $[ *]
States
(iv) The first Regulatory Approval in the United States of a Licensed $[ *]
Product in [*] formulation
(v) The first Regulatory Approval in the United States of a Licensed $[ *]
Product in a formulation [*]
(vii) The first Regulatory Approval of a Licensed Product in Canada $[ *]
</TABLE>
* If IntraBiotics provides to BioSearch the [*] conducted in the
United States prior to [*], the amount due to BioSearch for milestone (iv) shall
be reduced to [*]. IntraBiotics shall not be responsible for any milestone
payment set forth above if IntraBiotics gives notice of termination of this
Agreement under Sections 11.2 or 11.3 prior to the date the milestone is due.
ARTICLE 5
LICENSES
5.1 PATENT LICENSES TO INTRABIOTICS. BioSearch hereby grants to
IntraBiotics an exclusive (even as to BioSearch) license under the BioSearch
Patents to make, have made, use, import, offer, sell, offer for sale and have
sold Licensed Products in the Field and in the Territory. Such license shall not
include the right to make or have made Bulk Licensed Compound unless
IntraBiotics elects to manufacture Bulk Licensed Compound as provided in
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
9.
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Section 7.2. Such license shall be subject to the terms and conditions of this
Agreement, including payment of the amounts set forth in Articles 4, 7 and 8
hereof.
5.2 PATENT LICENSES TO BIOSEARCH. IntraBiotics hereby grants to
BioSearch an exclusive (even as to IntraBiotics), paid-up license under
IntraBiotics Patents to make, have made, use, import, offer, sell, offer for
sale and have sold (i) inside the Territory, products containing the Licensed
Compound (including without limitation Licensed Products) for any and all uses
outside of the Field, (ii) inside the Territory, products containing the
Licensed Compound in any Excluded Formulation for any and all uses within the
Field, and (iii) outside of the Territory, products containing the Licensed
Compound (including without limitation Licensed Products) for any and all uses.
5.3 KNOW-HOW LICENSE TO INTRABIOTICS. Subject to Article 9, BioSearch
grants to IntraBiotics a paid-up, nonexclusive license to use BioSearch Know-how
within the Territory for any purpose consistent with the rights and obligations
contained in this Agreement.
5.4 KNOW-HOW LICENSE TO BIOSEARCH. Subject to Article 9, IntraBiotics
grants to BioSearch a paid-up, nonexclusive worldwide license to use
IntraBiotics Know-how for any purpose consistent with the rights and obligations
contained in this Agreement.
5.5 SUBLICENSING. IntraBiotics may grant sublicenses under this Article
5 without the consent of BioSearch to its Affiliates or to Third Parties as
necessary to conduct Development and Commercialization of Licensed Products
within the Field and within the Territory. IntraBiotics will provide to
BioSearch reasonable notice in the event IntraBiotics intends to grant a
sublicense pursuant to this Section 5.5. BioSearch may grant sublicenses under
this Article 5 without the consent of IntraBiotics to its Affiliates within the
scope of licenses granted under IntraBiotics Patents or IntraBiotics Know-how,
respectively. Subject to Section 5.7, BioSearch may grant sublicenses to Other
Licensees within the scope of license granted under Section 5.4 solely to the
extent necessary to allow Other Licensees to use IntraBiotics' Information as
permitted under Article 2.
5.6 RIGHT OF NEGOTIATION FOR [*] FORMULATIONS OF THE LICENSED COMPOUND.
If BioSearch wishes to offer to any Third Party the opportunity to participate
in the research, development and commercialization of products including any [*]
formulation of the Licensed Compound for any indication in the Field and in the
Territory, BioSearch shall, prior to the time it first makes any such offer to a
Third Party, notify IntraBiotics of its intention to enter into such
discussions. If IntraBiotics requests within the [*] period following its
receipt of such notice to discuss with BioSearch the terms upon which
IntraBiotics may research, develop and commercialize in the Territory the
Licensed Compound in a [*] formulation, (either solely or jointly with
BioSearch), then the Parties shall meet and negotiate in good faith the
potential terms of an agreement on such terms. If the Parties do not enter into
such an agreement within [*] after IntraBiotics so requests to negotiate such
opportunity with BioSearch, then BioSearch shall thereafter be free to offer
such opportunity to a Third Party with respect to such [*] formulation of the
Licensed Compound; provided, however, that BioSearch must provide to
IntraBiotics any information that BioSearch provides to any Third Party that
materially differs
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
10.
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from the information that BioSearch provided to IntraBiotics with respect
thereto, in which case IntraBiotics may again exercise its right of negotiation
under this Section 5.6. However, BioSearch shall not be obligated to negotiate
or enter into any agreement, either with a Third Party or with IntraBiotics,
with respect to the research, development and commercialization of any such
products.
5.7 THIRD PARTY TECHNOLOGY.
(a) The licenses granted under Article 5, to the extent they
include sublicenses of Third Party technology, shall be subject to the terms and
conditions of the license agreement pursuant to which such sublicense is
granted. BioSearch represents to IntraBiotics that no Third Party technology is
included in the BioSearch Patents or in the BioSearch Know-how as of the
Effective Date.
(b) Any royalties payable to Third Parties in connection with
the sale of Licensed Products in the Territory shall be allocated as provided in
Section 8.2.
(c) BioSearch will endeavor to assist IntraBiotics in
obtaining access to, and licenses under, technology relating to Licensed
Products that is owned or Controlled by any Other Licensee which is developing
or commercializing products containing the Licensed Compound (including without
limitation Licensed Products) outside of the Territory, or products containing
the Licensed Compound (including without limitation Licensed Products) within
the Territory, in each case solely to the extent such technology is necessary or
useful for the Development or Commercialization of Licensed Products in the
Field.
ARTICLE 6
COMMERCIALIZATION
6.1 GENERAL. The Commercialization of Licensed Products in the Field
and in the Territory shall be conducted independently by IntraBiotics and its
Affiliates.
6.2 INTRABIOTICS EFFORTS. IntraBiotics will use [*] to promote, sell
and distribute the Licensed Products in the Territory after it obtains
Regulatory Approval therefor, consistent with accepted business practices.
6.3 FORMULATION, PACKAGING AND LABELING. IntraBiotics will be
responsible for formulating Bulk Licensed Compound into final dosage form and
packaging the Licensed Product for sale under this Agreement, including, without
limitation, designing and producing all packaging materials and product inserts,
all in forms consistent with the requirements of the regulatory authorities in
the Territory.
6.4 EXPENSES. All expenses incurred by IntraBiotics in connection
with its obligations under this Article 6 will be borne solely by
IntraBiotics. IntraBiotics will be responsible for appointing its own
employees, agents and representatives, who will be compensated by
IntraBiotics.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
11.
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6.5 RESTRICTIONS ON DISTRIBUTORS AND DEALERS. BioSearch shall not, and
shall also insure that any of its distributors or dealers (including its
Affiliates and non-Affiliates) to whom BioSearch sells products containing the
Licensed Compound (including without limitation Licensed Products) for resale
shall not, sell the Licensed Product for use in the Field to any customer
located in the Territory.
6.6 PRICING. IntraBiotics shall determine, in its sole discretion, the
pricing, discounting policy and other commercial terms relating to Licensed
Products in the Field and in the Territory.
ARTICLE 7
MANUFACTURE AND SUPPLY; TRANSFER PRICE AND SUPPLY PRICE
7.1 MANUFACTURE AND SUPPLY OF BULK LICENSED COMPOUND BY BIOSEARCH.
Subject to the terms and conditions of this Article 7, BioSearch will
manufacture, or arrange for manufacture of, IntraBiotics' requirements of
Bulk Licensed Compounds for Development and Commercialization of Licensed
Products in the Field and in the Territory (unless IntraBiotics elects also
to manufacture Bulk Licensed Compound as permitted under this Article 7),
subject to the payment of a Transfer Price for preclinical and clinical
supply pursuant to Section 7.9 and a Supply Price for commercial supply as
provided in Section 8.2. IntraBiotics, at its sole expense, will be
responsible for having the Bulk Licensed Compound that is manufactured by
BioSearch pursuant to this Article 7 processed into the final form of
Licensed Product for commercial sale in the Field.
7.2 MANUFACTURE BY INTRABIOTICS. Although the Parties intend that
BioSearch shall supply IntraBiotics' requirements of Bulk Licensed Compound,
BioSearch recognizes that IntraBiotics may desire to establish a second
manufacturing capability for Bulk Licensed Compound, at IntraBiotics' own
cost, as protection against possible disruptions to supply. IntraBiotics may
elect to perform all of the manufacture of its forecasted requirements of
Bulk Licensed Compound either if BioSearch is unable or unwilling to meet its
supply obligations as outlined in this Article 7, if BioSearch ceases
development and scale-up of manufacturing of the Bulk Licensed Compound, or
as set forth in Section 8.2(c). BioSearch shall provide prompt notice to
IntraBiotics either if BioSearch anticipates that it will be unable to meet
IntraBiotics' forecasted or actual requirements for Bulk Licensed Compound,
or if BioSearch intends to cease development and scale-up of manufacturing of
the Bulk Licensed Compound. If IntraBiotics manufactures Bulk Licensed
Compound pursuant to this Section 7.2, then IntraBiotics shall pay to
BioSearch a royalty equal to the average Royalty (as defined in Section 8.2)
paid to BioSearch on Net Sales during the twelve (12) months preceding the
commencement of IntraBiotics' manufacture of the Bulk Licensed Compound [*]
pursuant to Section 8.2. If IntraBiotics elects to manufacture Bulk Licensed
Compound, then BioSearch shall be relieved of its obligation to supply Bulk
Licensed Compound, although the Parties may then separately agree that
BioSearch may continue to supply a portion of IntraBiotics' requirements of
Bulk Licensed Compound. Upon IntraBiotics' request, BioSearch shall, and
shall cause its manufacturing contractors to, transfer to IntraBiotics or its
designee, and fully enable IntraBiotics or its designee with the then most
current version of
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all biological materials, know-how, and expertise necessary to manufacture
the Bulk Licensed Compound, including all production and quality control
specifications. BioSearch shall periodically update such materials.
IntraBiotics may use such materials to manufacture Bulk Licensed Compounds
only as provided in this Agreement. (In regard to the foregoing, the Parties
agree to cooperate to obtain all necessary assurances and cooperation from
any of BioSearch's Third Party contract manufacturers.) If IntraBiotics
elects to manufacture Bulk Licensed Compounds, BioSearch shall promptly
provide to IntraBiotics all process and manufacturing technology, material
and data and provide access to regulatory filings sufficient to enable
IntraBiotics to produce its requirements of such Bulk Licensed Compound. In
addition, BioSearch shall provide a right of reference and access to
appropriate regulatory filings for the manufacture of such Bulk Licensed
Compound to IntraBiotics.
7.3 PROCESS DEVELOPMENT, MANUFACTURING APPROVALS. BioSearch will use
[*] efforts to develop a process for the manufacture of Bulk Licensed Compounds
according to the specifications therefor and to scale up that process to a scale
sufficient to manufacture and supply IntraBiotics' anticipated requirements for
clinical and commercial supply of Licensed Products. BioSearch will use [*]
efforts to make necessary filings to obtain, or to cause a Third Party
manufacturer of Bulk Licensed Compounds to make necessary filings to obtain,
Regulatory Approval for the manufacture of Bulk Licensed Compounds as part of
the approval of a Drug Approval Application for each Licensed Product in the
Field and in the Territory.
7.4 SPECIFICATIONS. The current specifications for Bulk Licensed
Compound are attached to this Agreement in Exhibit 7.4. Either Party may at any
time during the term of this Agreement propose to the other Party changes to the
specifications for Bulk Licensed Compound. The Parties may during the term of
this Agreement modify the specifications for Bulk Licensed Compound if
regulatory authorities within the Territory recommend or require changes
thereto, or if one Party submits a proposal for changing such specifications to
the other Party and the other Party agrees to such changes. Either Party shall
give prior notice to the other of any changes in the specifications for Bulk
Licensed Compound that are recommended or required by the regulatory authorities
within the Territory. Any material changes to the specifications for Bulk
Licensed Compound may not be made without prior written consent of both Parties.
Notwithstanding the previous sentence, both Parties shall use their [*] efforts
to implement changes in the specifications which are required by the regulatory
authorities within the Territory unless both Parties agree to the contrary in
writing. At the request of IntraBiotics, BioSearch shall arrange for
IntraBiotics' designated representatives to inspect and visit from time to time
the facilities at which Bulk Licensed Compound is manufactured, stored or tested
for the purpose of determining that the manufacture of Bulk Licensed Compound
complies with the requirements of this Agreement. Such inspections shall occur
during regular business hours upon reasonable notice.
7.5 FORECASTING. IntraBiotics will provide BioSearch with rolling
forecasts of its expected requirements of Bulk Licensed Compound over the [*]
following the Effective Date on a [*] basis. Such forecasts shall set forth (i)
IntraBiotics' actual requirements for Bulk Licensed Compound for the following
[*], which portion of the forecast shall be binding and serve as an order for
Bulk Licensed Compound, and (ii) IntraBiotics' best estimate of its requirements
for
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the following [*] quarters. In no event shall BioSearch be required to deliver
more Bulk Licensed Compound in any given quarter than was estimated for such
quarter in the last [*] applicable forecasts. In addition, except with the
written consent of BioSearch, IntraBiotics may not increase its forecast of any
material requirements in a particular calendar quarter by more than [* ] of its
forecast for such quarter as set forth in the immediately preceding forecast for
such quarter. However, BioSearch shall use [*] efforts to supply any additional
quantities requested by IntraBiotics in excess of the amounts previously
forecasted by IntraBiotics, it being recognized that substantial increases in
production levels may require significant advance notice.
7.6 SHIPMENT OF BULK LICENSED COMPOUND. BioSearch shall ship Bulk
Licensed Compound it manufactures for IntraBiotics pursuant to this Article 7 to
location(s) designated by IntraBiotics by such method and carrier as
IntraBiotics shall request. Unless otherwise agreed by the Parties, all
shipments of Bulk Licensed Compound by BioSearch shall be [*] to a mutually
agreed delivery site within the Territory. BioSearch shall use [*] efforts to
deliver Bulk Licensed Compound on the dates specified by IntraBiotics. BioSearch
will bear all transportation expenses for the delivery of material to
IntraBiotics, and shall bear all risk of loss of any material following shipment
from the place of manufacture until delivered to IntraBiotics.
7.7 INVOICES. BioSearch will invoice IntraBiotics for each batch of
material supplied to IntraBiotics under this Article 7 and accepted by
IntraBiotics as provided in Section 7.8. IntraBiotics shall pay such invoices
within [*] after its receipt thereof.
7.8 ACCEPTANCE. Upon receipt of a shipment of Bulk Licensed Compound
from BioSearch, IntraBiotics may determine whether such shipment meets the
specifications. IntraBiotics shall notify BioSearch in writing promptly if such
Bulk Licensed Compound manufactured by BioSearch fails to meet the
specifications therefor. If BioSearch has not received such written notice
within [*] after such material has been received by IntraBiotics, then such
shall be deemed to have met the specifications. Upon receipt of any such written
notice of non-conformance, BioSearch shall either acknowledge that the subject
Bulk Licensed Compound does not meet the specifications or resample the lot or
batch in question and have said samples tested by an independent laboratory
acceptable to IntraBiotics. If such independent laboratory determines that such
samples fail to meet the specifications, then BioSearch shall at IntraBiotics
option either replace the non-conforming Bulk Licensed Compound at no additional
cost as soon as reasonably possible or refund IntraBiotics' payments for such
non-conforming materials.
7.9 TRANSFER PRICE FOR CLINICAL SUPPLY. Prior to receipt of Regulatory
Approval of the Licensed Product in the Territory, IntraBiotics will purchase
clinical supplies of Bulk Licensed Compound at a price (the "Transfer Price")
equal to [*] for such Bulk Licensed Compound.
7.10 MANUFACTURING REPORTS. The reports that BioSearch shall provide to
IntraBiotics pursuant to Section 2.4 shall include a summary of BioSearch's
efforts to scale up the manufacturing process for Bulk Licensed Compound
pursuant to Section 2.3.
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7.11 RETENTION OF BACK-UP SUPPLY OF BULK LICENSED COMPOUND. To help
protect against interruptions in supply of Bulk Licensed Compounds pursuant to
this Article 7, BioSearch shall retain under appropriate conditions a [*] supply
of Bulk Licensed Compound at all times after the parties commence production of
Licensed Products for commercial launch. IntraBiotics shall notify BioSearch at
least [*] prior to commencement of commercial scale manufacture of Bulk Licensed
Compound of the amount of Bulk Licensed Compound that constitutes a [*] supply
for the purpose of this Section 7.11 (the "Retained Amount"). IntraBiotics may
re-establish the Retained Amount from time to time as necessary or desirable in
view of its good faith estimate of its requirements for Bulk Licensed Compounds
during the remainder of the term of this Agreement.
7.12 DISCUSSIONS REGARDING LONG TERM SUPPLY CAPACITY. The parties
acknowledge that IntraBiotics will gain knowledge regarding the potential market
for Licensed Products in the Field and in the Territory as the development of
Licensed Products progresses. Accordingly, it is possible that IntraBiotics'
full commercial requirements for Bulk Licensed Compounds either upon commercial
launch of Licensed Products or thereafter may exceed the capacity at BioSearch's
manufacturing facility therefor. If at any time IntraBiotics' good faith
estimate of the market for Licensed Products indicates that BioSearch's current
manufacturing facility may not have sufficient capacity for manufacturing
IntraBiotics' requirements for Bulk Licensed Compound over the term of this
Agreement, then IntraBiotics and BioSearch shall discuss in good faith
acceptable mechanisms for any such actual or potential inability of BioSearch to
supply IntraBiotics' requirements, which may include without limitation for the
establishment of a second manufacturing site by BioSearch. If the parties do not
agree on such mechanisms for assuring sufficient supply of Bulk Licensed
Compound and appropriate amendments to this Agreement implementing such
mechanisms, then IntraBiotics may elect to establish a second manufacturing site
as provided in Section 7.2 or to pursue other remedies available to it under law
or in equity or under this Agreement.
ARTICLE 8
SUPPLY PRICE PAYMENTS; PAYMENT PROCEDURES; RECORDS
8.1 SUPPLY OBLIGATION; DURATION. During the term of this Agreement,
IntraBiotics shall purchase all of its requirements for Bulk Licensed Compound
from BioSearch, subject to Section 7.2. The price for commercial supply to
IntraBiotics of all Bulk Licensed Compound manufactured by BioSearch shall be as
provided in Section 8.2.
8.2 SUPPLY PRICE.
(a) IntraBiotics will pay to BioSearch a price for commercial
supply of Bulk Licensed Compounds by BioSearch (a "Supply Price") that will have
two components, a transfer price (the "Transfer Price") and a royalty payment
(the "Royalty"). The Transfer Price will be equal to the greater of (i) [*], or
(ii) [*] of Bulk Licensed Compound. Subject to Section 8.2(b), the Royalty will
be equal to [*] subject to the following adjustment: if the Transfer Price
exceeds [*] of Licensed Products, then the Royalty will be reduced by [*] of the
amount by
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which the Transfer Price exceeds [*]. Any royalties due to Third Parties with
respect to the manufacture, use, sale, offer for sale or import of Licensed
Products in the Field and in the Territory shall be borne solely by BioSearch.
(b) If a generic form of a Licensed Product is introduced by a
Third Party in any country in the Territory in which the manufacture, use, sale,
offer for sale and import of a Licensed Product by a Third Party would not
infringe a Valid Claim of a BioSearch Patent, then the Royalty portion of the
Supply Price due to BioSearch pursuant to Section 8.2(a) shall be reduced to [*]
in such country.
(c) In the event that the sum of the Supply Price payments due
to BioSearch pursuant to Sections 8.2(a) and (b), and the costs incurred by
IntraBiotics or its sublicensee in manufacturing Licensed Product from Bulk
Licensed Compound supplied by BioSearch and performing labeling and packaging of
such Licensed Products (such sum referenced herein as "Total Costs") is greater
than [*] for more than [*] consecutive calendar quarters, then the Parties
shall, promptly after request by IntraBiotics, meet and discuss in good faith an
appropriate mechanism to reduce the Total Costs. If the Parties do not agree
upon such an appropriate mechanism within [*] after IntraBiotics requests a
meeting pursuant to this Section 8.2(c), then IntraBiotics may elect to
manufacture or have manufactured by a Third Party its requirements of Bulk
Licensed Compound and thereafter pay to BioSearch a royalty equal to the average
Royalty portion of the Supply Price due to BioSearch pursuant to Sections 8.2(a)
and (b) during the [*] immediately preceding IntraBiotics' request for a meeting
pursuant to this Section 8.2(c), notwithstanding Sections 7.2, 8.2(a) or 8.2(b).
8.3 SALES BY SUBLICENSEES. If IntraBiotics grants a sublicense under
the rights granted to it pursuant to Section 5, then such sublicense shall
include an obligation for the sublicensee to account for and report its Net
Sales of such Licensed Products on the same basis as if such sales were Net
Sales by IntraBiotics, and IntraBiotics shall pay the Supply Price to BioSearch
on such sales as if the Net Sales of the sublicensee were Net Sales of
IntraBiotics.
8.4 TRANSFER PRICE PAYMENTS, ROYALTY PAYMENTS AND SUBLICENSE REVENUE
PAYMENTS.
(a) BioSearch shall invoice IntraBiotics for Bulk Licensed
Compound supplied at an estimated transfer price equal to [*] of Bulk Licensed
Compound. IntraBiotics shall pay for such material at such estimated transfer
price within [*] of the invoice date. IntraBiotics will deliver a report showing
in detail its calculation of the Net Sales of any Licensed Products during a
given calendar quarter to BioSearch within [*] following the end of each
calendar quarter and [*] following the end of each calendar year for which
Transfer Price payments are due from IntraBiotics. Any differences between the
total estimated transfer price payments made and the actual Transfer Price
payments due to BioSearch pursuant to Section 8.2 for any quarter shall be
reconciled within [*] following the delivery of such quarterly report.
(b) IntraBiotics will deliver a report showing in detail its
calculation of the Net Sales of any Licensed Products during a given calendar
quarter to BioSearch within [*]
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following the end of each calendar quarter and [*] following the end of each
calendar year for which Royalty or other royalty payments are due from
IntraBiotics. IntraBiotics shall pay the Royalty or other royalty due on Net
Sales for the calendar quarter covered by a given report under this Section
8.4(b) within [*] after IntraBiotics provides such report to BioSearch.
(c) IntraBiotics will deliver a report showing in detail its
calculation of the Net Sales of any Licensed Products received by IntraBiotics
from its sublicensees during a given calendar quarter to BioSearch within [*]
following the end of each calendar quarter and [*] following the end of each
calendar year for which payments are due from IntraBiotics to BioSearch thereon.
IntraBiotics shall pay the amounts due to BioSearch on Net Sales by
IntraBiotics' sublicensees pursuant to Section 8.2 and 8.3 for a given calendar
quarter covered by such reports within [*] after IntraBiotics provides such
report to BioSearch.
8.5 EXCHANGE RATE: MANNER AND PLACE OF PAYMENT. All amounts paid to
BioSearch hereunder shall be paid in United States currency. Net Sales shall be
accounted for on a monthly basis in U.S. Dollars for each month on the last
banking day of such month. All payments due to BioSearch under this Agreement
shall be made by wire transfer at a bank and to an account designated by
BioSearch, unless otherwise specified by BioSearch.
8.6 LATE PAYMENTS. In the event that any payment due hereunder is not
made when due, the payment shall accrue interest from the date due at the rate
of [* ] per month; provided that in no event shall such rate exceed the maximum
legal annual interest rate. The payment of such interest shall not limit any
Party from exercising any other rights it may have as a consequence of the
lateness of the payment.
8.7 RECORD KEEPING. During the term of this Agreement, IntraBiotics
shall keep full and accurate books and records setting forth, for the
Licensed Product on which Supply Price payments are due, including gross
sales, all deductions allowed in arriving at Net Sales and any other
information necessary and in sufficient detail to allow the calculation of
Supply Price payments to be paid by IntraBiotics. During the term of this
Agreement and for a period of three (3) years thereafter, IntraBiotics shall
permit BioSearch, at BioSearch's expense, by independent certified public
accountants employed by BioSearch and reasonably acceptable to IntraBiotics,
to examine relevant books and records at any reasonable time, not more often
than once each calendar year, within five (5) years of the payment of such
Supply Price. If it is determined that there was an underpayment of Supply
Price due BioSearch of [* ] or more, without prejudice to any other rights
BioSearch may have, IntraBiotics shall promptly pay to BioSearch the balance
of the amounts due and shall also reimburse BioSearch for the cost of such
verification examination.
8.8 TAX AND WITHHOLDINGS. Any withholding taxes levied by tax
authorities in the Territory on the payments hereunder shall be borne by
BioSearch and deducted by IntraBiotics from the sums otherwise payable by it
hereunder for payment to the proper tax authorities on behalf of BioSearch. In
such event, IntraBiotics shall deliver to BioSearch evidence of the payment of
such taxes. IntraBiotics agrees to cooperate with BioSearch in the event
BioSearch claims exemption from such withholding or seeks deductions under any
double taxation or other similar treaty or agreement from time to time in force.
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ARTICLE 9
CONFIDENTIALITY
9.1 CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, for the term of this Agreement and for five (5) years thereafter, the
receiving Party shall keep confidential and shall not publish or otherwise
disclose or use for any purpose other than as provided for in this Agreement any
Information and other information and materials furnished to it by the other
Party pursuant to this Agreement, or any provisions of this Agreement that are
the subject of an effective order of the Securities Exchange Commission granting
confidential treatment pursuant to the Securities Act of 1934, as amended
(collectively, "Confidential Information"), except to the extent that it can be
established by the receiving Party that such Confidential Information:
(a) was already known to the receiving Party, other than under
an obligation of confidentiality, at the time of disclosure by the other Party;
(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 disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others.
9.2 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential
Information hereunder to the extent such disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation,
complying with applicable governmental regulations or conducting preclinical or
clinical trials, provided that if a Party is required by law or regulation to
make any such disclosure of the other Party's Confidential Information it will,
except where impracticable for necessary disclosures (for example in the event
of medical emergency), give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its [*] to secure confidential treatment of such
Confidential Information required to be disclosed. In addition, each Party shall
be entitled to disclose, under a binder of confidentiality containing provisions
as protective as those of this Article 9, Confidential Information to any Third
Party for the purpose of carrying out activities authorized under this
Agreement, including disclosures to authorized sublicensees, and subject to
Sections 2.5 and 2.6 disclosures by BioSearch for purposes of the development
and commercialization of products other than Licensed Products anywhere in the
world outside of the Field, and of Licensed Products either outside of the Field
and within the Territory, or within the Field and outside of the Territory.
Nothing in this Article 9 shall restrict any Party from using for any purpose
any Information developed by it during the course of the
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collaboration hereunder. BioSearch acknowledges that if IntraBiotics files a
registration statement covering the sale of its securities in the United States,
it will be required to file a copy of this Agreement with its public disclosure
statement. IntraBiotics agrees to seek confidential treatment of at least the
economic terms of this Agreement with respect to any such filing.
9.3 SURVIVAL. This Article 9 shall survive the termination or
expiration of this Agreement for a period of five (5) years.
9.4 TERMINATION OF PRIOR AGREEMENT. This Agreement supersedes the
Confidentiality Agreement between BioSearch and IntraBiotics dated May 23, 1997.
All Information exchanged between the Parties under that Agreement shall be
deemed Confidential Information and shall be subject to the terms of this
Article 9, and shall be included within the definitions of BioSearch Know-how
and IntraBiotics Know-how.
9.5 PUBLICATIONS. Except as required by law, each Party agrees that it
shall not publish or present Information relating to the Licensed Compound or to
products containing the Licensed Compound without providing to the other Party
the opportunity for prior review of such publication or presentation. The Party
desiring to publish or present such Information (the "Proposing Party") shall
provide to the other Party the opportunity to review such proposed publication
or presentation (including information to be presented verbally) as early as
reasonably practical, but not later than twenty (20) days prior to the
anticipated date of submission or disclosure to a Third Party. The Party
reviewing such publication or presentation shall respond to the Proposing Party
with comments thereon within ten (10) days of receiving such materials from the
Proposing Party. The Proposing Party agrees, upon written request from the other
Party, not to submit such abstract or manuscript for publication or to make such
presentation until the other Party consents, which agreement shall not be
unreasonably withheld.
ARTICLE 10
OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
10.1 OWNERSHIP. Each Party shall solely own, and it alone shall have
the right to apply for, Patents within and outside of the Territory for any
inventions made solely by that Party's employees or consultants in the course of
performing work under this Agreement. Inventions made jointly by personnel of
BioSearch and IntraBiotics shall be jointly owned by the Parties, subject to the
licenses granted to IntraBiotics pursuant to Article 5.
10.2 DISCLOSURE OF PATENTABLE INVENTIONS. Each Party shall provide to
the other any patent application disclosing an invention relating to Licensed
Products within the Field arising during the term of this Agreement. Such patent
applications disclosing inventions made solely by a Party shall be provided to
the other Party promptly after submission of such application to a governmental
Patent authority, which shall in no event be later than [*] days after the date
the disclosure was submitted. Any such patent applications disclosing inventions
made jointly by the Parties shall be provided by BioSearch to IntraBiotics
reasonably in advance of the intended date for submission of such application to
a governmental Patent authority.
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10.3 PATENT FILINGS.
(a) BIOSEARCH RESPONSIBILITIES. BioSearch shall prepare, file,
prosecute and maintain Patents to cover inventions relating to the discovery,
evaluation, manufacture, use or sale of Licensed Products that are made solely
by BioSearch personnel (all of which shall be included in BioSearch Patents) or
that are made jointly by personnel of BioSearch and IntraBiotics in the course
of the collaboration ("Joint Patents," all of which shall be included in both
the BioSearch Patents and IntraBiotics Patents). BioSearch shall keep
IntraBiotics informed of the status of each BioSearch Patent and Joint Patent
and shall give reasonable consideration to any suggestions or recommendations of
IntraBiotics concerning the preparation, filing, prosecution and maintenance
thereof. The Parties shall cooperate reasonably in the prosecution of all
BioSearch Patents and Joint Patents under this Section 10.3(a) and shall share
all material Information relating thereto promptly after receipt of such
Information. If, during the term of this Agreement, BioSearch intends to allow
any issued BioSearch Patent or Joint Patent to which IntraBiotics has a license
under this Agreement to expire for failure to make maintenance fee payments,
BioSearch shall notify IntraBiotics of such intention at least [*] prior to the
date upon which such issued BioSearch Patent or Joint Patent shall expire, and
IntraBiotics shall thereupon have the right, but not the obligation, to assume
responsibility for the maintenance thereof.
(b) INTRABIOTICS RESPONSIBILITIES. IntraBiotics shall file,
prosecute and maintain Patents to cover inventions relating to the discovery,
evaluation, manufacture, use or sale of Licensed Products that are made solely
by IntraBiotics personnel (all of which shall be included in IntraBiotics
Patents). IntraBiotics shall keep BioSearch informed of the status of each
IntraBiotics Patent and shall give reasonable consideration to any suggestions
or recommendations of BioSearch concerning the preparation, filing, prosecution
and maintenance thereof. The Parties shall cooperate reasonably in the
prosecution of all IntraBiotics Patents under this Section 10.3(b) and shall
share all material Information relating thereto promptly after receipt of such
Information. If, during the term of this Agreement, IntraBiotics intends to
allow any issued IntraBiotics Patent to which BioSearch has a license under this
Agreement to expire for failure to make maintenance fee payments, IntraBiotics
shall notify BioSearch of such intention at least [*] prior to the date upon
which such IntraBiotics Patent shall expire, and BioSearch shall thereupon have
the right, but not the obligation, to assume responsibility for the maintenance
thereof.
10.4 THIRD PARTY PATENT RIGHTS. No Party makes any warranty with
respect to the validity, perfection or dominance of any Patent or other
proprietary right or with respect to the absence of rights in Third Parties
which may be infringed by the manufacture or sale of the Licensed Product. Each
Party agrees to bring to the attention of the other Party any patent or patent
application it discovers, or has discovered, and which relates to the subject
matter of this Agreement.
10.5 ENFORCEMENT RIGHTS.
(a) INFRINGEMENT BY THIRD PARTIES. If any BioSearch Patent or
IntraBiotics Patent is infringed by a Third Party in the Territory in connection
with the manufacture, import,
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use, sale or offer for sale of a product competitive with a Licensed Product
("Competitive Product Infringement"), the Party to this Agreement first
having knowledge of such infringement shall promptly notify the other in
writing. The notice shall set forth the facts of that infringement in
reasonable detail. IntraBiotics shall have the primary right, but not the
obligation, to institute, prosecute or control any action or proceeding with
respect to such infringement of a BioSearch Patent (including Joint Patents)
within the Field and within the Territory, or of an IntraBiotics Patent other
than a Joint Patent anywhere in the world both within and outside of the
Field, by counsel of its own choice. BioSearch shall have the right to
participate in such action and to be represented by counsel of its own
choice. BioSearch shall have the primary right, but not the obligation, to
institute, prosecute, and control any action or proceeding with respect to
such infringement of BioSearch Patents (including Joint Patents) occurring
within the Territory that is outside of the Field, or occurring anywhere else
in the world both within and outside of the Field, by counsel of its own
choice. Solely within the Territory with respect to BioSearch Patents other
than Joint Patents and anywhere in the world with respect to Joint Patents,
IntraBiotics shall have the right to participate in such action brought by
BioSearch pursuant to the foregoing sentence and to be represented by counsel
of its own choice therein. If the Party primarily responsible for bringing
suit under this Section 10.5(a) (the "Responsible Party") fails to bring an
action or proceeding within a period of ninety (90) days after having
knowledge of that infringement, then, solely with respect to infringement
occurring inside the Field and inside the Territory with respect to
infringement of patents other than Joint Patents and anywhere in the world
with respect to infringement of Joint Patents, the other Party shall have the
right to bring and control any such action by counsel of its own choice, and
the Responsible Party shall have the right to participate in such action and
be represented by counsel of its own choice. If a Responsible Party brings
any such action or proceeding hereunder, the other Party agrees to be joined
as a party plaintiff and to give the Responsible Party reasonable assistance
and authority to control, file and prosecute the suit as necessary. The costs
and expenses of the Party bringing suit under this Section (including the
internal costs and expenses specifically attributable to said suit) shall be
reimbursed first out of any damages or other monetary awards recovered in
favor of the Parties. Any remaining damages shall be split fifty percent
(50%) to BioSearch and fifty percent (50%) to IntraBiotics. No settlement
or consent judgment or other voluntary final disposition of a suit under this
Section 10.5(a) may be entered into without the joint consent of BioSearch
and IntraBiotics.
(b) DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS AGAINST
LICENSED PRODUCTS. If a Third Party asserts that a patent or other right owned
by it is infringed by the manufacture, import, use, sale or offer for sale of
any Licensed Product, the Party first obtaining knowledge of such a claim shall
immediately provide the other Party notice of such claim and the related facts
in reasonable detail. Defense of any such claim in the Field and in the
Territory shall be controlled by IntraBiotics; provided that BioSearch shall
have the right to participate in such defense and to be represented in any such
action by counsel of its selection at its sole discretion. IntraBiotics shall
also have the right to control settlement of such claim with respect to a
Licensed Product in the Field and in the Territory; PROVIDED, HOWEVER, that no
settlement shall be entered into without the written consent of BioSearch, which
consent shall not be withheld unreasonably.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(c) ALLOCATION OF EXPENSES INCURRED PURSUANT TO SECTION
10.5(b). The expenses of patent defense, settlement and judgments pursuant to
Section 10.5(b) with respect to the Licensed Products shall be borne solely
by IntraBiotics, except as provided in Section 10.5(d).
(d) SETTLEMENT OF THIRD PARTY CLAIMS FOR INFRINGEMENT;
PAYMENT OF THIRD PARTY ROYALTIES. If a Third Party asserts that a patent or
other right owned by it is infringed by the manufacture, use, sale, offer for
sale or import of any Licensed Product, and as a result of settlement
procedures or litigation under this Section 10.5, IntraBiotics is required to
pay the Third Party a royalty or make any payment of any kind for the right
to sell a Licensed Product in a particular country, such expense shall be
borne by BioSearch as set forth in Section 8.2.
(e) AGREEMENT OF PRIMARILY RESPONSIBLE PARTY. Notwithstanding
the provisions of Section 10.5(a), neither Party shall file and prosecute an
action for infringement of a Patent for which the other Party has the primary
responsibility to file and prosecute such action, and pursuant to which that
other Party having primary responsibility has commenced and is prosecuting at
least one such action for infringement of said Patent, without the agreement of
that other Party, which agreement shall not be unreasonably withheld.
10.6 PATENT MARKING. IntraBiotics shall mark Licensed Products with
appropriate patent numbers or indicia as necessary to maintain the
enforceability of BioSearch Patents, Joint Patents and IntraBiotics Patents.
10.7 TRADEMARKS.
(a) PRODUCT TRADEMARKS. Subject to section 10.7(c),
IntraBiotics shall select, prosecute applications for, register, maintain and
enforce the trademark for Licensed Products in the Territory, at
IntraBiotics' sole expense. All uses of a trademark(s) to identify a Licensed
Product shall comply with all applicable laws and regulations, including
without limitation those laws and regulations particularly applying to the
proper use and designation of trademarks.
(b) INFRINGEMENT. Each Party shall notify the other Party
promptly upon learning of any actual, alleged or threatened infringement of the
trademark for Licensed Product in the Field and in the Territory or of any
unfair trade practices, trade dress imitation, passing off of counterfeit goods
or like offenses. The parties shall confer regarding the appropriate steps
necessary or useful to protect, enforce and maintain such trademark.
IntraBiotics shall make the final decision of whether and how to defend the
trademark.
(c) TRADEMARK LICENSE. If IntraBiotics so requests,
BioSearch shall grant to IntraBiotics a fully paid license to use any
trademarks owned or Controlled by BioSearch under which BioSearch sells and
markets products containing the Licensed Compound (the "BioSearch Marks")
solely in connection with IntraBiotics' Commercialization of Licensed
Products in the Field and in the Territory pursuant to this Agreement.
IntraBiotics may sublicense such rights under the BioSearch Marks only in
connection with a sublicense under the rights granted to IntraBiotics
pursuant to Section 5.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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10.8 TRADE SECRETS. The parties each acknowledge that BioSearch
maintains certain technology useful for the manufacture of the Bulk Licensed
Compound as a trade secret and that accordingly BioSearch has chosen not to seek
patent protection on such technology. BioSearch hereby agrees that it shall use
[*] efforts to maintain such technology as a trade secret (unless and until
BioSearch files a patent application claiming such technology), including
without limitation (i) disclosing such technology to third parties only under an
obligation of confidentiality and non-use with respect thereto comparable in
scope to the confidentiality and non-use obligations set forth in Article 9 with
respect to Confidential Information, (ii) not disclosing any trade secrets in
any public presentation or publication and (iii) employing other mechanisms
typically used in the pharmaceutical industry to protect trade secrets of
similar nature.
ARTICLE 11
TERM AND TERMINATION
11.1 TERM. Except as otherwise provided herein, the term of this
Agreement shall commence on the Effective Date and, unless earlier terminated
as provided in this Agreement, shall expire upon the later of (i) the date
upon which the last to expire of the BioSearch Patents and the IntraBiotics
Patents covering the manufacture, use, sale, offer for sale or import of
Licensed Products in the Field and in the Territory expires, or (ii) ten (10)
years after first commercial sale of a Licensed Product by IntraBiotics in
the Field and in the Territory. After expiration of this Agreement pursuant
to this Section 11.1, IntraBiotics' license under the BioSearch Know-how
shall remain in full force and effect and IntraBiotics may thereafter
continue to sell Licensed Products in the Field and in the Territory on a
royalty-free basis.
11.2 TERMINATION FOR CAUSE. Either Party may terminate this Agreement
upon [*] written notice upon or after the breach of any material provision of
this Agreement by the other Party if the breaching Party has not cured such
breach within the [*] period following written notice of termination by the
other Party.
11.3 OTHER TERMINATION BY INTRABIOTICS. IntraBiotics may terminate this
Agreement, [*], at will at any time prior to the first Regulatory Approval of
Licensed Products in the Territory, effective upon [*] advance written notice to
BioSearch. After IntraBiotics notifies BioSearch of any such termination, no
milestone payments that would otherwise become payable with respect to a
Licensed Product in the country or countries with respect to which IntraBiotics
has so terminated this Agreement shall become payable to BioSearch.
11.4 EFFECT OF TERMINATION.
(a) Upon termination of this Agreement by BioSearch for
IntraBiotics' material breach pursuant to Section 11.2 or by IntraBiotics
pursuant to Section 11.3, all rights and licenses granted to IntraBiotics with
respect to the Licensed Product under Article 5 shall terminate. Furthermore,
upon termination by BioSearch pursuant to Section 11.2 or by IntraBiotics
pursuant to Section 11.3, IntraBiotics shall pay all sums accrued hereunder
which are then due (except as expressly otherwise provided in this Agreement),
and IntraBiotics shall
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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promptly assign to BioSearch all right, title and interest in and to any
regulatory filings in the Territory pertaining to Licensed Products and shall
deliver to BioSearch any IntraBiotics Information necessary to obtain the
Regulatory Approval of Licensed Products in the Territory which has not been
obtained as of the date of termination. If this Agreement is terminated by
BioSearch pursuant to Section 11.2 or by IntraBiotics pursuant to Section 11.3,
IntraBiotics shall return to BioSearch, or at BioSearch' request destroy, all
BioSearch Information and any other Confidential Information relating to the
Licensed Compound or Licensed Products, and any Bulk Licensed Compound supplied
by BioSearch for clinical development or commercial distribution. Additionally,
if BioSearch terminates this Agreement pursuant to Section 11.2 or IntraBiotics
terminates this Agreement pursuant to Section 11.3, the license granted in
Section 5.2 shall automatically become, without any further action by
IntraBiotics, an exclusive, worldwide, royalty-free license under the
IntraBiotics Patents and Joint Patents to make, have made, use, import, offer,
sell, offer for sale and have sold the Licensed Compound and pharmaceutical
products containing the Licensed Compound (including without limitation Licensed
Products) for any and all uses.
(b) Upon termination of this Agreement by IntraBiotics for
BioSearch's material breach pursuant to Section 11.2, all licenses granted to
IntraBiotics shall survive, subject to the payment of a royalty to BioSearch
equal to [*] of Licensed Products by BioSearch, its Affiliates or
sublicensees, [*]. The provisions of Sections 8.4 through 8.8 shall apply
with respect to any such royalties payable under this Section 11.4(b). If
BioSearch is manufacturing Licensed Bulk Compound at the time of any
termination by IntraBiotics of this Agreement for BioSearch's material
breach, BioSearch shall continue to provide for manufacture of Bulk Licensed
Compound to the extent provided prior to notice of such termination until
such time as IntraBiotics is able to secure an equivalent alternative
commercial manufacturing source for the Territory, as requested by
IntraBiotics; PROVIDED, HOWEVER, that IntraBiotics shall pay to BioSearch its
Cost of Goods Sold for such Bulk Licensed Compound plus an additional [* ]
thereof. Further, upon IntraBiotics' request, BioSearch shall provide such
technical assistance as needed by IntraBiotics to commence manufacture of
Bulk Licensed Compound, at BioSearch's cost.
11.5 ACCRUED RIGHTS, SURVIVING OBLIGATIONS. Termination of this
Agreement shall not affect any accrued rights and remedies of either Party.
Additionally, the terms of Article 9 of this Agreement shall survive five (5)
years after termination or expiration of this Agreement and Sections 10.2
through 10.8, 11.4, 11.5 and Articles 7 (solely to the extent required to effect
the intent of Section 11.4, if applicable), 8 (solely to the extent required to
effect the intent of Section 11.4, if applicable), 12, 13 and 14 of this
Agreement shall survive any termination or expiration of this Agreement.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
12.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party hereby
represents and warrants:
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(a) CORPORATE POWER. Such Party is duly organized and validly
existing under the laws of the state or country of its incorporation and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.
(b) DUE AUTHORIZATION. Such Party is duly authorized to
execute and deliver this Agreement and to perform its obligations hereunder.
(c) BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such Party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a Party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it. Such Party has not, and during the term of the
Agreement will not, grant any right to any Third Party with respect to its
Patents or Know-how that would conflict with the rights granted to the other
Party hereunder.
12.2 REPRESENTATIONS BY BIOSEARCH REGARDING MANUFACTURE OF BULK
LICENSED COMPOUNDS. BioSearch hereby warrants that the Bulk Licensed Compound
supplied hereunder will:
(a) comply with the specifications then in effect for Bulk
Licensed Compound;
(b) be manufactured, stored and shipped in compliance with all
applicable regional, federal, state and local laws and governmental regulations,
including without limitation the applicable current Good Manufacturing Practices
regulations;
(c) when shipped, will not be adulterated or misbranded within
the meaning of the Federal Food, Drug & Cosmetic Act and the regulations
promulgated thereunder; and
(d) be manufactured in accordance with all applicable laws and
governmental rules and regulations.
12.3 OTHER REPRESENTATIONS BY BIOSEARCH. BioSearch further represents
and warrants to IntraBiotics that:
(a) to the best of BioSearch's knowledge on the Effective
Date, there are no interferences or oppositions pending before any court or
administrative office or agency relating the BioSearch Patents;
(b) BioSearch has provided to IntraBiotics access to all
clinical records which describe all adverse event reports relating to Licensed
Products; and
(c) BioSearch owns all right, title and interest in and to the
Original IND, and BioSearch owns or controls all rights necessary to grant the
rights BioSearch purports to grant to IntraBiotics pursuant to this Agreement;
and
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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(d) as of the Effective Date, BioSearch has not received any
notices of infringement or any written communications relating in any way to a
possible infringement with respect to the Licensed Compound or Licensed Products
in the Field, and is not aware that the practice of the BioSearch Patents and
BioSearch Know-how as contemplated by this Agreement will involve any
infringement or unauthorized use of any intellectual property rights of any
Third Party.
12.4 DISCLAIMER OF WARRANTIES. The Parties understand that the
activities to be undertaken pursuant to this Agreement will involve technologies
and products that have not been approved by any regulatory authority and that
neither Party guarantees the safety or usefulness of the Licensed Products.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY NATURE, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 13
INDEMNIFICATION
13.1 INDEMNIFICATION BY BIOSEARCH. BioSearch hereby agrees to
indemnify, hold harmless and defend IntraBiotics against any and all expenses,
costs of defense (including without limitation attorneys' fees, witness fees,
damages, judgments, fines and amounts paid in settlement) and any amounts
IntraBiotics becomes legally obligated to pay because of any Third Party claim
or claims against it to the extent that such claim or claims result from (i)
BioSearch's negligence, (ii) BioSearch's breach or alleged breach of any
representation or warranty by BioSearch or of any other provision of this
Agreement, or (iii) the possession, manufacture, use, handling, storage, sale or
other disposition of Bulk Licensed Compound or of products containing the
Licensed Compound by BioSearch, its agents or licensees or sublicensees (other
than IntraBiotics), except to the extent such claim or claims arise from the
negligence, recklessness or willful misconduct of IntraBiotics or any breach of
any representation or warranty of IntraBiotics made pursuant to Section 12;
provided that IntraBiotics provides BioSearch with prompt notice of any such
claim and the exclusive ability to defend (with the reasonable cooperation of
IntraBiotics) and settle any such claim.
13.2 INDEMNIFICATION BY INTRABIOTICS. IntraBiotics hereby agrees to
indemnify, hold harmless and defend BioSearch against any and all expenses,
costs of defense (including without limitation attorneys' fees, witness fees,
damages, judgments, fines and amounts paid in settlement) and any amounts
BioSearch becomes legally obligated to pay because of any Third Party claim or
claims against it to the extent that such claim or claims arise out of (i)
IntraBiotics' negligence, recklessness or willful misconduct, (ii) IntraBiotics'
breach or alleged breach of any representation or warranty by IntraBiotics or of
any other provision of this Agreement, (iii) the possession, final manufacture,
use, sale or administration of Licensed Products by IntraBiotics or
IntraBiotics' Affiliates, licensees or sublicensees, except to the extent such
claim or claims arise from the negligence, recklessness or willful misconduct of
BioSearch
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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or any breach of any representation or warranty of BioSearch made pursuant to
Section 12; provided that BioSearch provides IntraBiotics with prompt notice of
any such claim and the exclusive ability to defend (with the reasonable
cooperation of BioSearch) or settle any such claim, and provided further that
such indemnities shall not apply to losses resulting from BioSearch matters
covered under Section 13.1 above.
13.3 MECHANICS. In the event that the parties cannot agree as to the
application of Sections 13.1 and 13.2 above to any particular loss or claim, the
parties may conduct separate defenses of such claim. Each Party further reserves
the right to claim indemnity from the other in accordance with Sections 13.1 and
13.2 above upon resolution of the underlying claim, notwithstanding the
provisions of Sections 13.1 and 13.2 above requiring the indemnified Party to
tender to the indemnifying Party the exclusive ability to defend such claim or
suit.
ARTICLE 14
MISCELLANEOUS
14.1 ASSIGNMENT.
(a) Either Party may assign any of its rights or obligations
under this Agreement to any Affiliates; PROVIDED, HOWEVER, that such assignment
shall not relieve the assigning Party of its responsibilities for performance of
its obligations under this Agreement, and further provided that if a proposed
assignment would have an adverse financial impact upon the other Party (e.g., by
reason of changed tax treatment of payments due under this Agreement), such
assignment shall be subject to the other Party's prior written consent.
(b) This Agreement shall survive any such merger or
reorganization of either Party with or into, or such sale of assets to, another
party and no consent for such merger, reorganization or sale shall be required
hereunder; provided, that in the event of such merger, reorganization or sale,
no intellectual property rights of the acquiring corporation shall be included
in the technology licensed hereunder.
(c) This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Parties. Any assignment
not in accordance with this Agreement shall be void.
14.2 DISPUTE RESOLUTION.
(a) The Parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement which relate to
either Party's rights and/or obligations hereunder or thereunder. It is the
objective of the Parties to establish procedures to facilitate the resolution of
disputes arising under this Agreement in an expedient manner by mutual
cooperation. To accomplish this objective, the Parties agree to follow the
procedures set forth in this Article 14 if and when a dispute arises under this
Agreement.
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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Unless otherwise specifically recited in this Agreement, disputes among
the Parties will be resolved by reference first to their respective executive
officers designated below or their successors, for attempted resolution by good
faith negotiations within [*] after such notice is received. Said designated
officers are as follows:
For IntraBiotics: Chief Executive Officer
For BioSearch: President
In the event the designated executive officers are not able to resolve
such dispute, either Party may at anytime after the [*] period seek to resolve
the dispute through the means provided in Section 14.2(b).
(b) Any claim or controversy arising out of or
related to this Agreement or any breach hereof that is not resolved by the
designated officers as provided in this Agreement shall be resolved solely and
exclusively by final and binding arbitration held in New York, New York, U.S.A.
conducted by JAMS/Endispute, according to the then existing rules of
JAMS/Endispute. The arbitrator(s) selected shall have significant experience in
the biotechnology or pharmaceutical industry, and in conducting such proceeding
shall apply the substantive law of the State of New York as provided in Section
14.6, except that the interpretation of and enforcement of this Section shall be
governed by the Federal Arbitration Act. Any arbitration proceeding conducting
pursuant to this Section 14.2(b) shall take place in the city of New York, NY,
USA. Any award made by such arbitrator(s) shall be final and binding upon the
parties and a judgment of a court having jurisdiction may be entered on such
award. Notwithstanding the foregoing, disputes regarding the validity, scope or
enforceability of patents shall be submitted to a court of competent
jurisdiction in the country where such patent has issued.
14.3 FORCE MAJEURE. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, earthquake, embargo, act
of God, or any other similar cause beyond the control of the defaulting Party,
provided that the Party claiming force majeure has exerted all reasonable
efforts to avoid or remedy such force majeure.
14.4 COMPLIANCE WITH LAW. Each Party hereto shall comply with all
applicable laws, rules, ordinances, guidelines, consent decrees and regulations
of any applicable federal, state or other governmental authority.
14.5 EXPORT LAW COMPLIANCE. IntraBiotics understands and recognizes
that the Licensed Product and other materials made available to it hereunder may
be subject to the export administration regulations of the United States
Department of Commerce and other United States government regulations related to
the export of chemical compounds and medical devices.
14.6 GOVERNING LAW. This Agreement is deemed to have been entered into
in the State of Delaware, United States of America, as applied to contracts
entered into and performed
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entirely in Delaware by Delaware residents and its interpretation, construction,
and the remedies for its enforcement or breach are to be applied pursuant to and
in accordance with the laws of the State of Delaware.
14.7 ENTIRE AGREEMENT. This Agreement, including all Exhibits attached
hereto, and all documents delivered concurrently herewith, set forth all the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and supersede and terminate all prior
agreements and understanding between the Parties. No subsequent alteration,
amendment, change or addition to this Agreement, shall be binding upon the
Parties hereto unless reduced to writing and signed by the respective authorized
officers of the Parties.
14.8 RELATIONSHIP OF THE PARTIES. Nothing hereunder shall be deemed to
authorize either Party to act for, represent or bind the other except as
expressly provided in this Agreement.
14.9 NOTICES. All notices hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile transmission (receipt
verified), telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by express courier service, to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice; provided, that notices of a change of address shall be
effective only upon receipt thereof).
If to BioSearch,
addressed to: BIOSEARCH ITALIA S.P.A.
Via Lepetit, 34
21040 Gerenzano, Italy
Attention: President
Telephone: 39.2.96474.341
Telecopy: 39.2.96474.400
If to IntraBiotics,
addressed to: INTRABIOTICS PHARMACEUTICALS INC.
1245 Terra Bella Avenue
Mountain View, CA 94043
Attention: Chief Executive Officer
Telephone: (650) 526-6800
Telecopy: (650) 969-0663
With copy to: COOLEY GODWARD LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Robert L. Jones, Esq.
Telephone: (650) 843-5000
Telecopy: (650) 857-0663
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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14.10 WAIVER. Except as specifically provided for herein, the waiver
from time to time by either of the Parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of same or of any other of such Party's rights or remedies provided in
this Agreement.
14.11 SEVERABILITY. If any term, covenant or condition of this
Agreement or the application thereof to any Party or circumstance shall, to any
extent, be held to be invalid or unenforceable, then (i) the remainder of this
Agreement, or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
14.12 OFFICIAL LANGUAGE. The official text of this Agreement and any
appendices, exhibits and schedules hereto, or any notice given or accounts or
statements required by this Agreement shall be in English. In the event of any
dispute concerning the construction or meaning of this Agreement, reference
shall be made only to this Agreement as written in English and not to any other
translation into any other language.
14.13 HEADINGS. The Section and paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of said sections or paragraphs.
14.14 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement in
duplicate originals by their proper officers as of the Effective Date.
INTRABIOTICS PHARMACEUTICALS, INC. BIOSEARCH ITALIA, S.P.A.
By: /s/ Kenneth J. Kelley By:/s/ Francesco Parenti
------------------------------- -------------------------------
Title: President and CEO Title: President
---------------------------- ----------------------------
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EXHIBIT 7.4
BULK LICENSED COMPOUND SPECIFICATIONS
<TABLE>
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TEST SPECIFICATION TEST METHOD
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COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
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EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated January 14,
2000 (except for the second paragraph of Note 1, as to which the date is
February 28, 2000) in Amendment No. 4 to the Registration Statement (Form S-1
No. 333-95461) and related Prospectus of IntraBiotics Pharmaceuticals, Inc. for
the registration of 8,625,000 shares of its common stock.
/s/ ERNST & YOUNG LLP
Palo Alto, California
March 21, 2000
